<PAGE> 1
ESC STRATEGIC FUNDS, INC.
- --------------------------------------------------------------------------------
November 19, 1997
Dear Shareholder:
We are pleased to present the September 30, 1997 semi-annual report for the ESC
Strategic Funds. We take this opportunity to inform you of the progress of the
Funds and to discuss recent and expected market environments. Of course, we
always want to convey our appreciation for your investment and confidence in our
effort.
The past six months held several important developments including closing of the
Small Cap Fund to new investors, the successful launch of the ESC Strategic
Value Fund and significant growth in the other newest fund, the ESC Strategic
Growth Fund.
The past six months were also a period of strength in virtually all of the
investment markets. This was an environment in which all sectors performed well
as compared to recent years in which the largest capitalization domestic stocks
led the way while other sectors were perceived to languish. More recently,
however, markets have been buffeted by weakness in Asian currencies which
produced unusual volatility and investor concern around the globe. Historically,
such developments create new opportunities for investors.
MULTIPLE MANAGER SERIES
Each fund in this series is diversified across several counter-balancing, yet
compatible, investment styles. The purpose is to ensure that a successful
manager, which runs the risk of being over-valued by way of superior
appreciation, does not become over-weighted within a particular fund and that an
under-performing manager is able to receive additional cash in advance of
returning to favor. Unlike some funds which attempt to anticipate trends, the
Multiple Manager Series adheres to a consistent strategy of maintaining target
allocations to each manager and respective market sectors.
ESC STRATEGIC INCOME FUND achieved a total return of 5.38% (Class A shares,
excluding sales charges) during the six months ended September 30, 1997, as
compared to 5.45% for the Lipper Global Income Fund Index and 4.34% for the
Salomon World Government Index. The Lipper Global Income Fund Index is a managed
index comprised of funds that invest at least 65% of their assets in global debt
issues and the Salomon World Government Index is an unmanaged index generally
representative of the total return of global debt securities.
The past six months continued a trend of low inflation and steady U.S. interest
rates. This afforded continued strength in the domestic high-yield sector as
investors sought the benefit of enhanced yields; however, little style
divergence occurred. Following are management firms, actual allocations and
target allocations at quarter-end:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF 9/30/97
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
Cincinnati Asset Management U.S. High Yield 33.9% 33.3%
Murray Johnstone International International 33.3% 33.3%
Llama Asset Management Investment Grade 33.8% 33.4%
</TABLE>
ESC STRATEGIC APPRECIATION FUND gained 36.49% (Class A shares, excluding sales
charges) during the six months ended September 30, 1997, as compared to 28.66%
and 26.21% for the Lipper Capital Appreciation Fund Index and the S&P 500 Index,
respectively. The Lipper Capital Appreciation Fund Index is a managed index
comprised of managed funds that seek capital appreciation through investing in
equity securities and the S&P 500 Index is an unmanaged index generally
representative of the U.S. stock market.
All sectors represented in the ESC Strategic Appreciation Fund performed well
with the most significant strength occurring in the mid to large-cap growth
segment in addition to the small-cap growth segment. The Fund was re-balanced as
noted below:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF 9/30/97
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
GlobeFlex Capital Mid to Large Cap Growth 33.3% 33.3%
Scott & Stringfellow Cap. Mgmt. Small Cap Growth 35.8% 33.4%
Brandes Investment Partners Value 30.9% 33.3%
</TABLE>
<PAGE> 2
ESC STRATEGIC GLOBAL EQUITY FUND returned 20.43% (Class A shares, excluding
sales charges) during the six months ended September 30, 1997, while the Lipper
Global Fund Index and FTA World Index gained 18.06% and 17.65%, respectively.
The Lipper Global Fund Index is a managed index comprised of managed funds that
invest in foreign equity securities and the FTA World Index is an unmanaged
index generally representative of foreign equity securities.
Prior to the end of the period, investor interest continued to return toward the
international markets, both developed and emerging. The best performing regions
continued to be Latin America and Eastern Europe. Despite recent weakness in
Asia, which has spilled over into many other markets, domestic as well as
international, we remain confident in the efficacy of a global approach toward
diversification. The Fund re-balanced as noted below in its on-going effort to
maintain the risk/reward ratio of the Fund:
<TABLE>
<CAPTION>
ALLOCATIONS AS OF 9/30/97
ACTUAL TARGET
------ ------
<S> <C> <C> <C>
GlobeFlex Capital Mid to Large Cap Growth 42.5% 35.0%
Murray Johnstone International Developed Markets 34.5% 39.0%
Murray Johnstone International Emerging Markets 23.0% 26.0%
</TABLE>
SINGLE MANAGER SERIES
This series utilizes a traditional single management firm approach to provide
investors access to more focused portfolio disciplines.
Our newest fund, ESC STRATEGIC VALUE FUND, commenced operations on May 8, 1997.
Since inception, the Fund has returned 12.40% (Class A shares, excluding sales
charges) versus 17.03% for the Russell Value Index without income. The Russell
Value Index is an unmanaged index comprised of 2,000 domestically traded common
stocks of small capitalization companies. As the Fund becomes more fully
invested, we expect performance to be more representative of relevant index
returns. The lead portfolio manager of the Fund, C. Marks Hinton Jr., has over
32 years of experience in the investment industry. The approach he brings to the
Fund can best be described as contrarian by way of seeking to understand and
thus benefit from the mistakes of others. The Fund attempts to purchase for
long-term investment, securities deemed by the manager to be over-sold relative
to underlying or intrinsic value with the expectation that they will recover to
at least full valuation as a result of a catalyst which has yet to become
recognized by the investing public.
ESC STRATEGIC SMALL CAP FUND returned 39.77% (Class A shares, excluding sales
charges) during the six months ended September 30, 1997, as compared to 34.91%
for the Lipper Small Company Growth Fund Index and 32.48% for the Russell 2000
Index without income. The Lipper Small Company Growth Fund is a managed index
comprised of managed funds that invest in equity securities of small
capitalization companies.
The Fund seeks fundamentally sound companies generating consistently superior
earnings growth rather than compete with the legions of analysts and economists
attention to determine the next direction of the economy or the market. Investor
confusion combined with a lack of sustained diligence on the part of Wall Street
creates opportunities which continue to present themselves.
The previous six months exhibited a rally in small-cap stocks that began in late
April. As the last several years have been favorable for large-cap stocks,
investors have indiscriminately thrust money at the larger of the S&P 500
companies, while generally ignoring values in the small-cap arena. Despite
recent performance, the manager of the Fund continues to view
small-capitalization stocks as an under-valued sector.
ESC STRATEGIC GROWTH FUND returned 48.86% (Class A shares, excluding sales
charges) during the six months ended September 30, 1997 as compared to 32.48%
for the Russell 2000 Index without income.
The ESC Strategic Growth Fund benefited from many of the same factors which
assisted the small-cap sector. The manager anticipates this sector will continue
to provide enhanced opportunity from the perspective of relative and historical
valuations.
We appreciate your interest in the ESC Strategic Funds and invite all questions
and comments. For more complete information, including management fees and
expenses in addition to the unique risks involved with investing in the
international markets and small capitalization stocks, please call
1-800-372-3360 for a prospectus and read it carefully before investing in any of
the Funds.
Sincerely,
/s/ W. Howard Cammack, Jr.
W. Howard Cammack, Jr.
Treasurer
<PAGE> 3
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
CREDIT MARKET
PRINCIPAL RATING* SECURITY DESCRIPTION COST VALUE
--------- ------- -------------------- ---- ------
<C> <C> <S> <C> <C>
CORPORATE OBLIGATIONS (63.1%):
BANKS (5.7%):
175,000 83/B First Nationwide
Holdings, 12.50%,
4/15/03................ $ 187,436 $ 197,313
48,000,000(b) Aaa/NR Japan Development Bank,
6.50%, 9/20/01......... 516,354 480,075
90,000,000(b) Aaa/AAA Export/Import Bank of
Japan, 2.88%,
7/28/05................ 800,607 800,443
----------- -----------
1,504,397 1,477,831
----------- -----------
BANKING & FINANCIAL SERVICES (5.5%):
500,000 A2/A Aetna Services, 6.75%,
8/15/01................ 494,440 506,347
500,000 Aa3/AA- Norwest Financial,
6.38%, 11/15/01........ 488,061 500,513
400,000 A1/A+ Suntrust Banks, 6.90%,
7/1/07................. 400,000 407,139
----------- -----------
1,382,501 1,413,999
----------- -----------
BEVERAGES (1.8%):
500,000 A1/A+ Anheuser Busch Cos.,
6.90%, 10/2/02......... 494,792 503,989
----------- -----------
BROADCASTING (1.1%):
250,000 82/B Intermedia Capital
Partners, 11.25%,
8/1/06................. 261,939 277,500
----------- -----------
CABLE (2.2%):
285,000 B1/BB- Cablevision Systems
Corp., 9.25%,
11/1/05................ 269,722 297,825
250,000 B1/B Helicon Group, Inc.,
11.00%, 11/1/03........ 249,045 263,125
----------- -----------
518,767 560,950
----------- -----------
CHEMICALS (1.1%):
250,000 B1/B NL Industries, 11.75%,
10/15/03............... 257,308 275,625
----------- -----------
CONSUMER GOODS & SERVICES (2.0%):
500,000 Aa2/AA Wal-Mart, 6.75%,
5/15/02................ 494,900 508,469
----------- -----------
CONSUMER GROUPS (1.0%):
250,000 B1/B+ Chiquita Brands, 9.63%,
1/15/04................ 254,214 263,750
----------- -----------
ENTERTAINMENT (2.1%):
250,000 B1/B Casino America, Inc.,
12.50%, 8/1/03......... 259,082 267,500
250,000 B3/B- Plus Theatres, Inc.,
10.88%, 6/15/04........ 254,379 264,375
----------- -----------
513,461 531,875
----------- -----------
FINANCIAL SERVICES/INSURANCE (1.9%):
500,000 Aa3/AA- Merrill Lynch, 6.00%,
1/15/01................ 484,917 496,023
----------- -----------
FINANCIAL SERVICES (1.8%):
500,000 A2/A Household Finance Corp.,
6.88%, 3/1/07.......... 497,058 501,078
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
CREDIT MARKET
PRINCIPAL RATING* SECURITY DESCRIPTION COST VALUE
--------- ------- -------------------- ---- ------
<C> <C> <S> <C> <C>
FOOD PRODUCTS (1.3%):
100,000 B3/B- Envirodyne Industries,
10.25%, 12/1/01........ $ 99,550 $ 100,250
250,000 B3/B- Pathmark Stores, 9.63%,
5/1/03................. 244,483 246,875
----------- -----------
344,033 347,125
----------- -----------
FOREST & PAPER PRODUCTS (1.0%):
250,000 B3/B Pacific Lumber Co.,
10.50%, 3/1/03......... 236,466 259,375
----------- -----------
GENERAL INDUSTRIES/MANUFACTURING (1.1%):
275,000 B3/B Envirosource, Inc.,
9.75%, 6/15/03......... 261,674 275,000
----------- -----------
HEALTH CARE (1.1%):
260,000 Caa1/B- Merit Behavioral Care,
11.50%, 11/15/05....... 272,182 288,600
----------- -----------
HOTELS & GAMING (1.8%):
250,000 B3/NR Griffin Gaming, 8.40%,
6/30/00................ 240,740 252,500
180,000 B1/B+ Horseshoe Gaming, LLC.
12.75%, 9/30/00........ 191,205 201,375
----------- -----------
431,945 453,875
----------- -----------
INDUSTRIAL GOODS & SERVICES (5.8%):
500,000 Aa1/AA Abbot Labs, 6.80%,
5/15/05................ 486,661 513,513
500,000 a2/A American Home Products,
6.50%, 10/15/02........ 491,800 498,955
500,000 aA3/AA- Campbell Soup Co.,
5.83%, 9/15/03......... 463,501 479,928
----------- -----------
1,443,962 1,492,396
----------- -----------
INDUSTRIALS (5.4%):
156,000 B3/B- Freedom Chemical
Company, 10.63%,
10/15/06............... 160,902 166,920
500,000 A1/A- Nike, Inc., 6.38%,
12/1/03................ 496,718 499,783
230,000 B3/B- Outdoor Communications,
Inc., 9.25%, 8/15/07... 231,138 228,850
500,000 A2/A Rubbermaid, Inc., 6.60%,
11/15/06............... 498,577 502,115
----------- -----------
1,387,335 1,397,668
----------- -----------
MANUFACTURING--CONSUMER GOODS (2.0%):
250,000 B3/B- Hartmarx Corp., 10.88%,
1/15/02................ 244,045 255,000
250,000 B3/B- International Wire
Group, 11.75%,
6/1/05................. 251,144 273,750
----------- -----------
495,189 528,750
----------- -----------
MATERIALS (1.5%):
350,000 B3/NR Plastic Specialty,
11.25%, 12/1/03........ 334,604 378,875
----------- -----------
</TABLE>
1
<PAGE> 4
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
CREDIT MARKET
PRINCIPAL RATING* SECURITY DESCRIPTION COST VALUE
--------- ------- -------------------- ---- ------
<C> <C> <S> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
OIL/GAS (2.9%):
250,000 B1/B Cliffs Drilling Co.,
10.25%, 5/15/03........ $ 249,063 $ 271,875
195,000 B2/B Cross Timbers Oil
Company, 9.25%,
4/1/07##............... 191,558 201,825
250,000 B2/B Plains Resources, Inc.,
10.25%, 3/15/06........ 256,627 268,750
----------- -----------
697,248 742,450
----------- -----------
OIL & GAS TRANSMISSION (1.0%):
245,000 B2/B+ Petroleum Heat & Power,
12.25%, 2/1/05......... 260,925 254,800
----------- -----------
PAPER PRODUCTS (1.0%):
250,000 B2/B Stone Container
Incorporated, 9.88%,
2/1/01................. 248,968 254,063
----------- -----------
RADIO/TV (1.1%):
250,000 B2/C JCAC, Inc., 10.13%,
6/15/06................ 250,000 272,500
----------- -----------
TELEPHONE (2.6%):
100,000 Aa1/AAA British Telecom, PLC,
7.13%, 9/15/03......... 139,967 164,864
500,000 A2/A Lucent Technologies,
Inc., 6.90%, 7/15/01... 500,000 510,155
----------- -----------
639,967 675,019
----------- -----------
TIRE & RUBBER (1.2%):
300,000 B2/B Applied Extrusion Tech.,
11.50%, 4/1/02......... 312,605 318,000
----------- -----------
TRANSPORTATION (1.9%):
200,000 NA/NA Greyhound Lines, 11.50%,
4/15/07................ 215,896 217,500
250,000 B1/BB- Sea Containers, 12.50%,
12/1/04................ 263,900 281,250
----------- -----------
479,796 498,750
----------- -----------
UTILITIES (2.0%):
500,000 A1/A+ Consolidated Edison,
6.63%, 2/1/02.......... 495,687 504,353
----------- -----------
UTILITIES -- ELECTRICAL & GAS (2.0%):
500,000 Baa1/BBB+ Texas Utilities, 6.75%,
3/1/03................. 494,287 504,518
----------- -----------
TOTAL CORPORATE
OBLIGATIONS............ 15,751,127 16,257,206
----------- -----------
FOREIGN GOVERNMENT BONDS (24.4%):
ARGENTINA (2.1%):
715,000 Ba3/BB Republic of Argentina,
5.25%, 3/31/23#........ 438,162 538,481
----------- -----------
CANADA (1.6%):
310,000(c) Aa1/AAA Canada Government,
10.00%, 6/1/08......... 290,051 297,463
160,000(c) Aa3/AA- Ontario Hydro, Floating
Rate Note, 3.61%,
3/16/99................ 115,025 115,844
----------- -----------
405,076 413,307
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
CREDIT MARKET
PRINCIPAL RATING* SECURITY DESCRIPTION COST VALUE
--------- ------- -------------------- ---- ------
<C> <C> <S> <C> <C>
CHINA (1.2%):
300,000 A3/BBB+ People's Republic of
China, 7.75%, 7/5/06... $ 304,531 $ 313,434
----------- -----------
FINLAND(1.9%):
500,000 Commerzbank OS Fin,
Floating Rate Note,
5.59%, 1/30/01......... 498,185 498,175
----------- -----------
FRANCE(1.6%):
330,000(a) NA/NA France O.A.T., 7.50%,
4/26/05................ 405,560 409,172
----------- -----------
GERMANY(4.5%):
1,450,000(d) Aaa/NR Deutcshland Variable
Rate Note, 2.95%,
4/6/00................. 799,709 818,433
675,000(d) Aaa/NA Deutcshland Republic,
6.50%, 7/4/27.......... 382,302 399,072
----------- -----------
1,182,011 1,217,505
----------- -----------
ITALY (4.4%):
175,000,000(e) Aa3/AAA Buoni Poliennali Del
Tes. 12.50%, 3/19/98... 104,486 103,470
840,000,000(e) Aa3/AAA Buoni Poliennali Del
Tes. 7.75%, 9/15/01.... 498,152 523,037
500,000 Aa3/AAA Italy (Republic Of),
Floating Rate Note,
5.59%, 5/12/02......... 499,508 500,000
----------- -----------
1,102,146 1,126,507
----------- -----------
SPAIN (0.5%):
18,700,000(g) Aa2/NA Spanish Govt., 9.90%,
10/31/98............... 126,499 132,026
----------- -----------
SWEDEN (1.1%):
1,800,000(g) Aa1/NR Sweden Government,
10.25%, 5/5/03......... 273,235 288,246
----------- -----------
UNITED KINGDOM (3.7%)
240,000(h) Aaa/NR United Kingdom Treasury,
8.50%, 12/7/05......... 385,990 437,896
110,000(h) Aaa/NA United Kingdom Treasury,
8.00%, 12/7/00......... 172,044 184,127
290,000(h) Aaa/NR United Kingdom Treasury,
4.00%, 1/28/00......... 312,813 317,441
----------- -----------
870,847 939,464
----------- -----------
TOTAL FOREIGN GOVERNMENT
BONDS.................. 5,606,252 5,876,417
----------- -----------
U.S. Treasury Notes
(3.9%):
1,000,000 U.S. Treasury Notes,
6.13%, 8/15/07......... 994,408 1,000,626
----------- -----------
TOTAL U.S. TREASURY
NOTES.................. 994,408 1,000,625
----------- -----------
INVESTMENTS, EXCLUDING
SHORT-TERM
INVESTMENTS............ 22,351,786 23,134,248
----------- -----------
</TABLE>
2
<PAGE> 5
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
CREDIT MARKET
PRINCIPAL RATING* SECURITY DESCRIPTION COST VALUE
--------- ------- -------------------- ---- ------
<C> <C> <S> <C> <C>
SHORT-TERM INVESTMENTS (2.2%):
576,475 Chase Bank Daily Sweep
Account, 5.25%,
10/1/97................ $ 576,475 $ 576,475
----------- -----------
TOTAL SHORT-TERM
INVESTMENTS............ 576,475 576,475
----------- -----------
TOTAL
INVESTMENTS -- 89.89%... $22,928,261 23,710,723
-----------
Cash and other assets,
net of
liabilities -- 10.11%... 2,054,145
-----------
NET ASSETS -- 100.0%.... $25,764,868
===========
# Step-up bond. Interest Rate increases to 6.00% on 3/31/99
and until ultimate maturity on 3/31/23.
## Security restricted as to resale to qualified institutional
buyers under Rule 144A of the Securities Act of 1933.
</TABLE>
Principal denominated in U.S. Dollars unless indicated as follows:
<TABLE>
<S> <C>
(a) French Francs
(b) Japanese Yen
(c) Canadian Dollars
(d) German Mark
(e) Italian Lire
(f) Spanish Peseta
(g) Swedish Krona
(h) British Pounds
</TABLE>
3
<PAGE> 6
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GLOBAL EQUITY FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 96.1%
AEROSPACE & MILITARY TECHNOLOGY --
0.9%
3,150 British Aerospace PLC... $ 64,148 $ 83,853
1,000 Thiokol Corp............ 72,550 86,000
----------- -----------
136,698 169,553
----------- -----------
AIRLINES -- 0.8%
3,600 BAA PLC................. 26,723 34,951
2,800 US Airways Group,
Inc................... 74,450 115,850
----------- -----------
101,173 150,801
----------- -----------
AUTOMOTIVE -- 1.3%
21,000 Nissan Motors Company... 131,444 125,238
2,100 PACCAR, Inc............. 75,603 117,600
----------- -----------
207,047 242,838
----------- -----------
AUTO RELATED -- 0.9%
2,400 Arvin Industries,
Inc................... 89,384 94,200
1,100 Cummins Engine, Inc..... 90,851 85,869
----------- -----------
180,235 180,069
----------- -----------
BANKING -- 5.8%
5,000 Abbey National PLC...... 54,081 77,119
2,000 Ahmanson H.F. and Co.... 72,341 113,625
23,000 Australia & New Zealand
Banking Group, Ltd.... 132,864 187,870
2,290 Banque Nationale de
Paris................. 115,492 115,383
6,000 Dai-Ichi Kangyo Bank.... 71,102 68,085
300 First Empire State
Corp.................. 106,190 124,500
5,370 OTP Bank-Sponsored
GDR##................. 95,813 174,794
9,000 Sumitomo Bank Ltd....... 144,320 135,675
1,200 Union Bank San
Francisco............. 74,797 103,800
----------- -----------
867,000 1,100,851
----------- -----------
SAVINGS & LOAN/THRIFTS--
0.5%
1,800 Popular, Inc............ 45,892 95,400
----------- -----------
BANKING & FINANCIAL SERVICES -- 1.8%
20,998 Allied Irish Banks...... 100,465 185,713
3,500 Standard Bank
Investment............ 159,282 155,764
----------- -----------
259,747 341,477
----------- -----------
BEVERAGES -- 0.5%
2,700 Adolph Coors Co., Class
B..................... 89,572 102,263
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
BROADCASTING/CABLE -- 0.4%
8,300 Carlton
Communications PLC.... $ 62,942 $ 68,983
----------- -----------
BUILDING MATERIALS -- 1.9%
8,400 Gujarat Ambuja Cement
ADR#.................. 50,000 78,750
2,400 Texas Industries,
Inc................... 94,579 101,850
2,100 USG Corp................ 76,161 100,669
13,400 Williams Holdings PLC... 76,047 79,875
----------- -----------
296,787 361,144
----------- -----------
CAPITAL GOODS -- 0.5%
1,900 Adaptec, Inc............ 72,306 88,825
----------- -----------
CHEMICALS -- 0.5%
1,600 Quimica y Minera Chile
S.A., ADR#............ 71,038 94,400
----------- -----------
CLOSED END FUNDS -- 0.6%
10,000 ROC Taiwan Fund*........ 103,015 121,250
----------- -----------
COMPUTERS -- 0.4%
3,100 Silicon Graphics,
Inc................... 85,913 81,375
----------- -----------
COMPUTER EQUIPMENT -- 1.9%
2,500 Applied Magnetics
Corp.................. 82,388 78,750
2,900 Quantum Corp............ 57,636 111,106
2,000 Storage Technology
Corp.................. 72,220 95,625
2,000 Western Digital Corp.... 28,500 80,125
----------- -----------
240,744 365,606
----------- -----------
COMPUTER SOFTWARE -- 2.4%
1,700 Citrix Systems, Inc..... 91,557 85,584
1,600 Compuware Corp.......... 31,299 96,800
1,637 McAfee Associates,
Inc................... 48,433 86,761
3,500 Read Rite Corp.......... 84,492 85,750
4,300 Symantec Corp........... 66,660 97,825
----------- -----------
322,441 452,720
----------- -----------
CONSTRUCTION -- 1.5%
2,100 Centex Corp............. 73,105 122,588
9,000 Empresas ICA S.A. de
C.V., ADR#............ 134,559 158,062
----------- -----------
207,664 280,650
----------- -----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 7
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GLOBAL EQUITY FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
COSMETICS/PERSONAL CARE -- 0.7%
8,000 Shiseido Co., Ltd....... $ 101,670 $ 128,551
----------- -----------
DISTRIBUTION -- 0.7%
7,000 Canon Sales Co.......... 158,959 137,994
----------- -----------
DIVERSIFIED -- 2.2%
13,099 Barlow Ltd.............. 141,312 149,603
4,000 Grupo Imsa, S.A de C.V.,
ADR#*................. 84,725 121,250
20,000 Swire Pacific Ltd....... 167,926 153,130
----------- -----------
393,963 423,983
----------- -----------
ELECTRIC UTILITY -- 0.6%
2,000 Companhia Energetica de
Minas Gerais, ADR#.... 97,750 109,896
----------- -----------
ELECTRICAL & ELECTRONICS -- 0.4%
7,700 Elektrim Spolka Alcyjna
S.A................... 57,647 86,255
----------- -----------
ELECTRICAL EQUIPMENT -- 0.5%
2,000 SCI Systems, Inc.*...... 48,401 99,125
----------- -----------
ELECTRONICS -- 0.4%
2,600 AVX Corp................ 83,924 84,175
----------- -----------
ELECTRONIC
COMPONENTS/INSTRUMENTS -- 1.1%
2,200 Dallas
Semi-Conductors....... 86,608 98,450
12,000 Hitachi Ltd............. 113,115 104,365
----------- -----------
199,723 202,815
----------- -----------
ENERGY -- 2.6%
4,804 British Petroleum Co.,
PLC................... 53,913 72,598
1,900 EVI, Inc................ 44,494 121,600
2,680 Total SA................ 230,091 306,752
----------- -----------
328,498 500,950
----------- -----------
ENGINEERING -- 0.8%
340 Mannesmann AG........... 111,532 161,704
----------- -----------
ENVIRONMENTAL -- 0.5%
2,600 Newpark Resources,
Inc................... 89,306 102,213
----------- -----------
FINANCIAL & INSURANCE -- 0.6%
3,700 North Fork Bancorp.,
Inc................... 70,225 107,300
----------- -----------
FINANCIAL SERVICES -- 5.6%
2,000 A.G. Edwards, Inc....... 82,620 102,750
2,675 Bear Stearns Companies,
Inc................... 48,897 117,699
1,300 Donaldson, Lufkin &
Jenrette.............. 86,788 93,031
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
2,100 FIRSTPLUS Financial
Group................. $ 71,742 $ 117,862
10,800 Instituto Mobiliare
Italiano S.P.A........ 72,452 115,908
2,100 Lehman Brothers
Holdings, Inc......... 46,188 112,613
5,212 Lloyds TSB Group PLC.... 31,076 70,261
2,300 Paine Webber Group,
Inc................... 72,908 107,094
2,900 Raymond James
Financial............. 76,507 104,400
3,300 Sunamerica, Inc......... 53,116 129,319
----------- -----------
642,294 1,070,937
----------- -----------
FOOD PRODUCTS & PAPERS -- 0.4%
7,100 Cadbury Schweppes PLC... 58,573 68,472
----------- -----------
FOOD -- 1.7%
6,800 Companhia Brasileira de
Distribuicao Grupo Pao
de Acucar, ADR#....... 73,100 151,445
105,600 Parmalat Finanziaria.... 97,939 181,135
----------- -----------
171,039 332,580
----------- -----------
FOREIGN BANKING -- 2.5%
4,400 Banco Frances Del Rio de
La Plata, S.A.,
ADR#.................. 89,144 143,825
25,000 Commonwealth Bank of
Australia............. 253,407 308,481
94,000 PT Bank Bira............ 60,770 27,309
----------- -----------
403,321 479,615
----------- -----------
FOREST PRODUCTS & PAPERS -- 1.2%
8,000 Grupo Industrial Durango
S.A., ADR#............ 78,212 140,000
6,800 Maderas y Sinteticos
S.A., ADR#............ 95,857 93,544
----------- -----------
174,069 233,544
----------- -----------
HEALTH CARE -- 1.6%
1,900 Lincare Holdings,
Inc.*................. 74,865 95,831
5,800 NovaCare, Inc.*......... 75,094 100,050
1,800 Wellpoint Health
Networks, Inc.*....... 74,479 104,288
----------- -----------
224,438 300,169
----------- -----------
HOLDING COMPANIES -
DIVERSIFIED -- 0.4%
40,000 Wing Tai Holdings
Ltd................... 128,034 82,613
----------- -----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 8
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GLOBAL EQUITY FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
INDUSTRIAL -- 0.7%
9,000 Sumitomo Electric
Industries............ $ 123,630 $ 128,965
----------- -----------
INDUSTRIAL HOLDING COMPANIES -- 1.4%
7,300 Grand Metropolitan
PLC................... 57,081 69,811
5,000 Sonae Investimentos-
Sociedade Gestora de
Paticipacoes Sicais,
S.A................... 145,910 197,743
----------- -----------
202,991 267,554
----------- -----------
INSURANCE -- 6.0%
930 Allianz AG.............. 239,185 224,998
2,099 AXA-UAP................. 105,609 140,825
850 Fortis AG............... 144,330 170,261
2,550 Fremont General Corp.... 59,393 121,763
5,000 Liberty Life Association
of Africa Ltd......... 139,674 145,845
9,800 Norwich Union PLC....... 51,727 53,350
2,000 Penncorp Financial
Group, Inc............ 80,079 62,000
520 Zuerich Versicherungs-
Gesellschaft.......... 147,313 226,651
----------- -----------
967,310 1,145,693
----------- -----------
LEISURE -- 0.7%
16,800 Ladbroke Group PLC...... 65,385 73,953
1,400 King World Productions,
Inc.*................. 57,084 60,550
----------- -----------
122,469 134,503
----------- -----------
MACHINERY & EQUIPMENT -- 0.4%
2,500 Cognex.................. 87,713 82,188
----------- -----------
MACHINE - DIVERSIFIED -- 0.4%
2,500 AGCO Corp............... 76,260 79,219
----------- -----------
MANUFACTURING - CAPITAL GOODS --1.1%
3,000 Murata Manufacturing
Co., Ltd.............. 103,651 129,711
9,100 Wolseley PLC............ 65,296 74,824
----------- -----------
168,947 204,535
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
MANUFACTURING - CONSUMER
GOODS -- 1.8%
3,000 Fuji Photo Film Ltd..... $ 115,923 $ 123,747
1,800 Jabil Circuit, Inc...... 42,417 117,900
2,300 Parker-Hannifin Corp.... 88,365 103,500
----------- -----------
246,705 345,147
----------- -----------
MEDICAL EQUIPMENT & SUPPLIES -- 1.1%
1,900 Sofamor Danek Group,
Inc.*................. 66,590 108,538
2,700 Vivus, Inc.............. 100,912 101,250
----------- -----------
167,502 209,788
----------- -----------
MERCHANDISING -- 0.4%
11,000 Safeway PLC............. 59,616 71,522
----------- -----------
MINING -- 0.5%
3,700 Madeco S.A.............. 93,503 90,650
----------- -----------
METALS - DIVERSIFIED -- 0.9%
2,700 ASARCO, Inc............. 85,180 86,400
1,100 Phelps Dodge Corp....... 89,029 85,388
----------- -----------
174,209 171,788
----------- -----------
MORTGAGE BANKERS &
CORRESPONDENTS -- 0.4%
5,750 Halifax PLC............. 68,627 68,076
----------- -----------
OFFICE EQUIPMENT & SERVICES -- 0.6%
8,000 Ricoh Company, Ltd...... 119,739 119,937
----------- -----------
OIL/GAS -- 0.5%
1,300 Helmerich & Payne,
Inc................... 49,501 104,000
----------- -----------
OIL/GAS - EXPLORATION -- 5.1%
1,800 Cliffs Drilling Co...... 86,151 125,325
3,000 ENSCO International,
Inc.*................. 66,852 118,312
2,700 Falcon Drilling Co.,
Inc.*................. 51,962 95,344
2,900 Global Marine, Inc.*.... 58,492 96,425
3,700 Marine Drilling
Companies, Inc*....... 62,475 115,625
3,400 Rowan Companies,
Inc.*................. 73,773 121,125
1,600 SEARCO SMIT, Inc........ 92,306 99,200
2,200 Sun Company, Inc........ 89,192 96,388
3,100 USX-Marathon Group...... 66,269 115,281
----------- -----------
647,472 983,025
----------- -----------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 9
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GLOBAL EQUITY FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
OIL & GAS TRANSMISSION -- 1.0%
9,000 Magyar Olaj-Es Gazipari
Reszvenytar -- GDR##... $ 146,250 $ 193,950
----------- -----------
PAPER/PULP -- 0.5%
2,200 Buckeye Cellulose
Corp.................. 87,133 88,688
----------- -----------
PACKAGING -- 0.4%
3,800 Cristalerias de Chile,
ADR#.................. 87,985 70,063
----------- -----------
PHARMACEUTICALS -- 3.3%
7,000 Eisai Co................ 126,306 71,903
1,520 Gedeon Richter, GDR##... 85,435 159,220
2,000 ICN Pharmaceuticals,
Inc................... 46,208 98,375
112 Novartis AG*............ 121,291 171,979
7,400 SmithKline Beecham
PLC................... 73,976 125,238
----------- -----------
453,216 626,715
----------- -----------
PLASTICS -- 0.4%
21,000 Nippon Zeon Co., Ltd.... 105,796 70,794
----------- -----------
PUBLISHING & PRINTING -- 1.7%
1,100 Central Newspapers,
Inc................... 73,845 81,675
5,650 VNU-Verenigde
Nederlandse
Uitgeversbedrijven.... 71,300 131,209
3,500 Valassis Communications,
Inc.*................. 73,973 111,563
----------- -----------
219,118 324,447
----------- -----------
REAL ESTATE -- 3.5%
15,000 Cheung Kong Holdings
Ltd................... 82,036 168,637
60,000 HongKong Land Holdings,
Ltd................... 130,321 204,000
20,000 Singapore Land Ltd...... 129,033 88,888
12,000 Sun Hung Kai Properties
Ltd................... 74,045 141,112
2,300 Vallehermoso SA......... 46,124 63,448
----------- -----------
461,559 666,085
----------- -----------
RETAIL -- 1.0%
7,000 Makro Atacadista S.A.
ADR#.................. 99,750 97,117
1,480 Vendex International
N.V................... 43,406 87,785
----------- -----------
143,156 184,902
----------- -----------
RETAIL - GENERAL MERCHANDISE -- 0.8%
3,900 Burlington Coat
Factory............... 70,449 82,388
5,700 Kingfisher PLC.......... 50,965 78,174
----------- -----------
121,414 160,562
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
STEEL -- 0.4%
2,300 USX -- U.S. Steel Group,
Inc................... $ 78,730 $ 79,925
----------- -----------
TECHNOLOGY -- 0.8%
2,400 Avid Technology......... 85,800 78,000
1,700 Stratus Computer,
Inc................... 70,208 82,238
----------- -----------
156,008 160,238
----------- -----------
TELECOMMUNICATION EQUIPMENT -- 0.4%
580 SPT Telekom A.S......... 71,794 73,411
----------- -----------
TELECOMMUNICATION SERVICES -- 0.8%
9,100 Videsh Sanchar Nigam
Ltd., GDR##........... 148,743 152,789
----------- -----------
TEXTILES AND APPAREL -- 1.7%
3,600 Ross Stores, Inc........ 55,010 122,850
3,600 The TJX Companies,
Inc................... 57,444 110,025
1,000 V.F. Corp............... 68,003 92,625
----------- -----------
180,457 325,500
----------- -----------
TRANSPORTATION -- 1.9%
2,100 Airborne Freight
Corp.................. 78,750 127,181
2,300 Caliber Systems, Inc.... 73,531 124,775
1,800 Tidewater, Inc.......... 85,431 106,650
----------- -----------
237,712 358,606
TELECOMMUNICATIONS -- 7.7%
1,800 MasTec, Inc............. 60,431 78,750
2,210 Nokia Ab -- A Shares.... 125,351 210,280
1,300 Philippine Long Distance
Telephone Co.......... 39,452 35,196
3,500 Portugal Telecom SA..... 76,024 151,865
20,000 Telecom Corp. of New
Zealand Ltd........... 103,764 101,383
32,000 Telecom Italia Mobile
SpA................... 38,178 127,025
47,250 Telecom Italia SpA...... 245,475 314,881
7,150 Telefonica de Espana.... 146,729 224,800
10,000 Telefonica del Peru
S.A., ADR#............ 214,671 236,250
----------- -----------
1,050,075 1,480,430
----------- -----------
WHOLESALE -- 0.7%
3,100 CellStar Corp........... 84,506 144,150
----------- -----------
TOTAL COMMON STOCKS..... 14,103,426 18,378,941
----------- -----------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 10
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GLOBAL EQUITY FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
PREFERRED STOCKS -- 1.3%
TELECOMMUNICATIONS -- 1.3%
8,400 Telecom Argentina,
ADR#.................. $ 231,952 $ 255,675
----------- -----------
TOTAL PREFERRED
STOCKS................ 231,952 255,675
----------- -----------
INVESTMENTS, EXCLUDING
SHORT-TERM
INVESTMENTS........... 14,335,378 18,634,616
----------- -----------
PRINCIPAL SHORT TERM
INVESTMENTS -- 1.4%
$264,744 Chase Bank London Daily
Sweep Account, 2.50%,
10/1/97............... 264,744 264,744
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
------ -------------------- ---- ------
<C> <S> <C> <C>
TOTAL INVESTMENTS --
98.8%................. $14,600,122 $18,899,380
===========
CASH AND OTHER ASSETS,
NET OF
LIABILITIES -- 1.2%... 220,373
-----------
Net Assets -- 100%...... $19,119,733
===========
</TABLE>
* Non-income producing securities
# American Depository Receipts
## Global Depository Receipts
See accompanying notes to financial statements.
8
<PAGE> 11
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 71.1%
CHEMICALS -- 2.2%
55,000 The Carbide / Graphite $ 925,525 $ 1,870,000
Group*...............
100,000 Synalloy Corp.......... 1,482,911 1,625,000
----------- ------------
2,408,436 3,495,000
----------- ------------
AUTO RELATED -- 1.9%
88,000 Wynn's International, 1,690,179 2,926,000
Inc..................
----------- ------------
BUILDING MATERIALS -- 2.0%
450,700 International Comfort 2,541,843 3,183,069
Products Corp.*......
----------- ------------
COMMERCIAL SERVICES -- 4.2%
58,100 Childrens Comprehensive 462,115 1,249,150
Services*............
83,100 Norrell Corp........... 1,222,355 2,856,563
100,000 Regis Corp............. 2,348,750 2,525,000
----------- ------------
4,033,220 6,630,713
----------- ------------
COMPUTERS -- 2.4%
106,300 Zebra Technologies*.... 2,417,804 3,800,225
----------- ------------
COMPUTER SOFTWARE -- 3.7%
156,000 American Software*..... 1,081,938 2,281,500
62,100 Gerber Scientific, 1,131,072 1,502,044
Inc..................
20,000 Total Control Products, 160,000 276,250
Inc.*................
100,000 Xionics Document 1,306,875 1,737,500
Technology, Inc.*....
----------- ------------
3,679,885 5,797,294
----------- ------------
CONSTRUCTION -- 2.4%
133,000 Benchmark Electronics, 2,032,417 3,748,938
Inc.*................
----------- ------------
CONSUMER CYCLICAL -- 1.5%
125,000 Apple South, Inc....... 1,781,817 2,406,250
----------- ------------
ELECTRICAL & ELECTRONICS -- 2.5%
64,700 Electro Scientific 1,638,803 3,946,700
Industries, Inc.*....
----------- ------------
ELECTRICAL EQUIPMENT -- 1.7%
75,000 Kuhlman Corporation.... 2,172,575 2,700,000
----------- ------------
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 3.2%
30,000 Hadco Corp.*........... 1,812,250 1,624,688
75,700 PCD Inc.*.............. 1,343,313 1,873,575
42,000 Plexus Corp.*.......... 725,999 1,475,250
----------- ------------
3,881,562 4,973,513
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
ENTERTAINMENT -- 1.2%
79,400 Speedway Motorsports $ 1,222,780 $ 1,950,263
Inc.*................
----------- ------------
ENVIRONMENTAL -- 2.2%
87,800 Newpark Resources 1,376,632 3,451,638
Inc.*................
----------- ------------
FINANCIAL & INSURANCE -- 1.1%
55,100 Capmac Holdings, 1,795,633 1,780,419
Inc..................
----------- ------------
FINANCIAL SERVICES -- 3.9%
80,800 Amresco, Inc.*......... 1,149,506 2,999,700
60,000 Sirrom Capital Corp.... 1,252,697 3,112,500
----------- ------------
2,402,203 6,112,200
----------- ------------
FOOD SERVING -- 2.1%
143,000 Worthington Foods...... 3,225,750 3,306,875
----------- ------------
FOOD - WHOLESALE -- 1.7%
134,600 Twinlab Corp.*......... 1,672,257 2,759,300
----------- ------------
FURNITURE/HOME APPLIANCE -- 0.8%
75,100 Aaron Rents, Inc....... 812,696 1,314,250
----------- ------------
HOUSING DEVELOPMENT -- 1.1%
44,100 Fairfield Communities 1,555,072 1,656,506
Inc.*................
----------- ------------
MACHINERY & ENGINEERING -- 2.6%
33,900 Cognex*................ 697,375 1,114,463
90,000 Roper Industries, 1,741,293 3,037,500
Inc..................
----------- ------------
2,438,668 4,151,963
----------- ------------
MANUFACTURING -- 2.3%
81,800 Asyst Technologies 1,020,955 3,632,431
Inc.*................
----------- ------------
METALS - DIVERSIFIED -- 1.3%
63,800 Wolverine Tube Inc.*... 1,980,531 2,001,725
----------- ------------
MEDICAL SUPPLIES -- 4.0%
100,000 American Healthcorp 966,113 1,412,500
Inc.*................
55,800 Hologic, Inc.*......... 1,368,755 1,565,887
50,000 Renal Treatment Centers 984,530 1,778,125
Inc.*................
63,500 Res - Care Inc.*....... 897,655 1,547,812
----------- ------------
4,217,053 6,304,324
----------- ------------
OIL/GAS EQUIPMENT -- 2.8%
59,600 National-Oilwell 1,905,271 4,458,825
Inc.*................
----------- ------------
OIL/GAS - EXPLORATION -- 5.0%
73,600 Patterson Energy, 1,243,298 3,854,800
Inc.*................
96,400 Veritas DGC Inc*....... 1,828,262 4,103,025
----------- ------------
3,071,560 7,957,825
----------- ------------
PHARMACEUTICALS -- 2.2%
75,600 Medicis 1,646,853 3,468,150
Pharmaceutical*......
----------- ------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 12
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- 3.9%
311,000 Compucom Systems, $ 2,537,532 $ 2,876,750
Inc.*................
71,700 Rexall Sundown Inc.*... 1,523,799 3,271,312
----------- ------------
4,061,331 6,148,062
----------- ------------
TECHNOLOGY -- 1.8%
65,000 Datastream Systems, 1,142,500 2,431,405
Inc.*................
19,700 Tetra Tech*............ 442,757 455,562
----------- ------------
1,585,257 2,886,967
----------- ------------
TEXTILES & APPAREL -- 1.6%
110,000 Quaker Fabric Corp.*... 1,400,375 2,488,750
----------- ------------
TRANSPORTATION - AIR -- 0.6%
50,000 United States Express 843,120 1,000,000
Enterprise*..........
----------- ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
TRUCKING & LEASING -- 1.1%
89,700 American Freightways $ 1,316,437 $ 1,704,300
Corp.*...............
----------- ------------
UTILITIES - ELECTRICAL & GAS -- 0.7%
110,000 York Research*......... 970,192 1,051,875
----------- ------------
$68,799,167 113,194,350
TOTAL
INVESTMENTS -- 71.7%
===========
44,571,725
Cash and other assets,
net of
liabilities -- 28.3%
------------
$157,766,075
NET ASSETS -- 100%
============
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 13
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 96.1%
AEROSPACE & MILITARY
TECHNOLOGY -- 0.4%
2,300 Thiokol Corp.............. $ 166,866 $ 197,800
----------- -----------
AIRLINES -- 0.6%
7,100 US Airways Group, Inc.*... 196,211 293,763
----------- -----------
AUTOMOTIVE -- 2.8%
7,400 Daimler-Benz AG Sponsored
ADR#.................... 371,519 609,575
15,900 Peugeot Citroen ADR#...... 486,874 523,994
5,300 Paccar, Inc............... 194,397 296,800
----------- -----------
1,052,790 1,430,369
----------- -----------
AUTO RELATED -- 0.8%
5,700 Arvin Industries Inc...... 212,316 223,725
2,700 Cummins Engine, Inc....... 223,009 210,769
----------- -----------
435,325 434,494
----------- -----------
BANKING -- 9.2%
5,100 Ahmanson H F & Co......... 192,609 289,744
10,000 BostonFed Bancorp, Inc.... 124,350 210,625
5,200 Chase Manhattan Corp...... 348,062 613,600
14,700 Corporacion Bancaria
Espana ADR#............. 311,532 435,487
14,600 FSF Financial Corp........ 187,975 286,525
9,200 First Bell Bancorp,
Inc..................... 85,450 159,850
600 First Empire State
Corp.................... 198,641 249,000
6,500 First Mutual Bancorp,
Inc..................... 83,076 120,250
5,900 Frankfort First Bancorp,
Inc..................... 74,004 59,737
11,000 Georgia Financial, Inc.... 121,660 204,875
11,700 Home Bancorp of Elgin,
Inc..................... 147,713 209,138
6,000 Industrial Bancorp,
Inc..................... 75,042 108,000
19,000 Istituto Mobiliare
Italiano ADR#........... 393,777 604,438
30,400 North Central Bancshares,
Inc..................... 328,664 547,200
10,000 PFF Bancorp, Inc.*........ 115,000 193,750
2,800 Union Bank San
Francisco............... 174,148 242,200
5,400 Westerfed Financial
Corp.................... 73,224 140,400
----------- -----------
3,034,927 4,674,819
----------- -----------
SAVINGS & LOAN/THRIFTS -- 0.8%
6,800 MLF Bancorp, Inc.......... 47,804 186,150
4,200 Popular, Inc.............. 115,544 222,600
----------- -----------
163,348 408,750
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
BEVERAGES -- 0.5%
6,400 Adolph Coors Co., Class
B....................... $ 212,434 $ 242,400
----------- -----------
BREWERY -- 0.4%
5,100 Guinness PLC ADR#*........ 243,321 232,764
----------- -----------
BUILDING MATERIALS -- 1.0%
5,600 Texas Industries, Inc..... 220,933 237,650
5,300 USG Corp.*................ 197,476 254,069
----------- -----------
418,409 491,719
----------- -----------
CAPITAL GOODS -- 1.0%
4,400 Adaptec, Inc.*............ 167,712 205,700
7,375 Corrections Corp. of
America*................ 230,739 320,813
----------- -----------
398,451 526,513
----------- -----------
CLOTHING -- 0.4%
8,500 Wet Seal, Inc.*........... 253,375 198,688
----------- -----------
COMPUTERS -- 0.4%
7,800 Silicon Graphics, Inc.*... 216,177 204,750
----------- -----------
COMPUTER EQUIPMENT -- 2.7%
6,000 Applied Magnetics
Corp.*.................. 196,010 189,000
16,475 CHS Electronics, Inc.*.... 251,938 451,003
7,200 Quantum Corp.*............ 142,149 275,850
5,100 Storage Technology
Corp.*.................. 197,304 243,844
4,900 Western Digital Corp.*.... 70,903 196,306
----------- -----------
858,304 1,356,003
----------- -----------
COMPUTER SOFTWARE -- 2.2%
4,300 Citrix Systems
Incorporated*........... 231,441 216,478
3,800 Compuware Corp.*.......... 82,925 229,900
4,187 McAfee Associates,
Inc.*................... 162,397 221,911
8,200 Read Rite*................ 197,860 200,900
10,700 Symantec Corp.*........... 175,946 243,425
----------- -----------
850,569 1,112,614
----------- -----------
CONSTRUCTION -- 0.6%
5,300 Centex Corp............... 187,869 309,388
----------- -----------
CONSUMER NON-DURABLE -- 2.0%
7,350 Archer-Daniels-Midland
Co...................... 138,670 175,941
13,450 Central Garden & Pet
Co*..................... 280,678 413,587
18,000 IBP, Inc.................. 428,238 425,250
----------- -----------
847,586 1,014,778
----------- -----------
CONSUMER STAPLES -- 0.6%
10,200 Smithfield Foods, Inc.*... 215,475 306,000
----------- -----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 14
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
CONSUMER CYCLICAL -- 2.2%
11,200 Analysts International.... $ 308,200 $ 434,000
16,650 Apple South, Inc.......... 257,253 320,512
13,862 Wolverine World Wide,
Inc..................... 303,793 350,016
----------- -----------
869,246 1,104,528
----------- -----------
DISTRIBUTION WHOLESALE -- 0.7%
7,400 Cellstar Corp.*........... 202,135 344,100
----------- -----------
DIVERSIFIED -- 3.6%
76,000 Jardine Matheson Holdings
Ltd..................... 555,363 608,000
6,800 Siemens AG ADR#........... 329,700 459,509
11,300 Telecom Italia............ 324,649 758,513
----------- -----------
1,209,712 1,826,022
----------- -----------
ELECTRIC UTILITY -- 1.4%
9,800 Centrais Electricas
Brasileiras S/A
Eletrobras.............. 186,788 256,722
18,500 P G & E Corp.............. 421,985 428,969
----------- -----------
608,773 685,691
----------- -----------
ELECTRICAL EQUIPMENT -- 0.5%
4,700 SCI Systems Inc.*......... 122,982 232,944
----------- -----------
ELECTRONICS -- 0.4%
6,200 AVX Corp.................. 200,175 200,725
----------- -----------
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 2.9%
5,200 Dallas Semi-Conductors.... 203,037 232,700
7,000 Hitachi Ltd............... 693,838 617,312
6,700 Telefonica De Espana...... 255,515 630,638
----------- -----------
1,152,390 1,480,650
----------- -----------
ENERGY -- 3.0%
14,550 EVI, Inc.*................ 432,864 931,200
5,550 Oceaneering
International*.......... 103,827 132,159
13,175 Pool Energy Services
Co*..................... 220,875 446,303
----------- -----------
757,566 1,509,662
----------- -----------
ENVIRONMENTAL -- 0.5%
6,500 Newpark Resources,
Inc.*................... 223,159 255,531
----------- -----------
FINANCIAL & INSURANCE -- 0.5%
8,600 North Fork Bancorp,
Inc..................... 163,196 249,400
----------- -----------
FINANCE-BROKERS -- 0.5%
4,400 Daiwa Securities, Inc.
ADR#.................... 275,603 269,692
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
FINANCIAL SERVICES -- 4.2%
4,700 A.G. Edwards, Inc......... $ 194,157 $ 241,463
6,750 Bear Stearns Companies,
Inc..................... 157,347 297,000
3,100 Donaldson Lufkin &
Jenrette................ 206,890 221,844
5,000 Firstplus Financial
Group*.................. 170,815 280,625
5,100 Lehman Brothers Holdings,
Inc..................... 123,794 273,487
5,800 Paine Webber Group Inc.... 187,942 270,063
6,700 Raymond James Financial... 175,555 241,200
7,650 SunAmerica, Inc........... 131,572 299,784
----------- -----------
1,348,072 2,125,466
----------- -----------
INSURANCE -- 0.6%
5,600 Safeco Corp............... 158,493 296,800
----------- -----------
FOOD PRODUCTS & SERVICES -- 0.2%
2,000 Morningstar Group,
Inc.*................... 82,750 86,000
----------- -----------
FOOD PROCESSING -- 0.6%
5,600 Suiza Foods*.............. 185,436 288,400
----------- -----------
FOOD -- 2.9%
21,300 Groupe Danone Sponsored
ADR#.................... 639,722 671,434
11,200 Nestle SA ADR#............ 569,477 781,230
----------- -----------
1,209,199 1,452,664
----------- -----------
HEALTH CARE -- 3.1%
11,500 Curative Tech*............ 327,375 357,938
13,550 HPR, Inc.*................ 211,331 296,406
11,325 Health Management
Associates*............. 278,955 358,153
1,150 Lincare Holdings, Inc.*... 46,875 58,003
16,150 Medcath, Inc.*............ 246,456 274,550
13,400 Nova Care*................ 173,797 231,150
----------- -----------
1,284,789 1,576,200
----------- -----------
HOLDING COMPANIES --
DIVERSIFIED -- 1.5%
48,000 BTR PLC ADR#.............. 721,444 780,043
----------- -----------
INSURANCE -- 0.9%
6,050 Fremont General Corp...... 148,928 288,888
4,800 Penncorp Financial
Group................... 192,220 148,800
----------- -----------
341,148 437,688
----------- -----------
LEISURE -- 0.3%
3,900 King World Productions,
Inc.*................... 159,967 168,675
----------- -----------
MACHINERY & EQUIPMENT -- 0.4%
6,200 Cognex*................... 217,479 203,825
----------- -----------
MACHINE - DIVERSIFIED -- 0.4%
5,800 Agco Corp................. 176,407 183,788
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 15
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
MANUFACTURING - CONSUMER GOODS -- 1.7%
4,400 Jabil Circuit Inc*........ $ 103,729 $ 288,200
5,400 Parker-Hannifin Corp...... 207,200 243,000
7,000 Reebok International
Ltd.*................... 188,545 340,812
----------- -----------
499,474 872,012
----------- -----------
MEDICAL EQUIPMENT & SUPPLIES -- 1.3%
3,650 Lincare Holdings.......... 145,088 184,097
4,400 Sofamor Danek Group
Inc*.................... 143,614 251,350
6,400 Vivus Incorporated*....... 239,200 240,000
----------- -----------
527,902 675,447
----------- -----------
MEDICAL - HOSPITAL SERVICES -- 0.5%
4,200 Wellpoint Health
Networks*............... 174,891 243,337
----------- -----------
MEDICAL - INFORMATION SYSTEMS -- 0.7%
10,600 Medic Computer Systems*... 307,109 363,050
----------- -----------
METALS - DIVERSIFIED -- 0.8%
6,300 Asarco, Inc............... 198,655 201,600
2,500 Phelps Dodge Corp......... 205,721 194,062
----------- -----------
404,376 395,662
----------- -----------
MULTI-INDUSTRY -- 0.6%
2,800 Loews Corp................ 123,409 316,225
----------- -----------
OIL/GAS -- 0.5%
3,100 Helmerich & Payne, Inc.... 131,572 248,000
----------- -----------
OIL/GAS - EXPLORATION -- 8.1%
12,000 Cliffs Drilling Co.*...... 477,391 835,500
6,900 Ensco International Inc... 156,315 272,119
10,100 Elf Aquitane.............. 358,447 673,543
6,400 Falcon Drilling Co.
Inc.*................... 129,734 226,000
6,800 Global Marine, Inc.*...... 147,044 226,100
8,700 Marine Drilling Companies,
Inc..................... 145,072 271,875
7,200 Oceaneering
International........... 125,532 171,450
7,800 Rowan Companies, Inc.*.... 177,488 277,875
3,800 Seacor Holdings, Inc.*.... 215,503 235,600
5,500 Sun, Inc.................. 222,980 240,969
7,200 USX-Marathon Group........ 160,349 267,750
11,400 YPF Sociedad Anonima...... 221,847 420,375
----------- -----------
2,537,702 4,119,156
----------- -----------
PAPER/PULP -- 0.4%
5,200 Buckeye Cellulose
Corp.*.................. 205,942 209,625
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
PHARMACEUTICALS -- 0.4%
4,600 ICN Pharmaceuticals,
Inc..................... $ 114,919 $ 226,262
----------- -----------
PUBLISHING & PRINTING -- 1.5%
2,800 Central Newspapers........ 189,147 207,900
9,700 Readers Digest Assoc.,
Inc..................... 250,347 291,000
8,400 Valassis Communications,
Inc.*................... 179,832 267,750
----------- -----------
619,326 766,650
----------- -----------
RETAIL - GENERAL MERCHANDISE -- 0.4%
9,000 Burlington Coat Factory... 162,690 190,125
----------- -----------
SERVICES -- 2.6%
14,325 Accustaff, Inc.*.......... 310,979 451,237
13,300 Personnel Group of
America, Inc.*.......... 359,651 455,525
10,388 Robert Half International,
Inc.*................... 266,141 429,783
----------- -----------
936,771 1,336,545
----------- -----------
IRON/STEEL -- 0.4%
5,300 USX- U S Steel Group,
Inc..................... 181,336 184,175
----------- -----------
TECHNOLOGY -- 5.9%
12,375 ACC Corp.*................ 361,719 406,828
6,000 Avid Technology*.......... 214,500 195,000
13,450 Computer Management
Sciences, Inc.*......... 269,987 309,350
12,375 Datastream Systems,
Inc.*................... 251,734 462,902
10,175 Ikos Systems, Inc.*....... 224,809 127,823
12,675 Inter-Tel, Inc.*.......... 177,759 671,775
9,800 National Techteam,
Inc.*................... 226,582 135,975
6,450 SBS Technologies, Inc.*... 209,594 153,994
4,300 Stratus Computer*......... 183,475 208,013
10,000 Telco Communications
Group, Inc.*............ 159,125 327,500
----------- -----------
2,279,284 2,999,160
----------- -----------
TECHNOLOGY - SOFTWARE -- 0.4%
7,800 Vantive Corp.*............ 209,113 187,200
----------- -----------
TEXTILES AND APPAREL -- 1.5%
8,600 Ross Stores, Inc.......... 152,021 293,475
8,500 TJX Cos., Inc............. 139,243 259,781
2,500 V.F. Corp................. 174,284 231,563
----------- -----------
465,548 784,819
----------- -----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 16
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
TRANSPORTATION -- 3.0%
5,800 Caliber Systems, Inc...... $ 187,955 $ 314,650
11,075 Hvide Marine, Inc., Class
A*...................... 298,563 354,400
8,850 Trico Marine Services,
Inc.*................... 207,444 307,537
5,300 Airborne Freight Corp..... 204,060 320,981
4,200 Tidewater Inc............. 190,309 248,850
----------- -----------
1,088,331 1,546,418
----------- -----------
TELECOMMUNICATIONS -- 4.1%
15,500 A T & T Corp.............. 555,992 686,844
4,200 Mastec Inc.*.............. 141,430 183,750
29,000 Tele Danmark A/S-ADR#..... 748,046 773,937
8,600 Telefonos De Mexico....... 274,978 445,050
----------- -----------
1,720,446 2,089,581
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
TELECOMMUNICATIONS - EQUIPMENT -- 1.9%
35,600 Alcatel Alsthom CGE
ADR#.................... $ 621,370 $ 945,625
----------- -----------
TELECOMMUNICATIONS - SERVICES &
EQUIPMENT -- 0.7%
15,075 Aspect
Telecommunications*..... 392,767 352,378
----------- -----------
UTILITIES -- 1.0%
22,400 Unicom Corp............... 533,343 523,600
----------- -----------
TOTAL
INVESTMENTS -- 96.1%.... $35,659,179 48,769,158
===========
Cash and other assets, net
of liabilities --3.9%... 1,978,196
-----------
Net Assets -- 100%........ $50,747,354
===========
</TABLE>
* Non-income producing securities
# American Depository Receipts
See accompanying notes to financial statements.
14
<PAGE> 17
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GROWTH FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- (74.0%):
APPAREL -- (0.8%):
14,700 Pluma, Inc.*............. $ 193,511 $ 153,431
----------- -----------
APPLIANCES & HOUSEHOLD
PRODUCTS -- (3.0%):
9,900 Quaker Fabric Corp.*..... 145,224 223,988
9,300 Zebra Technologies*...... 247,209 332,475
----------- -----------
392,433 556,463
----------- -----------
AUTOMOTIVE -- (1.4%):
7,600 Wynn's International, 183,065 252,700
Inc....................
----------- -----------
AUTO RELATED -- (1.4%):
50,500 Automobile Protection 242,627 255,656
Corp.*.................
----------- -----------
BUILDING MATERIALS -- (2.5%):
36,500 International Comfort 218,612 257,781
Products Corp.*........
7,100 Synthetic Industries, 132,297 205,900
Inc.*..................
----------- -----------
350,909 463,681
----------- -----------
CIRCUIT BOARDS -- (1.1%):
14,000 Praegitzer Industries, 198,700 194,250
Inc.*..................
----------- -----------
COMMERCIAL SERVICES -- (3.1%):
8,500 Jackson Hewitt, Inc.*.... 192,500 325,125
6,800 Norrell Corp............. 203,662 233,750
----------- -----------
396,162 558,875
----------- -----------
COMPUTERS -- (1.5%):
23,100 WPI Group, Inc.*......... 191,818 280,088
----------- -----------
COMPUTER EQUIPMENT -- (1.2%):
11,300 Transact Technologies, 132,675 220,350
Inc.*..................
----------- -----------
COMPUTER SOFTWARE -- (5.0%):
18,000 American Software*....... 131,025 263,250
17,500 International 174,386 306,250
Microcomputer
Software*..............
20,000 Triteal Corporation*..... 167,500 167,500
10,000 Xionics Document 131,809 173,750
Technology, Inc.*......
----------- -----------
604,720 910,750
----------- -----------
CONSTRUCTION -- (1.3%):
24,000 Schuff Steel Company*.... 194,400 246,000
----------- -----------
CONSULTING -- (1.1%):
16,000 A Consulting Team, 192,000 192,000
Inc.*..................
----------- -----------
CONSUMER CYCLICAL -- (1.3%):
12,100 Apple South, Inc......... 178,213 232,925
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
WHOLESALE -- (1.1%):
11,300 Scan Source, Inc.*....... $ 173,738 $ 194,925
----------- -----------
ELECTRICAL & ELECTRONICS -- (3.9%):
8,600 American Precision 170,591 196,725
Industries*............
4,000 Electro Scientific 144,500 244,000
Industries, Inc.*......
5,000 Teradyne, Inc.*.......... 228,575 269,063
----------- -----------
543,666 709,788
----------- -----------
ELECTRONICS -- (0.7%):
8,000 Aseco Corp.*............. 72,000 137,000
----------- -----------
ELECTRONIC
COMPONENTS/INSTRUMENTS -- (5.5%):
16,000 Apple Computer, Inc.*.... 344,000 347,000
3,000 Hadco Corp.*............. 179,000 162,469
10,000 PCD, Inc.*............... 179,375 247,500
18,100 Percon, Inc.*............ 242,996 253,400
----------- -----------
945,371 1,010,369
----------- -----------
FINANCIAL & INSURANCE -- (3.1%):
8,000 Capmac Holdings, Inc..... 250,716 258,500
6,000 Sirrom Capital Corp...... 219,529 311,250
----------- -----------
470,245 569,750
----------- -----------
FOOD -- WHOLESALE -- (0.7%):
6,400 Twinlab Corp.*........... 84,650 131,200
----------- -----------
GAMING -- (1.5%):
3,000 Anchor Gaming*........... 126,750 266,250
----------- -----------
HOUSING DEVELOPMENT -- (1.4%):
7,000 Fairfield Communities, 236,534 262,938
Inc.*..................
----------- -----------
INDUSTRIAL AUDIO & VIDEO
PRODUCTS -- (0.7%):
5,000 Creative Technology 108,750 127,813
Limited*...............
----------- -----------
INSURANCE -- (1.1%):
4,400 Ohio Casualty Corp....... 199,100 204,050
----------- -----------
MACHINERY -- FARM -- (1.4%):
15,800 CTB International 225,285 248,850
Corp.*.................
----------- -----------
MANUFACTURING -- (2.1%):
6,000 Asyst Technologies, 108,335 266,437
Inc.*..................
60,000 Consep, Inc.*............ 161,250 120,000
----------- -----------
269,585 386,437
----------- -----------
MANUFACTURING -- CONSUMER
GOODS -- (0.8%):
10,000 Genesco, Inc.*........... 131,450 146,250
----------- -----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 18
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GROWTH FUND
Portfolio of Investments (continued) -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
MEDICAL SUPPLIES -- 1.7%
8,000 Hologic, Inc.*........... $ 199,625 $ 224,500
14,600 Laserscope*.............. 109,077 93,987
----------- -----------
308,702 318,487
----------- -----------
MEDICAL - INFORMATION SYSTEMS -- 0.2%
4,900 Mediware Information 33,663 41,956
Systems*...............
----------- -----------
NUTRITION & VITAMINS PRODUCTS -- 0.6%
10,000 Weider Nutrition 164,938 116,250
International, Inc.....
----------- -----------
OFFICE/BUSINESS EQUIPMENT -- 1.2%
7,000 W. H. Brady Company...... 198,450 218,750
----------- -----------
OIL/GAS EQUIPMENT - 1.4%
3,500 National-Oilwell, 202,808 261,844
Inc.*..................
----------- -----------
OIL/GAS - EXPLORATION -- 4.2%
8,100 Carbo Ceramics, Inc...... 235,200 269,325
6,300 Rowan Companies, Inc.*... 138,254 224,437
6,300 Veritas DGC, Inc*........ 136,754 268,143
----------- -----------
510,208 761,905
----------- -----------
PHARMACEUTICALS -- 1.8%
7,250 Medicis 307,818 332,595
Pharmaceutical*........
----------- -----------
REAL ESTATE INVESTMENT TRUST -- 2.1%
10,000 Prison Realty Trust...... 210,000 377,500
----------- -----------
RETAIL -- 1.1%
12,600 Heilig Meyers Co......... 206,263 193,725
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
RETAIL - GENERAL MERCHANDISE -- 1.6%
20,000 S&K Famous Brands $ 277,500 $ 295,000
Incorporated*..........
----------- -----------
RETAIL - SPECIALTY LINE -- 2.2%
27,300 Compucom Systems, 233,952 252,525
Inc.*..................
3,300 Rexall Sundown, Inc.*.... 84,380 150,562
----------- -----------
318,332 403,087
----------- -----------
SHELTER -- 1.0%
10,000 Clayton Homes, Inc....... 147,937 185,625
----------- -----------
TECHNOLOGY - SOFTWARE -- 1.1%
4,000 Faro Technologies, 48,000 65,500
Inc.*..................
10,000 Mapics, Inc.*............ 90,000 130,000
----------- -----------
138,000 195,500
----------- -----------
TEXTILES -- 1.2%
16,000 Dixie Group, Inc.*....... 109,725 216,000
----------- -----------
TOBACCO -- 1.9%
10,000 JR Cigar, Inc.*.......... 170,000 350,000
----------- -----------
TRANSPORTATION - MARINE -- 1.1%
6,000 Gulfmark Offshore, 189,000 207,000
Inc.*..................
----------- -----------
TOYS -- 0.9%
5,700 The First Years, Inc..... 94,762 161,025
----------- -----------
$10,626,463 13,549,037
TOTAL
INVESTMENTS -- 74%.....
=========== -----------
4,770,674
Cash and other assets,
net of
liabilities -- 26%.....
-----------
$18,319,711
NET ASSETS -- 100%.......
===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 19
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC VALUE FUND
Portfolio of Investments -- September 30, 1997
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 69.4%
APPLIANCE & HOUSEHOLD PRODUCTS -- 2.9%
20,000 The Rival Co............... $ 311,375 $ 320,000
---------- -----------
AUTO RELATED -- 2.9%
18,500 Alrenco Inc.*.............. 244,862 330,688
---------- -----------
BREWERY -- 1.9%
43,000 Pete's Brewing Co.*........ 261,647 217,688
---------- -----------
BUILDING MATERIALS -- 0.1%
1,000 Dravo Group Corp.*......... 10,695 11,875
---------- -----------
CONSTRUCTION -- 3.8%
41,800 Schuff Steel Co.*.......... 356,399 428,450
---------- -----------
ENTERTAINMENT -- 3.6%
35,000 Jackpot Enterprises,
Inc...................... 393,822 402,500
---------- -----------
FINANCIAL SERVICES -- 3.8%
50,500 First Investors Financial
Services*................ 390,032 429,250
---------- -----------
FOOD -- 3.0%
30,000 Bridgford Foods Corp....... 285,063 341,250
---------- -----------
FOREST PRODUCTS & PAPERS -- 3.2%
11,100 Deltic Timber Corp......... 306,020 362,831
---------- -----------
HOME FURNISHINGS -- 2.9%
26,750 Flexsteel Industries....... 319,422 327,688
---------- -----------
HOUSEHOLD PRODUCTS -- 3.7%
14,500 Bassett Furniture
Industries, Inc.......... 407,000 413,250
---------- -----------
INSURANCE -- 3.7%
12,000 Leucadia National Corp..... 399,009 412,500
---------- -----------
MACHINERY & EQUIPMENT -- 1.4%
7,000 Alamo Group, Inc........... 126,786 162,313
---------- -----------
MATERIALS -- 0.1%
1,000 Green AP Industries,
Inc...................... 10,195 14,000
---------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES SECURITY DESCRIPTION COST VALUE
- ------ -------------------- ---- ------
<C> <S> <C> <C>
METALS & MINING -- 2.5%
165,000 MK Gold Co.*............... $ 274,686 $ 278,438
---------- -----------
OFFICE EQUIPMENT & SERVICES -- 3.5%
27,500 Falcon Products, Inc....... 383,341 390,156
---------- -----------
PIPELINES -- 3.9%
16,300 Northwest Pipe Co.*........ 308,336 440,100
---------- -----------
RECREATION -- 1.7%
13,000 Rockshox*.................. 177,148 185,250
---------- -----------
RESTAURANTS -- 7.1%
21,400 Brinker International,
Inc.*.................... 307,935 381,188
15,100 Outback Steakhouse*........ 347,155 417,138
---------- -----------
655,090 798,326
---------- -----------
RETAIL -- SPECIALTY LINE -- 7.4%
53,000 Bombay Company, Inc.*...... 287,267 407,438
1,000 Brookstone, Inc.*.......... 8,883 11,875
62,100 Natural Wonders, Inc.*..... 257,173 411,413
---------- -----------
553,323 830,726
---------- -----------
TEXTILES & APPAREL -- 3.5%
28,100 Burlington Industry,
Inc.*.................... 365,769 393,400
---------- -----------
TRANSPORTATION -- 2.8%
1,000 Greyhound Lines, Inc.*..... 4,883 3,875
17,500 International
Shipholding.............. 297,232 311,719
---------- -----------
302,115 315,594
---------- -----------
TOTAL
INVESTMENTS -- 69.4%..... $6,842,135 7,806,269
==========
Cash and other assets, net of
liabilities -- 30.6%................ 3,435,337
-----------
NET ASSETS -- 100%.................... $11,241,606
===========
</TABLE>
* Non-income producing securities
See accompanying notes to financial statements.
17
<PAGE> 20
ESC STRATEGIC FUNDS, INC.
Statements of Assets and Liabilities (unaudited)
September 30, 1997
<TABLE>
<CAPTION>
GLOBAL
INCOME EQUITY SMALL CAP APPRECIATION GROWTH VALUE
------ ------ --------- ------------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $22,351,786;
$14,335,378; $68,799,167; $35,659,181;
$10,626,463; and $6,842,135
respectively).......................... $23,134,248 $18,634,616 $113,194,350 $48,769,158 $13,549,037 $ 7,806,269
Short-Term Investments (cost $576,475;
$264,744; $0; $0; $0; and $0
respectively).......................... 576,475 264,744 -- -- -- --
Cash..................................... 1,523,860 333,735 44,173,678 1,952,550 5,100,237 3,516,615
Foreign Currency (cost $920; $17,589; $0;
$0; $0; and $0 respectively)........... 923 17,257 -- -- -- --
Interest and dividends receivable........ 475,219 21,483 16,899 51,346 3,932 52,753
Receivable for fund shares sold.......... -- -- 46,605 31,931 226,084 --
Receivable for securities sold........... 191,789 42,342 519,983 -- -- --
Receivable from Adviser.................. -- -- -- -- 7,679 --
Unamortized organizational expenses (Note
2e).................................... 13,995 14,164 18,281 15,493 -- --
Other assets............................. -- 10,603 106,863 -- -- 12,429
----------- ----------- ------------ ----------- ----------- -----------
Total Assets....................... 25,916,509 19,338,944 158,076,659 50,820,478 18,886,969 11,388,066
----------- ----------- ------------ ----------- ----------- -----------
LIABILITIES
Income distribution payable.............. 105,880 -- -- -- -- --
Payable for fund shares repurchased...... -- -- 110,250 -- 2,056 --
Payable for securities purchased......... -- 170,134 -- -- 539,249 142,460
Unrealized loss on open forward currency
contracts.............................. -- 406 -- -- -- --
Advisory fee payable..................... 23,537 15,372 122,098 48,472 -- --
Administration fee payable............... 3,531 2,306 18,315 7,271 -- --
Transfer agent fee payable............... 1,183 1,567 14,729 1,899 1,766 1,343
12b-1 Distribution fee payable........... 6,179 5,780 45,192 14,492 5,194 2,657
Other accrued expenses................... 11,331 23,646 -- 990 18,993 --
----------- ----------- ------------ ----------- ----------- -----------
Total Liabilities.................. 151,641 219,211 310,584 73,124 567,258 146,460
----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS................................. $25,764,868 $19,119,733 $157,766,075 $50,747,354 $18,319,711 $11,241,606
=========== =========== ============ =========== =========== ===========
Net Assets Consist of:
Capital stock............................ 2,582 1,368 6,448 2,654 1,277 1,000
Additional paid-in capital............... 25,672,556 12,428,866 104,560,789 26,775,986 14,634,913 10,253,125
Accumulated undistributed net investment
income/ (loss) on investments.......... 397,645 (9,641) (75,779) (43,400) (16,969) 15,066
Accumulated undistributed realized
gain/(loss) on investments and foreign
currency transactions.................. (1,091,002) 2,395,110 8,879,434 10,902,137 777,916 8,281
Net unrealized
appreciation/(depreciation) on
investments and foreign currency
translations........................... 783,087 4,304,030 44,395,183 13,109,977 2,922,574 964,134
----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS............................... $25,764,868 $19,119,733 $157,766,075 $50,747,354 $18,319,711 $11,241,606
=========== =========== ============ =========== =========== ===========
SHARES OF BENEFICIAL INTEREST
Class A
Shares of beneficial interest
outstanding.......................... 2,510,000 1,031,156 4,892,590 2,329,705 900,614 839,209
======== ======== ======== ======= ====== ======
Net Asset Value per share
outstanding.......................... $9.98 $14.03 $24.53 $19.15 $14.35 $11.24
==== ===== ===== ====== ===== =====
Maximum Offering Price per share
($9.98/.955, $14.03/.955,
$24.53/.955, $19.15/.955,
$14.35/.955, $11.24/.955
respectively)........................ $10.45 $14.80 $25.90 $20.22 $15.15 $11.77
----- ----- ----- ------ ----- -----
---- ----- ----- ------ ----- -----
Class D
Shares of beneficial interest
outstanding.......................... 72,332 337,142 1,555,291 324,476 376,855 160,950
===== ====== ======== ======= ====== ======
Net Asset Value per share
outstanding.......................... $9.98 $13.81 $24.27 $18.93 $14.32 $11.22
==== ===== ===== ====== ===== =====
Maximum Offering Price per share
($9.98/.985, $13.81/.985,
$24.27/.985, $18.93/.985,
$14.32/.985, $11.22/.985
respectively)........................ $10.53 $14.58 $25.63 $19.99 $15.12 $11.39
===== ===== ===== ====== ===== =====
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 21
ESC STRATEGIC FUNDS, INC.
Statements of Operations (unaudited)
For the Six Months Ended September 30, 1997
<TABLE>
<CAPTION>
GLOBAL
INCOME EQUITY SMALL CAP APPRECIATION GROWTH VALUE(A)
---------- ---------- ----------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Investment Income:
Interest......................... $ 22,930 $ -- $ 59,239 $ 5,950 $ -- $ 4,133
Dividend......................... 1,089,318 261,255 924,543 441,638 65,055 58,349
---------- ---------- ----------- ----------- ---------- --------
Total income..................... 1,112,248 261,255 983,782 447,588 65,055 62,482
---------- ---------- ----------- ----------- ---------- --------
Expenses:
Advisory......................... 155,441 107,164 614,721 272,643 58,185 33,488
Administration................... 23,316 16,075 92,208 40,896 6,982 4,018
Fund accounting.................. 19,967 26,231 17,603 21,818 15,603 11,927
Legal............................ 4,485 6,227 8,506 5,489 2,981 2,177
Reports to shareholders.......... 3,264 4,842 10,890 4,215 965 766
Audit............................ 7,448 18,957 9,162 9,614 8,204 5,216
Registration..................... 9,728 11,768 13,362 10,446 9,951 11,224
Custodian........................ 9,883 33,535 3,192 17,097 3,684 1,936
Directors........................ 1,996 3,562 1,995 1,998 1,971 1,560
Transfer agent fees and
expenses....................... 8,506 9,342 36,933 11,532 6,045 2,104
12b-1 Distribution fees -- Class
A.............................. 37,684 21,057 116,547 62,285 8,049 5,802
12b-1 Distribution fees -- Class
D.............................. 3,527 17,201 111,397 17,627 10,764 2,687
Insurance........................ 2,460 3,091 1,928 2,186 268 64
Amortization of organizational
expenses....................... 4,421 4,421 5,455 4,421 -- --
Miscellaneous.................... (19,635) (14,957) 15,662 8,721 14,050 1,953
---------- ---------- ----------- ----------- ---------- --------
Total expenses before waivers.... 272,491 268,516 1,059,561 490,988 147,702 84,922
Less: expenses
waived/reimbursed.............. -- -- -- -- (65,167) (37,506)
Less: expenses paid by third
parties........................ -- -- -- -- -- --
---------- ---------- ----------- ----------- ---------- --------
Net expenses..................... 272,491 268,516 1,059,561 490,988 82,535 47,416
---------- ---------- ----------- ----------- ---------- --------
Net investment income/(loss)....... 839,757 (7,261) (75,779) (43,400) (17,480) 15,066
---------- ---------- ----------- ----------- ---------- --------
Realized gain/(loss) on
investments...................... (311,350) 1,517,731 6,956,078 8,824,467 803,667 8,281
Net realized gain/(loss) on foreign
currency
transactions and assets and
liabilities
denominated in foreign
currencies..................... 20 715 -- -- -- --
Net change in unrealized
appreciation/
(depreciation) on investments.... 787,001 2,612,416 35,811,897 8,201,372 3,049,985 964,134
Net change in unrealized
gain/(loss) on foreign currency
translation...................... 310,375 4,219 -- -- -- --
---------- ---------- ----------- ----------- ---------- --------
Net realized and unrealized
gain/(loss)...................... 786,046 4,135,081 42,767,975 17,025,839 3,853,652 972,415
---------- ---------- ----------- ----------- ---------- --------
Net increase/(decrease) in net
assets resulting from
operations....................... $1,625,803 $4,127,820 $42,692,196 $16,982,439 $3,836,172 $987,481
========== ========== =========== =========== ========== ========
</TABLE>
(a) For the period from May 7, 1997 (commencement of operations) through
September 30, 1997.
See accompanying notes to financial statements.
19
<PAGE> 22
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
INCOME
-----------------------------------
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
------------------ --------------
<S> <C> <C>
Operations:
Net investment income/(loss).............................. $ 839,757 $ 2,077,199
Net realized gain/(loss) on investments and foreign
currency transaction.................................... (311,330) (537,499)
Net unrealized appreciation/(depreciation) of investments
and foreign currency translation........................ 1,097,376 1,011
----------- -----------
Net increase in net assets resulting from operations........ 1,625,803 1,540,711
----------- -----------
Dividends and Distributions to Shareholders:
From net investment income
Class A................................................. (816,570) (2,004,240)
Class D................................................. (23,197) (72,963)
----------- -----------
(839,767) (2,077,203)
----------- -----------
From net realized gains
Class A................................................. -- --
Class D................................................. -- --
----------- -----------
-- --
----------- -----------
Change in net assets resulting from dividends and
distributions to shareholders........................... (839,767) (2,077,203)
----------- -----------
Capital Share Transactions:
Proceeds from sales of shares
Class A................................................. 1,227,463 6,683,254
Class D................................................. 32,333 84,695
----------- -----------
1,259,796 6,767,949
----------- -----------
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
Class A................................................. 761,062 1,821,515
Class D................................................. 22,084 67,648
----------- -----------
783,146 1,889,163
----------- -----------
Net asset value of shares redeemed:
Class A................................................. (10,213,876) (12,379,107)
Class D................................................. (776,198) (152,695)
----------- -----------
(10,990,074) (12,531,802)
----------- -----------
Change in net assets from capital share transactions...... (8,947,132) (3,874,690)
----------- -----------
Total change in net assets.................................. (8,161,096) (4,411,182)
Net Assets:
Beginning of Year......................................... 33,925,964 38,337,146
----------- -----------
End of Year............................................... $25,764,868 $33,925,964
=========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 23
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
GLOBAL EQUITY SMALL CAP
----------------------------------- -----------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997 (UNAUDITED) MARCH 31, 1997
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss).......... $ (7,261) $ (103,754) $ (75,779) $ (363,908)
Net realized gain/(loss) on
investments and foreign currency
transactions........................ 1,518,446 1,450,841 6,956,078 3,281,474
Net unrealized
appreciation/(depreciation)
of investments and foreign currency
translation......................... 2,616,635 328,576 35,811,897 1,691,183
----------- ----------- ------------ -----------
Net increase in net assets resulting
from operations....................... 4,127,820 1,675,663 42,692,196 4,608,749
----------- ----------- ------------ -----------
Dividends and Distributions to
Shareholders:
From net investment income
Class A............................. -- -- -- --
Class D............................. -- -- -- --
----------- ----------- ------------ -----------
-- -- -- --
----------- ----------- ------------ -----------
From net realized gains
Class A............................. -- (538,288) -- (2,245,054)
Class D............................. -- (124,560) -- (589,117)
----------- ----------- ------------ -----------
-- (662,848) -- (2,834,171)
----------- ----------- ------------ -----------
Change in net assets resulting from
dividends and distributions to
shareholders........................ -- (662,848) -- (2,834,171)
----------- ----------- ------------ -----------
Capital Share Transactions:
Proceeds from sales of shares
Class A............................. 937,607 2,936,685 20,580,092 44,903,590
Class D............................. 102,014 314,954 5,911,661 13,740,847
----------- ----------- ------------ -----------
1,039,621 3,251,639 26,492,453 58,644,437
----------- ----------- ------------ -----------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions:
Class A............................. -- 430,207 -- 1,996,351
Class D............................. -- 124,562 -- 587,122
----------- ----------- ------------ -----------
-- 554,769 -- 2,583,473
----------- ----------- ------------ -----------
Net asset value of shares redeemed:
Class A............................. (8,032,745) (555,272) (5,385,088) (4,643,523)
Class D............................. (501,186) (99,859) (913,379) (1,216,361)
----------- ----------- ------------ -----------
(8,533,931) (655,131) (6,298,457) (5,859,884)
----------- ----------- ------------ -----------
Change in net assets from capital
share transactions.................. (7,494,310) 3,151,277 20,352,763 55,368,026
----------- ----------- ------------ -----------
Total change in net assets.............. (3,366,490) 4,164,092 62,886,192 57,142,604
Net Assets:
Beginning of Year..................... 22,486,223 18,322,131 94,879,883 37,737,279
----------- ----------- ------------ -----------
End of Year........................... $19,119,733 $22,486,223 $157,766,075 $94,879,883
=========== =========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 24
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
APPRECIATION GROWTH
----------------------------------- ----------------------------------------
JANUARY 28, 1997
SIX MONTHS ENDED SIX MONTHS ENDED (COMMENCEMENT OF
SEPTEMBER 30, 1997 YEAR ENDED SEPTEMBER 30, 1997 OPERATIONS) THROUGH
(UNAUDITED) MARCH 31, 1997 (UNAUDITED) MARCH 31, 1997
------------------ -------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)..... $ (43,400) $ (143,046) $ (17,480) $ 511
Net realized gain/(loss) on
investments and foreign
currency transactions.......... 8,824,467 3,760,548 803,667 (25,751)
Net unrealized
appreciation/(depreciation) of
investments and foreign
currency translation........... 8,201,372 751,608 3,049,985 (127,411)
------------ ----------- ----------- ----------
Net increase/(decrease) in net
assets resulting from
operations....................... 16,982,439 4,369,110 3,836,172 (152,651)
------------ ----------- ----------- ----------
Dividends and Distributions to
Shareholders:
From net investment income
Class A........................ -- -- -- --
Class D........................ -- -- -- --
------------ ----------- ----------- ----------
-- -- -- --
------------ ----------- ----------- ----------
From net realized gains
Class A........................ -- (2,410,033) -- --
Class D........................ -- (183,443) -- --
------------ ----------- ----------- ----------
-- (2,593,476) -- --
------------ ----------- ----------- ----------
Change in net assets resulting
from dividends and
distributions to
shareholders................... -- (2,593,476) -- --
------------ ----------- ----------- ----------
Capital Share Transactions:
Proceeds from sales of shares
Class A........................ 4,593,700 17,929,334 7,648,504 2,970,948
Class D........................ 1,129,935 1,473,420 2,980,145 1,359,717
------------ ----------- ----------- ----------
5,723,635 19,402,754 10,628,649 4,330,665
------------ ----------- ----------- ----------
Net asset value of shares issued
to shareholders in reinvestment
of dividends and distributions:
Class A........................ -- 2,230,880 -- --
Class D........................ -- 181,288 -- --
------------ ----------- ----------- ----------
-- 2,412,168 -- --
------------ ----------- ----------- ----------
Net asset value of shares
redeemed:
Class A........................ (20,258,677) (2,602,856) (230,248) (17,776)
Class D........................ (525,313) (209,187) (70,412) (4,788)
------------ ----------- ----------- ----------
(20,783,990) (2,812,043) (300,660) (22,564)
------------ ----------- ----------- ----------
Change in net assets from capital
share transactions............. (15,060,355) 19,002,879 10,327,989 4,308,101
------------ ----------- ----------- ----------
Total change in net assets......... 1,926,048 20,778,513 14,164,161 4,155,450
Net Assets:
Beginning of Year................ 48,821,306 28,042,793 4,155,550 100
------------ ----------- ----------- ----------
End of Year...................... $ 50,747,354 $48,821,306 $18,319,711 $4,155,550
============ =========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 25
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
VALUE
-------------------
MAY 7, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
SEPTEMBER 30,
1997
(UNAUDITED)
-------------------
<S> <C>
Operations:
Net investment income/(loss).............................. $ 15,066
Net realized gain/(loss) on investments................... 8,281
Net unrealized appreciation/(depreciation) on
investments............................................ 964,134
-----------
Net increase in net assets resulting from operations........ 987,481
-----------
Dividends and Distributions to Shareholders:
From net investment income
Class A................................................ --
Class D................................................ --
-----------
--
-----------
From net realized gains
Class A................................................ --
Class D................................................ --
-----------
--
-----------
Change in net assets resulting from dividends and
distributions to shareholders.......................... --
-----------
Capital Share Transactions:
Proceeds from sales of shares
Class A................................................ 8,584,946
Class D................................................ 1,669,774
-----------
10,254,720
-----------
Net asset value of shares issued to shareholders in
reinvestment of dividends and distributions:
Class A................................................ --
Class D................................................ --
-----------
--
-----------
Net asset value of shares redeemed:
Class A................................................ (220)
Class D................................................ (375)
-----------
(595)
-----------
Change in net assets from capital share transactions...... 10,254,125
-----------
Total change in net assets.................................. 11,241,606
Net Assets:
Beginning of Period....................................... --
-----------
End of Period............................................. $11,241,606
===========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 26
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1997 (unaudited)
1. DESCRIPTION. ESC Strategic Funds, Inc. (The "Company") was
incorporated in Maryland on November 24, 1993. The Company currently comprises
six portfolios, ESC Strategic Income Fund (commencement date May 4, 1994), ESC
Strategic Global Equity Fund (commencement date May 12, 1994), ESC Strategic
Small Cap Fund (commencement date June 8, 1994), ESC Strategic Appreciation Fund
(commencement date July 6, 1994), ESC Strategic Growth Fund (commencement date
January 28, 1997), and ESC Strategic Value Fund (commencement date May 7,
1997)(collectively the "Funds"). The Company is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. Each Fund, with the exception of ESC Strategic Small Cap
Fund, and ESC Strategic Value Fund, operates as a diversified fund. ESC
Strategic Small Cap Fund, and ESC Strategic Value Fund, operate as
non-diversified funds. The Company's Articles of Incorporation authorize the
issuance of two classes of common stock designated as Class A and Class D for
each Fund. Class A shares are offered with a maximum front-end sales charge of
4.50% which may be reduced or waived in certain cases. Class A shares are also
subject to a Service and Distribution Fee calculated at an annual rate of up to
0.25% of the average daily net asset value of Class A shares. Class D shares are
offered with a front-end sales charge of 1.50% and are subject to a Service and
Distribution Fee at an annual rate of up to 0.75% based on the average daily net
asset value of Class D shares. The Company's Board of Directors may, in the
future, authorize the issuance of additional classes of capital stock for the
Funds.
The Funds' investment objectives are as follows:
ESC Strategic Income Fund -- a high level of current income, with a
secondary objective of total return.
ESC Strategic Global Equity Fund -- long-term capital appreciation.
ESC Strategic Small Cap Fund -- high level of capital appreciation.
ESC Strategic Appreciation Fund -- long-term capital appreciation.
ESC Strategic Growth Fund -- high level of capital appreciation.
ESC Strategic Value Fund -- long-term capital appreciation.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Funds:
A. Portfolio Valuation. Investments in securities (including options
and financial futures) are valued at the last sales price on the securities
exchange or the NASDAQ National Market System on which such securities are
primarily traded or, if there are no trades, at the current bid price, as
of 4:15 p.m. eastern time. Over-the-counter securities, or securities for
which there were no transactions, are valued at the closing bid price,
except for open short positions, when the asked price is used. Bid price is
used when no asked price is available. Bonds and other fixed income
securities are valued by using market quotations, and may be valued on the
basis of prices provided by a pricing service. Securities for which market
quotations are not readily available are valued at fair value as determined
in good faith by or at the direction of the Board of Directors. Short-term
securities which mature in 60 days or less are valued at amortized cost, if
their terms to maturity at purchase were 60 days or less, or by amortizing
their value on the 61st day prior to maturity, if their original term to
maturity at purchase exceeded 60 days.
B. Securities transactions and investment income. Securities
transactions are recorded on a trade date basis. Realized gains and losses
from securities transactions are recorded on the identified cost basis.
Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium and accretion of discount on investments,
is accrued daily as earned.
24
<PAGE> 27
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
C. Dividend and Capital Gain Distributions to
Shareholders. Distributions to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions are determined
in accordance with federal income tax regulations which may differ from
generally accepted accounting principles. These "book/tax" differences are
considered either temporary or permanent in nature. To the extent these
differences are permanent in nature, such amounts are reclassified within
the capital accounts based on their federal tax basis treatment; temporary
differences do not require reclassification. Dividends and distributions
which exceed net investment income and net realized capital gains for
financial reporting purposes but not for tax purposes are reported as
dividends in excess of net investment income or distributions in excess of
net realized capital gains.
Permanent book/tax differences are primarily attributable to
non-deductible organization costs, foreign exchange gains/losses and net
operating losses.
D. Federal income taxes. It is the policy of each of the Funds to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986, as amended. By so qualifying, the Funds will
not be subject to Federal income taxes to the extent that they distribute
all of their taxable and tax-exempt income for the fiscal year. The Funds
also intend to meet the distribution requirements to avoid the payment of
an excise tax. Accordingly, no provision for taxes is recorded.
E. Organizational expenses. Costs incurred in connection with the
organization and initial registration of the Funds, with the exception of
the Growth Fund and Value Fund have been deferred and are being amortized
on a straight-line basis over sixty months beginning with each Fund's
commencement of operations. In the event any of the initial shares of the
Funds are redeemed during the amortization period, the redemption proceeds
will be reduced by a pro rata portion of any unamortized organization
expenses in the proportion as the number of shares being redeemed bears to
the number of initial shares outstanding at the time of redemption.
F. Determination of net asset value and calculation of
expenses. Expenses directly attributable to a Fund are charged to that
Fund. Other expenses of the Company are allocated proportionately among the
Funds in relation to the net assets of each Fund or on another reasonable
basis. In calculating net asset value per share of each class, investment
income, realized and unrealized gains and losses, and expenses other than
class specific expenses are allocated daily to each class of shares based
upon the proportion of net assets of each class at the beginning of each
day. Distribution expenses are solely borne by the class incurring the
expense.
G. Foreign exchange transactions. The books and records of the Funds
are maintained in U.S. dollars; non-U.S. dollar denominated amounts are
translated into U.S. dollars as follows with the resultant exchange gains
and losses recorded in the Statement of Operations:
(i) market value of investment securities and other assets and
liabilities: at the exchange rate on the valuation date,
(ii) purchases and sales of investment securities, income and
expenses: at the exchange rate prevailing on the respective date of such
transactions.
The Funds do not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from the
fluctuations arising from changes in market prices of securities at period
end. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales and maturities of short-term securities, currency gains and losses
realized between the trade and settlement dates on securities transactions,
the difference between the amounts of dividends, interest and foreign
withholding taxes recorded on the Funds' books, and the
25
<PAGE> 28
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
U.S. dollar equivalent of the amounts actually received or paid. Net
unrealized foreign exchange gains and losses arise from changes in the
value of the assets and liabilities, other than investments in securities
at period end, resulting from changes in the foreign exchange rate.
H. Forward foreign exchange contracts. A forward foreign exchange
contract is a commitment to buy or sell a foreign currency at a future date
at a negotiated exchange rate. The Funds bear the market risk which arises
from possible changes in foreign exchange values. Risks may arise from the
potential inability of counterparties to meet the terms of their contracts
and from unanticipated movements in the value of the foreign currency
relative to the U.S. dollar. The gain or loss from the difference between
the cost of original contracts and the amount realized upon the closing of
such contracts is included in net realized gains on foreign exchange
transactions.
I. Use of estimates. Estimates and assumptions are required to be
made regarding assets, liabilities, and changes in net assets resulting
from operations when financial statements are prepared in accordance with
generally accepted accounting principles. Changes in the economic
environment, financial markets and any other parameters used in determining
these estimates could cause actual results to differ from these amounts.
3. INVESTMENT ADVISORY AND ADMINISTRATION CONTRACTS AND DISTRIBUTION
AGREEMENT. The Company has entered into an investment advisory agreement (the
"Investment Advisory Agreement") with Equitable Securities Corporation ("ESC"or
the "Adviser"). The Investment Advisory Agreement provides for the Adviser to be
paid a fee calculated and accrued daily and paid monthly at the annual rates of
1.25% of average daily net assets for ESC Strategic Growth Fund, and ESC
Strategic Value Fund, and 1.00% of such net assets for each of the other Funds.
The Adviser provides portfolio management supervision and certain
administrative, clerical and bookkeeping services for the Company. The Adviser
has entered into agreements with various portfolio managers (the "Managers") to
provide portfolio management services for the Funds. Equitable Asset Management,
a wholly-owned subsidiary of the Adviser, provides portfolio management services
for Small Cap, Growth, and Value Funds and approximately one-third of the assets
of the Appreciation Fund. The Adviser has retained various other Managers to
advise the Global Equity Fund, Income Fund and the remaining assets of the
Appreciation Fund. Any fees payable under these agreements with the Managers are
paid by the Adviser. For the six months ended September 30, 1997 and the period
from May 7, 1997 (commencement of operations) through September 30, 1997, the
Adviser voluntarily waived fees of $58,185 and $33,488, for the Growth Fund and
Value Fund, respectively.
BISYS Fund Services Limited Partnership d/b/a/ BISYS Fund Services ("BISYS
Fund Services") and BISYS Fund Services, Inc. ("BISYS") are each a wholly-owned
subsidiary of the BISYS Group, Inc. BISYS Fund Services provides the Funds with
administration services, subject to the supervision of the Company's Board of
Directors and officers pursuant to the administration agreement (the
"Administration Agreement"). The services under the Administration Agreement
included day-to-day administration of matters related to the corporate existence
of the Company, maintenance of its records, preparation of reports, supervision
of the Funds' arrangement with their custodian and assistance in the preparation
of the Company's Registration Statement under federal and state laws. Pursuant
to the Administration Agreement, BISYS Fund Services is entitled to a fee
calculated and accrued daily and paid monthly at the annual rate of 0.15% of the
average daily net assets of the Funds.
BISYS serves as transfer agent and fund accountant for the Company.
Pursuant to a Transfer Agent Agreement between the Funds and BISYS, BISYS
provided the Funds with transfer and dividend and capital gain disbursing agent
services, for which it receives a fee of $15.00 per account per year subject to
a required minimum fee of $10,000 for each Fund, plus out-of-pocket expenses.
Pursuant to the Fund Accounting Agreement between the Funds and BISYS, BISYS
assists the Funds in calculating net asset values and provided certain other
account services for each Fund for an annual fee of $30,000 per Fund plus
out-of-pocket expenses.
26
<PAGE> 29
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
For the six months ended September 30, 1997, and for the period from May 7,
1997 (commencement of operations) through September 30, 1997 for the Value Fund,
BISYS Fund Services and BISYS were entitled to the following fees excluding
out-of-pocket expenses:
<TABLE>
<CAPTION>
TRANSFER
ADMINISTRATION AGENCY ACCOUNTING
-------------- -------- ----------
<S> <C> <C> <C>
Income............................... $23,316 $ 8,506 $19,967
Global Equity........................ 16,075 9,342 26,231
Small Cap............................ 92,208 36,933 17,603
Appreciation......................... 40,896 11,532 21,818
Growth............................... 6,982 6,045 15,603
Value................................ 4,018 2,104 11,927
</TABLE>
For the six months ended September 30, 1997, BISYS Fund Services
voluntarily waived administration fees of $6,982 and $4,018 for the Growth Fund
and the Value Fund, respectively.
ESC has voluntarily agreed to reimburse the Funds to the extent that their
ratios of expenses to average net assets exceed certain percentages as follows:
Appreciation -- 2.00% (Class A), 2.50% (Class D); Global Equity -- 2.50% (Class
A), 3.00% (Class D); Small Cap -- 2.00% (Class A), 2.50% (Class D);
Income -- 2.00% (Class A), 2.50% (Class D), Growth -- 2.00% (Class A), 2.50%
(Class D), and Value -- 2.00% (Class A), 2.50% (Class D). Accordingly, no
reimbursements were necessary for the Funds for the six months ended September
30, 1997.
The Company has entered into a distribution agreement (the "Distribution
Agreement") with ESC. Under the Distribution Agreement, ESC as agent for the
Funds, agrees to use its best efforts as sole distributor of the Funds' shares.
Under the Plan of Distribution, Class A shares will pay the Distributor a fee at
an annual rate up to 0.25% of the value of average daily net assets of Class A
shares in return for financing certain distribution and shareholder service
activities related to Class A shares. The Plans provide that Class D shares will
pay the Distributor amounts up to an annual rate up to 0.75% of the average
daily net assets of Class D shares to finance certain distribution and
shareholder services activities related to Class D shares.
During the six months ended September 30, 1997, the Global Equity, Small
Cap, Appreciation, and Growth Funds paid brokerage commissions of $2,808,
$6,888, $15,405, and $140 to Equitable Securities, a subsidiary of the Adviser's
subsidiary, Equitable Trust Company.
4. PURCHASE AND SALES TRANSACTIONS. The aggregate amount of purchases and
sales of investment securities, other than short-term securities, for the period
ended September 30, 1997 were as follows:
<TABLE>
<CAPTION>
COMMON STOCKS U.S. GOVERNMENT
AND CORPORATE BONDS OBLIGATIONS
------------------------- ----------------------
PURCHASES SALES PURCHASES SALES
----------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Income..................... $15,856,877 $18,493,769 $994,375 $2,881,842
Global Equity.............. 9,726,296 16,210,602 0 0
Small Cap.................. 53,886,476 39,077,410 0 0
Appreciation............... 19,113,790 35,908,412 0 0
Growth..................... 16,396,740 5,760,818 0 0
Value(a)................... 7,110,399 276,446 0 0
</TABLE>
(a) For the period from May 7, 1997 (commencement of operations) through
September 30, 1997.
27
<PAGE> 30
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
B. FEDERAL INCOME TAX BASIS. Cost for book and federal income tax
purposes were substantially the same as of September 30, 1997. Gross unrealized
appreciation and depreciation on investment securities at September 30, 1997,
based on cost for Federal income tax purposes is as follows:
<TABLE>
<CAPTION>
GROSS GROSS NET
UNREALIZED UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ ------------
<S> <C> <C> <C>
Income.............................. $ 879,746 $ (71,923) $ 807,823
Global Equity....................... 4,590,226 (290,988) 4,299,238
Small Cap........................... 44,860,534 (465,351) 44,395,183
Appreciation........................ 13,792,499 (682,522) 13,109,977
Growth.............................. 3,114,138 (191,564) 2,922,574
Value............................... 1,046,264 (82,130) 964,134
</TABLE>
5. CAPITAL SHARE TRANSACTIONS. The Company is authorized to issue 650
million shares of capital stock with a par value of $0.001 each. Transactions in
shares of the Funds for the six months ended September 30, 1997, and the year
ended March 31, 1997, were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1997
----------------------------------------------------------------------
GLOBAL
INCOME EQUITY SMALL CAP APPRECIATION GROWTH VALUE(A)
---------- --------- --------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Beginning Balance................ 3,339,466 1,568,551 4,129,592 3,190,643 295,961 0
---------- --------- --------- ---------- ------- -------
Shares sold...................... 124,529 75,497 1,029,535 282,598 623,783 839,229
Shares issued in reinvestment of
dividends...................... 77,415 0 (9) 0 0 0
Shares redeemed.................. (1,031,410) (612,892) (266,528) (1,143,536) (19,130) (20)
---------- --------- --------- ---------- ------- -------
Net increase/(decrease) in
shares......................... (829,466) (537,395) 762,998 (860,938) 604,653 839,209
---------- --------- --------- ---------- ------- -------
Ending Balance................... 2,510,000 1,031,156 4,892,590 2,329,705 900,614 839,209
========== ========= ========= ========== ======= =======
CLASS D
Beginning Balance................ 145,898 366,560 1,290,948 292,678 135,392 0
---------- --------- --------- ---------- ------- -------
Shares sold...................... 3,266 8,357 311,979 68,623 247,350 160,985
Shares issued in reinvestment of
dividends...................... 2,252 0 (7) 0 0 0
Shares redeemed.................. (79,084) (37,775) (47,629) (36,825) (5,887) (35)
---------- --------- --------- ---------- ------- -------
Net increase/(decrease) in
shares......................... (73,566) (29,418) 264,343 31,798 241,463 160,950
---------- --------- --------- ---------- ------- -------
Ending Balance................... 72,332 337,142 1,555,291 324,476 376,855 160,950
========== ========= ========= ========== ======= =======
</TABLE>
(a) For the period from May 7, 1997 (commencement of operations) through
September 30, 1997.
28
<PAGE> 31
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1997
-------------------------------------------------------------
GLOBAL
INCOME EQUITY SMALL CAP APPRECIATION GROWTH(B)
---------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
CLASS A
Beginning Balance....................... 3,730,042 1,321,204 1,816,310 1,963,842 10
---------- --------- --------- ---------- -------
Shares sold............................. 676,705 258,134 2,460,003 1,249,192 297,773
Shares issued in reinvestment of net
investment income and capital gain
distributions......................... 184,080 37,151 109,931 154,922 0
Shares redeemed......................... (1,251,361) (47,938) (256,652) (177,313) (1,822)
---------- --------- --------- ---------- -------
Net increase/(decrease) in shares....... (390,576) 247,347 2,313,282 1,226,801 295,951
---------- --------- --------- ---------- -------
Ending Balance.......................... 3,339,466 1,568,551 4,129,592 3,190,643 295,961
========== ========= ========= ========== =======
CLASS D
Beginning Balance....................... 145,876 336,540 564,447 192,247 0
---------- --------- --------- ---------- -------
Shares sold............................. 8,550 27,967 762,148 102,108 135,884
Shares issued in reinvestment of net
investment income and capital gain
distributions......................... 6,828 10,917 32,655 12,722 0
Shares redeemed......................... (15,356) (8,864) (68,302) (14,399) (492)
---------- --------- --------- ---------- -------
Net increase in shares.................. 22 30,020 726,501 100,431 135,392
---------- --------- --------- ---------- -------
Ending Balance.......................... 145,898 366,560 1,290,948 292,678 135,392
========== ========= ========= ========== =======
</TABLE>
(b) For the period from January 28, 1997 (commencement of operations) through
March 31, 1997.
29
<PAGE> 32
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997 (unaudited)
6. MULTIPLE MANAGER STRATEGY. The Adviser uses the Multiple Manager
Strategy for certain of the Funds from time to time. Under this strategy, the
Adviser allocates portions of a Fund's assets among multiple specialist Managers
with dissimilar investment styles and security selection disciplines. The
Adviser monitors the performance both of the total Fund portfolio and of each
Manager and will reallocate Fund assets among individual Managers, or recommend
to the Company that it employ or terminate particular Managers, to the extent
the Adviser deems appropriate to achieve the overall objectives of the
particular Fund.
The Managers are as follows:
ESC Strategic Income Fund -- Llama Asset Management Company, L.P.;
Cincinnati Assert Management, Inc. and Murray Johnstone International
Limited.
ESC Strategic Global Equity Fund -- GlobeFlex Capital, L.P. and Murray
Johnstone International Limited.
ESC Strategic Small Cap Fund -- Equitable Asset Management, Inc.
ESC Strategic Appreciation Fund -- GlobeFlex Capital, L.P.; Brandes
Investment Partners, Inc., Scott & Stringfellow Capital Management,
Inc. And Equitable Asset Management, Inc.
ESC Strategic Growth Fund -- Equitable Asset Management, Inc.
ESC Strategic Value Fund -- Equitable Asset Management, Inc.
Equitable Asset Management, Inc. is an affiliate of the Adviser.
7. OFF-BALANCE SHEET RISK. The Funds may invest in various financial
instruments with off-balance sheet risk. These financial instruments include
taking positions in foreign currency contracts. During the period the forward
contract is open, changes in the value of the contract are recognized as
unrealized gains or losses by "marking to market" such contract on a daily basis
to reflect the market value of the contract at the end of the day's trading.
When the forward contract is closed, the Fund records a realized gain or loss
between the proceeds from (or cost of) the closing transaction and the Fund's
basis in the contract. The Fund's enter into such contracts for the purpose of
hedging exposure to change in foreign currency exchange rates on their portfolio
holdings. A lack of correlation between the price of the security and the
underlying contract could result in a loss to the Funds.
30
<PAGE> 33
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997
<TABLE>
<CAPTION>
INCOME
------------------------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------------------- --------------------------------------
MAY 4, 1994
SIX MONTHS (COMMENCEMENT SIX MONTHS
ENDED YEAR YEAR OF OPERATIONS) ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED THROUGH SEPTEMBER 30, ENDED ENDED
1997 MARCH 31, MARCH 31, MARCH 31, 1997 MARCH 31, MARCH 31,
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996
------------- --------- --------- -------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............... $ 9.73 $ 9.89 $ 9.94 $ 10.00 $ 9.73 $ 9.89 $ 9.94
------- ------- ------- ------- ------- ------ ------
Income from Investment
Operations:
Net investment
income............. 0.33 0.60 0.59 0.55 0.37 0.50 0.54
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
transactions....... 0.19 (0.16) 0.16 (0.05) 0.12 (0.16) 0.16
------- ------- ------- ------- ------- ------ ------
Total from investment
operations......... 0.52 0.44 0.75 0.50 0.49 0.34 0.70
------- ------- ------- ------- ------- ------ ------
Less Dividends and
Distributions:
From net investment
income............. (0.27) (0.60) (0.59) (0.01) (0.24) (0.50) (0.54)
From realized
gains.............. 0.00 0.00 (0.21) (0.55) 0.00 0.00 (0.21)
------- ------- ------- ------- ------- ------ ------
Total distributions.... (0.27) (0.60) (0.80) (0.56) (0.24) (0.50) (0.75)
------- ------- ------- ------- ------- ------ ------
Net Asset Value, End of
Period............... $ 9.98 $ 9.73 $ 9.89 $ 9.94 $ 9.98 $ 9.73 $ 9.89
======= ======= ======= ======= ======= ====== ======
Total Return (excludes
sales charge)........ 5.38%(a) 3.91% 7.67% 5.30% 5.12%(a) 3.39% 7.11%
Net Assets End of
Period
(in thousands)....... $25,043 $32,506 $36,891 $32,373 $ 722 $1,420 $1,446
Ratios to Average Net Assets of:
Net investment
income............. 5.42%(b) 5.49% 5.87% 6.29%(b) 4.95%(b) 4.99% 5.37%
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties...... 1.74%(b) 1.65% 1.70% 1.85%(b) 2.24%(b) 2.15% 2.20%
Expenses before
waivers/
reimbursements and
expenses paid by
third parties...... 1.74%(b) 1.70% 1.75% 1.86%(b) 2.24%(b) 2.21% 2.25%
Portfolio Turnover
Rate................. 62.51% 123% 138% 92% 62.51% 123% 138%
<CAPTION>
INCOME
--------------
CLASS D
--------------
MAY 4, 1994
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MARCH 31,
1995
--------------
<S> <C>
Net Asset Value,
Beginning of
Period............... $10.00
------
Income from Investment
Operations:
Net investment
income............. 0.50
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
transactions....... (0.05)
------
Total from investment
operations......... 0.45
------
Less Dividends and
Distributions:
From net investment
income............. (0.01)
From realized
gains.............. (0.50)
------
Total distributions.... (0.51)
------
Net Asset Value, End of
Period............... $ 9.94
======
Total Return (excludes
sales charge)........ 4.74%(b)
Net Assets End of
Period
(in thousands)....... $1,241
Ratios to Average Net A
Net investment
income............. 5.73%(b)
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties...... 2.29%(b)
Expenses before
waivers/
reimbursements and
expenses paid by
third parties...... 2.31%(b)
Portfolio Turnover
Rate................. 92%
</TABLE>
(a) Not annualized.
(b) Annualized.
31
<PAGE> 34
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997
<TABLE>
<CAPTION>
GLOBAL EQUITY
------------------------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------------------- --------------------------------------
MAY 12, 1994
SIX MONTHS (COMMENCEMENT SIX MONTHS
ENDED YEAR YEAR OF OPERATIONS) ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED THROUGH SEPTEMBER 30, ENDED ENDED
1997 MARCH 31, MARCH 31, MARCH 31, 1997 MARCH 31, MARCH 31,
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996
------------- --------- --------- -------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Period............ $ 11.66 $ 11.08 $ 9.90 $10.00 $ 11.47 $ 10.95 $ 9.82
------- ------- ------- ------ ------- ------- ------
Income from Investment
Operations:
Net investment income
(loss)............. 0.01 (0.04) (0.04) (0.05) (0.05) (0.10) (0.09)
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
transactions....... 2.36 0.97 1.46 (0.03) 2.39 0.97 1.46
------- ------- ------- ------ ------- ------- ------
Total from investment
operations......... 2.37 0.93 1.42 (0.08) 2.34 0.87 1.37
------- ------- ------- ------ ------- ------- ------
Less Dividends and
Distributions:
From net investment
income............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
From realized
gains.............. 0.00 (0.35) (0.24) (0.02)* 0.00 (0.35) (0.24)
------- ------- ------- ------ ------- ------- ------
Total distributions.... 0.00 (0.35) (0.24) (0.02) 0.00 (0.35) (0.24)
------- ------- ------- ------ ------- ------- ------
Net Asset Value, End of
Period............... $ 14.03 $ 11.66 $ 11.08 $ 9.90 $ 13.81 $ 11.47 $10.95
======= ======= ======= ====== ======= ======= ======
Total Return (excludes
sales charge)........ 20.43%(a) 8.44% 14.41% (0.84)% 20.51%(a) 7.99% 14.01%
Net Assets End of
Period
(in thousands)....... $14,463 $18,282 $14,597 $9,213 $ 4,656 $ 4,204 $3,725
Ratios to Average Net Assets of:
Net investment income
(loss)............. 0.08%(b) (0.40)% (0.36)% (0.65)%(b) (0.65)%(b) (0.90)% (0.83)%
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties...... 2.40%(b) 2.25% 2.37% 2.50%(b) 2.90%(b) 2.78% 2.87%
Expenses before
waivers/
reimbursements and
expenses paid by
third parties...... 2.40%(b) 2.25% 2.43% 3.22%(b) 2.90%(b) 2.79% 2.96%
Portfolio Turnover
Rate................. 49.99% 94% 92% 76% 49.99% 94% 92%
Average Commission per
Share................ $0.0297 $0.0201 -- -- $0.0297 $0.0201 --
<CAPTION>
GLOBAL EQUITY
--------------
CLASS D
--------------
MAY 12, 1994
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MARCH 31,
1995
--------------
<S> <C>
Net Asset Value,
Beginning
of Period............ $10.00
------
Income from Investment
Operations:
Net investment income
(loss)............. (0.07)
Net realized and
unrealized
gain/(loss) on
investments and
foreign currency
transactions....... (0.10)
------
Total from investment
operations......... (0.17)
------
Less Dividends and
Distributions:
From net investment
income............. 0.00
From realized
gains.............. (0.01)*
------
Total distributions.... (0.01)
------
Net Asset Value, End of
Period............... $ 9.82
======
Total Return (excludes
sales charge)........ (1.72)%
Net Assets End of
Period
(in thousands)....... $3,322
Ratios to Average Net A
Net investment income
(loss)............. (1.51)%(b)
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties...... 2.98%(b)
Expenses before
waivers/
reimbursements and
expenses paid by
third parties...... 3.69%(b)
Portfolio Turnover
Rate................. 76%
Average Commission per
Share................ --
</TABLE>
* Represents distribution in excess of net investment income.
(a) Not annualized.
(b) Annualized.
32
<PAGE> 35
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997
<TABLE>
<CAPTION>
SMALL CAP
------------------------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------------------- --------------------------------------
JUNE 8, 1994
SIX MONTHS (COMMENCEMENT SIX MONTHS
ENDED YEAR YEAR OF OPERATIONS) ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED THROUGH SEPTEMBER 30, ENDED ENDED
1997 MARCH 31, MARCH 31, MARCH 31, 1997 MARCH 31, MARCH 31,
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996
------------- --------- --------- -------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Period.......... $ 17.55 $ 15.88 $ 11.25 $ 10.00 $ 17.35 $ 15.76 $11.22
-------- ------- ------- ------- ------- ------- ------
Income from
Investment
Operations:
Net investment
income (loss).... 0.01 (0.05) (0.08) (0.03) (0.03) (0.11) (0.16)
Net realized and
unrealized gains
on investments... 6.97 2.46 5.19 1.52 6.95 2.44 5.18
-------- ------- ------- ------- ------- ------- ------
Total from
investment
operations....... 6.98 2.41 5.11 1.49 6.92 2.33 5.02
-------- ------- ------- ------- ------- ------- ------
Less Dividends and
Distributions:
From net investment
income........... 0.00 0.00 0.00 (0.24) 0.00 0.00 0.00
From realized
gains............ 0.00 (0.74) (0.48) 0.00 0.00 (0.74) (0.48)
-------- ------- ------- ------- ------- ------- ------
Total
distributions...... 0.00 (0.74) (0.48) (0.24) 0.00 (0.74) (0.48)
-------- ------- ------- ------- ------- ------- ------
Net Asset Value, End
of
Period............. $ 24.53 $ 17.55 $ 15.88 $ 11.25 $ 24.27 $ 17.35 $15.76
======== ======= ======= ======= ======= ======= ======
Total Return
(excludes sales
charge)............ 39.77%(a) 14.99% 45.88% 15.03% 39.88%(a) 14.59% 45.19%
Net Assets End of
Period
(in thousands)..... $120,018 $72,488 $28,840 $ 8,785 $37,748 $22,392 $8,897
Ratios to Average Net
Assets of:
Net investment
loss............. 0.00%(b) (0.44)% (0.80)% (0.43)%(b) (0.50)%(b) (0.96)% (1.30)%
Expenses net of
waivers/
reimbursements
and expenses paid
by third
parties.......... 1.59%(b) 1.66% 2.00% 2.00%(b) 2.11%(b) 2.19% 2.50%
Expenses before
waivers/
reimbursements
and expenses paid
by third
parties.......... 1.59%(b) 1.74% 2.18% 3.28%(b) 2.11%(b) 2.29% 2.74%
Portfolio Turnover
Rate............... 45.67% 65% 102% 151% 45.67% 65% 102%
Average Commission
per
Share.............. $ 0.0642 $0.0634 -- -- $0.0642 $0.0634 --
<CAPTION>
SMALL CAP
--------------
CLASS D
--------------
JUNE 8, 1994
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MARCH 31,
1995
--------------
<S> <C>
Net Asset Value,
Beginning
of Period.......... $10.00
------
Income from
Investment
Operations:
Net investment
income (loss).... (0.05)
Net realized and
unrealized gains
on investments... 1.51
------
Total from
investment
operations....... 1.46
------
Less Dividends and
Distributions:
From net investment
income........... (0.24)
From realized
gains............ 0.00
------
Total
distributions...... (0.24)
------
Net Asset Value, End
of
Period............. $11.22
======
Total Return
(excludes sales
charge)............ 14.72%
Net Assets End of
Period
(in thousands)..... $3,367
Ratios to Average Net
Assets of:
Net investment
loss............. (0.93)%(b)
Expenses net of
waivers/
reimbursements
and expenses paid
by third
parties.......... 2.50%(b)
Expenses before
waivers/
reimbursements
and expenses paid
by third
parties.......... 3.68%(b)
Portfolio Turnover
Rate............... 151%
Average Commission
per
Share.............. --
</TABLE>
(a) Not annualized.
(b) Annualized.
See accompanying notes to financial statements.
33
<PAGE> 36
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997
<TABLE>
<CAPTION>
APPRECIATION
------------------------------------------------------------------------------------------------
CLASS A CLASS D
------------------------------------------------------- --------------------------------------
JULY 6, 1994
SIX MONTHS (COMMENCEMENT SIX MONTHS
ENDED YEAR YEAR OF OPERATIONS) ENDED YEAR YEAR
SEPTEMBER 30, ENDED ENDED THROUGH SEPTEMBER 30, ENDED ENDED
1997 MARCH 31, MARCH 31, MARCH 31, 1997 MARCH 31, MARCH 31,
(UNAUDITED) 1997 1996 1995 (UNAUDITED) 1997 1996
------------- --------- --------- -------------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning
of Period............. $ 14.03 $ 13.02 $ 10.67 $ 10.00 $ 13.85 $ 12.91 $10.63
------- ------- ------- ------- ------- ------- ------
Income from Investment
Operations:
Net investment loss... (0.04) (0.04) (0.05) 0.00 (0.09) (0.08) (0.09)
Net realized and
unrealized gains on
investments......... 5.16 1.92 2.71 0.73 5.17 1.89 2.68
------- ------- ------- ------- ------- ------- ------
Total from investment
operations.......... 5.12 1.88 2.66 0.73 5.08 1.81 2.59
------- ------- ------- ------- ------- ------- ------
Less Dividends and
Distributions:
From net investment
income.............. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
From realized gains... 0.00 (0.87) (0.31) (0.06) 0.00 (0.87) (0.31)
------- ------- ------- ------- ------- ------- ------
Total distributions..... 0.00 (0.87) (0.31) (0.06) 0.00 (0.87) (0.31)
------- ------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................ $ 19.15 $ 14.03 $ 13.02 $ 10.67 $ 18.93 $ 13.85 $12.91
======= ======= ======= ======= ======= ======= ======
Total Return (excludes
sales charge)......... 36.49%(a) 14.25% 25.07% 7.32% 36.68%(a) 13.81% 24.50%
Net Assets End of Period
(in thousands)........ $44,606 $44,767 $25,561 $15,126 $ 6,142 $ 4,054 $2,482
Ratios to Average Net
Assets of:
Net investment loss... (0.11)%(b) (0.30)% (0.39)% (0.04)%(b) (0.65)%(b) (0.78)% (0.86)%
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties....... 1.76%(b) 1.82% 2.00% 2.00%(b) 2.27%(b) 2.34% 2.50%
Expenses before
waivers/
reimbursements and
expenses paid by
third parties....... 1.76%(b) 1.84% 2.10% 2.88%(b) 2.27%(b) 2.36% 2.64%
Portfolio Turnover
Rate.................. 39.13% 71% 78% 58% 39.13% 71% 78%
Average Commission per
Share................. $0.0658 $0.0599 -- -- $0.0658 $0.0599 --
<CAPTION>
APPRECIATION
--------------
CLASS D
--------------
JULY 6, 1994
(COMMENCEMENT
OF OPERATIONS)
THROUGH
MARCH 31,
1995
--------------
<S> <C>
Net Asset Value,
Beginning
of Period............. $10.00
------
Income from Investment
Operations:
Net investment loss... (0.03)
Net realized and
unrealized gains on
investments......... 0.72
------
Total from investment
operations.......... 0.69
------
Less Dividends and
Distributions:
From net investment
income.............. 0.00
From realized gains... (0.06)
------
Total distributions..... (0.06)
------
Net Asset Value, End of
Period................ $10.63
======
Total Return (excludes
sales charge)......... 6.92%
Net Assets End of Period
(in thousands)........ $1,693
Ratios to Average Net
Assets of:
Net investment loss... (0.56)%(b)
Expenses net of
waivers/
reimbursements and
expenses paid by
third parties....... 2.50%(b)
Expenses before
waivers/
reimbursements and
expenses paid by
third parties....... 3.40%(b)
Portfolio Turnover
Rate.................. 58%
Average Commission per
Share................. --
</TABLE>
(a) Not annualized.
(b) Annualized.
34
<PAGE> 37
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1997
<TABLE>
<CAPTION>
GROWTH
-------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------- -------------------------------------
JANUARY 28, 1997 JANUARY 28, 1997
(COMMENCEMENT (COMMENCEMENT
SIX MONTHS ENDED OF OPERATIONS) SIX MONTHS ENDED OF OPERATIONS)
SEPTEMBER 30, 1997 THROUGH SEPTEMBER 30, 1997 THROUGH
(UNAUDITED) MARCH 31, 1997 (UNAUDITED) MARCH 31, 1997
------------------ ---------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 9.64 $ 10.00 $ 9.63 $ 10.00
-------- -------- -------- --------
Income from Investment Operations:
Net investment income................. (0.01) 0.00 (0.03) 0.00
Net realized and unrealized (loss) on
investments......................... 4.72 (0.36) 4.72 (0.37)
-------- -------- -------- --------
Total from investment operations...... 4.71 (0.36) 4.69 (0.37)
-------- -------- -------- --------
Less Dividends and Distributions:
From net investment income............ 0.00 0.00 0.00 0.00
From realized gains................... 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Total distributions..................... 0.00 0.00 0.00 0.00
-------- -------- -------- --------
Net Asset Value, End of Period.......... $ 14.35 $ 9.64 $ 14.32 $ 9.63
======== ======== ======== ========
Total Return (excludes sales charge).... 48.86%(a) (3.60)%(a) 48.70%(a) (3.70)%(a)
Net Assets End of Period (in
thousands)............................ $12,924 $ 2,852 $ 5,396 $ 1,304
Ratios to Average Net Assets of:
Net investment income (loss).......... $ (0.21)%(b) 0.25%(b) $ (0.73)%(b) (0.23)%(b)
Expenses net of waivers/reimbursements
and expenses paid by third
parties............................. 1.96%(b) 2.00%(b) 2.46%(b) 2.50%(b)
Expenses before waivers/reimbursements
and expenses paid by third
parties............................. 3.36%(b) 5.51%(b) 3.86%(b) 6.91%(b)
Portfolio Turnover Rate................. 69.70% 14% 69.70% 14%
Average Commission per Share............ $0.0651 $0.0681 $0.0651 $0.0681
</TABLE>
(a) Not annualized.
(b) Annualized.
35
<PAGE> 38
ESC STRATEGIC FUNDS, INC.
Financial Highlights
<TABLE>
<CAPTION>
VALUE
-------------------------------------------
CLASS A CLASS D
------------------- -------------------
MAY 7, 1997 MAY 7, 1997
(COMMENCEMENT OF (COMMENCEMENT OF
OPERATIONS) THROUGH OPERATIONS) THROUGH
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
(UNAUDITED) (UNAUDITED)
------------------- -------------------
<S> <C> <C>
Net Asset Value Per Share, Beginning of Period.......... $ 10.00 $ 10.00
---------- ----------
Income from Investment Operations:
Net investment income................................. 0.02 0.00
Net realized and unrealized gains on investments...... 1.22 1.22
---------- ----------
Total from investment operations...................... 1.24 1.22
---------- ----------
Less Dividends and Distributions:
From net investment income............................ 0.00 0.00
From realized gains................................... 0.00 0.00
---------- ----------
Total Dividends and Distributions....................... 0.00 0.00
---------- ----------
Net Asset Value, End of Period.......................... $ 11.24 $ 11.22
========== ==========
Total Return (excludes sales charge).................... 12.40%(a) 12.20%(a)
Ratios/Supplemental Data:
Net assets at end of period........................... $8,435,709 $1,805,897
Ratio of net investment income to average net
assets............................................. 0.63%(b) 0.12%(b)
Ratio of expenses net of waivers/reimbursements to
average net assets................................. 1.70%(b) 2.20%(b)
Ratio of expenses before waivers/reimbursements to
average net assets................................. 3.10%(b) 3.60%(b)
Portfolio turnover rate............................... 6.41% 6.41%
Average commission per share.......................... $ 0.0540 0.0540
</TABLE>
(a) Not annualized.
(b) Annualized.
See accompanying notes to financial statements.
36
<PAGE> 39
ESC STRATEGIC FUNDS, INC.
DIRECTORS AND OFFICERS
<TABLE>
<S> <C>
DIRECTORS
WILLIAM H. CAMMACK* Chairman, Equitable Securities Corporation
W. HOWARD CAMMACK, JR.* Managing Director, Equitable Securities Corporation
J. BRANSFORD WALLACE Chairman, Willis Coroon, PLC
BROWNLEE O. CURREY, JR. President, The Nashville Banner
E. TOWNES DUNCAN Chairman and Chief Executive Officer, Comptronix
Corporation
* "Interested Person" as that term is defined in the Investment Company Act of 1940.
- ------------------------------------------------------------------------------------------------------
OFFICERS
WILLIAM H. CAMMACK President
W. HOWARD CAMMACK, JR. Treasurer
ELLEN STOUTAMIRE Secretary
JOHN L. McALLISTER Assistant Secretary and Assistant Treasurer
MARTIN R. DEAN Assistant Treasurer
R. JEFFREY YOUNG Assistant Treasurer
ALAINA METZ Assistant Secretary
JEANETTE PEPLOWSKI Assistant Secretary
</TABLE>
<PAGE> 40
[ESC STRATEGIC FUNDS LOGO]
ESC STRATEGIC FUNDS, INC.
3435 STELZER ROAD
COLUMBUS, OHIO 43219-8006
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
3435 Stelzer Road
Columbus, Ohio 43219
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
[ESC STRATEGIC FUNDS LOGO]
ESC Strategic INCOME Fund
ESC Strategic GLOBAL EQUITY Fund
ESC Strategic SMALL CAP Fund
ESC Strategic APPRECIATION Fund
ESC Strategic GROWTH Fund
ESC Strategic VALUE Fund
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
