<PAGE> 1
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
MOODY'S/S&P PRINCIPAL MARKET
RATINGS # AMOUNT VALUE
- ----------- --------- ------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS -- 89.2%
BEVERAGES -- 1.7%
B1/B+ Canandaigua Brands,
Inc., 8.50%,
3/1/2009.......... $132,000 $ 122,760
-----------
CABLE -- 2.9%
B1/B+ Adelphia
Communications,
9.88%, 3/1/2007... 200,000 203,500
-----------
CHEMICALS -- 2.9%
B1/B NL Industries,
11.75%,
10/15/2003........ 200,000 207,500
-----------
CONSUMER GOODS & SERVICES -- 2.7%
Ba3/B+ Finlay Fine Jewelry
Corp., 8.38%,
5/1/2008.......... 200,000 187,500
-----------
ENTERTAINMENT -- 5.1%
Ba2/Bb+ Park Place
Entertainment,
7.875%,
12/15/2005........ 105,000 99,225
B2/B President Casinos,
Inc., 13.00%,
9/15/2001......... 220,000 198,000
B3/B Regal Cinemas, Inc.,
9.50%, 6/1/2008,
Callable 6/1/2003
@ 104.75.......... 95,000 64,600
-----------
361,825
-----------
FINANCIAL SERVICES -- 2.7%
B2/B Polymer Group, Inc.,
9.00%, 7/1/2007... 200,000 190,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
MOODY'S/S&P PRINCIPAL MARKET
RATINGS # AMOUNT VALUE
- ----------- --------- ------
<S> <C> <C> <C>
FOOD PRODUCTS (7.6%)
B1/B+ Chiquita Brands,
9.63%,
1/15/2004......... $250,000 $ 219,375
B3/B+ Fleming Co., 10.68%,
7/31/2007,
Callable 7/31/2002
@ 105.31.......... 200,000 185,000
B3/B Packaged Ice, Inc.,
9.75%, 2/1/2005,
Callable 2/1/2002
@ 104.875......... 148,000 133,940
-----------
538,315
-----------
FOREST PRODUCTS & PAPERS -- 1.9%
B1/B+ Doman Industries
Ltd., 8.75%,
3/15/2004......... 186,000 133,920
-----------
GAMING -- 2.8%
B2/B Hollywood Park,
Inc., 9.50%,
8/1/2007.......... 200,000 195,000
-----------
GENERAL INDUSTRIES & MANUFACTURING -- 7.6%
B3/B- International Wire
Group, 11.75%,
6/1/2005.......... 250,000 256,875
B1/B+ Nortek, Inc., 9.13%,
9/1/2007, Callable
9/1/2002 @
104.56............ 290,000 278,400
-----------
535,275
-----------
HEALTH CARE -- 2.4%
B1/B+ NBTY, Inc., 8.63%,
9/15/2007,
Callable 9/15/2002
@ 104.313......... 200,000 167,000
-----------
MANUFACTURING - CONSUMER GOODS -- 2.9%
B2/B Applied Extrusion
Tech., 11.50%,
4/1/2002.......... 200,000 205,500
-----------
</TABLE>
See accompanying notes to financial statements.
1
<PAGE> 2
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
MOODY'S/S&P PRINCIPAL MARKET
RATINGS # AMOUNT VALUE
- ----------- --------- ------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS (CONTINUED)
MEDIA - CABLE -- 6.4%
B1/B Helicon Group, Inc.,
11.00%,
11/1/2003......... $250,000 $ 257,813
B2/B Intermedia Capital
Partners, 11.25%,
8/1/2006.......... 174,000 194,880
-----------
452,693
-----------
MEDIA - NON CABLE -- 8.5%
B3/B- Allbritton
Communications,
9.75%,
11/30/2007........ 188,000 188,000
B3/B- Citadel Broadcasting
Corp., 10.25%,
7/1/2007.......... 200,000 205,000
B3/B- Gray Communications
Systems, 10.63%,
10/1/2006,
Callable 10/1/2001
@ 105.31.......... 200,000 207,499
-----------
600,499
-----------
OIL & GAS -- 5.7%
B1/BB- Cliffs Drilling Co.,
10.25%,
5/15/2003......... 200,000 199,000
B2/B- Plains Resources,
Inc., 10.25%,
3/15/2006......... 200,000 202,000
-----------
401,000
-----------
RETAIL -- 2.7%
B3/B- Tropical Sportswear
Int'l, 11.00%,
6/15/2008......... 200,000 189,000
-----------
SOFTWARE -- 1.7%
B3/B- Psinet, Inc.,
10.00%, 2/15/05... 126,000 120,488
-----------
STEEL/IRON -- 2.7%
B2/B Weirton Steel Corp.,
11.38%, 7/1/2004,
Callable 7/1/2002
@ 105.69.......... 200,000 192,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
MOODY'S/S&P PRINCIPAL MARKET
RATINGS # AMOUNT VALUE
- ----------- --------- ------
<S> <C> <C> <C>
TELECOMMUNICATIONS -- 6.4%
B2/B Paging Network,
10.00%,
10/15/2008,
Callable
10/15/2001 @ 105.. $200,000 $ 56,000
B3/B- Rural Cellular
Corp., 9.63%,
5/15/2008,
Callable 5/15/2003
@ 104.813......... 200,000 205,000
B3/B- USA Mobile
Communication,
9.50%, 2/1/2004... 250,000 187,500
-----------
448,500
-----------
TEXTILES -- 7.3%
B3/B+ Delta Mills, Inc.,
9.63%, 9/1/2007... 200,000 156,000
B3/B Hartmarx Corp.,
10.88%,
1/15/2002......... 250,000 253,125
B2/B+ Pillowtex Corp.,
10.00%,
11/15/2006........ 151,000 103,435
-----------
512,560
-----------
TRANSPORTATION -- 4.6%
Ba3/BBB Greyhound Lines,
11.50%,
4/15/2007......... 290,000 326,513
-----------
TOTAL CORPORATE
OBLIGATIONS (COST
$6,772,192)....... 6,291,348
-----------
PREFERRED STOCKS -- 2.8%
PUBLISHING & PRINTING -- 2.8%
Primedia Corp....... 2,000 197,000
-----------
TOTAL PREFERRED
STOCKS (COST
$208,000)......... 197,000
-----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE> 3
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INCOME FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES
OR
MOODY'S/S&P PRINCIPAL MARKET
RATINGS # AMOUNT VALUE
- ----------- --------- ------
<S> <C> <C> <C>
SHORT-TERM INVESTMENTS -- 6.4%
CASH SWEEP ACCOUNT -- 6.4%
Union Bank of
California........ $448,919 $ 448,919
-----------
TOTAL SHORT-TERM
INVESTMENTS
(COST $448,919)... 448,919
-----------
TOTAL INVESTMENTS
(COST $7,429,112)
(a) -- 98.4%...... 6,937,267
OTHER ASSETS
IN EXCESS OF
LIABILITIES --
1.6%.............. 115,537
-----------
TOTAL NET ASSETS --
100.0%............ $ 7,052,804
===========
(a) Represents cost for federal income tax and financial
reporting purposes and differs from value by net
unrealized depreciation of securities as follows:
Unrealized appreciation.................. $ 45,209
Unrealized depreciation.................. (537,054)
-----------
Net unrealized depreciation.............. $ (491,845)
===========
</TABLE>
# See page 18 for Credit Ratings.
See accompanying notes to financial statements.
3
<PAGE> 4
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND*
Portfolio of Investments -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---------- ----------
<C> <S> <C> <C>
COMMON STOCKS -- 98.2%
APPLIANCES & HOUSEHOLD PRODUCTS -- 1.9%
10,000 Sharp Corp.............. $ 126,614 $ 160,238
---------- ----------
AUTOMOTIVE -- 2.7%
3,500 Gkn PLC................. 59,182 55,768
58,000 Shinmaywa Industries.... 158,978 168,334
---------- ----------
218,160 224,102
---------- ----------
BANKING -- 4.9%
1,500 Abbey National PLC...... 29,427 26,630
11,816 Allied Irish Banks
PLC................... 56,263 142,702
10,000 Banco Frances Del Rio de
La Plata SA, ADR...... 185,013 198,750
1,500 Barclays PLC, ORD....... 44,705 44,022
---------- ----------
315,408 412,104
---------- ----------
BEVERAGES -- 2.6%
7,000 Fomento Economico,
ADR................... 183,245 219,188
---------- ----------
BROADCASTING & PUBLISHING -- 1.6%
12,993 NLG Elsevier, ORD....... 210,220 133,531
---------- ----------
BUILDING MATERIALS -- 3.3%
2,504 Lafarge................. 261,153 276,807
---------- ----------
BUSINESS EQUIPMENT & SERVICES -- 2.1%
2,502 Vivendi................. 206,632 175,731
---------- ----------
CHEMICALS -- 0.5%
3,400 Imperial Chemical
Industries PLC 100p... 38,726 37,712
---------- ----------
COMPUTER EQUIPMENT -- 2.0%
5,700 Taiwan Semiconductor,
ADR (b)............... 166,158 168,150
---------- ----------
ELECTRICAL & ELECTRONICS -- 2.0%
18,000 Elektrim Spolka Alcyjna
SA.................... 204,584 166,935
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---------- ----------
<C> <S> <C> <C>
ENERGY -- 2.7%
3,400 British Petroleum Co.
PLC (b)............... $ 49,821 $ 62,098
25,000 Companhia Paranaense De
Energia-Copel, ADR.... 256,533 164,063
---------- ----------
306,354 226,161
---------- ----------
ENGINEERING -- 5.1%
1,583 Mannesmann AG........... 164,692 252,882
8,000 Nippon Comsys Co........ 99,772 167,940
---------- ----------
264,464 420,822
---------- ----------
FINANCIAL SERVICES -- 2.9%
5,000 Lloyds TSB Group PLC.... 71,695 62,376
1,100 Takefuji Corp........... 170,340 183,184
---------- ----------
242,035 245,560
---------- ----------
FOOD PRODUCTS -- 2.4%
10,000 Companhia Brasileira De
Distribuicao Grupo.... 190,182 200,576
---------- ----------
HEALTH & PERSONAL CARE -- 2.3%
4,000 Yamanouchi
Pharmaceutical Co.
Ltd................... 158,111 187,476
---------- ----------
INSURANCE -- 9.2%
762 Aegon N.V............... 68,560 65,571
262 Allianz AG Holdings..... 64,757 75,505
1,618 AXA Co.................. 84,600 204,711
549 Marschollek
Lautenshlaeger........ 65,073 95,186
18,500 Norwich Union PLC....... 126,605 133,829
324 Zurich Allied AG........ 213,893 180,723
---------- ----------
623,488 755,525
---------- ----------
MACHINE-DIVERSIFIED -- 0.2%
5,000 Fki..................... 18,039 15,666
---------- ----------
MACHINERY & EQUIPMENT -- 2.3%
4,000 Fuji Machine Mfg........ 184,241 191,609
---------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE> 5
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---------- ----------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
MEDIA -- 1.3%
4,000 Sogecable (b)........... $ 97,854 $ 109,183
---------- ----------
MERCHANDISING -- 0.9%
379 Pinault Printemps
Redo.................. 59,367 71,846
---------- ----------
METALS -- DIVERSIFIED -- 2.9%
20,000 Tubos De Acero De Mex... 238,798 245,000
---------- ----------
MINING -- 3.4%
3,000 Sar Anglogold........... 162,488 189,005
18,000 Wmc Ltd................. 83,281 91,629
---------- ----------
245,769 280,634
---------- ----------
MISC. MATERIALS & COMMODITIES -- 3.0%
1,362 Cie De St. Gobain
(Compagniede)......... 239,514 253,840
---------- ----------
OFFICE/BUSINESS EQUIPMENT -- 2.2%
6,000 Fujitsu Ltd............. 105,604 187,101
---------- ----------
OIL & GAS TRANSMISSION -- 1.0%
4,000 Magyar Olaj-Es Gazipari
Reszvenytar, GDR...... 65,000 84,000
---------- ----------
OIL/GAS -- 3.8%
17,800 Petroleo Brasileiro SA,
ADR................... 243,901 274,421
5,500 Shell Transport &
Trading Co............ 47,132 41,123
---------- ----------
291,033 315,544
---------- ----------
PHARMACEUTICALS -- 3.3%
2,520 Gedeon Richter, GDR..... 113,605 101,556
85 Novartis AG............. 92,051 126,091
4,000 SmithKline Beecham
PLC................... 46,885 46,476
---------- ----------
252,541 274,123
---------- ----------
PUBLISHING & PRINTING -- 3.3%
3,500 Pearson PLC............. 78,227 75,107
5,650 VNU-Verenigde
Nederlandse
Uitgeversbedrijven.... 71,300 196,160
---------- ----------
149,527 271,267
---------- ----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---------- ----------
<C> <S> <C> <C>
REAL ESTATE -- 3.1%
15,000 Cheung Kong Holdings
Ltd................... $ 137,247 $ 125,039
27,000 City Development Ltd.... 54,788 137,345
---------- ----------
192,035 262,384
---------- ----------
RESTAURANTS -- 0.8%
5,000 Whitbread PLC........... 88,472 63,035
---------- ----------
STEEL/IRON -- 1.5%
4,000 Pohang Iron & Steel..... 131,000 125,250
---------- ----------
TELECOMMUNICATION EQUIPMENT -- 3.7%
2,000 Matsushita
Communications........ 137,633 222,604
5,800 SPT Telekom A.S......... 71,794 88,227
---------- ----------
209,427 310,831
---------- ----------
TELECOMMUNICATION SERVICES -- 4.7%
36,000 China Telecom Ltd.
(b)................... 55,327 111,000
4,500 Hellenic
Telecommunication
Organization SA....... 105,829 105,021
9 NTT Mobile
Communications........ 138,831 177,520
---------- ----------
299,987 393,541
---------- ----------
TELECOMMUNICATIONS -- 8.6%
2,500 British
Telecommunications
PLC................... 37,807 37,858
6,800 Telecom Argentina,
ADR................... 230,682 181,475
20,500 Telecom Corp. of New
Zealand Ltd........... 76,401 80,775
44,426 Telecom Italia Mobile
SpA................... 172,031 276,310
10,646 Telecom Italia SpA...... 100,127 92,517
2,000 Vodafone Group, ORD..... 37,792 47,365
---------- ----------
654,840 716,300
---------- ----------
TOTAL COMMON STOCKS..... 7,238,582 8,181,772
---------- ----------
PREFERRED STOCKS -- 2.2%
ELECTRIC UTILITY -- 2.2%
12,000 Cemig SA................ 265,368 181,315
---------- ----------
TOTAL PREFERRED
STOCKS................ 265,368 181,315
---------- ----------
</TABLE>
See accompanying notes to financial statements.
5
<PAGE> 6
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC INTERNATIONAL EQUITY FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---------- ----------
<C> <S> <C> <C>
PREFERRED STOCKS (CONTINUED)
SHORT TERM INVESTMENTS -- 0.5%
CASH SWEEP ACCOUNT -- 0.5%
43,142 Union Bank of
California............ $ 43,142 $ 43,142
---------- ----------
TOTAL SHORT TERM
INVESTMENTS........... 43,142 43,142
---------- ----------
TOTAL INVESTMENTS --
100.9%................ $7,547,092 8,406,229
==========
OTHER ASSETS AND
LIABILITIES
(NET) -- (0.9)%....... (76,100)
----------
NET ASSETS -- 100.0%.... $8,330,129
==========
</TABLE>
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation........ $ 1,359,265
Unrealized depreciation........ (500,128)
-----------
Net unrealized appreciation.... $ 859,137
===========
</TABLE>
(b) Non-income producing security.
* See page 18 for Concentration by Country.
ADR -- American Depository Receipts.
GDR -- Global Depository Receipts/Shares.
ORD -- Ordinary.
PLC -- Public Limited Company.
See accompanying notes to financial statements.
6
<PAGE> 7
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 97.5%
AEROSPACE -- 1.5%
110,000 Armor Holdings,
Inc. Delaware
(b)............. $ 1,267,850 $ 1,196,250
------------ ------------
AUTO-RELATED -- 6.9%
100,000 Copart, Inc.
(b)............. 1,428,400 1,843,750
110,700 Sonic Automotive,
Inc. (b)........ 1,209,137 1,439,100
132,000 Wynn's
International,
Inc............. 1,690,179 2,103,749
------------ ------------
4,327,716 5,386,599
------------ ------------
BUILDING MATERIALS -- 4.7%
175,200 Dal-Tile
International,
Inc. (b)........ 2,080,191 1,390,650
86,000 NCI Building
Systems, Inc.
(b)............. 1,992,440 1,424,375
58,800 U.S. Aggregates,
Inc. (b)........ 877,081 819,525
------------ ------------
4,949,712 3,634,550
------------ ------------
COMMERCIAL SERVICES -- 7.7%
150,000 Group Maintenance
America Corp.
(b)............. 2,099,999 1,874,999
92,000 Regis Corp. (c)... 1,448,438 1,771,000
43,600 Rent Way, Inc.
(b)............. 962,428 828,400
100,000 Wackenhut Corp.,
Class B......... 2,216,682 1,500,000
------------ ------------
6,727,547 5,974,399
------------ ------------
COMPUTER EQUIPMENT -- 1.2%
27,500 Cybex Computer
Products Corp.
(b)............. 787,031 917,813
------------ ------------
COMPUTERS -- 2.2%
37,200 Zebra Technologies
Corp. (b)....... 1,037,882 1,691,438
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
CONSTRUCTION -- 2.5%
55,600 Benchmark
Electronics,
Inc. (b) (c).... $ 830,794 $ 1,963,375
------------ ------------
COSMETICS/PERSONAL CARE -- 1.6%
55,900 Chattem, Inc.
(b)............. 1,952,483 1,233,294
------------ ------------
ELECTRICAL & ELECTRONICS -- 4.4%
64,200 Electro Scientific
Industries, Inc.
(b)............. 1,739,925 3,420,656
------------ ------------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 10.8%
58,700 Artesyn
Technologies,
Inc. (b)........ 1,408,941 1,113,466
100,000 Kulicke & Soffa
Industries, Inc.
(b)............. 1,661,087 2,431,249
125,300 PCD, Inc. (b)..... 2,341,737 986,738
25,000 Photronics, Inc.
(b) (c)......... 571,395 560,938
43,700 Plexus Corp.
(b)............. 977,371 1,338,312
76,500 Power-One, Inc.
(b) (c)......... 742,375 1,950,749
------------ ------------
7,702,906 8,381,452
------------ ------------
ELECTRONICS -- 4.5%
149,000 ADE Corp. (b)
(c)............. 3,127,311 2,086,000
192,100 FEI Co. (b) (c)... 1,998,441 1,452,756
------------ ------------
5,125,752 3,538,756
------------ ------------
ENTERTAINMENT -- 2.2%
40,000 Speedway
Motorsports,
Inc. (b) (c).... 900,761 1,732,500
------------ ------------
ENVIRONMENTAL -- 2.7%
119,800 Newpark Resources,
Inc. (b)........ 1,392,486 928,450
100,000 Safety Kleen Corp.
(b)............. 1,475,684 1,206,250
------------ ------------
2,868,170 2,134,700
------------ ------------
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
FOOD -- WHOLESALE -- 1.1%
100,000 United Natural
Foods, Inc. (b)
(c)............. $ 2,118,750 $ 878,125
------------ ------------
FOOD SERVING -- 1.9%
105,666 Worthington Foods,
Inc............. 1,736,945 1,518,949
------------ ------------
HEALTH & PERSONAL CARE -- 1.3%
120,000 Natrol, Inc. (b)
(c)............. 1,690,000 975,000
------------ ------------
HEALTH CARE -- 1.4%
60,000 United Payors &
United
Providers, Inc.
(b)............. 1,183,500 1,057,500
------------ ------------
INVESTMENT COMPANY -- 2.3%
80,000 Allied Capital
Corp............ 1,774,219 1,795,000
------------ ------------
MACHINE - DIVERSIFIED -- 1.5%
167,600 CMI Corp., Class
A............... 1,241,681 1,173,200
------------ ------------
MANUFACTURING -- 5.3%
103,100 Asyst
Technologies,
Inc. (b)........ 1,646,066 3,402,300
27,300 Veeco Instruments,
Inc. (b)........ 913,955 764,400
------------ ------------
2,560,021 4,166,700
------------ ------------
MANUFACTURING -- CAPITAL GOODS -- 1.6%
52,650 Astec Industries,
Inc. (b)........ 886,850 1,270,181
------------ ------------
MEDICAL SUPPLIES -- 3.6%
130,000 Endosonics Corp.
(b)............. 889,375 1,105,000
100,000 Res-Care, Inc. (b)
(c)............. 1,001,264 1,700,000
------------ ------------
1,890,639 2,805,000
------------ ------------
METALS -- DIVERSIFIED -- 2.1%
65,000 Quanex Corp.
(c)............. 1,908,843 1,665,625
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
NUTRITION & VITAMIN PRODUCTS -- 1.7%
150,000 Twinlab Corp.
(b)............. $ 1,956,757 $ 1,331,250
------------ ------------
OIL/GAS EQUIPMENT -- 1.9%
90,000 National-Oilwell,
Inc. (b)........ 1,782,330 1,479,375
------------ ------------
OIL/GAS SERVICES -- 1.8%
71,500 Veritas DGC, Inc.
(b)............. 1,386,038 1,376,375
------------ ------------
PHARMACEUTICALS -- 4.5%
123,000 Dura
Pharmaceuticals,
Inc. (b) (c).... 1,293,448 1,714,313
62,000 Medicis
Pharmaceutical
Corp., Class A
(b)............. 1,599,264 1,767,000
------------ ------------
2,892,712 3,481,313
------------ ------------
PIPELINES -- 1.1%
109,000 Global Industries
Ltd. (b)........ 1,224,242 885,625
------------ ------------
REAL ESTATE -- 2.6%
121,800 Intrawest Corp.... 2,120,714 2,017,313
------------ ------------
RESTAURANTS -- 3.0%
64,500 Cec Entertainment
(b)............. 1,609,592 2,313,938
------------ ------------
RETAIL -- 1.6%
37,200 Whole Foods
Market, Inc. (b)
(c)............. 1,195,050 1,217,138
------------ ------------
RETAIL -- SPECIALTY LINE -- 1.3%
85,000 Rexall Sundown,
Inc. (b) (c).... 1,308,895 1,046,563
------------ ------------
TECHNOLOGY -- 1.9%
110,000 Datastream
Systems, Inc.
(b)............. 1,353,813 1,443,750
------------ ------------
TELECOMMUNICATIONS -- 1.1%
28,800 MasTec, Inc.
(b)............. 933,768 847,800
------------ ------------
TOTAL COMMON
STOCKS.......... 74,973,888 75,951,502
</TABLE>
See accompanying notes to financial statements.
8
<PAGE> 9
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
SHORT TERM INVESTMENTS -- 3.0%
CASH SWEEP ACCOUNT -- 3.0%
2,374,709 Union Bank of
California...... $ 2,374,709 $ 2,374,709
------------ ------------
TOTAL SHORT TERM
INVESTMENTS..... 2,374,709 2,374,709
------------ ------------
SHORT TERM SECURITIES PURCHASED WITH CASH
COLLATERAL -- 17.2%
FLOATING RATE NOTES -- 9%
2,500,000 Amex Centurion,
5.45%,
4/24/00......... 2,500,000 2,500,000
2,000,000 Bear Stearns Co.
Inc, 5.98%,
1/7/00.......... 2,000,000 2,000,000
2,500,000 Merrill Lynch &
Co., 6.02%,
2/28/00......... 2,500,000 2,500,000
------------ ------------
7,000,000 7,000,000
------------ ------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
REPURCHASE AGREEMENT -- 8.2%
6,421,600 Lehman Brothers
Triparty
Agreement,
5.83%, 10/1/99
(See Significant
Accounting
Policies,
Securities
Lending in the
Notes to
Financial
Statements for
Collateral
description..... $ 6,421,600 $ 6,421,600
------------ ------------
TOTAL SHORT TERM
SECURITIES
PURCHASED WITH
CASH
COLLATERAL...... 13,421,600 13,421,600
------------ ------------
TOTAL
INVESTMENTS --
117.7%.......... $ 90,770,197 91,747,811
============
OTHER ASSETS AND LIABILITIES
(NET) -- (17.7)%.............. (13,844,947)
------------
NET ASSETS -- 100.0%............ $ 77,902,864
============
</TABLE>
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation........ $12,629,992
Unrealized depreciation........ (11,652,378)
-----------
Net unrealized appreciation.... $ 977,614
===========
</TABLE>
(b) Non-income producing security.
(c) All or a portion of this security has been loaned at September 30, 1999.
See accompanying notes to financial statements.
9
<PAGE> 10
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND*
Portfolio of Investments -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 97.1%
ADVERTISING -- 0.6%
2,390 Interpublic Group
Cos., Inc......... $ 89,398 $ 98,289
----------- -----------
AEROSPACE/DEFENSE -- 2.4%
6,200 Boeing Co. (c)...... 213,653 264,275
2,700 Raytheon Co., Class
B................. 153,882 133,988
----------- -----------
367,535 398,263
----------- -----------
AIRLINES -- 1.6%
5,400 Atlantic Coast
Airlines Holdings,
Inc. (b).......... 123,627 95,850
7,700 Skywest, Inc........ 149,250 168,919
----------- -----------
272,877 264,769
----------- -----------
BANKING -- 8.3%
10,000 Bostonfed Bancorp,
Inc............... 124,350 150,000
9,200 First Bell Bancorp,
Inc............... 85,450 144,900
14,600 FSF Financial
Corp.............. 187,975 171,550
11,000 Georgia Financial,
Inc............... 121,660 141,625
4,654 ING Groep N.V.,
ADR............... 224,672 254,806
10,000 PFF Bancorp, Inc.... 115,000 206,249
10,693 State Financial
Services Corp..... 147,713 155,717
2,600 Wells Fargo Co...... 112,931 103,025
5,400 Westerfed Financial
Corp.............. 73,224 89,100
----------- -----------
1,192,975 1,416,972
----------- -----------
BANKING & FINANCIAL SERVICES -- 0.7%
2,160 HSBC Holdings
PLC-ADR........... 80,460 125,415
----------- -----------
BUSINESS & PUBLIC SERVICES --0.6%
4,855 Waste Management,
Inc............... 186,517 93,459
----------- -----------
BUSINESS EQUIPMENT & SERVICES -- 1.1%
5,400 International
Integration, Inc.
(b)............... 112,612 176,850
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
CAPITAL GOODS -- 0.6%
2,300 CBS Corp. (b)....... $ 117,886 $ 106,375
----------- -----------
CHEMICALS -- 0.4%
1,900 Great Lakes Chemical
Corp.............. 84,991 72,319
----------- -----------
COMMERCIAL SERVICES -- 2.0%
5,000 AHL Services, Inc.
(b)............... 132,219 130,313
4,000 Meta Group, Inc.
(b)............... 81,500 71,000
3,425 Whittman-Hart, Inc.
(b)............... 91,172 132,825
----------- -----------
304,891 334,138
----------- -----------
COMPUTER EQUIPMENT -- 3.3%
2,170 Cisco Systems, Inc.
(b)............... 115,584 148,781
1,650 Emulex Corp. (b).... 55,208 141,694
2,170 Microsoft Corp.
(b)............... 167,632 196,520
1,250 Triquint
Semiconductor,
Inc. (b).......... 79,433 71,484
----------- -----------
417,857 558,479
----------- -----------
COMPUTER SERVICES -- 0.5%
3,000 RSA Security, Inc.
(b)............... 64,361 79,688
----------- -----------
COMPUTER SOFTWARE -- 4.9%
10,300 Aspect Development,
Inc. (b).......... 174,733 260,718
2,700 CBT Group PLC-ADR
(b)............... 59,526 66,488
4,500 CSG Systems
International,
Inc. (b).......... 111,375 123,328
5,700 Nvidia Corp. (c)
(b)............... 109,056 109,725
4,100 Open Text Corp.
(b)............... 89,220 80,975
6,900 TSI International
Software Ltd.
(b)............... 176,692 187,162
----------- -----------
720,602 828,396
----------- -----------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE> 11
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
CONSUMER NON-DURABLE -- 1.1%
15,456 Archer-Daniels-
Midland Co........ $ 232,864 $ 188,370
----------- -----------
CONSUMER SERVICES -- 2.0%
6,000 Philip Morris Cos.,
Inc............... 223,685 205,125
1,320 Procter & Gamble
Co................ 125,892 123,750
----------- -----------
349,577 328,875
----------- -----------
DEFENSE -- 0.5%
5,750 Titan Corp. (b)..... 83,001 82,656
----------- -----------
DIVERSIFIED -- 1.2%
21,000 Invensys PLC-ADR.... 142,824 203,360
----------- -----------
ELECTRIC UTILITY -- 1.1%
1,700 AES Corp. (b)....... 111,234 100,300
9,600 Centrais Electricas
Brasileiras,
ADR............... 76,651 80,002
----------- -----------
187,885 180,302
----------- -----------
ELECTRICAL EQUIPMENT -- 1.9%
1,840 General Electric
Co................ 189,055 218,155
2,350 SCI Systems, Inc.
(b)............... 90,082 104,428
----------- -----------
279,137 322,583
----------- -----------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 5.2%
3,800 Flextronics
International Ltd.
(b)............... 81,700 221,112
700 Hitachi Ltd......... 47,817 76,388
3,250 SDL, Inc. (b)....... 48,615 248,015
7,000 Semtech Corp. (b)... 113,973 256,374
3,000 SLI, Inc. (b)....... 73,830 63,938
----------- -----------
365,935 865,827
----------- -----------
ELECTRONICS -- 0.7%
1,540 PE Biosystems
Group............. 85,112 111,265
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
ENERGY -- 2.9%
1,880 Chevron Corp........ $ 176,337 $ 166,850
2,240 Exxon Corp.......... 184,375 170,100
3,600 Powergen PLC-ADR.... 144,216 149,850
----------- -----------
504,928 486,800
----------- -----------
ENTERTAINMENT -- 1.2%
1,460 MediaOne Group
(b)............... 108,493 99,736
1,610 Time Warner, Inc.... 110,683 97,808
----------- -----------
219,176 197,544
----------- -----------
FINANCE -- BROKERS -- 0.6%
4,382 Investment
Technology
Group............. 134,986 100,786
----------- -----------
FINANCIAL SERVICES -- 1.9%
1,520 Bank Of America
Corp.............. 97,276 84,645
2,360 Citigroup, Inc...... 101,476 103,840
5,500 Telebanc Financial
Corp. (b)......... 182,205 126,500
----------- -----------
380,957 314,985
----------- -----------
FINANCIAL-BANKING -- 0.6%
2,587 Union Planters
Corp.............. 83,077 105,420
----------- -----------
FOOD -- 0.8%
3,640 Sysco Corp.......... 109,646 127,628
----------- -----------
HEALTH CARE -- 3.7%
1,110 Allergan, Inc....... 88,491 122,100
2,490 Bristol-Myers Squibb
Co. 166,200 168,074
3,000 Columbia/HCA
Healthcare
Corp.............. 67,868 63,563
3,750 Jones Pharma,
Inc............... 111,200 123,633
3,440 Schering-Plough
Corp.............. 154,791 150,070
----------- -----------
588,550 627,440
----------- -----------
HOME FURNISHINGS -- 0.9%
2,000 Gemstar
International
Group Ltd......... 62,047 156,250
----------- -----------
</TABLE>
See accompanying notes to financial statements.
11
<PAGE> 12
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
INDUSTRIAL -- 0.8%
1,310 Tyco International
Ltd............... $ 114,540 $ 135,258
----------- -----------
INSURANCE -- 3.7%
1,637 American
International
Group............. 146,017 142,317
2,540 Nationwide Financial
Services.......... 113,346 89,853
3,100 Safeco Corp......... 86,231 86,800
3,382 Southwest Securities
Group, Inc........ 152,972 91,314
5,400 St. Paul Co......... 180,886 148,499
1,940 Unumprovident
Corp.............. 108,878 57,109
----------- -----------
788,330 615,892
----------- -----------
LIQUOR & TOBACCO -- 1.4%
13,300 British American
Tobacco, ADR...... 239,900 231,088
----------- -----------
MACHINERY & EQUIPMENT -- 1.5%
4,900 Case Corp........... 124,744 244,081
----------- -----------
MEDICAL -- BIOTECHNOLOGY -- 0.4%
4,800 Pharmaceutical
Product
Development, Inc.
(b)............... 120,012 65,100
----------- -----------
MEDICAL EQUIPMENT & SUPPLIES -- 0.4%
2,800 The Laser Center,
Inc. (b).......... 112,986 68,950
----------- -----------
MINING -- 0.9%
2,572 Anglo American
Corp.............. 77,288 143,711
----------- -----------
MULTI-INDUSTRY -- 0.8%
2,000 Loews Corp.......... 101,731 140,375
----------- -----------
NATURAL GAS UTILITY -- 0.5%
2,360 Williams Cos.,
Inc............... 112,979 88,353
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
OFFICE EQUIPMENT & SERVICES -- 0.6%
930 Pitney Bowes,
Inc............... $ 60,516 $ 56,672
1,040 Xerox Corp.......... 59,011 43,615
119,527 100,287
----------- -----------
OIL & GAS UTILITY -- 0.6%
2,560 Enron Corp.......... 93,437 105,600
----------- -----------
OIL/GAS -- 1.3%
13,900 Petroleo Brasileiro
SA, ADR........... 203,741 214,295
----------- -----------
OIL/GAS EXPLORATION -- 2.7%
1,860 Apache Corp......... 65,677 80,329
1,450 Elf Aquitane, ADR... 53,059 132,856
2,200 Oceaneering
International,
Inc. (b).......... 49,082 36,988
3,900 Precision Drilling
Corp. (b)......... 96,759 90,431
7,500 Pride International,
Inc. (b).......... 103,575 106,406
----------- -----------
368,152 447,010
----------- -----------
OIL/GAS SERVICES -- 1.3%
14,625 Patterson Energy,
Inc. (b).......... 133,387 222,117
----------- -----------
PHARMACEUTICALS -- 4.7%
2,240 Cardinal Health,
Inc............... 137,069 122,080
6,800 Mckesson HBOC,
Inc............... 212,908 197,199
2,320 Merck & Co., Inc.... 159,059 150,365
4,840 Pfizer, Inc......... 167,480 173,937
4,450 Priority Healthcare
Corp., Class B
(b)............... 69,346 137,394
----------- -----------
745,862 780,975
----------- -----------
PUBLISHING & PRINTING -- 0.9%
10,500 Mail-Well Holdings,
Inc. (b).......... 159,063 145,688
----------- -----------
</TABLE>
See accompanying notes to financial statements.
12
<PAGE> 13
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
RADIO -- 0.5%
1,800 Westwood One, Inc.
(b)............... $ 63,720 $ 81,225
----------- -----------
RETAIL -- 2.9%
1,770 Home Depot, Inc..... 99,779 121,466
5,000 Pacific Sunwear of
California, Inc.
(b)............... 107,922 140,156
2,490 Wal-Mart Stores,
Inc............... 115,156 118,431
6,600 Wet Seal, Inc.
(b)............... 175,566 109,313
----------- -----------
498,423 489,366
----------- -----------
RETAIL -- GENERAL MERCHANDISE -- 0.6%
1,400 Costco Wholesale
Corp. (b)......... 105,872 100,800
----------- -----------
TECHNOLOGY -- 4.6%
1,720 Computer Sciences
Corp. (b)......... 105,926 120,938
9,000 Datastream Systems,
Inc. (b).......... 88,313 118,125
1,690 Intel Corp.......... 88,303 125,588
7,750 Inter-Tel, Inc...... 43,109 137,563
960 International
Business Machines
Corp.............. 111,935 116,520
1,940 Texas Instruments,
Inc............... 106,152 159,564
----------- -----------
543,738 778,298
----------- -----------
TELECOMMUNICATION EQUIPMENT -- 3.7%
6,700 Korea Telecom Corp.,
ADR (b)........... 184,652 247,900
2,120 Lucent Technologies,
Inc............... 118,980 137,535
5,000 Polycom, Inc. (b)... 133,125 238,281
----------- -----------
436,757 623,716
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
TELECOMMUNICATION SERVICES --
1.7%
7,000 Deutsche
Telecommunications,
ADR............... $ 195,545 $ 292,688
----------- -----------
TELECOMMUNICATIONS -- 3.2%
2,100 Embratel
Participacoes,
ADR............... 33,536 24,019
2,040 MCI Worldcom, Inc.
(b)............... 173,144 146,625
210 Telecelular Sul
Participa, ADR.... 2,635 3,977
700 Telecentro Oeste
Celular, ADR...... 1,564 2,319
420 Telecentro Sul
Participa, ADR.... 18,915 23,310
570 Telecom Italia,
ADR............... 57,590 49,127
3,100 Telefonos De Mexico,
ADR............... 94,723 220,874
42 Teleleste Celular
Participa, ADR.... 855 1,328
105 Telemig Celular
Participa, ADR.... 2,146 3,098
105 Telenordeste Celular
Participa, ADR.... 1,166 2,389
42 Telenorte Celular
Participa, ADR.... 498 1,197
840 Telesp Celular
Participa, ADR.... 20,000 21,945
2,100 Telesp Participacoes
SA, ADR........... 59,878 33,075
----------- -----------
466,650 533,283
----------- -----------
TELECOMMUNICATIONS-EQUIPMENT -- 1.3%
7,900 Alcatel Alsthom Cge
SA, ADR........... 178,287 219,225
----------- -----------
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 14
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC APPRECIATION FUND*
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL MARKET
AMOUNT COST VALUE
- --------- ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
TEXTILES & APPAREL -- 0.6%
10,000 Reebok International
Ltd. (c) (b)...... $ 161,725 $ 106,875
----------- -----------
UTILITIES -- 2.2%
4,700 Entergy Corp........ 135,407 136,006
1,550 GTE Corp............ 108,302 119,156
3,300 Unicom Corp......... 78,573 121,894
----------- -----------
322,282 377,056
----------- -----------
TOTAL COMMON
STOCKS............ 14,411,342 16,304,815
SHORT TERM INVESTMENTS -- 2.9%
CASH SWEEP ACCOUNT -- 2.9%
494,010 Union Bank of
California........ 494,010 494,010
----------- -----------
TOTAL SHORT TERM
INVESTMENTS....... 494,010 494,010
----------- -----------
SHORT TERM SECURITIES PURCHASED WITH CASH
COLLATERAL -- 6.4%
REPURCHASE AGREEMENT -- 6.4%
1,069,268 Lehman Brothers
Triparty
Agreement, 5.83%,
10/1/99 (See
Significant
Accounting
Policies,
Securities Lending
in the Notes to
Financial
Statements for
Collateral
description....... 1,069,268 1,069,268
----------- -----------
TOTAL SHORT TERM
SECURITIES
PURCHASED WITH
CASH COLLATERAL... 1,069,268 1,069,268
----------- -----------
TOTAL INVESTMENTS --
106.4%............ $15,974,619 17,868,093
===========
OTHER ASSETS AND
LIABILITIES
(NET) -- (6.4)%... (1,073,666)
-----------
NET
ASSETS -- 100.0%.. $16,794,427
===========
</TABLE>
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation........ $ 2,949,942
Unrealized depreciation........ (1,056,468)
-----------
Net Unrealized appreciation.... $ 1,893,474
===========
</TABLE>
(b) Non-income producing security.
(c) All or a portion of this security has been loaned at September 30, 1999.
* See page 18 for Concentration by Country.
ADR -- American Depository Receipts.
PLC -- Public Limited Company.
See accompanying notes to financial statements.
14
<PAGE> 15
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP II FUND
Portfolio of Investments -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS -- 106.8%
AEROSPACE -- 2.3%
41,700 Armor Holdings,
Inc. Delaware
(b).............. $ 461,202 $ 453,488
----------- -----------
AUTO-RELATED -- 4.1%
27,500 Sonic Automotive,
Inc. (b)......... 410,088 357,500
26,800 Wynn's
International,
Inc.............. 485,557 427,125
----------- -----------
895,645 784,625
----------- -----------
BIOTECHNOLOGY -- 0.9%
20,000 Embrex, Inc. (b)... 105,000 172,500
----------- -----------
BUILDING MATERIALS -- 2.1%
24,800 NCI Building
Systems, Inc.
(b).............. 619,100 410,750
----------- -----------
BUSINESS SERVICES -- 1.8%
20,000 Aaron Rents,
Inc.............. 239,950 345,000
----------- -----------
COMMERCIAL SERVICES -- 4.9%
15,000 Group Maintenance
America Corp.
(b).............. 218,918 187,500
11,400 Regis Corp.(c)..... 262,125 219,450
20,300 Rent Way, Inc.
(b).............. 528,838 385,699
47,600 Towne Services,
Inc. (b)......... 396,566 151,725
----------- -----------
1,406,447 944,374
----------- -----------
COMPUTER SOFTWARE -- 4.7%
80,150 Acclaim
Entertainment,
Inc. (b)......... 372,210 608,638
46,300 Mecon, Inc. (b).... 320,825 295,163
----------- -----------
693,035 903,801
----------- -----------
COMPUTERS -- 1.2%
5,000 Zebra Technologies
Corp. (b)........ 153,689 227,344
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
CONSTRUCTION -- 4.8%
13,700 Benchmark
Electronics, Inc.
(b).............. $ 418,422 $ 483,780
17,700 Insituform
Technologies,
Class A (b)...... 305,325 442,500
----------- -----------
723,747 926,280
----------- -----------
COSMETICS/PERSONAL CARE -- 1.3%
11,200 Chattem, Inc.
(b).............. 353,665 247,100
----------- -----------
ELECTRICAL & ELECTRONICS -- 3.1%
11,400 Electro Scientific
Industries, Inc.
(b).............. 442,035 607,406
----------- -----------
ELECTRONIC COMPONENTS/INSTRUMENTS -- 11.8%
10,900 Etec Systems, Inc.
(b).............. 339,410 410,113
20,000 Kulicke & Soffa
Industries, Inc.
(b).............. 376,437 486,249
10,000 PCD, Inc. (b)...... 179,375 78,750
16,300 Photronics, Inc.
(b) (c).......... 295,891 365,731
12,500 Plexus Corp. (b)... 245,334 382,813
21,100 Power-One, Inc. (b)
(c).............. 129,925 538,049
----------- -----------
1,566,372 2,261,705
----------- -----------
ELECTRONICS -- 5.7%
61,500 FEI Co. (b)........ 664,933 465,094
19,500 Pittway Corp.,
Class A.......... 469,858 614,249
----------- -----------
1,134,791 1,079,343
----------- -----------
ENERGY -- 1.7%
10,300 Weatherford
International,
Inc. (b)......... 292,054 329,600
----------- -----------
ENTERTAINMENT -- 1.5%
6,600 Speedway
Motorsports, Inc.
(b) (c).......... 153,087 285,863
----------- -----------
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 16
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP II FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
ENVIRONMENTAL -- 2.0%
31,300 Safety Kleen Corp.
(b).............. $ 461,141 $ 377,556
----------- -----------
FOOD -- 2.1%
18,900 Rare Hospitality
International,
Inc. (b)......... 415,927 408,713
----------- -----------
FOOD -- WHOLESALE -- 0.8%
17,000 United Natural
Foods, Inc. (b)
(c).............. 368,357 149,281
----------- -----------
HEALTH CARE -- 1.3%
15,000 American Retirement
Corp. (b)........ 230,286 147,188
5,400 United Payors &
United Providers,
Inc. (b)......... 111,038 95,175
----------- -----------
341,324 242,363
----------- -----------
HOME FURNISHINGS -- 2.2%
20,500 Ladd Furniture,
Inc. (b)......... 380,188 434,344
----------- -----------
INVESTMENT COMPANY -- 2.3%
20,000 Allied Capital
Corp............. 426,125 448,750
----------- -----------
MANUFACTURING -- 3.9%
17,000 Asyst Technologies,
Inc. (b)......... 353,824 561,000
6,900 Veeco Instruments,
Inc. (b)......... 232,425 193,200
----------- -----------
586,249 754,200
----------- -----------
MANUFACTURING -- CAPITAL GOODS -- 1.8%
14,700 Astec Industries,
Inc. (b)......... 225,877 354,638
----------- -----------
METALS -- DIVERSIFIED -- 1.3%
10,100 Quanex Corp. ...... 235,431 258,813
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
NUTRITION & VITAMIN PRODUCTS -- 1.8%
39,500 Twinlab Corp.
(b).............. $ 525,356 $ 350,563
----------- -----------
OIL/GAS EQUIPMENT -- 2.5%
29,100 National-Oilwell,
Inc. (b)......... 585,176 478,331
----------- -----------
OIL/GAS EXPLORATION -- 4.1%
25,000 Marine Drilling
Cos., Inc. (b)... 484,491 395,313
32,700 Varco
International,
Inc. (b)......... 308,027 398,531
----------- -----------
792,518 793,844
----------- -----------
OIL/GAS SERVICES -- 5.6%
12,000 Carbo Ceramics,
Inc. ............ 350,970 330,000
11,700 Nabors Industries,
Inc. (b) (c)..... 283,881 292,500
30,000 Patterson Energy,
Inc. (b)......... 248,869 455,624
----------- -----------
883,720 1,078,124
----------- -----------
PHARMACEUTICALS -- 2.1%
14,375 Medicis
Pharmaceutical
Corp., Class A
(b) (c).......... 409,555 409,688
----------- -----------
PIPELINES -- 0.9%
21,800 Global Industries
Ltd. (b)......... 242,153 177,125
----------- -----------
REAL ESTATE -- 2.2%
25,300 Intrawest Corp. ... 425,664 419,031
----------- -----------
RESTAURANTS -- 2.4%
12,700 Cec Entertainment
(b).............. 322,241 455,613
----------- -----------
RETAIL -- 4.1%
32,100 O' Charley's, Inc.
(b).............. 409,275 473,475
10,000 Whole Foods Market,
Inc. (b) (c)..... 318,571 327,188
----------- -----------
727,846 800,663
----------- -----------
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 17
ESC STRATEGIC FUNDS, INC.
ESC STRATEGIC SMALL CAP II FUND
Portfolio of Investments (continued) -- September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
COMMON STOCKS (CONTINUED)
RETAIL -- SPECIALTY LINE -- 1.3%
21,000 Rexall Sundown,
Inc. (b) (c)..... $ 322,875 $ 258,563
----------- -----------
RIGHTS -- FOREIGN -- 1.1%
11,500 Intercept Group,
Inc. (b)......... 77,680 212,750
----------- -----------
STEEL/IRON -- 1.8%
21,700 Northwest Pipe Co.
(b).............. 387,888 339,063
----------- -----------
TECHNOLOGY -- 1.3%
19,700 Datastream Systems,
Inc. (b)......... 259,449 258,563
----------- -----------
TELECOMMUNICATIONS -- 1.9%
12,500 MasTec, Inc. (b)... 435,110 367,969
----------- -----------
TEXTILES -- 1.9%
15,800 Westpoint Stevens,
Inc. ............ 439,425 373,275
----------- -----------
TEXTILES & APPAREL -- 0.8%
20,000 Dixie Group,
Inc. ............ 164,306 155,000
----------- -----------
WHOLESALE -- 1.4%
10,000 ScanSource, Inc.
(b).............. 182,500 278,750
----------- -----------
TOTAL COMMON
STOCKS........... 19,863,901 20,614,752
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES COST VALUE
------ ---- ------
<C> <S> <C> <C>
SHORT-TERM SECURITIES PURCHASED
WITH CASH COLLATERAL -- 13.7%
REPURCHASE AGREEMENT -- 13.7%
$2,641,100 Lehman Brothers
Triparty
Agreement, 5.83%,
10/1/99, (See
Significant
Accounting
Policies,
Securities
Lending in the
Notes to
Financial
Statements For
collateral
description)..... $ 2,641,100 $ 2,641,100
----------- -----------
TOTAL SHORT-TERM
SECURITIES
PURCHASED WITH
CASH
COLLATERAL....... 2,641,100 2,641,100
----------- -----------
TOTAL INVESTMENTS--
120.5%........... $22,505,001 23,255,852
=========== ===========
OTHER ASSETS AND LIABILITIES
(NET) -- (20.5)%.............. (3,948,734)
-----------
NET ASSETS -- 100.0%............ $19,307,118
===========
</TABLE>
(a) Represents cost for federal income tax and financial reporting purposes and
differs from value by net unrealized appreciation of securities as follows:
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation........ $ 3,140,830
Unrealized depreciation........ (2,389,979)
-----------
Net unrealized appreciation.... $ 750,851
===========
</TABLE>
(b) Non-income producing security.
(c) All or a portion of this security has been loaned at September 30, 1999.
See accompanying notes to financial statements.
17
<PAGE> 18
ESC STRATEGIC FUNDS, INC.
Concentration by Country
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND APPRECIATION FUND
COUNTRY MARKET VALUE MARKET VALUE
- ------- ------------------------- -----------------
<S> <C> <C>
Argentina................................................... 4.5% --
Australia................................................... 1.1% --
Brazil...................................................... 9.8% 2.4%
Czech Republic.............................................. 1.0% --
France...................................................... 1.7% 2.1%
Germany..................................................... 5.0% --
Greece...................................................... 1.2% --
Hong Kong................................................... 2.8% --
Hungary..................................................... 2.2% --
Ireland..................................................... 1.7% --
Italy....................................................... 4.4% --
Japan....................................................... 19.6% 0.5%
Mexico...................................................... 5.5% 1.3%
Netherlands................................................. 4.7% --
New Zealand................................................. 1.0% --
Poland...................................................... 2.0% --
Singapore................................................... 1.6% --
South Africa................................................ 2.2% --
South Korea................................................. 1.5% --
Spain....................................................... 1.3% --
Switzerland................................................. 3.6% --
Taiwan...................................................... 2.0% --
United Kingdom.............................................. 8.9% --
United States............................................... 0.7% 93.7%
---- ----
Total Investments........................................... 100% 100%
==== ====
</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.
18
<PAGE> 19
ESC STRATEGIC FUNDS, INC.
Statements of Assets and Liabilities
September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL
INCOME EQUITY SMALL CAP APPRECIATION SMALL CAP II
FUND FUND FUND FUND FUND
---------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Investments, at value (cost $7,429,112;
$7,547,092; $84,348,597; $14,905,351; and
$19,863,901 respectively)...................... $6,937,267 $8,406,229 $ 85,326,211 $16,798,825 $20,614,752
Repurchase agreements, at cost................... -- -- 6,421,600 1,069,268 2,641,100
---------- ---------- ------------ ----------- -----------
Total Investments.......................... 6,937,267 8,406,229 91,747,811 17,868,093 23,255,852
Foreign Currency (cost $0; $13,795; $0; $0;
$0)............................................ -- 13,951 -- -- --
Interest and dividends receivable................ 180,600 7,394 24,467 29,755 1,158
Receivable for securities sold................... -- 689,960 -- -- --
Prepaid expenses................................. 13,019 22,103 14,899 13,459 11,621
---------- ---------- ------------ ----------- -----------
Total Assets............................... 7,130,886 9,139,637 91,787,177 17,911,307 23,268,631
---------- ---------- ------------ ----------- -----------
LIABILITIES
Payable to custodian............................. -- -- -- -- 1,162,119
Payable for return of collateral received........ -- -- 13,421,600 1,069,268 2,641,100
Income distribution payable...................... 48,783 -- -- -- --
Payable for securities purchased................. -- 778,321 -- -- --
Payable for fund shares repurchased.............. -- -- 258,359 418 107,089
Advisory fee payable............................. -- 3,722 68,937 12,534 13,156
Administration fee payable....................... 117 135 1,280 273 320
12b-1 Distribution fee payable................... 1,666 2,355 24,522 5,093 6,987
Other accrued expenses........................... 27,516 24,975 109,615 29,294 30,742
---------- ---------- ------------ ----------- -----------
Total Liabilities.......................... 78,082 809,508 13,884,313 1,116,880 3,961,513
---------- ---------- ------------ ----------- -----------
NET ASSETS................................. $7,052,804 $8,330,129 $ 77,902,864 $16,794,427 $19,307,118
========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
19
<PAGE> 20
ESC STRATEGIC FUNDS, INC.
Statements of Assets and Liabilities
September 30, 1999 -- (Continued)
(unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL
INCOME EQUITY SMALL CAP APPRECIATION SMALL CAP II
FUND FUND FUND FUND FUND
---------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net Assets Consist of:
Shares, at par ($0.001).......................... 778 740 4,496 1,458 1,906
Additional paid-in capital....................... 7,657,679 5,603,511 73,350,931 11,645,602 25,262,012
Distributions in excess of net investment
income......................................... (51,225) (50,894) (622,095) (59,754) (212,493)
Accumulated net realized gain/(loss) on
investments and foreign currency
transactions................................... (62,583) 1,916,980 4,191,918 3,313,647 (6,495,158)
Net unrealized appreciation/(depreciation) on
investments and foreign currency
translations................................... (491,845) 859,792 977,614 1,893,474 750,851
---------- ---------- ------------ ----------- -----------
NET ASSETS....................................... $7,052,804 $8,330,129 $ 77,902,864 $16,794,427 $19,307,118
========== ========== ============ =========== ===========
Class A.......................................... $6,558,386 $6,788,232 $ 61,122,475 $13,143,084 $13,468,215
Class D.......................................... $ 494,418 $1,541,897 $ 16,780,389 $ 3,651,343 $ 5,838,903
---------- ---------- ------------ ----------- -----------
$7,052,804 $8,330,129 $ 77,902,864 $16,794,427 $19,307,118
========== ========== ============ =========== ===========
SHARES OF BENEFICIAL INTEREST
Class A
Shares of beneficial interest issued and
outstanding.................................. 723,744 599,553 3,511,544 1,134,349 1,325,016
========== ========== ============ =========== ===========
Net Asset Value and redemption price per share
outstanding.................................. $ 9.06 $ 11.32 $ 17.41 $ 11.59 $ 10.16
========== ========== ============ =========== ===========
Maximum Offering Price per share ($9.06/.955,
$11.32/.955, $17.41/.955, $11.59/.955,
$10.16/.955 respectively).................... $ 9.49 $ 11.85 $ 18.23 $ 12.14 $ 10.64
========== ========== ============ =========== ===========
Class D
Shares of beneficial interest issued and
outstanding.................................. 54,157 140,441 984,860 323,796 581,210
========== ========== ============ =========== ===========
Net Asset Value and redemption price per share
outstanding.................................. $ 9.13 $ 10.98 $ 17.04 $ 11.28 $ 10.05
========== ========== ============ =========== ===========
Maximum Offering Price per share ($9.13/.985,
$10.98/.985, $17.04/.985, $11.28/.985,
$10.05/.985 respectively).................... $ 9.27 $ 11.15 $ 17.30 $ 11.45 $ 10.20
========== ========== ============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
20
<PAGE> 21
ESC STRATEGIC FUNDS, INC.
Statements of Operations
For the Six Months Ended September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
INTERNATIONAL
INCOME EQUITY SMALL CAP APPRECIATION SMALL CAP II
FUND FUND FUND FUND FUND
--------- ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Investment Income
Interest................................... $ 366,705 $ 3,728 $ 104,424 $ 12,715 $ 4,044
Dividend (net of withholding tax of $0;
$7,777; $0; $50 and $0, respectively).... 10,124 89,113 149,478 140,245 35,068
Income from Securities Lending
Activities............................... -- -- 34,466 4,729 5,949
Total Income........................ 376,829 92,841 288,368 157,689 45,061
--------- --------- ---------- ---------- ------------
Expenses Advisory............................ 37,211 45,236 467,732 103,600 161,142
Administration............................. 5,582 6,785 70,160 15,540 19,337
12b-1 Distribution fees -- Class A......... 8,654 9,138 91,094 20,641 23,463
12b-1 Distribution fees -- Class D......... 1,948 6,513 77,515 15,778 26,295
Audit fees................................. 8,101 8,283 8,796 7,281 7,281
Custodian.................................. 48 14,571 12,045 1,213 723
Fund accounting............................ 15,327 15,752 16,793 18,553 16,721
Amortization of organizational costs....... 1,047 1,069 -- 2,073 --
Registration and filing fees............... 7,496 7,451 8,817 8,189 8,587
Transfer agent fees and expenses........... 10,806 11,520 88,220 18,159 42,483
Directors fees............................. 318 611 6,586 1,398 1,830
Miscellaneous.............................. 3,844 4,557 62,705 12,807 14,290
--------- --------- ---------- ---------- ------------
Total expenses before waivers....... 100,382 131,486 910,463 225,232 322,152
Less: expenses waived/ reimbursed.......... (37,216) (13,879) -- (7,789) (64,598)
Net expenses............................... 63,166 117,607 910,463 217,443 257,554
--------- --------- ---------- ---------- ------------
Net investment income/ (loss)................ 313,663 (24,766) (622,095) (59,754) (212,493)
--------- --------- ---------- ---------- ------------
Net realized gain/ (loss) on investments and
foreign currency transactions.............. (62,583) 1,094,253 1,682,809 2,196,732 (3,235,334)
Net change unrealized appreciation/
(depreciation) of investments and foreign
currency transactions...................... (490,543) (588,391) 4,467,160 (135,911) 5,176,146
--------- --------- ---------- ---------- ------------
Net realized and unrealized gain/ (loss)..... (553,126) 505,862 6,149,969 2,060,821 1,940,812
Net increase/ (decrease) in net assets
resulting from operations.................. $(239,463) $ 481,096 $5,527,874 $2,001,067 $ 1,728,319
========= ========= ========== ========== ============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE> 22
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
INCOME FUND INTERNATIONAL EQUITY FUND
----------------------------------- -----------------------------------
SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999 SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ -------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment income/(loss)....... $ 313,663 $ 851,759 $ (24,766) $ (66,534)
Net realized gain/(loss) on
investments and foreign currency
transactions..................... (62,583) 57,784 1,094,253 1,024,996
Net change unrealized depreciation
of investments and foreign
currency translations............ (490,543) (193,923) (588,391) (1,842,011)
------------ ------------ ----------- ------------
Net change in net assets resulting
from operations.................... (239,463) 715,620 481,096 (883,549)
------------ ------------ ----------- ------------
Dividends and Distributions to
Shareholders:
From net investment income
Class A.......................... (291,487) (759,547) -- --
Class D.......................... (20,518) (32,600) -- --
------------ ------------ ----------- ------------
(312,005) (792,147) -- --
------------ ------------ ----------- ------------
From net realized gains
Class A.......................... -- (104,773) -- (712,147)
Class D.......................... -- (9,574) -- (192,848)
------------ ------------ ----------- ------------
-- (114,347) -- (904,995)
------------ ------------ ----------- ------------
From tax return of capital
Class A.......................... -- (76,574) -- --
Class D.......................... -- (3,289) -- --
------------ ------------ ----------- ------------
-- (79,863) -- --
------------ ------------ ----------- ------------
Change in net assets resulting from
dividends and distributions to
shareholders..................... (312,005) (986,357) -- (904,995)
------------ ------------ ----------- ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A.......................... 153,064 926,359 209,909 1,144,165
Class D.......................... 3,588 155,831 (6,839) 124,302
------------ ------------ ----------- ------------
156,652 1,082,190 203,070 1,268,467
------------ ------------ ----------- ------------
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions:
Class A.......................... 260,711 894,208 -- 582,876
Class D.......................... 20,420 40,551 -- 192,848
------------ ------------ ----------- ------------
281,131 934,759 -- 775,724
------------ ------------ ----------- ------------
Net asset value of shares redeemed:
Class A.......................... (572,756) (18,743,090) (1,625,217) (5,735,950)
Class D.......................... (39,201) (460,910) (424,663) (885,822)
------------ ------------ ----------- ------------
(611,957) (19,204,000) (2,049,880) (6,621,772)
------------ ------------ ----------- ------------
Change in net assets from capital
share transactions............... (174,174) (17,187,051) (1,846,810) (4,577,581)
------------ ------------ ----------- ------------
Total change in net assets........... (725,642) (17,457,788) (1,365,714) (6,366,125)
Net Assets:
Beginning of period................ 7,778,446 25,236,234 9,695,843 16,061,968
------------ ------------ ----------- ------------
End of period...................... $ 7,052,804 $ 7,778,446 $ 8,330,129 $ 9,695,843
============ ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
22
<PAGE> 23
ESC STRATEGIC FUNDS, INC.
Statements 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, 1999 MARCH 31, 1999 SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ -------------- ------------------ --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operations:
Net investment loss............ $ (622,095) $ (817,900) $ (59,754) $ (172,352)
Net realized gain on
investments.................. 1,682,809 2,508,888 2,196,732 1,116,912
Net change unrealized
appreciation/ (depreciation)
of investments............... 4,467,160 (42,488,775) (135,911) (9,813,011)
------------ ------------ ------------ ------------
Net change in net assets
resulting from operations...... 5,527,874 (40,797,787) 2,001,067 (8,868,451)
------------ ------------ ------------ ------------
Dividends and Distributions to
Shareholders:
From net realized gains
Class A...................... 325 (2,603,327) -- (2,762,177)
Class D...................... -- (765,335) -- (692,033)
------------ ------------ ------------ ------------
325 (3,368,662) -- (3,454,210)
------------ ------------ ------------ ------------
Change in net assets resulting
from dividends and
distributions to
shareholders................... 325 (3,368,662) -- (3,454,210)
------------ ------------ ------------ ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A...................... 2,107,780 8,371,667 299,555 2,982,123
Class D...................... 982,474 1,473,645 114,220 1,227,616
------------ ------------ ------------ ------------
3,090,254 9,845,312 413,775 4,209,739
------------ ------------ ------------ ------------
Net asset value of shares
issued to shareholders in
reinvestment of dividends and
distributions:
Class A...................... (325) 2,359,265 -- 2,596,704
Class D...................... -- 764,367 -- 691,921
------------ ------------ ------------ ------------
(325) 3,123,632 -- 3,288,625
------------ ------------ ------------ ------------
Net asset value of shares
redeemed:
Class A...................... (19,885,160) (28,936,985) (7,715,313) (10,175,152)
Class D...................... (7,645,025) (8,181,883) (1,221,495) (2,462,053)
------------ ------------ ------------ ------------
(27,530,185) (37,118,868) (8,936,808) (12,637,205)
------------ ------------ ------------ ------------
Change in net assets from
capital share transactions... (24,440,256) (24,149,924) (8,523,033) (5,138,841)
------------ ------------ ------------ ------------
Total change in net
assets................ (18,912,057) (68,316,373) (6,521,966) (17,461,502)
Net Assets:
Beginning of period............ 96,814,921 165,131,294 23,316,393 40,777,895
------------ ------------ ------------ ------------
End of period.................. $ 77,902,864 $ 96,814,921 $ 16,794,427 $ 23,316,393
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
23
<PAGE> 24
ESC STRATEGIC FUNDS, INC.
Statements of Changes in Net Assets (continued)
<TABLE>
<CAPTION>
SMALL CAP II FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1999 MARCH 31, 1999
------------------ --------------
(UNAUDITED)
<S> <C> <C>
Operations:
Net investment loss....................................... $ (212,493) $ (309,625)
Net realized loss on investments.......................... (3,235,334) (2,810,903)
Net change unrealized appreciation/ (depreciation) of
investments............................................. 5,176,146 (8,261,391)
----------- ------------
Net change in net assets resulting from operations.......... 1,728,319 (11,381,919)
----------- ------------
Capital Share Transactions:
Proceeds from sales of shares:
Class A................................................. 1,298,963 14,824,338
Class D................................................. 734,309 4,282,060
----------- ------------
2,033,272 19,106,398
----------- ------------
Net asset value of shares redeemed:
Class A................................................. (9,177,910) (6,663,800)
Class D................................................. (2,789,117) (3,179,324)
----------- ------------
(11,967,027) (9,843,124)
----------- ------------
Change in net assets from capital share transactions...... (9,933,755) 9,263,274
----------- ------------
Total change in net assets......................... (8,205,436) (2,118,645)
Net Assets:
Beginning of period....................................... 27,512,554 29,631,199
----------- ------------
End of period............................................. $19,307,118 $ 27,512,554
=========== ============
</TABLE>
See accompanying notes to financial statements.
24
<PAGE> 25
ESC STRATEGIC FUNDS, INC.
Statements of Cash Flows
September 30, 1999
(unaudited)
<TABLE>
<CAPTION>
SMALL CAP SMALL CAP II
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Total investment income................................... $ 288,368 $ 45,061
Net expenses.............................................. (910,463) (257,554)
------------ -----------
Net investment income (loss).......................... (622,095) (212,493)
------------ -----------
Adjustments to reconcile net investment income to cash flows
from operating activities
Changes in receivables
Interest................................................ (9,017) (6,878)
Change in payables
Expenses................................................ (13,521) 8,946
------------ -----------
Total adjustments..................................... (22,538) 2,068
------------ -----------
Net cash provided (used) by operating activities... (599,556) (214,561)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of investments........................ 69,735,243 19,638,969
Purchases of investments.................................. (44,619,889) (10,684,700)
Net purchases of short-term investments with cash received
as collateral from securities lending................... (953,791) 1,129,700
------------ -----------
Net cash provided (used) by investing activities... 24,161,563 10,083,969
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from shares issued............................... 3,103,254 2,033,272
Cost of shares redeemed................................... (27,619,051) (11,935,099)
Distributions paid to shareholders........................ 325 --
Dividends reinvested...................................... (325) --
Net collateral received from securities lending........... 953,791 (1,129,700)
------------ -----------
Net cash provided (used) by financing activities... (23,562,006) (11,031,527)
Net increase (decrease) in cash............................. 0 (1,162,119)
Cash at beginning of period................................. -- --
------------ -----------
Cash at end of period....................................... $ 0 $(1,162,119)
============ ===========
</TABLE>
See accompanying notes to financial statements.
25
<PAGE> 26
ESC STRATEGIC FUNDS, INC.
Financial Highlights
<TABLE>
<CAPTION>
INCOME FUND
----------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------
MAY 4, 1994
(COMMENCEMENT
SIX MONTHS OF OPERATIONS)
ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1999 1998 1997 1996 1995
------------- ---------- ---------- ---------- ---------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........... $ 9.77 $ 9.99 $ 9.73 $ 9.89 $ 9.94 $ 10.00
------ ------ ------- ------- ------- -------
Income from Investment
Operations
Net investment income....... 0.41 0.51(a) 0.34 0.60 0.59 0.55
Net realized and unrealized
gains/ (losses) on
investments............... (0.71) 0.04 0.44 (0.16) 0.16 (0.05)
------ ------ ------- ------- ------- -------
Total from investment
operations.................. (0.30) 0.55 0.78 0.44 0.75 0.50
------ ------ ------- ------- ------- -------
Less Dividends and
Distributions:.............. -- -- -- -- -- --
From net investment
income.................... (0.41) (0.57) (0.52) (0.60) (0.59) (0.01)
From realized gains......... -- (0.15) -- -- (0.21) (0.55)
From tax return of
capital................... -- (0.05) -- -- -- --
------ ------ ------- ------- ------- -------
Total Dividends and
Distributions............... (0.41) (0.77) (0.52) (0.60) (0.80) (0.56)
------ ------ ------- ------- ------- -------
Net asset value per share,
end of period............. $ 9.06 $ 9.77 $ 9.99 $ 9.73 $ 9.89 $ 9.94
====== ====== ======= ======= ======= =======
Total Return (excludes sales
charge)..................... (3.21%) 5.64% 8.18% 3.91% 7.67% 5.30%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................ $6,558 $7,230 $24,413 $32,506 $36,891 $32,373
Ratios to Average Net Assets
of:
Net investment income..... 8.46% 5.09% 5.27% 5.49% 5.87% 6.29%**
Expenses net of
waivers/reimbursements
and expenses paid by
third parties........... 1.66% 1.91% 1.87% 1.65% 1.70% 1.85%**
Expenses before
waivers/reimbursements
and expenses paid by
third parties........... 2.66% 2.22% 1.87% 1.70% 1.75% 1.86%**
Portfolio Turnover Rate... 13% 95% 130% 123% 138% 92%
</TABLE>
(a) Calculated using the average share method.
** Annualized.
26
<PAGE> 27
ESC STRATEGIC FUNDS, INC.
Financial Highlights
<TABLE>
<CAPTION>
INCOME FUND
------------------------------------------------------------------------------
CLASS D
------------------------------------------------------------------------------
MAY 4, 1994
(COMMENCEMENT
SIX MONTHS YEAR YEAR YEAR YEAR OF OPERATIONS)
ENDED ENDED ENDED ENDED ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1999 1998 1997 1996 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share, beginning
of period........................... $ 9.84 $ 9.99 $ 9.73 $ 9.89 $ 9.94 $ 10.00
------- ------- ------- ------- ------- -------
Income from Investment Operations:
Net investment income............. 0.38 0.50(a) 0.28 0.50 0.54 0.50
Net realized and unrealized gains/
(losses) on investments......... (0.71) 0.01 0.45 (0.16) 0.16 (0.05)
------- ------- ------- ------- ------- -------
Total from investment operations.... (0.33) 0.51 0.73 0.34 0.70 0.45
------- ------- ------- ------- ------- -------
Less Dividends and Distributions:
From net investment income........ (0.38) (0.46) (0.47) (0.50) (0.54) (0.01)
From realized gains............... -- (0.15) -- -- (0.21) (0.50)
From tax return of capital........ -- (0.05) -- -- -- --
------- ------- ------- ------- ------- -------
Total Dividends and Distributions... (0.38) (0.66) (0.47) (0.50) (0.75) (0.51)
------- ------- ------- ------- ------- -------
Net asset value per share, end of
period.......................... $ 9.13 $ 9.84 $ 9.99 $ 9.73 $ 9.89 $ 9.94
======= ======= ======= ======= ======= =======
Total Return (excludes sales
charge)......................... (3.43%) 5.23% 7.64% 3.39% 7.11% 4.74%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)...................... $ 494 $ 548 $ 823 $ 1,420 $ 1,446 $ 1,241
Ratios to Average Net Assets of:
Net investment income........... 7.97% 5.03% 4.77% 4.99% 5.37% 5.73%**
Expenses net of
waivers/reimbursements and
expenses paid by third
parties....................... 2.16% 2.44% 2.37% 2.15% 2.20% 2.29%**
Expenses before
waivers/reimbursements and
expenses paid by third
parties....................... 3.16% 2.96% 2.37% 2.21% 2.25% 2.31%**
Portfolio Turnover Rate......... 13% 95% 130% 123% 138% 92%
</TABLE>
(a) Calculated using the average share method.
** Annualized.
See accompanying notes to financial statements.
27
<PAGE> 28
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
MAY 12, 1994
(COMMENCEMENT
SIX MONTHS YEAR YEAR YEAR YEAR OF OPERATIONS)
ENDED ENDED ENDED ENDED ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1999 1998 1997 1996 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period................ $10.75 $12.06 $ 11.66 $ 11.08 $ 9.90 $10.00
------ ------ ------- ------- ------- ------
Income from Investment Operations
Net investment loss.............. (0.03) (0.06) -- (0.04) (0.04) (0.05)
Net realized and unrealized
gains/(losses) on
investments.................... 0.60 (0.31) 2.37 0.97 1.46 (0.03)
------ ------ ------- ------- ------- ------
Total from investment operations... 0.57 (0.37) 2.37 0.93 1.42 (0.08)
------ ------ ------- ------- ------- ------
Less Dividends and Distributions:
From realized gains.............. -- (0.94) (1.97) (0.35) (0.24) (0.02)(a)
------ ------ ------- ------- ------- ------
Total Dividends and
Distributions.................... -- (0.94) (1.97) (0.35) (0.24) (0.02)
------ ------ ------- ------- ------- ------
Net asset value per share, end of
period......................... $11.32 $10.75 $ 12.06 $ 11.66 $ 11.08 $ 9.90
====== ====== ======= ======= ======= ======
Total Return (excludes sales
charge)........................ 5.20% (2.22%) 22.24% 8.44% 14.41% (0.84%)
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)..................... $6,788 $7,816 $13,286 $18,282 $14,597 $9,213
Ratios to Average Net Assets of:
Net investment loss............ (0.46%) (0.44%) (0.50%) (0.40%) (0.36%) (0.65%)**
Expenses net of
waivers/reimbursements and
expenses paid by third
parties...................... 2.50% 2.45% 2.48% 2.25% 2.37% 2.50%**
Expenses before
waivers/reimbursements and
expenses paid by third
parties...................... 2.81% 2.55% 2.48% 2.25% 2.43% 3.22%**
Portfolio Turnover Rate........ 37% 123% 79% 94% 92% 76%
</TABLE>
(a) Represents distribution in excess of net investment income.
** Annualized.
See accompanying notes to financial statements.
28
<PAGE> 29
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
------------------------------------------------------------------------------
CLASS D
------------------------------------------------------------------------------
MAY 12, 1994
(COMMENCEMENT
SIX MONTHS YEAR YEAR YEAR YEAR OF OPERATIONS)
ENDED ENDED ENDED ENDED ENDED THROUGH
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, MARCH 31,
1999 1999 1998 1997 1996 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period................ $10.45 $11.81 $ 11.47 $ 10.95 $ 9.82 $10.00
------ ------ ------- ------- ------- ------
Income from Investment Operations
Net investment loss.............. (0.06) (0.16) (0.13) (0.10) (0.09) (0.07)
Net realized and unrealized
gains/(losses) on
investments.................... 0.59 (0.26) 2.44 0.97 1.46 (0.10)
------ ------ ------- ------- ------- ------
Total from investment operations... 0.53 (0.42) 2.31 0.87 1.37 (0.17)
------ ------ ------- ------- ------- ------
Less Dividends and Distributions:
From realized gains.............. -- (0.94) (1.97) (0.35) (0.24) (0.01)(a)
------ ------ ------- ------- ------- ------
Total Dividends and
Distributions.................... -- (0.94) (1.97) (0.35) (0.24) (0.01)
------ ------ ------- ------- ------- ------
Net asset value per share, end of
period......................... $10.98 $10.45 $ 11.81 $ 11.47 $ 10.95 $ 9.82
====== ====== ======= ======= ======= ======
Total Return (excludes sales
charge)........................ 4.97% (2.73%) 22.09% 7.99% 14.01% (1.72%)
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)..................... $1,542 $1,880 $ 2,776 $ 4,204 $ 3,725 $3,322
Ratios to Average Net Assets of:
Net investment loss............ (0.92%) (0.94%) (1.00%) (0.90%) (0.83%) (1.51%)**
Expenses net of
waivers/reimbursements and
expenses paid by third
parties...................... 3.00% 2.95% 2.98% 2.78% 2.87% 2.98%**
Expenses before
waivers/reimbursements and
expenses paid by third
parties...................... 3.31% 3.05% 2.98% 2.79% 2.96% 3.69%**
Portfolio Turnover Rate........ 37% 123% 79% 94% 92% 76%
</TABLE>
(a) Represents distribution in excess of net investment income.
** Annualized.
See accompanying notes to financial statements.
29
<PAGE> 30
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP FUND
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
JUNE 8, 1994
SIX MONTHS YEAR YEAR YEAR YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS)
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........... $ 16.59 $ 22.81 $ 17.55 $ 15.88 $ 11.25 $10.00
------- ------- -------- ------- ------- ------
Income from Investment
Operations
Net investment
income/(loss)............. (0.13) (0.12) 0.02 (0.05) (0.08) (0.03)
Net realized and unrealized
gains/(losses) on
investments............... 0.95 (5.59) 6.97 2.46 5.19 1.52
------- ------- -------- ------- ------- ------
Total from investment
operations.................. 0.82 (5.71) 6.99 2.41 5.11 1.49
------- ------- -------- ------- ------- ------
Less Dividends and
Distributions:
From net investment
income.................... -- -- -- -- -- (0.24)
From realized gains......... --(a) (0.51) (1.73) (0.74) (0.48) --
------- ------- -------- ------- ------- ------
Total Dividends and
Distributions............... -- (0.51) (1.73) (0.74) (0.48) (0.24)
------- ------- -------- ------- ------- ------
Net asset value per share,
end of period............. $ 17.41 $ 16.59 $ 22.81 $ 17.55 $ 15.88 $11.25
======= ======= ======== ======= ======= ======
Total Return (excludes sales
charge)................... 4.94% (24.97%) 40.64% 14.99% 45.88% 15.03%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................ $61,122 $74,740 $126,857 $72,488 $28,840 $8,785
Ratios to Average Net Assets
of:
Net investment loss....... (1.22%) (0.54%) (0.18%) (0.44%) (0.80%) (0.43%)**
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................. 1.84% 1.79% 1.65% 1.66% 2.00% 2.00%**
Expenses before waivers/
reimbursements and
expenses paid by third
parties................. 1.84% 1.79% 1.68% 1.74% 2.18% 3.28%**
Portfolio Turnover Rate... 19% 57% 67% 65% 102% 151%
</TABLE>
(a) Distribution per share was less than $.005.
** Annualized.
See accompanying notes to financial statements.
30
<PAGE> 31
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP FUND
------------------------------------------------------------------------------
CLASS D
------------------------------------------------------------------------------
JUNE 8, 1994
SIX MONTHS YEAR YEAR YEAR YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS)
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........... $ 16.26 $ 22.50 $ 17.35 $ 15.76 $11.22 $10.00
------- ------- ------- ------- ------ ------
Income from Investment
Operations
Net investment loss......... (0.18) (0.22) (0.07) (0.11) (0.16) (0.05)
Net realized and unrealized
gains/(losses) on
investments............... 0.96 (5.51) 6.95 2.44 5.18 1.51
------- ------- ------- ------- ------ ------
Total from investment
operations.................. 0.78 (5.73) 6.88 2.33 5.02 1.46
------- ------- ------- ------- ------ ------
Less Dividends and
Distributions:
From net investment
income.................... -- -- -- -- -- (0.24)
From realized gains......... -- (0.51) (1.73) (0.74) (0.48) --
------- ------- ------- ------- ------ ------
Total Dividends and
Distributions............... -- (0.51) (1.73) (0.74) (0.48) (0.24)
------- ------- ------- ------- ------ ------
Net asset value per share,
end of period............. $ 17.04 $ 16.26 $ 22.50 $ 17.35 $15.76 $11.22
======= ======= ======= ======= ====== ======
Total Return (excludes sales
charge)................... 4.80% (25.40%) 40.47% 14.59% 45.19% 14.72%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................ $16,780 $22,075 $38,274 $22,392 $8,897 $3,367
Ratios to Average Net Assets
of:
Net investment loss....... (1.73%) (1.04%) (0.68%) (0.96%) (1.30%) (0.93%)**
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................. 2.34% 2.29% 2.15% 2.19% 2.50% 2.50%**
Expenses before waivers/
reimbursements and
expenses paid by third
parties................. 2.34% 2.29% 2.18% 2.29% 2.74% 3.68%**
Portfolio Turnover Rate... 19% 57% 67% 65% 102% 151%
</TABLE>
** Annualized.
See accompanying notes to financial statements.
31
<PAGE> 32
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
APPRECIATION FUND
------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------
JUNE 6, 1994
SIX MONTHS YEAR YEAR YEAR YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS)
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........... $ 10.73 $ 15.80 $ 14.03 $ 13.02 $ 10.67 $ 10.00
------- ------- ------- ------- ------- -------
Income from Investment
Operations
Net investment
income/(loss)............. (0.03) (0.06) 0.02 (0.04) (0.05) --
Net realized and unrealized
gains/(losses) on
investments............... 0.89 (3.50) 6.02 1.92 2.71 0.73
------- ------- ------- ------- ------- -------
Total from investment
operations.................. 0.86 (3.56) 6.04 1.88 2.66 0.73
------- ------- ------- ------- ------- -------
Less Dividends and
Distributions:
From realized gains......... -- (1.51) (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- ------- -------
Total Dividends and
Distributions............... -- (1.51) (4.27) (0.87) (0.31) (0.06)
------- ------- ------- ------- ------- -------
Net asset value per share,
end of period............. $ 11.59 $ 10.73 $ 15.80 $ 14.03 $ 13.02 $ 10.67
======= ======= ======= ======= ======= =======
Total Return (excludes sales
charge)................... 8.01% (22.43%) 46.73% 14.25% 25.07% 7.32%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................ $13,143 $18,916 $33,394 $44,767 $25,561 $15,126
Ratios to Average Net Assets
of:
Net investment loss....... (0.47%) (0.44%) (0.40%) (0.30%) (0.39%) (0.04%)**
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................. 2.00% 1.95% 1.80% 1.82% 2.00% 2.00%**
Expenses before waivers/
reimbursements and
expenses paid by third
parties................. 2.07% 1.97% 1.80% 1.84% 2.10% 2.88%**
Portfolio Turnover Rate... 62% 96% 67% 71% 78% 58%
</TABLE>
** Annualized.
See accompanying notes to financial statements.
32
<PAGE> 33
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
APPRECIATION FUND
------------------------------------------------------------------------------
CLASS D
------------------------------------------------------------------------------
JUNE 6, 1994
SIX MONTHS YEAR YEAR YEAR YEAR (COMMENCEMENT
ENDED ENDED ENDED ENDED ENDED OF OPERATIONS)
SEPTEMBER 30, MARCH 31, MARCH 31, MARCH 31, MARCH 31, THROUGH
1999 1999 1998 1997 1996 MARCH 31, 1995
------------- --------- --------- --------- --------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Net asset value per share,
beginning of period........... $10.47 $15.54 $13.85 $12.91 $10.63 $10.00
------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net investment loss......... (0.06) (0.15) (0.08) (0.08) (0.09) (0.03)
------ ------ ------ ------ ------ ------
Total Dividends and
Distributions............... -- (1.51) (4.27) (0.87) (0.31) 0.06
------ ------ ------ ------ ------ ------
Net realized and unrealized
gains/(losses) on
investments............... 0.87 (3.41) 6.04 1.89 2.68 0.72
------ ------ ------ ------ ------ ------
Total from investment
operations.................. 0.81 (3.56) 5.96 1.81 2.59 0.69
------ ------ ------ ------ ------ ------
Less Dividends and
Distributions:
From realized gains......... -- (1.51) (4.27) (0.87) (0.31) (0.06)
------ ------ ------ ------ ------ ------
Total Dividends and
Distributions............... -- (1.51) (4.27) (0.87) (0.31) (0.06)
------ ------ ------ ------ ------ ------
Net asset value per share,
end of period............. $11.28 $10.47 $15.54 $13.85 $12.91 $10.63
====== ====== ====== ====== ====== ======
Total Return (excludes sales
charge)................... 7.74% (22.82%) 46.76% 13.81% 24.50% 6.92%
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)................ $3,651 $4,400 $7,384 $4,054 $2,482 $1,693
Ratios to Average Net Assets
of:
Net investment loss....... (0.99%) (0.94%) (0.90%) (0.78%) (0.86%) (0.56%)**
Expenses net of waivers/
reimbursements and
expenses paid by third
parties................. 2.50% 2.45% 2.30% 2.34% 2.50% 2.50%**
Expenses before waivers/
reimbursements and
expenses paid by third
parties................. 2.57% 2.47% 2.30% 2.36% 2.64% 3.40%**
Portfolio Turnover Rate... 62% 96% 67% 71% 78% 58%
</TABLE>
** Annualized.
See accompanying notes to financial statements.
33
<PAGE> 34
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP II FUND
--------------------------------------------------------------------------
CLASS A
--------------------------------------------------------------------------
JANUARY 28, 1997
(COMMENCEMENT
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1997
------------------ -------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value per share, beginning
of period........................... $ 9.61 $ 13.68 $ 9.64 $10.00
------- ------- ------- ------
Income from Investment Operations
Net investment income/(loss)...... (0.11) (0.09) 0.01 --
Net realized and unrealized
gains/(losses) on investments... 0.66 (3.98) 4.65 (0.36)
------- ------- ------- ------
Total from investment operations.... 0.55 (4.07) 4.66 (0.36)
------- ------- ------- ------
Less Dividends and Distributions:
From net investment income........ -- -- (0.36) --
From realized gains............... -- -- (0.26) --
------- ------- ------- ------
Total Dividends and Distributions... -- -- (0.62) --
------- ------- ------- ------
Net asset value per share, end of
period.......................... $ 10.16 $ 9.61 $ 13.68 $ 9.64
======= ======= ======= ======
Total Return (excludes sales
charge)......................... 5.72% (29.75%) 48.92% (3.60%)
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)...................... $13,468 $20,077 $19,942 $2,852
Ratios to Average Net Assets of:
Net investment income/(loss).... (1.51%) (0.87%) (0.36%) 0.25%**
Expenses net of
waivers/reimbursements and
expenses paid by third
parties....................... 1.86% 2.00% 1.62% 2.00%**
Expenses before
waivers/reimbursements and
expenses paid by third
parties....................... 2.36% 2.27% 2.45% 5.51%**
Portfolio Turnover Rate......... 23% 58% 86% 14%
</TABLE>
** Annualized.
See accompanying notes to financial statements.
34
<PAGE> 35
ESC STRATEGIC FUNDS, INC.
Financial Highlights (continued)
<TABLE>
<CAPTION>
SMALL CAP II FUND
--------------------------------------------------------------------------
CLASS D
--------------------------------------------------------------------------
JANUARY 28, 1997
(COMMENCEMENT
OF OPERATIONS)
SIX MONTHS ENDED YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, 1999 MARCH 31, 1999 MARCH 31, 1998 MARCH 31, 1997
------------------ -------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net asset value per share,
beginning of period................ $ 9.52 $13.61 $ 9.63 $10.00
------ ------ ------ ------
Income from Investment Operations
Net investment loss.............. (0.12) (0.16) (0.03) --
Net realized and unrealized
gains/(losses) on
investments.................... 0.65 (3.93) 4.63 (0.37)
------ ------ ------ ------
Total from investment operations... 0.53 (4.09) 4.60 (0.37)
------ ------ ------ ------
Less Dividends and Distributions:
From net investment income....... -- -- (0.36) --
From realized gains.............. -- -- (0.26) --
------ ------ ------ ------
Total Dividends and
Distributions.................... -- -- (0.62) --
------ ------ ------ ------
Net asset value per share, end of
period......................... $10.05 $ 9.52 $13.61 $ 9.63
====== ====== ====== ======
Total Return (excludes sales
charge).......................... 5.57% (30.05%) 48.33% (3.70%)
Ratios/Supplemental Data:
Net Assets End of Period (in
thousands)..................... $5,839 $7,435 $9,689 $1,304
Ratios to Average Net Assets of:
Net investment loss............ (2.01%) (1.37%) (0.86%) (0.23%)**
Expenses net of
waivers/reimbursements and
expenses paid by third
parties...................... 2.36% 2.50% 2.12% 2.50%**
Expenses before
waivers/reimbursements and
expenses paid by third
parties...................... 2.87% 2.77% 2.95% 6.91%**
Portfolio Turnover Rate........ 23% 58% 86% 14%
</TABLE>
** Annualized.
See accompanying notes to financial statements.
35
<PAGE> 36
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
1. DESCRIPTION. ESC Strategic Funds, Inc. (the "Company") was incorporated
in Maryland on November 24, 1993. The Company currently comprises five
portfolios: ESC Strategic Income Fund, ESC Strategic International Equity Fund,
(formerly ESC Strategic Global Equity Fund), ESC Strategic Small Cap Fund, ESC
Strategic Appreciation Fund, and ESC Strategic Small Cap II Fund, (formerly ESC
Strategic Growth Fund),(individually a "Fund"; 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, operates as a diversified fund. ESC
Strategic Small Cap Fund, operates as a non-diversified fund. 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 Small Cap II 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.
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 accepted
accounting principles ("GAAP"). 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.
36
<PAGE> 37
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
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 4:00 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. REPURCHASE AGREEMENTS. The Funds may purchase instruments from
financial institutions, such as banks and broker-dealers, subject to the
seller's agreement to repurchase them at an agreed upon time and price
("repurchase agreements"). The seller under a repurchase agreement is
required to maintain the value of the securities subject to the agreement
at not less than the repurchase price. Default by the seller would,
however, expose the relevant Funds to possible loss because of adverse
market action or delay in connection with the disposition of the underlying
obligations. Risks may arise from the potential inability of counterparties
to honor the terms of the repurchase agreements. Accordingly, the Funds
could receive less than the repurchase price upon the sale of collateral
securities.
E. FEDERAL INCOME TAXES. It is the policy of each of the Funds to
continue 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.
F. ORGANIZATIONAL EXPENSES. Costs incurred in connection with the
organization and initial registration of the Funds, with the exception of
the Small Cap II Fund, have been deferred and are being amortized on a
straight-line basis over sixty months beginning with each Fund's
commencement of operations. In the event any of the initial
37
<PAGE> 38
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
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.
G. DETERMINATION OF NET ASSET VALUE AND CALCULATION OF EXPENSES.
Expenses directly attributable to a Fund are charged to that Fund. Other
expenses of the Company are allocated proportionately among the Funds in
relation to the net assets of each Fund or on another reasonable basis. In
calculating net asset value per share of each class, investment income,
realized and unrealized gains and losses, and expenses other than class
specific expenses are allocated daily to each class of shares based upon
the proportion of net assets of each class at the beginning of each day.
Distribution expenses are solely borne by the class incurring the expense.
H. 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.
I. 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.
38
<PAGE> 39
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
J. 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 Funds enter
into such contracts for the purpose of hedging exposure to change in
foreign currency exchange rates on their portfolio holdings. A lack of
correlation between the price of the security and the underlying contract
could result in a loss to the Funds. At September 30, 1999, 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 GAIN
--------------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C>
9,396,725/Japanese Yen.................... 10/1/99 $88,025 $88,259 $234
</TABLE>
K. CREDIT AND MARKET RISK. Funds that invest in high yield
instruments are subject to certain credit and market risks. The yields of
high yield debt obligations reflect, among other things, perceived credit
risk. The Funds' investment in securities rated below investment grade
typically involve risks not associated with higher rated securities
including, among others, greater risk of timely and ultimate payment of
interest and principal, greater market price volatility and less liquid
secondary market trading.
L. SECURITIES LENDING. To increase current income, each Fund may lend
its portfolio securities worth up to one-third of that Fund's total assets
to brokers, dealers and financial institutions, provided: (1) the loan is
secured continuously by collateral consisting of U.S. Government securities
or cash or letters of credit maintained on a daily mark-to-market basis in
an amount at least equal to the current market value of the securities
loaned; (2) the Funds may at any time call the loan and obtain the return
of the securities loaned within five business days, therefore not
considered to be illiquid investments; and (3) the Funds will receive any
interest or dividends paid on the loaned securities while simultaneously
seeking to earn interest on the investment of collateral.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money
market instruments. The cash or subsequent short-term investments are
recorded as assets of the Funds, offset by a corresponding liability to
repay the cash at the termination of the loan. In addition, the short-term
securities purchased with the cash collateral are included in the
accompanying schedules of portfolio investments. In connection with lending
securities, the Funds may pay reasonable finders, administrative and
custodial fees. Loans of securities involve risk that the borrower may fail
to return the securities or may fail to provide additional collateral.
According to GAAP, a statement of cash flows is presented if the Fund lent
out and received cash as collateral, on average, more than 10% of net
assets during the year.
39
<PAGE> 40
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
As of September 30, 1999, the following Funds had securities with the
following market values on loan:
<TABLE>
<CAPTION>
MARKET VALUE MARKET VALUE
OF COLLATERAL OF LOANED SECURITIES
------------- --------------------
<S> <C> <C>
Small Cap..................................... $13,421,600 $12,553,770
Appreciation.................................. $ 1,069,268 $ 1,027,733
Small Cap II.................................. $ 2,641,100 $ 2,339,440
</TABLE>
The loaned securities were fully collateralized by cash which was invested
in short term corporate bonds and repurchase agreements at September 30, 1999.
As disclosed in the schedules of portfolio investments the Small Cap ,
Appreciation and Small Cap II Funds collectively invested cash collateral in a
Lehman Brothers Repurchase Agreement with an interest rate of 5.83% and a
maturity of 10/1/1999 which was collateral by $10,630,000 Collateralized
Mortgage Obligation, Series 99-BC2, due 6/25/29 with a market value of
$10,638,879.
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 rate of 1.25% of average daily net assets for ESC
Strategic Small Cap II 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 and Small Cap II Funds and approximately one-third of the assets
of the Appreciation Fund. The Adviser has retained various other Managers to
advise the International Equity Fund, Income Fund and the remaining assets of
the Appreciation Fund. The Adviser pays any fees payable under these agreements
with the Managers. For the six months ended September 30, 1999, the Adviser
voluntarily waived fees of $37,216, $13,879, $7,789, and $64,598 for the Income
Fund, International Equity Fund, Appreciation Fund and Small Cap II Fund,
respectively. The Adviser did not waive any fee for the Small Cap Fund.
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 include day-to-day administration of matters
related to the corporate existence of the Company, maintenance of its records,
preparation of reports, supervision of the Funds' arrangement with their
custodian and assistance in the preparation of the Company's Registration
Statement under federal and state laws. Pursuant to the Administration
Agreement, 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.
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
40
<PAGE> 41
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
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.
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:
Income -- 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);
Appreciation -- 2.00% (Class A), 2.50% (Class D), and Small Cap II -- 2.00%
(Class A), 2.50% (Class D).
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.
4. SECURITIES TRANSACTIONS.
A. PURCHASE AND SALE TRANSACTIONS. The aggregate amount of purchases
and sales of investment securities, other than short-term securities, for
the six months ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
Income.................................... $ 1,081,680 $ 877,108
International Equity...................... $ 3,345,428 $ 4,980,016
Small Cap................................. $16,988,566 $40,820,200
Appreciation.............................. $12,247,385 $21,073,506
Small Cap II.............................. $ 5,819,284 $14,057,679
</TABLE>
41
<PAGE> 42
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
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 six months ended September 30, 1999,
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------
INTERNATIONAL
INCOME EQUITY SMALL CAP
----------- ------------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CLASS A
Beginning Balance.......................................... 740,072 727,019 4,504,805
---------- --------- ----------
Shares Sold................................................ 16,526 17,989 118,276
Shares issued in reinvestment of net dividends and
distributions............................................ 27,337 -- (20)
Shares redeemed............................................ (60,191) (145,455) (1,111,517)
---------- --------- ----------
Net change in shares....................................... (16,328) (127,466) (993,261)
---------- --------- ----------
Ending Balance............................................. 723,744 599,553 3,511,544
========== ========= ==========
CLASS D
Beginning Balance.......................................... 55,694 179,858 1,357,437
---------- --------- ----------
Shares Sold................................................ 363 (480) 54,922
Shares issued in reinvestment of net dividends and
distributions............................................ 2,126 -- --
Shares redeemed............................................ (4,026) (38,937) (427,499)
---------- --------- ----------
Net change in shares....................................... (1,537) (39,417) (372,577)
---------- --------- ----------
Ending Balance............................................. 54,157 140,441 984,860
========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1999
---------------------------
APPRECIATION SMALL CAP II
------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CLASS A
Beginning Balance........................................... 1,762,710 2,090,287
--------- ---------
Shares Sold................................................. 25,100 123,185
Shares issued in reinvestment of net dividends and
distributions............................................. -- --
Shares redeemed............................................. (653,461) (888,456)
--------- ---------
Net change in shares........................................ (628,361) (765,271)
--------- ---------
Ending Balance.............................................. 1,134,349 1,325,016
========= =========
CLASS D
Beginning Balance........................................... 420,184 781,351
--------- ---------
Shares Sold................................................. 10,621 70,575
Shares issued in reinvestment of net dividends and
distributions............................................. -- --
Shares redeemed............................................. (107,009) (270,716)
--------- ---------
Net change in shares........................................ (96,388) (200,141)
--------- ---------
Ending Balance.............................................. 323,796 581,210
========= =========
</TABLE>
42
<PAGE> 43
ESC STRATEGIC FUNDS, INC.
Notes to Financial Statements -- September 30, 1999
(unaudited)
6. MULTIPLE MANAGER STRATEGY. The Adviser uses the Multiple Manager
Strategy for certain of the Funds from time to time. Under this strategy, the
Adviser allocates portions of a Fund's assets among multiple specialist Managers
with dissimilar investment styles and security selection disciplines. The
Adviser monitors the performance of both the total Fund portfolio and of each
Manager. The Adviser will reallocate Fund assets among individual Manager's or
recommend to the Company that it employ or terminate particular Manager's to the
extent the Adviser deems appropriate to achieve the overall objectives of the
particular Fund.
Effective May 24, 1999, Westcap Investors, LLC replaced Globe Flex Capital,
L.P. as a Manager of the ESC Stratagie Appreciation 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-Westcap Investors, LLC; Brandes
Investment Partners, L.P., and Atlantic Capital Management, LLC.
ESC Strategic Small Cap II Fund-Equitable Asset Management, Inc.
Equitable Asset Management, Inc. is an affiliate of the Adviser.
43
<PAGE> 44
[ESC Strategic Funds Graphic]
ESC STRATEGIC FUNDS, INC.
3435 STELZER ROAD
COLUMBUS, OHIO 43219-8006
GENERAL AND ACCOUNT INFORMATION:
(800) 261-FUND(3863)
INVESTMENT ADVISER
- ---------------------
SunTrust Equitable Securities
800 Nashville City Center
Nashville, Tennessee 37219-1743
ADMINISTRATOR AND DISTRIBUTOR
- ---------------------------------
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
COUNSEL
- --------
Dechert Price & Rhoads
Ten Post Office Square -- South
Boston, MA 02109-4603
INDEPENDENT ACCOUNTANTS
- ---------------------------
PricewaterhouseCoopers LLP
100 East Broad Street
Suite 2100
Columbus, Ohio 43215
ESC Strategic INCOME Fund
ESC Strategic INTERNATIONAL EQUITY Fund
ESC Strategic SMALL CAP Fund
ESC Strategic APPRECIATION Fund
ESC Strategic SMALL CAP II Fund
SEMI-ANNUAL REPORT
SEPTEMBER 30, 1999
11/99
