<PAGE> 1
ESC STRATEGIC FUNDS
- --------------------------------------------------------------------------------
November 13, 1998
Dear Shareholders:
Very simply, the six months ended September 30, 1998 were a tumultuous time for
investors in both the fixed income and equity markets worldwide. Uncertainty,
and at times even fear; dominated the marketplace. Consequently, returns for
equity securities across the spectrum for the period can only be described as
disappointing.
Nonetheless, despite the gloomy atmosphere, the economy did not spin into free
fall. Employment remained strong, inflation non-existent and interest rates low.
In short, the fundamentals of the economy remained intact, and the long-term
prospects for the markets are still very bright. As a result, the volatility in
the marketplace provided us with an opportunity to further strengthen our funds'
long-term positioning.
A WARM WELCOME
We're also very pleased to announce that during the period, two of our funds,
formerly part of our Multiple Manager Series, were placed under Single Managers:
The ESC Strategic Income Fund is now managed by Cincinnati Asset Management.
Founded in 1989, this firm is focused solely on the management of "high
performance" fixed income portfolios and with over 50 years of combined
experience in the marketplace, has developed a "value-oriented equity approach"
to the analysis and management of corporate bond portfolios. During the
transition to higher yielding securities, the Fund may be largely invested in
cash or cash equivalents.
The ESC Strategic International Equity Fund (formerly known as the ESC Strategic
Global Equity Fund) is now managed by Murray Johnstone International. With $7.5
billion under management worldwide, the firm utilizes a top-down style in
managing international portfolios -- first selecting the best markets on the
basis of sound fundamentals and good value, then picking the blue-chip companies
in those markets.
As always, if you'd like more information regarding these funds, including their
fees and expenses, you can contact your financial advisor, or call us at
1-800-261-FUND for a prospectus.
TURNING TO THE MARKETS . . .
Clearly, over the past several months, fear has been the dominant theme in the
markets. There was fear over the Japanese ability to adjust their economy from
post-war rigidity to a truer free market system. There was fear that yet another
Asian economy would fall. There was fear that the problems in the Pacific region
would impact Latin America -- that Brazil and Mexico would devalue their
currencies. And that this, in turn, would impact the U.S. economy. There was
also fear of instability in Russia. Fear that our own domestic political drama
would grow more intense. Fear that yet another over-leveraged hedge fund would
implode. And fear that a global credit crunch would result from any one or all
of these factors.
But, perhaps, as the months wore on, what investors feared most was what they
might find as they opened their account statements--and this was absolutely
understandable. After several years of virtually uninterrupted gains, few were
prepared to see the value of their portfolio decline, much less drop
dramatically. In many cases, the response was to liquidate investments entirely,
or to allocate investment dollars toward the sector which performed the best
most recently. As a result, what little favorable market sentiment there was
favored large cap U.S. stocks and high quality fixed income instruments. Over
the course of the period, small cap and international equities were simply
trampled underfoot as
<PAGE> 2
investors fled in that direction. As the period ended on September 30, the
average stock included in the S&P 500 was down approximately 22% over last year
and the average NASDAQ stock had fallen some 40% below its 1998 peak, according
to the September 21, 1998 edition of Forbes.
WE EXPECT THE TIDE TO TURN
Thus, the current environment is certainly painful and even terrifying to some.
Yet, lest we forget in all of the excitement of the moment, very little has
changed in our economy or in the securities held by our funds. Moreover, while
we can't predict the future, we do know two things. First, markets anticipate --
and in recent weeks, we have seen signs of this, as smaller cap stocks have
strengthened and markets overseas have stabilized to some degree. Second,
markets over the long term have historically returned to value -- and we believe
stocks beyond the Nifty Fifty Magic Circle and fixed income securities other
than Treasuries do certainly offer investors value at this point.
In fact, we believe the small capitalization sector now offers investors simply
outstanding value. After two years of neglect, these stocks were at extremely
attractive valuations prior to the market's decline -- and now represent even
greater opportunity. Few have little, if any, exposure to fallout from markets
overseas. And, due in part to the low inflation and low interest rate
environment of the past several years, most offer investors strong balance
sheets in addition to solid potential. Finally, in times of slowing growth,
smaller stocks have always offered investors greater potential for growth than
larger capitalization issues. Consequently, while things may seem somewhat bleak
at the moment, the long-term prospects, we feel, are very bright.
KEEPING THE FAITH
Nonetheless, the last several months have been very disconcerting ones for all
but the most determined long-term investors. As hard as it may seem at times,
taking a long-term perspective is now more important than ever -- and has the
potential to be profitable. Capitalizing on current valuations, insiders
(company directors and officers) are buying their firms' shares at a pace seen
only following the '87 market crash, the mini-bear market in '90 -- and in
'94-'95, the months just before the strongest four year period in the market's
history. Given this, and our economy's fundamental strength, we have every
reason to believe that -- as has been the case every time in the past, although
remember that past performance is not a guarantee of future results -- stocks
will weather this storm and may move even higher in the future. And, very
simply, the key for all investors is to sit tight.
IN CLOSING . . .
In the pages that follow, you will find a detailed discussion of the performance
of each of the ESC Strategic Funds during the six months ended September 30,
1998. We urge you to read this report closely.
Finally, we would like to thank you for your continued confidence in us. We look
forward to providing you with superior investment management and service to meet
your investment needs now and in the future. If you would like a prospectus,
have any questions or require any assistance, we can, as always, be reached at
1-800-261-FUND.
Sincerely,
/s/ W. Howard Cammack, Jr.
W. Howard Cammack, Jr.
Chairman
Shares of the ESC Strategic Funds are not deposits or obligations of, or
guaranteed or endorsed by SunTrust Bank, any of its affiliates or the
distributor. Shares are NOT FDIC INSURED nor are they insured by any other
government agency. An investment in the funds involves investment risk,
including possible loss of principal. For more complete information on any of
the ESC Strategic Funds, including fees, expenses and sales charges, please call
1-800-261-FUND for a free prospectus. Please read the prospectus carefully
before investing or sending money. BISYS Fund Services is the distributor for
the ESC Strategic Funds.
<PAGE> 3
ESC STRATEGIC SMALL CAP FUND(1) Regardless of fundamentals or potential and
across all sectors, investors sold small cap stocks indiscriminately as they
fled to quality during the six months ended September 30, 1998. Rationally, it
was clear that smaller capitalization companies had very little exposure to
currency problems overseas or international markets(1) But, as events unfolded,
investor pessimism hit unprecedented highs and selling became emotional.
Liquidity and safety became investors' prime concerns -- and market sentiment
favored larger capitalization issues, and even they lost ground as emotions
reached a peak in August. But, the storm hit the small caps the hardest -- by
the period's end, stocks with market caps under $250 million had fallen some 60%
on average, according to Salomon Brothers, Smith Barney.
Carefully managed throughout the period, the Fund did not suffer this
dramatically. Nonetheless, with stocks with market caps of $300 million on
average, the portfolio was impacted by what was clearly a bear market for small
cap issues in the third quarter of '98. The Fund posted a return of -31.74%,
Class A, without the sales charge, for the six-month period ended September 30,
1998.
DRAMATICALLY OVERSOLD AND WOEFULLY UNDERVALUED Battered and bloodied, the small
cap sector was so oversold and undervalued by the period's end we believed it
was unlikely to go lower -- and presented opportunities too attractive to ignore
any longer. As a result, in recent weeks, we've seen the sector strengthen and
even take back some ground. In the months ahead, we expect to see this trend
continue.
Expectations for an explosive move upward in the near-term, however, may be
unrealistic given the uncertainty of the environment and investors' preference
for safety and liquidity. Inevitably, however, the environment and sentiment
will change -- and, having taken full advantage of this buying opportunity of
the past several months, we believe the Fund is very well positioned for the day
it does.
Past performance is no guarantee of future results.
ESC STRATEGIC GROWTH FUND Global financial turmoil and fears concerning the
potential impact on the U.S. economy created an unprecedented liquidity crunch
during the six months ended September 30, 1998 -- a crunch that sent stocks
spiraling downward. Damage was evident across the spectrum, but nowhere was it
as dramatic as in the small cap sector. Between its high on April 22, 1998 to
the low on September 1, 1998, the Russell 2000 Index(2) declined an astonishing
31.8%.
Ironically, however, this happened in spite of the fact that the fundamentals of
small cap companies in general, and of the Fund's holdings specifically have
never been stronger. During the third quarter of '98, 80% of the Fund's top
holdings exceeded earnings expectations. Hard facts, however, had little impact
on a market where selling had become emotional. For the six months ended
September 30, 1998, the Fund posted a total return of -32.09%, Class A, without
the sales charge.
Past performance is no guarantee of future results.
ON THE COMEBACK TRAIL Eventually, however, the market historically has returned
to value -- and extremely oversold as the fourth quarter opened, the small cap
sector offered investors opportunities simply too attractive to ignore.
Consequently, in recent weeks, we've seen the beginnings of a bounce back, or at
least, strong indications that the worst is over.
As a result, we are cautiously optimistic about the prospects for the sector in
the months ahead. Given this, we have capitalized on several very attractive
opportunities in the infrastructure, security services and healthy living
(vitamins and nutritional supplements) sectors in recent weeks. And, in the
weeks ahead, we expect to take a closer look at the sectors most beaten up over
the summer, such as technology and energy.
- ---------------
(1)Small Cap stocks historically have experienced a greater degree of market
volatility and have a higher risk of failure than large cap stocks.
(2)The Russell 2000 Index is an unmanaged index generally representative of
small cap securities.
<PAGE> 4
ESC STRATEGIC VALUE FUND Like a Category 4 hurricane, the storm from Asia
slammed into the world's financial markets -- and wreaked havoc during the six
months ended September 30, 1998. Damage was apparent across the spectrum and in
all sectors -- growth stocks, value stocks, large caps, small caps and
international stocks -- all suffered to some degree. By the end of August, the
average NYSE and NASDAQ stock had declined some 37%.
Our contrarian/value investment philosophy was sorely tested over the course of
the period. But, we believe the key to successful investing is having the
discipline to stick to the strategy in all market environments. Historically,
the markets have handsomely rewarded such investors for their pain and
suffering. Nonetheless, the period was a very disappointing and frustrating one.
Over the course of the six months ended September 30, 1998, the Fund produced a
total return of -25.72%, Class A, without the sales charge.
STANDING STRONG In recent weeks, many of the situations that so frightened
investors earlier in the year have calmed. Asia's rate of decline has slowed, or
possibly, even flattened out. The Russian economy, while still very shaky, is no
longer in complete free fall. And, in an effort to spark activity in markets
overseas, the U.S. Federal Reserve has cut interest rates twice. As a result,
the stock market has firmed and even gained back some of the ground lost.
Given this, while we aren't completely out of the woods yet, we believe the
worst may be over. But uncertainty lingers -- so new highs are rather unlikely
in the near-term. Long-term, however, we believe prospects remain extremely
bright for the markets in general, and our holdings in particular. Which is why
we have no plans to change our strategy -- we believe it is a proven one. And we
know "you've gotta dance with who brung ya" to succeed over the long-term.
Past performance is no guarantee of future results.
ESC STRATEGIC INCOME FUND Fear that the Asian contagion would spread and slow
the U.S. economy put downward pressure on the fixed income markets during the
six months ended September 30, 1998. Liquidity dried up and pain was felt across
the spectrum -- and as it radiated, momentum players began to leave the
marketplace. The situation was exacerbated by the public failure of a Long Term
Capital hedge fund in the third quarter. Better quality securities were bid down
aggressively, and the markets for lower quality securities dropped
significantly. As a result, over the course of the period, the average high
yield fund lost -6.92% as measured by Lipper Analytical Services' average of all
high yield funds. With no foreign exposure, no paper from start-ups or financial
institutions and no private placements and invested primarily in securities
rated B or better and issued by larger companies in the U.S. and Canada, the
Fund's results were better, but still disappointing. For the period, it posted a
total return of 2.42%, Class A, without the sales charge.
A TIME OF OPPORTUNITY Given the current global situation and indications that
our own economy is weakening, we expect the markets to be somewhat illiquid and
to favor high quality in the months ahead. Even high quality securities may
continue to feel downward pressure. Refusing to chase yield and remaining
focused on preserving capital, however, will lessen downside risks.
Moreover, such a market environment often provides very attractive
opportunities. For instance, many high quality "museum" pieces (high quality
core holdings) are now finding their way to market -- and selling at very
attractive prices -- as over-leveraged hedge funds and others unwind their
positions and cover their losses. In recent weeks we have been capitalizing on
such opportunities, and in the months ahead, we will continue to do so. As a
result, while the months ahead may be rough, we believe it will be a time of
real opportunity for those of us focused on quality.
Past performance is no guarantee of future results.
ESC STRATEGIC APPRECIATION FUND Aftershocks from the financial quake that
struck Asia last year finally reached developed markets in Europe and the United
States over the summer months. Fallout from the political and economic turmoil
in Russia simply added fuel to the fire. As a result, equity markets worldwide
dropped -- and all but the most defensive stocks were battered. Moreover,
because liquidity and safety were investors' primary concern, smaller
capitalization issues and international equities took the most significant
hits -- and by the end of the period reflected the impact of events, and a great
deal of future uncertainty, rather than value, earnings or potential.
<PAGE> 5
As a result, the six months ended September 30, 1998 were extremely frustrating
and returns disappointing for all but the most conservative investors. For the
period, the Fund posted a total return of -25.70%, Class A, without the sales
charge.
WE EXPECT SENTIMENT TO CHANGE Given their extremely attractive relative
valuations, low exposure to global economic pressures, and prolonged relative
underperformance cycle, we believe that small cap stocks may be poised for a
period of relative outperformance. Moreover, earnings do ultimately drive the
markets -- and the earnings story for small cap stocks is now truly compelling.
In the year ahead, the earnings of smaller capitalization companies are expected
to grow, on average, some 20% -- as opposed to estimates for S&P companies which
are estimated to be flat or even declining.
In short, we believe that prices of small stocks represent exceptional value at
current levels unless the United States enters a prolonged and exceptionally
deep recession. We do not believe we are entering such a period. On a relative
basis, small stocks have not been this cheap in over thirty-five years. Or the
potential rewards been so great in comparison to the risks. Now is the time, we
believe, to consider allocating additional money to small caps.(3)
Past performance is no guarantee of future results.
ESC STRATEGIC INTERNATIONAL EQUITY FUND(4) Volatility reigned in markets
worldwide during the six months ended September 30, 1998. Early on, concerns
centered on emerging markets and the meltdown in Russia. Then, as the period
wore on, the focus shifted to the impact that these events would have on other
economies worldwide. Taking a realistic look at the situation, analysts
downgraded profits and their forecasts turned more cautious. Hearing this,
investors looked for the exits and selling put markets under pressure. The
implosion of a large hedge fund, added fuel to the fire as the period drew to a
close.
Consequently, it was a difficult time for virtually all but the most
conservative investors worldwide. For the six months ended September 30, 1998,
the EAFE(5) Index fell 14.15%, and the World Index closed 11.95% lower. Like the
vast majority of funds with overseas exposures, the Fund also lost ground,
posting a total return of -21.23%, Class A, without the sales charge, for the
period ended September 30, 1998.
SENTIMENT CHANGING With profit expectations downgraded and fears of deflation
somewhat allayed for the moment, markets worldwide are now closer to reasonable
value. Yet, just as they have a tendency to overshoot on the upside, they
overshoot on the downside as well. Given the volatile atmosphere, we believe
that this is the situation we're currently seeing. At the same time, however,
markets and investors always seek value -- and in some areas of the world,
indications of this are beginning to appear.
Moreover, the recent cut in rates by the U.S. Federal Reserve should lead to
even lower rates by the end of the year. This will help restore stability to the
financial markets. As a result, we expect to see sentiment shift in the months
ahead -- and that the earliest beneficiaries of the turnaround will be Japan,
Hong Kong, Singapore, Australia, and New Zealand.
Past performance is no guarantee of future results.
- ---------------
(3) Small Cap stocks historically have experienced a greater degree of market
volatility and have a higher risk of failure than large cap stocks.
(4) International investing is subject to certain factors such as currency
exchange rate volatility, possible political, social or economic instability,
foreign taxation, and differences in auditing and other financial standards.
(5) The EAFE Index, Europe, Asia and Far East Index is an unmanaged index
generally representative of international stocks.
<PAGE> 6
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CREDIT PRINCIPAL MARKET
RATING # AMOUNT VALUE
- -------- --------- ------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS -- 28.5%
CHEMICALS -- 1.0%
B1/B+ Pioneer Americas
Acquisition,
9.25%,
6/15/2007......... $ 290,000 $ 233,450
-----------
FOOD PRODUCTS -- 3.6%
B1/B+ Chiquita Brands,
9.63%, 1/15/2004.. 250,000 254,375
B3/B- Envirodyne
Industries,
10.25%,
12/1/2001......... 290,000 275,500
B3/B+ Fleming Co., 10.63%,
7/31/2007,
Callable 7/31/2002
@ 105.31.......... 290,000 287,100
-----------
816,975
-----------
FOREST PRODUCTS & PAPERS -- 0.9%
B1/B+ Doman Industries
Ltd., 8.75%,
3/15/2004......... 290,000 200,100
-----------
GAMING -- 0.8%
B2/B Hollywood Park,
Inc., 9.50%,
8/1/2007.......... 180,000 172,800
-----------
GENERAL INDUSTRIES &
MANUFACTURING -- 3.6%
B3/B Envirosource, Inc.,
9.75%, 6/15/2003.. 290,000 261,000
B3/B- International Wire
Group, 11.75%,
6/1/2005.......... 250,000 256,250
B1/B+ Nortek, Inc., 9.13%,
9/1/2007, Callable
9/1/2002 @104.56.. 290,000 284,200
-----------
801,450
-----------
MANUFACTURING -- CONSUMER
GOODS -- 1.3%
B2/B Applied Extrusion
Tech., 11.50%,
4/1/2002.......... 300,000 301,500
-----------
MEDIA -- CABLE -- 2.4%
B1/B Helicon Group, Inc.,
11.00%,
11/1/2003......... 250,000 260,000
B2/B Intermedia Capital
Partners, 11.25%,
8/1/2006.......... 250,000 278,750
-----------
538,750
-----------
</TABLE>
<TABLE>
<CAPTION>
CREDIT PRINCIPAL MARKET
RATING # AMOUNT VALUE
- -------- --------- ------
<S> <C> <C> <C>
MEDIA -- NON CABLE -- 4.5%
B3/B- Allbritton
Communications,
9.75%,
11/30/2007........ $ 290,000 $ 294,350
B3/B- Citadel Broadcasting
Corp., 10.25%,
7/1/2007.......... 250,000 268,750
B3/B- Gray Communications
Systems, 10.63%,
10/1/2006,
Callable 10/1/2001
@ 105.31.......... 200,000 210,500
B3/B Outdoor
Communications,
Inc., 9.25%,
8/15/2007......... 230,000 234,600
-----------
1,008,200
-----------
OIL & GAS -- 3.1%
B1/B+ Dawson Production
Services, 9.38%
2/1/2007.......... 290,000 289,275
B3/B- Kelley Oil & Gas
Corp., 10.38%,
10/15/2006,
Callable
10/15/2001 @
105.19............ 160,000 132,800
B2/B- Plains Resources,
Inc., 10.25%,
3/15/2006......... 290,000 278,400
-----------
700,475
-----------
OIL & GAS TRANSMISSION -- 1.0%
B2/B+ Petroleum Heat &
Power, 12.25%,
2/1/2005.......... 245,000 235,200
-----------
TELECOMMUNICATIONS -- 2.2%
B2/B Paging Network,
10.00%,
10/15/2008,
Callable
10/15/2001 @
105............... 250,000 248,125
Ba3/BB+ Roger Cantel Mobile,
Inc., 9.38%,
6/1/2008, Callable
6/1/2003 @
104.69............ 250,000 255,000
-----------
503,125
-----------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 7
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
CREDIT PRINCIPAL MARKET
RATING # AMOUNT VALUE
- -------- --------- ------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
TEXTILES -- 2.3%
B3/B Delta Mills, Inc.,
9.63%, 9/1/2007... $ 290,000 $ 269,700
B3/B Hartmarx Corp.,
10.88%,
1/15/2002......... 250,000 255,000
-----------
524,700
-----------
TRANSPORTATION -- 1.8%
Caa3/C Ameritruck
Distribution,
12.25%,
11/15/2005,
Callable
11/15/2000 @
106.25............ 290,000 87,000
B3/B- Greyhound Lines,
11.50%,
4/15/2007......... 290,000 307,400
-----------
394,400
-----------
TOTAL CORPORATE OBLIGATIONS 6,431,125
-----------
PREFERRED STOCKS -- 1.2%
MEDIA -- NON CABLE -- 1.2%
B2/B Primedia Corp....... 2,900 278,400
-----------
TOTAL PREFERRED STOCKS 278,400
-----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
VALUE
------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 69.8%
CASH SWEEP ACCOUNT -- 69.8%
Union Bank of
California........ $15,713,494
-----------
TOTAL SHORT-TERM INVESTMENTS... 15,713,494
-----------
TOTAL INVESTMENTS -- 99.5%
(COST $22,977,527)(1).......... 22,423,019
OTHER ASSETS AND LIABILITIES
(NET) -- 0.5% 108,095
-----------
NET ASSETS -- 100.0%.......... $22,531,114
-----------
-----------
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
# See page 19 for Credit Ratings.
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 8
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND**
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS -- 95.7%
AEROSPACE & MILITARY TECHNOLOGY -- 0.8%
14,300 British Aerospace
PLC ................ $ 92,937 $ 86,756
----------- -----------
AUTOMOTIVE -- 2.8%
4,444 Volkswagen............ 393,828 323,059
----------- -----------
BANKING -- 7.1%
2,500 Abbey National PLC.... 45,014 43,080
11,816 Allied Irish Banks
PLC................. 56,263 173,994
2,900 Banco Frances Del Rio
de La Plata, S.A.,
ADR*................ 65,399 56,188
25,000 Banco Rio De La
Plata............... 294,451 212,499
2,500 Barclays PLC, ORD..... 63,615 40,658
7,000 Credicorp Ltd......... 99,435 51,188
35,000 Standard Bank......... 159,282 72,024
12,000 Sumitomo Bank Ltd..... 142,332 83,750
7,000 Uniano De Banks
Brasileiros......... 258,687 94,500
----------- -----------
1,184,478 827,881
----------- -----------
BEVERAGES -- 1.7%
4,000 Embotelladora Andina,
ADR................. 93,237 55,000
7,000 Fomento Economico,
ADR................. 231,902 137,375
----------- -----------
325,139 192,375
----------- -----------
BUILDING MATERIALS -- 2.9%
26,300 BPB Industries PLC.... 147,167 105,479
2,504 Lafarge............... 261,152 221,592
1 Williams Holdings
PLC................. 5 5
----------- -----------
408,324 327,076
----------- -----------
CHEMICALS -- 1.8%
7,000 Quimica y Minera Chile
S.A., ADR........... 260,849 203,875
----------- -----------
COMPUTER EQUIPMENT -- 0.8%
10,000 Mysis PLC............. 95,797 88,199
----------- -----------
CONSTRUCTION -- 0.5%
9,000 Empresas ICA S.A.,
ADR*................ 134,559 52,875
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
DIVERSIFIED -- 0.9%
13,394 Barlow Ltd............ $ 143,653 $ 50,113
26,000 Beijing Enterprises... 103,628 27,683
2,700 Grupo Imsa S.A.,
ADR................. 57,265 26,325
----------- -----------
304,546 104,121
----------- -----------
ENERGY -- 2.6%
25,000 Companhia Paranaense
De Energia-Copel
ADR................. 256,532 159,375
1,051 Total S.A............. 90,234 132,388
----------- -----------
346,766 291,763
----------- -----------
ENGINEERING -- 3.3%
4,163 Mannesmann AG......... 263,571 382,337
----------- -----------
FINANCIAL SERVICES -- 4.8%
17,000 Big Bank Gdanski S.A.,
GDR................. 247,499 221,241
2,644 Ing Groep N.V......... 196,197 119,080
10,712 Lloyds TSB Group
PLC................. 131,599 119,691
2,000 Promise Co. Ltd....... 88,446 90,361
----------- -----------
663,741 550,373
----------- -----------
FOOD PRODUCTS -- 3.1%
5,000 Cadbury Schweppes PLC,
ORD................. 42,554 64,747
15,000 Companhia Brasileira
De Distribuicao
Grupo............... 243,932 197,427
47,000 Marudai Food Co.
Ltd................. 123,693 93,227
----------- -----------
410,179 355,401
----------- -----------
FOREST PRODUCTS & PAPERS -- 0.7%
8,000 Grupo Industrial
Durango S.A., ADR... 78,212 43,500
6,800 Maderas y Sinteticos,
ADR................. 95,857 35,700
----------- -----------
174,069 79,200
----------- -----------
INDUSTRIAL -- 3.0%
8,000 Bridgestone Corp.
ORD................. 188,778 161,622
50,000 Inax Corp............. 197,101 179,254
----------- -----------
385,879 340,876
----------- -----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE> 9
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL HOLDING COMPANY -- 1.8%
23,000 Hutchison Whampoa
Ltd................. $ 110,782 $ 121,107
3,000 Sonae Investimentos-
Sociedade Gestora de
Paticipacoes Sicais,
S.A................. 91,573 87,458
----------- -----------
202,355 208,565
----------- -----------
INSURANCE -- 11.2%
3,259 Aegon N.V............. 293,224 258,117
685 Allianz AG Holdings... 173,548 211,891
1,618 AXA Co................ 84,600 148,093
644 Fortis AG............. 121,277 158,713
5,000 Liberty Life
Association of
Africa Ltd.......... 139,674 75,765
183 Marschollek
Lautenshlaeger...... 65,073 92,849
18,500 Norwich Union PLC..... 126,605 144,462
397 Zurich Allied AG*..... 234,611 197,021
----------- -----------
1,238,612 1,286,911
----------- -----------
LEISURE & GAMING -- 0.4%
12,200 Ladbroke Group PLC,
ORD................. 47,896 45,508
----------- -----------
MANUFACTURING -- 0.4%
21,000 Shanghai Industrial
Holdings Ltd........ 102,526 42,008
----------- -----------
MANUFACTURING -- CONSUMER
GOODS -- 1.5%
5,000 Fuji Photo Film
Ltd................. 186,184 172,642
----------- -----------
MERCHANDISING -- 2.3%
1,791 Pinault Printemps
Redo................ 280,546 258,833
----------- -----------
METALS -- DIVERSIFIED -- 1.2%
19,000 Tubos De Acero De
Mex................. 258,491 137,750
----------- -----------
MINING -- 0.9%
3,700 Madeco S.A............ 93,503 25,438
24,000 Sumitomo Metal &
Mining.............. 103,517 75,991
----------- -----------
197,020 101,429
----------- -----------
OFFICE EQUIPMENT & SERVICES --1.5%
18,000 Ricoh Company, Ltd.... 230,068 166,618
----------- -----------
OFFICE/BUSINESS EQUIPMENT -- 1.4%
18,000 Fujitsu Ltd........... 196,077 156,039
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
OIL & GAS TRANSMISSION -- 0.7%
4,000 Magyar Olaj-Es
Gazipari
Reszvenytar -- GDR... $ 65,000 $ 76,200
----------- -----------
OIL/GAS -- 2.8%
18,000 Petroleo Brasileiro
S.A., ADR........... 254,250 184,518
22,900 Shell Transport &
Trading Co.......... 160,761 138,639
----------- -----------
415,011 323,157
----------- -----------
OIL/GAS EXPLORATION -- 1.3%
9,233 Petroleum
Geo-Services*....... 230,373 146,574
----------- -----------
PACKAGING -- 1.1%
4,430 Buhrmann N.V.......... 92,733 82,494
3,800 Cristalerias de Chile,
ADR................. 87,985 43,700
----------- -----------
180,718 126,194
----------- -----------
PHARMACEUTICALS -- 4.2%
2,520 Gedeon Richter, GDR... 113,605 74,340
112 Novartis AG........... 121,291 179,532
1,796 Rhone Poulenc S.A.,
ORD................. 80,826 75,303
13,300 SmithKline Beecham
PLC................. 146,524 146,800
----------- -----------
462,246 475,975
----------- -----------
PUBLISHING & PRINTING -- 3.1%
14,000 Singapore Press
Holdings Ltd........ 131,527 116,340
5,650 VNU-Verenigde
Nederlandse
Uitgeversbedrijven... 71,300 233,184
----------- -----------
202,827 349,524
----------- -----------
REAL ESTATE -- 1.2%
60,000 City Development...... 157,126 131,773
----------- -----------
RETAIL -- 1.0%
7,000 Makro Atacadista S.A.,
ADR................. 99,750 49,019
13,900 Safeway PLC........... 83,962 65,727
----------- -----------
183,712 114,746
----------- -----------
RETAIL -- GENERAL MERCHANDISE --
1.5%
18,800 Kingfisher............ 129,524 174,440
----------- -----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 10
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
TELECOMMUNICATION EQUIPMENT -- 1.3%
4,000 Matsushita
Communications...... $ 125,507 $ 143,991
----------- -----------
TELECOMMUNICATION SERVICES -- 2.4%
70,000 China Telecom......... 107,581 110,215
23 Nippon Telephone &
Telegraph........... 196,551 168,124
----------- -----------
304,132 278,339
----------- -----------
TELECOMMUNICATIONS -- 14.4%
8,600 British
Telecommunications
PLC................. 106,553 115,896
2,000 Portugal Telecom
S.A................. 43,443 72,716
5,800 SPT Telekom A.S....... 71,794 74,892
10,000 Telecom Argentina,
ADR*................ 320,306 296,875
60,000 Telecom Corp. of New
Zealand Ltd......... 220,459 229,730
44,426 Telecom Italia Mobile
SpA................. 172,031 258,875
17,688 Telecom Italia SpA.... 91,894 121,759
6,609 Telefonica de
Espana.............. 268,911 240,979
10,000 Telefonica del Peru
S.A., ADR........... 214,671 122,500
10,700 Vodafone ORD.......... 150,139 124,194
----------- -----------
1,660,201 1,658,416
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ----------- -----------
<C> <S> <C> <C>
WHOLESALE & INTERNATIONAL TRADE -- 1.3%
37,000 Mitsui & Co. ORD...... $ 225,699 $ 152,762
----------- -----------
TOTAL COMMON STOCKS 12,726,513 10,934,561
----------- -----------
PREFERRED
STOCKS -- 1.9%
ELECTRIC
UTILITY -- 1.9%
10,000 Cemig Sa.............. 232,813 221,136
----------- -----------
TOTAL PREFERRED
STOCKS.............. 232,813 221,136
----------- -----------
TOTAL INVESTMENTS --
97.6%............... $12,959,326 11,155,697
===========
OTHER ASSETS AND
LIABILITIES (NET) --
2.4%................ 278,466
-----------
NET ASSETS --100.0%... $11,434,163
===========
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
* Represents non-income producing security.
** See page 19 for Concentration by Country.
ADR--American Depository Receipts.
GDR--Global Depository Receipts/Shares.
ORD--Ordinary.
PLC--Public Limited Company.
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 11
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 81.8%
AUTO-RELATED -- 4.3%
106,500 Sonic Automotive,
Inc.*.......... $ 1,261,976 $ 2,110,031
132,000 Wynn's
International,
Inc............ 1,690,179 2,466,750
------------ ------------
2,952,155 4,576,781
------------ ------------
BUILDING MATERIALS -- 2.3%
301,100 International
Comfort
Products
Corp.*......... 1,712,803 2,465,256
------------ ------------
BUSINESS SERVICES -- 1.6%
111,600 Aaron Rents, Inc. 1,527,676 1,674,000
------------ ------------
COMMERCIAL SERVICES -- 8.0%
180,000 Group Maintenance
America
Corp.*......... 2,520,000 2,598,750
100,000 Regis Corp. 2,348,750 3,149,999
143,600 Wackenhut Corp.,
Class B........ 3,161,209 2,710,450
------------ ------------
8,029,959 8,459,199
------------ ------------
COMPUTER SOFTWARE -- 0.8%
80,000 3DFX Interactive,
Inc.*.......... 1,527,937 900,000
------------ ------------
COMPUTERS -- 1.8%
57,350 Zebra
Technologies
Corp.*......... 1,529,569 1,921,225
------------ ------------
CONSTRUCTION -- 2.8%
133,000 Benchmark
Electronics,
Inc.*.......... 2,032,417 3,034,063
------------ ------------
DISTRIBUTION -- 1.6%
113,700 Pameco Corp.*.... 1,919,020 1,762,350
------------ ------------
ELECTRICAL & ELECTRONICS --1.5%
99,200 Electro
Scientific
Industries,
Inc.*.......... 2,609,720 1,574,800
------------ ------------
ELECTRICAL EQUIPMENT -- 2.9%
30,000 Kemet Corp.*..... 572,025 333,750
85,000 Kuhlman Corp..... 2,533,606 2,757,188
------------ ------------
3,105,631 3,090,938
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 5.3%
50,000 Kulicke & Soffa
Industries,
Inc.*.......... $ 829,000 $ 681,250
125,300 PCD, Inc.*....... 2,341,737 1,566,250
104,000 Plexus Corp.*.... 1,916,819 2,014,999
175,000 Power-One,
Inc.*.......... 2,302,500 1,290,625
------------ ------------
7,390,056 5,553,124
------------ ------------
ELECTRONICS -- 3.9%
140,000 ADE Corp.*....... 3,048,936 1,365,000
182,100 FEI Co.*......... 1,907,816 1,456,800
100,000 Power
Integrations,
Inc.*.......... 1,105,158 1,356,250
------------ ------------
6,061,910 4,178,050
------------ ------------
ENTERTAINMENT -- 2.4%
137,700 Speedway
Motorsports,
Inc.*.......... 2,545,723 2,599,088
------------ ------------
ENVIRONMENTAL -- 0.9%
146,200 Newpark
Resources,
Inc.*.......... 1,590,486 1,005,125
------------ ------------
FINANCIAL SERVICES -- 0.8%
113,900 Amresco, Inc.*... 2,047,344 854,250
------------ ------------
FOOD SERVING -- 3.7%
205,666 Worthington
Foods, Inc..... 3,434,489 3,984,779
------------ ------------
HEALTH & PERSONAL CARE -- 0.9%
110,000 Natrol, Inc.*.... 1,623,750 976,250
------------ ------------
INVESTMENT COMPANY -- 2.7%
139,800 Allied Capital
Corp........... 3,022,522 2,481,450
110,000 Sirrom Capital
Corp........... 1,196,447 426,250
------------ ------------
4,218,969 2,907,700
------------ ------------
MANUFACTURING -- 0.7%
113,100 Asyst
Technologies,
Inc.*.......... 1,756,949 791,700
------------ ------------
MANUFACTURING -- CAPITAL
GOODS -- 3.0%
75,000 Astec Industries,
Inc.*.......... 2,490,000 3,196,875
------------ ------------
MEDICAL SUPPLIES -- 1.7%
100,000 Res-Care,
Inc.*.......... 1,001,264 1,875,000
------------ ------------
</TABLE>
See accompanying notes to financial statements.
6
<PAGE> 12
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
METALS -- DIVERSIFIED -- 3.4%
114,300 Quanex Corp...... $ 3,392,877 $ 2,264,568
65,000 Wolverine Tube,
Inc.*.......... 2,016,552 1,369,063
------------ ------------
5,409,429 3,633,631
------------ ------------
NUTRITION & VITAMIN PRODUCTS -- 3.3%
100,000 Twinlab Corp.*... 1,440,769 2,562,500
175,000 Weider Nutrition
International,
Inc............ 1,949,885 1,017,188
------------ ------------
3,390,654 3,579,688
------------ ------------
OIL/GAS EQUIPMENT -- 1.0%
90,000 National-Oilwell,
Inc.*.......... 1,782,330 1,113,750
------------ ------------
OIL/GAS SERVICES -- 1.6%
80,000 Patterson Energy,
Inc.*.......... 773,386 530,000
70,500 Veritas DGC,
Inc.*.......... 1,368,405 1,176,469
------------ ------------
2,141,791 1,706,469
------------ ------------
PHARMACEUTICALS -- 2.7%
74,300 Medicis
Pharmaceutical
Corp., Class
A*............. 1,917,322 2,944,137
------------ ------------
PIPELINES -- 1.0%
125,000 Shaw Group,
Inc.*.......... 2,723,604 1,078,125
------------ ------------
REAL ESTATE -- 2.6%
183,700 Intrawest
Corp........... 3,243,714 2,812,906
------------ ------------
REAL ESTATE INVESTMENT TRUST -- 0.8%
50,000 Prison Realty
Trust.......... 1,581,689 900,000
------------ ------------
RESTAURANTS -- 3.2%
140,000 Apple South,
Inc............ 2,009,567 1,557,500
110,000 Logan's
Roadhouse,
Inc.*.......... 2,011,013 1,842,500
------------ ------------
4,020,580 3,400,000
------------ ------------
RETAIL -- 1.2%
311,000 Compucom Systems,
Inc.*.......... 2,537,532 1,244,000
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- ---------- ---- ------
<C> <S> <C> <C>
RETAIL -- DEPARTMENT STORE -- 1.1%
70,000 Elder-Beerman
Stores
Corp.*......... $ 1,415,938 $ 1,216,250
------------ ------------
RETAIL -- GENERAL MERCHANDISE -- 0.8%
80,000 Cash America
International,
Inc............ 906,763 890,000
------------ ------------
RETAIL -- SPECIALTY LINE --1.4%
70,000 Eagle Hardware &
Garden,
Inc.*.......... 1,527,875 1,518,125
------------ ------------
SERVICES -- 1.3%
60,000 Kroll-O'Gara
Co.*........... 1,314,688 1,402,500
------------ ------------
TECHNOLOGY -- 1.8%
110,000 Datastream
Systems,
Inc.*.......... 1,353,813 1,918,125
------------ ------------
TEXTILES & APPAREL -- 1.0%
232,500 Quaker Fabric
Corp.* 2,229,125 1,089,844
------------ ------------
TOTAL COMMON
STOCKS......... 98,604,674 87,828,103
------------ ------------
SHORT TERM INVESTMENTS -- 18.2%
CASH SWEEP ACCOUNT -- 18.2%
$19,499,077 Union Bank of
California..... 19,499,077 19,499,077
------------ ------------
TOTAL SHORT TERM
INVESTMENTS.... 19,499,077 19,499,077
------------ ------------
TOTAL
INVESTMENTS --
100.0%......... $118,103,751(1) 107,327,180
============
OTHER ASSETS AND LIABILITIES
(NET) -- 0.0%................ (52,602)
------------
NET ASSETS -- 100.0%........... $107,274,578
============
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
* Represents non-income producing security.
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 13
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 96.2%
AEROSPACE/DEFENSE -- 1.2%
1,700 Boeing Co........... $ 57,477 $ 58,331
5,100 Raytheon Co., Class
B................. 290,666 275,082
----------- -----------
348,143 333,413
----------- -----------
AIRLINES -- 1.3%
1,600 AMR Corp.*.......... 101,752 88,700
15,000 Skywest, Inc........ 284,300 286,875
----------- -----------
386,052 375,575
----------- -----------
AUTO-RELATED -- 1.1%
3,500 Arvin Industries,
Inc............... 115,779 130,375
13,200 Carey International,
Inc.*............. 302,390 198,000
----------- -----------
418,169 328,375
----------- -----------
AUTOMOTIVE -- 1.0%
1,800 Daimler-Benz AG,
ADR............... 93,933 147,487
6,100 Navistar
International
Corp., Inc.*...... 151,341 138,013
----------- -----------
245,274 285,500
----------- -----------
BANKING -- 10.3%
2,800 Bank United Corp.... 93,316 100,275
10,000 Bostonfed Bancorp,
Inc............... 124,350 170,000
5,400 Chase Manhattan
Corp.............. 182,599 233,549
4,200 Corporacion Bancaria
De Espana, ADR.... 88,452 164,588
9,200 First Bell Bancorp,
Inc............... 85,450 138,575
6,500 First Mutual
Bancorp, Inc...... 83,077 108,875
4,400 Firstbank Puerto
Rico.............. 123,597 111,650
14,600 FSF Financial
Corp.............. 187,974 224,475
11,000 Georgia Financial,
Inc............... 121,660 168,438
4,000 Golden State
Bancorp*.......... 128,766 79,750
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
11,700 Home Bancorp of
Elgin, Inc........ $ 147,713 $ 159,413
1,080 HSBC Holdings PLC,
ADR............... 272,338 197,922
4,900 Imperial Bancorp*... 122,411 74,113
30,400 North Central
Bancshares,
Inc............... 328,663 528,199
10,000 PFF Bancorp,
Inc.*............. 115,000 152,500
4,300 Riggs National
Corp.............. 120,007 105,350
5,900 Societe Generale
France, ADR....... 147,146 130,530
5,400 Westerfed Financial
Corp.............. 73,224 112,050
----------- -----------
2,545,743 2,960,252
----------- -----------
BREWERY -- 0.4%
15,000 Cia Cervejaria
Brahma, ADR....... 205,275 117,188
----------- -----------
BUILDING MATERIALS -- 1.0%
1,700 Lone Star
Industries, Inc... 120,122 101,575
1,600 Southdown, Inc...... 112,393 72,000
2,900 USG Corp............ 108,563 125,425
----------- -----------
341,078 299,000
----------- -----------
BUSINESS & PUBLIC SERVICES --0.5%
2,755 Waste Management,
Inc............... 94,516 132,412
----------- -----------
CHEMICALS -- 0.9%
5,800 Great Lakes Chemical
Corp.............. 259,446 225,475
1,450 Octel Corp.*........ 38,152 19,938
----------- -----------
297,598 245,413
----------- -----------
COMMERCIAL SERVICES -- 6.7%
14,325 Accustaff, Inc.*.... 310,978 208,608
3,000 Administaff,
Inc.*............. 141,329 95,813
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 14
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
COMMERCIAL SERVICES (CONTINUED)
3,500 AHL Services,
Inc.*............. $ 56,000 $ 114,625
16,400 Childrens
Comprehensive
Services, Inc.*... 287,000 161,950
3,800 Kelly Services,
Class A........... 124,979 119,225
7,150 Nova
Corp./Georgia*.... 193,750 219,416
26,600 Personnel Group of
America, Inc.*.... 359,650 327,512
10,000 Quanta Services,
Inc.*............. 139,350 123,125
9,387 Robert Half
International,
Inc.*............. 240,524 405,400
5,200 Romac International,
Inc.*............. 104,208 93,600
3,300 Staffmark, Inc.*.... 136,965 60,225
----------- -----------
2,094,733 1,929,499
----------- -----------
COMPUTER EQUIPMENT -- 1.7%
23,975 CHS Electronics,
Inc.*............. 398,187 260,727
5,000 Storage Technology
Corp.*............ 102,862 127,188
2,800 Synopsys, Inc.*..... 118,960 93,275
----------- -----------
620,009 481,190
----------- -----------
COMPUTER SERVICES -- 0.4%
5,200 Mastech Corp.*...... 131,962 125,125
----------- -----------
COMPUTER SOFTWARE -- 2.5%
9,400 CCC Information
Services Group,
Inc.*............. 267,301 117,500
2,700 Computer Horizons
Corp.*............ 127,427 67,331
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
9,600 Inspire Insurance
Solutions,
Inc.*............. $ 201,600 $ 226,801
4,800 Learning Co.,
Inc.*............. 134,088 95,100
4,800 Sterling Software,
Inc.*............. 136,735 132,300
5,500 Symantec Corp.*..... 94,394 72,531
----------- -----------
961,545 711,563
----------- -----------
COMPUTERS -- 0.3%
15,000 Daou Systems,
Inc.*............. 330,768 86,250
----------- -----------
CONSTRUCTION -- 0.9%
3,000 Centex Construction
Products, Inc..... 115,359 102,375
4,300 Centex Corp......... 80,938 148,350
----------- -----------
196,297 250,725
----------- -----------
CONSUMER CYCLICAL -- 2.3%
16,800 Analysts
International
Corp.............. 308,200 504,000
13,862 Wolverine World
Wide, Inc......... 303,793 150,749
----------- -----------
611,993 654,749
----------- -----------
CONSUMER NON-DURABLE -- 2.2%
14,720 Archer-Daniels-Midland
Co................ 232,864 246,560
15,850 Central Garden & Pet
Co.*.............. 359,341 293,225
3,800 Department 56,
Inc.*............. 138,766 102,600
----------- -----------
730,971 642,385
----------- -----------
CONSUMER SERVICES -- 1.7%
4,000 Banta Corp.......... 124,449 109,000
2,400 Canandaigua Wine
Co., Class A*..... 120,144 94,800
2,600 Maytag Corp......... 139,906 124,150
3,800 Philip Morris Cos.,
Inc............... 147,241 175,038
----------- -----------
531,740 502,988
----------- -----------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE> 15
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
DISTRIBUTION -- 0.8%
3,900 Hughes Supply,
Inc............... $ 119,586 $ 111,150
4,600 United Stationers,
Inc.*............. 128,464 109,825
----------- -----------
248,050 220,975
----------- -----------
DIVERSIFIED -- 1.5%
10,000 Hutchison Whampoa,
ADR............... 282,670 263,276
56,500 Swire Pacific Ltd.,
ADR............... 301,428 177,913
----------- -----------
584,098 441,189
----------- -----------
ELECTRIC UTILITY -- 1.9%
23,700 Centrais Electricas
Brasileiras,
ADR............... 397,169 247,949
9,200 P G & E Corp........ 209,852 293,825
----------- -----------
607,021 541,774
----------- -----------
ELECTRICAL & ELECTRONICS -- 0.3%
2,100 Amp, Inc............ 80,976 75,075
1,780 Centrais Geradoras
Do Su, ADR*....... 15,025 9,311
----------- -----------
96,001 84,386
----------- -----------
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 1.6%
2,800 Apple Computer,
Inc.*............. 73,655 106,750
8,100 Hitachi Ltd......... 593,993 351,338
----------- -----------
667,648 458,088
----------- -----------
ELECTRONICS -- 0.7%
3,100 Lexmark
International
Group*............ 130,478 214,869
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
ENERGY -- 2.8%
13,100 Peco Energy Corp.... $ 284,485 $ 478,968
13,175 Pool Energy Services
Co.*.............. 220,875 120,222
9,625 Weatherford
International,
Inc.*............. 304,517 208,141
----------- -----------
809,877 807,331
----------- -----------
FINANCE -- BROKERS -- 0.6%
4,100 Everen Capital
Corp.............. 116,269 99,425
3,000 Jefferies Group,
Inc............... 132,630 79,500
----------- -----------
248,899 178,925
----------- -----------
FINANCIAL SERVICES -- 3.9%
6,200 Doral Financial
Corp.............. 122,444 99,200
2,500 Financial Securities
Assurance Holdings
Ltd............... 132,118 121,874
1,400 Golden West
Financial Corp.... 122,481 114,538
2,700 Lehman Brothers
Holdings, Inc..... 71,375 76,275
1,688 Metris Co........... 108,541 78,681
1,800 NCO Group, Inc.*.... 38,700 50,063
6,100 Ocwen Financial
Corp.*............ 115,763 53,375
6,200 Raymond James
Financial, Inc.... 109,590 130,199
9,700 SLM Holding Corp.... 400,707 314,643
4,500 UST Corp............ 118,320 95,063
----------- -----------
1,340,039 1,133,911
----------- -----------
FOOD & HOUSEHOLD PRODUCTS -- 0.8%
10,000 Rubbermaid, Inc..... 265,600 239,375
----------- -----------
FOOD PROCESSING -- 0.8%
7,300 Suiza Foods
Corp.*............ 268,186 228,125
----------- -----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 16
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
HEALTH & PERSONAL CARE -- 1.4%
7,550 Province Healthcare
Co.*.............. $ 203,378 $ 257,172
4,500 Sunrise Assisted
Living, Inc.*..... 151,875 154,406
----------- -----------
355,253 411,578
----------- -----------
HEALTH CARE -- 4.2%
3,600 Columbia/HCA
Healthcare
Corp.............. 97,416 72,225
11,500 Curative Health
Services, Inc.*... 327,374 352,188
25,480 Health Management
Associates,
Inc.*............. 278,941 465,009
5,200 Lincare Holdings,
Inc.*............. 104,513 201,500
1,500 Pacificare Health
Systems, Inc.*.... 94,110 111,750
----------- -----------
902,354 1,202,672
----------- -----------
HOMEBUILDERS -- 1.9%
5,200 Champion
Enterprises,
Inc.*............. 127,427 120,900
6,100 D. R. Horton,
Inc............... 138,074 97,600
2,900 Fleetwood
Enterprises,
Inc............... 133,558 87,544
4,000 Kaufman & Broad Home
Corp.............. 130,523 93,750
5,600 Pulte Corp.......... 138,611 137,550
----------- -----------
668,193 537,344
----------- -----------
INSURANCE -- 3.1%
1,900 Ambac, Inc.......... 98,641 91,200
3,500 Fidelity National
Financial, Inc.... 137,148 118,344
4,500 First American
Financial Corp.... 133,535 144,000
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
2,300 Landamerica
Financial Group,
Inc............... $ 129,578 $ 117,875
5,600 Safeco Corp......... 158,493 233,450
4,000 Tokio Marine & Fire,
ADR............... 217,250 178,000
----------- -----------
874,645 882,869
----------- -----------
INVESTMENT COMPANY -- 0.2%
2,500 Morgan Keegan,
Inc............... 50,150 44,219
----------- -----------
LEISURE & GAMING -- 0.3%
1,700 Anchor Gaming*...... 100,938 97,325
----------- -----------
MANUFACTURING -- 0.3%
13,000 Pentacon, Inc.*..... 182,780 82,875
----------- -----------
MANUFACTURING -- CONSUMER GOODS -- 0.4%
1,100 Nacco Industries,
Inc............... 127,529 110,000
----------- -----------
MEDICAL -- BIOTECHNOLOGY -- 1.4%
4,800 Arterial Vascular
Engineering,
Inc.*............. 151,200 177,600
8,000 Pharmaceutical
Product
Development,
Inc.*............. 193,750 224,000
----------- -----------
344,950 401,600
----------- -----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.4%
2,500 Becton, Dickinson &
Co................ 100,832 102,813
----------- -----------
MINING -- 0.8%
8,500 Anglo American
Corp.............. 243,313 234,813
----------- -----------
MULTI-INDUSTRY -- 0.8%
2,800 Loews Corp.......... 123,409 236,250
----------- -----------
NUTRITION & VITAMIN PRODUCTS -- 0.3%
3,100 Twinlab Corp.*...... 118,122 79,438
----------- -----------
OIL/GAS -- 0.4%
2,300 Plantronics,
Inc.*............. 117,817 110,831
----------- -----------
OIL/GAS EXPLORATION -- 4.8%
4,250 Cliffs Drilling
Co.*.............. 148,474 83,938
10,100 Elf Aquitane, ADR... 358,446 628,093
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 17
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
OIL/GAS EXPLORATION (CONTINUED)
12,750 Oceaneering
International,
Inc.*............. $ 229,359 $ 181,688
600 Seacor Holdings,
Inc.*............. 35,626 24,900
5,200 Varco International,
Inc.*............. 135,878 43,550
5,200 Xircom, Inc.*....... 115,418 127,400
11,400 YPF Sociedad
Anonima, ADR...... 221,847 296,399
----------- -----------
1,245,048 1,385,968
----------- -----------
OIL/GAS SERVICES -- 0.1%
2,400 Veritas DGC,
Inc.*............. 98,145 40,050
----------- -----------
PHARMACEUTICALS -- 0.7%
4,000 ICN Pharmaceuticals,
Inc............... 124,492 70,000
17,800 NBTY, Inc.*......... 310,163 140,175
----------- -----------
434,655 210,175
----------- -----------
PUBLISHING & PRINTING -- 2.5%
6,400 Bowne & Co.......... 138,242 108,400
8,300 Hollinger
International,
Inc............... 124,801 119,313
15,700 Mail-Well Holdings,
Inc.*............. 308,406 134,431
7,600 Readers Digest
Assoc., Inc....... 217,531 145,350
5,000 Valassis
Communications,
Inc.*............. 110,095 200,000
----------- -----------
899,075 707,494
----------- -----------
REAL ESTATE -- 0.3%
4,200 Lennar Corp......... 119,614 93,713
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
RETAIL -- 3.1%
5,300 Fingerhut Companies,
Inc............... $ 67,576 $ 58,300
3,800 Footstar, Inc.*..... 127,684 86,213
7,500 K Mart, Inc.*....... 98,956 89,531
4,200 Limited, Inc........ 100,662 92,138
4,100 Shopko Stores,
Inc.*............. 139,355 133,250
11,800 Toys "R" Us,
Inc.*............. 237,083 191,013
13,200 Wet Seal, Inc.*..... 360,389 228,524
----------- -----------
1,131,705 878,969
----------- -----------
RETAIL -- GENERAL MERCHANDISE -- 0.2%
5,000 Party City Corp.*... 154,375 65,625
----------- -----------
RETAIL -- SPECIALTY LINE -- 0.9%
2,700 Best Buy, Inc.*..... 63,700 112,050
2,000 Payless Shoesource,
Inc.*............. 124,076 82,750
4,700 Rexall Sundown,
Inc.*............. 160,388 72,556
----------- -----------
348,164 267,356
----------- -----------
TECHNOLOGY -- 3.9%
11,750 Computer Management
Sciences, Inc.*... 233,012 167,438
24,750 Datastream Systems,
Inc.*............. 251,734 431,577
22,850 Inter-Tel, Inc...... 156,197 295,622
9,800 National Techteam,
Inc.*............. 226,582 78,400
6,450 SBS Technologies,
Inc.*............. 209,594 161,250
----------- -----------
1,077,119 1,134,287
----------- -----------
TELECOMMUNICATION EQUIPMENT -- 0.3%
2,100 Qualcomm, Inc.*..... 104,403 100,669
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 18
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND**
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
OIL/GAS EXPLORATION (CONTINUED)
TELECOMMUNICATION SERVICES -- 3.5%
18,975 Aspect
Telecommunications
Corp.*............ $ 469,549 $ 455,400
5,900 Citizens Utilities
Co.*.............. 46,982 47,938
16,700 Deutsche
Telecommunications,
ADR............... 466,515 491,605
----------- -----------
983,046 994,943
----------- -----------
TELECOMMUNICATIONS -- 4.4%
10,695 Excel
Communications,
Inc.*............. 170,276 241,974
5,800 Motorola, Inc....... 334,210 247,588
5,200 Premisys
Communications, Inc.*.. 135,102 36,400
5,500 Telecom Italia,
ADR............... 172,297 368,500
8,600 Telefonos De Mexico,
ADR............... 274,979 380,549
----------- -----------
1,086,864 1,275,011
----------- -----------
TEXTILES & APPAREL -- 1.2%
10,000 Reebok International
Ltd.*............. 268,094 135,625
4,400 Ross Stores, Inc.... 94,374 125,950
4,600 TJX Companies,
Inc............... 40,632 81,938
----------- -----------
403,100 343,513
----------- -----------
TRANSPORTATION -- 0.5%
3,600 Airborne Freight
Corp.............. 125,905 62,325
1,075 Hvide Marine, Inc.,
Class A*.......... 39,103 7,727
8,850 Trico Marine
Services, Inc.*... 207,444 61,397
----------- -----------
372,452 131,449
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- ---------- ---- ------
<C> <S> <C> <C>
TRANSPORTATION -- AIR -- 0.3%
2,500 Alaska Airgroup,
Inc.*............. $ 116,400 $ 85,156
----------- -----------
UTILITIES -- 1.5%
8,500 Entergy Corp........ 244,885 261,375
4,700 Unicom Corp......... 111,907 175,663
----------- -----------
356,792 437,038
----------- -----------
TOTAL COMMON STOCKS 29,599,005 27,696,593
----------- -----------
SHORT TERM INVESTMENTS -- 4.0%
CASH SWEEP ACCOUNT -- 4.0%
$1,151,025 Union Bank of
California........ 1,151,025 1,151,025
----------- -----------
TOTAL SHORT TERM
INVESTMENTS....... 1,151,025 1,151,025
----------- -----------
TOTAL INVESTMENTS --
100.2%.............. $30,750,030(1) 28,847,618
===========
Other Assets and
Liabilities
(Net) -- (0.2)%... (44,860)
-----------
NET ASSETS --
100.0%............ $28,802,758
===========
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
* Represents non-income producing security.
** See page 19 for Concentration by Country.
ADR--American Depository Receipts.
PLC--Public Limited Company.
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 19
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GROWTH FUND
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 76.7%
AEROSPACE -- 1.5%
41,700 Armor Holdings,
Inc. Delaware*... $ 461,202 $ 393,544
----------- -----------
AIRLINES -- 1.3%
18,400 Skywest, Inc....... 365,400 351,900
----------- -----------
AUTO-RELATED -- 1.5%
21,800 Wynn's
International,
Inc.............. 396,507 407,388
----------- -----------
BUILDING MATERIALS -- 4.2%
21,500 Cameron Ashley
Building
Products,
Inc.*............ 328,625 240,531
49,500 International
Comfort Products
Corp.*........... 327,015 405,281
24,800 NCI Building
Systems, Inc.*... 619,100 491,351
----------- -----------
1,274,740 1,137,163
----------- -----------
COMMERCIAL SERVICES -- 1.6%
29,600 Group Maintenance
America Corp.*... 424,619 427,350
----------- -----------
COMPUTER SOFTWARE -- 6.3%
24,600 3DFX Interactive,
Inc.*............ 564,991 276,750
80,800 Acclaim
Entertainment,
Inc.*............ 375,294 515,099
25,000 Infinium Software,
Inc.*............ 360,782 234,375
46,300 Mecon, Inc.*....... 320,825 347,250
43,300 Orcad, Inc.*....... 389,425 308,513
----------- -----------
2,011,317 1,681,987
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMPUTERS -- 5.0%
20,000 Evans & Sutherland
Computer
Corp.*........... $ 538,749 $ 262,500
35,000 Powerhouse
Technologies,
Inc.*............ 441,157 310,625
52,100 WPI Group, Inc.*... 425,293 345,163
12,700 Zebra Technologies
Corp.*........... 354,309 425,449
----------- -----------
1,759,508 1,343,737
----------- -----------
CONSTRUCTION -- 0.5%
28,400 Schuff Steel
Co.*............. 241,700 142,000
----------- -----------
DISTRIBUTION -- 1.4%
23,900 Pameco Corp.*...... 380,834 370,450
----------- -----------
ELECTRICAL & ELECTRONICS -- 1.2%
19,500 Electro Scientific
Industries,
Inc.*............ 775,404 309,563
----------- -----------
ELECTRICAL EQUIPMENT -- 1.3%
10,400 Kuhlman Corp....... 406,104 337,350
----------- -----------
ELECTRONIC COMPONENTS/
INSTRUMENTS -- 6.2%
90,700 EFTC Corp.*........ 685,869 379,805
14,100 Etec Systems,
Inc.*............ 456,990 367,481
18,000 Kulicke & Soffa
Industries,
Inc.*............ 339,313 245,250
10,000 PCD, Inc.*......... 179,375 125,000
14,600 Plexus Corp.*...... 210,890 282,875
36,100 Power-One, Inc.*... 375,400 266,238
----------- -----------
2,247,837 1,666,649
----------- -----------
ELECTRONICS -- 2.8%
61,500 FEI Co.*........... 664,933 491,999
11,200 Pittway Corp.,
Class A.......... 272,198 267,400
----------- -----------
937,131 759,399
----------- -----------
ENTERTAINMENT -- 1.3%
18,100 Speedway
Motorsports,
Inc.*............ 419,829 341,637
----------- -----------
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 20
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GROWTH FUND
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FINANCIAL SERVICES -- 0.7%
14,200 Amresco, Inc.*..... $ 368,372 $ 106,500
12,500 Gilman & Ciocia,
Inc.*............ 209,375 78,516
----------- -----------
577,747 185,016
----------- -----------
HEALTH & PERSONAL CARE -- 1.1%
24,300 Natural Alternative
International,
Inc.*............ 528,338 297,675
----------- -----------
HEALTH CARE -- 0.6%
31,900 Mariner Post-Acute
Network, Inc.*... 623,964 163,488
----------- -----------
HOME FURNISHINGS -- 1.3%
20,500 Ladd Furniture,
Inc.*............ 380,188 338,250
----------- -----------
HOTELS & LODGING -- 1.3%
37,900 Execustay Corp.*... 351,725 341,100
----------- -----------
INVESTMENT COMPANY -- 1.7%
21,350 Allied Capital
Corp............. 462,115 378,963
19,200 Sirrom Capital
Corp............. 400,404 74,400
----------- -----------
862,519 453,363
----------- -----------
MANUFACTURING -- 0.7%
25,100 Asyst Technologies,
Inc.*............ 520,434 175,700
----------- -----------
MANUFACTURING -- CAPITAL GOODS -- 2.2%
14,100 Astec Industries,
Inc.*............ 432,958 601,013
----------- -----------
MANUFACTURING -- CONSUMER
GOODS -- 1.2%
58,200 Genesco, Inc.*..... 459,725 316,463
----------- -----------
NUTRITION & VITAMIN PRODUCTS -- 2.3%
17,700 Twinlab Corp.*..... 320,650 453,563
30,100 Weider Nutrition
International,
Inc.............. 412,646 174,956
----------- -----------
733,296 628,519
----------- -----------
OIL/GAS EQUIPMENT -- 0.5%
11,900 National-Oilwell,
Inc.*............ 379,647 147,263
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
OIL/GAS EXPLORATION -- 1.4%
33,000 Marine Drilling
Cos., Inc.*...... $ 705,852 $ 379,500
----------- -----------
OIL/GAS SERVICES -- 4.8%
12,300 Carbo Ceramics,
Inc.............. 359,332 279,825
24,800 Nabors Industries,
Inc.*............ 643,301 376,649
22,200 Patterson Energy,
Inc.*............ 338,406 147,075
19,800 Rowan Cos.,
Inc.*............ 552,513 221,513
15,100 Veritas DGC,
Inc.*............ 388,783 251,981
----------- -----------
2,282,335 1,277,043
----------- -----------
PHARMACEUTICALS -- 2.5%
10,000 D & K Healthcare
Resources,
Inc.*............ 146,583 180,000
12,650 Medicis
Pharmaceutical
Corp., Class
A*............... 543,721 501,256
----------- -----------
690,304 681,256
----------- -----------
REAL ESTATE -- 1.4%
25,300 Intrawest Corp..... 425,664 387,406
----------- -----------
REAL ESTATE INVESTMENT TRUST --
1.4%
21,000 Prison Realty
Trust............ 702,062 378,000
----------- -----------
RESTAURANTS -- 1.4%
34,600 Apple South,
Inc.............. 517,838 384,925
----------- -----------
RETAIL -- 1.7%
30,700 Compucom Systems,
Inc.*............ 267,341 122,800
32,100 O'Charley's,
Inc.*............ 409,275 325,013
----------- -----------
676,616 447,813
----------- -----------
RETAIL -- DEPARTMENT STORE -- 1.3%
19,900 Elder-Beerman
Stores Corp.*.... 430,338 345,763
----------- -----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 21
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC GROWTH FUND
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- GENERAL MERCHANDISE -- 3.7%
30,000 Blue Rhino
Corp.*........... $ 398,163 $ 303,750
24,200 Cash America
International.... 358,127 269,225
34,400 S&K Famous Brands,
Inc.*............ 459,899 412,799
----------- -----------
1,216,189 985,774
----------- -----------
RETAIL -- SPECIALTY LINE -- 1.0%
12,000 Eagle Hardware &
Garden, Inc.*.... 242,340 260,250
----------- -----------
RIGHTS -- FOREIGN -- 1.1%
50,000 Intercept Group,
Inc.*............ 347,180 300,000
----------- -----------
STEEL/IRON -- 1.5%
21,700 Northwest Pipe
Co.*............. 387,889 401,450
----------- -----------
TEXTILES & APPAREL -- 1.2%
20,000 Dixie Group,
Inc.............. 164,306 130,000
40,900 Quaker Fabric
Corp.*........... 464,199 191,719
----------- -----------
628,505 321,719
----------- -----------
TRANSPORTATION -- 0.8%
20,000 Covenant Transport,
Inc., Class A*... 320,000 227,500
----------- -----------
TRUCKING & LEASING -- 0.6%
8,200 MS Carriers,
Inc.*............ 197,225 162,975
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- ---------- ----------- -----------
<C> <S> <C> <C>
WHOLESALE -- 1.2%
21,300 ScanSource,
Inc.*............ $ 356,238 $ 335,475
----------- -----------
TOTAL COMMON
STOCKS........... 28,079,248 20,594,816
----------- -----------
SHORT TERM INVESTMENTS -- 23.1%
CASH SWEEP ACCOUNT -- 23.1%
$6,213,634 Union Bank of
California....... $ 6,213,634 $ 6,213,634
----------- -----------
TOTAL SHORT TERM
INVESTMENTS...... 6,213,634 6,213,634
----------- -----------
TOTAL INVESTMENTS--
99.8%............ $34,292,882 26,808,450
===========
OTHER ASSETS AND
LIABILITIES
(NET) -- 0.2%.... 51,982
-----------
NET ASSETS --
100.0%........... $26,860,432
===========
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
* Represents non-income producing security.
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 22
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC VALUE FUND
Portfolio of Investments -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 68.4%
BUILDING MATERIALS -- 0.5%
6,000 Cameron Ashley
Building
Products,
Inc.*........... $ 91,688 $ 67,125
----------- -----------
CONSTRUCTION -- 2.2%
55,800 Schuff Steel
Co.*............ 502,149 279,000
----------- -----------
CONTAINERS & PACKAGING -- 4.1%
16,000 Grief Brothers
Co., Class A.... 551,875 528,000
----------- -----------
ELECTRONICS -- 3.1%
26,500 AVX Corp.......... 407,340 394,187
----------- -----------
ENTERTAINMENT -- 4.0%
51,200 Jackpot
Enterprises,
Inc.*........... 581,104 508,800
----------- -----------
FINANCIAL SERVICES -- 11.1%
75,100 First Investors
Financial
Services Group,
Inc.*........... 566,842 403,663
32,800 Medallion
Financial
Corp............ 446,900 516,599
84,600 World Acceptance
Corp.*.......... 494,267 475,875
----------- -----------
1,508,009 1,396,137
----------- -----------
FOOD -- 2.2%
21,600 Bridgford Foods
Corp............ 265,769 280,800
----------- -----------
HOME FURNISHINGS -- 3.3%
39,150 Flexsteel
Industries,
Inc............. 481,039 425,756
----------- -----------
HOMEBUILDERS -- 3.7%
50,000 Cavalier Homes,
Inc............. 573,785 465,625
----------- -----------
INDUSTRIAL -- 2.2%
18,500 Justin Industries,
Inc............. 260,030 284,438
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
INSTITUTIONAL
FURNISHINGS -- 2.2%
25,300 Falcon Products,
Inc............. $ 357,777 $ 278,300
----------- -----------
INSURANCE -- 3.9%
17,000 Leucadia National
Corp.*.......... 569,259 498,313
----------- -----------
MACHINERY & EQUIPMENT -- 1.5%
73,000 Hirsh
International
Corp., Class
A*.............. 602,250 187,063
----------- -----------
MANUFACTURING -- 1.0%
11,200 Callaway Golf
Co.............. 121,072 121,100
----------- -----------
METALS & MINING -- 1.8%
313,000 MK Gold Co.*...... 496,342 234,750
----------- -----------
OFFICE EQUIPMENT & SERVICES -- 1.0%
13,000 Ennis Business
Forms, Inc...... 138,780 130,000
----------- -----------
RAILROADS -- 3.7%
40,000 Railtex, Inc.*.... 654,374 470,000
----------- -----------
RECREATION -- 1.9%
91,700 Rockshox, Inc.*... 719,212 240,713
----------- -----------
RESTAURANTS -- 4.7%
61,800 Cooker Restaurant
Corp............ 574,158 602,549
----------- -----------
RETAIL -- SPECIALTY LINE --2.0%
68,100 Natural Wonders,
Inc.*........... 298,673 259,631
----------- -----------
STEEL/IRON -- 4.0%
27,800 Northwest Pipe
Co.*............ 571,211 514,300
----------- -----------
TRANSPORTATION -- 4.3%
36,600 International
Shipholding
Corp............ 627,274 542,137
----------- -----------
TOTAL COMMON
STOCKS.......... 10,953,170 8,708,724
----------- -----------
</TABLE>
See accompanying notes to financial statements.
17
<PAGE> 23
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC VALUE FUND
Portfolio of Investments (continued) -- September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL/ MARKET
SHARES COST VALUE
- ---------- ---- ------
<C> <S> <C> <C>
PREFERRED STOCKS -- 6.6%
ENTERTAINMENT -- 3.3%
58,100 Craig Corp., Class
A*.............. $ 545,439 $ 417,594
----------- -----------
INDUSTRIAL -- 3.3%
32,200 Freeport McMoran
Preferred
Shares*......... 590,395 422,625
----------- -----------
TOTAL PREFERRED
STOCKS.......... 1,135,834 840,219
----------- -----------
SHORT TERM INVESTMENTS -- 24.9%
CASH SWEEP ACCOUNT -- 24.9%
$3,177,973 Union Bank of
California...... 3,177,973 3,177,973
----------- -----------
TOTAL SHORT TERM
INVESTMENTS..... 3,177,973 3,177,973
----------- -----------
TOTAL
INVESTMENTS --
99.9%........... $15,266,977(1) 12,726,916
===========
Other Assets and
Liabilities
(Net) -- 0.1%... 14,376
-----------
NET ASSETS --
100.0%.......... $12,741,292
===========
Percentages indicated are based on net assets.
(1) The cost of securities for Federal income tax purposes
is substantially the same.
* Represents non-income producing security.
</TABLE>
See accompanying notes to financial statements.
18
<PAGE> 24
ESC STRATEGIC FUNDS, INC.
Concentration by Country**
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND APPRECIATION FUND
COUNTRY MARKET VALUE MARKET VALUE
- ------- ------------------------- -----------------
<S> <C> <C>
Argentina............................................. $ 353,063 $ 296,400
Belgium............................................... 158,713 --
Brazil................................................ 577,938 365,137
Chile................................................. 273,013 --
Czech Republic........................................ 74,892 --
France................................................ 836,211 628,094
Germany............................................... 1,010,136 147,487
Hong Kong............................................. 301,013 --
Hungary............................................... 150,540 --
Italy................................................. 380,634 --
Japan................................................. 1,644,379 351,337
Mexico................................................ 260,450 380,550
Netherlands........................................... 692,874 --
New Zealand........................................... 229,730 --
Peru.................................................. 173,687 --
Portugal.............................................. 160,174 --
Singapore............................................. 248,114 --
South Africa.......................................... 197,902 --
Spain................................................. 240,979 164,588
Switzerland........................................... 376,553 --
United Kingdom........................................ 1,678,277 --
United States......................................... 1,136,425 26,514,025
----------- -----------
Total Investments..................................... $11,155,697 $28,847,618
=========== ===========
</TABLE>
# CREDIT RATINGS (unaudited)
<TABLE>
<CAPTION>
MOODY'S STANDARD & POOR'S
------- -----------------
<C> <C> <S>
Aaa AAA Instrument judged to be of the highest quality
and carrying the smallest amount of investment
risk.
Aa AA Instrument judged to be of high quality by all
standards.
A A Instrument judged to be adequate by all
standards.
Baa BBB Instrument judged to be of moderate quality by
all standards.
Ba-B BB-B Instrument judged to have speculative elements,
and generally lack desirable characteristics.
Caa-C CCC-C Instrument judged to be predominately
speculative with respect to pay interest and
repay principal in accordance with terms of
obligation.
NR NR Not Rated. In the opinion of the Investment
Adviser, instrument judged to be of comparable
investment quality to rated securities which
may be purchased by the Fund.
</TABLE>
For items possessing the strongest investment attributes of their
category, Moody's gives that letter rating followed by a number. The
Standard & Poor's ratings may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
U.S. Government Issues have an assumed rating of AAA/Aaa.
19
<PAGE> 25
ESC STRATEGIC FUNDS, INC.
Statements of Assets and Liabilities
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
INCOME EQUITY CAP APPRECIATION GROWTH VALUE
FUND FUND FUND FUND FUND FUND
----------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost
$7,264,133; $12,959,326;
$98,604,674; $29,599,005;
$28,079,248; and $12,089,004
respectively)...................... $ 6,709,525 $11,155,697 $ 87,828,103 $27,696,593 $20,594,816 $ 9,548,943
Short-Term Investments (cost
$15,713,494; $0; $19,499,077;
$1,151,025; $6,213,634; and
$3,177,973 respectively)........... 15,713,494 -- 19,499,077 1,151,025 6,213,634 3,177,973
----------- ----------- ------------ ----------- ----------- -----------
Total Investments.............. 22,423,019 11,155,697 107,327,180 28,847,618 26,808,450 12,726,916
----------- ----------- ------------ ----------- ----------- -----------
Foreign Currency (cost $0; $654,868;
$0; $0; $0; and $0 respectively)... -- 656,296 -- -- -- --
Interest and dividends receivable.... 208,824 24,082 126,741 47,312 40,345 23,605
Receivable for securities sold....... -- -- -- 118,119 131,533 46,561
Withholding tax reclaim receivable... -- 21,228 -- -- -- --
Receivable for fund shares sold...... -- -- 12,629 279 19,720 --
Unamortized organizational expense... 4,708 4,989 14,327 6,020 -- --
Prepaid expenses and other assets.... 19,346 10,051 53,675 24,358 18,859 11,618
----------- ----------- ------------ ----------- ----------- -----------
Total Assets................... 22,655,897 11,872,343 107,534,552 29,043,706 27,018,907 12,808,700
----------- ----------- ------------ ----------- ----------- -----------
LIABILITIES
Payable to custodian bank............ -- 156,919 -- -- -- --
Income distribution payable.......... 83,948 -- -- -- -- --
Payable for fund shares
repurchased........................ -- -- 86,792 4,003 53,466 13,254
Payable for securities purchased..... -- 243,547 -- 183,424 57,969 --
Unrealized loss on open forward
currency contracts................. -- 1,653 -- -- -- --
Advisory fee payable................. 17,582 9,385 83,353 26,866 20,220 18,406
Administration fee payable........... 278 144 1,309 363 334 2,210
Audit fees payable................... 5,818 8,003 15,272 6,944 6,793 6,198
Reports to shareholders payable...... 6,473 4,150 30,297 5,455 6,516 3,748
12b-1 Distribution fee payable....... 4,907 3,211 31,749 8,277 8,767 3,870
Other accrued expenses............... 5,777 11,168 11,202 5,616 4,410 19,722
----------- ----------- ------------ ----------- ----------- -----------
Total Liabilities.............. 124,783 438,180 259,974 240,948 158,475 67,408
----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS..................... $22,531,114 $11,434,163 $107,274,578 $28,802,758 $26,860,432 $12,741,292
=========== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 26
ESC STRATEGIC FUNDS, INC.
Statements of Assets and Liabilities -- (Continued)
September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
INCOME EQUITY CAP APPRECIATION GROWTH VALUE
FUND FUND FUND FUND FUND FUND
----------- ------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Assets Consist of:
Shares of beneficial interest, at par
($0.001), unlimited number of
shares authorized.................. 2,256 1,208 6,915 2,462 2,897 1,493
Additional paid-in capital........... 22,407,990 10,628,956 115,823,770 23,715,189 35,587,630 15,813,420
Accumulated undistributed
(distributions in excess of) net
investment income/(loss) on
investments........................ (174,854) (56,826) (423,858) (75,555) (126,971) (37,351)
Accumulated undistributed
(distributions in excess of)
realized gain/loss on investments
and foreign currency
transactions....................... 850,222 2,680,000 2,644,322 7,076,924 (1,118,690) (496,209)
Net unrealized
appreciation/(depreciation) on
investments and foreign currency
translations....................... (554,500) (1,819,175) (10,776,571) (1,916,262) (7,484,434) (2,540,061)
----------- ----------- ------------ ----------- ----------- -----------
NET ASSETS........................... $22,531,114 $11,434,163 $107,274,578 $28,802,758 $26,860,432 $12,741,292
=========== =========== ============ =========== =========== ===========
Class A.............................. $21,852,620 $ 9,391,254 $ 83,141,860 $23,236,710 $18,956,243 $ 9,658,238
Class D.............................. $ 678,494 $ 2,042,909 $ 24,132,718 $ 5,566,048 $ 7,904,189 $ 3,083,054
----------- ----------- ------------ ----------- ----------- -----------
$22,531,114 $11,434,163 $107,274,578 $28,802,758 $26,860,432 $12,741,292
=========== =========== ============ =========== =========== ===========
SHARES OF BENEFICIAL INTEREST
Class A
Shares of beneficial interest
issued and outstanding........... 2,187,766 988,484 5,338,747 1,978,674 2,040,409 1,130,098
=========== =========== ============ =========== =========== ===========
Net Asset Value and redemption
price per share outstanding...... $ 9.99 $ 9.50 $ 15.57 $ 11.74 $ 9.29 $ 8.55
=========== =========== ============ =========== =========== ===========
Maximum Offering Price per share
($9.99/.955, $9.50/.955,
$15.57/.955, $11.74/.955,
$9.29/.955, $8.55/.955
respectively).................... $ 10.46 $ 9.95 $ 16.31 $ 12.30 $ 9.73 $ 8.95
=========== =========== ============ =========== =========== ===========
Class D
Shares of beneficial interest
issued and outstanding........... 67,929 219,971 1,576,101 483,086 856,834 362,854
=========== =========== ============ =========== =========== ===========
Net Asset Value and redemption
price per share outstanding...... $ 9.99 $ 9.29 $ 15.31 $ 11.52 $ 9.22 $ 8.50
=========== =========== ============ =========== =========== ===========
Maximum Offering Price per share
($9.99/.985, $9.29/.985,
$15.31/.985, $11.52/.985,
$9.22/.985, $8.50/.985
respectively).................... $ 10.14 $ 9.43 $ 15.54 $ 11.70 $ 9.37 $ 8.63
=========== =========== ============ =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 27
ESC STRATEGIC FUNDS, INC.
Statements of Operations
For the Six Months Ended September 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
INCOME INTERNATIONAL SMALL CAP APPRECIATION GROWTH VALUE
FUND EQUITY FUND FUND FUND FUND FUND
-------- ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Investment Income
Interest (net of witholding
tax of $0; $4,670; $0;
$0; $0; $0,
respectively)............ $808,987 $ 37,676 $ 441,171 $ 56,572 $ 149,994 $ 76,474
Dividend................... 13,340 116,819 457,503 234,582 62,798 51,889
-------- ----------- ------------ ------------ ------------ -----------
Total income............... 822,327 154,495 898,674 291,154 212,792 128,363
-------- ----------- ------------ ------------ ------------ -----------
Expenses
Advisory................... 122,179 73,454 708,390 188,634 197,101 102,364
Administration............. 18,327 11,018 106,259 27,448 23,652 12,284
Fund accounting............ 20,279 20,787 17,490 17,351 16,080 16,833
Professional fees.......... 9,390 6,006 34,422 11,723 8,228 5,874
Reports to shareholders.... 2,873 1,458 30,299 7,563 4,262 3,299
Registration............... 5,842 3,177 23,845 9,072 4,504 11,057
Custodian.................. 4,548 19,868 7,188 5,510 4,038 3,629
Directors.................. 1,075 287 11,834 1,848 1,410 899
Transfer agent fees and
expenses................. 15,599 15,737 95,154 21,361 33,702 17,114
12b-1 Distribution
fees--Class A............ 29,544 15,184 136,353 37,000 27,452 15,557
12b-1 Distribution
fees--Class D............ 3,001 9,539 122,232 26,239 35,906 14,748
Insurance.................. 892 383 7,650 1,604 1,320 862
Amortization of
organizational costs..... 4,559 4,359 5,146 4,486 -- --
Miscellaneous.............. 7,241 4,208 16,270 9,179 11,017 14,349
-------- ----------- ------------ ------------ ------------ -----------
Total expenses before
waivers.................. 245,349 185,465 1,322,532 369,018 368,672 218,869
Less: expenses
waived/reimbursed........ (5,065) (2,315) -- (2,537) (28,909) (45,112)
Net expenses............... 240,284 183,150 1,322,532 366,481 339,763 173,757
-------- ----------- ------------ ------------ ------------ -----------
Net investment
income/(loss).............. 582,043 (28,655) (423,858) (75,327) (126,971) (45,394)
-------- ----------- ------------ ------------ ------------ -----------
Realized gain/(loss) on
investments................ 732,928 2,107,312 (724,236) 3,622,483 (669,842) (676,130)
Net realized gain/(loss) on
foreign currency
transactions............... 8,925 (193,886) -- -- -- --
Net change in unrealized
appreciation/(depreciation)
on investments............. (979,940) (5,647,522) (49,775,800) (13,758,658) (11,320,530) (3,923,854)
Net change in unrealized
gain/(loss) on foreign
currency translations...... 232,819 538,153 -- -- -- --
-------- ----------- ------------ ------------ ------------ -----------
Net realized and unrealized
gain/(loss)................ (5,268) (3,195,943) (50,500,036) (10,136,175) (11,990,372) (4,599,984)
-------- ----------- ------------ ------------ ------------ -----------
Net increase/(decrease) in
net assets resulting from
operations................. $576,775 $(3,224,598) $(50,923,894) $(10,211,502) $(12,117,343) $(4,645,378)
======== =========== ============ ============ ============ ===========
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 28
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
INCOME FUND INTERNATIONAL EQUITY FUND
------------------------------------ ------------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ -------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)... $ 582,043 $ 1,494,331 $ (28,655) $ (115,193)
Net realized gain/(loss) on
investments and foreign
currency transactions........ 741,853 315,559 1,913,426 2,620,302
Net change unrealized
appreciation/(depreciation)
of investments and foreign
currency translations........ (747,121) 506,910 (5,109,369) 1,602,799
----------- ------------ ----------- ------------
Net increase in net assets
resulting from operations...... 576,775 2,316,800 (3,224,598) 4,107,908
----------- ------------ ----------- ------------
Dividends and Distributions to
Shareholders:
From net investment income
Class A...................... (564,830) (1,452,325) -- --
Class D...................... (17,213) (42,035) -- --
----------- ------------ ----------- ------------
(582,043) (1,494,360) -- --
----------- ------------ ----------- ------------
From net realized gains
Class A...................... -- -- -- (1,988,043)
Class D...................... -- -- -- (658,846)
----------- ------------ ----------- ------------
-- -- -- (2,646,889)
----------- ------------ ----------- ------------
Change in net assets resulting
from dividends and
distributions to
shareholders................. (582,043) (1,494,360) -- (2,646,889)
----------- ------------ ----------- ------------
Capital Share Transactions:
Proceeds from sales of shares
Class A...................... 281,895 1,530,230 329,734 1,271,346
Class D...................... 123,528 172,805 115,738 162,830
----------- ------------ ----------- ------------
405,423 1,703,035 445,472 1,434,176
----------- ------------ ----------- ------------
Net asset value of shares
issued to shareholders in
reinvestment of dividends and
distributions:
Class A...................... 517,410 1,298,541 -- 1,337,906
Class D...................... 14,386 36,502 -- 658,846
----------- ------------ ----------- ------------
531,796 1,335,043 -- 1,996,752
----------- ------------ ----------- ------------
Net asset value of shares
redeemed:
Class A...................... (3,356,135) (11,722,261) (1,571,306) (8,953,584)
Class D...................... (280,936) (827,987) (277,373) (2,362,618)
----------- ------------ ----------- ------------
(3,637,071) (12,550,248) (1,848,679) (11,316,202)
----------- ------------ ----------- ------------
Change in net assets from
capital share transactions... (2,699,852) (9,512,170) (1,403,207) (7,885,274)
----------- ------------ ----------- ------------
Total change in net assets....... (2,705,120) (8,689,730) (4,627,805) (6,424,255)
Net Assets:
Beginning of Period............ 25,236,234 33,925,964 16,061,968 22,486,223
----------- ------------ ----------- ------------
End of Period.................. $22,531,114 $ 25,236,234 $11,434,163 $ 16,061,968
=========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 29
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
SMALL CAP FUND APPRECIATION FUND
------------------------------------ -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ --------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)........ $ (423,858) $ (409,168) $ (75,327) $ (219,043)
Net realized gain/(loss) on
investments and foreign currency
transactions...................... (724,236) 13,586,328 3,622,483 12,458,936
Net change unrealized appreciation/
(depreciation) of investments and
foreign currency translations..... (49,775,800) 30,415,943 (13,758,658) 6,933,791
------------ ------------ ------------ ------------
Net increase in net assets resulting
from operations..................... (50,923,894) 43,593,103 (10,211,502) 19,173,684
------------ ------------ ------------ ------------
Dividends and Distributions to
Shareholders:
From net realized gains
Class A........................... -- (8,972,632) -- (9,402,699)
Class D........................... -- (2,767,599) -- (1,466,362)
------------ ------------ ------------ ------------
-- (11,740,231) -- (10,869,061)
------------ ------------ ------------ ------------
Change in net assets resulting from
dividends and distributions to
shareholders...................... -- (11,740,231) -- (10,869,061)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from sales of shares
Class A........................... 4,808,323 35,090,045 1,448,372 6,480,292
Class D........................... 983,288 8,450,667 1,069,033 2,468,392
------------ ------------ ------------ ------------
5,791,611 43,540,712 2,517,405 8,948,684
------------ ------------ ------------ ------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions:
Class A........................... -- 8,110,200 -- 8,381,574
Class D........................... -- 2,759,244 -- 1,440,941
------------ ------------ ------------ ------------
-- 10,869,444 -- 9,822,515
------------ ------------ ------------ ------------
Net asset value of shares redeemed:
Class A........................... (9,356,491) (12,927,511) (3,395,841) (34,006,037)
Class D........................... (3,367,942) (3,084,106) (885,199) (1,113,196)
------------ ------------ ------------ ------------
(12,724,433) (16,011,617) (4,281,040) (35,119,233)
------------ ------------ ------------ ------------
Change in net assets from capital
share transactions................ (6,932,822) 38,398,539 (1,763,635) (16,348,034)
------------ ------------ ------------ ------------
Total change in net assets............ (57,856,716) 70,251,411 (11,975,137) (8,043,411)
Net Assets:
Beginning of Period................. 165,131,294 94,879,883 40,777,895 48,821,306
------------ ------------ ------------ ------------
End of Period....................... $107,274,578 $165,131,294 $ 28,802,758 $ 40,777,895
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 30
ESC STRATEGIC FUNDS, INC.
Statement of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
GROWTH FUND VALUE FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ -------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)...... $ (126,971) $ (83,519) $ (45,394) $ 31,544
Net realized gain/(loss) on
investments..................... (669,769) 601,246 (676,130) 305,111
Net change unrealized
appreciation/(depreciation) of
investments..................... (11,320,530) 3,963,507 (3,923,854) 1,383,793
----------- ------------ ----------- ------------
Net increase/(decrease) in net
assets resulting from
operations........................ (12,117,270) 4,481,234 (4,645,378) 1,720,448
----------- ------------ ----------- ------------
Dividends and Distributions to
Shareholders:
Distributions of net investment
income
Class A......................... -- -- -- (28,213)
Class D......................... -- -- -- (4,506)
----------- ------------ ----------- ------------
-- -- -- (32,719)
----------- ------------ ----------- ------------
Distributions from net realized
gains
Class A......................... -- (388,459) -- (98,921)
Class D......................... -- (187,036) -- (26,269)
----------- ------------ ----------- ------------
-- (575,495) -- (125,190)
----------- ------------ ----------- ------------
Distributions in excess of
realized gains
Class A......................... -- (271,796) -- --
Class D......................... -- (130,865) -- --
----------- ------------ ----------- ------------
-- (402,661) -- --
----------- ------------ ----------- ------------
Change in net assets resulting
from dividends and distributions
to shareholders................. -- (978,156) -- (157,909)
----------- ------------ ----------- ------------
Capital Share Transactions:
Proceeds from sales of shares
Class A......................... 9,980,594 14,983,054 1,314,719 13,081,834
Class D......................... 2,790,675 7,349,742 459,972 4,290,509
----------- ------------ ----------- ------------
12,771,269 22,332,796 1,774,691 17,372,343
----------- ------------ ----------- ------------
Net asset value of shares issued
to shareholders in reinvestment
of dividends and distributions:
Class A......................... -- 610,656 -- 120,393
Class D......................... -- 312,261 -- 30,587
----------- ------------ ----------- ------------
-- 922,917 -- 150,980
----------- ------------ ----------- ------------
Net asset value of shares
redeemed:
Class A......................... (2,445,547) (934,557) (1,940,051) (661,791)
Class D......................... (979,219) (348,585) (757,095) (114,946)
----------- ------------ ----------- ------------
(3,424,766) (1,283,142) (2,697,146) (776,737)
----------- ------------ ----------- ------------
Change in net assets from capital
share transactions.............. 9,346,503 21,972,571 (922,455) 16,746,586
----------- ------------ ----------- ------------
Total change in net assets.......... (2,770,767) 25,475,649 (5,567,833) 18,309,125
Net Assets:
Beginning of Period............... 29,631,199 4,155,550 18,309,125 --
----------- ------------ ----------- ------------
End of Period..................... $26,860,432 $ 29,631,199 $12,741,292 $ 18,309,125
=========== ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 31
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1998
(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 International Equity Fund (commencement date May 12, 1994), (formerly
ESC Strategic Global Equity Fund), 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 -- To seek a high level of current income,
with a secondary objective of total return. The Fund seeks to achieve its
investment objective by investing primarily in debt instruments of U.S. and
foreign issuers that are rated below investment grade. (Prior to September
30, 1998, this Fund primarily invested in a diversified portfolio of
corporate, government and other debt instruments of U.S. issuers.)
ESC Strategic International Equity Fund -- To seek long-term capital
appreciation. The Fund seeks to achieve its investment objective by
primarily investing in a diversified portfolio of publicly traded common
stocks and securities convertible into or exchangeable for common stock of
non-U.S. issuers. (Prior to July 17, 1998, this Fund's investments were
diversified across both domestic and international markets.)
ESC Strategic Small Cap Fund -- To seek a high level of capital
appreciation. The Fund pursues its objective by investing primarily in
equity securities of domestic and foreign issuers.
ESC Strategic Appreciation Fund -- To seek long-term capital
appreciation. The Fund seeks to achieve its investment objective by
primarily investing in a diversified portfolio of U.S. based companies
publicly traded common stocks and securities convertible into or
exchangeable for common stock.
ESC Strategic Growth Fund -- To seek a high level of capital
appreciation. The Fund pursues its objective by investing primarily in
equity securities of domestic and foreign issuers believed to offer
superior opportunities for growth.
ESC Strategic Value Fund -- To seek long-term capital appreciation.
The Fund pursues its objective by investing primarily in equity securities
of domestic and foreign issuers believed to be undervalued.
2. SIGNIFICANT ACCOUNTING POLICIES. The following is a summary of the
significant accounting policies followed by the Funds in the preparation of its
financial statements. The policies are in conformity with generally
26
<PAGE> 32
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
accepted accounting principles. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts and disclosures. Actual results could differ from those estimates.
A. PORTFOLIO VALUATION. Investments in securities 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. Bid price is used when
no asked price is available. Bonds and other fixed income securities are
valued by using market quotations, and may be valued on the basis of prices
provided by a pricing service. Securities for which market quotations are
not readily available are valued at fair value as determined in good faith
by or at the direction of the Board of Directors. Short-term securities
which mature in 60 days or less are valued at amortized cost, if their
terms to maturity at purchase were 60 days or less, or by amortizing their
value on the 61st day prior to maturity, if their original term to maturity
at purchase exceeded 60 days.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Securities
transactions are recorded on a trade date basis. Realized gains and losses
from securities transactions are recorded on the identified cost basis.
Dividend income is recognized on the ex-dividend date and interest income,
including amortization of premium and accretion of discount on investments,
is accrued daily as earned.
C. DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS TO
SHAREHOLDERS. Distributions to shareholders are recorded on the
ex-dividend date. The amount of dividends and distributions are determined
in accordance with federal income tax regulations, which may differ from
generally accepted accounting principles. These "book/tax" differences are
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.
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, 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
27
<PAGE> 33
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
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. However, the Funds do isolate the effect of
fluctuations in foreign exchange rates when determining the gain or loss
upon the sale or maturity of foreign currency denominated debt obligations
pursuant to U.S. Federal income tax regulations. Such amounts are
categorized as foreign exchange gain or loss for both financial reporting
and income tax reporting purposes.
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 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. 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
28
<PAGE> 34
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
correlation between the price of the security and the underlying contract
could result in a loss to the Funds. At September 30, 1998, the
International Equity Fund had the following open forward foreign currency
contract:
INTERNATIONAL EQUITY FUND
LONG CONTRACT:
<TABLE>
<CAPTION>
SETTLEMENT MARKET UNREALIZED
AMOUNT/CURRENCY DATE COST VALUE LOSS
--------------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C>
300,562/New Zealand Dollar............... 10/2/98 U.S.$152,084 $150,431 $(1,653)
</TABLE>
3. RELATED PARTY TRANSACTIONS. The Company has entered into an investment
advisory agreement (the "Investment Advisory Agreement") with SunTrust Equitable
Securities Corporation ("STES" 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.
The Adviser has retained various other Managers to advise the International
Equity Fund, the Income Fund and the Appreciation Fund. The Adviser pays any
fees payable under these agreements with the Managers. For the period ended
September 30, 1998, the Adviser voluntarily waived fees of $5,065, $2,315,
$2,537, $28,909 and $32,828 for the Income Fund, International Equity Fund,
Appreciation Fund, Growth Fund and Value Fund, respectively.
BISYS Fund Services Limited Partnership d/b/a/ BISYS Fund Services
("BISYS") and BISYS Fund Services, Inc ("BFSI") are each a wholly-owned
subsidiary of the BISYS Group, Inc. BISYS serves as Administrator 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 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 each Fund
and are accrued daily.
For the period ended September 30, 1998, BISYS voluntarily waived
administration fees of $12,284 for the Value Fund.
BFSI serves as transfer agent and fund accountant for the Company. Pursuant
to a Transfer Agent Agreement between the Company and BFSI, BFSI provides the
Company with transfer and dividend disbursing agent services, for which it
receives a fee of $15.00 per account per year subject to a required minimum fee
of $15,000 for each Fund, plus out-of-pocket expenses. Pursuant to the Fund
Accounting Agreement between the Company and BFSI, BFSI assists the Company in
calculating net asset values and provides certain other accounting services for
each Fund for an annual fee of $30,000 per Fund plus out-of-pocket expenses.
29
<PAGE> 35
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
STES 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); International 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). No reimbursements were
necessary for the Funds.
BISYS acts as Distributor for the Funds pursuant to a Distribution
Contract. Each Fund has adopted a service and distribution plan ("Plan") with
respect to each class of its shares. The Plans provide that Class A shares will
pay the Distributor a fee up to an annual rate of 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 of
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 period ended September 30, 1998, the Income, International
Equity, Small Cap, Appreciation, Growth, and Value Fund paid brokerage
commissions of $1,147, $1,117, $3,620, $12,478, $24,796, and $6,362, to SunTrust
Equitable Securities Corporation.
4. SECURITIES TRANSACTIONS.
A. PURCHASE AND SALE TRANSACTIONS. The aggregate amount of purchases
and sales of investment securities, other than short-term securities, for
the period ended September 30, 1998 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Income.................................... $ 6,974,027 $20,944,005
International Equity...................... $12,673,070 $12,136,619
Small Cap................................. $28,822,587 $30,986,404
Appreciation.............................. $14,939,927 $15,596,051
Growth.................................... $13,274,954 $ 7,623,195
Value..................................... $ 5,430,902 $ 5,767,725
</TABLE>
B. FEDERAL INCOME TAX BASIS. Cost for book and federal income tax
purposes were substantially the same as of September 30, 1998. Gross
unrealized appreciation and depreciation on investment securities at
September 30, 1998, based on cost for Federal income tax purposes is as
follows:
<TABLE>
<CAPTION>
NET
GROSS GROSS UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
APPRECIATION DEPRECIATION (DEPRECIATION)
------------ ------------- --------------
<S> <C> <C> <C>
Income.................. $ 64,263 $ (650,775) $ (586,512)
International Equity.... 233,719,969 (107,017,416) 126,702,553
Small Cap............... 11,091,512 (21,868,084) (10,776,572)
Appreciation............ 3,877,668 (5,780,080) (1,902,412)
Growth.................. 929,353 (8,413,786) (7,484,433)
Value................... 158,690 (2,698,750) (2,540,060)
</TABLE>
30
<PAGE> 36
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
5. CAPITAL SHARE TRANSACTIONS. The Company is authorized to issue 650
million shares of capital stock with a par value $0.001 each. Transactions in
each class of shares of the Funds for the period ended September 30, 1998, and
the year ended March 31, 1998, were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998
----------------------------------------
INTERNATIONAL
INCOME EQUITY SMALL CAP
------------ ------------- ---------
<S> <C> <C> <C>
CLASS A
Beginning Balance.......................................... 2,443,891 1,101,884 5,561,203
--------- --------- ---------
Shares Sold................................................ 28,248 29,930 255,358
Shares issued in reinvestment of net investment income and
capital gain distributions............................... 51,881 0 0
Shares redeemed............................................ (336,254) (143,330) (477,815)
--------- --------- ---------
Net increase/(decrease) in shares.......................... (256,125) (113,400) (222,457)
--------- --------- ---------
Ending Balance............................................. 2,187,766 988,484 5,338,746
========= ========= =========
CLASS D
Beginning Balance.......................................... 82,351 234,924 1,701,274
--------- --------- ---------
Shares Sold................................................ 12,365 10,181 49,938
Shares issued in reinvestment of net investment income and
capital gain distributions............................... 1,443 0 0
Shares redeemed............................................ (28,230) (25,133) (175,111)
--------- --------- ---------
Net increase/(decrease) in shares.......................... (14,422) (14,952) (125,173)
--------- --------- ---------
Ending Balance............................................. 67,929 219,972 1,576,101
========= ========= =========
</TABLE>
31
<PAGE> 37
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
<TABLE>
<CAPTION>
PERIOD ENDED SEPTEMBER 30, 1998
----------------------------------------
APPRECIATION GROWTH VALUE
------------ ------------- ---------
<S> <C> <C> <C>
CLASS A
Beginning Balance.......................................... 2,114,008 1,458,113 1,199,696
--------- --------- ---------
Shares Sold................................................ 100,197 794,360 124,066
Shares issued in reinvestment of net investment income and
capital gain distributions............................... 0 0 0
Shares redeemed............................................ (235,532) (212,064) (193,664)
--------- --------- ---------
Net increase/(decrease) in shares.......................... (135,335) 582,296 (69,598)
--------- --------- ---------
Ending Balance............................................. 1,978,673 2,040,409 1,130,098
========= ========= =========
CLASS D
Beginning Balance.......................................... 475,250 711,840 392,807
--------- --------- ---------
Shares Sold................................................ 72,026 226,166 43,803
Shares issued in reinvestment of net investment income and
capital gain distributions............................... 0 0 0
Shares redeemed............................................ (64,190) (81,172) (73,756)
--------- --------- ---------
Net increase/(decrease) in shares.......................... 7,836 144,994 (29,953)
--------- --------- ---------
Ending Balance............................................. 483,086 856,834 362,854
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
------------------------------------------
INTERNATIONAL
INCOME EQUITY SMALL CAP
------------ ------------- ---------
<S> <C> <C> <C>
CLASS A
Beginning Balance...................................... 3,339,466 1,568,551 4,129,592
---------- --------- ---------
Shares Sold............................................ 155,058 102,868 1,661,014
Shares issued in reinvestment of net investment income
and capital gain distributions....................... 131,084 122,744 384,551
Shares redeemed........................................ (1,181,717) (692,279) (613,954)
---------- --------- ---------
Net increase/(decrease) in shares...................... (895,575) (466,667) 1,431,611
---------- --------- ---------
Ending Balance......................................... 2,443,891 1,101,884 5,561,203
========== ========= =========
CLASS D
Beginning Balance...................................... 145,898 366,560 1,290,948
---------- --------- ---------
Shares Sold............................................ 17,012 13,339 428,750
Shares issued in reinvestment of net investment income
and capital gain distributions....................... 3,690 61,747 132,655
Shares redeemed........................................ (84,249) (206,722) (151,079)
---------- --------- ---------
Net increase/(decrease) in shares...................... (63,547) (131,636) 410,326
---------- --------- ---------
Ending Balance......................................... 82,351 234,924 1,701,274
========== ========= =========
</TABLE>
32
<PAGE> 38
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements (continued) -- September 30, 1998
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1998
------------------------------------------
APPRECIATION GROWTH VALUE(A)
------------ ------------- ---------
<S> <C> <C> <C>
CLASS A
Beginning Balance...................................... 3,190,643 295,961 0
---------- --------- ---------
Shares Sold............................................ 402,557 1,186,062 1,248,837
Shares issued in reinvestment of net investment income
and capital gain distributions....................... 595,282 48,311 10,945
Shares redeemed........................................ (2,074,474) (72,221) (60,086)
---------- --------- ---------
Net increase/(decrease) in shares...................... (1,076,635) 1,162,152 1,199,696
---------- --------- ---------
Ending Balance......................................... 2,114,008 1,458,113 1,199,696
========== ========= =========
CLASS D
Beginning Balance...................................... 292,678 135,392 0
---------- --------- ---------
Shares Sold............................................ 154,004 579,982 400,749
Shares issued in reinvestment of net investment income
and capital gain distributions....................... 104,039 24,782 2,786
Shares redeemed........................................ (75,471) (28,316) (10,728)
---------- --------- ---------
Net increase/(decrease) in shares...................... 182,572 576,448 392,807
---------- --------- ---------
Ending Balance......................................... 475,250 711,840 392,807
========== ========= =========
</TABLE>
(a) For the period from May 7, 1997 (commencement of operations) through March
31, 1998.
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 of both the total Fund portfolio and of each
Manager. The Adviser 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.
Effective September 30, 1998, the Income Fund's sole Manager is Cincinnati
Asset Management, Inc. Llama Asset Management Company, L.P. and Murray Johnstone
International Limited are no longer Managers for the Income Fund. Effective July
17, 1998, the International Equity Fund's sole Manager is Murray Johnstone
International Limited, Globeflex Capital, L.P. is no longer a Manager for the
International Equity Fund.
The Managers are as follows:
ESC Strategic Income Fund -- Cincinnati Asset Management, Inc.
ESC Strategic International Equity Fund -- Murray Johnstone
International Limited.
ESC Strategic Small Cap Fund -- Equitable Asset Management, Inc.
ESC Strategic Appreciation Fund -- GlobeFlex Capital, L.P.; Brandes
Investment Partners, L.P., and Atlantic Capital Management, LLC.
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.
33
<PAGE> 39
ESC STRATEGIC FUNDS, INC.
Financial Highlights
<TABLE>
<CAPTION>
INCOME FUND
--------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
MAY 4, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period....... $ 9.99 $ 9.73 $ 9.89 $ 9.94 $ 10.00
------- ------- ------- ------- -------
Income from Investment
Operations
Net investment
income/(loss)........... 0.23 0.34 0.60 0.59 0.55
Net realized and
unrealized
gains/(losses) on
investments............. 0.01 0.44 (0.16) 0.16 (0.05)
------- ------- ------- ------- -------
Total from investment
operations................ 0.24 0.78 0.44 0.75 0.50
------- ------- ------- ------- -------
Less Dividends and
Distributions:
From net investment
income.................. (0.24) (0.52) (0.60) (0.59) (0.01)
From realized gains....... -- -- -- (0.21) (0.55)
------- ------- ------- ------- -------
Total Dividends and
Distributions............. (0.24) (0.52) (0.60) (0.80) (0.56)
------- ------- ------- ------- -------
Net asset value per share,
end of period........... $ 9.99 $ 9.99 $ 9.73 $ 9.89 $ 9.94
======= ======= ======= ======= =======
Total Return (excludes
sales charge)........... 2.42%(a) 8.18% 3.91% 7.67% 5.30%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands).......... $21,858 $24,413 $32,506 $36,891 $32,373
Ratios to Average Net
Assets of:
Net investment income/
(loss)................ 4.78% 5.27% 5.49% 5.87% 6.29%*
Expenses net of
waivers/reimbursements
and expenses paid by
third parties......... 1.95% 1.87% 1.65% 1.70% 1.85%*
Expenses before
waivers/reimbursements
and expenses paid by
third parties......... 1.99% 1.87% 1.70% 1.75% 1.86%*
Portfolio Turnover
Rate**................ 65% 130% 123% 138% 92%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
34
<PAGE> 40
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
INCOME FUND
--------------------------------------------------------------------------------------
CLASS D
--------------------------------------------------------------------------------------
MAY 4, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period....... $9.99 $9.73 $ 9.89 $ 9.94 $10.00
----- ----- ------ ------ ------
Income from Investment
Operations
Net investment
income/(loss)........... 0.20 0.28 0.50 0.54 0.50
Net realized and
unrealized
gains/(losses) on
investments............. 0.01 0.45 (0.16) 0.16 (0.05)
----- ----- ------ ------ ------
Total from investment
operations................ 0.21 0.73 0.34 0.70 0.45
----- ----- ------ ------ ------
Less Dividends and
Distributions:
From net investment
income.................. (0.21) (0.47) (0.50) (0.54) (0.01)
From realized gains....... -- -- -- (0.21) (0.50)
----- ----- ------ ------ ------
Total Dividends and
Distributions............. (0.21) (0.47) (0.50) (0.75) (0.51)
----- ----- ------ ------ ------
Net asset value per share,
end of period........... $9.99 $9.99 $ 9.73 $ 9.89 $ 9.94
===== ===== ====== ====== ======
Total Return (excludes
sales charge)........... 2.17%(a) 7.64% 3.39% 7.11% 4.74%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands).......... $ 679 $ 823 $1,420 $1,446 $1,241
Ratios to Average Net
Assets of:
Net investment income/
(loss)................ 4.31% 4.77% 4.99% 5.37% 5.73%*
Expenses net of
waivers/reimbursements
and expenses paid by
third parties......... 2.46% 2.37% 2.15% 2.20% 2.29%*
Expenses before
waivers/reimbursements
and expenses paid by
third parties......... 2.50% 2.37% 2.21% 2.25% 2.31%*
Portfolio Turnover
Rate**................ 65% 130% 123% 138% 92%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
35
<PAGE> 41
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
MAY 12, 1994
(COMMENCEMENT
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........ $12.06 $ 11.66 $ 11.08 $ 9.90 $10.00
------ ------- ------- ------- ------
Income from Investment
Operations
Net investment
income/(loss)............ (0.03) -- (0.04) (0.04) (0.05)
Net realized and unrealized
gains/(losses) on
investments.............. (2.53) 2.37 0.97 1.46 (0.03)
------ ------- ------- ------- ------
Total from investment
operations................. (2.56) 2.37 0.93 1.42 (0.08)
------ ------- ------- ------- ------
Less Dividends and
Distributions:
From realized gains........ -- (1.97) (0.35) (0.24) (0.02)(b)
------ ------- ------- ------- ------
Total Dividends and
Distributions.............. -- (1.97) (0.35) (0.24) (0.02)
------ ------- ------- ------- ------
Net asset value per share,
end of period............ $ 9.50 $ 12.06 $ 11.66 $ 11.08 $ 9.90
====== ======= ======= ======= ======
Total Return (excludes
sales charge)............ (21.23%)(a) 22.24% 8.44% 14.41% (0.84%)
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands)........... $9,391 $13,286 $18,282 $14,597 $9,213
Ratios to Average Net
Assets of:
Net investment income/
(loss)................. (0.30%) (0.50%) (0.40%) (0.36%) (0.65%)*
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................ 2.41% 2.48% 2.25% 2.37% 2.50%*
Expenses before waivers/
reimbursements and
expenses paid by third
parties................ 2.44% 2.48% 2.25% 2.43% 3.22%*
Portfolio Turnover
Rate**................. 90% 79% 94% 92% 76%
</TABLE>
(a) Not Annualized.
(b) Represents distribution in excess of net investment income.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
36
<PAGE> 42
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------------
CLASS D
--------------------------------------------------------------------------------------
MAY 12, 1994
(COMMENCEMENT
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........ $ 11.81 $ 11.47 $ 10.95 $ 9.82 $10.00
------- ------- ------- ------- ------
Income from Investment
Operations
Net investment
income/(loss)............ (0.02) (0.13) (0.10) (0.09) (0.07)
Net realized and unrealized
gains/(losses) on
investments.............. (2.50) 2.44 0.97 1.46 (0.10)
------- ------- ------- ------- ------
Total from investment
operations................. (2.52) 2.31 0.87 1.37 (0.17)
------- ------- ------- ------- ------
Less Dividends and
Distributions:
From realized gains........ -- (1.97) (0.35) (0.24) (0.01)(b)
------- ------- ------- ------- ------
Total Dividends and
Distributions.............. -- (1.97) (0.35) (0.24) (0.01)
------- ------- ------- ------- ------
Net asset value per share,
end of period............ $ 9.29 $ 11.81 $ 11.47 $ 10.95 $ 9.82
======= ======= ======= ======= ======
Total Return (excludes
sales charge)............ (21.34%)(a) 22.09% 7.99% 14.01% (1.72%)
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands)........... $ 2,043 $ 2,776 $ 4,204 $ 3,725 $3,322
Ratios to Average Net
Assets of:
Net investment income/
(loss)................. (0.81%) (1.00%) (0.90%) (0.83%) (1.51%)*
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................ 2.92% 2.98% 2.78% 2.87% 2.98%*
Expenses before waivers/
reimbursements and
expenses paid by third
parties................ 2.95% 2.98% 2.79% 2.96% 3.69%*
Portfolio Turnover
Rate**................. 90% 79% 94% 92% 76%
</TABLE>
(a) Not Annualized.
(b) Represents distribution in excess of net investment income.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
37
<PAGE> 43
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
JUNE 8, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........ $ 22.81 $ 17.55 $ 15.88 $ 11.25 $10.00
------- -------- ------- ------- ------
Income from Investment
Operations
Net investment
income/(loss)............ (0.06) 0.02 (0.05) (0.08) (0.03)
Net realized and unrealized
gains/(losses) on
investments.............. (7.18) 6.97 2.46 5.19 1.52
------- -------- ------- ------- ------
Total from investment
operations................. (7.24) 6.99 2.41 5.11 1.49
------- -------- ------- ------- ------
Less Dividends and
Distributions:
From net investment
income................... -- -- -- -- (0.24)
From realized gains........ -- (1.73) (0.74) (0.48) --
------- -------- ------- ------- ------
Total Dividends and
Distributions.............. -- (1.73) (0.74) (0.48) (0.24)
------- -------- ------- ------- ------
Net asset value per share,
end of period............ $ 15.57 $ 22.81 $ 17.55 $ 15.88 $11.25
======= ======== ======= ======= ======
Total Return (excludes
sales charge)............ (31.74%)(a) 40.64% 14.99% 45.88% 15.03%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands)........... $83,142 $126,857 $72,488 $28,840 $8,785
Ratios to Average Net
Assets of:
Net investment income/
(loss)................. (0.48%) (0.18%) (0.44%) (0.80%) (0.43%)*
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................ 1.75% 1.65% 1.66% 2.00% 2.00%*
Expenses before waivers/
reimbursements and
expenses paid by third
parties................ 1.75% 1.68% 1.74% 2.18% 3.28%*
Portfolio turnover
rate**................. 24% 67% 65% 102% 151%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
38
<PAGE> 44
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP FUND
--------------------------------------------------------------------------------------
CLASS D
--------------------------------------------------------------------------------------
JUNE 8, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........ 22.50 $ 17.35 $ 15.76 $11.22 $10.00
------- ------- ------- ------ ------
Income from Investment
Operations
Net investment
income/(loss)............ (0.06) (0.07) (0.11) (0.16) (0.05)
Net realized and unrealized
gains/(losses) on
investments.............. (7.13) 6.95 2.44 5.18 1.51
------- ------- ------- ------ ------
Total from investment
operations................. (7.19) 6.88 2.33 5.02 1.46
------- ------- ------- ------ ------
Less Dividends and
Distributions:
From net investment
income................... -- -- -- -- (0.24)
From realized gains........ -- (1.73) (0.74) (0.48) --
------- ------- ------- ------ ------
Total Dividends and
Distributions.............. -- (1.73) (0.74) (0.48) (0.24)
------- ------- ------- ------ ------
Net asset value per share,
end of period............ $ 15.31 $ 22.50 $ 17.35 $15.76 $11.22
======= ======= ======= ====== ======
Total Return (excludes
sales charge)............ (31.96%)(a) 40.47% 14.59% 45.19% 14.72%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands)........... $24,133 $38,274 $22,392 $8,897 $3,367
Ratios to Average Net
Assets of:
Net investment income/
(loss)................. (0.99%) (0.68%) (0.96%) (1.30%) (0.93%)*
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................ 2.26% 2.15% 2.19% 2.50% 2.50%*
Expenses before waivers/
reimbursements and
expenses paid by third
parties................ 2.26% 2.18% 2.29% 2.74% 3.68%*
Portfolio turnover
rate**................. 24% 67% 65% 102% 151%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
39
<PAGE> 45
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
APPRECIATION FUND
--------------------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------------------
JULY 6, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period....... $ 15.80 $ 14.03 $ 13.02 $ 10.67 $ 10.00
------- ------- ------- ------- -------
Income from Investment
Operations
Net investment
income/(loss)........... (0.03) 0.02 (0.04) (0.05) --
Net realized and
unrealized
gains/(losses) on
investments............. (4.03) 6.02 1.92 2.71 0.73
------- ------- ------- ------- -------
Total from investment
operations................ (4.06) 6.04 1.88 2.66 0.73
------- ------- ------- ------- -------
Less Dividends and
Distributions:
From realized gains....... -- (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- -------
Total Dividends and
Distributions............. -- (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- -------
Net asset value per share,
end of period........... $ 11.74 $ 15.80 $ 14.03 $ 13.02 $ 10.67
======= ======= ======= ======= =======
Total Return (excludes
sales charge)........... (25.70%)(a) 46.73% 14.25% 25.07% 7.32%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands).......... $23,237 $33,394 $44,767 $25,561 $15,126
Ratios to Average Net
Assets of:
Net investment
income/(loss)........... (0.31%) (0.40%) (0.30%) (0.39%) (0.04%)*
Expenses net of
waivers/reimbursements
and expenses paid by
third parties......... 1.91% 1.80% 1.82% 2.00% 2.00%*
Expenses before
waivers/reimbursements
and expenses paid by
third parties......... 1.92% 1.80% 1.84% 2.10% 2.88%*
Portfolio turnover
rate**................ 44% 67% 71% 78% 58%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
40
<PAGE> 46
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
APPRECIATION FUND
--------------------------------------------------------------------------------------
CLASS D
--------------------------------------------------------------------------------------
JULY 6, 1994
(COMMENCEMENT)
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 MARCH 31, 1997 MARCH 31, 1996 MARCH 31, 1995
------------------ -------------- -------------- -------------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period....... $ 15.54 $ 13.85 $ 12.91 $ 10.63 $ 10.00
------- ------- ------- ------- -------
Income from Investment
Operations
Net investment
income/(loss)........... (0.03) (0.08) (0.08) (0.09) (0.03)
Net realized and
unrealized
gains/(losses) on
investments............. (3.99) 6.04 1.89 2.68 0.72
------- ------- ------- ------- -------
Total from investment
operations................ (4.02) 5.96 1.81 2.59 0.69
------- ------- ------- ------- -------
Less Dividends and
Distributions:
From realized gains....... -- (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- -------
Total Dividends and
Distributions............. -- (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- -------
Net asset value per share,
end of period........... $ 11.52 $ 15.54 $ 13.85 $ 12.91 $ 10.63
======= ======= ======= ======= =======
Total Return (excludes
sales charge)........... (25.87%)(a) 46.76% 13.81% 24.50% 6.92%
Ratios/Supplemental Data:
Net Assets End of Period
(in thousands).......... $ 5,566 $ 7,384 $ 4,054 $ 2,482 $ 1,693
Ratios to Average Net
Assets of:
Net investment
income/(loss)........... (0.83%) (0.90%) (0.78%) (0.86%) (0.56%)*
Expenses net of
waivers/reimbursements
and expenses paid by
third parties......... 2.42% 2.30% 2.34% 2.50% 2.50%*
Expenses before
waivers/reimbursements
and expenses paid by
third parties......... 2.43% 2.30% 2.36% 2.64% 3.40%*
Portfolio turnover
rate**................ 44% 67% 71% 78% 58%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
41
<PAGE> 47
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
GROWTH FUND
------------------------------------------------------------------------------------------
CLASS A CLASS D
-------------------------------------------- -------------------------------------------
JANUARY 28, JANUARY 28,
1997 1997
(COMMENCEMENT) (COMMENCEMENT)
SIX MONTHS YEAR OF OPERATIONS) SIX MONTHS YEAR OF OPERATIONS)
ENDED ENDED THROUGH ENDED ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31, SEPTEMBER 30, MARCH 31, MARCH 31,
1998 1998 1997 1998 1998 1997
------------- --------- -------------- ------------- --------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per
share, beginning of
period.............. $ 13.68 $ 9.64 $ 10.00 $ 13.61 $ 9.63 $ 10.00
------- ------- ------- ------- ------- -------
Income from Investment
Operations
Net investment
income/(loss)..... (0.04) 0.01 -- (0.05) (0.03) --
Net realized and
unrealized
gains/(losses) on
investments....... (4.35) 4.65 (0.36) (4.34) 4.63 (0.37)
------- ------- ------- ------- ------- -------
Total from investment
operations.......... (4.39) 4.66 (0.36) (4.39) 4.60 (0.37)
------- ------- ------- ------- ------- -------
Less Dividends and
Distributions:
From net investment
income............ -- (0.36) -- -- (0.36) --
From realized
gains............. -- (0.26) -- -- (0.26) --
------- ------- ------- ------- ------- -------
Total Dividends and
Distributions....... -- (0.62) -- -- (0.62) --
------- ------- ------- ------- ------- -------
Net asset value per
share, end of
period............ $ 9.29 $ 13.68 $ 9.64 9.22 $ 13.61 $ 9.63
======= ======= ======= ======= ======= =======
Total Return
(excludes sales
charge)........... (32.09%)(a) 48.92% (3.60%) (32.26%)(a) 48.33% (3.70%)
Ratios/Supplemental
Data:
Net Assets End of
Period (in
thousands)........ $18,956 $19,942 $ 2,852 $ 7,904 $ 9,689 $ 1,304
Ratios to Average
Net Assets of:
Net investment
income/(loss)... (0.65%) (0.36%) 0.25%* (1.17%) (0.86%) (0.23%)*
Expenses net of
waivers/reimbursements
and expenses
paid by third
parties......... 2.00% 1.62% 2.00%* 2.50% 2.12% 2.50%*
Expenses before
waivers/reimbursements
and expenses
paid by third
parties......... 2.18% 2.45% 5.51%* 2.69% 2.95% 6.91%*
Portfolio turnover
rate**.......... 31% 86% 14% 31% 86% 14%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
42
<PAGE> 48
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
VALUE FUND
--------------------------------------------------------------------------
CLASS A CLASS D
----------------------------------- -----------------------------------
MAY 7, 1997 MAY 7, 1997
(COMMENCEMENT) (COMMENCEMENT)
OF OPERATIONS) OF OPERATIONS)
SIX MONTHS ENDED THROUGH SIX MONTHS ENDED THROUGH
SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1998 MARCH 31, 1998
------------------ -------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value per share,
beginning of period............ $ 11.51 $ 10.00 $ 11.47 $ 10.00
------- ------- ------- -------
Income from Investment Operations
Net investment income.......... -- 0.04 (0.01) 0.01
Net realized and unrealized
gains on investments......... (2.93) 1.60 (2.94) 1.58
------- ------- ------- -------
Total from investment
operations..................... (2.93) 1.64 (2.95) 1.59
------- ------- ------- -------
Less Dividends and Distributions:
From net investment income..... (0.03) (0.03) (0.02) (0.02)
From realized gains............ -- (0.10) -- (0.10)
------- ------- ------- -------
Total Dividends and
Distributions................ (0.03) (0.13) (0.02) (0.12)
------- ------- ------- -------
Net asset value per share, end
of period.................... $ 8.55 $ 11.51 $ 8.50 $ 11.47
======= ======= ======= =======
Total Return (excludes sales
charge)...................... (25.72%)(a) 16.47% (25.89%)(a) 15.95%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................... $ 9,658 $13,804 $ 3,083 $ 4,505
Ratios to Average Net Assets
of:
Net investment income/(loss)... (0.43%) 0.42%* (0.94%) (0.13%)*
Expenses net of
waivers/reimbursements and
expenses paid by third
parties.................... 2.00% 1.56%* 2.50% 2.06%*
Expenses before
waivers/reimbursements and
expenses paid by third
parties.................... 2.56% 2.31%* 3.06% 2.81%*
Portfolio turnover rate**.... 42% 32% 42% 32%
</TABLE>
(a) Not Annualized.
* Annualized.
** Portfolio turnover is calculated on the basis of the fund as a whole without
distinguishing between the classes of shares issued.
43
<PAGE> 49
[ESC STRATEGIC FUNDS LOGO]
ESC STRATEGIC FUNDS, INC.
P.O. BOX 182487
COLUMBUS, OHIO 43218-2487
GENERAL AND ACCOUNT INFORMATION:
(800) 261-FUND(3863)
INVESTMENT ADVISER
- ---------------------
SunTrust Equitable Securities Corporation
800 Nashville City Center
Nashville, Tennessee 37219-1743
ADMINISTRATOR AND DISTRIBUTOR
- ---------------------------------
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
COUNSEL
- --------
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, D.C. 20006
INDEPENDENT ACCOUNTANTS
- ---------------------------
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York 10036
12/98
[ESC STRATEGIC FUNDS LOGO]
ESC Strategic INCOME Fund
ESC Strategic INTERNATIONAL EQUITY Fund
ESC Strategic SMALL CAP Fund
ESC Strategic APPRECIATION Fund
ESC Strategic GROWTH Fund
ESC Strategic VALUE Fund
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1998
(UNAUDITED)
