ESC STRATEGIC FUNDS INC, 485APOS, 1996-12-05

ESC STRATEGIC FUNDS INC
485APOS, 1996-12-05

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<PAGE> 1

Registration Nos. 33-72190
811-8166

As filed with the Securities and Exchange Commission on December 5, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 6 X
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 7 X

ESC STRATEGIC FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)

237 Park Avenue, New York, New York 10017

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(Address of Principal Executive Offices)(ZipCode)
Registrant's Telephone Number, including area code: (212) 808-3901

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W. Howard Cammack, Jr.
Equitable Securities Corporation
800 Nashville City Center
511 Union Street
Nashville, Tennessee 37219-1743

(Name and Address of Agent for Service)

Copies to:

Jeffrey L. Steele, Esq. Joan V. Fiore, Esq.
Dechert Price & Rhoads Furman Selz LLC
1500 K Street, N.W. 230 Park Avenue
Washington, D.C. 20005 New York, New York 10169

Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.

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

immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of rule 485

DECLARATION PURSUANT TO RULE 24f-2

Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the
Registrant has previously filed a declaration of registration of an
indefinite number of shares of Common Stock, $.001 par value per share, of all
series of the Registrant, now existing or hereafter created. Registrant's
24f-2 Notice for the fiscal year ended March 31, 1996 was filed on May 17,
1996.

<PAGE> 2

ESC STRATEGIC GROWTH FUND
a series of
ESC STRATEGIC FUNDS, INC.
CROSS REFERENCE SHEET
(as required by Rule 404(c))

<TABLE>
<CAPTION>
PART A
N-1A Item No. Location

<S> <C> <C>
Item 1. Cover Page Cover Page

Item 2. Synopsis Highlights

Item 3. Condensed Financial Information Not applicable

Item 4. General Description of Registrant The Fund; Description of Securities and
Investment Practices; Investment
Restrictions
Item 5. Management of the Fund Management of the Fund

Item 5A. Not Applicable Not Applicable

Item 6. Capital Stock and Other Securities. Other Information, Dividends, Distributions
and Federal Income Taxation

Item 7. Purchase of Securities Being Offered. Fund Share Valuation; Purchase of Fund
Shares; Management of the Fund
Item 8. Redemption or Repurchase Redemption of Fund Shares

Item 9. Pending Legal Proceedings Not Applicable

Part B

N-1A Item No. Location

Item 10. Cover Page Cover Page

Item 11. Table of Contents Table of Contents

Item 12. General Information and History Not Applicable

Item 13. Investment Objectives and Policies Investment Policies

Item 14. Management of the Registrant Management

Item 15. Control Persons and Principal Holders Not applicable
of Securities
Item 16. Investment Advisory and Other Services Management

Item 17. Brokerage Allocation Portfolio Transactions

Item 18. Capital Stock and Other Securities Other Information

Item 19. Purchase, Redemption and Pricing of Purchase of Fund Shares; Redemption of
Securities Being Offered Fund Shares (Part A)
Item 20. Tax Status Taxation

Item 21. Underwriters Management

Item 22. Calculations of Performance Data Other Information

Item 23. Financial Statements Not applicable
</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C of the Registration Statement.

<PAGE> 3

Explanatory Note

This Post-Effective Amendment No. 6 ("Amendment" to Registrant's registration
statement on Form N-1A (File No. 33-72190) is filed solely for the purpose of
amending the prospectus and statement of additional information for Registrant's
new series, ESC Strategic Growth Fund. The Amendment does not affect any of
Registrant's other currently effective prospectuses or statements of additional
information, each of which is hereby incorporated herein by reference as most
recently filed pursuant to Rule 497 under the Securities Act of 1933.

<PAGE> 4

[LOGO] ESC STRATEGIC FUNDS

ESC STRATEGIC GROWTH FUND
A PORTFOLIO OF
ESC STRATEGIC FUNDS, INC.

3435 STELZER ROAD

COLUMBUS, OHIO 43219

GENERAL AND ACCOUNT INFORMATION:
(800) 261-FUND(3863)

EQUITABLE SECURITIES CORPORATION -- INVESTMENT ADVISER AND DISTRIBUTOR
BISYS FUND SERVICES -- ADMINISTRATOR, TRANSFER AGENT
AND FUND ACCOUNTING AGENT
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This Prospectus describes ESC Strategic Growth Fund (the "Fund"), the
objective of which is a high level of capital appreciation. The Fund is one of
six funds comprising ESC Strategic Funds, Inc. (the "Company"), an open-end
management registered investment company advised by Equitable Securities
Corporation (the "Adviser"). The Fund is a separate portfolio of the Company and
offers two classes of shares. The Fund bears certain expenses related to the
distribution of its shares.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND FUND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN MUTUAL FUNDS, SUCH AS THE FUNDS, INVOLVE RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL.

THIS PROSPECTUS SETS FORTH CONCISELY THE INFORMATION A PROSPECTIVE INVESTOR
SHOULD KNOW BEFORE INVESTING IN THE FUND AND SHOULD BE READ AND RETAINED FOR
INFORMATION ABOUT THE FUND.

A Statement of Additional Information (the "SAI"), dated , 199 ,
containing additional and more detailed information about the Fund, has been
filed with the Securities and Exchange Commission ("SEC") and is hereby
incorporated by reference into this Prospectus. It is available without charge
and can be obtained by writing or telephoning the Company at the address and
information numbers printed above.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The Date of this Prospectus is , 199
<PAGE> 5

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Highlights....................................................................... 2
Fund Expenses.................................................................... 4
Fee Table........................................................................ 4
The Fund......................................................................... 5
Risks of Investing in the Fund................................................... 6
Management of the Fund........................................................... 9
Fund Share Valuation............................................................. 12
Pricing of Fund Shares........................................................... 13
Minimum Purchase Requirements.................................................... 15
Purchase of Fund Shares.......................................................... 16
Retirement Plan Accounts......................................................... 17
Exchange of Fund Shares.......................................................... 17
Redemption of Fund Shares........................................................ 18
Dividends, Distributions, and Federal Income Taxation............................ 21
Description of Securities and Investment Practices............................... 22
Investment Restrictions.......................................................... 25
Other Information................................................................ 26
Appendix......................................................................... 28
</TABLE>

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HIGHLIGHTS

THE FUND

This Prospectus describes ESC Strategic Growth Fund (the "Fund"), one of six
Funds comprising ESC Strategic Funds, Inc. (the "Company"). The Fund's objective
is a high level of capital appreciation. The Fund invests primarily in equity
securities of domestic and foreign issuers believed by the Manager to offer
superior opportunities for growth.

SPECIAL RISKS

THE FUND MAY ENGAGE IN TRANSACTIONS IN OPTIONS AND FUTURES CONTRACTS FOR HEDGING
PURPOSES, PROVIDED THAT NO MORE THAN 5% OF THE FUND'S ASSETS MAY BE PLACED AT
RISK BY SUCH TRANSACTIONS. THESE AND OTHER INVESTMENT PRACTICES OF THE FUND
INVOLVE SPECIAL RISKS. FOR MORE INFORMATION ON THESE PRACTICES AND OTHER
INVESTMENTS AND INVESTMENT RESTRICTIONS AND RISKS, SEE "DESCRIPTION OF
SECURITIES AND INVESTMENT PRACTICES" AND "RISKS OF INVESTING IN THE FUND." THERE
CAN BE, OF COURSE, NO ASSURANCE THAT THE FUND WILL ACHIEVE ITS INVESTMENT
OBJECTIVE. MOREOVER, INVESTORS SHOULD BE AWARE THAT THE VALUE OF THE FUND'S
SHARES WILL FLUCTUATE, WHICH MAY CAUSE A LOSS IN THE PRINCIPAL VALUE OF THE
INVESTMENT.

THE ADVISER AND THE MANAGER

Overall management of the Fund is provided by Equitable Securities Corporation
(the "Adviser"). The Adviser, headquartered in Nashville, Tennessee, is a New
York Stock Exchange member investment banking and securities brokerage firm.
Founded in 1930, the predecessor of the Adviser developed a national clientele
as an investment banking firm dealing in both corporate and municipal
securities. In 1968, the American Express Company acquired the Adviser's
predecessor and in 1972 the firm was reestablished as an independent company
when a group of its employees purchased the firm. Equitable Trust Company, a
wholly-owned subsidiary of the Adviser formed in 1991, provides investment
management, trust, and other fiduciary services to individuals and other
clients. In 1986, the Adviser formed the IMES Consulting Group to provide
consulting services to institutional and individual investors employing outside
investment management expertise. The primary services of the IMES Consulting
Group are strategic investment planning, asset allocation analysis, investment
manager evaluation and performance measurement. The IMES Consulting Group
provides primary information

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2
<PAGE> 6

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within Equitable Securities Corporation in the latter's role as Adviser of the
ESC Strategic Funds. For its services, the Adviser receives a fee at an annual
rate of 1.25% based on the Fund's average daily net assets. This fee, which is
higher than those for most other investment companies, is used by the Adviser to
pay the Manager's fee, at no additional cost to the Fund.

Portfolio management for the Fund is provided by Equitable Asset Management,
Inc. ("EAM"), an affiliate of the Adviser. See "Management of the Fund."

THE DISTRIBUTOR AND ADMINISTRATOR

Equitable Securities Corporation distributes the Fund's shares and may be
reimbursed for certain of its distribution-related expenses. BISYS Fund Services
("BISYS") acts as Administrator, transfer agent and fund accounting agent to the
Fund. For its services as Administrator, the Fund pays BISYS a fee at the annual
rate of 0.15% of its average daily net assets. BISYS receives separate fees for
its services as transfer agent and fund accounting agent. See "Management of the
Fund."

CLASSES OF SHARES

The Fund offers investors a choice of two classes of shares which differ
principally with respect to sales charges and the rate of expenses to which they
are subject. Investors may select the class which better suits their investment
needs. Class A shares are offered with a maximum front-end sales charge of
4.50%, which may be reduced or waived in certain cases. See "Purchase of Fund
Shares." 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 1.50% front-end sales
charge 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. See
"Management of the Fund -- The Distributor."

In selecting between the classes, a prospective investor should consider the
impact of the sales charge together with the cumulative effect of the Service
and Distribution Fees for each class over the anticipated period of investment,
as well as the effect of any sales charge waivers to which the investor may be
entitled. Investors should be aware that other expenses attributable to each
class may differ slightly due to the allocation to each class of certain "class
specific" expenses, including distribution and marketing expenses and federal
and state securities registration fees. Finally, investors should be aware that
persons selling shares of the Fund may receive different levels of compensation
for sales of Class A and Class D shares.

GUIDE TO INVESTING IN ESC STRATEGIC GROWTH FUND

Purchase orders for shares of the Fund received by your broker or Service
Organization in proper order prior to 4:00 p.m., Eastern time, and transmitted
to the Fund prior to 4:00 p.m. Eastern time will become effective that day.

<TABLE>
<S> <C>
- - Minimum initial investment................................................... $1,000
- - Minimum initial investment for IRAs and other qualified retirement plans..... $ 500
- - Minimum subsequent investment................................................ $ 50
</TABLE>

Shareholders may exchange shares of a particular class of the Fund for shares of
the same class in another fund of ESC Strategic Funds, Inc. by telephone or
mail.

<TABLE>
<S> <C>
- - Minimum initial exchange.................................................... $ 2,000
(No minimum for subsequent exchanges.)
</TABLE>

Shareholders may redeem shares by telephone, mail or wire.

- - The Fund reserves the right to redeem upon not less than 30 days' notice all
shares in an account which has an aggregate value of $500 or less.

All dividends and distributions will be automatically reinvested at net asset
value in additional shares of the same class of the Fund unless cash payment is
requested.

- - Distributions for ESC Strategic Growth Fund are paid at least annually.

See "Purchase of Fund Shares" and "Redemption of Fund Shares" for more
information.

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3
<PAGE> 7

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FUND EXPENSES

The following expense tables indicate costs and expenses that an investor should
anticipate incurring either directly or indirectly as a shareholder of the Fund
during its fiscal year ending March 31, 1997. The "Other Expenses" numbers
reflect estimated levels of operating expenses based on general industry
experience.

FEE TABLE

<TABLE>
<CAPTION>
ESC STRATEGIC
GROWTH FUND
-----------------------
CLASS A CLASS D
------- -----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................... 4.50% 1.50%
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................... None None
Deferred Sales Charge (as a percentage of redemption
proceeds)..................................................... None None
Exchange Fees................................................... None None
ANNUAL FUND OPERATING EXPENSE
(as a percentage of average net assets annualized)
Management Fees............................................... 1.25% 1.25%
12b-1 Fees*................................................... 0.25% 0.75%
Other Expenses** (estimated, after waivers)................... 0.50% 0.50%
------- -----------
TOTAL PORTFOLIO OPERATING EXPENSES.............................. 2.00% 2.50%
====== ==========
</TABLE>

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

* Under rules of the National Association of Securities Dealers, Inc. (the
"NASD"), a 12b-1 fee may be treated as a sales charge for certain purposes
under those rules. Because the 12b-1 fee is an annual fee charged against the
assets of the Fund, long-term shareholders may pay more sales charges than
the economic equivalent of the maximum front-end sales charge permitted by
rules of the NASD. See "Management of the Fund."

** Amounts shown for "Other Expenses" reflect a reimbursement of certain
expenses by the Adviser. Without these waivers, "Other Expenses" and "Total
Portfolio Operating Expenses," respectively, would be: 0.70% and 2.20% for
Class A and 0.70% and 2.70% for Class D. Out of its Management Fees, the
Adviser pays the fees of the Managers.

The Purpose of this table is to assist the prospective investor in understanding
the various costs and expenses that a Fund shareholder will bear.

EXAMPLE:*

An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
ESC STRATEGIC
GROWTH FUND
-----------------
CLASS A CLASS D
------- -------
<S> <C> <C>
1 year......................................................... $ 64 $40
3 years........................................................ $ 105 $92
</TABLE>

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* THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES
WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual return. Actual return may be greater or less than the assumed amount.

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4
<PAGE> 8

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THE FUND

Investors seeking long-term capital appreciation should consider investing in
ESC Strategic Growth Fund.

The investment objective of the Fund is a high level of capital appreciation.
Under normal circumstances, at least 65% of the value of the Funds' total assets
will be invested in equity securities of companies believed by the Manager to
show superior prospects for growth due, for example, to promising new products,
new distribution strategies, new manufacturing technologies or new management
teams or management philosophy. In the Manager's view, such companies tend to be
responsible for technological breakthroughs and/or unique solutions to market
needs. By focusing on internal rather than external factors, the Fund attempts
to minimize the risk associated with macro-economic forces such as changes in
commodity prices, currency exchange rates and interest rates. The Manager
intends to invest in equity securities of all market capitalizations. For
example, the Manager may find that small capitalization stocks provide the most
compelling growth characteristics with the most attractive valuations and,
therefore, at times the Fund's investments may be weighted toward small cap
stocks. There can be no assurance that the Fund will achieve its investment
objective.

In selecting portfolio companies, the Manager considers the growth rate in
earnings, financial performance, management strengths and weaknesses, and
current market valuation relative to earnings and earnings growth as well as
historic and comparable company valuations. The Manager also analyzes the level
and nature of the company's debt, cash flow, working capital and the quality of
the company's assets. Typically, companies included in the Fund's portfolio will
show earnings growth exceeding 15% compared to the previous year's comparable
period. Companies with excessive levels of debt will generally be avoided.

By developing and maintaining contacts with managements, customers, competitors
and suppliers of current and potential portfolio companies, the Manager
typically attempts to invest in those companies that are not widely followed by
securities analysts and the financial press or where the Manager believes the
Company offers an investment opportunity that is not seen or is misunderstood by
the investment community. Because such securities tend not to be efficiently
priced, the Manager believes they offer potentially superior investment
opportunities. The Manager favors common stocks of companies whose prices at the
time of purchase are between five and fifteen times projected earnings for the
coming year.

Although the Fund's portfolio securities are generally acquired for the long
term, they may be sold under any of the following circumstances: (a) the
anticipated price appreciation has been achieved or is no longer probable; (b)
the Manager's analysis indicates that the company's fundamentals may be
deteriorating; (c) general market expectations regarding the company's future
performance exceed those of the Manager; or (d) alternative investments, in the
Manager's view, offer superior potential for appreciation.

The Fund's diversified portfolio will consist primarily of common stocks, but
may also include convertible preferred, participating preferred and preferred
stocks. Its equity investments will be traded on domestic or foreign securities
exchanges or in over-the-counter markets. For liquidity purposes, however, it
may invest up to 35% of its assets in debt securities rated at least A by
Moody's Investors Service, Inc. or A by Standard & Poor's or, if unrated,
determined to be of comparable quality by the Fund's Manager. Such debt
securities may include U.S. Government securities, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements and debt
obligations of corporations (corporate bonds, debentures, notes and other
similar corporate debt instruments). The Fund may invest up to 100% of its
assets in such debt securities for temporary defensive purposes.

INVESTING IN COMPANIES THAT ARE UNDERGOING INTERNAL CHANGE MAY INVOLVE SPECIAL
RISKS DUE TO THE UNKNOWN EFFECTS OF

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5
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CHANGE. In addition to the investment policies and practices described above,
the Fund may engage in transactions in options and futures contracts for hedging
purposes, provided that no more than 5% of the Fund's assets may be placed at
risk by such transactions. (See "Risks of Investing in the Fund."). For
additional information on these and other investments and investment
restrictions, see "Description of Securities and Investment Practices,"
"Investment Restrictions," and the SAI. The Fund's Manager is EAM. For
information regarding the Manager, see "Management of the Fund."

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RISKS OF INVESTING IN THE FUND

The price per share of the Fund will fluctuate with changes in the value of the
investments held by the Fund. Additionally, an investment in the Fund may entail
special risks because the Fund, at times, may have substantial investments in
small capitalization stocks. Investments in small companies may involve greater
risks than investments in large companies due to such factors as limited product
lines, markets and financial or managerial resources, and less frequently traded
securities that may be subject to more abrupt price movements than securities of
larger companies.

There is, of course, no assurance that the Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. In order to
attempt to minimize that risk, the Adviser and Manager monitor developments in
the economy, the securities markets, and with each particular issuer.

Foreign Securities. Investing in the securities of issuers in any foreign
country, including ADRs and EDRs, involves special risks and considerations not
typically associated with investing in U.S. companies. These include differences
in accounting, auditing and financial reporting standards; generally higher
commission rates on foreign portfolio transactions; the possibility of
nationalization, expropriation or confiscatory taxation; adverse changes in
investment or exchange control regulations (which may include suspension of the
ability to transfer currency from a country); and political instability which
could affect U.S. investments in foreign countries. Additionally, foreign
securities and dividends and interest payable on those securities may be subject
to foreign taxes, including taxes withheld from payments on those securities.
Foreign securities often trade with less frequency and volume than domestic
securities and, therefore, may exhibit greater price volatility and less
liquidity. Additional costs associated with an investment in foreign securities
may include higher custodial fees than apply to domestic custodial arrangements
and transaction costs of foreign currency conversions. Changes in foreign
exchange rates also will affect the value of securities denominated or quoted in
currencies other than the U.S. dollar. The Fund's objectives may be affected
either unfavorably or favorably by fluctuations in the relative rates of
exchange between the currencies of different nations, by exchange control
regulations and by indigenous economic and political developments. A decline in
the value of any particular currency against the U.S. dollar will cause a
decline in the U.S. dollar value of the Fund's holdings of securities
denominated in such currency, and related ADRs and EDRs, and, therefore, will
cause an overall decline in the Fund's net asset value and any net investment
income and capital gains to be distributed in U.S. dollars to shareholders of
the Fund. The rate of exchange between the U.S. dollar and other currencies is
determined by several factors including the supply and demand for particular
currencies, central bank efforts to support particular currencies, the movement
of interest rates, the pace of business activity in certain other countries and
the United States, and other economic and financial conditions affecting the
world economy.

Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. Although foreign exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference ("spread")

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6
<PAGE> 10

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between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund at one rate,
while offering a lesser rate of exchange should the Fund desire to sell that
currency to the dealer.

Through the Fund's flexible policies, the Manager endeavors to avoid unfavorable
consequences and to take advantage of favorable developments in particular
nations where, from time to time, it places the Fund's investments. See the SAI
for further information about foreign securities.

Short Sales. The Fund will incur a loss as a result of a short sale (other than
a short sale against the box) 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. Possible losses from short sales differ from losses that could be
incurred from a purchase of a security, because losses from short sales may be
unlimited, whereas losses from purchases of a security can equal only the total
amount invested. To limit these risks, a Fund's short sales (other than short
sales against the box) will be only with respect to securities fully listed on a
national securities exchange and will not at any time exceed a dollar amount
equal to 25% of the Fund's net equity. Further, a Fund's short sales of
securities of a single issuer will not exceed the lesser of 2% of the value of
the Fund's net assets or 2% of the securities of any class of the issuer.

Risks of Options Transactions. The purchase and writing of options involves
certain risks. During the option period, the covered call writer has, in return
for the premium on the option, given up the opportunity to profit from a price
increase in the underlying securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the risk of loss should the
price of the underlying security decline. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. Once an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate its obligation under
the option and must deliver the underlying securities at the exercise price. If
a put or call option purchased by the Fund is not sold when it has remaining
value, and if the market price of the underlying security, in the case of a put,
remains equal to or greater than the exercise price, or in the case of a call,
remains less than or equal to the exercise price, the Fund will lose its entire
investment in the option. Also, where a put or call option on a particular
security is purchased to hedge against price movements in a related security,
the price of the put or call option may move more or less than the price of the
related security. There can be no assurance that a liquid market will exist when
the Fund seeks to close out an option position. Furthermore, if trading
restrictions or suspensions are imposed on the options market, the Fund may be
unable to close out a position. If the Fund cannot effect a closing transaction,
it will not be able to sell the underlying security while the previously written
option remains outstanding, even if it might otherwise be advantageous to do so.
Options transactions involve, additionally, risks similar to those described
below in "Risks of Futures and Related Options Transactions."

Currency Risk. Most of the foreign securities in which the Fund invests will be
denominated in foreign currencies. Changes in foreign exchange rates will affect
the value of securities denominated or quoted in foreign currencies. Exchange
rate movements can be large and can endure for extended periods of time,
affecting either favorably or unfavorably the value of the Fund's assets. The
Fund may, however, engage in foreign currency transactions to protect its
portfolio against fluctuations in currency exchange rates in relation to the
U.S. dollar. Such foreign currency transactions may include forward foreign
currency contracts, currency exchange transactions on a spot (i.e., cash) basis,
put and call options on foreign currencies, and foreign exchange futures
contracts. (See below.) The Fund cannot assure that these techniques will always
be successful.

Foreign Currency Options. Currency options traded on U.S. or other exchanges
may be subject to position limits which may limit the ability of the Fund to
reduce foreign currency risk using such options. Over-the-counter options differ
from traded options in that they are two-party contracts with price

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7
<PAGE> 11

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and other terms negotiated between buyer and seller and generally do not have as
much market liquidity as exchange-traded options. Employing hedging strategies
with options on currencies does not eliminate fluctuations in the prices of
portfolio securities or prevent losses if the prices of such securities decline.
Furthermore, such hedging transactions reduce or preclude the opportunity for
gain if the value of the hedged currency should change relative to the U.S
dollar. The Fund will not speculate in options on foreign currencies.

There is no assurance that a liquid secondary market will exist for any
particular foreign currency option, or at any particular time. In the event no
liquid secondary market exists, it might not be possible to effect closing
transactions in particular options. If the Fund cannot close out an option which
it holds, it would have to exercise its option in order to realize any profit
and would incur transactional costs on the sale of the underlying assets.

Risks of Futures and Related Options Transactions. There are several risks
associated with the use of futures contracts and options on futures contracts.
While the Fund's use of futures contracts and related options for hedging may
protect the Fund against adverse movements in the general level of interest
rates or securities prices, such transactions could also preclude the
opportunity to benefit from favorable movements in the level of interest rates
or securities prices. There can be no guarantee that the Manager's forecasts
about market values, interest rates and other applicable factors will be correct
or that there will be a correlation between price movements in the hedging
vehicle and in the securities being hedged. The skills required to invest
successfully in futures and options may differ from skills required to manage
other assets in the Fund's portfolio. An incorrect forecast or imperfect
correlation could result in a loss on both the hedged securities in the Fund and
the hedging vehicle so that the Fund's return might have been better had hedging
not been attempted.

There can be no assurance that a liquid market will exist at a time when the
Fund seeks to close out a futures contract or futures option position. Most
futures exchanges and boards of trade limit the amount of fluctuation permitted
in futures contract prices during a single day; once the daily limit has been
reached on a particular contract, no trades may be made that day at a price
beyond that limit. In addition, certain of these instruments are relatively new
and without a significant trading history. As a result, there is no assurance
that an active secondary market will develop or continue to exist. Lack of a
liquid market for any reason may prevent the Fund from liquidating an
unfavorable position and the Fund would remain obligated to meet margin
requirements until the position is closed.

The Fund will only enter into futures contracts or futures options which are
standardized and traded on a U.S. or foreign exchange or board of trade, or
similar entity, or are quoted on an automated quotation system. The Fund will
not enter into a futures contract if immediately thereafter the initial margin
deposits for futures contracts held by the Fund plus premiums paid by it for
open futures options positions, less the amount by which any such positions are
"in-the-money," would exceed 5% of the Fund's total assets.

The Fund may trade futures contracts and options on futures contracts on U.S.
domestic markets and also on exchanges located outside of the United States.
Foreign markets may offer advantages such as trading in indices that are not
currently traded in the United States. Foreign markets, however, may have
greater risk potential than domestic markets. Unlike trading on domestic
commodity exchanges, trading on foreign commodity exchanges is not regulated by
the CFTC and may be subject to greater risk than trading on domestic exchanges.
For example, some foreign exchanges are principal markets so that no common
clearing facility exists and a trader may look only to the broker for
performance of the contract. In addition, any profits that the Fund might
realize in trading could be eliminated by adverse changes in the exchange rate
of the currency in which the transaction is denominated, or the Fund could incur
losses as a result of changes in the exchange rate. Transactions on foreign
exchanges may include both commodities that are traded on

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domestic exchanges or boards of trade and those that are not.

Risks of Forward Foreign Currency Contracts. The precise matching of forward
contracts and the value of the securities involved will not generally be
possible since the future value of the securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the date the forward contract is entered into and the date it matures.
Projection of short-term currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
There can be no assurance that new forward contracts or offsets will always be
available to the Fund.

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MANAGEMENT OF THE FUND

The business and affairs of the Fund are managed under the direction of the
Company's Board of Directors. The Directors are William Howard Cammack, Sr.;
William Howard Cammack, Jr.; J. Bransford Wallace; Brownlee O. Currey, Jr.; and
E. Townes Duncan. Additional information about the Directors, as well as the
Company's executive officers, may be found in the SAI under the heading
"Management -- Directors and Officers." The Adviser continuously monitors the
performance of the Fund and its Manager. Investments and investment management
decisions are made by the Fund's Manager based on the Fund's investment
objective and policies.

THE ADVISER: EQUITABLE SECURITIES CORPORATION

Equitable Securities Corporation, 800 Nashville City Center, 511 Union Street,
Nashville, Tennessee 37219-1743, is a registered investment adviser, a
registered broker-dealer, and a member of the New York Stock Exchange, Inc.
Together with predecessors, the Adviser has been in business since 1930 and has
operated under its present name since 1972. Through its IMES Consulting Group,
the Adviser provides consulting services to clients regarding the strategic
allocation of assets and the selection and monitoring of investment management
firms. The Adviser serves as General Partner of several private, unregistered
limited partnerships. The Company is the Adviser's first registered investment
company client. The Fund's Manager, EAM, is a subsidiary of the Adviser's
subsidiary, Equitable Trust Company, and is, therefore, an affiliate of the
Adviser. The Adviser and its affiliates had approximately $1.3 billion under
management at August 31, 1996.

For the advisory services it provides the Fund, the Adviser receives fees,
payable monthly based on average daily net assets, at an annual rate of 1.25% of
the Fund's average net assets. This fee is higher than that paid by most other
Funds. The Manager's fees are at a maximum annual rate of 0.65% of the Fund's
daily net assets with a declining schedule once assets of the Fund exceed $50
million. The Manager's fees are paid by the Adviser from its fees from the Fund.
The Adviser has agreed to limit the Fund's expenses to the following percentages
of the net assets of each class: 2.00% (Class A) and 2.50% (Class D).

W. Howard Cammack, Jr. has primary responsibility for the Adviser's advice to
the Fund. Mr. Cammack joined the Adviser in 1979. He is presently a Managing
Director, is head of the Adviser's Investment Advisory Group and is a member of
the Board of Directors of the Adviser and of its wholly-owned subsidiary,
Equitable Trust Company. In 1986, Mr. Cammack organized the Adviser's IMES
Consulting Group, which he oversees. Mr. Cammack received a Bachelor's degree in
history from Tulane University in 1979 and an Owner/President Management Degree
from The Harvard Business School in 1996.

THE MANAGER

Equitable Asset Management, Inc. ("EAM"), 800 Nashville City Center, 511 Union
Street, Nashville, Tennessee 37219-1743, is a subsidiary of Equitable Trust
Company, a single-purpose financial institution chartered under

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Tennessee banking statutes and a wholly-owned subsidiary of the Adviser. EAM
began business as an investment adviser in 1988 and at August 31, 1996 managed
approximately $276.0 million in assets. Frank D. Inman has primary investment
responsibility for equity management at EAM, including day-to-day responsibility
for EAM's services to the Fund. Mr. Inman joined Equitable Securities
Corporation in May of 1988 where he is a Managing Director. Prior to that date,
Mr. Inman was Director of Institutional Equity Sales at Interstate Securities in
Charlotte, North Carolina. Mr. Inman received a Bachelors degree in English from
the University of Georgia in 1973 and a Masters degree in Business
Administration from Georgia State University in 1979.

THE DISTRIBUTOR

The Adviser acts as Distributor for the Funds pursuant to a Distribution
Contract.

The Fund has adopted a service and distribution plan ("Plan") with respect to
each class of its shares. The Plan provides that Class A shares will pay the
Distributor a fee up to an annual rate of 0.25% (which may include a 0.25%
Service Fee) of the value of average daily net assets of Class A shares as
reimbursement for its costs incurred for financing certain distribution and
shareholder service activities related to Class A shares. The Plan provides that
Class D shares will pay the Distributor amounts up to an annual rate of 0.75%
(which may include a 0.25% Service Fee) of the average daily net assets of Class
D shares as reimbursement for its costs incurred to finance certain distribution
and shareholder service activities related to Class D Shares. Service Fees are
paid to securities dealers and other financial institutions for maintaining
shareholder accounts and providing related services to shareholders.

Under the Plan, the Fund pays the Distributor and other securities dealers and
other financial institutions and organizations for certain shareholder service
or distribution activities. Selling dealers may be paid amounts, at the end of
each quarter, totalling up to 0.25%, annually, of the average daily net asset
value of Class A shares and 0.75%, annually, of the average daily net asset
value of Class D shares in their clients' accounts. Amounts received by the
Distributor may, additionally, subject to the Plan maximums, be used to cover
certain other costs and expenses related to the distribution of Fund shares and
provision of service to Fund shareholders, including: (a) advertising by radio,
television, newspapers, magazines, brochures, sales literature, direct mail or
any other form of advertising; (b) expenses of sales employees or agents of the
Distributor, including salary, commissions, travel and related expenses; (c)
costs of printing prospectuses and other materials to be given or sent to
prospective investors; and (d) such other similar services as the Directors
determine to be reasonably calculated to result in the sale of shares of the
Fund. The Fund will pay all costs and expenses in connection with the
preparation, printing and distribution of the Prospectus to current shareholders
and the operation of the Plan, including related legal and accounting fees. The
Fund will not be liable for distribution expenditures made by the Distributor in
any given year in excess of the maximum amount payable under the Plan in that
year.

SERVICE ORGANIZATIONS

Payments may be made by the Fund or by the Adviser to various banks, trust
companies, broker-dealers or other financial organizations (collectively,
"Service Organizations") for providing administrative services for the Fund and
its shareholders, such as maintaining shareholder records, answering shareholder
inquiries and forwarding materials and information to shareholders. The Fund may
pay fees to Service Organizations (which vary depending upon the services
provided) in amounts up to an annual rate of 0.25% of the daily net asset value
of the shares of either class owned by shareholders with whom the Service
Organization has a servicing relationship.

Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the Fund's
minimum initial or subsequent investment or charging a direct fee for servicing.
If imposed, these fees would be in addition to any amounts which might be paid
to the Service Organization by

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the Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged to
consult with them regarding any such fees or conditions.

ADMINISTRATIVE SERVICES

BISYS Fund Services ("BISYS"), 3435 Stelzer Road, Columbus, Ohio 43219, acts as
the Fund's Administrator transfer agent and fund accounting agent. BISYS
supports more than 5,000 financial institutions and corporate clients through
two strategic business units. BISYS Information Services Group provides image
and data processing outsourcing, and pricing analysis to more than 600 banks
nationwide. BISYS Investment Services Group designs, administers and distributes
over 30 families of proprietary mutual funds consisting of more than 365
portfolios, and provides 401(k) marketing support, administration, and
recordkeeping services in partnership with banking institutions and investment
management companies.

Pursuant to an Administration Agreement with the Company, BISYS provides certain
management and administrative services necessary for the Fund's operations
including: (a) general supervision of the Fund's operation including
coordination of the services performed by the Adviser, Manager, custodian,
independent accountants and legal counsel; (b) regulatory compliance, including
the compilation of information for documents such as reports to, and filings
with, the SEC and state securities commissions, and preparation of proxy
statements and shareholder reports; (c) general supervision relative to the
compilation of data required for the preparation of periodic reports distributed
to the Fund's officers and Board of Directors; and (d) furnishing office space
and certain facilities required for conducting the Fund's business. For these
services, BISYS receives from the Fund a fee, payable monthly, at the annual
rate of 0.15% of the Fund's average daily net assets. Pursuant to a Transfer
Agency Agreement between the Company and BISYS, provides the Company with
transfer services, for which it receives a fee with respect to the Fund of
$15.00 per account per year, subject to a required minimum fee of $10,000, plus
out-of-pocket expenses. Pursuant to a Fund Accounting Agreement between the
Company and BISYS, BISYS assists the Company in calculating net asset values and
provides certain other accounting services for the Fund described therein, for
an annual fee of $30,000, plus out-of-pocket expenses.

OTHER EXPENSES

The Fund bears all costs of its operations other than expenses specifically
assumed by the Administrator, the Adviser, the Manager or other service
providers. In addition to the fees to service providers described above, the
costs borne by the Fund, some of which may vary between the classes, as noted
above, include: legal and accounting expenses; Directors' fees and expenses;
insurance premiums; custodian and transfer agent fees and expenses; expenses
incurred in acquiring or disposing of the Fund's portfolio securities; expenses
of registering and qualifying the Fund's shares for sale with the SEC and with
various state securities commissions; expenses of maintaining the Fund's legal
existence and of shareholders' meetings; and expenses of preparing and
distributing reports, proxy statements and prospectuses to existing
shareholders. Company expenses directly attributable to the Fund or to a class
are charged to the Fund or that class; other expenses are allocated
proportionately among all of the funds (including the Fund) and classes in the
Company in relation to the net assets of each fund and class. The organizational
expenses of the ESC Strategic Growth Fund are considered expenses of the
Company. As such, the expenses will be allocated across all the Funds in the
Company based on the relative size of each Fund.

PORTFOLIO TRANSACTIONS

Pursuant to the Investment Advisory Agreement and Portfolio Management
Agreement, the Manager places orders for the purchase and sale of portfolio
investments for the Fund's account with brokers or dealers it selects in its
discretion.

In effecting purchases and sales of portfolio securities for the account of the
Fund, the Manager will seek the best execution of the

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11
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Fund's orders. Purchases and sales of common stocks are generally placed by the
Manager with broker-dealers which, in the judgment of the Manager, provide
prompt and reliable execution at favorable security prices and reasonable
commission rates. Broker-dealers are selected on the basis of a variety of
factors such as reputation, capital strength, size and difficulty of order, sale
of Fund shares and research provided to the Manager. Broker-dealers selected to
execute portfolio transactions for the Fund may include affiliates of the
Company, the Adviser, the Administrator, the Manager or a manager of another
fund of the Company, provided the charge for any such transaction does not
exceed usual and customary levels. Subject to Section 28(e) of the Securities
Exchange Act of 1934, the Manager may cause the Fund to pay commissions higher
than another broker-dealer would have charged if the Manager believes the
commission paid is reasonable in relation to the value of the brokerage and
research services received by the Manager. The Fund will not pay higher
securities prices or higher mark-ups or mark-downs, in recognition of the value
of research services provided by a securities dealer, on transactions with a
securities dealer where the dealer sells securities to the Fund or purchases
them from the Fund, on a principal basis. Purchases and sales of any portfolio
debt securities for the Fund are generally placed by the Manager with primary
market makers for these securities on a net basis, without any brokerage
commission being paid by the Fund. Trading does, however, involve transaction
costs. Transactions with dealers serving as primary market makers reflect the
spread between the bid and asked prices. The Fund may purchase securities during
an underwriting, which will include an underwriting fee paid to the underwriter.
To the extent permitted by, and subject to conditions of, applicable law and
regulations, the Fund may purchase securities from an underwriting syndicate of
which an affiliate of the Company, the Adviser, the Administrator or a Manager
is a member (but not directly from such affiliate).

Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Manager may consider sales of shares of the Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.

It is anticipated that the annual portfolio turnover rate for the Fund will not
exceed 100%.

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FUND SHARE VALUATION

The net asset value per share for each class of shares of the Fund is calculated
at 4:00 p.m. (Eastern time), Monday through Friday, on each day the New York
Stock Exchange is open for trading, which excludes the following business
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of each class of shares is computed by dividing the value of net
assets of each class (i.e., the value of the assets less the liabilities) by the
total number of such class's outstanding shares. All expenses, including fees
paid to the Adviser and BISYS, are accrued daily and taken into account for the
purpose of determining the net asset value.

Securities listed on an exchange are valued on the basis of the last sale prior
to the time the valuation is made. If there has been no sale since the
immediately previous valuation, then the current bid price is used. Quotations
are taken for the exchange where the security is primarily traded. Portfolio
securities which are primarily traded on foreign exchanges may be valued with
the assistance of a pricing service and are valued at the preceding closing
values of such securities on their respective exchanges, except that when an
occurrence subsequent to the time a foreign security is valued is likely to have
changed such value, then the fair value of those securities will be determined
by consideration of other factors by or under the direction of the Board of
Directors. Over-

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the-counter securities are valued on the basis of the bid price at the close of
business on each business day. 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. Notwithstanding the above, 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 approved by the
Board of Directors. All assets and liabilities initially expressed in foreign
currencies will be expressed for valuation purposes in U.S. dollars at the mean
between the bid and asked prices of such currencies against U.S. dollars as last
quoted by any major bank.

With respect to options contracts sold by the Fund, the Fund records the premium
received as an asset and equivalent liability, and thereafter adjusts the
liability to the market value of the option determined in accordance with the
preceding paragraph. The premium paid for an option purchased by the Fund is
recorded as an asset and subsequently adjusted to market value. Open futures
contracts are valued at the most recent settlement price, unless such price does
not reflect the fair value of the contract, in which case such positions will be
valued by or under the direction of the Directors.

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PRICING OF FUND SHARES

Orders for the purchase of shares of each class will be executed at the net
asset value per share of that class plus any applicable sales charge (the
"public offering price") next determined after an order has been received in
proper order by the Fund, or by an authorized broker, investment adviser or
Service Organization and transmitted to the Fund by 4:00 p.m. Eastern Time. (See
"Purchase of Fund Shares"). The sales charge on purchases of each class of
shares of the Fund is as follows:

<TABLE>
<CAPTION>
SALES CHARGE AS A AMOUNT OF SALES
PERCENTAGE OF CHARGE REALLOWED
--------------------- TO DEALERS AS A
PUBLIC NET PERCENTAGE OF
OFFERING AMOUNT PUBLIC OFFERING
CLASS A SHARES PRICE INVESTED PRICE
- --------------------------------------------------------------- -------- -------- ----------------
<S> <C> <C> <C>
Amount of Investment
Less than $100,000............................................. 4.50% 4.71% 4.00%
$100,000 but less than $250,000................................ 3.50% 3.63% 3.00%
$250,000 but less than $500,000................................ 2.50% 2.56% 2.25%
$500,000 but less than $1,000,000.............................. 2.00% 2.04% 1.75%
$1,000,000 and over............................................ None None None
CLASS D SHARES
Amount of Investment
Less than $1,000,000........................................... 1.50% 1.52% 1.25%
$1,000,000 and over............................................ None None None
</TABLE>

The sales charge will not apply to shares of either class purchased by: (a)
trust, investment management and other fiduciary accounts managed by the
Adviser, the Manager or a manager of another fund of the Company pursuant to a
written agreement; (b) any person purchasing shares with the proceeds of a
distribution from a trust, investment management or other fiduciary account
managed by the Adviser, the Manager or a manager of another fund of the Company
pursuant to a written agreement; (c) any person purchasing shares with the
proceeds of a redemption of shares of a mutual fund, other than ESC Strategic
Funds, Inc., that were originally purchased with a sales load; (d) BISYS or any
of its affiliates; (e) Directors or officers of the Fund; (f) directors or
officers of BISYS, the Adviser, the Manager or a manager of another fund of the
Company, or affiliates or bona fide full-time employees of any of the foregoing
who have acted as such for not less than 90 days (including members of their
imme-

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diate families and their retirement plans or accounts); or (g) retirement
accounts or plans (or monies from retirement accounts or plans) for which there
is a written service agreement between the Company and the Plan Sponsor, so long
as such shares are purchased through the Distributor; or (h) any person
purchasing shares within an asset allocation or fee based program sponsored by a
financial services organization.

The sales charge also does not apply to shares sold to representatives of
selling brokers and members of their immediate families. In addition, the sales
charge does not apply to sales to bank trust departments, acting on behalf of
one or more clients, of shares having an aggregate value equal to or exceeding
$200,000.

See "Dividends, Distributions and Federal Income Tax," for an explanation of
circumstances in which a sales charge paid to acquire shares of a mutual fund
may not be taken into account in determining gain or loss on the disposition of
those shares.

QUANTITY DISCOUNTS IN THE SALES CHARGES

The following quantity discounts shall be available to: (a) an individual, his
or her spouse, and their children under the age of 21, and any trust, pension,
IRA, spousal IRA, profit sharing or other benefit plan for such persons; (b) a
trustee or other fiduciary of a single trust estate or a single fiduciary
account; (c) a pension, profit-sharing or other employee benefit plan qualified
under Section 401 of the Internal Revenue Code of 1986, and (d) tax-exempt
organizations under Section 501(c)(3) of the Code.

Right of Accumulation

The Fund permits sales charges on Class A shares to be reduced through rights of
accumulation. For Class A shares, the schedule of reduced sales charges will be
applicable once the accumulated value of the account has reached $100,000. For
this purpose, the dollar amount of the qualifying concurrent or subsequent
purchase of Class A shares of the Fund is added to the net asset value of any
other Class A shares of funds in the Company owned at the time by the investor.
The sales charge imposed on the Class A shares being purchased will then be at
the rate applicable to the aggregate of Class A shares purchased. For example,
if the investor held Class A shares of the Fund and other funds in the Company
valued at $100,000 and purchased an additional $20,000 of shares of the Fund or
of another fund in the Company (totalling an investment of $120,000), the sales
charge for the $20,000 purchase would be at the next lower sales charge on the
schedule (i.e., the sales charge for purchases over $100,000 but less than
$250,000). There can be no assurance that investors will receive the cumulative
discounts to which they may be entitled unless, at the time of placing their
purchase order, the investors or their dealers make a written request for the
discount. The cumulative discount program may be amended or terminated at any
time. This particular privilege does not entitle the investor to any adjustment
in the sales charge paid previously on purchases of shares of the Fund or
another fund in the Company. If the investor knows that he will be making
additional purchases of shares in the future, he may wish to consider executing
a Letter of Intent.

Letter of Intent

The schedule of reduced sales charges is also available to Class A investors who
enter into a written Letter of Intent providing for the purchase, within a
13-month period, of Class A shares of the Fund. Shares of the Fund previously
purchased during a 90-day period prior to the date of receipt by the Fund of the
Letter of Intent which are still owned by the shareholder may also be included
in determining the applicable reduction, provided the shareholder or the dealer
notifies the Fund of such prior purchases.

A Letter of Intent permits an investor to establish a total investment goal for
the Fund to be achieved by any number of investments over a 13-month period.
Each investment made during the period will receive the reduced sales commission
applicable to the amount represented by the goal as if it were a single
investment. A number of shares totalling 5% of the dollar amount of the Letter
of Intent will be held in escrow by the

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14
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Distributor in the name of the shareholder. The initial purchase under a Letter
of Intent must be equal to at least 5% of the stated investment goal.

The Letter of Intent does not obligate the investor to purchase, or the Fund to
sell, the indicated amount. In the event the Letter of Intent goal is not
achieved within the 13-month period, the Letter of Intent provides that a
sufficient number of escrowed shares will be liquidated to reimburse the
Distributor to the extent of the difference between the sales charge otherwise
applicable to the purchases made during this period and sales charges actually
paid. If the goal is exceeded and purchases pass the next sales charge level,
the sales charge on the entire amount of the purchase that results in passing
that level and on subsequent purchases will be subject to further reduced sales
charges in the same manner as set forth under "Right of Accumulation," but there
will be no retroactive reduction of sales charges on previous purchases. At any
time while a Letter of Intent is in effect, a shareholder may, by written notice
to the Fund, increase the amount of the stated goal. In that event, shares
purchased during the previous 90-day period and still owned by the shareholder
will be included in determining the applicable sales charge reduction. The 5%
escrow and minimum purchase requirements will be applicable to the new stated
goal. Investors electing to purchase Fund shares pursuant to a Letter of Intent
should carefully read the application for Letter of Intent which is available
from the Fund.

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MINIMUM PURCHASE REQUIREMENTS

The minimum initial investment in the Fund is $1,000, except that the minimum is
$500 for an IRA or other qualified retirement plan. Any subsequent investments
must be at least $50, including an IRA or qualified retirement plan investment.
All initial investments should be accompanied by a completed Purchase
Application. A Purchase Application accompanies this Prospectus. However, a
separate application is required for IRA and other qualified retirement plan
investments. The Fund reserves the right to reject purchase orders. The officers
of the Fund are authorized to waive the minimum initial and subsequent
investment requirements of the Fund.

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PURCHASE OF FUND SHARES

All funds received by the Fund are invested in full and fractional shares of the
indicated class of the Fund. Certificates for shares are not issued. BISYS
maintains records of each shareholder's holdings of Fund shares, and each
shareholder receives a statement of transactions, holdings and dividends. The
Fund reserves the right to reject any purchase.

An investment may be made using any of the following methods:

Through an Authorized Broker, Investment Adviser or Service
Organization. Shares are available to new and existing shareholders through
authorized brokers, investment advisers and Service Organizations. To make an
investment using this method, a Purchase Application must have been completed
and the customer must notify the broker, investment adviser or Service
Organization of the amount to be invested. The broker will then contact the Fund
to place the order.

Orders received by the broker or Service Organization in proper order prior to
the determination of net asset value and transmitted to the Fund prior to the
close of its business day (which is currently 4:00 p.m., Eastern time), will
become effective that day. Brokers who receive orders are obligated to transmit
them promptly. Written confirmation of an order should be received a few days
after the broker has placed the order.

From the Distributor. Shares may be purchased directly from the Distributor by
sending a completed Purchase Application together with a money order, check or
other negotiable bank draft to ESC Strategic Funds, Inc., P.O. Box 182487,
Columbus, Ohio 43218-2487. No third party or foreign checks will be accepted.

By Wire. Investments may be made directly through the use of wire transfers of
Federal funds. An investor's bank may wire Federal funds to the Fund. In most
cases, the bank will either be a member of the Federal Reserve Banking System or
have a relationship with a bank that is. The bank will normally charge a fee for
handling the transaction. A completed Account Application must be overnighted to
the Fund at ESC Strategic Funds, Inc. c/o BISYS Fund Services, Inc., 3435
Stelzer Road, Columbus, Ohio 43219-8021. Notification must be given to the Fund
at 1-800-261-FUND (3863) prior to 4:00 p.m., Eastern time, of the wire date.
Federal funds purchases will be accepted only on a day on which the Funds, the
Distributor and the custodian bank are all open for business. To purchase shares
by a Federal funds wire, investors should first contact the fund for complete
wiring instructions.

Other Purchase Information. Requests in "proper order" must include the
following documentation: (a) a letter of instruction, if required, signed by all
registered owners of the shares in the exact names in which they are registered;
(b) any required signature guarantees (see "Signature Guarantees" below); and
(c) other supporting legal documents, if required, in the case of estates,
trusts, guardianships, custodianships, corporations, pension and profit sharing
plans and other organizations.

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Institutional Accounts. Bank trust departments and other institutional
accounts, not subject to sales charges, may place orders directly with the Fund
by telephone at 1-800-261-FUND(3863).

Automatic Investment Program. An eligible shareholder may also participate in
the ESC Strategic Investment Program, an investment plan that automatically
debits money from the shareholder's bank account and invests it in the Fund
through the use of electronic funds transfers or automatic bank drafts.
Shareholders may commence their participation in this program with a minimum
initial investment of $1,000 and may elect to make subsequent investments by
transfers of a minimum of $50 on either the fifth or twentieth day of each month
or calendar quarter into their established Fund account. Contact the Fund for
more information about the ESC Strategic Automatic Investment Program.

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RETIREMENT PLAN ACCOUNTS

The Fund may be used as a funding medium for IRAs and other qualified retirement
plans ("Plans"). The minimum initial investment for an IRA or a Plan is $500.
Completion of a special application is required in order to create such an
account. Fund shares may also be purchased for IRAs and Plans established with
other authorized custodians. Contributions to IRAs are subject to prevailing
amount limits set by the Internal Revenue Service. For more information about
IRAs and other Plan accounts, call the Fund at 1-800-261-FUND(3863).

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EXCHANGE OF FUND SHARES

The Fund offers two convenient ways to exchange shares for shares of another
fund in the Company. Shares of a particular class of the Fund may be exchanged
only for shares of that same class in another fund, with no sales charge. Before
engaging in an exchange transaction, a shareholder should obtain and read
carefully a prospectus for the fund into which the exchange will occur. A
shareholder may not exchange Fund shares for shares of another fund that is not
qualified for sale in the state of the shareholder's residence. The minimum
amount for an initial exchange is $2,000. There is no minimum for subsequent
exchanges, and no service fee is imposed for an exchange. The Company may
terminate or amend the terms of the exchange privilege at any time upon 60 days'
notice to shareholders.

An exchange is taxable as a sale of a security on which a gain or loss may be
recognized. Shareholders should receive written confirmation of the exchange
within a few days of the completion of the transaction. See "Dividends,
Distributions and Federal Income Tax" for an explanation of circumstances in
which a sales charge paid to acquire shares of the Fund may not be taken into
account in determining gain or loss on the disposition of those shares.

A new account opened by exchange must be established with the same name(s),
address and social security number as the existing account. All exchanges will
be made based on the respective net asset values next determined following
receipt of the request by the Fund containing the information described below.

Exchange by Mail. To exchange Fund shares by mail, shareholders should simply
send a letter of instruction to the Fund. The letter of instruction must
include: (a) the investor's account number; (b) the class of shares to be
exchanged; (c) the name of the Fund and of the fund into which the exchange is
to be made; (d) the dollar or share amount to be exchanged; and (e) the
signatures of all registered owners or authorized parties.

Exchange by Telephone. To exchange Fund shares by telephone or to ask any
questions, shareholders may call the Fund at 1-800-261-FUND(3863). Please be
prepared

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to give the telephone representative the following information: (a) the account
number, social security number and account registration; (b) the class of shares
to be exchanged; (c) the name of the Fund and of the fund into which the
exchange is to be made; and (d) the dollar or share amount to be exchanged.
Telephone exchanges are available only if the shareholder so indicates by
checking the "yes" box on the Purchase Application. The Fund employs procedures,
including recording telephone calls, testing a caller's identity, and sending
written confirmation of telephone transactions, designed to give reasonable
assurance that instructions communicated by telephone are genuine, and to
discourage fraud. To the extent that the Fund does not follow such procedures,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. The Company
reserves the right to suspend or terminate the privilege of exchanging by mail
or by telephone at any time. Telephone Redemption and Telephone Exchange will be
suspended for a period of 10 days following a telephonic address change.

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REDEMPTION OF FUND SHARES

Shareholders may redeem their shares, in whole or in part, on any business day.
Shares will be redeemed at the net asset value next determined after a
redemption request in good order has been received by the Fund. See
"Determination of Net Asset Value." A redemption may be a taxable transaction on
which gain or loss may be recognized.

Where the shares to be redeemed have been purchased by check, the redemption
request will be held until the purchasing check has cleared, which may take up
to 15 days. Shareholders may avoid this delay by investing through wire
transfers of Federal funds. During the period prior to the time the shares are
redeemed, the shareholder will continue to be a record owner of shares for
purposes of receiving any declared dividends and will be entitled to exercise
all other beneficial rights of ownership.

Once the shares are redeemed, the Fund will ordinarily send the proceeds by
check to the shareholder at the address of record on the next business day. The
Fund may, however, take up to three days to make payment, although this will not
be the customary practice. Also, if the New York Stock Exchange is closed (or
when trading is restricted) for any reason other than the customary weekend or
holiday closing or if an emergency condition as determined by the SEC merits
such action, the Fund may suspend redemptions or postpone payment dates.

Redemption Methods. To ensure acceptance of a redemption request, it is
important that shareholders follow the procedures described below. Although the
Fund has no present intention to do so, the Fund reserves the right to refuse or
to limit the frequency of any telephone or wire redemptions. Of course, it may
be difficult to place orders by telephone during periods of severe market or
economic change, and a shareholder should consider alternative methods of
communications, such as couriers. The Fund's services and their provisions may
be modified or terminated at any time by the Fund. If the Fund terminates any
particular service, it will do so only after giving written notice to
shareholders. Redemption by mail will always be available to shareholders.
Requests in "proper order" must include the following documentation: (a) a
letter of instruction, if required, signed by all registered owners of the
shares in the exact names in which they are registered; (b) any required
signature guarantees (see "Signature Guarantees" below); and (c) other
supporting legal documents, if required, in the case of estates, trusts,
guardianships, custodianships, corporations, pension and profit sharing plans
and other organizations.

A shareholder may redeem shares using any of the following methods:

Through an Authorized Broker, Investment Adviser or Service Organization. The
shareholder should contact his or her bro-

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ker, investment adviser or Service Organization and provide instructions to
redeem shares. These organizations are responsible for the prompt transmission
of orders. The broker will contact the Fund and place a redemption trade. The
broker may charge a fee for this service.

By Mail. Shareholders may redeem shares by sending a letter directly to the
Fund. To be accepted, a letter requesting redemption must include: (a) the name
of the Fund, class of shares and account registration from which shares are
being redeemed; (b) the account number; (c) the amount to be redeemed; (d) the
signatures of all registered owners; and (e) if the redemption request is to be
sent to someone other than the registered address, a signature guarantee is
necessary by any eligible guarantor institution including members of national
securities exchanges, commercial banks or trust companies, brokers-dealers,
credit unions and savings associations.

By Telephone. Shareholders may redeem shares by calling the Fund toll free at
1-800-261-FUND(3863). Be prepared to give the telephone representative the
following information: (a) the account number, social security number and
account registration; (b) the name of the Fund and the class from which shares
are being redeemed; and (c) the amount to be redeemed. Telephone redemptions are
available only if the shareholder so indicates by checking the "yes" box on the
Purchase Application or on the Optional Services Form. The Fund employs
procedures, including recording telephone calls, testing a caller's identity,
and sending written confirmation of telephone transactions, designed to give
reasonable assurance that instructions communicated by telephone are genuine,
and to discourage fraud. To the extent that the Fund does not follow such
procedures, it may be liable for losses due to unauthorized or fraudulent
telephone instructions. The Fund will not be liable for acting upon instructions
communicated by telephone that it reasonably believes to be genuine. Telephone
Redemption and Telephone Exchange will be suspended for a period of 10 days
following a telephonic address change.

By Wire. Shareholders may redeem shares by contacting the Fund by mail or
telephone and instructing the Fund to send a wire transmission to the
shareholder's bank.

The shareholder's instructions should include: (a) the account number, social
security number and account registration; (b) the name of the Fund and the class
from which shares are being redeemed; and (c) the amount to be redeemed. Wire
redemptions can be made only if the "yes" box has been checked on the
shareholder's Purchase Application, and a copy is attached of a void check on an
account where proceeds are to be wired. The bank may charge a fee for receiving
a wire payment on behalf of its customer.

Systematic Withdrawal Plan. An owner of $12,000 or more of shares of the Fund
may elect to have periodic redemptions made from his account to be paid on a
monthly, quarterly, semiannual or annual basis. The maximum payment per year is
12% of the account value at the time of the election. A sufficient number of
shares to make the scheduled redemption will normally be redeemed on the date
selected by the shareholder. Depending on the size of the payment requested and
fluctuation in the net asset value, if any, of the shares redeemed, redemptions
for the purpose of making such payments may reduce or even exhaust the account.
A shareholder may request that these payments be sent to a predesignated
bank or other designated party. Capital gains and dividend distributions paid to
the account will automatically be reinvested at net asset value on the
distribution payment date.

Reinstatement Privilege. A shareholder who has redeemed shares on which a sales
charge was paid may reinvest, without a sales charge, up to the full amount of
such redemption at the net asset value determined at the time of the
reinvestment within 30 days of the original redemption. This privilege must be
effected within 30 days of the redemption. The shareholder must reinvest in the
same class of the Fund, and the same account from which the shares were
redeemed. A redemption is a taxable transaction and gain may be recognized for
Federal income tax purposes even if the reinstatement privilege is exercised.
Any loss real-

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ized upon the redemption will not be recognized as to the number of shares
acquired by reinstatement, except through an adjustment in the tax basis of the
shares so acquired. See "Dividends, Distributions and Federal Income Tax" for an
explanation of circumstances in which a sales charge paid to acquire shares of
the Fund may not be taken into account in determining gain or loss on the
disposition of those shares.

Redemption of Small Accounts. Due to the disproportionately higher cost of
servicing small accounts, the Fund reserves the right to redeem, on not less
than 30 days' notice, a Fund account that has been reduced by a shareholder (not
by market action) to $500 or less. However, if during the 30-day notice period
the shareholder purchases sufficient shares to bring the value of the account
above $500, the account will not be redeemed.

Redemption in Kind. All redemptions of Fund shares shall be made in cash,
except that the commitment to redeem shares in cash extends only to redemption
requests made by each shareholder during any 90-day period of up to the lesser
of $250,000 or 1% of the net asset value of the Fund at the beginning of such
period. This commitment is irrevocable without the prior approval of the SEC. In
the case of redemption requests by shareholders in excess of such amounts, the
Board of Directors reserves the right to have the Fund make payment, in whole or
in part, in readily marketable securities or other assets, in case of an
emergency or any time a cash distribution would impair the liquidity of the Fund
to the detriment of the existing shareholders. In this event, the securities
would be valued in the same manner as the securities of the Fund are valued
generally. If the recipient were to sell such securities, he or she would incur
brokerage charges.

Signature Guarantees. To protect shareholder accounts, the Fund and the
Administrator from fraud, signature guarantees are required to enable the Fund
to verify the identity of the person who has authorized a redemption from an
account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareholder(s) and
the registered address, (2) a redemption of $25,000 or more, and (3) share
transfer requests. Signature guarantees may be obtained from certain eligible
financial institutions, including but not limited to, the following: banks,
trust companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities and Transfer Association
Medallion Program ("STAMP"), the Stock Exchange Medallion Program ("SEMP") or
the New York Stock Exchange Medallion Signature Program ("MSP"). Shareholders
may contact the Fund at 1-800-261-FUND (3863) for further details.

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DIVIDENDS, DISTRIBUTIONS, AND
FEDERAL INCOME TAXATION

The Fund intends to qualify annually as a regulated investment company pursuant
to the provisions of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify, the Fund must meet certain income,
distribution and diversification requirements. If the Fund qualifies as a
regulated investment company and timely distributes all of its taxable income,
the Fund generally will not pay any U.S. federal income or excise tax.

The Fund intends to distribute at least annually to its shareholders all of its
investment company taxable income (which includes, among other items, dividends
and interest, less expenses and the excess, if any, of net short-term capital
gains over net long-term capital losses). The Fund also intends to distribute,
at least annually, substantially all net capital gain (the excess of net
long-term capital gains over net short-term capital losses). In determining
amounts of capital gains to be distributed, any capital loss carryovers from
prior years will be applied against current year capital gains.

Distributions will be paid in additional Fund shares of the relevant class based
on the net asset value of that class at the close of business of the payment
date of the distribution, unless the shareholder elects in writing, not less
than five full business days prior to the record date, to receive such
distributions in cash.

Any dividend or other distribution paid by the Fund has the effect of reducing
the net asset value per share on the record date by the amount thereof.
Therefore, a dividend or other distribution paid shortly after a purchase of
shares would represent, in substance, a return of capital to the shareholder (to
the extent it is paid on the shares so purchased), even though subject to income
taxes, as discussed below.

Distributions of investment company taxable income (regardless of whether
derived from dividends, interest or short-term capital gains) will be taxable to
shareholders as ordinary income. If a portion of the Fund's income consists of
dividends paid by U.S. corporations, a portion of the dividends paid by the Fund
may qualify for the deduction for dividends received by corporations.
Distributions of net long-term capital gains designated by the Fund as capital
gain dividends will be taxable as long-term capital gains, regardless of how
long a shareholder has held his Fund shares. Distributions are taxable in the
same manner whether received in additional shares or in cash.

A distribution will be treated as paid on December 31 of the calendar year if it
is declared by the Fund during October, November, or December of that year to
shareholders of record in such a month and paid by the Fund during January of
the following calendar year. Such distributions will be taxable to shareholders
in the calendar year in which the distributions are declared, rather than the
calendar year in which the distributions are received.

Any gain or loss realized by a shareholder upon the sale or other disposition of
shares of the Fund, or upon receipt of a distribution in complete liquidation of
the Fund, generally will be a capital gain or loss which will be long-term or
short-term, generally depending upon the shareholder's holding period for the
shares.

Under certain circumstances, the sales charge incurred in acquiring shares of
the Fund may not be taken into account in determining the gain or loss on the
disposition of those shares. This rule applies when Fund shares are exchanged
within 90 days after the date they were purchased for shares of another fund
without payment of a sales charge or at a reduced sales charge. In that case,
the gain or loss recognized on the exchange will be determined by excluding from
the tax basis of the shares exchanged all or a portion of the sales charge
incurred in acquiring those shares. This exclusion applies to the extent that
the otherwise applicable sales charge with respect to the newly acquired shares
is reduced as a result of having incurred a sales charge initially. The portion
of the sales charge affected by

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this rule will be treated as a sales charge paid for the new shares.

The Fund may be required to withhold Federal income tax of 31% ("backup
withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to provide a correct taxpayer identification number or to
make required certifications, or where the Fund or a shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code are exempt from backup withholding. Backup withholding is
not an additional tax. Any amounts withheld may be credited against the
shareholder's U.S. federal income tax liability.

Further information relating to tax consequences is contained in the SAI.

Shareholders will be notified annually by the Company as to the federal tax
status of distributions made by the Fund. Depending on the residence of the
shareholder for tax purposes, distributions also may be subject to state and
local taxes, including withholding taxes. Foreign shareholders may, for example,
be subject to special withholding requirements. Special tax treatment, including
a penalty on certain pre-retirement distributions, is accorded to accounts
maintained as IRAs. Shareholders should consult their own tax advisers as to the
federal, state and local tax consequences of ownership of Fund shares in their
particular circumstances.

If you elect to receive distributions in cash and checks (1) are returned and
marked as "undeliverable" or (2) remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Fund at the per share net asset
value determined as of the date of payment of the distribution. In addition, any
undeliverable check or checks that remain uncashed for six months will be
canceled and will be reinvested in the Fund at the per share net asset value
determined as of the date of cancellation.

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DESCRIPTION OF SECURITIES AND
INVESTMENT PRACTICES

U.S. Government Securities. U.S. Government securities are obligations issued
or guaranteed by the U.S. Government, its agencies or instrumentalities. U.S.
Treasury bills, which have a maturity of up to one year, are direct obligations
of the United States and are the most frequently issued marketable U.S.
Government security. The U.S. Treasury also issues securities with longer
maturities in the form of notes and bonds.

U.S. Government agency and instrumentality obligations are debt securities
issued by U.S. Government-sponsored enterprises and federal agencies. Some
obligations of agencies are supported by the full faith and credit of the United
States or by U.S. Treasury guarantees, such as mortgage-backed certificates
issued by the Government National Mortgage Association; others, such as
obligations of the Federal Home Loan Banks, Federal Farm Credit Bank, Bank for
Cooperatives, Federal Intermediate Credit Banks and the Federal Land Bank, are
guaranteed by the right of the issuer to borrow from the U.S. Treasury; others,
such as obligations of the Federal National Mortgage Association, are supported
by discretionary authority of the U.S. Government to purchase certain
obligations of the agency or instrumentality; and others, such as obligations of
the Student Loan Marketing Association and the Tennessee Valley Authority, are
backed only by the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States, the investor must look principally to the agency issuing
or guaranteeing the obligation for ultimate repayment.

Bank Obligations. These obligations include negotiable certificates of deposit
and bankers' acceptances. The Fund limits its bank investments to
dollar-denominated obligations of U.S. or foreign banks which have

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more than $1 billion in total assets at the time of investment and, in the case
of U.S. banks, are members of the Federal Reserve System or are examined by the
Comptroller of the Currency, or whose deposits are insured by the Federal
Deposit Insurance Corporation.

Commercial Paper. Commercial paper includes short-term unsecured promissory
notes, variable rate demand notes and variable rate master demand notes issued
by domestic and foreign bank holding companies, corporations and financial
institutions, as well as similar instruments issued by government agencies and
instrumentalities. The Fund has established standards of creditworthiness for
issuers of such investments.

Corporate Debt Securities. The Fund's investments in U.S. dollar- or foreign
currency-denominated corporate debt securities of domestic or foreign issuers
are limited to corporate debt securities (corporate bonds, debentures, notes and
other similar corporate debt instruments) which meet the previously disclosed
minimum ratings criteria established for the Fund under the direction of the
Board of Directors and the Fund's Manager or, if unrated, are in the Manager's
opinion comparable in quality to corporate debt securities in which the Fund may
invest. See "The Fund." The rate of return or return of principal on some debt
obligations may be linked or indexed to the level of exchange rates between the
U.S. dollar and a foreign currency or currencies.

Repurchase Agreements. Securities held by the Fund may be subject to repurchase
agreements. A repurchase agreement is a transaction in which the seller of a
security commits itself at the time of the sale to repurchase that security from
the buyer at a mutually agreed-upon time and price. These agreements may be
considered to be loans by the purchaser collateralized by the underlying
securities. These agreements will be fully collateralized and the collateral
plus accrued interest will be marked-to-market daily. The Fund will enter into
repurchase agreements only with dealers, domestic banks or recognized financial
institutions which, in the opinion of the Manager, present minimal credit risks
in accordance with guidelines adopted by the Board of Directors. In the event of
default by the seller under the repurchase agreement, the Fund may have problems
in exercising its rights to the underlying securities and may experience time
delays in connection with the disposition of such securities.

Loans of Portfolio Securities. To increase current income the Fund may lend its
portfolio securities worth up to 5% of the Fund's total assets to brokers,
dealers and financial institutions, provided certain conditions are met,
including the condition that each loan is secured continuously by collateral
maintained on a daily mark-to-market basis in an amount at least equal to the
current market value of the securities loaned. For further information, see the
SAI.

Variable and Floating Rate Demand and Master Demand Notes. The Fund may, from
time to time, buy variable or floating rate demand notes issued by corporations,
bank holding companies and financial institutions and similar instruments issued
by government agencies and instrumentalities. These securities will typically
have a maturity over one year but carry with them the right of the holder to put
the securities to a remarketing agent or other entity at designated time
intervals and on specified notice. The obligation of the issuer of the put to
repurchase the securities may be backed by a letter of credit or other
obligation issued by a financial institution. The repurchase price is ordinarily
par plus accrued and unpaid interest. Generally, the remarketing agent will
adjust the interest rate every seven days (or at other specified intervals) in
order to maintain the interest rate at the prevailing rate for securities with a
seven-day or other designated maturity. The Fund's investments in demand
instruments which provide that the Fund will not receive the principal note
amount within seven days' notice, in combination with the Fund's other
investments in illiquid instruments, will be limited to an aggregate total of
15% of the Fund's net assets.

The Fund may also buy variable rate master demand notes. The terms of these
obligations permit the Fund to invest fluctuating amounts at varying rates of
interest pursuant to direct arrangements between the Fund, as

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lender, and the borrower. These instruments permit weekly and, in some
instances, daily changes in the amounts borrowed. The Fund has the right to
increase the amount under the note at any time up to the full amount provided by
the note agreement, or to decrease the amount, and the borrower may repay up to
the full amount of the note without penalty. The notes may or may not be backed
by bank letters of credit. Because the notes are direct lending arrangements
between the Fund and borrower, it is not generally contemplated that they will
be traded, and there is no secondary market for them, although they are
redeemable (and, thus, immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time. In connection with any such purchase
and on an ongoing basis, the Manager will consider the earning power, cash flow
and other liquidity ratios of the issuer, and its ability to pay principal and
interest on demand, including a situation in which all holders of such notes
make demand simultaneously. While master demand notes, as such, are not
typically rated by credit rating agencies, the Fund may, under its minimum
rating standards, invest in them only if, at the time of an investment, the
issuer meets the criteria set forth in this Prospectus for commercial paper
obligations.

Foreign Securities. The Fund may purchase foreign securities traded in the
United States or in foreign markets. The Fund may invest directly in foreign
equity securities and in securities represented by European Depositary Receipts
("EDRs") or American Depositary Receipts ("ADRs"). ADRs are dollar-denominated
receipts generally issued by domestic banks, which represent the deposit with
the bank of a security of a foreign issuer, and which are publicly traded on
exchanges or over-the-counter in the United States. EDRs are receipts similar to
ADRs and are issued and traded in Europe.

There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreement for service and payment will be
between the depositary and the shareholders. The company issuing the stock
underlying the ADRs pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.

In addition, in an unsponsored ADR program, there may be several depositaries
with no defined legal obligations to the non-U.S. company. The duplicate
depositaries may lead to marketplace confusion because there would be no central
source of information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports.

The Fund may invest directly in both sponsored and unsponsored U.S. dollar- or
foreign currency-denominated corporate securities (including preferred or
preference stock), certificates of deposit and bankers' acceptances issued by
foreign banks, U.S. dollar-denominated bonds sold in the United States ("Yankee
bonds"), other bonds denominated in U.S. dollars or other currencies and sold to
investors outside the United States ("Eurobonds"), and obligations of foreign
governments or their subdivisions, agencies and instrumentalities, international
agencies and supranational entities. There may be less information available to
the Fund concerning unsponsored securities, for which the paying agent is
located outside the United States. See "Risks of Investing in the Fund."

Forward Foreign Currency Transactions. The Fund may enter into forward foreign
currency exchange contracts in order to protect against uncertainty in the level
of future foreign exchange rates. See the SAI for further information concerning
forward foreign currency transactions.

Futures Contracts and Options. The Fund may purchase and sell futures contracts
on securities, currencies, and indices of securities, and write and sell put and
call options on securities, currencies and indices of securities as a hedge
against changes in interest rates, stock prices, currency fluctuations and other
market developments, provided that not more than 5% of the Fund's net assets are
committed to margin deposits on futures

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contracts and premiums for options. See the SAI for further information about
futures and options. See "Risks of Investing in the Fund" for a discussion of
risks related to investing in futures and options.

Short Sales. The Fund may from time to time sell securities short. A short sale
is a transaction in which the Fund sells securities it does not own (but has
borrowed) in anticipation of a decline in the market price of the securities.
Risks associated with short sales of securities are described below under "Risks
of Investing in the Fund."

To complete a short sale, the Fund must arrange through a broker to borrow the
securities to be delivered to the buyer. The proceeds received by the Fund from
the short sale are retained by the broker until the Fund replaces the borrowed
securities. In borrowing the securities to be delivered to the buyer, the Fund
becomes obligated to replace the securities borrowed at their market price at
the time of replacement, whatever that price may be. The Fund may have to pay a
premium to borrow the securities and must pay any dividends or interest payable
on the securities until they are replaced.

The Fund's obligation to replace the securities borrowed in connection with a
short sale will be secured by collateral deposited with the broker that consists
of cash or obligations of the U.S. Government, its agencies and
instrumentalities ("U.S. Government Securities"). In addition, the Fund will
place in a segregated account with its custodian an amount of cash or U.S.
Government Securities equal to the difference, if any, between (a) the market
value of the securities sold at the time they were sold short, and (b) any cash
or U.S. Government Securities deposited as collateral with the broker in
connection with the short sale (not including the proceeds of the short sale).
Until it replaces the borrowed securities, the Fund will maintain the segregated
account daily at a level so that (a) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short, and (b)
the amount deposited in the account plus the amount deposited with the broker
(not including the proceeds from the short sale) will not be less than the
market value of the securities at the time they were sold short. For further
limitations on the Fund's short sales, see "Risks of Investing in the Fund."

Short Sales Against the Box. The Fund may, in addition to engaging in short
sales as described above, enter into a short sale of common stock such that when
the short position is open, the Fund owns an equal amount of preferred stock or
debt securities, convertible or exchangeable without payment of further
consideration, into an equal number of shares of the common stock sold short.
This kind of short sale, which is described as one "against the box," will be
entered into by the Fund for the purpose of receiving a portion of the interest
earned by the executing broker from the proceeds of the sale. The proceeds of
the sale will be held by the broker until the settlement date, when the Fund
delivers the convertible securities to close out its short position. Although,
prior to delivery, the Fund will have to pay an amount equal to any dividends
paid on the common stock sold short, the Fund will receive the dividends from
the preferred stock or interest from the debt securities convertible into the
stock sold short, plus a portion of the interest earned from the proceeds of the
short sale. The Fund will deposit, in a segregated account with its custodian,
convertible preferred stocks or convertible debt securities in connection with
short sales against the box. A maximum of 10% of the value of the Funds' net
assets will be, when added together, (a) deposited as collateral in short sales
and (b) allocated to segregated accounts in connection with short sales.

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INVESTMENT RESTRICTIONS

The following restrictions are applicable to the Fund.

(1) The Fund may not, with respect to 75% of its total assets, purchase more
than 10% of

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the voting securities of any one issuer or invest more than 5% of the value of
such assets in the securities or instruments of any one issuer, except
securities or instruments issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

(2) The Fund may not purchase securities or instruments which would cause 25% or
more of the market value of its total assets at the time of such purchase to be
invested in securities or instruments of one or more issuers having their
principal business activities in the same industry, provided that there is no
limit with respect to investments in the U.S. Government, its agencies and
instrumentalities.

(3) The Fund may not borrow money, except that the Fund may borrow from banks up
to 10% of the current value of its total net assets for temporary or emergency
purposes. The Fund will make no purchases if its outstanding borrowings exceed
5% of its total assets.

(4) The Fund may not make loans, except that the Fund may (a) lend its portfolio
securities, (b) enter into repurchase agreements with respect to its portfolio
securities, and (c) purchase the types of debt instruments described in this
Prospectus or the SAI.

The foregoing investment restrictions and those described in the SAI as
fundamental are policies of the Fund which may be changed only when permitted by
law and approved by the holders of a majority of the Fund's outstanding voting
securities as described under "Other Information -- Voting."

Additionally, as a non-fundamental policy, the Fund may not invest more than 15%
of the value of its net assets in investments which are illiquid, or not readily
marketable (including repurchase agreements having maturities of more than seven
calendar days and variable and floating rate demand and master demand notes not
requiring receipt of the principal note amount within seven days' notice).

Except for limits on borrowing and on investments in illiquid securities, if a
percentage restriction on investment policies or the investment or use of assets
set forth in this Prospectus are adhered to at the time a transaction is
effected, later changes in percentage resulting from changing values will not be
considered a violation.

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OTHER INFORMATION

CAPITALIZATION

ESC Strategic Funds, Inc. was organized as a Maryland corporation on November
24, 1993 and currently consists of six separately managed portfolios, including
the Fund. (The Company has one additional portfolio that is currently inactive.)
The Board of Directors may establish additional portfolios in the future. The
capitalization of the Company consists solely of 650 million shares of common
stock with a par value of $0.001 per share. When issued, shares of the Fund are
fully paid, non-assessable and freely transferable.

VOTING

Shareholders have the right to vote in the election of Directors and on any and
all matters on which, by law or under the provisions of the Articles of
Incorporation, they may be entitled to vote. The Company is not required to hold
regular annual meetings of the Fund's shareholders and does not intend to do so.
The Fund's shareholders vote separately on matters affecting only that Fund and
shareholders of each class vote separately on matters affecting only that class,
such as the service and distribution plan for that class. The Company has
received an order of exemption from the Securities and Exchange Commission which
permits it to retain new Managers that are unaffiliated with the Adviser without
obtaining shareholder approval.

The Articles of Incorporation provide that the holders of not less than a
majority of the outstanding shares of the Company may remove a person serving as
Director. The Directors are required to call a meeting for the purpose of
considering the removal of a

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26
<PAGE> 30

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

person serving as Director if requested in writing to do so by the holders of
not less than 10% of the outstanding shares of the Company. See "Other
Information -- Voting Rights" in the SAI.

Shares entitle their holders to one vote per share (with proportionate voting
for fractional shares). As used in this Prospectus, the phrase "vote of a
majority of the outstanding shares" of the Fund, a class or the Company, as
applicable, means the vote of the lesser of: (1) 67% of the shares of the Fund
(a class or the Company) present at a meeting if the holders of more than 50% of
the outstanding shares are present in person or by proxy; or (2) more than 50%
of the outstanding shares of the Fund (a class or the Company).

PERFORMANCE INFORMATION

The Fund may, from time to time, include the yield and total return for shares
(including each class) in advertisements or reports to shareholders or
prospective investors. The methods used to calculate the yield and total return
of the Fund are mandated by the SEC.

Quotations of "yield" will be based on the investment income per share during a
particular 30-day (or one month) period (including dividends and interest), less
expenses accrued during the period ("net investment income"), and will be
computed by dividing net investment income by the maximum public offering price
per share for each class on the last day of the period.

Quotations of yield reflect the Fund's (and its classes') performance only
during the particular period on which the calculations are based. Yields will
vary based on changes in market conditions, the level of interest rates and the
level of the Fund's and each class's expenses, including class-specific
expenses, and no reported performance figure should be considered an indication
of performance which may be expected in the future. Quotations of average annual
total return will be expressed in terms of the average annual compounded rate of
return of a hypothetical investment in shares of the Fund (or class) over
periods of 1, 5 and 10 years (up to the life of the Fund), reflect the deduction
of a proportional share of Fund (and class-specific expenses) on an annual
basis, and assume that all dividends and distributions are reinvested when paid.

Performance information for the Fund may be compared to various unmanaged
indices, such as the Standard & Poor's 500 Stock Index, the Dow Jones Industrial
Average, indices prepared by Lipper Analytical Services, and other entities or
organizations which track the performance of investment companies. Any
performance information should be considered in light of the Fund's investment
objectives and policies, characteristics and quality of the Fund and the market
conditions during the time period indicated, and should not be considered to be
representative of what may be achieved in the future. For a description of the
methods used to determine yield and total return for the Fund, see the SAI.

ACCOUNT SERVICES

All transactions in shares of the Fund will be reflected in a statement for each
shareholder. In those cases where a Service Organization or its nominee is
shareholder of record of shares purchased for its customer, the Fund has been
advised that the statement may be transmitted to the customer at the discretion
of the Service Organization.

BISYS, the Company's Administrator, provides fund accounting functions for the
Fund, and provides personnel and facilities to perform shareholder servicing and
transfer agency-related services for the Company.

SHAREHOLDER INQUIRIES

All shareholder inquiries should be directed to ESC Strategic Funds Inc., P.O.
Box 182485, Columbus, Ohio 43218-2487.

General and Account Information:
(800) 261-FUND(3863).

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27
<PAGE> 31

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APPENDIX
DESCRIPTION OF BOND RATINGS

DESCRIPTION OF MOODY'S BOND RATINGS:

Excerpts from Moody's description of its bond ratings are listed as follows:
AAA -- judged to be the best quality and they carry the smallest degree of
investment risk; AA -- judged to be of high quality by all standards -- together
with the Aaa group, they comprise what are generally known as high grade bonds;
A -- possess many favorable investment attributes and are to be considered as
"upper medium grade obligations"; BAA -- considered to be medium grade
obligations, i.e., they are neither highly protected nor poorly
secured -- interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time; BA -- judged to
have speculative elements, their future cannot be considered as well assured;
B -- generally lack characteristics of the desirable investment; CAA -- are of
poor standing -- such issues may be in default or there may be present elements
of danger with respect to principal or interest; CA -- speculative in a high
degree, often in default; C -- lowest rated class of bonds, regarded as having
extremely poor prospects.

Moody's also supplies numerical indicators 1, 2 and 3 to rating categories. The
modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.

DESCRIPTION OF S&P'S BOND RATINGS:

Excerpts from S&P's description of its bond ratings are listed as follows:
AAA -- highest grade obligations, in which capacity to pay interest and repay
principal is extremely strong; AA -- has a very strong capacity to pay interest
and repay principal, and differs from AAA issues only in a small degree; A --
has a strong capacity to pay interest and repay principal, although they are
somewhat more susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB -- regarded as
having an adequate capacity to pay interest and repay principal; whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories. This group is the lowest which qualifies for commercial bank
investment. BB, B, CCC, CC, C -- predominantly speculative with respect to
capacity to pay interest and repay principal in accordance with terms of the
obligations; BB indicates the highest grade and C the lowest within the
speculative rating categories. D -- interest or principal payments are in
default.

S&P applies indicators "+," no character, and "-" to its rating categories. The
indicators show relative standing within the major rating categories.

DESCRIPTION OF MOODY'S COMMERCIAL
PAPER RATINGS:

Excerpts from Moody's commercial paper ratings are listed as follows:
PRIME-1 -- issuers (or supporting institutions) have a superior ability for
repayment of senior short-term promissory obligations; PRIME-2 -- issuers (or
supporting institutions) have a strong ability for repayment of senior short-
term promissory obligations; PRIME-3 -- issuers (or supporting institutions)
have an acceptable ability for repayment of senior short-term promissory
obligations; NOT PRIME -- issuers rated Not Prime do not fall within any of the
Prime categories.

DESCRIPTION OF S&P'S RATINGS FOR
CORPORATE DEBT:

INVESTMENT GRADE RATINGS: AAA -- has the highest rating assigned by
S&P -- capacity to pay interest and repay principal is extremely strong;
AA -- has a very strong capacity to pay interest and repay principal and differs
from the highest rated issues only in a small degree; A -- has strong capacity
to pay interest and repay principal although it

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

28
<PAGE> 32

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

is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories; BBB -- is regarded
as having an adequate capacity to pay interest and repay principal -- whereas it
normally exhibits adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.

SPECULATIVE GRADE RATINGS: BB, B, CCC, CC, C -- regarded as having predominantly
speculative characteristics with respect to capacity to pay interest and repay
principal -while such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions; CI -- reserved for income bonds on which no
interest is being paid; D -- in default, and payment of interest and/or
repayment of principal is in arrears. PLUS (+) OR MINUS (-) -- the ratings from
"AA" to "CCC" may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.

DESCRIPTION OF S&P'S RATINGS FOR SHORT-TERM CORPORATE DEMAND OBLIGATIONS AND
COMMERCIAL PAPER:

An S&P commercial paper rating is a current assessment of the likelihood of
timely repayment of debt having an original maturity of no more than 365 days.
Excerpts from S&P's description of its commercial paper ratings are listed as
follows: A-1 -- the degree of safety regarding timely payment is strong -- those
issues determined to possess extremely strong safety characteristics will be
denoted with a plus (+) designation; A-2 -- capacity for timely payment on
issues with this designation is satisfactory -- however, the relative degree of
safety is not as high as for issues designated "A-1;" A-3 -- has adequate
capacity for timely payment -- however, is more vulnerable to the adverse
effects of changes in circumstances than obligations carrying the higher
designations; B -- regarded as having only speculative capacity for timely
payment; C -- short-term debt obligations with a doubtful capacity for payment;
D -- in payment default -- the "D" rating category is used when interest
payments or principal payments are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period.

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29
<PAGE> 33

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ADDRESS FOR:

[LOGO] ESC STRATEGIC FUNDS

ESC STRATEGIC GROWTH FUND
A PORTFOLIO OF
ESC STRATEGIC FUNDS, INC.

3435 STELZER ROAD
COLUMBUS, OHIO 43219

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

BISYS FUND SERVICES
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

INDEPENDENT ACCOUNTANTS

Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036

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<PAGE> 34

ESC STRATEGIC GROWTH FUND
A PORTFOLIO OF
ESC STRATEGIC FUNDS, INC.
3435 SLELZER ROAD
COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION: (800) 261-3863

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

EQUITABLE SECURITIES CORPORATION --
INVESTMENT ADVISER AND DISTRIBUTOR

BISYS FUND SERVICES -
ADMINISTRATOR, TRANSFER AGENT AND FUND ACCOUNTING AGENT

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information ("SAI") describes ESC
Strategic Growth Fund (the "Fund"), one of six funds offered by ESC Strategic
Funds, Inc. (the "Company"). The Fund is advised by Equitable Securities
Corporation (the "Adviser"). Its portfolio manager is Equitable Asset
Management (the "Manager"), an affiliate of the Adviser. See "Management."
Shares of the Fund are sold to the public by the Distributor as an investment
vehicle for individuals, institutions, corporations and fiduciaries, including
customers of the Adviser or its affiliates.

The Company is offering an indefinite number of shares of each class
of the Fund.

This SAI is not a prospectus and is authorized for distribution only
when preceded or accompanied by the prospectus for the Fund dated
_______________, 199_ (the "Prospectus"). This SAI contains additional and
more detailed information than that set forth in the Prospectus and should be
read in conjunction with the Prospectus. The Prospectus may be obtained
without charge by writing or calling the Fund at the address and information
numbers printed above.

____________, 199_
<PAGE> 35

<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------

PAGE
----

<S> <C>
INVESTMENT POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Bank Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Commercial Paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Corporate Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Repurchase Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Variable and Floating Rate Demand and Master Demand Notes . . . . . . . . . . . . . . . . . . . . . . . . . 2
Loans of Portfolio Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Foreign Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Forward Foreign Currency Exchange Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Stock Index Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Option Writing and Purchasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Options on Futures Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Risks of Futures and Options Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Limitations on Futures Contracts and Options on Futures Contracts . . . . . . . . . . . . . . . . . . . . . 8

INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Investment Adviser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Distribution of Fund Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Administrative Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Service Organizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

PORTFOLIO TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Portfolio Turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Custodian, Transfer Agent and Dividend Disbursing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Yield and Performance Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Registration Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>

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<PAGE> 36

INVESTMENT POLICIES

The Prospectus discusses the investment objective of the Fund and the
policies to be employed to achieve that objective. This section contains
supplemental information concerning certain types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize, and certain risks attendant to such
investments, policies and strategies.

Bank Obligations. These obligations include negotiable certificates
of deposit and bankers' acceptances. A description of the banks the
obligations of which the Fund may purchase are set forth in the Prospectus. A
certificate of deposit is a short-term, interest-bearing negotiable certificate
issued by a commercial bank against funds deposited in the bank. A bankers'
acceptance is a short-term draft drawn on a commercial bank by a borrower,
usually in connection with an international commercial transaction. The
borrower is liable for payment as is the bank, which unconditionally guarantees
to pay the draft at its face amount on the maturity date.

Commercial Paper. Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by the Fund
must meet the Fund's minimum rating criteria.

Corporate Debt Securities. Fund investments in these securities are
limited to corporate debt securities (corporate bonds, debentures, notes and
similar corporate debt instruments) which meet the Fund's rating criteria.

After purchase by the Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require a sale of such security by the Fund. However, the
Manager will consider such event in its determination of whether the Fund
should continue to hold the security. To the extent the ratings given by
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation
("S&P") or another rating agency may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in the Prospectus and in this SAI.

Repurchase Agreements. The Fund may invest in securities subject to
repurchase agreements with U.S. banks or broker-dealers. Such agreements may
be considered to be loans by the Funds for purposes of the Investment Company
Act of 1940, as amended (the "1940 Act"). A repurchase agreement is a
transaction in which the seller of a security commits itself at
<PAGE> 37

the time of the sale to repurchase that security from the buyer at a mutually
agreed-upon time and price. The repurchase price exceeds the sale price,
reflecting an agreed-upon interest rate effective for the period the buyer owns
the security subject to repurchase. The agreed-upon rate is unrelated to the
interest rate on that security. The Manager will monitor the value of the
underlying security at the time the transaction is entered into and at all
times during the term of the repurchase agreement to insure that the value of
the security always equals or exceeds the repurchase price. In the event of
default by the seller under the repurchase agreement, the Fund may have
problems in exercising its rights to the underlying securities and may incur
costs and experience time delays in connection with the disposition of such
securities.

Variable and Floating Rate Demand and Master Demand Notes. The Fund
may, from time to time, buy variable rate demand notes issued by corporations,
bank holding companies and financial institutions and similar instruments
issued by government agencies and instrumentalities. These securities will
typically have a maturity in the 5 to 20 year range but carry with them the
right of the holder to put the securities to a remarketing agent or other
entity on short notice, typically seven days or less. The obligation of the
issuer of the put to repurchase the securities is backed up by a letter of
credit or other obligation issued by a financial institution. The purchase
price is ordinarily par plus accrued and unpaid interest. Ordinarily, the
remarketing agent will adjust the interest rate every seven days (or at other
intervals corresponding to the notice period for the put), in order to maintain
the interest rate at the prevailing rate for securities with a seven-day
maturity.

The Fund may also buy variable rate master demand notes. The terms of
these obligations permit the investment of fluctuating amounts by the Fund at
varying rates of interest pursuant to direct arrangements between the Fund, as
lender, and the borrower. They permit weekly, and in some instances, daily,
changes in the amounts borrowed. The Fund has the right to increase the amount
under the note at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to the
full amount of the note without penalty. The notes may or may not be backed by
bank letters of credit. Because the notes are direct lending arrangements
between the lender and the borrower, it is not generally contemplated that they
will be traded, and there is no secondary market for them, although they are
redeemable (and thus, immediately repayable by the borrower) at principal
amount, plus accrued interest, at any time. The Fund has no limitations on the
type of issuer from whom the notes will be purchased. However, in connection
with such purchase and on an ongoing

- 2 -
<PAGE> 38

basis, the Manager will consider the earning power, cash flow and other
liquidity ratios of the issuer, and its ability to pay principal and interest
on demand, including a situation in which all holders of such notes make demand
simultaneously. While master demand notes, as such, are not typically rated by
credit rating agencies, if not so rated, the Fund may, under its minimum rating
standards, invest in them only if at the time of an investment the issuer meets
the criteria set forth in the Prospectus for other comparable debt obligations.

Floating rate demand and master demand notes are similar to variable
rate instruments except that their interest rates vary with a designated market
index or market rate, such as the coupon equivalent of the U.S. Treasury bill
rate.

Loans of Portfolio Securities. The Fund may lend its portfolio
securities to brokers, dealers and financial institutions, provided: (1) the
loan is secured continuously by collateral consisting of U.S. Government
securities or cash or letters of credit maintained on a daily mark-to-market
basis in an amount at least equal to the current market value of the securities
loaned; (2) the Fund may at any time call the loan and obtain the return of the
securities loaned within five business days; (3) the Fund will receive any
interest or dividends paid on the loaned securities; and (4) the aggregate
market value of securities loaned will not at any time exceed 5% of the total
assets of the Fund.

The Fund will earn income for lending its securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Fund may pay
reasonable finders, administrative and custodial fees. Loans of securities
involve a risk that the borrower may fail to return the securities or may fail
to provide additional collateral.

Foreign Securities. As described in the Prospectus, changes in
foreign exchange rates will affect the value of securities denominated or
quoted in currencies other than the U.S. dollar.

Since the Fund may invest in securities denominated in currencies
other than the U.S. dollar, and since the Fund may, for various periods pending
investment for non speculative purposes, hold funds in bank deposits or other
money market investments denominated in foreign currencies, the Fund may be
affected favorably or unfavorably by exchange control regulations or changes in
the exchange rate between such currencies and the dollar. Changes in foreign
currency exchange rates will influence values of securities in the Fund's
portfolio, from the perspective of U.S. investors. Changes in foreign
currency

- 3 -
<PAGE> 39

exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities, and net investment income
and gains, if any, to be distributed to shareholders by the Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.

Forward Foreign Currency Exchange Contracts. The Fund may enter into
forward foreign currency exchange contracts in order to protect against
uncertainty in the level of future foreign exchange rates. A forward foreign
currency exchange contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are entered into in the interbank market conducted
between currency traders (usually large commercial banks) and their customers.
Forward foreign currency exchange contracts may be bought or sold to protect the
Fund against a possible loss resulting from an adverse change in the
relationship between foreign currencies and the U.S. dollar, or between foreign
currencies. Although such contracts are intended to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time, they
tend to limit any potential gain which might result should the value of such
currency increase.

Stock Index Futures Contracts. The Fund may enter into stock index
futures contracts in order to protect the value of its common stock
investments. A stock index futures contract is an agreement in which one party
agrees to deliver to the other an amount of cash equal to a specific dollar
amount times the difference between the value of a specific stock index at the
close of the last trading day of the contract and the price at which the
agreement is made. As the aggregate market value of the stocks in the index
changes, the value of the index also will change. In the event that the index
level rises above the level at which the stock index futures contract was sold,
the seller of the stock index futures contract will realize a loss determined
by the difference between the two index levels at the time of expiration of the
stock index futures contract, and the purchaser will realize a gain in that
amount. In the event the index level falls below the level at which the stock
index futures contract was sold, the seller will recognize a gain determined by
the difference between the two index levels at the expiration of the stock
index futures contract, and the purchaser will realize a loss. Stock index
futures contracts expire on a fixed date,

- 4 -
<PAGE> 40

currently one to seven months from the date of the contract, and are settled
upon expiration of the contract.

The Fund intends to utilize stock index futures contracts only for the
purpose of attempting to protect the value of its common stock portfolio in the
event of a decline in stock prices and, therefore, usually will be a seller of
stock index futures contracts. This risk management strategy is an alternative
to selling securities in the portfolio and investing in money market
instruments. Also, stock index futures contracts may be purchased to protect
the Fund against an increase in prices of stocks which the Fund intends to
purchase. If the Fund is unable to invest its cash (or cash equivalents) in
stock in an orderly fashion, the Fund could purchase a stock index futures
contract which may be used to offset any increase in the price of the stock.
However, it is possible that the market may decline instead, resulting in a
loss on the stock index futures contract. If the Fund then concludes not to
invest in stock at that time, or if the price of the securities to be purchased
remains constant or increases, the Fund will realize a loss on the stock index
futures contract that is not offset by a reduction in the price of securities
purchased. The Fund also may buy or sell stock index futures contracts to
close out existing futures positions.

Option Writing and Purchasing. The Fund may write (or sell) put and
call options on the securities that the Fund is authorized to buy or already
holds in its portfolio. These option contracts may be listed for trading on a
national securities exchange or traded over-the-counter. The Fund may also
purchase put and call options. The Fund will not write covered calls on more
than 5% of its portfolio, and the Fund will not write covered calls with strike
prices lower than the underlying securities' cost basis on more than 5% of its
total portfolio. The Fund may not invest more than 5% of its total assets in
option purchases.

A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at the agreed upon exercise (or
"strike") price during the option period. A put option gives the purchaser the
right to sell, and the writer the obligation to buy, the underlying security at
the strike price during the option period. Purchasers of options pay an
amount, known as a premium, to the option writer in exchange for the right
under the option contract.

The Fund may sell "covered" put and call options as a means of hedging
the price risk of securities in the Fund's portfolio. The sale of a call
option against an amount of cash equal to the put's potential liability
constitutes a "covered put." When a

- 5 -
<PAGE> 41

Fund sells an option, if the underlying securities do not increase (in the case
of a call option) or decrease (in the case of a put option) to a price level
that would make the exercise of the option profitable to the holder of the
option, the option will generally expire without being exercised and the Fund
will realize as profit the premium paid for such option. When a call option of
which the Fund is the writer is exercised, the option holder purchases the
underlying security at the strike price and the Fund does not participate in
any increase in the price of such securities above the strike price. When a
put option of which the Fund is the writer is exercised, the Fund will be
required to purchase the underlying securities at the strike price, which may
be in excess of the market value of such securities.

Over-the-counter options ("OTC options") differ from exchange-traded
options in several respects. They are transacted directly with dealers and not
with a clearing corporation, and there is a risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for
a wider range of expiration dates and exercise prices than exchange- traded
options. Because OTC options are not traded on an exchange, pricing is
normally done by reference to information from a market marker. This
information is carefully monitored by the Manager and verified in appropriate
cases. OTC options transactions will be made by the Fund only with recognized
U.S. Government securities dealers.

It may be the Fund's policy, in order to avoid the exercise of an
option sold by it, to cancel its obligation under the option by entering into a
closing purchase transaction, if available, unless it is determined to be in
the Fund's interest to sell (in the case of a call option) or to purchase (in
the case of a put option) the underlying securities. A closing purchase
transaction consists of the Fund purchasing an option having the same terms as
the option sold by the Fund and has the effect of cancelling the Fund's
position as a seller. The premium which the Fund will pay in executing a
closing purchase transaction may be higher than the premium received when the
option was sold, depending in large part upon the relative price of the
underlying security at the time of each transaction. To the extent options
sold by the Fund are exercised and the Fund either delivers portfolio
securities to the holder of a call option or liquidates securities in its
portfolio as a source of funds to purchase securities put to the Fund, the
Fund's portfolio turnover rate may increase, resulting in a possible increase
in short-term capital gains and a possible decrease in long-term capital gains.

- 6 -
<PAGE> 42

Options on Futures Contracts. The Fund may purchase and write put and
call options on futures contracts that are traded on a U.S. exchange or board
of trade and enter into related closing transactions to attempt to gain
additional protection against the effects of equity market fluctuations. There
can be no assurance that such closing transactions will be available at all
times. In return for the premium paid, such an option gives the purchaser the
right to assume a position in a futures contract at any time during the option
period for a specified exercise price.

The Fund may purchase put options on futures contracts in lieu of, and
for the same purpose as, the sale of a futures contract. It also may purchase
such put options in order to hedge a long position in the underlying futures
contract.

The purchase of call options on futures contracts is intended to serve
the same purpose as the actual purchase of the futures contracts. The Fund may
purchase call options on futures contracts in anticipation of a market advance
when it is not fully invested.

The Fund may write a call option on a futures contract in order to
hedge against a decline in the prices of the index or securities underlying the
futures contracts. If the price of the futures contract at expiration is below
the exercise price, the Fund would retain the option premium, which would
offset, in part, any decline in the value of its portfolio securities.

The writing of a put option on a futures contract is similar to the
purchase of the futures contracts, except that, if market price declines, the
Fund would pay more than the market price for the underlying securities or
index units. The net cost to the Fund would be reduced, however, by the
premium received on the sale of the put, less any transactions costs.

Risks of Futures and Options Investments. The Fund will incur
brokerage fees in connection with its futures and options transactions, and it
will be required to segregate funds for the benefit of brokers as margin to
guarantee performance of its futures and options contracts. In addition, while
such contracts will be entered into to reduce certain risks, trading in these
contracts entails certain other risks. Thus, while the Fund may benefit from
the use of futures contracts and related options, unanticipated changes in
interest rates may result in a poorer overall performance for the Fund than if
it had not entered into any such contracts. Additionally, the skills required
to invest successfully in futures and options may differ from skills required
for managing other assets in the Fund's portfolio. Further, although the
Manager may engage in transactions with

- 7 -
<PAGE> 43

respect to index-based futures contracts if the Manager believes a correlation
exists between price movements in the index and in the Fund's portfolio
securities, such a correlation is not likely to be perfect because the Fund's
portfolio is not likely to duplicate the index, making the futures contract an
imperfect hedge.

Limitations on Futures Contracts and Options on Futures Contracts.
The Fund will use financial futures contracts and related options only for
"bona fide hedging" purposes, as such term is defined in applicable regulations
of the CFTC, or, with respect to positions in financial futures and related
options that do not qualify as "bona fide hedging" positions, will enter such
non-hedging positions only to the extent that aggregate initial margin deposits
plus premiums paid by it for open futures option positions, less the amount by
which any such positions are "in-the-money," would not exceed 5% of the Fund's
total assets.

INVESTMENT RESTRICTIONS

The following restrictions are fundamental policies of the Fund, and
except as otherwise indicated, may not be changed with respect to the Fund
without the approval of a majority of the outstanding voting securities of the
Fund which, as defined in the Investment Company Act of 1940 ("1940 Act"),
means the lesser of (1) 67% of the shares of the Fund present at a meeting if
the holders of more than 50% of the outstanding shares of the Fund are present
in person or by proxy, or (2) more than 50% of the outstanding voting shares of
the Fund.

The Fund may not:

(1) With respect to 75% of its total assets, purchase
more than 10% of the voting securities of any one issuer or invest
more than 5% of the value of such assets in the securities or
instruments of any one issuer, except securities of instruments issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities;

(2) Borrow money except that the Fund may borrow from
banks up to 10% of the current value of its total net assets for
temporary or emergency purposes, provided that the Fund may make no
purchases if its outstanding borrowings exceed 5% of its total assets;

(3) Invest in real estate, provided that the Fund may
invest in readily marketable securities (except limited partnership
interests) of issuers that deal in real estate and securities secured
by real estate or interests therein

- 8 -
<PAGE> 44

and the Fund may hold and sell real estate (a) used principally for
its own office space or (b) acquired as a result of the Fund's
ownership of securities;

(4) Engage in the business of underwriting securities of
other issuers, except to the extent that the purchase of securities
directly from the issuer (either alone or as one of a group of
bidders) or the disposal of an investment position may technically
cause it to be considered an underwriter as that term is defined under
the Securities Act of 1933;

(5) Make loans, except that the Fund may (a) lend its
portfolio securities, (b) enter into repurchase agreements and (c)
purchase the types of debt instruments described in the Prospectus or
the SAI;

(6) Purchase securities or instruments which would cause
25% or more of the market value of the Fund's total assets at the time
of such purchase to be invested in securities or instruments of one or
more issuers having their principal business activities in the same
industry, provided that there is no limit with respect to investments
in the U.S. Government, its agencies and instrumentalities;

(7) Issue any senior securities, except as appropriate to
evidence indebtedness which it is permitted to incur, and provided
that collateral arrangements with respect to forward contracts,
futures contracts or options, including deposits of initial and
variation margin, are not considered to be the issuance of a senior
security for purposes of this restriction; or

(8) Purchase or sell commodity contracts, except that the
Fund may invest in futures contracts and in options related to such
contracts (for purposes of this restriction, forward foreign currency
exchange contracts are not deemed to be commodities).

For purposes of investment restriction number 6, public utilities are
not deemed to be a single industry but are separated by industrial categories,
such as telephone or gas utilities.

The following policies of the Fund are non-fundamental and may be
changed by the Board of Directors without shareholder approval. These policies
provide that the Fund, except as otherwise specified, may not:

- 9 -
<PAGE> 45

(a) Invest in companies for the purpose of exercising
control or management;

(b) Knowingly purchase securities of other investment
companies, except (i) in connection with a merger, consolidation,
acquisition, or reorganization; and (ii) the Fund may invest up to 10%
of its total assets in shares of other investment companies;

(c) Purchase securities on margin, except that the Fund
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities;

(d) Mortgage, pledge, or hypothecate any of its assets,
except that the Fund may pledge not more than 15% of the current value
of its total net assets;

(e) Purchase or retain the securities of any issuer, if
those individual officers and Directors of the Company, the Adviser,
the Manager, the Administrator, or the Distributor, each owning
beneficially more than 1/2 of 1% of the securities of such issuer,
together own more than 5% of the securities of such issuer;

(f) Invest more than 5% of its net assets in warrants
which are unattached to securities; included within that amount, no
more than 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchanges;

(g) Write, purchase or sell puts, calls or combinations
thereof, except as described in the Prospectus or SAI;

(h) Invest more than 5% of the current value of its total
assets in the securities of companies which, including predecessors,
have a record of less than three years' continuous operation;

(i) Invest more than 15% of the value of its net assets
in investments which are illiquid, or not readily marketable
(including repurchase agreements having maturities of more than seven
calendar days and variable and floating rate demand and master demand
notes not requiring receipt of the principal note amount within seven
days' notice); or

(j) Invest in oil, gas or other mineral exploration or
development programs, although it may invest in issuers that own or
invest in such programs.

- 10 -
<PAGE> 46

MANAGEMENT

Directors and Officers

The principal occupations of the Directors and executive officers of
the Company for the past five years are listed below. The address of each,
unless otherwise indicated, is 230 Park Avenue, New York, New York 10169.
Directors deemed to be "interested persons" of the Company for purposes of the
1940 Act are indicated by an asterisk.

<TABLE>
<CAPTION>
Name, Address Position with Company Principal Occupation
- ------------- --------------------- --------------------
and Age
- -------

<S> <C> <C>
*William Howard Director and Equitable Securities Corporation
Cammack, Sr. President Chairman and Managing Director.
800 Nashville
City Center
511 Union Street
Nashville, TN 37219-1743
Age: 65

*William Howard Director and Treasurer Equitable Securities Corporation
Cammack, Jr.1 - Managing Director.
800 Nashville
City Center
511 Union Street
Nashville, TN 37219-1743
Age: 39

J. Bransford Wallace Director Willis Coroon Corporations
26 Century Boulevard (insurance) - Vice Chairman
Nashville, TN 37214 (1994); Chairman (1992-93);
Age: 64 various positions since prior
to 1989.

Brownlee O. Currey,Jr. Director Osborn Communications, Inc. -
1100 Broadway Chairman; Nashville Banner
Nashville, TN 37203 Publishing Company - President.
Age: 68
</TABLE>

- 11 -
<PAGE> 47
<TABLE>
<S> <C> <C>
E. Townes Duncan Director Comptronix Corporation (contract
Three Maryland Farms manufacturing) - Chairman and
Suite 140 Chief Executive Officer (1993-
Brentwood, TN 37027 present); Massey Burch Investment
Age: 43 Group (venture capital) -

</TABLE>

(1) William Howard Cammack, Sr. and William Howard Cammack, Jr. are father
and son.

- 12 -

<PAGE> 48
<TABLE>
<S> <C> <C>
John J. Pileggi Secretary Furman Selz LLC - Senior Managing
Age: 37 Director (1992-present); Managing
Director (1984-1992).

Joan Fiore Assistant Furman Selz LLC - Managing
Age: 40 Secretary Director and Counsel (1991-
present); Securities and Exchange
Commission - Staff Attorney
(1986-1991).

Sheryl Assistant Secretary Furman Selz LLC
Hirschfeld Director,Corporate Secretary
Age: 36 Services; The Dreyfus Corporation
- Assistant to the Corporate
Secretary and General Counsel
(1982-1994).

John L. McAllister Assistant Secretary and Assistant Equitable Securities Corporation
Age: 33 Treasurer - Vice President (1990-present).
Copyright Management, Inc. -
Analyst (1988-1989).

Gordon M. Forrester Assistant Treasurer Furman Selz LLC - Managing
Age: 35 Director (1987-present).
</TABLE>

Directors of the Company not affiliated with the Adviser, the Manager,
a manager of another fund of the Company, or the Administrator receive from the
Company an annual retainer of $2,000 and a fee of $250 for each Board of
Directors and Board committee meeting of the Company attended and are
reimbursed for all out-of-pocket expenses relating to attendance at such

- 13 -
<PAGE> 49

meetings. Directors who are affiliated with the Adviser, the Manager, another
manager of a fund of the Company, or the Administrator do not receive
compensation from the Company.

DIRECTOR COMPENSATION
(for fiscal year ended March 31, 1996)

<TABLE>
<CAPTION>
Pension or Estimated Total
Aggregate Retirement Annual Compensation
Name of Compensation Benefits Accrued Benefits From Registrant
Person, From As Part of Fund Upon and Fund Complex
Position Registrant Expenses Retirement Paid to Directors
- -------- ---------- ---------------- ---------- -----------------
<S> <C> <C> <C> <C>
J. Bransford $6,000 0 N/A $6,000
Wallace

Brownlee O. $7,000 0 N/A $7,000
Currey, Jr.

E. Townes $7,000 0 N/A $7,000
Duncan
</TABLE>

Investment Adviser

Equitable Securities Corporation (the "Adviser") 511 Union Street,
Nashville, Tennessee 37219-1743, serves as investment adviser to the Fund,
providing overall supervision of the Manager. For these services, the Adviser
receives from the Fund a fee at an annual rate of 1.25% of the Fund's average
daily net assets. Out of these fees, the Adviser pays fees of the Manager.

Under the terms of the Investment Advisory Agreement between the
Company and the Adviser ("Agreement"), the investment advisory services of the
Adviser to the Fund are not exclusive. The Adviser is free to, and does, render
investment advisory services to others.

The Agreement was approved with respect to the Fund by the Board of
Directors, including a majority of the Directors who are not parties to the
Agreement or interested persons of any such parties, at its meeting held on
October 23, 1996, and by the sole shareholder of the Fund on October 23, 1996.
The Agreement will continue in effect with respect to the Fund for a period of
more than two years from the date of its execution, only as long as such
continuance is approved at least annually (i) by vote of the holders of a
majority of the outstanding voting securities of the Fund or by the Board of
Directors and (ii) by a majority of the Directors who are not parties to the
Agreement or "interested persons" (as defined in the 1940 Act) of any such
party. The Agreement may be terminated at any time without penalty by vote of
the Directors (with respect to the Company or the Fund) or, with respect to the
Fund, by vote of the Directors or the shareholders of the Fund, or by the
Adviser, on 60 days written notice by either party to the Agreement and will
terminate automatically if assigned.

The Manager

The Adviser has entered into a Portfolio Management Agreement for the
Fund with Equitable Asset Management (the "Manager"), a division of the
Adviser's subsidiary, Equitable Trust Company.

For more information on the Manager, see the Prospectus. The
Manager's fee, which is paid by the Adviser, is at an annual rate of 0.65% on
the first $50 million of the Fund's average daily net assets, 0.60% on the next
$50 million of such assets, 0.55% on the next $100 million of such assets, and
0.50% on such assets in excess of $200 million.

- 14 -
<PAGE> 50

The Portfolio Management Agreement provides that the Manager's
services to the Fund are not exclusive. The Manager is free to and does
provide investment advisory services to others.

The Portfolio Management Agreement for the Fund was initially approved
by the Board of Directors, including a majority of the Directors who are not
parties to the Portfolio Management Agreement or interested persons of any such
party, at a meeting held on October 23, 1996, and by the sole shareholder of the
Fund on October 23, 1996. The Portfolio Management Agreement provides that it
will continue in effect for a period beyond two years from the date of its
execution only so long as such continuance is approved at least annually by (i)
the Directors or by vote of the holders of a majority of the Fund's outstanding
voting securities and (ii) by a majority of the Directors who are not parties to
the Portfolio Management Agreement or interested persons of any such party. The
Portfolio Management Agreement may be terminated at any time without penalty (a)
by the Adviser, by the Fund upon vote of a majority of the Directors, or by vote
of a majority of the Fund's outstanding voting securities, each upon sixty days'
written notice to the Manager; or (b) by the Manager upon sixty days' notice to
the Company or the Adviser. The Portfolio Management Agreement will also
terminate automatically in the event of its assignment.

Distribution of Fund Shares

Equitable Securities Corporation(the "Distributor") serves as
principal underwriter for the shares of the Fund pursuant to a Distribution
Contract. The Distribution Contract provides that the Distributor will use its
best efforts to maintain a broad distribution of the Fund's shares among bona
fide investors and may enter into selling group agreements with responsible
dealers and dealer managers as well as sell the Fund's shares to individual
investors. The Distributor is not obligated to sell any specific amount of
shares.

The Fund has adopted a service and distribution plan (the "Plan").
The Plan provides for the different rates of fee payment with respect to each
class of shares, as described in the Prospectus. Pursuant to the Plan, the
Fund may pay directly or reimburse the Distributor monthly in amounts described
in the Prospectus for costs and expenses of marketing the shares, or classes of
shares, of the Fund. The Board of Directors has concluded that there is a
reasonable likelihood that the Plan will benefit the Fund and its shareholders.

The Plan provides that it may not be amended to increase materially
the costs which the Fund or a class of shares may bear

- 15 -
<PAGE> 51

pursuant to the Plan without shareholder approval and that other material
amendments of the Plan must be approved by the Board of Directors, and by the
Directors who are neither "interested persons" (as defined in the 1940 Act) of
the Company nor have any direct or indirect financial interest in the operation
of the Plan or any related agreement, by vote cast in person at a meeting called
for the purpose of considering such amendments. The selection and nomination of
the Directors of the Company have been committed to the discretion of the
Directors who are not "interested persons" of the Company. The Plan was approved
for the Fund by the Board of Directors and by the Directors who are neither
"interested persons" nor have any direct or indirect financial interest in the
operation of the Plan ("Plan Director"), by vote cast in person at an October
23, 1996 meeting called for the purpose of voting on the Plan, and by the sole
shareholder of each class of shares of the Fund on October 23, 1996. The
continuance of the Plan is subject to similar annual approval by the Directors
and the Plan Directors. The Plan is terminable with respect to a class of
shares of the Fund at any time by a vote of a majority of the Plan Directors or
by vote of the holders of a majority of the shares of the class.

Administrative Services

BISYS Fund Services (the "Administrator") provides administrative
services necessary for the operation of the Fund, including among other things,
(i) preparation of shareholder reports and communications, (ii) regulatory
compliance, such as reports to and filings with the Securities and Exchange
Commission ("SEC") and state securities commissions and (iii) general
supervision of the operation of the Fund, including coordination of the
services performed by the Adviser, Manager, Distributor, custodians,
independent accountants, legal counsel and others. In addition, BISYS
furnishes office space and facilities required for conducting the business of
the Fund and pays the compensation of the Fund's officers, employees and
Directors affiliated with BISYS. For these services, BISYS receives from the
Fund a fee, payable monthly, at the annual rate of 0.15% of the Fund's average
daily net assets.

The Board of Directors, including a majority of the Directors who are
not parties to the agreements or interested persons of such parties, approved
the Administration Agreement on behalf of the Company at their July 16, 1996
Board of Directors Meeting. BISYS, headquartered in Little Falls, New Jersey,
supports more than 5,000 financial institutions and corporate clients through
two strategic business units. BISYS Information Services Group designs,
administers and distributes over 30 families of proprietary mutual funds
consisting of more than 365 portfolios, and provides 401(k) marketing support,

- 16 -
<PAGE> 52

administration, and recordkeeping services in partnership with 18 of the
nation's leading bank and investment management companies.

The Administration Agreement will continue until December 31, 1997 and
will automatically continue for successive one-year periods unless either party
notifies the other in writing of non-renewal at least 90 days prior to the
expiration of the then-current term.

Service Organizations

The Company may also contract with banks, trust companies,
broker-dealers (other than BISYS) or other financial organizations ("Service
Organizations") to provide certain administrative services for the Fund.
Services provided by Service Organizations may include among other things:
providing necessary personnel and facilities to establish and maintain certain
shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
verifying and guaranteeing client signatures in connection with redemption
orders, transfers among and changes in client-designating accounts; providing
periodic statements showing a client's account balance and, to the extent
practicable, integrating such information with other client transactions;
furnishing periodic and annual statements and confirmations of all purchases
and redemptions of shares in a client's account; transmitting proxy statements,
annual reports, and updating prospectuses and other communications from the
Fund to clients; and providing such other services as the Fund or a client
reasonably may request, to the extent permitted by applicable statute, rule or
regulation. Neither BISYS, the Adviser nor the Manager will be a Service
Organization or receive fees for servicing.

Some Service Organizations may impose additional or different
conditions on their clients, such as requiring their clients to invest more
than the minimum initial or subsequent investments specified by the Fund or
charging a direct fee for servicing. If imposed, these fees would be in
addition to any amounts that might be paid to the Service Organization by the
Fund. Each Service Organization has agreed to transmit to its clients a
schedule of any such fees. Shareholders using Service Organizations are urged
to consult them regarding any such fees or conditions.

The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks
from performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or
interpretations of such laws, as well as changes in either Federal or state
statutes or regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. In addition, state

- 17 -
<PAGE> 53

securities laws on this issue may differ from the interpretations of federal
law expressed herein and banks and financial institutions may be required to
register as dealers pursuant to state law. If a bank were prohibited from so
acting, its shareholder clients would be permitted to remain shareholders of
the Fund and alternative means for continuing the servicing of such
shareholders would be sought. In that event, changes in the operation of the
Fund might occur and a shareholder serviced by such a bank might no longer be
able to avail itself of any services then being provided by the bank. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.

DETERMINATION OF NET ASSET VALUE

The Fund values its portfolio securities in accordance with the
procedures described in the Prospectus.

PORTFOLIO TRANSACTIONS

Investment decisions for the Fund and for the other investment
advisory clients of the Manager are made with a view to achieving their
respective investment objectives. Investment decisions are the product of many
factors in addition to basic suitability for the particular client involved.
Thus, a particular security may be bought or sold for certain clients even
though it could have been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more clients when one
or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that
two or more clients simultaneously purchase or sell the same security, in which
event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in
the Manager's opinion is equitable to each and in accordance with the amount
being purchased or sold by each. There may be circumstances when purchases or
sales of portfolio securities for one or more clients will have an adverse
effect on other clients.

The Fund has no obligation to deal with any dealer or group of dealers
in the execution of transactions in portfolio securities. Subject to policies
established by the Company's Board of Directors, the Manager is primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Fund to obtain the best results
taking into account the broker-dealer's general execution and operational
facilities, the type of transaction involved and other factors such as the
dealer's risk in positioning the securities. While the Manager generally seeks
reasonably competitive spreads or commissions, the Fund will not necessarily be
paying the lowest spread or commission available.

Purchases and sales of securities will often be principal transactions
in the case of debt securities and equity securities traded otherwise than on
an exchange. The purchase or sale of equity securities will frequently involve
the payment of a

- 18 -
<PAGE> 54

commission to a broker-dealer who effects the transaction on behalf of the
Fund. Debt securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price. Generally, money market securities are traded on a net basis and do not
involve brokerage commissions. Under the 1940 Act, persons affiliated with the
Fund, the Adviser, the Manager or BISYS are prohibited from dealing with the
Fund as a principal in the purchase and sale of securities unless a permissive
order allowing such transactions is obtained from the SEC.

The Manager may, in circumstances in which two or more broker-dealers
are in a position to offer comparable results, give preference to a dealer that
has provided statistical or other research services to the Manager. By
allocating transactions in this manner, the Manager is able to supplement its
research and analysis with the views and information of securities firms.
These items, which in some cases may also be purchased for cash, include such
matters as general economic and securities market reviews, industry and company
reviews, evaluations of securities and recommendations as to the purchase and
sale of securities. Some of these services are of value to the Manager in
advising various of its clients (including the Fund), although not all of these
services are necessarily useful and of value in managing the Funds. The
management fee paid by the Fund is not reduced because the Manager and its
affiliates receive such services.

As permitted by Section 28(e) of the Securities Exchange Act of 1934
(the "Act"), the Manager may cause the Fund to pay a broker-dealer that
provides "brokerage and research services" (as defined in the Act) to the
Manager an amount of disclosed commission for effecting a securities
transaction for the Fund in excess of the commission which another
broker-dealer would have charged for effecting that transaction.

Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Directors may determine, the
Manager may consider sales of shares of the Fund as a factor in the selection
of broker-dealers to execute portfolio transactions for the Fund.

Portfolio Turnover

Changes may be made in the portfolio consistent with the investment
objectives and policies of the Fund whenever such changes are believed to be in
the best interests of the Fund and its shareholders. It is anticipated that
the annual portfolio turnover rate for the Fund normally will not exceed 100%,
although it may be higher under some circumstances. The portfolio turnover
rate is calculated by dividing the lesser of purchases or sales of portfolio
securities by the average monthly value of the Fund's portfolio securities.
For purposes of this calculation, portfolio securities exclude all securities
having a maturity when purchased of one year or less.

- 19 -
<PAGE> 55

TAXATION

The Fund intends to qualify annually as regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). To qualify as a regulated investment company, the Fund must (a)
distribute to shareholders at least 90% of its investment company taxable
income (which includes, among other items, dividends, taxable interest less
expenses and the excess of net short-term capital gains over net long-term
capital losses); (b) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock, securities or foreign
currencies or other income derived with respect to its business of investing in
such stock, securities or currencies; (c) derive less than 30% of its gross
income from the sale or other disposition of certain assets (namely, in the
case of the Fund, (i) stock or securities; (ii) options, futures, and forward
contracts (other than those on foreign currencies), and (iii) foreign
currencies (including options, futures, and forward contracts on such
currencies) not directly related to the Fund's principal business of investing
in stock or securities (or options and futures with respect to stocks or
securities)) held less than 3 months; and (d) diversify its holdings so that,
at the end of each quarter of the taxable year, (i) at least 50% of the market
value of the Fund's assets is represented by cash and cash items (including
receivables), U.S. Government securities, the securities of other regulated
investment companies and other securities, with such other securities of any
one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than
10% of the outstanding voting securities of such issuer, and (ii) not more than
25% of the value of its total assets is invested in the securities of any one
issuer (other than U.S. Government securities or the securities of other
regulated investment companies), or of two or more issuers that the Fund
controls and that are determined to be engaged in the same business or similar
or related businesses. By meeting these requirements, the Fund generally will
not be subject to Federal income tax on its investment company taxable income
and net capital gains which are distributed to shareholders. If the Fund does
not meet all of these Code requirements, it will be taxed as an ordinary
corporation.

Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement are subject to a nondeductible 4% excise
tax. To prevent imposition of the excise tax, the Fund must distribute for
each calendar year an amount equal to the sum of (1) at least 98% of its
ordinary income (excluding any capital gains or losses) for the calendar year,
(2) at least 98% of the excess of its capital gains over capital

- 20 -
<PAGE> 56

losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gain net
income (adjusted for certain ordinary losses) for previous years that were not
distributed during such years. A distribution will be treated as paid on
December 31 of a calendar year if it is declared by the Fund during October,
November or December of that year to shareholders of record on a date in such a
month and paid by the Fund during January of the following year. Such
distributions will be taxable to shareholders in the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.

Distributions of investment company taxable income generally are
taxable to shareholders as ordinary income. Distributions from the Fund may be
eligible for the dividends-received deduction available to corporations.
Distributions of net capital gains, if any, designated by the Fund as capital
gain dividends are taxable to shareholders as long-term capital gain,
regardless of the length of time the Fund shares have been held by a
shareholder. All distributions are taxable to the shareholder in the same
manner whether reinvested in additional shares or received in cash.
Shareholders will be notified annually as to the Federal tax status of
distributions.

Distributions by the Fund reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a stockholder's
cost basis, such distribution, nevertheless, would be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital.
In particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Fund. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a distribution which
will nevertheless generally be taxable to them.

Upon the taxable disposition (including a sale or redemption) of
shares of the Fund, a shareholder may realize a gain or loss depending upon his
basis in his shares. Such gain or loss generally will be treated as capital
gain or loss if the shares are capital assets in the shareholder's hands. Such
gain or loss will be long-term or short-term, generally depending upon the
shareholder's holding period for the shares. However, a loss realized by a
shareholder on the disposition of Fund shares with respect to which capital
gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held
by the

- 21 -
<PAGE> 57

shareholder for six months or less. A loss realized on a disposition will be
disallowed to the extent the shares disposed of are replaced (whether by
reinvestment of distributions or otherwise) within a period of 61 days
beginning 30 days before and ending 30 days after the shares are disposed of.
In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. Shareholders receiving distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in
each share received equal to the net asset value of a Fund share on the
reinvestment date.

Under certain circumstances, the sales charge incurred in acquiring
Fund shares may not be taken into account in determining the gain or loss on
the disposition of those shares. This rule applies where shares of the Fund
are exchanged within 90 days after the date they were purchased and new shares
of a Fund are acquired without a sales charge or at a reduced sales charge. In
that case, the gain or loss recognized on the exchange will be determined by
excluding from the tax basis of the shares exchanged all or a portion of the
sales charge incurred in acquiring those shares. This exclusion applies to the
extent that the otherwise applicable sales charge with respect to the newly
acquired shares is reduced as a result of having incurred the sales charge
initially. Instead, the portion of the sales charge affected by this rule will
be treated as a sales charge paid for the new shares.

The taxation of equity options is governed by the Code section 1234.
Pursuant to Code section 1234, the premium received by the Fund for selling a
put or call option is not included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to the Fund. If the
Fund enters into a closing transaction, the difference between the amount paid
to close out its position and the premium received is short-term capital gain
or loss. If a call option written by the Fund is exercised, thereby requiring
the Fund to sell the underlying security, the premium will increase the amount
realized upon the sale of such security and any resulting gain or loss will be
a capital gain or loss, and will be long-term or short-term depending upon the
holding period of the security. With respect to a put or call option that is
purchased by the Fund, if the option is sold, any resulting gain or loss will
be a capital gain or loss, and will be long-term or short-term, depending upon
the holding period of the option. If the option expires, the resulting loss is
a capital loss and is long-term or short-term, depending upon the holding
period of the option. If the option is exercised, the cost of the option, in
the case of a call option, is added to the basis of the purchased

- 22 -
<PAGE> 58

security and, in the case of a put option, reduces the amount realized on the
underlying security in determining gain or loss.

Certain of the options, futures contracts, and forward foreign
currency exchange contracts that the Fund may invest in are so-called "section
1256 contracts." With certain exceptions, gains or losses on section 1256
contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40"). Also, section 1256 contracts held by the Fund at
the end of each taxable year (and, generally, for purposes of the 4% excise
tax, on October 31 of each year) are "marked-to-market" with the result that
unrealized gains or losses are treated as though they were realized and the
resulting gain or loss is treated as 60/40 gain or loss.

Generally, the hedging transactions undertaken by the Fund may result
in "straddles" for Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on a position that is part of a straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which such losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. Hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary income when
distributed to stockholders.

The Fund may make one or more of the elections available under the
Code which are applicable to straddles. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the election(s) made. The rules applicable under certain of
the elections may operate to accelerate the recognition of gains or losses from
the affected straddle positions.

Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as
ordinary income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not engage in such hedging
transactions.

The Fund will not realize gain or loss on a short sale of a security
until it closes the transaction by delivering the borrowed security to the
lender. All or a portion of any gain arising from a short sale may be treated
as short-term capital gain, regardless of the period for which the Fund held
the

- 23 -
<PAGE> 59

security used to close the short sale. In addition, the Fund's holding period
of any security which is substantially identical to that which is sold short
may be reduced or eliminated as a result of the short sale.

Certain requirements that must be met under the Code in order for the
Fund to qualify as a regulated investment company may limit the extent to which
the Fund will be able to engage in short sales and transactions in options,
futures, and forward contracts.

Certain of the debt securities acquired by the Fund may be treated as
debt securities that were originally issued at a discount. Original issue
discount can generally be defined as the difference between the price at which
a security was issued and its stated redemption price at maturity. Although no
cash income is actually received by the Fund, original issue discount on a
taxable debt security earned in a given year generally is treated for Federal
income tax purposes as interest and, therefore, such income would be subject to
the distribution requirements of the Code.

Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any.
This additional discount represents market discount for Federal income tax
purposes. The gain realized on the disposition of any debt security having
market discount will be treated as ordinary income to the extent it does not
exceed the accrued market discount on such debt security. Generally, market
discount accrues on a daily basis for each day the debt security is held by the
Fund at a constant rate over the time remaining to the debt security's maturity
or, at the election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest.

Under the Code, gains or losses attributable to fluctuations in
exchange rates which occur between the time the Fund accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency, and the time the Fund actually collects such receivables or pays such
liabilities, generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of debt securities denominated in a foreign currency
and on disposition of certain options and forward and futures contracts, gains
or losses attributable to fluctuations in the value of foreign currency between
the date of acquisition of the security or contract and the date of disposition
also are treated as ordinary gain or loss. These gains or losses, referred to
under the Code as "section 988" gains or losses, may increase, decrease, or
eliminate the amount

- 24 -
<PAGE> 60

of the Fund's investment company taxable income to be distributed to its
shareholders as ordinary income.

The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general,
a foreign company is classified as a PFIC under the Code if at least one- half
of its assets constitutes investment-type assets or 75% or more of its gross
income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund held the PFIC stock.
The Fund itself will be subject to tax on the portion, if any, of the excess
distribution that is allocated to the Fund's holding period in prior taxable
years (and an interest factor will be added to the tax, as if the tax had
actually been payable in such prior taxable years) even though the Fund
distributes the corresponding income to stockholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain distributions
from a PFIC. All excess distributions are taxable as ordinary income.

The Fund may be able to elect alternative tax treatment with respect
to PFIC stock. Under an election that currently may be available, the Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. In addition, another election may be available that would involve
marking to market the Fund's PFIC shares at the end of each taxable year (and
on certain other dates prescribed in the Code), with the result that unrealized
gains are treated as though they were realized. If this election were made,
tax at the Fund level under the PFIC rules would generally be eliminated, but
the Fund could, in limited circumstances, incur nondeductible interest charges.
The Fund's intention to qualify annually as a regulated investment company may
limit its elections with respect to PFIC stock.

Income received by the Fund from sources within foreign countries may
be subject to withholding and other similar income taxes imposed by the foreign
country. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to treat such foreign taxes paid by the
Fund that qualify as income or similar taxes under U.S. income tax principles
as paid by its shareholders. Pursuant to this election, a shareholder would be
required to include in gross income (in addition to taxable dividends actually
received) his pro rata share of the foreign taxes paid by the Fund, and

- 25 -
<PAGE> 61

would be entitled either to deduct his pro rata share of foreign taxes in
computing his taxable income or to use it as a foreign tax credit against his
U.S. Federal income tax liability, subject to limitations. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions,
but such a shareholder may be eligible to claim the foreign tax credit (see
below). Each shareholder will be notified within 60 days after the close of
the Fund's taxable year whether the foreign taxes paid by a Fund will
"pass-through" for that year and, if so, such notification will designate (a)
the shareholder's portion of the foreign taxes paid to each such country and
(b) the portion of the dividend which represents income derived from foreign
sources.

Generally, a credit for foreign taxes is subject to the limitation
that it may not exceed the shareholder's U.S. tax attributable to his total
foreign source taxable income. For this purpose, if the Fund makes the
election described in the preceding paragraph, the source of the Fund's income
flows through to its shareholders. With respect to the Fund, gains from the
sale of securities will be treated as derived from U.S. sources and certain
currency fluctuations gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on the
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit) including foreign source
passive income of the Fund. The foreign tax credit may offset only 90% of the
alternative minimum tax imposed on corporations and individuals, and foreign
taxes generally may not be deducted in computing alternative minimum taxable
income.

The Fund is required to report to the Internal Revenue Service ("IRS")
all distributions except in the case of certain exempt shareholders. All such
distributions generally are subject to withholding of Federal income tax at a
rate of 31% ("backup withholding") in the case of non-exempt shareholders if
(1) the shareholder fails to furnish the Fund with and to certify the
shareholder's correct taxpayer identification number or social security number,
(2) the IRS notifies the Funds or a shareholder that the shareholder has failed
to report properly certain interest and dividend income to the IRS and to
respond to notices to that effect, or (3) when required to do so, the
shareholder fails to certify that he is not subject to backup withholding. If
the withholding provisions are applicable, any such distributions, whether
reinvested in additional shares or taken in cash, will be reduced by the
amounts required to be withheld. Backup withholding is not an additional tax.
Any amount withheld may be credited against the shareholder's U.S. Federal
income tax liability. Investors may wish to consult their tax advisors about
the applicability of the backup withholding provisions.

- 26 -
<PAGE> 62

The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Fund
also may be subject to state and local taxes and their treatment under state
and local income tax laws may differ from the Federal income tax treatment.
Distributions of the Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult
their tax advisors with respect to particular questions of Federal, state and
local taxation. Shareholders who are not U.S. persons should consult their tax
advisors regarding U.S. and foreign tax consequences of ownership of shares of
the Fund including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).

Changes in the tax law frequently come under consideration. Since the
Fund does not undertake to furnish tax advice, it is important for shareholders
to consult their tax advisers regularly about the tax consequences to them of
investing in the Fund.

OTHER INFORMATION

Capitalization

The Company is a Maryland corporation established under Articles of
Incorporation dated November 24, 1993 and currently consists of six separately
managed portfolios ("funds"). (The Company has one other portfolio which is
currently inactive.) Five of the funds currently being offered, including the
Fund, offer two classes of shares. The capitalization of the Company consists
solely of 650 million shares of common stock with a par value of $0.001 per
share. The Board of Directors may establish additional funds (with different
investment objectives and fundamental policies), or additional classes of
shares, at any time in the future. Establishment and offering of additional
funds or classes will not alter the rights of the Company's shareholders. When
issued, shares are fully paid, non-assessable, redeemable and freely
transferable. Shares do not have preemptive rights or subscription rights. In
any liquidation of the Fund or class, each shareholder is entitled to receive
his pro rata share of the net assets of the Fund or class.

- 27 -
<PAGE> 63

Expenses incurred in connection with the Fund's organization were
$______. These costs have been deferred and are being amortized on a
straight-line basis over a period of not less than five years.

Voting Rights

Under the Articles of Incorporation, the Company is not required to
hold annual meetings of the Fund's or the Company's shareholders to elect
Directors or for other purposes. It is not anticipated that the Company will
hold shareholders' meetings unless required by law or the Articles of
Incorporation. In this regard, the retention of a new investment adviser for
the Company, or a new Manager affiliated with the Adviser with respect to the
Fund, requires approval both by a majority of the Company's directors,
including a majority of its directors who are not parties to such contract or
"interested persons" (as defined in the Investment Company Act of 1940) of any
such party, and by a vote of a majority of the outstanding voting securities of
the Company or Fund, as applicable. For this purpose, the "vote of a majority
of the outstanding voting securities" of the Company or the Fund, as
applicable, means the vote of the lesser of (1) 67% of the shares of the
Company or Fund, as applicable, if the holders of more than 50% of the
outstanding shares of the Company or Fund, as applicable, are present in person
or by proxy; or (2) more than 50% of the outstanding shares of the Company or
Fund, as applicable. The Company has received an order from the Securities and
Exchange Commission that permits it to retain new Managers that are not
affiliated with the Adviser without obtaining shareholder approval.
Additionally, the Company will be required to hold a meeting to elect Directors
to fill any existing vacancies on the Board if, at any time, fewer than a
majority of the Directors have been elected by the shareholders of the Company.
In addition, the Articles of Incorporation provide that the holders of not less
than a majority of the outstanding shares of the Company may remove persons
serving as Director.

The Company's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board
of Directors, in which case the holders of the remaining shares would not be
able to elect any Directors.

Custodian, Transfer Agent and Dividend Disbursing Agent

Investors Fiduciary Trust Company, 127 West 10th Street, Kansas City,
Missouri 64105, acts as custodian of the Company's assets, but plays no role in
making decisions as to the purchase or sale of portfolio securities for the
Fund.

- 28 -
<PAGE> 64

BISYS serves as the Company's transfer agent and fund accounting agent
pursuant to a Transfer Agency Agreement and an Fund Accounting Agreement.

Yield and Performance Information

The Fund may, from time to time, include its yield, effective yield
and average annual total return in advertisements or reports to shareholders or
prospective investors.

Quotations of yield for each class of shares will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued with respect to that class during a period ("net investment
income"), and will be computed by dividing net investment income for the class
by the maximum offering price per share of that class on the last day of the
period, according to the following formula:

YIELD = 2[(a-b + 1)6-1]
---
cd

where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares of the class outstanding during the period that were entitled to receive
dividends, and d = the maximum offering price per share of the class on the
last day of the period.

Quotations of average annual total return will be expressed in terms
of the average annual compounded rate of return of a hypothetical investment in
each class of shares of the Fund over periods of 1, 5 and 10 years (up to the
life of the Fund), calculated pursuant to the following formula:

P (1 + T)n = ERV

(where P = a hypothetical initial payment of $1,000, T = the average annual
total return for the class, n = the number of years, and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of the
period). All total return figures will reflect the deduction of the maximum
sales charge and a proportional share of Fund and class-specific expenses (net
of certain reimbursed expenses) on an annual basis, and will assume that all
dividends and distributions are reinvested when paid.

Quotations of yield and total return will reflect only the performance
of a hypothetical investment in a class of shares of the Fund during the
particular time period shown. Yield and total return for the Fund will vary
based on changes in the

- 29 -
<PAGE> 65

market conditions and the level of the Fund's (and classes') expenses, and no
reported performance figure should be considered an indication of performance
which may be expected in the future.

In connection with communicating its yields or total return to current
or prospective unit holders, the Fund also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexes which may assume reinvestment of dividends but
generally do not reflect deductions for administrative and management costs.

Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow
Jones Industrial Average, or other unmanaged indices so that investors may
compare the Fund's results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities markets in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives, and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall
performance or other criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment in the Fund.

Investors who purchase and redeem shares of the Fund through a
customer account maintained at a Service Organization may be charged one or
more of the following types of fees as agreed upon by the Service Organization
and the investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid
on those assets). Such fees will have the effect of reducing the yield and
average annual total return of the Fund for those investors.

Independent Accountants

Price Waterhouse LLP serves as the independent accountants for the
Company. Price Waterhouse LLP provides audit services, tax return preparation
and assistance and consultation in connection with review of SEC filings.

Counsel

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<PAGE> 66

Dechert Price & Rhoads, 1500 K Street, N.W., Washington, D.C., 20005,
passes upon certain legal matters in connection with the shares offered by the
Company and also acts as Counsel to the Company.

Registration Statement

This SAI and the Prospectus do not contain all the information
included in the Company's Registration Statement filed with the SEC under the
Securities Act of 1933 with respect to the securities offered hereby, certain
portions of which have been omitted pursuant to the rules and regulations of
the SEC. The Registration Statement, including the exhibits filed therewith,
may be examined at the office of the SEC in Washington, D.C.

Statements contained herein and in the Prospectus as to the contents
of any contract or other documents referred to are not necessarily complete,
and, in each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.

- 31 -
<PAGE> 67

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements:

Incorporated by reference into the Prospectus:

(1) Financial Highlights for the periods ended March 31,
1996 and March 31, 1995.

Incorporated by reference into Statement of Additional
Information:

(1) Portfolio of Investments at March 31, 1986.
(2) Statement of Assets and Liabilities dated March
31, 1996.
(3) Statement of Operations for the fiscal year ended March
31, 1996.
(4) Statement of Changes in Net Assets for the fiscal
periods ended March 31, 1996 and March 31, 1995.
(5) Notes to Financial Statements at March 31, 1996.
(6) Selected Per Share Data for the fiscal periods ended
March 31, 1996 and March 31, 1995.
(6) Report of Independent Accountants.

(b) Exhibits:
(1) (a) Articles of Incorporation of Registrant. (*)

(b) Certificate of Correction. (*)

(2) By-laws of Registrant. (*)

(3) Not applicable.

(4) Specimen certificates of shares of common stock of
Registrant. (*)

(5) (a) Investment Advisory Agreement.
(b) Portfolio Management Agreement for
ESC Strategic Growth Fund
(c) Portfolio Management Agreement for
other Funds of Registrant. (**)
(d) Portfolio Management Agreement with
Cincinnati Asset Management, Inc. (**)
(6) (a) Master Distribution Contract. (**)

(b) Distribution Contract Supplements for
ESC Strategic Growth Fund

(d) Form of Dealer and Selling Group Agreement. (*)

(e) Form of Escrow Agreement. (*)

(7) Not applicable.

(8) Custody Agreement. (**)

<PAGE> 68

(9) (a) Master Administrative Services Contract. (**)

(b) Administrative Services Contract Supplement
for ESC Strategic Growth Fund.

(d) Transfer Agency Agreement. (**)

(e) Transfer Agency Agreement Supplement for ESC
Strategic Growth Fund.

(f) Sub-Transfer Agency Agreement. (**)

(g) Accounting Agent Contract. (**)

(h) Accounting Agent Contract Supplement for ESC
Strategic Growth Fund.

(i) Form of Services Agreement. (*)

(10) Opinion of Counsel. (*)

(11) Consent of Independent Accountants.

(12) Not applicable.

(13) Purchase Agreement. (**)

(14) Not applicable.

(15) (a) Form of Master Distribution Plan. (*)

(b) Distribution Plan Supplements for ESC
Strategic Growth Fund

(16) Schedules for Computation. (***)

(17) Not applicable.

(18) Form of Multi-Class Plan (**)

(27) Financial Data Schedules

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

* Filed with Pre-Effective Amendment No. 3, April 5, 1994,
and are incorporated herein by reference.

** Filed with Post-Effective Amendment No. 2, July 28, 1995,
and are incorporated herein by reference.

*** Filed with Post-Effective Amendment No. 3, July 26, 1996,
and are incorporated herein by reference.

Item 25. Persons Controlled by or Under Common Control with Registrant

None.

Item 26. Number of Holders of Securities

As of September 13, 1996, the number of record holders of each
class of shares of each Fund was as follows:

<PAGE> 69

<TABLE>
<CAPTION>
Number of
---------
Fund/Class Record Owners
---------- -------------
<S> <C>
ESC Strategic Appreciation Fund
Class A 265
Class D 84

ESC Strategic Global Equity Fund
Class A 262
Class D 78

ESC Strategic Small Cap Fund
Class A 1499
Class D 415

ESC Strategic Income Fund
Class A 119
Class D 40
</TABLE>

ESC Strategic Asset Preservation Fund 20

Item 27. Indemnification

Reference is made to Article VII of Registrant's Articles of
Incorporation.

Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers
and controlling persons of the Registrant by the Registrant
pursuant to the Articles of Incorporation or otherwise, the
Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Investment Company Act of 1940 and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
directors, officers or controlling persons of the Registrant in
connection with the successful defense of any act, suit or
proceeding) is asserted by such directors, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Investment Company Act of 1940 and will be
governed by the final adjudication of such issues.

Item 28. Business and Other Connections of Investment Adviser

Equitable Securities Corporation, the investment adviser to ESC
Strategic Funds, Inc., is a New York Stock Exchange member
investment banking and securities brokerage firm. The names of
Equitable Securities Corporation's directors and officers and
their business and other connections for at least the past two
years are as follows: (1)

<PAGE> 70

<TABLE>
<CAPTION>
Name Title Business and
- ---- ----- ------------
Other Connections
-----------------

<S> <C> <C>
William H. Cammack, Sr. Chairman, Managing Position with Equitable
Director and Director Securities Corporation,
1972 to present; Director
and President, ESC
Strategic Funds, Inc.,
1994 to present.

Katie H. Gambill President, Head of Position with Equitable
Equity Capital Securities Corporation,
Markets, Managing 1972 to present.
Director and Director

Frank D. Inman Managing Director Position with Equitable
Securities Corporation,
1989 to present.

William P. Johnston Chief Executive Position with Equitable
Officer, Managing Securities Corporation,
Director and Director 1987 to present.

Hershel L. Smith, Jr. Chief Financial Position with Equitable
Officer, Chief Securities Corporation,
Operations Officer 1986 to present.
and Managing Director

Tom R. Steele Managing Director and Position with Equitable
Director Securities Corporation,
1988 to present.

W. Howard Cammack, Jr. Managing Director and Position with Equitable
Director Securities Corporation,
1979 to present; Director
and Treasurer, ESC
Strategic Funds, Inc.,
1994 to present.
</TABLE>

____________________

(1) The address of all Directors and Officers of Equitable
Securities Corporation is 800 Nashville City Center, 511 Union Street,
Nashville, Tennessee 37279-1743.

Item 29. Principal Underwriters

(a) Not applicable.

<PAGE> 71

(b)

<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address (1) with Underwriter with Registrant
- -------------------- --------------------- ---------------------
<S> <C> <C>
William H. Cammack, Sr. Chairman, Managing Director and President
Director

Katie H. Gambill President, Head of None
Equity Capital
Markets, Managing
Director and Director

Frank D. Inman Managing Director None

William P. Johnston Chief Executive None
Officer, Managing
Director and Director

Hershel L. Smith, Jr. Chief Financial None
Officer, Chief
Operations Officer
and Managing Director

Tom R. Steele Managing Director and None
Director

W. Howard Cammack, Jr. Managing Director and Director and Treasurer
Director
</TABLE>

(1) The address of all directors and officers is 800 Nashville City
Center, 511 Union Street, Nashville, Tennessee 37219-1743.

Item 30. Location of Accounts and Records

The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940, and the Rules thereunder will be
maintained at the offices of Furman Selz LLC, 230 Park
Avenue, New York, New York 10169.

Item 31. Management Services

Not applicable.

Item 32. Undertakings

(a) Not applicable.

(b) The Registrant undertakes to file a post-effective
amendment using financial statements for ESC Strategic Growth
Fund which need not be certified, within four to six months
following the latter of the effective date of this amendment to
Registrant's registration statement or the date that shares of
ESC Strategic Growth Fund are publicly offered. Such
<PAGE> 72

financial statements will be as of and for the time period ended
on a date reasonably close or as soon as practicable to the date
of the filing of the amendment.

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

<PAGE> 73

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized, in the City of New York and State of New York on the
3rd day of December, 1996.

ESC STRATEGIC FUNDS, INC. ESC STRATEGIC FUNDS, INC.

* By: /s/ Gordon M. Forrester
- ------------------------- ------------------------
William H. Cammack, Sr. Gordon M. Forrester
President Assistant Treasurer

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment to the Registration Statement has been signed by
the following persons in the capacities indicated on the 3rd day of December,
1996.

<TABLE>
<CAPTION>
Signature Title
- --------- -----

<S> <C>
* Director and President
- -------------------------
William H. Cammack, Sr.

* Director and Treasurer
- -------------------------
William H. Cammack, Jr.

* Director
- -------------------------
J. Bransford Wallace

* Director
- ------------------------
Brownlee O. Currey, Jr.

* Director
- ------------------------
E. Townes Duncan

/s/ Gordon M. Forrester Assistant Treasurer
- ------------------------
Gordon M. Forrester

</TABLE>
*By: /s/ Joan V. Fiore
-----------------
Joan V. Fiore
Attorney-in-Fact

<PAGE> 74

ESC STRATEGIC FUNDS, INC.

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
------- ----------------------

<S> <C>
Exhibit 5(a) Investment Advisory Agreement

Exhibit 5(b) Portfolio Management Agreement for ESC
Strategic Growth Fund

Exhibit 6(b) Distribution Contract Supplements for ESC
Strategic Growth Fund

Exhibit 9(b) Administrative Services Contract Supplement
for ESC Strategic Growth Fund

Exhibit 9(e) Transfer Agency Agreement Supplement for ESC
Strategic Growth Fund

Exhibit 9(h) Accounting Agent Agreement Supplement for ESC
Strategic Growth Fund

Exhibit 11 Consent of Independent Accountants

Exhibit 15(b) Distribution Plan Supplements for ESC
Strategic Growth Fund

Exhibit 27 Financial Data Schedules (for SEC use only)
</TABLE>

<PAGE> 1
EXHIBIT 5(a)

ESC STRATEGIC FUNDS, INC.

INVESTMENT ADVISORY AGREEMENT

AGREEMENT, effective commencing on ________________, 1994, between
Equitable Securities Corporation (the "Adviser") and ESC Strategic Funds, Inc.
(the "Company").

WHEREAS, the Company is a Maryland corporation of the series type
organized under Articles of Incorporation dated November 24, 1993, (the
"Articles") and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end, management series-type investment
company;

WHEREAS, the Company wishes to retain the Adviser to render investment
advisory services to the Company with respect to each of its present and future
series ("Funds"), unless otherwise specifically indicated by the Company, and
the Adviser is willing to furnish such services to the Company;

WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act");

NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Company and the Adviser as follows:

1. Appointment. The Company hereby appoints the Adviser to act as
investment adviser for the Funds for the periods and on the terms set forth in
this Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.

2. Investment Advisory Duties. Subject to the supervision of the
Directors of the Company, the Adviser will have the sole and exclusive
responsibility for providing, or arranging for others to provide, (a) the
management for the Funds' assets in accordance with each Fund's investment
objectives, policies and limitations as stated in its prospectus and Statement
of Additional Information included as part of the Company's Registration
Statement filed with the Securities and Exchange Commission, as they may be
amended from time to time, copies of which shall be provided to the Adviser by
the Company; and (b) the placement of orders to purchase and sell securities
for the Funds. The Adviser, subject to approval in each case by the Directors
of the Company, shall be authorized to retain one or more subadvisers (the
"Portfolio Managers") for each of the Funds, and to direct that such Portfolio
Managers shall exercise full discretion in furnishing investment advice to the
Funds and arranging for the execution of portfolio transactions for the Funds,
subject only to general oversight by the Adviser. The Adviser shall be
responsible for monitoring, or arranging for
<PAGE> 2

others to monitor, compliance by the Portfolio Managers with the investment
policies and restrictions of the respective Funds and with such other
limitations or directions as the Board of Directors of the Company may from
time to time prescribe. The Adviser shall report to the Board of Directors of
the Company regularly at such times and in such detail as the Board may from
time to time determine to be appropriate, in order to permit the Board to
determine the adherence of the Adviser and Portfolio Managers to the investment
policies of the Funds.

The Adviser further agrees that, in performing its duties hereunder, it
will directly, or assure that the Portfolio Managers will,:

(a) comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Directors;

(b) use reasonable efforts to manage the Funds so that they will each
qualify, and continue to qualify, as regulated investment companies under
Subchapter M of the Code and regulations issued thereunder;

(c) place orders for the investments of the Funds directly with the
issuer, or with any broker or dealer, in accordance with applicable policies
expressed in the prospectus and/or Statement of Additional Information with
respect to each Fund and in accordance with applicable legal requirements;

(d) furnish to the Company whatever statistical information the Company
may reasonably request with respect to the Funds' assets or contemplated
investments; keep the Company and the Directors informed of developments
materially affecting the Funds' portfolios; and, on the Adviser's or Portfolio
Managers' own initiative, furnish to the Company from time to time whatever
information the Adviser or Portfolio Manager believes appropriate for this
purpose;

(e) make available to the Company's administrator, Furman Selz
Incorporated (the "Administrator"), and the Company, promptly upon their
request, such copies of its investment records and ledgers with respect to the
Funds as may be required to assist the Administrator and the Company in their
compliance with applicable laws and regulations. The Adviser will furnish the
Directors with such periodic and special reports regarding the Funds as they
may reasonably request;

- 2 -

<PAGE> 3

(f) immediately notify the Company in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees
to notify the Company immediately of any material fact known to the Adviser
respecting or relating to the Adviser that is not contained in the Company's
Registration Statement regarding the Funds, or any amendment or supplement
thereto, but that is required to be disclosed therein, and of any statement
contained therein that becomes untrue in any material respect;

(g) in making investment decisions with respect to the Funds, use no
inside information that may be in its possession or in the possession of any of
its affiliates, nor will the Adviser seek to obtain any such information.

3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 3, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as directors, officers
and executive employees of the Company (including the Company's share of
payroll taxes) and shall pay all fees payable pursuant to portfolio management
agreements with any Portfolio Managers it may retain. The Adviser shall make
available, without expense to the Funds, the services of its directors,
officers and employees who may be duly elected officers or directors of the
Company, subject to their individual consent to serve and to any limitations
imposed by law.

The Adviser shall not be required to pay any expenses of the Company or
the Funds other than those specifically allocated to the Adviser in this
section 3. In particular, but without limiting the generality of the
foregoing, the Adviser shall not be responsible, except to the extent of the
reasonable compensation of such of the Company's employees as are officers or
employees of the Adviser whose services may be involved, for the following
expenses of the Company or the Funds: organization and certain offering
expenses of the Company and the Funds (including out-of-pocket expenses, but
not including the Adviser's overhead and employee costs); fees payable to the
Adviser; legal expenses; auditing and accounting expenses; interest expenses;
telephone, telex, facsimile, postage and other communications expenses; taxes
and governmental fees; fees, dues and expenses incurred by or with respect to
the Company or the Funds in connection with membership in investment company
trade organizations; costs of insurance; fees and expenses of the Company's
Administrator or of any custodian, subcustodian,

- 3 -
<PAGE> 4

transfer agent, registrar, or dividend disbursing agent of the Company or the
Funds; payments for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; expenses of preparing and
printing share certificates; other expenses in connection with the issuance,
offering, distribution, redemption or sale of securities issued by the Funds;
expenses relating to investor and public relations; expenses of registering and
qualifying shares of the Funds for sale; freight, insurance and other charges
in connection with the shipment of the Funds' portfolio securities; brokerage
commissions or other costs of acquiring or disposing of any portfolio
securities or other assets of the Funds, or of entering into other transactions
or engaging in any investment practices with respect to the Funds; expenses of
printing and distributing prospectuses, Statements of Additional Information,
reports, notices and dividends to stockholders; costs of preparing, printing
and filing documents with regulatory agencies; costs of stationery and other
office supplies; any litigation or other extraordinary expenses; costs of
stockholders' and other meetings; the compensation and all expenses
(specifically including travel expenses relating to the business of the Company
or a Fund) of officers, directors and employees of the Company who are not
interested persons of the Adviser; and travel expenses (or an appropriate
portion thereof) of officers or directors of the Company who are officers,
directors or employees of the Adviser to the extent that such expenses relate
to attendance at meetings of the Board of Directors of the Company, or any
committees thereof or advisory group thereto or other business of the Company
or the Funds.

4. Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Company will arrange for the
Funds to pay the Adviser at the end of each calendar month an investment
advisory fee computed daily at an annual rate equal to the percentage of each
Fund's average daily net assets specified in Schedule A hereto. The "average
daily net assets" of a Fund shall mean the average of the values placed on the
Fund's net assets as of 4:15 p.m. (Eastern time) on each day on which the net
asset value of the Fund is determined consistent with the provisions of Rule
22c-1 under the 1940 Act or, if the Fund lawfully determines the value of its
net assets as of some other time on each business day, as of such other time.
The value of net assets of the Fund shall always be determined pursuant to the
applicable provisions of the Articles and the Registration Statement. If,
pursuant to such provisions, the determination of net asset value for a Fund is
suspended for any particular business day, then for the purposes of this
section 4, the value of the net assets of the Fund as last determined shall be
deemed to be the value of its net assets as of the close of the New York Stock
Exchange, or as

- 4 -
<PAGE> 5

of such other time as the value of the net assets of the Fund's portfolio may
lawfully be determined, on that day. If the determination of the net asset
value of the shares of a Fund has been so suspended for a period including any
month end when the Adviser's compensation is payable pursuant to this section,
then the Adviser's compensation payable at the end of such month shall be
computed on the basis of the value of the net assets of the Fund as last
determined (whether during or prior to such month). If a Fund determines the
value of the net assets of its portfolio more than once on any day, then the
last such determination thereof on that day shall be deemed to be the sole
determination thereof on that day for the purposes of this section 4.

In the event that the Adviser's gross compensation hereunder shall, when
added to the other expenses of a Fund, cause the aggregate expenses of the Fund
to exceed the maximum expenses permitted under the lowest applicable expense
limitation established pursuant to the statutes or regulations of any
jurisdiction in which the shares of the Fund may be qualified for offer or
sale, the total compensation paid or payable to the Adviser shall be reduced
(but not below zero) to the extent necessary to cause the Fund not to exceed
such expense limitation. Except to the extent that such reduction has been
reflected in lower monthly payments to the Adviser, the Adviser shall refund to
a Fund the amount by which the total payments received by the Adviser are in
excess of such expense limitation as promptly as practicable after the end of
such fiscal year, provided that the Adviser shall not be required to pay a Fund
an amount greater than the fee otherwise payable to the Adviser by that Fund in
respect of such year. As used in this Section 4, "expenses" shall mean those
expenses included in the applicable expense limitation having the broadest
specifications thereof, and "expense limitation" shall mean a limitation on the
maximum annual expenses which may be incurred by an investment company as
determined by applicable law. The words "lowest applicable expense limitation"
shall be deemed to be that which results in the largest reduction of the
Adviser's compensation for any fiscal year of a Fund; provided, however, that
nothing in this Agreement shall limit the Adviser's fees if not required by an
applicable statute or regulation referred to above in this Section 4.

5. Books and Records. The Adviser agrees to maintain such books and
records with respect to its services to the Company and the Funds as are
required by Section 31 under the 1940 Act, and rules adopted thereunder, and by
other applicable legal provisions, and to preserve such records for the periods
and in the manner required by that Section, and those rules and legal
provisions. The Adviser also agrees that records it maintains and preserves
pursuant to Rules 31a-1 and 31a-2 under the 1940

- 5 -
<PAGE> 6

Act and otherwise in connection with its services hereunder are the property of
the Company and will be surrendered promptly to the Company upon its request.
And the Adviser further agrees that it will furnish to regulatory authorities
having the requisite authority any information or reports in connection with
its services hereunder which may be requested in order to determine whether the
operations of the Company and the Funds are being conducted in accordance with
applicable laws and regulations.

6. Standard of Care and Limitation of Liability. The Adviser shall
exercise its best judgment in rendering the services provided by it under this
Agreement. The Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Company or a Fund or the holders
of a Fund's shares in connection with the matters to which this Agreement
relates, provided that nothing in this Agreement shall be deemed to protect or
purport to protect the Adviser against any liability to the Company, a Fund or
to holders of a Fund's shares to which the Adviser would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Adviser's reckless disregard
of its obligations and duties under this Agreement. As used in this Section 6,
the term "Adviser" shall include any officers, directors, employees or other
affiliates of the Adviser performing services with respect to the Company or a
Fund.

7. Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or to
other series of investment companies (whether or not their investment
objectives and policies are similar to those of a Fund) or from engaging in
other activities, provided such other services and activities do not, during
the term of this Agreement, interfere in a material manner with the Adviser's
ability to meet its obligations to the Company and the Funds hereunder. When
the Adviser recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Adviser recommends the
purchase or sale of the same security for a Fund, it is understood that in
light of its fiduciary duty to the Fund, such transactions will be executed on
a basis that is fair and equitable to the Fund. In connection with purchases
or sales of portfolio securities for the account of a Fund, neither the Adviser
nor any of its directors, officers or employees shall act as a principal or
agent or receive any commission. If the Adviser provides any advice to its
clients concerning the shares of the Funds, the Adviser shall act solely as
investment counsel

- 6 -
<PAGE> 7

for such clients and not in any way on behalf of the Company or a Fund.

8. Duration and Termination. This Agreement shall continue until
__________________, 199 , and thereafter shall continue automatically, with
respect to all or fewer than all the Funds, as applicable, for successive
annual periods, provided such continuance is specifically approved at least
annually by (i) the Directors or, (ii) with respect to each Fund, by vote of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities (as defined in the 1940 Act), provided that in either event the
continuance is also approved by a majority of the Directors who are not parties
to this Agreement or "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. Notwithstanding the foregoing, this
Agreement may be terminated: (a) at any time without penalty by the Company or
a Fund upon the vote of a majority of the Directors (with respect to the
Company or a Fund) or, with respect to a Fund, by vote of the majority of the
Fund's outstanding voting securities, upon sixty (60) days' written notice to
the Adviser or (b) by the Adviser at any time without penalty, upon sixty (60)
days' written notice to the Company. This Agreement will also terminate
automatically in the event of its assignment (as defined in the 1940 Act).

9. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
with respect to a Fund until approved by an affirmative vote of (i) a majority
of the outstanding voting securities of the Fund, and (ii) a majority of the
Directors, including a majority of Directors who are not interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting on such approval, if such approval is required by applicable law.

10. Proxies. Unless the Company gives written instructions to the
contrary, the Adviser shall vote all proxies solicited by or with respect to
the issuers of securities in which assets of the Funds may be invested,
provided, that the Adviser may delegate this responsibility with respect to one
or more Funds to Portfolio Managers pursuant to a portfolio management
agreement. The Adviser (or Portfolio Manager) shall use its best good faith
judgment to vote such proxies in a manner which best serves the interests of
the particular Fund's shareholders.

- 7 -
<PAGE> 8

11. Name Reservation. The Company acknowledges and agrees that the
Adviser has property rights relating to the use of the term "ESC Strategic" and
has permitted the use of such term by the Company and its Funds. The Company
agrees that: (i) it will use the term "ESC Strategic" only as a component of
the names of the Company and the Funds and for no other purposes; (ii) it will
not purport to grant to any third party any rights in such term; (iii) at the
request of the Adviser, the Company will take such action as may be required to
provide its consent to use of the term by the Adviser, or any affiliate of the
Adviser to whom the Adviser shall have granted the right to such use; and (iv)
the Adviser may use or grant to others the right to use the term as all or a
portion of a corporate or business name or for any commercial purpose,
including a grant of such right to any other investment company. Upon
termination of this Agreement as to the Company or any Fund, the Company shall,
upon request of the Adviser, cease to use the term "ESC Strategic" as part of
the name of the Company and its Funds, or of any Fund as to which the Agreement
is terminated, as applicable. In the event of any such request by the Adviser
that use of the term "ESC Strategic" shall cease, the Company shall cause its
officers, directors and stockholders to take any and all such actions which the
Adviser may request to effect such request and to reconvey to the Adviser any
and all rights to the term "ESC Strategic."

12. Miscellaneous.

a. This Agreement shall be governed by the laws of the State of Tennessee,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.

b. The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.

c. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.

d. Nothing herein shall be construed as constituting the Adviser as an
agent of the Company or any Fund.

- 8 -

<PAGE> 9

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of ______________, 199__.

ESC STRATEGIC FUNDS, INC.

By
-------------------------------
President

EQUITABLE SECURITIES CORPORATION

By
-------------------------------
President

- 9 -

<PAGE> 10

SCHEDULE A

Fees payable to the Adviser pursuant to paragraph 4 hereof shall be at the
following annual rates for each Fund:

ESC Strategic Appreciation Fund 1.00%
ESC Strategic Global Equity Fund 1.00%
ESC Strategic Small Cap Fund 1.00%
ESC Strategic Growth Fund 1.25%
ESC Strategic Income Fund 1.00%
ESC Strategic Asset Preservation Fund 0.50%

- 10 -

<PAGE> 1
EXHIBIT 5(b)

ESC STRATEGIC FUNDS, INC.

PORTFOLIO MANAGEMENT AGREEMENT

AGREEMENT, effective commencing on ________________, 199_, among
Equitable Securities Corporation (the "Adviser"), ESC Strategic Funds, Inc.
(the "Company") and Equitable Asset Management, Inc. ("Portfolio Manager").

WHEREAS, the Adviser has been appointed by the Company, pursuant to an
investment advisory agreement dated __________, 1996 ("Investment Advisory
Agreement"), to act as investment adviser to the Company with respect to each
of its present and future series ("Funds");

WHEREAS, the Adviser wishes to retain the Portfolio Manager to render
portfolio management services to the Company with respect to ESC Strategic
Growth Fund (the "Fund") and the Portfolio Manager is willing to furnish such
services to the Fund;

WHEREAS, the Portfolio Manager is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended ("Advisers Act");

NOW THEREFORE, in consideration of the promises and mutual covenants
herein contained, it is agreed between the Adviser and the Portfolio Manager as
follows:

1. Appointment. Pursuant to authority granted in the Investment
Advisory Agreement and with the approval of the Directors, the Adviser hereby
appoints the Portfolio Manager to act as portfolio manager for the Fund for the
periods and on the terms set forth in this Agreement. The Portfolio Manager
accepts such appointment and agrees to furnish the services herein set forth,
for the compensation herein provided.

2. Portfolio Management Duties. Subject to the overall
supervision of the Directors of the Company and the Adviser, the Portfolio
Manager is hereby granted full responsibility and discretion, with respect to
such portion of the Fund's assets as shall be allocated to it by the Adviser
for management pursuant to this Agreement from time to time (the "Assets"), for
(a) the management of the Assets in accordance with the Fund's investment
objectives, policies and limitations as stated in its prospectus
<PAGE> 2

and Statement of Additional Information included as part of the Company's
registration statement filed with the Securities and Exchange Commission
("SEC"), as they may be amended from time to time, ("Registration Statement")
copies of which shall be provided to the Portfolio Manager by the Adviser; and
(b) the placement of orders to purchase and sell securities for the Fund. At
the request of the Directors or the Adviser, the Portfolio Manager shall report
to the Board of Directors of the Company regularly at such times and in such
detail as the Board may from time to time determine to be appropriate, in order
to permit the Board to determine the adherence of the Portfolio Manager to the
investment policies of the Fund.

The Portfolio Manager further agrees that, in performing its duties
hereunder, it will:

(a) comply with the 1940 Act and all rules and regulations
thereunder, the Advisers Act, the Internal Revenue Code (the "Code") and all
other applicable federal and state laws and regulations, and with any
applicable procedures adopted by the Directors;

(b) use reasonable efforts to manage the Assets, and to coordinate
its activities with the Adviser and any other portfolio manager of the Fund, so
that the Fund will qualify, and continue to qualify, as a regulated investment
company under Subchapter M of the Code and regulations issued thereunder;

(c) place orders for the investment of the Assets directly with
the issuer, or with any broker or dealer, in accordance with applicable
policies expressed in the prospectus and/or Statement of Additional Information
with respect to the Fund and in accordance with applicable legal requirements;

(d) furnish to the Company, the Adviser and any other portfolio
manager whatever statistical information the Company, the Adviser or such other
portfolio manager may reasonably request with respect to the Assets or
contemplated investments; and keep the Adviser and the Directors and, as
appropriate, other portfolio managers informed of developments materially
affecting the Fund's portfolio;

(e) make available to the Company's administrator (the
"Administrator"), the Company or the Adviser, promptly upon their request, such
copies of its investment records and ledgers with respect to the Fund as may be
required to assist the Administrator, the Company and the Adviser in their
compliance with applicable laws and regulations. The Portfolio Manager will
furnish the Directors with such periodic and special reports regarding the Fund
as the Directors may reasonably request;

- 2 -
<PAGE> 3

(f) immediately notify the Company and the Adviser in the event
that the Portfolio Manager or any of its affiliates: (1) becomes aware that it
is subject to a statutory disqualification that prevents the Portfolio Manager
from serving as a portfolio manager pursuant to this Agreement; or (2) becomes
aware that it is the subject of an administrative proceeding or enforcement
action by the SEC or other regulatory authority. The Portfolio Manager further
agrees to review information in the Company's Registration Statement describing
the Portfolio Manager and to notify the Company and the Adviser if the
information becomes incorrect;

(g) in making investment decisions with respect to the Assets, use
no inside information that may be in its possession or in the possession of any
of its affiliates, nor will the Portfolio Manager seek to obtain any such
information.

3. Banking and Custody Accounts. The Portfolio Manager shall not
be required to provide or arrange for banking accounts for the Fund or to hold
money or assets on the Fund's behalf. The Portfolio Manager shall not be
required to act as the registered holder of any investment or to provide or
procure any custody or settlement services in connection with its services
hereunder. The Fund has entered into one or more agreements with providers of
banking and custody services (Custodians) whom the Fund will authorize to act
upon instructions from properly authorized representatives of the Portfolio
Manager, in connection with its services hereunder, directing the Custodian(s)
to pay, deliver or receive cash and securities in settlement of transactions
authorized by the Portfolio Manager on the Fund's behalf. The Fund's
agreement(s) with such Custodian(s) will require the Custodian(s) to settle all
transactions directed by the Portfolio Manager on the Fund's behalf.

4. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 4, the Portfolio Manager shall pay the
compensation and expenses of all its directors, officers and employees who
serve as directors, officers and executive employees of the Company (including
the Company's share of payroll taxes), and the Portfolio Manager shall make
available, without expense to the Fund, the services of its directors, officers
and employees who may be duly elected officers or directors of the Company,
subject to their individual consent to serve and to any limitations imposed by
law.

The Portfolio Manager shall not be required to pay any expenses of the
Company or the Fund other than those specifically allocated to the Portfolio
Manager in this section 4. In particular, but without limiting the generality
of the foregoing,

- 3 -

<PAGE> 4

the Portfolio Manager shall not be responsible, except to the extent of the
reasonable compensation of such of the Company's employees as are officers or
employees of the Portfolio Manager whose services may be involved, for the
following expenses of the Company or the Fund: organization and certain
offering expenses of the Company and the Fund (including out-of-pocket
expenses, but not including the Portfolio Manager's overhead and employee
costs); fees payable to or expenses of other portfolio managers or consultants;
legal expenses; auditing and accounting expenses; interest expenses; telephone,
telex, facsimile, postage and other communications expenses; taxes and
governmental fees; fees, dues and expenses incurred by or with respect to the
Company or the Fund in connection with membership in investment company trade
organizations; costs of insurance; fees and expenses of the Company's
Administrator or of any custodian, subcustodian, transfer agent, registrar, or
dividend disbursing agent of the Company or the Fund; payments for portfolio
pricing or valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing and printing share certificates;
other expenses in connection with the issuance, offering, distribution,
redemption or sale of securities issued by the Fund; expenses relating to
investor and public relations; expenses of registering and qualifying shares of
the Fund for sale; freight, insurance and other charges in connection with the
shipment of the Fund's portfolio securities; brokerage commissions or other
costs of acquiring or disposing of any portfolio securities or other assets of
the Fund, or of entering into other transactions or engaging in any investment
practices with respect to the Fund; expenses of printing and distributing
prospectuses, Statements of Additional Information, reports, notices and
dividends to stockholders; costs of preparing, printing and filing documents
with regulatory agencies; costs of stationery and other office supplies; any
litigation or other extraordinary expenses; costs of stockholders' and other
meetings; the compensation and all expenses (specifically including travel
expenses relating to the business of the Company or the Fund) of officers,
directors and employees of the Company who are not interested persons of the
Portfolio Manager; and travel expenses (or an appropriate portion thereof) of
officers or directors of the Company who are officers, directors or employees
of the Portfolio Manager to the extent that such expenses relate to attendance
at meetings of the Board of Directors of the Company, or any committees thereof
or advisory group thereto or other business of the Company or the Funds.

5. Compensation. As compensation for the services provided and
expenses assumed by the Portfolio Manager under this Agreement, the Adviser,
out of its fees from the Fund pursuant to the Investment Advisory Agreement,
will pay the Portfolio Manager at the end of each calendar month an investment
management fee

- 4 -
<PAGE> 5

computed daily at an annual rate equal to 0.65% of the first $50 million of the
average daily net value of the Assets, 0.60% on the next $50 million of such
value, 0.55% on the next $100 million of such value, and 0.50% on such value in
excess of $200 million. The "average daily net value of the Assets" shall mean
the average of the values placed on the net Assets as of 4:15 p.m. (Eastern
time) on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the Fund
lawfully determines the value of its net assets as of some other time on each
business day, as of such other time. The value of the net Assets, and of the
net assets of the Fund, shall always be determined pursuant to the applicable
provisions of the Articles and the Registration Statement. If, pursuant to
such provisions, the determination of net asset value for a Fund is suspended
for any particular business day, then for the purposes of this section 5, the
value of the net Assets as last determined shall be deemed to be the value of
the net Assets as of the close of the New York Stock Exchange, or as of such
other time as the value of the net assets of the Fund's portfolio may lawfully
be determined, on that day. If the determination of the net asset value of the
shares of the Fund has been so suspended for a period including any month end
when the Portfolio Manager's compensation is payable pursuant to this section,
then the Portfolio Manager's compensation payable at the end of such month
shall be computed on the basis of the value of the net Assets as last
determined (whether during or prior to such month). If the Fund determines the
value of the net assets of its portfolio more than once on any day, then the
last such determination thereof with respect to the net Assets on that day
shall be deemed to be the sole determination thereof on that day with respect
to the net Assets for the purposes of this section 5.

6. Books and Records. The Portfolio Manager agrees to maintain
such books and records with respect to its services to the Fund as are required
by Section 31 under the 1940 Act, and rules adopted thereunder, and by other
applicable legal provisions, and to preserve such records for the periods and
in the manner required by that Section, and those rules and legal provisions.
The Portfolio Manager also agrees that records it maintains and preserves
pursuant to Rules 31a-1 and 31a-2 under the 1940 Act and otherwise in
connection with its services hereunder are the property of the Company and will
be surrendered promptly to the Company upon its request. And the Portfolio
Manager further agrees that it will furnish to regulatory authorities having
the requisite authority any information or reports in connection with its
services hereunder which may be requested in order to determine whether the
operations of the Company and the Fund are being conducted in accordance with
applicable laws and regulations.

7. Standard of Care and Limitation of Liability. The Portfolio
Manager shall exercise its best judgment in rendering

- 5 -
<PAGE> 6

the services provided by it under this Agreement. The Portfolio Manager shall
not be liable for any error of judgment or mistake of law or for any loss
suffered by the Company or the Fund or the holders of the Fund's shares in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Portfolio Manager against any liability to the Company, the Fund or to holders
of the Fund's shares to which the Portfolio Manager would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence on its part in
the performance of its duties or by reason of the Portfolio Manager's reckless
disregard of its obligations and duties under this Agreement. As used in this
Section 7, the term "Portfolio Manager" shall include any officers, directors,
employees or other affiliates of the Portfolio Manager performing services with
respect to the Company or the Fund.

8. Services Not Exclusive. It is understood that the services of
the Portfolio Manager are not exclusive, and that nothing in this Agreement
shall prevent the Portfolio Manager from providing similar services to other
investment companies or to other series of investment companies (whether or not
their investment objectives and policies are similar to those of the Fund or
another fund of the Company) or from engaging in other activities, provided
such other services and activities do not, during the term of this Agreement,
interfere in a material manner with the Portfolio Manager's ability to meet its
obligations to the Company, the Adviser and the Fund hereunder. When the
Portfolio Manager recommends the purchase or sale of a security for other
investment companies and other clients, and at the same time the Portfolio
Manager recommends the purchase or sale of the same security for the Fund, it
is understood that in light of its fiduciary duty to the Fund, such
transactions will be executed on a basis that is fair and equitable to the
Fund. In connection with purchases or sales of portfolio securities for the
account of the Fund, neither the Portfolio Manager nor any of its directors,
officers or employees shall act as a principal or agent or receive any
commission. If the Portfolio Manager provides any advice to its clients
concerning the shares of the Fund or other funds of the Company, the Portfolio
Manager shall act solely as investment counsel for such clients and not in any
way on behalf of the Company, the Fund or another fund of the Company.

9. Duration and Termination. This Agreement shall continue until
__________________, 199__, and thereafter shall continue automatically for
successive annual periods, provided such continuance is specifically approved
at least annually by (i) the Directors or (ii) by vote of a "majority" (as
defined in the 1940 Act) of the Fund's outstanding voting securities (as

- 6 -
<PAGE> 7

defined in the 1940 Act), provided that in either event the continuance is also
approved by a majority of the Directors who are not parties to this Agreement
or "interested persons" (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. Notwithstanding the foregoing, this Agreement may be
terminated: (a) at any time without penalty (i) by the Adviser, (ii) by the
Company upon the vote of a majority of the Directors or (iii) by vote of the
majority of the Fund's outstanding voting securities, each upon sixty (60)
days' written notice to the Portfolio Manager; or (b) by the Portfolio Manager
at any time without penalty, upon sixty (60) days' written notice to the
Company or the Adviser. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).

10. Amendments. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against which enforcement of the change, waiver, discharge
or termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Directors, including
a majority of Directors who are not interested persons of any party to this
Agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.

11. Proxies and Rights. Unless the Company or the Adviser
gives written instructions to the contrary, the Portfolio Manager shall (a)
vote all proxies solicited by or with respect to the issuers of securities in
which the Assets are invested, using its best good faith judgment to vote such
proxies in a manner which best serves the interests of the Fund's shareholders,
and (b) exercise all other rights attaching to or arising with respect to the
Assets, subject to the Fund's investment objectives, policies and limitations
as stated in its Registration Statement, directing the Custodian to make any
required payment or settlement in connection therewith.

12. Non-Competition. The Company acknowledges that the Portfolio
Manager as a firm, and not any particular employee or managing director of the
Portfolio Manager (a "Portfolio Manager Employee"), is being retained by the
Company as portfolio manager for the Fund. The Company agrees not to employ or
otherwise receive portfolio management services from any Portfolio Manager
Employee, directly or indirectly through the engagement of any person or entity
which employs or to which such services are provided by any Portfolio Manager
Employee, at any location within the States of Michigan, Ohio, Tennessee,
Kentucky or

- 7 -
<PAGE> 8

Indiana, for the 24 (twenty-four) consecutive months after the termination of
the Portfolio Manager Employee's employment. The Company acknowledges that
this provision is not contained in the investment advisory or portfolio
management agreements of all investment advisors or portfolio managers.

13. Miscellaneous.

a. This Agreement shall be governed by the laws of the State of
Tennessee, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act, or rules or orders of the SEC
thereunder.

b. The captions of this Agreement are included for convenience
only and in no way define or limit any of the provisions hereof or otherwise
affect their construction or effect.

c. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected hereby and, to this extent, the provisions of
this Agreement shall be deemed to be severable.

d. Nothing herein shall be construed as constituting the
Portfolio Manager as an agent of the Company or the Fund.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of ______________, 199__.

EQUITABLE SECURITIES CORPORATION

By
-------------------------------
President

EQUITABLE ASSET MANAGEMENT, INC.

By
-------------------------------
Title:
-------------------------

- 8 -

<PAGE> 1
EXHIBIT 6(b)

DISTRIBUTION CONTRACT SUPPLEMENT

ESC STRATEGIC FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017

October 15, 1996

Equitable Securities Corporation
800 Nashville City Center
511 Union Street
Nashville, Tennessee 37219

Re: ESC Strategic Growth Fund - Class A Shares

Dear Sirs:

This will confirm the agreement between the undersigned (the "Company")
and you (the "Distributor") as follows:

1. The Company is an open-end management investment company organized as a
Maryland corporation and consists of such separate investment portfolios as
have been or may be established by the Directors of the Company from time to
time. A separate series of shares of common stock of the Company is offered to
investors with respect to each investment portfolio. ESC Strategic Growth Fund
(the "Fund") is a separate investment portfolio of the Company and has two
classes of shares, including the Class A Shares covered by this Supplement.

2. The Company and the Distributor have entered into a Master Distribution
Contract ("Master Agreement") pursuant to which the Distributor has agreed to
be the distributor of shares of the Company.

3. As provided in paragraph 1 of the Master Agreement, the Company hereby
adopts the Master Agreement with respect to Class A Shares of the Fund, and the
Distributor hereby acknowledges that the Master Agreement shall pertain to
Class A Shares of the Fund, the terms and conditions of such Master Agreement
being hereby incorporated herein by reference.

4. The term "Fund", "Funds", "Class" and "Classes", as used in the Master
Agreement shall, for purposes of this Supplement, pertain to the Fund and to
its Class A Shares, respectively, as the context requires.

5. This Supplement and the Master Agreement (together, the "contract")
shall become effective with respect to the Company and Class A Shares of the
Fund on October 15, 1996, and shall continue in effect until such time as there
shall remain no unsold balance of Class A Shares registered under the 1933 Act
provided that this contract shall continue in effect for a period of more than
two years from the effective date of this Supplement only so long as such
continuance is specifically approved at least annually by (a) the Company's
Board of Directors or by the vote of a majority of the outstanding voting
securities (as defined in the 1940

<PAGE> 2

Act) of the Company, the Fund or Class A, as required by applicable legal
provisions and (b) by the vote, cast in person at a meeting called for the
purpose, of a majority of the Company's Directors who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such
party. This contract shall terminate automatically in the event of its
assignment (as defined in the 1940 Act). This contract may, in any event, be
terminated at any time, without the payment of any penalty, by the Company upon
60 days written notice to the Distributor and by the Distributor upon 60 days
written notice to the Company.

If the foregoing correctly sets forth the agreement between the Company
and the Distributor, please so indicate by signing and returning to the Company
the enclosed copy hereof.

Very truly yours,

ESC STRATEGIC FUNDS, INC.

By:
-----------------------------
Name: John J. Pileggi
Title: Secretary

ACCEPTED:

EQUITABLE SECURITIES CORPORATION

By:
-------------------------------
Name:
Title:

<PAGE> 3

DISTRIBUTION CONTRACT SUPPLEMENT

ESC STRATEGIC FUNDS, INC.
237 PARK AVENUE
NEW YORK, NEW YORK 10017

October 15, 1996

Equitable Securities Corporation
800 Nashville City Center
511 Union Street
Nashville, Tennessee 37219

Re: ESC Strategic Growth Fund - Class D Shares

Dear Sirs:

This will confirm the agreement between the undersigned (the "Company")
and you (the "Distributor") as follows:

2. The Company and the Distributor have entered into a Master Distribution
Contract ("Master Agreement") pursuant to which the Distributor has agreed to
be the distributor of shares of the Company.

3. As provided in paragraph 1 of the Master Agreement, the Company hereby
adopts the Master Agreement with respect to Class D Shares of the Fund, and the
Distributor hereby acknowledges that the Master Agreement shall pertain to
Class A Shares of the Fund, the terms and conditions of such Master Agreement
being hereby incorporated herein by reference.

5. This Supplement and the Master Agreement (together, the "contract")
shall become effective with respect to the Company and Class D Shares of the
Fund on October 15, 1996, and shall continue in effect until such time as there
shall remain no unsold balance of Class D Shares registered under the 1933 Act
provided that this contract shall continue in effect for a period of more than
two years from the effective date of this Supplement only so long as such
continuance is specifically approved at least annually by (a) the Company's
Board of Directors or by the vote of a majority of the outstanding voting
securities (as defined in the 1940

<PAGE> 4

Act) of the Company, the Fund or Class D, as required by applicable legal
provisions and (b) by the vote, cast in person at a meeting called for the
purpose, of a majority of the Company's Directors who are not parties to this
contract or "interested persons" (as defined in the 1940 Act) of any such
party. This contract shall terminate automatically in the event of its
assignment (as defined in the 1940 Act). This contract may, in any event, be
terminated at any time, without the payment of any penalty, by the Company upon
60 days written notice to the Distributor and by the Distributor upon 60 days
written notice to the Company.

If the foregoing correctly sets forth the agreement between the Company
and the Distributor, please so indicate by signing and returning to the Company
the enclosed copy hereof.

Very truly yours,

ESC STRATEGIC FUNDS, INC.

By:
----------------------------
Name: John J. Pileggi
Title: Secretary

ACCEPTED:

EQUITABLE SECURITIES CORPORATION

By:
-----------------------------
Name:
Title:

<PAGE> 1

EXHIBIT 9(b)

ESC STRATEGIC FUNDS, INC.

October 15, 1996

Furman Selz LLC
230 Park Avenue
New York, New York 10169

Dear Sirs:

Pursuant to Section 1.1 of the Administration Agreement dated April 4,
1994, between ESC Strategic Funds, Inc. (the "Company") and Furman Selz LLC
(the "Agreement"), a new portfolio has been established for which the Company
would like to retain Furman Selz LLC as Administrator. The terms and
conditions of the Agreement as well as the compensation referred to in Section
12 therein will be the same for the new portfolio as for the Company's other
portfolios referred to in the Agreement. The new portfolio to be added to the
Administration Agreement is:

ESC Strategic Growth Fund

If the foregoing is acceptable and correctly sets forth the agreement
between the Company and Furman Selz LLC, please so indicate by signing and
returning this letter to the Company.

Very truly yours,

ESC STRATEGIC FUNDS, INC.

By:
------------------------
Name: John J. Pileggi
Title: Secretary

Accepted:

Furman Selz LLC

By:
-----------------------
Name: John J. Pileggi
Title: Director

<PAGE> 1

EXHIBIT 9(e)

ESC STRATEGIC FUNDS, INC.

October 15, 1996

Furman Selz LLC
230 Park Avenue
New York, New York 10169

Dear Sirs:

Pursuant to Section 1 of the Transfer Agency Agreement dated April 4,
1994, between ESC Strategic Funds, Inc. (the "Company") and Furman Selz LLC
(the "Agreement"), a new portfolio has been established for which the Company
would like to retain Furman Selz LLC as Transfer Agent. The terms and
conditions of the Agreement as well as the compensation referred to in Section
16 therein will be the same for the new portfolio as for the Company's other
portfolios referred to in the Agreement. The new portfolio to be added to the
Transfer Agency Agreement is:

ESC Strategic Growth Fund

If the foregoing is acceptable and correctly sets forth the agreement
between the Company and Furman Selz LLC, please so indicate by signing and
returning this letter to the Company.

Very truly yours,

ESC Strategic Funds, Inc.

By:
-----------------------
Name: John J. Pileggi
Title: Secretary

Accepted:

Furman Selz LLC

By:
------------------
Name: John J. Pileggi
Title: Director

<PAGE> 1

EXHIBIT 9(h)

ESC STRATEGIC FUNDS, INC.

October 15, 1996

Furman Selz LLC
230 Park Avenue
New York, New York 10169

Dear Sirs:

Pursuant to Section 18 of the Fund Accounting Agreement dated April 4,
1994, between ESC Strategic Funds, Inc. (the "Company") and Furman Selz LLC
(the "Agreement"), a new portfolio has been established for which the Company
would like to retain Furman Selz LLC as Accounting Agent. The terms and
conditions of the Agreement as well as the compensation referred to in Section
14 therein will be the same for the new portfolio as for the Company's other
portfolios referred to in the Agreement. The new portfolio to be added to the
Accounting Agent Agreement is:

ESC Strategic Growth Fund, Inc.

If the foregoing is acceptable and correctly sets forth the agreement
between the Company and Furman Selz LLC, please so indicate by signing and
returning this letter to the Company.

Very truly yours,

ESC STRATEGIC FUNDS, INC.

By: -----------------------
Name: John J. Pileggi
Title: Secretary

Accepted:

Furman Selz LLC

By:
-----------------------
Name: John J. Pileggi
Title: Director

<PAGE> 1
Exhibit 11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statements of Additional Information which
have been incorporated by reference in this Post-Effective Amendment No. 6 to
the registration statement on Form N-1A (the "Registration Statement"), of our
report dated May 16, 1996, relating to the financial statements and financial
highlights of ESC Strategic Asset Preservation Fund, ESC Strategic Income Fund,
ESC Global Equity Fund, ESC Strategic Small Cap Fund and ESC Strategic
Appreciation Fund (five of the six portfolios constituting ESC Strategic Funds,
Inc.), which report appears in such Statements of Additional Information. We
also consent to the incorporation by reference of our report into the
Prospectuses which have been incorporated by reference into this Registration
Statement and to the references to us under the heading "Independent
Accountants" in the Statement of Additional Information constituting part of
the Registration Statement.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 25, 1996

<PAGE> 1
EXHIBIT 15(b)

ESC STRATEGIC FUNDS, INC.

Distribution Plan Supplement

ESC Strategic Growth Fund

Class A Shares

October 15, 1996

WHEREAS, ESC Strategic Funds, Inc. (The "Company") is an open-end
investment company organized as a Maryland Corporation and consists of one or
more separate investment portfolios, as may be established and designated by
the Directors from time to time;

WHEREAS, a separate series of shares of common stock of the Company is
offered to investors with respect to each investment portfolio; and

WHEREAS, each investment portfolio offers one or more classes of
shares;

WHEREAS, the Company has adopted a Mater Distribution Plan ("Plan")
which provides that it shall pertain to such investment portfolios and classes
of shares as shall be designated from time to time by the Directors of the
Company in any Supplement to the Plan; and

WHEREAS, ESC Strategic Growth Fund (the "Fund") is a separate
investment portfolio of the Company and offers two classes of shares
("Classes"), including the Class A shares covered by this Supplement:

NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:

1. As provided in paragraph 1 of the Plan, the Company hereby
adopts the Plan on behalf of the Fund and its Class A shares,
the terms and conditions of such Plan being hereby
incorporated herein by reference;

2. The terms "Fund" or "Funds" and "Class" or "Classes" as used
in the Plan shall refer to the Fund and its Classes,
respectively; and

3. As provided in paragraph 2 of the Plan, reimbursements by the
Fund shall be subject to the following annual limits: 0.25%
of the average daily net assets attributable to Class A
shares, provided that up to 0.25% of such average daily net
assets may be designated out of such reimbursements as a
"service fee," as defined in rules and policy statements of
the National Association of Securities Dealers.
<PAGE> 2

ESC STRATEGIC FUNDS, INC.

Distribution Plan Supplement

ESC Strategic Growth Fund

Class D Shares

October 15, 1996

WHEREAS, a separate series of shares of common stock of the Company is
offered to investors with respect to each investment portfolio; and

WHEREAS, each investment portfolio offers one or more classes of
shares;

WHEREAS, ESC Strategic Growth Fund (the "Fund") is a separate
investment portfolio of the Company and offers two classes of shares
("Classes"), including the Class D shares covered by this Supplement:

NOW, THEREFORE, the Directors of the Company hereby take the following
actions, subject to the conditions set forth:

2. The terms "Fund" or "Funds" and "Class" or "Classes" as used
in the Plan shall refer to the Fund and its Classes,
respectively; and

3. As provided in paragraph 2 of the Plan, reimbursements by the
Fund shall be subject to the following annual limits: 0.75%
of the average daily net assets attributable to Class A
shares, provided that up to 0.25% of such average daily net
assets may be designated out of such reimbursements as a
"service fee," as defined in rules and policy statements of
the National Association of Securities Dealers.

<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> ESC STRATEGIC ASSET PRESERVATION FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 13,094
<INVESTMENTS-AT-VALUE> 13,151
<RECEIVABLES> 222
<ASSETS-OTHER> 392
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 13,765
<PAYABLE-FOR-SECURITIES> 489
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 35
<TOTAL-LIABILITIES> 524
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,195
<SHARES-COMMON-STOCK> 1,324
<SHARES-COMMON-PRIOR> 1,206
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (11)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56
<NET-ASSETS> 13,241
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 821
<OTHER-INCOME> 0
<EXPENSES-NET> 115
<NET-INVESTMENT-INCOME> 706
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 128
<NET-CHANGE-FROM-OPS> 835
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 706
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 104
<NUMBER-OF-SHARES-REDEEMED> 56
<SHARES-REINVESTED> 70
<NET-CHANGE-IN-ASSETS> 1,317
<ACCUMULATED-NII-PRIOR> 1
<ACCUMULATED-GAINS-PRIOR> (20)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 64
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 202
<AVERAGE-NET-ASSETS> 12,765
<PER-SHARE-NAV-BEGIN> 9.89
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> 0.56
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.00
<EXPENSE-RATIO> 0.90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> ESC STRATEGIC GLOBAL EQUITY FUND - CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 16,490
<INVESTMENTS-AT-VALUE> 17,849
<RECEIVABLES> 242
<ASSETS-OTHER> 589
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,680
<PAYABLE-FOR-SECURITIES> 289
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68
<TOTAL-LIABILITIES> 358
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,786
<SHARES-COMMON-STOCK> 1,321
<SHARES-COMMON-PRIOR> 931
<ACCUMULATED-NII-CURRENT> 84
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 94
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,359
<NET-ASSETS> 18,322
<DIVIDEND-INCOME> 228
<INTEREST-INCOME> 89
<OTHER-INCOME> 0
<EXPENSES-NET> 393
<NET-INVESTMENT-INCOME> (66)
<REALIZED-GAINS-CURRENT> 900
<APPREC-INCREASE-CURRENT> 1,134
<NET-CHANGE-FROM-OPS> 1,967
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 283
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 393
<NUMBER-OF-SHARES-REDEEMED> 22
<SHARES-REINVESTED> 20
<NET-CHANGE-IN-ASSETS> 5,787
<ACCUMULATED-NII-PRIOR> (8)
<ACCUMULATED-GAINS-PRIOR> (295)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 393
<AVERAGE-NET-ASSETS> 12,098
<PER-SHARE-NAV-BEGIN> 9.90
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 1.46
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.08
<EXPENSE-RATIO> 2.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> ESC STRATEGIC GLOBAL EQUITY FUND - CLASS D
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 16,490
<INVESTMENTS-AT-VALUE> 17,849
<RECEIVABLES> 242
<ASSETS-OTHER> 589
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18,680
<PAYABLE-FOR-SECURITIES> 289
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68
<TOTAL-LIABILITIES> 358
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,786
<SHARES-COMMON-STOCK> 337
<SHARES-COMMON-PRIOR> 338
<ACCUMULATED-NII-CURRENT> 84
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 94
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,359
<NET-ASSETS> 18,322
<DIVIDEND-INCOME> 228
<INTEREST-INCOME> 89
<OTHER-INCOME> 0
<EXPENSES-NET> 393
<NET-INVESTMENT-INCOME> (66)
<REALIZED-GAINS-CURRENT> 900
<APPREC-INCREASE-CURRENT> 1,134
<NET-CHANGE-FROM-OPS> 1,967
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 76
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39
<NUMBER-OF-SHARES-REDEEMED> 48
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 5,787
<ACCUMULATED-NII-PRIOR> (8)
<ACCUMULATED-GAINS-PRIOR> (295)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 157
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 393
<AVERAGE-NET-ASSETS> 3,586
<PER-SHARE-NAV-BEGIN> 9.82
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 1.46
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .24
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.95
<EXPENSE-RATIO> 2.96
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 031
<NAME> ESC STRATEGIC INCOME FUND - CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 33,259
<INVESTMENTS-AT-VALUE> 32,943
<RECEIVABLES> 817
<ASSETS-OTHER> 4,679
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,439
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,516
<SHARES-COMMON-STOCK> 3,730
<SHARES-COMMON-PRIOR> 3,256
<ACCUMULATED-NII-CURRENT> 509
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (373)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (315)
<NET-ASSETS> 38,337
<DIVIDEND-INCOME> 43
<INTEREST-INCOME> 2,792
<OTHER-INCOME> 0
<EXPENSES-NET> 657
<NET-INVESTMENT-INCOME> 2,179
<REALIZED-GAINS-CURRENT> 742
<APPREC-INCREASE-CURRENT> (286)
<NET-CHANGE-FROM-OPS> 2,635
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,105
<DISTRIBUTIONS-OF-GAINS> 742
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 422
<NUMBER-OF-SHARES-REDEEMED> 207
<SHARES-REINVESTED> 259
<NET-CHANGE-IN-ASSETS> 4,723
<ACCUMULATED-NII-PRIOR> 149
<ACCUMULATED-GAINS-PRIOR> 12
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 373
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 673
<AVERAGE-NET-ASSETS> 35,846
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.59
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> ESC STRATEGIC INCOME FUND - CLASS D
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 33,259
<INVESTMENTS-AT-VALUE> 32,943
<RECEIVABLES> 817
<ASSETS-OTHER> 4,679
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 38,439
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 102
<TOTAL-LIABILITIES> 102
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38,516
<SHARES-COMMON-STOCK> 146
<SHARES-COMMON-PRIOR> 125
<ACCUMULATED-NII-CURRENT> 509
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (373)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (315)
<NET-ASSETS> 38,337
<DIVIDEND-INCOME> 43
<INTEREST-INCOME> 2,792
<OTHER-INCOME> 0
<EXPENSES-NET> 657
<NET-INVESTMENT-INCOME> 2,179
<REALIZED-GAINS-CURRENT> 742
<APPREC-INCREASE-CURRENT> (286)
<NET-CHANGE-FROM-OPS> 2,635
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 74
<DISTRIBUTIONS-OF-GAINS> 29
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 39
<NUMBER-OF-SHARES-REDEEMED> 48
<SHARES-REINVESTED> 7
<NET-CHANGE-IN-ASSETS> 4,723
<ACCUMULATED-NII-PRIOR> 149
<ACCUMULATED-GAINS-PRIOR> 12
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 373
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 673
<AVERAGE-NET-ASSETS> 1,378
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> 0.54
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> 0.54
<PER-SHARE-DISTRIBUTIONS> 0.21
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 2.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 041
<NAME> ESC STRATEGIC SMALL CAP FUND - CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 22,769
<INVESTMENTS-AT-VALUE> 29,661
<RECEIVABLES> 822
<ASSETS-OTHER> 7,490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,973
<PAYABLE-FOR-SECURITIES> 106
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129
<TOTAL-LIABILITIES> 235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,415
<SHARES-COMMON-STOCK> 1,816
<SHARES-COMMON-PRIOR> 781
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,808
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,892
<NET-ASSETS> 37,737
<DIVIDEND-INCOME> 81
<INTEREST-INCOME> 192
<OTHER-INCOME> 0
<EXPENSES-NET> 480
<NET-INVESTMENT-INCOME> (207)
<REALIZED-GAINS-CURRENT> 2,358
<APPREC-INCREASE-CURRENT> 6,354
<NET-CHANGE-FROM-OPS> 8,505
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 649
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,060
<NUMBER-OF-SHARES-REDEEMED> 63
<SHARES-REINVESTED> 39
<NET-CHANGE-IN-ASSETS> 25,585
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 524
<AVERAGE-NET-ASSETS> 17,494
<PER-SHARE-NAV-BEGIN> 11.25
<PER-SHARE-NII> (0.08)
<PER-SHARE-GAIN-APPREC> 5.19
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.88
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 042
<NAME> ESC STRATEGIC SMALL CAP FUND - CLASS D
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 22,769
<INVESTMENTS-AT-VALUE> 29,661
<RECEIVABLES> 822
<ASSETS-OTHER> 7,490
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 37,973
<PAYABLE-FOR-SECURITIES> 106
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 129
<TOTAL-LIABILITIES> 235
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,415
<SHARES-COMMON-STOCK> 564
<SHARES-COMMON-PRIOR> 300
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,808
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,892
<NET-ASSETS> 37,737
<DIVIDEND-INCOME> 81
<INTEREST-INCOME> 192
<OTHER-INCOME> 0
<EXPENSES-NET> 480
<NET-INVESTMENT-INCOME> (207)
<REALIZED-GAINS-CURRENT> 2,358
<APPREC-INCREASE-CURRENT> 6,354
<NET-CHANGE-FROM-OPS> 8,505
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 189
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 280
<NUMBER-OF-SHARES-REDEEMED> 29
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> 25,585
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 487
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 225
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 524
<AVERAGE-NET-ASSETS> 5,223
<PER-SHARE-NAV-BEGIN> 11.22
<PER-SHARE-NII> (0.16)
<PER-SHARE-GAIN-APPREC> 5.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.48
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.76
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 051
<NAME> ESC STRATEGIC APPRECIATION FUND - CLASS A
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 22,698
<INVESTMENTS-AT-VALUE> 26,855
<RECEIVABLES> 49
<ASSETS-OTHER> 1,270
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,174
<PAYABLE-FOR-SECURITIES> 54
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77
<TOTAL-LIABILITIES> 131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,852
<SHARES-COMMON-STOCK> 1,964
<SHARES-COMMON-PRIOR> 1,418
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,033
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,157
<NET-ASSETS> 28,043
<DIVIDEND-INCOME> 296
<INTEREST-INCOME> 85
<OTHER-INCOME> 0
<EXPENSES-NET> 482
<NET-INVESTMENT-INCOME> (101)
<REALIZED-GAINS-CURRENT> 1,696
<APPREC-INCREASE-CURRENT> 3,346
<NET-CHANGE-FROM-OPS> 4,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 573
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 670
<NUMBER-OF-SHARES-REDEEMED> 165
<SHARES-REINVESTED> 40
<NET-CHANGE-IN-ASSETS> 11,224
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 507
<AVERAGE-NET-ASSETS> 21,584
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> (0.05)
<PER-SHARE-GAIN-APPREC> 2.71
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.02
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 052
<NAME> ESC STRATEGIC APPRECIATION FUND - CLASS D
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
<INVESTMENTS-AT-COST> 22,698
<INVESTMENTS-AT-VALUE> 26,855
<RECEIVABLES> 49
<ASSETS-OTHER> 1,270
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,174
<PAYABLE-FOR-SECURITIES> 54
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77
<TOTAL-LIABILITIES> 131
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,852
<SHARES-COMMON-STOCK> 192
<SHARES-COMMON-PRIOR> 159
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,033
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,157
<NET-ASSETS> 28,043
<DIVIDEND-INCOME> 296
<INTEREST-INCOME> 85
<OTHER-INCOME> 0
<EXPENSES-NET> 482
<NET-INVESTMENT-INCOME> (101)
<REALIZED-GAINS-CURRENT> 1,696
<APPREC-INCREASE-CURRENT> 3,346
<NET-CHANGE-FROM-OPS> 4,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 51
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55
<NUMBER-OF-SHARES-REDEEMED> 27
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 11,224
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 57
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 237
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 507
<AVERAGE-NET-ASSETS> 2,055
<PER-SHARE-NAV-BEGIN> 10.63
<PER-SHARE-NII> (0.09)
<PER-SHARE-GAIN-APPREC> 2.68
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.31
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.91
<EXPENSE-RATIO> 2.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>