<PAGE> 1
As Filed With the Securities and Exchange Commission
July 13, 1998
Registration No. 2-28097
------------------------
-----------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------
FORM N-1A
Registration Statement Under the Securities Act of 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 50 x
and/or
Registration Statement Under the Investment Company Act of 1940
Amendment No. 36 x
(Check appropriate box or boxes)
- -------------------------------------------------------------------------------
THE ENTERPRISE GROUP OF FUNDS, INC.
(Exact Name of Registrant)
Suite 450
3343 Peachtree Road
Atlanta, Georgia 30326
(Address of Principal Executive Office)
Registrant's Telephone Number: (404) 261-1116
Catherine R. McClellan
Suite 450
3343 Peachtree Road, N.E.
Atlanta, Georgia 30326-1022
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box)
_________immediately upon filing pursuant to paragraph (b)
________ on _____________pursuant to paragraph (b)
X 75 days after filing pursuant to paragraph (a) (2) of Rule 485
- --------
60 days after filing pursuant to paragraph (a)
- ---------
on pursuant to paragraph (a) of Rule 485
- --------- -----
DECLARATION PURSUANT TO RULE 24f-2(a)(l)
The Rule 24f-2 Notice for the Registrant's fiscal year ended December 31, 1997
was filed with the Securities and Exchange Commission on March 4, 1998.
<PAGE> 2
Cross Reference Sheet
<TABLE>
<CAPTION>
Form N-lA
Item
----
Prospectus Caption
------------------
<S> <C>
Part A
1. Cover Page.................................... The Enterprise Group of Funds, Inc.
2. Synopsis...................................... Prospectus Summary
3. Condensed Financial Information............... Condensed Financial Information
4. General Description of Registrant............ The Enterprise Group of Funds, Inc.
General Information - Organization of the
Fund
5. Management of the Fund........................ Management of the Fund
5A. Management's Discussion of Fund Performance... Refer to Annual Report
5B. Management's Discussion of Year 2000 Management of the Fund
6. Capital Stock and Other Securities............ General Information - Capital Stock
7. Purchase of Securities Being Offered.......... How To Purchase Portfolio Shares
8. Redemption or Repurchase...................... How to Redeem Portfolio Shares
9. Legal Proceedings............................. Not Applicable
Statement of Additional
Part B Information Caption
------ -------------------
10. Cover Page.................................... Cover Page
11. Table of Contents............................. Table of Contents
12. General Information and History............... General Information and History
13. Investment Objectives and Policies............ Investment Objectives and Investment
Restrictions
14. Management of the Registrant.................. Management of the Fund
15. Control Persons and Principal of Securities... Management of the Fund
16. Investment Advisory and Other Services........ Investment Advisory and Other Services
17. Brokerage Allocation and other Practices...... Portfolio Transactions and Brokerage
18. Capital Stock and Other Securities............ Not Applicable
19. Purchase, Redemption and Pricing of Securities
Being Offered................................. Purchase, Redemption and Pricing of Securities
Being Offered
20. Tax Status.................................... Not Applicable
21. Underwriters.................................. Purchase, Redemption and Pricing of Securities
Being Offered
22. Calculation of Yield Quotations of Money Market
Funds......................................... Performance Comparisons
23. Financial Statements.......................... Financial Statements
</TABLE>
Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C to this Post-Effective Amendment.
A-2
<PAGE> 3
PROSPECTUS
October 1, 1998
[Four Color Photograph of Keys on a Key Ring]
The Enterprise Group of Funds, Inc.
A-3
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense information...........................................
Prospectus summary............................................
Condensed financial information...............................
Investment objectives and policies of the Portfolios..........
Certain investment techniques and associated risks............
Investment restrictions.......................................
How to purchase Portfolio shares..............................
Shareholder services..........................................
How to exchange shares among the Portfolios...................
How to redeem Portfolio shares................................
Distributor's Agreement and Plan of Distribution..............
Performance comparisons.......................................
Management of the Fund........................................
Taxes.........................................................
Dividends and distribution....................................
Brokerage transactions........................................
General information...........................................
Appendix......................................................
</TABLE>
A-4
<PAGE> 5
THE ENTERPRISE GROUP OF FUNDS, INC.
Atlanta Financial Center
3343 Peachtree Road, N.E., Suite 450
Atlanta, Georgia 30326
For Shareholder Information Call 1-800-368-3527
PROSPECTUS
DATED OCTOBER 1, 1998
The Enterprise Group of Funds, Inc. (the "Fund") is a series of mutual funds
that seeks to provide investors a broad range of investment alternatives through
its 14 separate Funds. Each Fund is managed as if it were a separate mutual fund
issuing its own shares. The Fund's principal investment adviser, Enterprise
Capital Management, Inc., selects separate sub-advisers referred to as "Fund
Managers" that provide investment advice for the Funds and that are selected on
the basis of able investment performance in their respective areas of
responsibility.
This Prospectus explains concisely what you should know about the Fund before
you invest. Please read this Prospectus and keep it for future reference. You
can find more detailed information about the Funds in a Statement of Additional
Information ("SAI"), dated October 1, 1998, which has been filed with the
Securities and Exchange Commission ("SEC"). The SAI is incorporated by reference
into this Prospectus (which means that it is legally part of the Prospectus).
You can obtain a free copy of the SAI by calling (800) 368-3527 or by writing to
the above address. The SEC maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference and other information
regarding the Funds.
Equity Funds
Growth Fund
Growth and Income Fund
Equity Fund
Equity Income Fund
Capital Appreciation Fund
Small Company Growth Fund
Small Company Value Fund
International Growth Fund
Global Financial Services Fund
Income Funds
Government Securities Fund
High-Yield Bond Fund
Tax-Exempt Income Fund
Flexible Fund
Managed Fund
Money Market Fund
Money Market Fund
LIKE ALL MUTUAL FUND SHARES, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE MONEY MARKET FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE HIGH-YIELD BOND FUND INVESTS SIGNIFICANTLY IN LOWER RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS." BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE
WITH REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL AND HAVE SPECIAL
RISKS. THEY MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE READ THE RISK
INFORMATION CAREFULLY.
PLEASE NOTE THAT THESE FUNDS ARE NOT BANK DEPOSITS; ARE NOT FEDERALLY INSURED;
ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY; AND ARE NOT GUARANTEED TO
ACHIEVE THEIR GOAL(S).
THE ENTERPRISE Group of Funds, Inc.
<PAGE> 6
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
CAPITAL
GROWTH AND EQUITY INCOME APPRECIATION
GROWTH FUND INCOME FUND EQUITY FUND FUND FUND
------------------ ------------------ ------------------ ------------------ ------------------
CLASS OF SHARES: A B C A B C A B C A B C A B C
---------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Initial Sales
Load Imposed on
Purchase (as a % of
offering price)(1)..... 4.75% none none 4.75% none none 4.75% none none 4.75% none none 4.75% none none
Maximum Deferred Sales
Load................... none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
Maximum Sales Load
Imposed On Reinvested
Dividends.............. none none none none none none none none none none none none none none none
Exchange Fee............ none none none none none none none none none none none none none none none
ANNUAL FUND OPERATING
EXPENSES (AS A % OF
AVERAGE NET ASSETS)
Management Fee.......... 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Fee (including
service fees of
.25%)(3)............... 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00%
Other Expenses (net of
waivers)(4)............ 0.23% 0.23% 0.22% 0.30% 0.30% 0.30% 0.40% 0.40% 0.40% 0.30% 0.30% 0.30% 0.45% 0.46% 0.46%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING
EXPENSES............... 1.43% 1.98% 1.97% 1.50% 2.05% 2.05% 1.60% 2.15% 2.15% 1.50% 2.05% 2.05% 1.65% 2.21% 2.21%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
EXAMPLE 1: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) retention of shares at the end of the time period.
10-year figures for Class B shares assume conversion to Class A shares after eight years.
1 Year.................. $ 61 $ 20 $ 20 $ 62 $ 21 $ 21 $ 63 $ 22 $ 22 $ 62 $ 21 $ 21 $ 63 $ 22 $ 22
3 Years................. 91 62 62 93 64 64 96 67 67 93 64 64 97 69 69
5 Years................. 122 107 106 125 110 110 130 115 115 125 110 110 133 118 118
10 Years................ 211 216 230 218 224 238 228 234 248 218 224 238 234 240 254
EXAMPLE 2: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge, (b) a 5% annual return, and (c) redemption at the end of the time period. 10-year
figures for Class B shares assume conversion to Class A shares after eight years.
1 Year.................. $ 61 $ 70 $ 30 $ 62 $ 71 $ 31 $ 63 $ 72 $ 32 $ 62 $ 71 $ 31 $ 63 $ 72 $ 32
3 Years................. 91 102 62 93 104 64 96 107 67 93 104 64 97 109 69
5 Years................. 122 127 106 125 130 110 130 135 115 125 130 110 133 138 118
10 Years................ 211 216 230 218 224 238 228 234 248 218 224 238 234 240 254
<CAPTION>
SMALL COMPANY
GROWTH FUND
------------------
CLASS OF SHARES: A B C
---------------- ---- ---- ----
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES
Maximum Initial Sales
Load Imposed on
Purchase (as a % of
offering price)(1)..... 4.75% none none
Maximum Deferred Sales
Load................... none 5.00% 1.00%
Maximum Sales Load
Imposed On Reinvested
Dividends.............. none none none
Exchange Fee............ none none none
ANNUAL FUND OPERATING
EXPENSES (AS A % OF
AVERAGE NET ASSETS)
Management Fee.......... 1.00% 1.00% 1.00%
12b-1 Fee (including
service fees of
.25%)(3)............... 0.45% 1.00% 1.00%
Other Expenses (net of
waivers)(4)............ 0.40% 0.40% 0.40%
---- ---- ----
TOTAL FUND OPERATING
EXPENSES............... 1.85% 2.40% 2.40%
==== ==== ====
EXAMPLE 1: You would pay
(a) payment of the maxi
10-year figures for Cla
1 Year.................. $ 65 $ 24 $ 24
3 Years................. 103 75 75
5 Years................. 143 128 128
10 Years................ 254 260 274
EXAMPLE 2: You would pay
(a) payment of the maxi
figures for Class B sha
1 Year.................. $ 65 $ 74 $ 34
3 Years................. 103 115 75
5 Years................. 143 148 128
10 Years................ 254 260 274
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
The purpose of this table is to help you understand the various costs and
expenses that you will bear directly or indirectly.
(1) Certain purchases of Class A shares of $1 million or more are not subject to
front-end sales charges; however, if you redeem the shares within 24 months
after the purchase date, you will pay a contingent deferred sales charge
("CDSC") of 1% of the redemption proceeds.
(2) These fees may be higher than that of other Funds. However, the Board of
Directors has determined that such fees are reasonable in light of the
services, investment decisions, and investment techniques employed.
(3) Includes a service fee of .25% of average net assets for Class B and Class C
shares. See "Distributor's Agreement and Plan of Distribution." Long-term
shareholders of a 12b-1 Fund may over time pay more in 12b-1 fees than the
economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. Expense information of the
Money Market Fund has been restated to reflect the elimination of 12b-1
expense for Classes A, B and C.
(4) Expenses for the Growth Fund do not reflect a reduction for reimbursements
of .02% for brokerage credits. As for the Tax-Exempt Income Fund, expense
information has been restated to reflect a reduction in the maximum expense
to 1.10% for Class A, 1.65% for Class B and 1.65% for Class C. Absent these
reimbursements and reductions, expenses would have been higher.
THE ENTERPRISE Group of Funds, Inc.
2
<PAGE> 7
<TABLE>
<CAPTION>
SMALL COMPANY INTERNATIONAL GLOBAL FINANCIAL GOVERNMENT HIGH-YIELD BOND TAX-EXEMPT
VALUE FUND GROWTH FUND SERVICES FUND SECURITIES FUND FUND INCOME FUND
------------------ ------------------ ------------------ ------------------ ------------------ ------------------
A B C A B C A B C A B C A B C A B C
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
4.75% none none 4.75% none none 4.75% none none 4.75% none none 4.75% none none 4.75% none none
none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00% none 5.00% 1.00%
none none none none none none none none none none none none none none none none none none
none none none none none none none none none none none none none none none none none none
0.75% 0.75% 0.75% 0.85% 0.85% 0.85% 0.85% 0.85% 0.85% 0.60% 0.60% 0.60% 0.60% 0.60% 0.60% 0.50% 0.50% 0.50%
0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00% 0.45% 1.00% 1.00%
0.55% 0.55% 0.55% 0.70% 0.70% 0.70% 0.45% 0.45% 0.45% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.15% 0.15% 0.15%
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
1.75% 2.30% 2.30% 2.00% 2.55% 2.55% 1.75% 2.30% 2.30% 1.30% 1.85% 1.85% 1.30% 1.85% 1.85% 1.10% 1.65% 1.65%
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
$ 64 $ 23 $ 23 $ 67 $ 26 $ 26 $ 64 $ 23 $ 23 $ 60 $ 19 $ 19 $ 60 $ 19 $ 19 $ 58 $ 17 $ 17
100 72 72 107 79 79 100 72 72 87 58 58 87 58 58 81 52 52
138 123 123 150 136 136 -- -- -- 115 100 100 115 100 100 105 90 90
244 250 264 269 275 289 -- -- -- 197 203 217 197 203 217 175 181 195
$ 64 $ 73 $ 33 $ 67 $ 76 $ 36 $ 64 $ 73 $ 33 $ 60 $ 69 $ 29 $ 60 $ 69 $ 29 $ 58 $ 67 $ 27
100 112 72 107 119 79 100 112 72 87 98 58 87 98 58 81 92 52
138 143 123 150 156 136 -- -- -- 115 120 100 115 120 100 105 110 90
244 250 264 269 275 289 -- -- -- 197 203 217 197 203 217 175 181 195
<CAPTION>
MONEY MARKET
MANAGED FUND FUND
------------------ ------------------
A B C A B C
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.75% none none none none none
none 5.00% 1.00% none 5.00% 1.00%
none none none none none none
none none none none none none
0.75% 0.75% 0.75% 0.35% 0.35% 0.35%
0.45% 1.00% 1.00% none none none
0.29% 0.29% 0.31% 0.35% 0.35% 0.35%
---- ---- ---- ---- ---- ----
1.49% 2.04% 2.06% 0.70% 0.70% 0.70%
==== ==== ==== ==== ==== ====
$ 62 $ 21 $ 21 $ 7 $ 7 $ 7
92 64 65 22 22 22
125 110 111 39 39 39
217 223 239 87 87 87
$ 62 $ 71 $ 31 $ 7 $ 57 $ 17
92 104 65 22 62 22
125 130 111 39 59 39
217 223 239 87 87 87
</TABLE>
See "Management of the Fund," "Distribution Plans," and "Brokerage Transactions"
for further information concerning expenses. For a separate $10 charge,
redemptions for a maximum of $250,000 will be wired at your request. For
redemption information, please refer to page 45 of the Prospectus.
If your account balance is $1,000 or less, you will be charged a $25 account
maintenance fee. This fee does not apply to Automatic Bank Draft Plan, Automatic
Investment Plan, Retirement Plan and Savings Plan Accounts.
THE ENTERPRISE Group of Funds, Inc.
3
<PAGE> 8
THE ENTERPRISE GROUP OF FUNDS, INC.
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Set forth below are the 14 Funds, their Fund Managers and investment
objectives. The Fund is a diversified, open-end management investment
company. Enterprise Capital Management, Inc. (the "Adviser") serves as
investment adviser. The Fund consists of common stock divided into 14
Funds consisting of four separate classes for each Fund. Shares are
transferable within each class.
<TABLE>
<CAPTION>
FUND MANAGER INVESTMENT OBJECTIVES
------------ ---------------------
<S> <C> <C> <C>
EQUITY FUNDS
GROWTH FUND Capital appreciation, primarily from investments
Montag & Caldwell, Inc. in common stocks.
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND Total return in excess of the total return of the
Retirement System Investors Inc. Lipper Growth and Income Mutual Funds Average
New York, New York measured over a period of three to five years, by
investing primarily in a broadly diversified group
of large capitalization stocks.
- ------------------------------------------------------------------------------------------------------------
EQUITY FUND Long-term capital appreciation, primarily from
OpCap Advisors investments in securities of companies that are
New York, New York believed by the Fund Manager to be undervalued.
- ------------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND A combination of growth and income to achieve an
1740 Advisers, Inc. above- average and consistent total return,
New York, New York primarily from investments in dividend-paying
common stocks.
- ------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND Maximum capital appreciation, primarily through
Provident Investment Counsel, Inc. investment in common stock of companies that
Pasadena, California demonstrate accelerating earnings momentum and
consistently strong financial characteristics.
- ------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND Capital appreciation by investing primarily in
Pilgrim Baxter & Associates, Ltd. common stocks of small capitalization companies
Wayne, Pennsylvania believed by the Fund Manager to have an outlook
for strong earnings growth and potential for
significant capital appreciation.
- ------------------------------------------------------------------------------------------------------------
SMALL COMPANY VALUE FUND Maximum capital appreciation, primarily through
Gabelli Asset Management Company investment in the equity securities of companies
Rye, New York that have a market capitalization of no more than
$1 billion.
- ------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND Capital appreciation, primarily through a
Brinson Partners, Inc. diversified portfolio of non-U.S. equity
Chicago, Illinois securities.
- ------------------------------------------------------------------------------------------------------------
GLOBAL FINANCIAL SERVICES FUND Capital appreciation, primarily through investment
Sanford C. Bernstein & Co., Inc. in common stocks of domestic and foreign financial
New York, New York services companies.
- ------------------------------------------------------------------------------------------------------------
INCOME FUNDS
GOVERNMENT SECURITIES FUND Current income and safety of principal, primarily
TCW Funds Management, Inc. from securities that are obligations of the U.S.
Los Angeles, California Government, or its agencies, or its
instrumentalities.
- ------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND FUND Maximum current income, primarily from debt
Caywood-Scholl Capital Management securities that are rated Ba or lower by Moody's
San Diego, California Investors Service, Inc. or BB or lower by Standard
& Poor's Corporation.
- ------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INCOME FUND A high level of current income exempt from federal
MBIA Capital Management Corp. income tax, with consideration given to
Armonk, New York preservation of principal, primarily from
investment in a diversified portfolio of long-term
investment grade municipal bonds.
- ------------------------------------------------------------------------------------------------------------
FLEXIBLE FUND
MANAGED FUND Growth of capital over time through investment in
OpCap Advisors a portfolio consisting of common stocks, bonds and
New York, New York cash equivalents, the percentages of which will
vary based on the Fund Manager's assessments of
relative investment values.
- ------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
MONEY MARKET FUND The highest possible level of current income
Enterprise Capital Management, Inc. consistent with preservation of capital and
Atlanta, Georgia liquidity by investing in obligations maturing in
one year or less from the time of purchase.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE ENTERPRISE Group of Funds, Inc.
4
<PAGE> 9
INVESTMENT RISK FACTORS
The risk characteristics of each Fund are different. In general, investors
should consider the following risks: An investment in any of the Funds carries
the risk that the net asset value of the Fund shares will fluctuate in response
to market conditions. Further, an investment in any of the Income Funds carries
the risk that the issuers of securities in the Income Funds may default on the
payment of principal and interest. An investment in the High-Yield Bond Fund
carries an increased risk that issuers of securities in which the High-Yield
Bond Fund invests may default in the payment of principal and interest as
compared to the risk of such defaults in the other Income Funds. In addition, an
investment in the High-Yield Bond Fund may be subject to certain other risks
relating to the market price, relative liquidity in the secondary market and
sensitivity to interest rate and economic changes of the noninvestment grade
securities in which the High-Yield Bond Fund invests that are higher than may be
associated with higher rated, investment grade securities. The Small Company
Growth and Small Company Value Funds carry an increased risk that smaller
capitalization companies may experience higher growth rates and higher failure
rates than do larger companies. The limited volume and frequency of trading of
small capitalization companies may subject their stocks to greater price
deviations than stocks of larger companies. The International Growth Fund and
the Global Financial Services Fund carry additional risks associated with
possibly less stable foreign securities and currencies. Because of the short-
term nature of the Money Market Fund's investments, an investment in shares of
the Money Market Fund is subject to relatively little market risk and financial
risk, but is subject to a high level of current income volatility. In addition,
the Money Market Fund uses the amortized cost method to value its portfolio
securities and seeks to maintain a constant net asset value of $1.00 per share.
There is no assurance that this Fund will be able to maintain this constant net
asset value. See "Certain Investment Techniques and Associated Risks."
PURCHASE ALTERNATIVES
Each Fund offers four Classes of shares. Shares of each Class are generally
offered at the net asset value next determined after receipt of your purchase
order plus (i) an initial ("front-end") sales charge (Class A shares) or (ii) a
deferred sales charge (Class B and C shares). The following is a brief
description of three Classes of shares offered by each Fund. Class Y shares for
institutional investors are offered pursuant to a separate prospectus. For more
complete descriptions of each Class of shares, see "How to Purchase Shares."
CLASS A SHARES: Class A shares are sold with an initial sales charge
of up to 4.75% of the offering price (for all Funds
other than Money Market) and are subject to an
ongoing distribution fee of 0.45% (no fee for Money
Market) of the Fund's average daily net assets. The
initial sales charge may be waived or reduced in
certain circumstances. Shares purchased pursuant to
waiver of the initial sales charge are subject to a
CDSC if redeemed within two years of purchase in
certain circumstances.
CLASS B SHARES: Class B shares do not incur an initial sales charge
when purchased but are subject to an ongoing service
fee of 0.25% and an ongoing distribution fee of 0.75%
(no fees for Money Market) of the Fund's average
daily net assets, and a CDSC if they are redeemed
within six years of purchase. Class B shares
automatically convert to Class A shares (which are
subject to lower ongoing expenses) approximately
eight years after purchase. Class B shares are
available only to investors purchasing less than
$250,000 in the aggregate.
CLASS C SHARES: Class C shares are sold at net asset value per share
without an initial sales charge but are subject to an
ongoing service fee of 0.25% and an ongoing
distribution fee of 0.75% (no fees for Money Market)
of the fund's average daily net assets. If Class C
shares are redeemed within 12 months of their
purchase, a contingent deferred sales charge of 1.00%
will be deducted from the redemption proceeds. Class
C shares are available only to investors purchasing
less than $1,000,000 in the aggregate.
THE ENTERPRISE Group of Funds, Inc.
5
<PAGE> 10
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
SHAREHOLDER SERVICES
<S> <C>
Automatic Reinvestment Plan Check Writing (Class A Money Market
Automatic Bank Draft Plan Fund Shares Only)
Investment Plan Bank Purchase and Redemption Plan
Letter of Intent Systematic Withdrawal Plan
Right of Accumulation Retirement Plans
24-Hour Account Information
FOR MORE COMPLETE INFORMATION ABOUT THESE PLANS AND SERVICES,
SEE SHAREHOLDER SERVICES OR
CALL THE ENTERPRISE GROUP OF FUNDS AT
(800) 368-3527
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE ENTERPRISE Group of Funds, Inc.
6
<PAGE> 11
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGH THE PERIODS INDICATED)
The audited financial highlights which follow are part of the Fund's financial
statements and are included in the Fund's Annual Report to Shareholders. The
Fund's 1997 Annual Report to Shareholders is incorporated by reference into the
Statement of Additional Information. The Annual Report to Shareholders may be
obtained without charge by calling the Fund at 800-368-3527. The Report contains
information about the performance of the Funds.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------
GROWTH FUND (CLASS A) 1997 1996 1995 1994 1993 1992(G) 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 13.10 $ 10.44 $ 7.76 $ 8.26 $ 7.96 $ 8.22 $ 6.31
Net Investment Income (Loss)............ (0.07) (0.04) (0.03) (0.02) 0.01 (0.02) 0.07
Net Realized and Unrealized Gain (Loss)
on Investments......................... 4.23 3.44 3.13 (0.06) 0.84 0.55 2.57
----------------------------------------------------------------------------
Total from Investment Operations........ 4.16 3.40 3.10 (0.08) 0.85 0.53 2.64
----------------------------------------------------------------------------
Dividends from Net Investment Income.... 0.00 0.00 0.00 0.00 0.01 0.00 0.07
Distributions from Net Realized Capital
Gains.................................. 0.35 0.74 0.42 0.42 0.54 0.79 0.66
----------------------------------------------------------------------------
Total Distributions..................... 0.35 0.74 0.42 0.42 0.55 0.79 0.73
----------------------------------------------------------------------------
Net Asset Value, End of Period.......... $ 16.91 $ 13.10 $ 10.44 $ 7.76 $ 8.26 $ 7.96 $ 8.22
----------------------------------------------------------------------------
Total Return(C)......................... 31.76% 32.60% 39.99% (0.99)% 10.59% 6.46% 41.79%
Net Assets End of Period (In
Thousands)............................. $424,280 $196,752 $122,559 $88,375 $90,902 $84,200 $77,784
Ratio of Expenses to Average Net
Assets................................. 1.43%(F) 1.53%(F) 1.60% 1.56% 1.60% 1.60% 1.60%
Ratio of Expenses to Average Net Assets
(Excluding Waivers).................... 1.43%(F) 1.53%(F) 1.60% 1.56% 1.61% 1.67% 1.81%
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... (0.55)% (0.39)% (0.35)% (0.30)% 0.10% (0.30)% 0.90%
Ratio of Net Investment Income (Loss) to
Average Net Assets (Excluding
Waivers)............................... (0.55)% (0.39)% (0.35)% (0.30)% 0.06% (0.31)% 0.69%
Portfolio Turnover...................... 22.28% 29.90% 45.30% 64.50% 107.90% 61.20% 74.70%
Average Commission Per Share(E)......... $ 0.0509 $ 0.0636
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
GROWTH FUND (CLASS A) 1990 1989 1988
- ---------------------------------------- -----------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.... $ 7.24 $ 6.25 $ 6.02
Net Investment Income (Loss)............ 0.08 0.02 0.07
Net Realized and Unrealized Gain (Loss)
on Investments......................... (0.24) 1.42 0.67
-----------------------------
Total from Investment Operations........ (0.16) 1.44 0.74
-----------------------------
Dividends from Net Investment Income.... 0.09 0.02 0.07
Distributions from Net Realized Capital
Gains.................................. 0.68 0.43 0.44
-----------------------------
Total Distributions..................... 0.77 0.45 0.51
-----------------------------
Net Asset Value, End of Period.......... $ 6.31 $ 7.24 $ 6.25
-----------------------------
Total Return(C)......................... (2.26)% 23.05% 12.30%
Net Assets End of Period (In
Thousands)............................. $52,897 $55,320 $40,363
Ratio of Expenses to Average Net
Assets................................. 1.60% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
(Excluding Waivers).................... 1.75% 2.70% 2.60%
Ratio of Net Investment Income (Loss) to
Average Net Assets..................... 1.00% 0.30% 0.80%
Ratio of Net Investment Income (Loss) to
Average Net Assets (Excluding
Waivers)............................... 0.89% 0.10% 0.75%
Portfolio Turnover...................... 138.40% 78.30% 67.10%
Average Commission Per Share(E).........
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
--------------------- MAY 1 THROUGH
GROWTH FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 12.97 $ 10.41 $ 8.69
Net Investment Income (Loss)........................... (0.11) (0.06) (0.02)
Net Realized and Unrealized Gains (Losses) on
Investments........................................... 4.15 3.36 2.16
-----------------------------------------
Total from Investment Operations....................... 4.04 3.30 2.14
-----------------------------------------
Dividends from Net Investment Income................... 0.00 0.00 0.00
Distributions from Net Realized Capital Gains.......... 0.35 0.74 0.42
-----------------------------------------
Total Distributions.................................... 0.35 0.74 0.42
-----------------------------------------
Net Asset Value, End of Period......................... $ 16.66 $ 12.97 $10.41
-----------------------------------------
Total Return(D)........................................ 31.15% 31.73% 24.66%(B)
Net Assets End of Period (in thousands)................ $166,932 $36,483 $4,572
Ratio of Expenses to Average Net Assets................ 1.98%(F) 2.10%(F) 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).............................................. 1.98%(F) 2.10%(F) 2.15%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets................................................ (1.10)% (0.96)% (0.82)%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers)............................ (1.10)% (0.96)% (0.82)%(A)
Portfolio Turnover..................................... 22.28% 29.90% 45.30%(A)
Average Commission Per Share(E)........................ $ 0.0509 $0.0636
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
GROWTH FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 14.11
Net Investment Income (Loss)................................ (0.06)
Net Realized and Unrealized Gains (Losses) on Investments... 3.15
-------
Total from Investment Operations............................ 3.09
-------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 0.35
-------
Total Distributions......................................... 0.35
-------
Net Asset Value, End of Period.............................. $ 16.85
-------
Total Return(D)............................................. 21.91%(B)
Net Assets End of Period (In Thousands)..................... $26,601
Ratio of Expenses to Average Net Assets..................... 1.97%(F)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 1.97%(F)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (1.10)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (1.10)%(A)
Portfolio Turnover.......................................... 22.28%(A)
Average Commission Per Share(E)............................. $0.0509
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchase and sale of equity
investments on which commissions are charged during the period.
F Effective September 1, 1995, ratio includes expenses paid indirectly.
G Based on average monthly shares outstanding.
THE ENTERPRISE Group of Funds, Inc.
7
<PAGE> 12
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
GROWTH AND INCOME FUND (CLASS A) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 25.71 $ 25.05
Net Investment Income (Loss)............................... 0.01 0.00
Net Realized and Unrealized Gain (Loss) on Investments..... 0.04 0.66
--------------------------------------
Total from Investment Operations........................... 0.05 0.66
--------------------------------------
Dividends from Net Investment Income....................... 0.11 0.00
Distributions from Net Realized Capital Gains.............. 0.46 0.00
--------------------------------------
Total Distributions........................................ 0.57 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 25.19 $ 25.71
--------------------------------------
Total Return(C)............................................ 0.20%(B) 2.63%(B)
Net Assets End of Period (In Thousands).................... $ 4,032 $ 1,109
Ratio of Expenses to Average Net Assets.................... 1.50%(A) 1.50%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.11%(A) 4.47%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... 0.56%(A) 0.07%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers) (0.04)%(A) (2.90)%(A)
Portfolio Turnover......................................... 1.46%(A) 15.69%(A)
Average Commission Per Share(E)............................ $0.0600 $0.0560
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
GROWTH AND INCOME FUND (CLASS B) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 25.68 $ 25.05
Net Investment Income (Loss)............................... (0.01) (0.01)
Net Realized and Unrealized Gains(Losses) on Investments... 0.03 0.64
--------------------------------------
Total from Investment Operations........................... 0.02 0.63
--------------------------------------
Dividends from Net Investment Income....................... 0.09 0.00
Distributions from Net Realized Capital Gains.............. 0.46 0.00
--------------------------------------
Total Distributions........................................ 0.55 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 25.15 $ 25.68
--------------------------------------
Total Return(D)............................................ 0.07%(B) 2.51%(B)
Net Assets End of Period (In Thousands).................... $ 3,257 $ 992
Ratio of Expenses to Average Net Assets.................... 2.05%(A) 2.05%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.66%(A) 4.59%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... (0.02)%(A) (0.34)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers (0.63)%(A) (2.87)%(A)
Portfolio Turnover......................................... 1.46%(A) 15.69%(A)
Average Commission Per Share(E)............................ $0.0600 $0.0560
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
GROWTH AND INCOME FUND (CLASS C) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 25.68 $ 25.05
Net Investment Income (Loss)............................... (0.02) (0.01)
Net Realized and Unrealized Gains (Losses) on
Investments............................................... 0.05 0.64
--------------------------------------
Total from Investment Operations........................... 0.03 0.63
--------------------------------------
Dividends from Net Investment Income....................... 0.10 0.00
Distributions from Net Realized Capital Gains.............. 0.46 0.00
--------------------------------------
Total Distributions........................................ 0.56 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 25.15 $ 25.68
--------------------------------------
Total Return(D)............................................ 0.10%(B) 2.51%(B)
Net Assets End of Period (In Thousands).................... $ 561 $ 99
Ratio of Expenses to Average Net Assets.................... 2.05%(A) 2.05%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.64%(A) 4.60%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... 0.03%(A) (0.39)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)....................................... (0.56)%(A) (2.94)%(A)
Portfolio Turnover......................................... 1.46%(A) 15.69%(A)
Average Commission Per Share(E)............................ $0.0600 $0.0560
</TABLE>
A Annualized.
B Not Annualized.
C Total return does not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
8
<PAGE> 13
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
EQUITY FUND (CLASS A) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 5.00
Net Investment Income (Loss)................................ 0.01
Net Realized and Unrealized Gain (Loss) on Investments...... 1.05
-----------------
Total from Investment Operations............................ 1.06
-----------------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 0.10
-----------------
Total Distributions......................................... 0.10
-----------------
Net Asset Value, End of Period.............................. $ 5.96
-----------------
Total Return(C)............................................. 21.30%(B)
Net Assets End of Period (In Thousands)..................... $ 3,196
Ratio of Expenses to Average Net Assets..................... 1.60%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 6.52%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 0.26%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (4.66)%(A)
Portfolio Turnover.......................................... 68.73%(A)
Average Commission Per Share(E)............................. $0.0564
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
EQUITY FUND (CLASS B) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 5.00
Net Investment Income (Loss)................................ 0.00
Net Realized and Unrealized Gains (Losses) on Investments... 1.04
-----------------
Total from Investment Operations............................ 1.04
-----------------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 0.10
-----------------
Total Distributions......................................... 0.10
-----------------
Net Asset Value, End of Period.............................. $ 5.94
-----------------
Total Return(D)............................................. 20.80%(B)
Net Assets End of Period (In Thousands)..................... $ 1,820
Ratio of Expenses to Average Net Assets..................... 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 6.21%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.23)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (4.29)%(A)
Portfolio Turnover.......................................... 68.73%(A)
Average Commission Per Share(E)............................. $0.0564
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
EQUITY FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 5.00
Net Investment Income (Loss)................................ 0.00
Net Realized and Unrealized Gains (Losses) on Investments... 1.04
-----------------
Total from Investment Operations............................ 1.04
-----------------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 0.10
-----------------
Total Distributions......................................... 0.10
-----------------
Net Asset Value, End of Period.............................. $ 5.94
-----------------
Total Return(D)............................................. 20.89%(B)
Net Assets End of Period (In Thousands)..................... $ 283
Ratio of Expenses to Average Net Assets..................... 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 6.01%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.21)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (4.07)%(A)
Portfolio Turnover.......................................... 68.73%(A)
Average Commission Per Share(E)............................. $0.0564
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchase and sale of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
9
<PAGE> 14
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------------
EQUITY INCOME FUND (CLASS A) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period....................... $ 22.44 $ 20.73 $ 16.43 $ 17.75 $ 16.93 $ 16.00 $ 13.40 $ 15.26 $ 13.40 $ 12.16
Net Investment Income
(Loss)....................... 0.17 0.41 0.45 0.44 0.52 0.43 0.52 0.61 0.37 0.29
Net Realized and Unrealized
Gain (Loss) on Investments... 5.95 3.27 5.00 (0.53) 1.74 0.92 2.61 (1.84) 1.97 1.37
-------------------------------------------------------------------------------------------------
Total from Investment
Operations................... 6.12 3.68 5.45 (0.09) 2.26 1.35 3.13 (1.23) 2.34 1.66
-------------------------------------------------------------------------------------------------
Dividends from Net Investment
Income....................... 0.15 0.40 0.45 0.44 0.50 0.41 0.53 0.63 0.38 0.26
Distributions from Net
Realized Capital Gains....... 1.99 1.57 0.70 0.79 0.94 0.01 0.00 0.00 0.10 0.16
-------------------------------------------------------------------------------------------------
Total Distributions........... 2.14 1.97 1.15 1.23 1.44 0.42 0.53 0.63 0.48 0.42
-------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period....................... $ 26.42 $ 22.44 $ 20.73 $ 16.43 $ 17.75 $ 16.93 $ 16.00 $ 13.40 $ 15.26 $ 13.40
-------------------------------------------------------------------------------------------------
Total Return(C)............... 28.08% 17.86% 33.38% (0.49)% 13.45% 8.48% 23.55% (8.20)% 17.55% 13.64%
Net Assets End of Period (In
Thousands)................... $97,932 $72,647 $61,906 $50,926 $49,920 $40,918 $33,605 $29,330 $33,402 $10,199
Ratio of Expenses to Average
Net Assets................... 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 2.50% 2.50%
Ratio of Expenses to Average
Net Assets (Excluding
Waivers)..................... 1.62% 1.68% 1.78% 1.73% 1.91% 1.95% 2.02% 2.01% 2.80% 3.80%
Ratio of Net Investment Income
(Loss) to Average Net
Assets....................... 1.35% 1.87% 2.33% 2.50% 2.90% 2.80% 3.50% 4.20% 3.30% 3.60%
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers).......... 1.23% 1.69% 2.06% 2.30% 2.51% 2.22% 2.84% 3.73% 3.04% 2.28%
Portfolio Turnover............ 32.89% 33.22% 25.60% 41.40% 39.90% 38.30% 25.90% 20.80% 9.50% 9.70%
Average Commission Per
Share(E)..................... $0.0600 $0.0615
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------ MAY 1 THROUGH
EQUITY INCOME FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 22.30 $ 20.67 $ 18.12
Net Investment Income (Loss)................................ 0.12 0.24 0.29
Net Realized and Unrealized Gain (Loss) on Investments...... 5.83 3.30 3.40
--------------------------------------
Total from Investment Operations............................ 5.95 3.54 3.69
--------------------------------------
Dividends from Net Investment Income........................ 0.09 0.34 0.44
Distributions from Capital Gains............................ 1.99 1.57 0.70
--------------------------------------
Total Distributions......................................... 2.08 1.91 1.14
--------------------------------------
Net Asset Value, End of Period.............................. $ 26.17 $ 22.30 $ 20.67
--------------------------------------
Total Return(D)............................................. 27.35% 17.22% 20.57%(B)
Net Assets End of Period (In Thousands)..................... $19,055 $ 5,615 $ 1,086
Ratio of Expenses to Average Net Assets..................... 2.05% 2.05% 2.05%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.17% 2.23% 2.23%(A)
Ratio of Net Investment Income to Average Net Assets........ 0.77% 1.32% 1.56%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers) 0.65% 1.14% 1.33%(A)
Portfolio Turnover Rate..................................... 32.89% 33.22% 25.60%(A)
Average Commission Per Share(C)............................. $0.0600 $0.0615
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
EQUITY INCOME FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value Beginning of Period......................... $ 24.26
Net Investment Income (Loss)................................ 0.04
Net Realized and Unrealized Gains (Losses) on Investments... 4.14
-------
Total from Investment Operations............................ 4.18
-------
Dividends from Net Investment Income........................ 0.14
Distributions from Net Realized Capital Gains............... 1.99
-------
Total Distributions......................................... 2.13
-------
Net Asset Value, End of Period.............................. $ 26.31
-------
Total Return(D)............................................. 18.21%(B)
Net Assets End of Period (In Thousands)..................... $ 1,857
Ratio of Expense in Average Net Assets...................... 2.05%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.20%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 0.69%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 0.54%(A)
Portfolio Turnover.......................................... 32.89%(A)
Average Commission Per Share(E)............................. $0.0600
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
10
<PAGE> 15
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
CAPITAL APPRECIATION FUND (CLASS A) 1997 1996 1995 1994 1993 1992(G)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 34.21 $ 32.54 $ 28.54 $ 31.10 $ 29.42 $ 27.80
Net Investment Income (Loss)......................... (0.37) (0.31) (0.25) (0.13) (0.15) (0.04)
Net Realized and Unrealized Gain (Loss) on
Investments......................................... 7.31 5.69 7.59 (0.95) 1.83 1.66
-------------------------------------------------------------------
Total from Investment Operations..................... 6.94 5.38 7.34 (1.08) 1.68 1.62
-------------------------------------------------------------------
Dividends from Net Investment Income................. 0.00 0.00 0.00 0.00 0.00 0.00
Distributions from Net Realized Capital Gains........ 5.61 3.71 3.34 1.48 0.00 0.00
-------------------------------------------------------------------
Total Distributions.................................. 5.61 3.71 3.34 1.48 0.00 0.00
-------------------------------------------------------------------
Net Asset Value, End of Period....................... $ 35.54 $ 34.21 $ 32.54 $ 28.54 $ 31.10 $ 29.42
-------------------------------------------------------------------
Total Return(C)...................................... 20.27% 16.52% 25.72% (3.46)% 5.71% 5.83%
Net Assets End of Period (In Thousands).............. $112,738 $115,253 $121,207 101,237 103,187 72,569
Ratio of Expenses to Average Net Assets.............. 1.65% 1.60%(F) 1.65% 1.66% 1.64% 1.72%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)............................................ 1.65% 1.60%(F) 1.65% 1.66% 1.64% 1.72%
Ratio of Net Investment Income (Loss) to Average Net
Assets.............................................. (1.06)% (0.87)% (0.82)% (0.50)% (0.60)% (0.20)%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers).......................... (1.06)% (0.87)% (0.82)% (0.50)% (0.60)% (0.20)%
Portfolio Turnover................................... 60.73% 66.42% 65.20% 74.40% 61.90% 32.50%
Average Commission Per Share(E)...................... $ 0.0463 $ 0.0486
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
CAPITAL APPRECIATION FUND (CLASS A) 1991 1990 1989 1988
- ----------------------------------------------------- --------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................. $ 17.48 $ 16.94 $13.01 $12.28
Net Investment Income (Loss)......................... (0.01) 0.11 (0.03) (0.03)
Net Realized and Unrealized Gain (Loss) on
Investments......................................... 10.33 0.54 4.49 0.76
--------------------------------------
Total from Investment Operations..................... 10.32 0.65 4.46 0.73
--------------------------------------
Dividends from Net Investment Income................. 0.00 0.11 0.00 0.00
Distributions from Net Realized Capital Gains........ 0.00 0.00 0.53 0.00
--------------------------------------
Total Distributions.................................. 0.00 0.11 0.53 0.00
--------------------------------------
Net Asset Value, End of Period....................... $ 27.80 $ 17.48 $16.94 $13.01
--------------------------------------
Total Return(C)...................................... 59.04% 3.84% 34.27% 5.94%
Net Assets End of Period (In Thousands).............. 33,375 12,552 9,091 2,825
Ratio of Expenses to Average Net Assets.............. 1.75% 1.75% 2.50% 2.50%
Ratio of Expenses to Average Net Assets (Excluding
Waivers)............................................ 2.04% 2.27% 3.90% 6.00%
Ratio of Net Investment Income (Loss) to Average Net
Assets.............................................. (0.10)% 0.70% (0.50)% (0.30)%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers).......................... (0.44)% 0.12% (1.92)% (3.77)%
Portfolio Turnover................................... 40.20% 60.50% 65.80% 49.30%
Average Commission Per Share(E)......................
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED FOR THE PERIOD
DECEMBER 31, MAY 1 THROUGH
CAPITAL APPRECIATION FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 33.86 $ 32.42 $30.04
Net Investment Income (Loss)................................ (0.45) (0.35) (0.12)
Net Realized and Unrealized Gain (Loss) on Investments...... 7.09 5.50 5.84
-------------------------------------
Total from Investment Operations............................ 6.64 5.15 5.72
-------------------------------------
Dividends from Net Investment Income........................ 0.00 0.00 0.00
Distributions from Capital Gains............................ 5.61 3.71 3.34
-------------------------------------
Total Distributions......................................... 5.61 3.71 3.34
-------------------------------------
Net Asset Value, End of Period.............................. $ 34.89 $ 33.86 $32.42
-------------------------------------
Total Return(D)............................................. 19.60% 15.87% 18.99%(B)
Net Assets End of Period (In Thousands)..................... $ 7,862 $ 5,047 $1,953
Ratio of Expenses to Average Net Assets..................... 2.21% 2.14%(F) 2.08%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.21% 2.14%(F) 2.08%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (1.61)% (1.43)% (1.41)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (1.61)% (1.43)% (1.41)%(A)
Portfolio Turnover Rate..................................... 60.73% 66.42% 65.20%(A)
Average Commission Per Share(E)............................. $0.0463 $0.0486
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
CAPITAL APPRECIATION FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 33.54
Net Investment Income (Loss)................................ (0.19)
Net Realized and Unrealized Gains (Losses) on Investments... 7.69
-------
Total from Investment Operations............................ 7.50
-------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 5.61
-------
Total Distributions......................................... 5.61
-------
Net Asset Value, End of Period.............................. $ 35.43
-------
Total Return(D)............................................. 22.35%(B)
Net Assets End of Period (In Thousands)..................... $ 126
Ratio of Expenses to Average Net Assets..................... 2.21%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.21%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (1.88)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (1.88)%(A)
Portfolio Turnover.......................................... 60.73%(A)
Average Commission Per Share................................ $0.0463
</TABLE>
AAnnualized.
BNot Annualized.
CTotal returns do not include one time sales charge.
DTotal return do not include contingent deferred sales charge.
EDisclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
FEffective September 1, 1995, ratio includes expenses paid indirectly.
GBased on average monthly shares outstanding.
THE ENTERPRISE Group of Funds, Inc.
11
<PAGE> 16
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
SMALL COMPANY GROWTH FUND (CLASS A) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 26.61 $ 24.54
Net Investment Income (Loss)............................... 0.18 (0.05)
Net Realized and Unrealized Gain (Loss) on Investments..... (2.85) 2.12
--------------------------------------
Total from Investment Operations........................... (2.67) 2.07
--------------------------------------
Dividends from Net Investment Income....................... 0.00 0.00
Distributions from Net Realized Capital Gains.............. 0.55 0.00
--------------------------------------
Total Distributions........................................ 0.55 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 23.39 $ 26.61
--------------------------------------
Total Return(C)............................................ (10.04)%(B) 8.44%(B)
Net Assets End of Period (In Thousands).................... $ 4,861 $ 2,102
Ratio of Expenses to Average Net Assets.................... 1.85%(A) 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.38%(A) 4.48%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... (1.56)%(A) (1.61)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)....................................... (2.09)%(A) (4.25)%(A)
Portfolio Turnover......................................... 23.68%(A) 157.51%(A)
Average Commission Per Share............................... $0.0518 $0.0503
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
SMALL COMPANY GROWTH FUND (CLASS B) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 26.58 $ 24.54
Net Investment Income (Loss)............................... 0.15 (0.05)
Net Realized and Unrealized Gains (Losses) on
Investments............................................... (2.86) 2.09
--------------------------------------
Total from Investment Operations........................... (2.71) 2.04
--------------------------------------
Dividends from Net Investment Income....................... 0.00 0.00
Distributions from Net Realized Capital Gains.............. 0.55 0.00
--------------------------------------
Total Distributions........................................ 0.55 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 23.33 $ 26.58
--------------------------------------
Total Return(D)............................................ (10.16)%(B) 8.31%(B)
Net Assets End of Period (In Thousands).................... $ 2,842 $ 1,099
Ratio of Expenses to Average Net Assets.................... 2.40%(A) 2.40%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.93%(A) 5.52%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... (2.11)%(A) (2.18)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)....................................... (2.64)%(A) (5.29)%(A)
Portfolio Turnover......................................... 23.68%(A) 157.51%(A)
Average Commission Per Share............................... $0.0518 $0.0503
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 1 FOR THE PERIOD
THROUGH JULY 17 THROUGH
SMALL COMPANY GROWTH FUND (CLASS C) DECEMBER 31, 1997 SEPTEMBER 30, 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value, Beginning of Period....................... $ 26.57 $ 24.54
Net Investment Income (Loss)............................... 0.16 (0.07)
Net Realized and Unrealized Gains (Losses) on
Investments............................................... (2.86) 2.10
--------------------------------------
Total from Investment Operations........................... (2.70) 2.03
--------------------------------------
Dividends from Net Investment Income....................... 0.00 0.00
Distributions from Net Realized Capital Gains.............. 0.55 0.00
--------------------------------------
Total Distributions........................................ 0.55 0.00
--------------------------------------
Net Asset Value, End of Period............................. $ 23.32 $ 26.57
--------------------------------------
Total Return(D)............................................ (10.16)%(B) 8.27%(B)
Net Assets End of Period (In Thousands).................... $ 795 $ 201
Ratio of Expenses to Average Net Assets.................... 2.40%(A) 2.40%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers).................................................. 2.93%(A) 5.91%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets.................................................... (2.11)%(A) (2.15)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)....................................... (2.64)%(A) (5.65)%(A)
Portfolio Turnover......................................... 23.68%(A) 157.51%(A)
Average Commission Per Share............................... $0.0518 $0.0503
</TABLE>
A Annualized.
B Not Annualized.
C Total return does not include one time sales charge.
D Total return does not include contingent deferred sales charge.
THE ENTERPRISE Group of Funds, Inc.
12
<PAGE> 17
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
---------------------------------------- OCTOBER 1 THROUGH
SMALL COMPANY VALUE FUND (CLASS A) 1997 1996 1995 1994 DECEMBER 31, 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................... $ 5.74 $ 5.43 $ 5.17 $ 5.29 $ 5.00
Net Investment Income (Loss)...... 0.01 (0.01) 0.02 0.03 0.01
Net Realized and Unrealized Gain
(Loss) on Investments............ 2.53 0.62 0.46 (0.01) 0.29
-------------------------------------------------------------
Total from Investment
Operations....................... 2.54 0.61 0.48 0.02 0.30
-------------------------------------------------------------
Dividends from Net Investment
Income........................... 0.00 0.00 0.02 0.03 0.01
Distributions from Net Realized
Capital Gains (Loss)............. 0.53 0.30 0.20 0.11 0.00
-------------------------------------------------------------
Total Distributions............... 0.53 0.30 0.22 0.14 0.01
-------------------------------------------------------------
Net Asset Value, End of Period.... $ 7.75 $ 5.74 $ 5.43 $ 5.17 $ 5.29
-------------------------------------------------------------
Total Return(C)................... 44.24% 11.28% 9.28% 0.34% 5.92%(B)
Net Assets End of Period (In
Thousands)....................... $45,310 $17,308 $19,720 $22,120 $8,118
Ratio of Expenses to Average Net
Assets........................... 1.75% 1.75% 1.75% 1.75% 1.75%(A)
Ratio of Expenses to Average Net
Assets (Excluding Waivers)....... 1.95% 2.38% 2.21% 2.15% 4.00%(A)
Ratio of Net Investment Income
(Loss) to Average Net Assets..... 0.05% (0.13)% 0.32% 0.60% 0.10%(A)
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers).............. (0.15)% (0.76)% (0.14)% 0.18% (1.54) %(A)
Portfolio Turnover................ 62.51% 143.58% 36.50% 16.70% 0%(A)
Average Commission Per Share(E)... $0.0470 $0.0483
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
---------------------------- MAY 1 THROUGH
SMALL COMPANY VALUE FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 5.69 $ 5.41 $ 5.28
Net Investment Income (Loss)................ 0.00 (0.03) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments................................ 2.47 0.61 0.36
-------------------------------------------------
Total from Investment Operations............ 2.47 0.58 0.35
-------------------------------------------------
Dividends from Net Investment Income........ 0.00 0.00 0.02
Distributions from Capital Gains............ 0.53 0.30 0.20
-------------------------------------------------
Total Distributions......................... 0.53 0.30 0.22
-------------------------------------------------
Net Asset Value, End of Period.............. $ 7.63 $ 5.69 $ 5.41
-------------------------------------------------
Total Return(D)............................. 43.40% 10.77% 6.87%(B)
Net Assets End of Period (In Thousands)..... $22,013 $ 2,606 $ 862
Ratio of Expenses to Average Net Assets..... 2.30% 2.30% 2.30%(A)
Ratio of Expenses to Average Net Assets
(Excluding Waivers)........................ 2.44% 2.92% 2.78%(A)
Ratio of Net Investment Income to Average
Net Assets................................. (0.67)% (0.77)% (0.40)%(A)
Ratio of Net Investment Income (Loss) to
Average Net Assets (Excluding Waivers)..... (0.81)% (1.39)% (0.90)%(A)
Portfolio Turnover Rate..................... 62.51% 143.58% 36.50%(A)
Average Commission Per Share(E)............. $0.0470 $0.0483
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
SMALL COMPANY VALUE FUND (CLASS C) DECEMBER 31, 1997
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 6.14
Net Investment Income (Loss)................................ (0.02)
Net Realized and Unrealized Gains(Losses) on Investments.... 2.15
-------
Total from Investment Operations............................ 2.13
-------
Dividends from Net Investment Income........................ 0.00
Distributions from Net Realized Capital Gains............... 0.53
-------
Total Distributions......................................... 0.53
-------
Net Asset Value, End of Period.............................. $ 7.74
-------
Total Return(D)............................................. 34.68%(B)
Net Assets End of Period (In Thousands)..................... $ 2,684
Ratio of Expenses to Average Net Assets..................... 2.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.38%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.88)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (0.95)%(A)
Portfolio Turnover.......................................... 62.51%(A)
Average Commission Per Share(E)............................. $0.0470
</TABLE>
A Annualized.
B Not Annualized.
C Total return does not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
13
<PAGE> 18
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND (CLASS A) 1997 1996 1995 1994 1993 1992(G) 1991
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 17.10 $ 16.08 $ 14.70 $ 17.44 $ 13.23 $ 13.38 $ 11.95
Net Investment Income (Loss)............... 0.08 0.10 0.11 (0.01) (0.02) 0.28 0.28
Net Realized and Unrealized Gain (Loss) on
Investments............................... 0.73 1.88 2.12 (0.49) 4.79 (0.39) 1.25
-------------------------------------------------------------------------
Total from Investment Operations........... 0.81 1.98 2.23 (0.50) 4.77 (0.11) 1.53
-------------------------------------------------------------------------
Dividends from Net Investment Income....... 0.07 0.09 0.09 0.00 0.00 0.04 0.10
Distributions from Capital Gains (Loss).... 1.13 0.87 0.76 2.24 0.17 0.00 0.00
Other...................................... 0.00 0.00 0.00 0.00 0.39 0.00 0.00
-------------------------------------------------------------------------
Total Distributions........................ 1.20 0.96 0.85 2.24 0.56 0.04 0.10
-------------------------------------------------------------------------
Net Asset Value, End of Period............. $ 16.71 $ 17.10 $ 16.08 $ 14.70 $ 17.44 $ 13.23 $ 13.38
-------------------------------------------------------------------------
Total Return(C)............................ 4.75% 12.32% 15.17% (2.82)% 36.05% (0.93)% 12.91%
Net Assets End of Period (In Thousands).... $38,020 $34,837 $28,628 $27,523 $22,900 $11,630 $10,736
Ratio of Expenses to Average Net Assets.... 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of Expenses to Average Net Assets
(Excluding Waivers)....................... 2.11% 2.19% 2.40% 2.51% 3.06% 3.70% 3.59%
Ratio of Net Investment Income (Loss) to
Average Net Assets........................ 0.50% 0.61% 0.70% (0.20)% (0.10)% 0.50% 0.60%
Ratio of Net Investment Income (Loss) to
Average Net Assets(Excluding Waivers)..... 0.39% 0.42% 0.30% (0.70)% (1.15)% (1.15)% (0.93)%
Portfolio Turnover Rate.................... 27.08% 23.79% 31.10% 116.10% 70.10% 134.90% 64.50%
Average Commission Per Share(E)............ $0.0275 $0.0221
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
INTERNATIONAL GROWTH FUND (CLASS A) 1990 1989 1988
- ------------------------------------------- -----------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period....... $ 14.53 $ 12.91 $ 12.00
Net Investment Income (Loss)............... 0.04 0.06 0.00
Net Realized and Unrealized Gain (Loss) on
Investments............................... (2.27) 2.21 0.91
Total from Investment Operations........... (2.23) 2.27 0.91
Dividends from Net Investment Income....... 0.04 0.00 0.00
Distributions from Capital Gains (Loss).... 0.31 0.65 0.00
Other...................................... 0.00 0.00 0.00
Total Distributions........................ 0.35 0.65 0.00
Net Asset Value, End of Period............. $ 11.95 $ 14.53 $ 12.91
Total Return(C)............................ (15.37)% 17.17% 7.58%
Net Assets End of Period (In Thousands).... $ 9,278 $ 8,514 $ 4,246
Ratio of Expenses to Average Net Assets.... 2.00% 2.50% 2.50%
Ratio of Expenses to Average Net Assets
(Excluding Waivers)....................... 3.85% 5.50% 8.50%
Ratio of Net Investment Income (Loss) to
Average Net Assets........................ 0.70% 0.60% 0.00%
Ratio of Net Investment Income (Loss) to
Average Net Assets(Excluding Waivers)..... (1.22)% (2.41)% (6.09)%
Portfolio Turnover Rate.................... 84.70% 68.20% 67.10%
Average Commission Per Share(E)............
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------ MAY 1 THROUGH
INTERNATIONAL GROWTH FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 16.97 $ 16.02 $14.82
Net Investment Income (Loss)................................ 0.01 0.01 (0.02)
Net Realized and Unrealized Gain (Loss) on Investments...... 0.69 1.87 2.08
---------------------------------------
Total from Investment Operations............................ 0.70 1.88 2.06
---------------------------------------
Dividends from Net Investment Income........................ 0.01 0.06 0.10
Distributions from Capital Gains............................ 1.13 0.87 0.76
---------------------------------------
Total Distributions......................................... 1.14 0.93 0.86
---------------------------------------
Net Assets Value, End of Period............................. $ 16.53 $ 16.97 $16.02
---------------------------------------
Total Return(C)............................................. 4.17% 11.72% 13.88%(B)
Net Assets End of Period (In Thousands)..................... $ 9,878 $ 4,276 $1,094
Ratio of Expenses to Average Net Assets..................... 2.55% 2.55% 2.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.67% 2.75% 2.73%(A)
Ratio of Net Investment Income to Average Net Assets........ (0.06)% 0.09% (0.65)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (0.18)% (0.11)% (0.85)%(A)
Portfolio Turnover Rate..................................... 27.08% 23.79% 31.10%(A)
Average Commission Per Share(E)............................. $0.0275 $0.0221
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
INTERNATIONAL GROWTH FUND (CLASS C) DECEMBER 31, 1997
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 17.51
Net Investment Income (Loss)................................ (0.03)
Net Realized and Unrealized Gains (Losses) on Investments... 0.39
-------
Total from Investment Operations............................ 0.36
-------
Dividends from Net Investment Income........................ 0.08
Distributions from Net Realized Capital Gains............... 1.13
-------
Total Distributions......................................... 1.21
-------
Net Asset Value, End of Period.............................. $ 16.66
-------
Total Return(D)............................................. 2.07%(B)
Net Assets End of Period (In Thousands)..................... $ 1,113
Ratio of Expenses to Average Net Assets..................... 2.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.75%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.51)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (0.71)%(A)
Portfolio Turnover.......................................... 27.08%(A)
Average Commission Per Share(E)............................. $0.0275
</TABLE>
A Annualized.
B Not Annualized.
C Total return does not include one time sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
G Based on average monthly shares outstanding.
THE ENTERPRISE Group of Funds, Inc.
14
<PAGE> 19
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
GOVERNMENT SECURITIES FUND (CLASS A) 1997 1996 1995 1994 1993 1992(G) 1991
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 11.80 $ 11.83 $ 10.62 $ 12.44 $ 12.47 $ 12.40 $ 11.96
Net Investment Income (Loss)....... 0.73 0.74 0.76 0.87 0.92 0.99 1.00
Net Realized and Unrealized Gain
(Loss) on Investments............. 0.23 (0.03) 1.21 (1.82) 0.21 0.19 0.44
--------------------------------------------------------------------
Total from Investment Operations... 0.96 0.71 1.97 (0.95) 1.13 1.18 1.44
--------------------------------------------------------------------
Dividends from Net Investment
Income............................ 0.73 0.74 0.76 0.87 0.92 0.98 1.00
Distributions from Net Realized
Capital Gains (Loss).............. 0.00 0.00 0.00 0.00 0.24 0.13 0.00
--------------------------------------------------------------------
Total Distributions................ 0.73 0.74 0.76 0.87 1.16 1.11 1.00
--------------------------------------------------------------------
Net Asset Value, End of Period..... $ 12.03 $ 11.80 $ 11.83 $ 10.62 $ 12.44 $ 12.47 $ 12.40
--------------------------------------------------------------------
Total Return(C).................... 8.39% 6.29% 19.00% (7.81)% 9.26% 9.93% 12.58%
Net Assets End of Period (In
Thousands)........................ $68,639 $73,693 $86,224 $84,431 $106,541 $71,515 $46,480
Ratio of Expenses to Average Net
Assets............................ 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 0.90%
Ratio of Expenses to Average Net
Assets (Excluding Waivers)........ 1.46% 1.42% 1.44% 1.35% 1.44% 1.54% 1.65%
Ratio of Net Investment Income
(Loss) to Average Net Assets...... 6.16% 6.35% 6.66% 7.60% 7.20% 7.90% 8.20%
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers)............... 6.00% 6.23% 6.52% 7.59% 7.03% 7.72% 7.39%
Portfolio Turnover................. 9.61% 0.17% 0.00% 27.20% 90.10% 108.40% 58.60%
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
GOVERNMENT SECURITIES FUND (CLASS A) 1990 1989 1988
- ------------------------------------ --------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of
Period............................ $ 11.92 $ 11.70 $11.96
Net Investment Income (Loss)....... 1.01 0.90 0.79
Net Realized and Unrealized Gain
(Loss) on Investments............. 0.05 0.23 (0.26)
Total from Investment Operations... 1.06 1.13 0.53
Dividends from Net Investment
Income............................ 1.02 0.91 0.79
Distributions from Net Realized
Capital Gains (Loss).............. 0.00 0.00 0.00
Total Distributions................ 1.02 0.91 0.79
Net Asset Value, End of Period..... $ 11.96 $ 11.92 $11.70
Total Return(C).................... 9.41% 10.01% 4.53%
Net Assets End of Period (In
Thousands)........................ $31,535 $29,897 $3,826
Ratio of Expenses to Average Net
Assets............................ 1.00% 2.10% 2.10%
Ratio of Expenses to Average Net
Assets (Excluding Waivers)........ 1.60% 2.70% 4.50%
Ratio of Net Investment Income
(Loss) to Average Net Assets...... 8.60% 8.00% 7.00%
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers)............... 7.77% 7.31% 4.52%
Portfolio Turnover................. 70.00% 85.40% 14.30%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
----------------- MAY 1 THROUGH
GOVERNMENT SECURITIES FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period.............. $ 11.79 $11.83 $11.12
Net Investment Income (Loss)...................... 0.66 0.68 0.44
Net Realized and Unrealized Gain (Loss) on
Investments...................................... 0.23 (0.04) 0.71
--------------------------------------
Total from Investment Operations.................. 0.89 0.64 1.15
--------------------------------------
Dividends from Net Investment Income.............. 0.66 0.68 0.44
Distributions from Capital Gains.................. 0.00 0.00 0.00
--------------------------------------
Total Distributions............................... 0.66 0.68 0.44
--------------------------------------
Net Asset Value, End of Period.................... $ 12.02 $11.79 $11.83
--------------------------------------
Total Return(D)................................... 7.81% 5.61% 10.47%(B)
Net Assets End of Period (in thousands)........... $12,285 $5,683 $2,124
Ratio of Expenses to Average Net Assets........... 1.85% 1.85% 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)......................................... 2.01% 1.96% 1.91%(A)
Ratio of Net Investment Income to Average Net
Assets........................................... 5.55% 5.79% 5.64%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers)................... 5.39% 5.68% 5.58%(A)
Portfolio Turnover Rate........................... 9.61% 0.17% 0.00%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
GOVERNMENT SECURITIES FUND (CLASS C) DECEMBER 31, 1997
- ---------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $11.63
Net Investment Income (Loss)................................ 0.46
Net Realized and Unrealized Gains (Losses) on Investments... 0.40
-----------------
Total from Investment Operations............................ 0.86
-----------------
Dividends from Net Investment Income........................ 0.46
Distributions from Net Realized Capital Gains (Loss)........ 0.00
-----------------
Total Distributions......................................... 0.46
-----------------
Net Asset Value, End of Period.............................. $12.03
-----------------
Total Return(D)............................................. 7.49%(B)
Net Assets End of Period (In Thousands)..................... $ 498
Ratio of Expenses to Average Net Assets..................... 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.03%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 5.39%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 5.21%(A)
Portfolio Turnover.......................................... 9.61%(A)
</TABLE>
A Annualized.
B Not Annualized.
C Total return does not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
G Based on average monthly shares outstanding.
THE ENTERPRISE Group of Funds, Inc.
15
<PAGE> 20
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
HIGH-YIELD BOND FUND (CLASS A) 1997 1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 11.84 $ 11.39 $ 10.72 $ 11.70 $ 10.83 $ 10.19 $ 8.55
Net Investment Income (Loss)........................... 0.99 0.94 0.99 0.97 0.95 1.01 1.13
Net Realized and Unrealized Gain (Loss) on
Investments........................................... 0.51 0.45 0.67 (0.97) 0.89 0.64 1.66
------------------------------------------------------------------------
Total from Investment Operations....................... 1.50 1.39 1.66 0.00 1.84 1.65 2.79
------------------------------------------------------------------------
Dividends from Net Investment Income................... 0.99 0.94 0.99 0.98 0.97 1.01 1.15
Distributions from Capital Gains....................... 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Other.................................................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
------------------------------------------------------------------------
Total Distributions.................................... $ 0.99 0.94 0.99 0.98 0.97 1.01 1.15
------------------------------------------------------------------------
Net Asset Value, End of Period......................... $ 12.35 $ 11.84 $ 11.39 $ 10.72 $ 11.70 $ 10.83 $ 10.19
------------------------------------------------------------------------
Total Return(C)........................................ 13.18% 12.78% 16.00% 0.05% 17.58% 16.69% 33.02%
Net Assets End of Period (In Thousands)................ $66,422 $54,129 $52,182 $44,822 $44,361 $30,851 $24,672
Ratio of Expenses to Average Net Assets................ 1.30% 1.30% 1.30% 1.30% 1.30% 1.30% 1.30%
Ratio of Expenses to Average Net Assets (Excluding
Waivers).............................................. 1.47% 1.50% 1.52% 1.45% 1.59% 1.64% 1.85%
Ratio of Net Investment Income to Average Net Assets... 8.20% 8.21% 8.80% 8.60% 8.20% 9.40% 11.30%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers)............................ 8.03% 8.01% 8.58% 8.52% 7.95% 8.95% 10.51%
Portfolio Turnover Rate................................ 175.38% 180.13% 88.50% 113.00% 121.20% 121.70% 109.30%
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
HIGH-YIELD BOND FUND (CLASS A) 1990 1989 1988
- ------------------------------------------------------- -------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 10.98 $ 12.37 $ 12.20
Net Investment Income (Loss)........................... 1.26 1.33 1.24
Net Realized and Unrealized Gain (Loss) on
Investments........................................... (2.43) (1.37) 0.19
Total from Investment Operations....................... (1.17) (0.04) 1.43
Dividends from Net Investment Income................... 1.24 1.35 1.24
Distributions from Capital Gains....................... 0.00 0.00 0.02
Other.................................................. 0.02(E) 0.00 0.00
Total Distributions.................................... 1.26 1.35 1.26
Net Asset Value, End of Period......................... $ 8.55 $ 10.98 $ 12.37
Total Return(C)........................................ (11.55)% (0.70)% 12.08%
Net Assets End of Period (In Thousands)................ $19,591 $29,144 $15,772
Ratio of Expenses to Average Net Assets................ 1.00% 2.10% 2.10%
Ratio of Expenses to Average Net Assets (Excluding
Waivers).............................................. 1.71% 2.50% 3.10%
Ratio of Net Investment Income to Average Net Assets... 12.30% 11.20% 11.10%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers)............................ 11.66% 10.76% 10.09%
Portfolio Turnover Rate................................ 67.40% 61.60% 88.60%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
---------------- MAY 1 THROUGH
HIGH-YIELD BOND FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 11.84 $11.39 $11.11
Net Investment Income (Loss)................................ 0.77 0.88 0.61
Net Realized and Unrealized Gain (Loss) on Investments...... 0.51 0.45 0.28
------------------------------------
Total from Investment Operations............................ 1.28 1.33 0.89
------------------------------------
Dividends from Net Investment Income........................ 0.77 0.88 0.61
Distributions from Capital Gains............................ 0.00 0.00 0.00
------------------------------------
Total Distributions......................................... 0.77 0.88 0.61
------------------------------------
Net Asset Value, End of Period.............................. $ 12.35 $11.84 $11.39
------------------------------------
Total Return(D)............................................. 12.59% 12.16% 8.12%(B)
Net Assets End of Period (In Thousands)..................... $19,898 $7,892 $2,951
Ratio of Expenses to Average Net Assets..................... 1.85% 1.85% 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.02% 2.05% 2.09%(A)
Ratio of Net Investment Income to Average Net Assets........ 7.51% 7.74% 7.84%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 7.35% 7.55% 7.68%(A)
Portfolio Turnover Rate..................................... 175.38% 180.13% 88.50%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
HIGH-YIELD BOND FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $11.71
Net Investment Income (Loss)................................ 0.61
Net Realized and Unrealized Gains (Losses) on Investments... 0.64
------
Total from Investment Operations............................ 1.25
------
Dividends from Net Investment Income........................ 0.61
Distributions from Net Realized Capital Gains............... 0.00
------
Total Distributions......................................... 0.61
------
Net Asset Value, End of Period.............................. $12.35
------
Total Return (D)............................................ 10.87%(B)
Net Assets End of Period (In Thousands)..................... $1,463
Ratio of Expenses to Average Net Assets..................... 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.01%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 6.84%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers) 6.68%(A)
Portfolio Turnover.......................................... 175.38%(A)
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
THE ENTERPRISE Group of Funds, Inc.
16
<PAGE> 21
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
TAX-EXEMPT INCOME FUND (CLASS A) 1997 1996 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 13.83 $ 13.99 $ 12.80 $ 14.31 $ 13.60 $ 13.34 $ 12.78
Net Investment Income (Loss)........................... 0.63 0.64 0.65 0.67 0.70 0.76 0.82
Net Realized and Unrealized Gain (Loss) on
Investments........................................... 0.31 (0.16) 1.21 (1.48) 0.73 0.26 0.56
-------------------------------------------------------------------------
Total from Investment Operations....................... 0.94 0.48 1.86 (0.81) 1.43 1.02 1.38
-------------------------------------------------------------------------
Dividends from Net Investment Income (Loss)............ 0.63 0.64 0.65 0.68 0.70 0.76 0.82
Distributions from Net Realized Capital Gains.......... 0.19 0.00 0.02 0.02 0.02 0.00 0.00
-------------------------------------------------------------------------
Total Distributions.................................... 0.82 0.64 0.67 0.70 0.72 0.76 0.82
-------------------------------------------------------------------------
Net Asset Value, End of Period......................... $ 13.95 $ 13.83 $ 13.99 $ 12.80 $ 14.31 $ 13.60 $ 13.34
-------------------------------------------------------------------------
Total Return(C)........................................ 6.96% 3.54% 14.85% (5.69)% 10.76% 7.88% 11.13%
Net Assets End of Period (In Thousands)................ $23,695 $28,478 $33,626 $34,297 $41,702 $29,728 $22,614
Ratio of Expenses to Average Net Assets................ 1.22% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of Expenses to Average Net Assets (Excluding
Waivers).............................................. 1.60% 1.41% 1.42% 1.28% 1.39% 1.41% 1.47%
Ratio of Net Investment Income (Loss) to Average Net
Assets................................................ 4.50% 4.64% 4.82% 5.00% 4.90% 5.60% 6.30%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers)............................ 4.12% 4.48% 4.65% 4.97% 4.79% 5.49% 6.04%
Portfolio Turnover..................................... 0.94% 0.91% 0.75% 25.70% 8.30% 16.30% 21.60%
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
TAX-EXEMPT INCOME FUND (CLASS A) 1990 1989 1988
- ------------------------------------------------------- -----------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 12.87 $ 12.66 $ 12.09
Net Investment Income (Loss)........................... 0.81 0.76 0.65
Net Realized and Unrealized Gain (Loss) on
Investments........................................... (0.10) 0.31 0.64
Total from Investment Operations....................... 0.71 1.07 1.29
Dividends from Net Investment Income (Loss)............ 0.80 0.77 0.65
Distributions from Net Realized Capital Gains.......... 0.00 0.09 0.07
Total Distributions.................................... 0.80 0.86 0.72
Net Asset Value, End of Period......................... $ 12.78 $ 12.87 $ 12.66
Total Return(C)........................................ 5.71% 8.68% 10.90%
Net Assets End of Period (In Thousands)................ $19,880 $18,354 $ 6,655
Ratio of Expenses to Average Net Assets................ 1.20% 2.10% 2.10%
Ratio of Expenses to Average Net Assets (Excluding
Waivers).............................................. 1.47% 2.60% 4.00%
Ratio of Net Investment Income (Loss) to Average Net
Assets................................................ 6.50% 6.00% 5.60%
Ratio of Net Investment Income (Loss) to Average Net
Assets (Excluding Waivers)............................ 6.14% 5.53% 3.67%
Portfolio Turnover..................................... 66.40% 99.60% 117.40%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
---------------- MAY 1 THROUGH
TAX-EXEMPT INCOME FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $13.83 $13.99 $13.44
Net Investment Income (Loss)................................ 0.55 0.56 0.38
Net Realized and Unrealized Gain (Loss) on Investments...... 0.31 (0.16) 0.57
------------------------------------
Total from Investment Operations............................ 0.86 0.40 0.95
------------------------------------
Dividends from Net Investment Income........................ 0.55 0.56 0.38
Distributions from Capital Gains............................ 0.19 0.00 0.02
------------------------------------
Total Distributions......................................... 0.74 0.56 0.40
------------------------------------
Net Asset Value, End of Period.............................. $13.95 $13.83 $13.99
------------------------------------
Total Return(D)............................................. 6.36% 2.96% 7.18%(B)
Net Assets End of Period (In Thousands)..................... $2,883 $2,037 $ 912
Ratio of Expenses to Average Net Assets..................... 1.76% 1.80% 1.80%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.16% 1.96% 1.98%(A)
Ratio of Net Investment Income to Average Net Assets........ 3.94% 4.07% 4.08%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 3.54% 3.92% 3.94%(A)
Portfolio Turnover rate..................................... 0.94% 0.91% 0.75%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
TAX-EXEMPT INCOME FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $13.68
Net Investment Income (Loss)................................ 0.36
Net Realized and Unrealized Gains (Losses) on Investments... 0.46
-----------------
Total from Investment Operations............................ 0.82
-----------------
Dividends from Net Investment Income (Loss)................. 0.36
Distributions from Net Realized Capital Gains............... 0.19
-----------------
Total Distributions......................................... 0.55
-----------------
Net Asset Value, End of Period.............................. $13.95
-----------------
Total Return(D)............................................. 6.14%(B)
Net Assets End of Period (In Thousands)..................... $ 184
Ratio of Expenses to Average Net Assets..................... 1.67%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.34%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 3.99%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers) 3.32%(A)
Portfolio Turnover.......................................... 0.94%(A)
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
THE ENTERPRISE Group of Funds, Inc.
17
<PAGE> 22
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
------------------------------- OCTOBER 1 THROUGH
MANAGED FUND (CLASS A) 1997 1996 1995 DECEMBER 31, 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 7.97 $ 6.70 $ 4.91 $ 5.00
Net Investment Income (Loss)................................ 0.04 0.06 0.04 0.01
Net Realized and Unrealized Gain (Loss) on Investments...... 1.64 1.41 1.81 (0.09)
------------------------------------------------------
Total from Investment Operations............................ 1.68 1.47 1.85 (0.08)
------------------------------------------------------
Dividends from Net Investment Income (Loss)................. 0.04 0.06 0.03 0.01
Distributions from Net Realized Capital Gains............... 0.36 0.14 0.03 0.00
------------------------------------------------------
Total Distributions......................................... 0.40 0.20 0.06 0.01
------------------------------------------------------
Net Asset Value, End of Period.............................. $ 9.25 $ 7.97 $ 6.70 $ 4.91
------------------------------------------------------
Total Return(C)............................................. 21.05% 22.08% 37.68% (1.58)%(B)
Net Assets End of Period (In Thousands)..................... $156,608 $101,022 $47,839 $7,872
Ratio of Expenses to Average Net Assets..................... 1.49% 1.57% 1.75% 1.75%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 1.49% 1.57% 1.90% 3.71%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 0.47% 1.12% 1.09% 1.30%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 0.47% 1.12% 0.94% (0.32)%(A)
Portfolio Turnover.......................................... 28.17% 33.21% 26.40% 27.10%(A)
Average Commission Per Share(E)............................. $ 0.0552 $ 0.0551
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------- MAY 1 THROUGH
MANAGED FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 7.93 $ 6.68 $ 5.68
Net Investment Income (Loss)................................ (0.01) 0.02 0.01
Net Realized and Unrealized Gain (Loss) on Investments...... 1.63 1.41 1.05
---------------------------------------
Total from Investment Operations............................ 1.62 1.43 1.06
---------------------------------------
Dividends from Net Investment Income (Loss)................. 0.00 0.04 0.03
Distributions from Capital Gains............................ 0.36 0.14 0.03
---------------------------------------
Total Distributions......................................... 0.36 0.18 0.06
---------------------------------------
Net Asset Value, End of Period.............................. $ 9.19 $ 7.93 $ 6.68
---------------------------------------
Total Return(D)............................................. 20.45% 21.50% 18.38%(B)
Net Assets End of Period (In Thousands)..................... $110,213 $57,037 $16,792
Ratio of Expenses to Average Net Assets..................... 2.04% 2.13% 2.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.04% 2.13% 2.45%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.09)% 0.52% 0.31%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (0.09)% 0.52% 0.14%(A)
Portfolio Turnover Rate..................................... 28.17% 33.21% 26.40%(A)
Average Commission Per Share(E)............................. $ 0.0552 $0.0551
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
MANAGED FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 8.24
Net Investment Income (Loss)................................ 0.00
Net Realized and Unrealized Gains (Losses) on Investments... 1.38
-----------------
Total from Investment Operations............................ 1.38
-----------------
Dividends from Net Investment Income........................ 0.05
Distributions from Net Realized Capital Gains............... 0.36
-----------------
Total Distributions......................................... 0.41
-----------------
Net Asset Value, End of Period.............................. $ 9.21
-----------------
Total Return(D)............................................. 16.74%(B)
Net Assets End of Period (In Thousands)..................... $ 3,614
Ratio of Expenses to Average Net Assets..................... 2.06%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 2.06%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... (0.18)%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ (0.18)%(A)
Portfolio Turnover.......................................... 28.17%(A)
Average Commission Per Share(E)............................. $0.0552
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
18
<PAGE> 23
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 FOR THE PERIOD
-------------------------------------------------------------------------- MAY 1 THROUGH
MONEY MARKET FUND (CLASS A) 1997 1996 1995 1994 1993 1992(G) 1991 DECEMBER 31, 1990
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income (Loss)... 0.05 0.04 0.05 0.03 0.02 0.03 0.05 0.04
-------------------------------------------------------------------------------------------------
Total from Investment
Operations.................... 0.05 0.04 0.05 0.03 0.02 0.03 0.05 0.04
-------------------------------------------------------------------------------------------------
Dividends from Net Investment
Income (Loss)................. 0.05 0.04 0.05 0.03 0.02 0.03 0.05 0.04
-------------------------------------------------------------------------------------------------
Total Distributions............ 0.05 0.04 0.05 0.03 0.02 0.03 0.05 0.04
-------------------------------------------------------------------------------------------------
Net Asset Value, End of
Period........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------------
Total Return................... 4.69% 4.51% 5.05% 3.34% 2.24% 2.92% 5.22% 4.75%(B)
Net Assets End of Period (In
Thousands).................... $68,466 $59,074 $40,325 $32,334 $18,302 $18,932 $16,710 $19,031
Ratio of Expenses to Average
Net Assets.................... 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%(A)
Ratio of Expenses to Average
Net Assets (Excluding
Waivers)...................... 1.24% 1.18% 1.35% 1.33% 1.72% 1.56% 1.51% 1.38%(A)
Ratio of Net Investment Income
(Loss) to Average Net
Assets........................ 4.59% 4.42% 4.92% 3.30% 2.20% 2.80% 5.10% 7.00%(A)
Ratio of Net Investment Income
(Loss) to Average Net Assets
(Excluding Waivers)........... 4.35% 4.24% 4.57% 3.08% 1.47% 1.81% 4.62% 6.17%(A)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
---------------- MAY 1 THROUGH
MONEY MARKET FUND (CLASS B) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period........................ $ 1.00 $ 1.00 $ 1.00
Net Investment Income (Loss)................................ 0.04 0.04 0.03
------------------------------------
Total from Investment Operations............................ 0.04 0.04 0.03
------------------------------------
Dividends from Net Investment Income (Loss)................. 0.04 0.04 0.03
------------------------------------
Total Distributions......................................... 0.04 0.04 0.03
------------------------------------
Net Asset Value, End of Period.............................. $ 1.00 $ 1.00 $ 1.00
------------------------------------
Total Return(D)............................................. 4.11% 3.94% 2.95%(B)
Net Assets End of Period (In Thousands)..................... $5,980 $1,344 $ 394
Ratio of Expenses to Average Net Assets..................... 1.55% 1.55% 1.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 1.79% 1.73% 1.88%(A)
Ratio of Net Investment Income to Average (Loss) Net
Assets..................................................... 4.09% 3.85% 4.23%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 3.85% 3.68% 3.90%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1 THROUGH
MONEY MARKET FUND (CLASS C) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net Asset Value, Beginning of Period........................ $ 1.00
Net Investment Income (Loss)................................ 0.02
------
Total from Investment Operations............................ 0.02
------
Dividends from Net Investment Income (Loss)................. 0.02
------
Total Distributions......................................... 0.02
------
Net Asset Value, End of Period.............................. $ 1.00
------
Total Return(D)............................................. 2.86%(B)
Net Assets End of Period (In Thousands)..................... $1,021
Ratio of Expenses to Average Net Assets..................... 1.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers)................................................... 1.85%(A)
Ratio of Net Investment Income (Loss) to Average Net
Assets..................................................... 4.15%(A)
Ratio of Net Investment Income (Loss) to Average Net Assets
(Excluding Waivers)........................................ 3.85%(A)
</TABLE>
A Annualized.
B Not Annualized.
C Total returns do not include one time sales charge.
D Total return does not include contingent deferred sales charge.
G Based on average monthly shares outstanding.
THE ENTERPRISE Group of Funds, Inc.
19
<PAGE> 24
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The following descriptions of the Funds are intended to help you select the Fund
which is appropriate for your investment objective. You may wish to pursue your
objectives by investing in more than one Fund.
The investment objectives of each Fund may not be changed without approval of a
majority of the outstanding voting securities of that Fund.
EQUITY FUNDS
Under normal market conditions, at least 65% of the net asset value of the nine
Equity Funds will be invested in common equity securities. The remainder of the
Equity Funds' assets may be invested in repurchase agreements, bankers
acceptances, bank certificates of deposit, commercial paper and similar money
market instruments, convertible bonds, convertible preferred stock, preferred
stock, corporate bonds, U.S. Treasuries, notes and bonds, American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), rights and warrants.
The Growth, Growth and Income, Equity, Equity Income, Capital Appreciation,
Global Financial Services, Small Company Growth and Small Company Value Funds
invest in securities that are traded on national securities exchanges and in the
over-the-counter market. Each of these Funds, except the Global Financial
Services Fund, may invest up to 20% of its assets in foreign securities provided
they are listed on a domestic or foreign securities exchange or are represented
by ADRs. The Global Financial Services Fund may invest over 50% of its assets in
foreign securities. No Fund may invest more than 10% of its net assets in
illiquid, including restricted, securities. As noted below, the International
Growth Fund invests principally in the securities of foreign issuers listed on
recognized foreign exchanges, but may also invest in securities traded on the
over-the-counter market.
GROWTH FUND
The objective of the Growth Fund is appreciation of capital primarily through
investments in common stocks. The Fund's common stock selection emphasizes those
companies having growth characteristics, but the Fund's investment policy
recognizes that securities of other companies may be attractive for capital
appreciation purposes by virtue of special developments or depression in price
believed to be temporary. The potential for appreciation of capital is the basis
for investment decisions; any income is incidental.
GROWTH AND INCOME FUND
The objective of the Growth and Income Fund is to achieve a total return in
excess of the total return of the Lipper Growth and Income Mutual Funds Average,
measured over a period of three to five years, by investing primarily in a
broadly diversified group of large capitalization companies. The Fund seeks this
objective primarily through capital appreciation with income as a secondary
consideration. The Fund will invest in securities of companies which the Fund
Manager believes to be financially sound and will consider such factors as the
sales, growth and profitability prospects for the economic sector and markets in
which the company operates and for the services of products it provides; the
financial condition of the company; its ability to meet its liabilities and to
provide income in the form of dividends; the prevailing price of the security;
how that price compares to historical price levels of the security, to current
price levels in the general market, and to the prices of competing companies;
projected earnings estimates and earnings growth rate of the company, and the
relation of those figures to the current price.
In general, the Fund will invest in stocks of companies with market
capitalizations in excess of $750 million. Although there is no assurance that
the Fund will meet its objective, the securities held in the Growth and Income
Fund will generally reflect the price volatility of the broad equity market
(i.e., the Standard & Poor's 500 Index).
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EQUITY FUND
The investment objective of the Equity Fund is long-term capital appreciation
through investment in securities (primarily equity securities) of companies that
are believed by the Fund Manager to be undervalued in the marketplace in
relation to factors such as the companies' assets or earnings. It is the Fund
Manager's intention to invest in securities of companies which in the Fund
Manager's opinion possess one or more of the following characteristics:
undervalued assets, valuable consumer or commercial franchises, securities
valuation below peer companies, substantial and growing cash flow and/or a
favorable price to book value relationship. Investment policies aimed at
achieving the Fund's objective are set in a flexible framework of securities
selection which primarily includes equity securities, such as common stocks,
preferred stocks, convertible securities, rights and warrants in proportions
which vary from time to time. Under normal circumstances at least 65% of the
Fund's assets will be invested in equity securities. The Fund will invest
primarily in stocks listed on the New York Stock Exchange. In addition, it may
also purchase securities listed on other domestic securities exchanges,
securities traded in the domestic over-the-counter market and foreign securities
provided that they are listed on a domestic or foreign securities exchange or
represented by ADRs listed on a domestic securities exchange or traded in the
United States over-the-counter market.
EQUITY INCOME FUND
The objective of the Equity Income Fund is a combination of growth and income to
achieve an above-average and consistent total return, primarily from investments
in dividend-paying common stocks. Under normal circumstances, at least 65% of
the Fund's total assets will be invested in income-producing equity securities.
The Fund's principal criterion in stock selection is above-average yield, and it
uses this criterion as a discipline to enhance stability and reduce market risk.
Subject to this primary criterion, the Fund invests in stocks that have
relatively low price to earnings ratios or relatively low price to book value
ratios.
CAPITAL APPRECIATION FUND
The objective of the Capital Appreciation Fund is maximum capital appreciation,
primarily through investments in common stocks of companies that demonstrate
accelerating earnings momentum and consistently strong financial
characteristics.
The Fund invests primarily in common stocks of companies which meet the Fund
Manager's criteria of: (a) steadily increasing earnings; and (b) a three-year
average performance record of sales, earnings, dividend growth, pretax margins,
return on equity and reinvestment rate at an aggregate average of 1.5 times the
average performance of the Standard & Poor's 500 common stocks ("S&P 500") for
the same period. The Fund attempts to invest in a range of small, medium and
large companies designed to achieve an average capitalization of the companies
in which it invests that is less than the average capitalization of the S&P 500.
The potential for maximum capital appreciation is the basis for investment
decisions; any income is incidental.
SMALL COMPANY GROWTH FUND
The Small Company Growth Fund seeks capital appreciation and invests primarily
in common stocks of small capitalization companies believed by the Fund Manager
to have an outlook for strong earnings growth and potential for significant
capital appreciation. The Fund will normally be as fully invested as practicable
in common stocks and securities convertible into common stocks, but also may
invest up to 5% of its assets in warrants and rights to purchase common stocks.
In the option of the Fund Manager, there may be times when the shareholder's
best interests are best served and the investment objective is more likely to be
achieved by having varying amounts of the Fund's assets in convertible
securities. Under normal market conditions, the Fund will invest at least 65% of
its total assets in common stocks and convertible securities of small
capitalization companies (market capitalization of up to $1 billion). At certain
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times that percentage may be substantially higher. Securities will be sold when
the Fund Manager believes that anticipated appreciation is no longer probable,
alternative investments offer superior appreciation prospects, or the risk of a
decline in market price is too great. Because of its policy with respect to the
sales of investments, the Fund may from time to time realize short-term gains or
losses. The Fund will likely have somewhat greater volatility than the stock
market in general, as measured by the S&P 500 Index.
SMALL COMPANY VALUE FUND
The objective of the Small Company Value Fund is maximum capital appreciation,
primarily through investment of at least 65% of Fund assets in the common equity
securities of companies (based on the total outstanding common shares at the
time of investment) which have a market capitalization of up to $1 billion.
The Fund intends to invest the remaining 35% of its total assets in the same
manner but reserves the right to use some or all of the 35% to invest in equity
securities of companies (based on the total outstanding common shares at the
time of investment) which have a market capitalization of more than $1 billion.
In pursuing its objective, the Fund's strategy will be to invest in stocks of
companies with value that may not be fully reflected by current stock price.
Since small companies tend to be less actively followed by stock analysts, the
market may overlook favorable trends and then adjust its valuation more quickly
once investor interest has surfaced. The Fund Manager seeks out companies in the
public market that are selling at a discount to their private market value (PMV)
measured using proprietary research techniques in areas of core competencies.
The Fund Manager then determines whether there is an emerging catalyst that will
focus investor attention on the underlying assets of the company. Smaller
companies may be subject to a valuation catalyst such as increased investor
attention, takeover efforts or a change in management.
INTERNATIONAL GROWTH FUND
The objective of the International Growth Fund is capital appreciation,
primarily through a diversified portfolio of non-U.S. equity securities.
It is a fundamental policy of the Fund that it will invest at least 80% of the
value of its assets (except when maintaining a temporary defensive position) in
equity securities of companies domiciled outside the United States. That portion
of the Fund not invested in equity securities is, in normal circumstances,
invested in U.S. and foreign government securities, high-grade commercial paper,
certificates of deposit, foreign currency, bankers acceptances, cash and cash
equivalents, time deposits, repurchase agreements and similar money market
instruments, both foreign and domestic. The Fund may invest in convertible debt
securities of foreign issuers which are convertible into equity securities at
such time as a market for equity securities is established in the country
involved.
The Fund Manager's investment perspective for the Fund is to invest in the
equity securities of non-U.S. markets and companies which are believed to be
undervalued based upon internal research and proprietary valuation systems. This
international equity strategy reflects the Fund Manager's decisions concerning
the relative attractiveness of asset classes, the individual international
equity markets, industries across and within those markets, other common risk
factors within those markets and individual international companies. The Fund
Manager initially identifies those securities which it believes to be
undervalued in relation to the issuer's assets, cash flow, earnings and
revenues. The relative performance of foreign currencies is an important factor
in the Fund's performance. The Fund Manager may manage the Fund's exposure to
various currencies to take advantage of different yield, risk and return
characteristics. The Fund Manager's proprietary valuation model determines which
securities are potential candidates for inclusion in the Fund.
The benchmark for the Fund is the European, Australian, Far East ("EAFE") Index
(the "Benchmark"). The Benchmark is a market driven, broad based index
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which includes non-U.S. equity markets in terms of capitalization and
performance. The Benchmark is designed to provide a representative total return
for all major stock exchanges located outside the U.S. From time to time, the
Fund Manager may substitute securities in an equivalent index when it believes
that such securities in the index more accurately reflect the relevant
international market.
As a general matter, the Fund Manager will purchase for the Fund only securities
contained in the underlying index relevant to the Benchmark. Brinson Partners
will attempt to enhance the long-term risk and return performance of the Fund
relative to the Benchmark by deviating from the normal Benchmark mix of country
allocation and currencies in reaction to discrepancies between current market
prices and fundamental values. The active management process is intended to
produce a superior performance relative to the Benchmark index.
The Fund Manager will purchase securities of companies domiciled in a minimum of
eight to 12 countries outside the United States.
GLOBAL FINANCIAL SERVICES FUND
The investment objective of the Global Financial Services Fund is capital
appreciation. The Fund seeks to achieve its objective through investment in the
common stocks of domestic and foreign financial services companies. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
financial services companies.
For Fund purposes, a financial services company is a firm that in its most
recent fiscal year either (i) derived at least 50% of its revenues or earnings
from financial services activities, or (ii) devoted at least 50% of its assets
to such activities. Financial services companies provide financial services to
consumers and businesses and include the following types of U.S. and foreign
firms: commercial banks, thrift institutions and their holding companies;
consumer and industrial finance companies; diversified financial services
companies; investment banks; securities brokerage and investment advisory firms;
financial technology companies; real estate-related firms; leasing firms; credit
card companies; government sponsored financial enterprises; investment
companies; insurance brokerages; and various firms in all segments of the
insurance industry such as multi-line property and casualty, and life insurance
companies and insurance holding companies.
The Fund will concentrate its investments in the financial services industry.
This policy may not be changed without the approval of a majority of the Fund's
shareholders.
The Fund Manager seeks to maximize returns by combining fundamental and
quantitative research to identify securities of financial services companies
that are attractively priced relative to their expected returns. Its research
analysts employ a long-term approach to forecasting the earnings and growth
potential of companies and attempt to construct global portfolios that produce
maximum returns at a given risk level.
INCOME FUNDS
Investors should refer to the Appendix to the Statement of Additional
Information for a description of the Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's ("S&P") ratings mentioned below.
GOVERNMENT SECURITIES FUND
The objective of the Government Securities Fund is current income and safety of
principal primarily from securities that are obligations of the U.S. Government,
its agencies and instrumentalities ("U.S. Government Securities").
It is a fundamental policy of the Fund that under normal conditions at least 80%
of the value of its net assets (or at least 65% of total assets) will be
invested in U.S. Government Securities. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities are generally considered to
be of the same or higher credit quality as privately issued securities rated Aaa
by Moody's or AAA by S&P.
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U.S. Government Securities consist of direct obligations of the U.S. Treasury
(such as treasury bills, treasury notes and treasury bonds) and securities
issued or guaranteed by agencies and instrumentalities of the United States
Government. Those securities issued by agencies or instrumentalities may or may
not be backed by the full faith and credit of the United States. Examples of
full faith and credit securities are securities issued by the Government
National Mortgage Association ("GNMA Certificates"). Examples of agencies or
instrumentalities whose securities are not backed by the full faith and credit
of the United States are the Federal Farm Credit System, the Federal Home Loan
Banks, the Tennessee Valley Authority, the United States Postal Service and the
Export-Import Bank. The Fund may concentrate from time to time in different
securities described above in order to obtain the highest level of current
income and safety of principal.
The remainder of the Fund's assets may be invested in repurchase agreements,
bankers acceptances, bank certificates of deposit, commercial paper and similar
money market instruments, corporate bonds and other mortgage-related securities
(including collateralized mortgage obligations or "CMOs") rated Aaa by Moody's
or AAA by S&P at the time of the investment or determined by the Fund Manager to
be of comparable credit quality at the time of investment to such rated
securities. In making such investments, the Fund Manager seeks income but gives
careful attention to security of principal and considers such factors as
marketability and diversification. For a discussion of CMOs and related risks,
see "Certain Investment Techniques and Associated Risks."
As described in "Certain Investment Techniques and Associated Risks," the Fund
may write and sell covered call option contracts on securities that it owns (in
an effort to enhance income through hedging and other investment techniques) to
the extent of 20% of the value of its net assets at the time such option
contracts are written.
HIGH-YIELD BOND FUND
The objective of the High-Yield Bond Fund is maximum current income, primarily
from debt securities that are rated Ba or lower by Moody's or BB or lower by
Standard & Poor's.
It is a fundamental policy of the Fund that under normal circumstances it will
invest at least 80% of the value of its total net assets (at least 65% of gross
assets) in high-yielding, income-producing corporate bonds that are rated B3 or
better by Moody's or B- or better by S&P. The corporate bonds in which the Fund
invests are high-yielding but normally carry a greater credit risk than bonds
with higher ratings. In addition, such bonds, commonly referred to as "junk
bonds," may involve greater volatility of price than higher-rated bonds. For a
discussion of high-yield securities and related risks, see "Certain Investment
Techniques and Associated Risks."
The Fund's investments are selected by the Fund Manager after careful
examination of the economic outlook to determine those industries that appear
favorable for investments. Industries going through a perceived decline
generally are not candidates for selection. After the industries are selected,
bonds of issuers within those industries are selected based on their
creditworthiness, their yields in relation to their credit and the relative
strength of their common stock prices. Companies near or in bankruptcy are not
considered for investment. The Fund does not purchase bonds which are rated Ca
or lower by Moody's or CC or lower by S&P or which, if unrated, in the judgment
of the Fund Manager have characteristics of such lower-grade bonds. Should an
investment purchased with the above-described credit quality requisites be
downgraded to Ca or lower or CC or lower, the Fund Manager shall have discretion
to hold or liquidate the security.
Subject to the restrictions described above, under normal circumstances, up to
20% of the Fund's assets may include: (1) bonds rated Caa by Moody's or CCC by
S&P; (2) unrated debt securities which, in the judgment of the Fund Manager have
characteristics similar to those described above; (3) convertible
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debt securities; (4) puts, calls and futures as hedging devices; (5) foreign
issuer debt securities; and (6) short-term money market instruments, including
certificates of deposit, commercial paper, U.S. Government Securities and other
income-producing cash equivalents. For a discussion of puts, calls, and futures
and their related risks, see "Certain Investment Techniques and Associated
Risks."
TAX-EXEMPT INCOME FUND
The objective of the Tax-Exempt Income Fund is a high level of current income
not includable in gross income for federal income tax purposes, with
consideration given to preservation of principal, primarily from investments in
a diversified portfolio of long-term investment grade municipal bonds.
It is a fundamental policy of the Fund that under normal circumstances it will
invest at least 80% of its net assets in Municipal Securities (or futures
contracts or options on futures with respect thereto) which, at the time of
investment, are investment grade or in Municipal Securities which are not rated
if, based upon credit analysis by the Fund Manager, it is believed that such
securities are of comparable quality to such rated bonds.
The Fund invests primarily in investment grade "Municipal Securities" the
interest on which, in the opinion of counsel for issuers and the Fund, is not
includable in gross income for federal income tax purposes, and not subject to
the alternative minimum tax. Municipal Securities are notes and bonds issued by
or on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities. These securities are traded primarily in the over-
the-counter market. Such securities may have fixed, variable or floating rates
of interest. See the Appendix to this Prospectus for a further description of
Municipal Securities.
Investment grade securities are: bonds rated within the three highest ratings by
Moody's (Aaa, Aa, A) or S&P (AAA, AA, A); notes given one of the three highest
ratings by Moody's (MIG1, MIG2, MIG3) for notes; commercial paper rated P-1 by
Moody's or A-1 by S&P; and variable rate securities rated VMIG1 or VMIG2 by
Moody's.
While there are no maturity restrictions on the Municipal Securities in which
the Fund invests, the average maturity is expected to range between 10 and 25
years. The Fund Manager will actively manage the Fund, adjusting the average
Fund maturity and utilizing futures contracts and options on futures as a
defensive measure according to its judgment of anticipated interest rates.
During periods of rising interest rates and falling prices, a shorter weighted
average maturity may be adopted to cushion the effect of bond price declines on
the Fund's net asset value. When rates are falling and prices are rising, a
longer weighted average maturity rate may be adopted. For a discussion on
futures and their related risks, see "Certain Investment Techniques and
Associated Risks."
The Fund may also invest up to 20% of its net assets in cash, cash equivalents
and debt securities, the interest from which may be subject to federal income
tax. Investments in taxable securities will be limited to investment grade
corporate debt securities and U.S. Government Securities.
The Fund will not invest more than 20% of its net assets in Municipal Securities
the interest on which is subject to federal alternative minimum tax.
FLEXIBLE FUND
MANAGED FUND
The objective of the Managed Fund is growth of capital over time through
investment in a portfolio consisting of common stocks, bonds and cash
equivalents, the percentages of which will vary based on the Fund Manager's
assessments of the relative outlook for such investments. In seeking to achieve
its investment objective, the types of equity securities in which the Fund may
invest will be the same as those in which the Equity Funds invest. Debt
securities are expected to be predominantly investment grade intermediate to
long-term U.S. Government and corporate debt, although the Fund will also invest
in high quality short-term money market and cash equivalent
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securities and may invest almost all of its assets in such securities when the
Fund Manager deems it advisable in order to preserve capital. In addition, the
Fund may also invest up to 20% of its assets in foreign securities provided that
they are listed on a domestic or foreign securities exchange or are represented
by ADRs listed on a domestic securities exchange or traded in the United States
over-the-counter market.
The allocation of the Fund's assets among the different types of permitted
investments will vary from time to time based upon the Fund Manager's evaluation
of economic and market trends and its perception of the relative values
available from such types of securities at any given time. There is neither a
minimum nor a maximum percentage of the Fund's assets that may, at any given
time, be invested in any of the types of investments identified above.
Consequently, while the Fund will earn income to the extent it is invested in
bonds or cash equivalents, the Fund does not have any specific income objective.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to provide the highest
possible level of current income, consistent with preservation of capital and
liquidity. Securities in which the Fund will invest may not yield as high a
level of current income as securities of lower quality and longer maturity which
generally have less liquidity and greater market risk. The Money Market Fund
seeks to achieve its objective by investing in a diversified portfolio of
high-quality money market instruments, comprised of U.S. dollar-denominated
instruments which present minimal credit risks and are of eligible quality which
consist of the following:
1. obligations issued or guaranteed as to principal and interest by the United
States Government or any agency or authority controlled or supervised by and
acting as an instrumentality of the U.S. Government pursuant to authority
granted by Congress;
2. commercial paper, negotiable certificates of deposit, letters of credit, time
deposits and bankers acceptances, of U.S. or foreign banks, and U.S. or
foreign savings and loans associations, which at the date of investment have
capital, surplus and undistributed profits as of the date of their most
recent published financial statements of $500,000,000 or greater;
3. short-term corporate debt instruments (commercial paper or variable amount
master demand notes) rated "A-1" or "A-2" by S&P or "Prime 1" or "Prime 2" by
Moody's or Tier 1 by any two Nationally Recognized Statistical Rating
Organization ("NRSRO"), or, if not rated, issued by a company rated at least
"A" by any two NRSROs and about which the Board of Directors of the Fund has
ratified the Fund Manager's independent determination that the instrument
presents minimal credit risks and is of high quality; however, investments in
securities of all issuers having the second highest rating (A-2/P-2) assigned
shall be limited to no more than five percent of the Fund's assets at the
time of purchase, with the investment of any one such issuer being limited to
not more than one percent of Fund assets at the time of purchase;
4. corporate obligations limited to non-convertible corporate debt securities
having one year or less remaining to maturity and which are rated "AA" or
better by S&P or "Aa" or better by Moody's; and
5. repurchase agreements with respect to any of the foregoing obligations.
The Money Market Fund will limit its investment in the securities of any one
issuer to no more than five percent of Fund assets, measured at the time of
purchase.
In addition, the Money Market Fund will not purchase any security, including any
repurchase agreement maturing in more than seven days, which is subject to legal
or contractual delays on resale or which is not readily marketable if more than
10% of the net assets of the Money Market Fund, taken at market value would be
invested in such securities.
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After purchase by the Money Market Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Money
Market Fund. Neither event will require a sale of such security by the Money
Market Fund. The Fund Manager will consider such event in its determination of
whether the Money Market Fund should continue to hold the security provided that
the security presents minimal credit risks and that holding the security is in
the best interests of the Fund. To the extent Moody's or S&P may change their
rating systems generally (as described in the Appendix to the Statement of
Additional Information) the Money Market Fund will attempt to use comparable
ratings as standards for investments in accordance with investment policies
contained herein and in the Fund's Statement of Additional Information.
The dollar-weighted average maturity of the Money Market Fund will be 90 days or
less.
All investments of the Money Market Fund will be limited to instruments which
the Board of Directors determines are of eligible quality, which, if instruments
of foreign issuers, are United States dollar-denominated instruments presenting
minimal credit risk, and all of which are either:
1. of those rated in the two highest rating categories by any NRSRO, or
2. if the instrument is not rated, of comparable quality as determined by the
Board of Directors.
Generally, instruments with NRSRO ratings in the two highest grades are
considered "high quality." All of the money market investments will mature in
397 days or less. The Money Market Fund will use the amortized cost method of
securities valuation, as described more fully in the Statement of Additional
Information.
CERTAIN INVESTMENT
SECURITIES, TECHNIQUES
AND ASSOCIATED RISKS
Following is a description of certain investment techniques employed by the
Funds, and certain types of securities invested in by the Funds and associated
risks. Unless otherwise indicated, all of the Funds may use the indicated
techniques and invest in the indicated securities.
GENERAL RISKS ASSOCIATED WITH EQUITY FUNDS
The Equity Funds seek to reduce risk of loss of principal due to changes in the
value of individual stocks by investing in a diversified portfolio of common
stocks and through the use of options on stocks. Such investment techniques do
not, however, eliminate all risks. Investors should expect the value of the
Equity Funds and the net asset value of their shares to fluctuate based on
market conditions.
Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies due to the risk related to
markets, market share, product performance and financial resources. The limited
volume and frequency of trading of small capitalization companies may subject
their stocks to greater price deviations than stocks of larger companies.
The International Growth Fund and the Global Financial Services Fund carry
additional risks associated with possibly less stable foreign securities and
currencies. For a discussion of these risks, please refer to "Foreign Currency
Values and Transactions."
GENERAL RISKS ASSOCIATED WITH INCOME FUNDS
Although the Income Funds seek to reduce credit risks, i.e., failure of obligors
to pay interest and principal, through careful selection of investments, and
they seek to reduce market risks resulting from fluctuations in the principal
value of debt obligations due to changes in prevailing interest rates by careful
timing of maturities of investments, such risks cannot be eliminated, and these
factors will affect the net
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asset value of shares in the Income Funds. The value of debt obligations has an
inverse relationship with prevailing interest rates.
GENERAL RISKS ASSOCIATED WITH FLEXIBLE FUND
The foregoing types of risks associated with equity and income funds also apply
to flexible funds.
GENERAL RISKS ASSOCIATED WITH
GLOBAL FINANCIAL SERVICES FUND
As stated above, the Global Financial Services Fund will concentrate its
investments in the financial services industry. As a result, market and economic
conditions and other risk factors particular to the financial services industry
will affect the Fund more than other mutual funds that are not similarly
concentrated. Generally, the financial services industry is extremely sensitive
to fluctuations in interest rates.
Financial services companies are subject to extensive government regulation
which may limit their activities and adversely affect their profitability. Some
financial services companies, e.g., insurance companies, are also subject to
severe market share competition and price competition. The removal of regulatory
barriers to entry into certain segments of the financial services industry may
increase competitive pressures on some companies. Financial services companies
in foreign countries are subject to similar regulatory concerns and risk factors
as domestic companies. Foreign companies, however, may face governmental
controls on interest rates, price and currency movements, and credit
availability. In addition, some foreign governments have taken steps to
nationalize banks and other financial services companies.
U.S. GOVERNMENT SECURITIES
Although the payment of interest and principal on a security may be guaranteed
by the United States Government or one of its agencies or instrumentalities, the
value of such fixed income securities and, consequently, the yield on and net
asset value of shares of the Government Securities Fund are not guaranteed by
the U.S. Government. The net asset value fluctuates in response to changes in
interest rates and market valuation. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. As a result, the Government Securities Fund's ability to maintain
positions in high-yielding, mortgage-backed securities, such as GNMA
Certificates, will be affected by reductions in the principal amounts of such
securities resulting from such prepayments, and its ability to reinvest the
returns of principal at comparable yields is subject to generally prevailing
interest rates at the time.
MORTGAGE-RELATED SECURITIES AND
ASSET-BACKED SECURITIES
Up to 20% of the net assets of the Government Securities Fund may be invested in
assets other than U.S. Government Securities, including collateralized
mortgage-related securities ("CMOs") and asset-backed securities. These
securities are considered to be volatile and may be thinly traded. CMOs are
obligations fully collateralized by a portfolio of mortgages or mortgage-related
securities. Payments of principal and interest on the mortgages are passed
through to the holders of the CMOs on the same schedule as they are received,
although certain classes of CMOs have priority over others with respect to the
receipt of prepayments on the mortgages. Therefore, depending on the type of
CMOs in which the Government Securities Fund invests, the investment may be
subject to a greater or lesser risk of prepayment than other types of
mortgage-related securities.
While there are many versions of CMOs and asset-backed securities, some include
"Interest Only" or "IO" -- where all interest payments go to one class of
holders, "Principal Only" or "PO" -- where all of the principal goes to a second
class of holders, "Floaters" -- where the coupon rate floats in the same
direction as interest rates and "Inverse Floaters" -- where the coupon rate
floats in the opposite direction as interest rates. All these securities are
volatile; they also have particular risks in differing interest rate
environments as described below.
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The yield to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on yield to maturity and, therefore, the market value of the IO. As
interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. Accordingly, investment in IOs can theoretically be
expected to contribute to stabilizing a Fund's net asset value. However, if the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities even if the securities are rated AAA or the equivalent. Conversely,
while the yield to maturity on a PO class is also extremely sensitive to rate of
principal payments (including prepayments) on the related underlying mortgage
assets, a slow rate of principal payments may have a material adverse effect on
yield to maturity and therefore the market value of the PO. As interest rates
rise and fall, the value of POs tends to move in the opposite direction from
interest rates. This is typical of most debt instruments. See "General Risks
Associated With Income Funds."
Floaters and Inverse Floaters ("Floaters") are extremely sensitive to the rise
and fall in interest rates. The coupon rate on these securities is based on
various benchmarks, such as LIBOR ("London Inter-Bank Offered Rate") and the
11th District cost of funds (the base rate). The coupon rate on Floaters can be
affected by a variety of terms. Floaters can be reset at fixed intervals over
the life of the Floater, float with a spread to the base rate or be a certain
percentage rate minus a certain base rate. Some Floaters have floors below which
the interest rate cannot be reset and/or ceilings above which the interest rate
cannot be reset. The coupon rate and/or market value of Floaters tend to move in
the same direction as the base rate while the coupon rate and/or market value of
Inverse Floaters tend to move in the opposite direction from the base rate.
The market value of all CMOs and other asset-backed securities are determined by
supply and demand in the bid/ask market, interest rate movements, the yield
curve, forward rates, prepayment assumptions and credit of the underlying
issuer. Further, the price actually received on a sale may be different from
bids when the security is being priced. CMOs and asset-backed securities
tradeover a bid and ask market through several large market makers. Due to the
complexity and concentration of derivative securities, the liquidity and,
consequently, the volatility of these securities can be sharply influenced by
market demand.
Asset-backed and mortgage-related securities may not be readily marketable. To
the extent any of these securities are not readily marketable in the judgment of
the Fund Manager (subject to the oversight of the Board of Directors), the
investment restriction limiting the Fund's investment in illiquid instruments to
not more than 10% of the value of its net assets will apply. However, IOs and
POs issued by the U.S. Government, its agencies and instrumentalities, and
backed by fixed-rate mortgages may be excluded from this limit, if, in the
judgment of the Fund Manager (subject to the oversight of the Board of
Directors) such IOs and POs are readily marketable. The Government Securities
Fund does not intend to invest in residual interests, privately issued
securities or subordinated classes of underlying mortgages.
HIGH-YIELD SECURITIES
Notwithstanding the investment policies and restrictions applicable to the
High-Yield Bond and Managed Funds which were designed to reduce risks associated
with such investments, high-yield securities may carry higher levels of risk
than many other types of income producing securities. These risks are of three
basic types: the risk that the issuer of the high-yield bond will default in the
payment of principal and interest; the risk that the value of the bond will
decline due to rising interest rates, economic conditions, or public perception;
and the risk that the investor in such bonds may not be able to readily sell
such bonds.
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<PAGE> 34
Each of the major categories of risk are impacted by various factors, as
discussed below:
HIGH-YIELD BOND MARKET
The high-yield bond market is relatively new and has grown in the context of a
long economic expansion. Any downturn in the economy may have a negative impact
on the perceived ability of the issuer to make principal and interest payments
which may adversely affect the value of outstanding high-yield securities and
reduce market liquidity.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES
In general, the market prices of bonds bear an inverse relationship to interest
rates; as interest rates increase, the prices of bonds decrease. The same
relationship may hold for high-yield bonds, but in the past high-yield bonds
have been somewhat less sensitive to interest rate changes than treasury and
investment grade bonds. While the price of high-yield bonds may not decline as
much, relatively, as the prices of treasury or investment grade bonds decline in
an environment of rising interest rates, the market price, or value, of a
high-yield bond will be expected to decrease in periods of increasing interest
rates, negatively impacting the net asset value of the High-Yield Bond Fund.
High-yield bond prices may not increase as much, relatively, as the prices of
treasury or investment grade bonds in periods of decreasing interest rates.
Payments of principal and interest on bonds are dependent upon the issuer's
ability to pay. Because of the generally lower creditworthiness of issuers of
high-yield bonds, changes in the economic environment generally, or in an
issuer's particular industry or business, may severely impact the ability of the
issuer to make principal and interest payments and may depress the price of
high-yield securities more significantly than such changes would impact
higher-rated, investment-grade securities.
PAYMENT EXPECTATIONS
Many high-yield bonds contain redemption or call provisions which might be
expected to be exercised in periods of decreasing interest rates. Should bonds
in which the High-Yield Bond Fund has invested be redeemed or called during such
an interest rate environment, the Fund would have to sell such securities
without reference to their investment merit and reinvest the proceeds received
in lower yielding securities, resulting in a decreased return for investors in
the High-Yield Bond Fund. In addition, such redemptions or calls may reduce the
High-Yield Bond Fund's asset base over which the Fund's investment expenses may
be spread.
LIQUIDITY AND VALUATION
Because of periods of relative illiquidity, many high-yield bonds may be thinly
traded. As a result, the ability to accurately value high-yield bonds and
determine the net asset value of the High-Yield Bond Fund, as well as the Fund's
ability to sell such securities, may be limited. Public perception of and
adverse publicity concerning high-yield securities may have a significant
negative impact on the value and liquidity of high-yield securities, even though
not based on fundamental investment analysis.
TAX CONSIDERATIONS
To the extent that a Fund invests in securities structured as zero coupon bonds,
or other securities issued with original issue discount, the Fund will be
required to report interest income even though no cash interest payment is
received. Because such income is not represented by cash, the Fund may be
required to sell other securities in order to satisfy the distribution
requirements applicable to regulated investment companies under the Internal
Revenue Code of 1986 ("IRC").
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<PAGE> 35
FUND COMPOSITION
As of March 31, 1998, the High-Yield Bond Fund consisted of securities
classified as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
CATEGORY FUND
<S> <C>
BB................................. 23%
B.................................. 71%
CCC................................ 1%
Non-rated*......................... 5%
</TABLE>
- ---------------
* Equivalent ratings for these securities would have been B.
REITS
Each Fund may invest up to 10% of its total assets in the securities of real
estate investment trusts ("REITs"). REITs are pooled investment vehicles which
invest in real estate and real estate-related loans. The value of a REIT's
shares generally is affected by changes in the value of the underlying
investments of the trust.
HEDGING TRANSACTIONS
Except as otherwise indicated, the Fund Managers, other than for the Money
Market Fund, may engage in the following hedging transactions to seek to hedge
all or a portion of a Fund's assets against market value changes resulting from
changes in equity values, interest rates and currency fluctuations. Hedging is a
means of offsetting, or neutralizing, the price movement of an investment by
making another investment, the price of which should tend to move in the
opposite direction from the original investment.
The Funds will not engage in hedging transactions for speculative purposes but
only as a hedge against changes resulting from market conditions in the values
of securities owned or expected to be owned by the Funds. Unless otherwise
indicated, a Fund will not enter into a hedging transaction (except for closing
transactions) if, immediately thereafter, the sum of the amount of the initial
deposits and premiums on open contracts and options would exceed 5% of the
Fund's total assets taken at current value.
CERTAIN SECURITIES
The Funds may invest in the following described securities, except as otherwise
indicated. These securities are commonly referred to as derivatives. A Fund's
investment in such securities, in the aggregate, may not exceed 5% of net assets
at the time of investment; provided, however, that the International Growth
Fund, the High-Yield Bond Fund, and the Government Securities Fund may invest up
to 20% of their net assets in such securities.
CALL OPTIONS
The Funds, other than the Money Market Fund, may write (sell) call options that
are listed on national securities exchanges or are available in the over-the-
counter market through primary broker-dealers. Call options are short-term
contracts with a duration of nine months or less. Such Funds may only write call
options which are "covered," meaning that the Fund either owns the underlying
security or has an absolute and immediate right to acquire that security,
without additional cash consideration, upon conversion or exchange of other
securities currently held in the Fund. In addition, no Fund will, prior to the
expiration of a call option, permit the call to become uncovered. If a Fund
writes a call option, the purchaser of the option has the right to buy (and the
Fund has the obligation to sell) the underlying security at the exercise price
throughout the term of the option. The amount paid to the Fund by the purchaser
of the option is the "premium." The Fund's obligation to deliver the underlying
security against payment of the exercise price would terminate either upon
expiration of the option or earlier if the Fund were to effect a "closing
purchase transaction" through the purchase of an equivalent option on an
exchange. The Fund would not be able to effect a closing purchase transaction
after it had received notice of exercise. The International Growth Fund may
purchase and write covered call options on foreign and U.S. securities and
indices and enter into related closing transactions.
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<PAGE> 36
Generally, such a Fund intends to write listed covered calls when it anticipates
that the rate of return from so doing is attractive, taking into consideration
the premium income to be received, the risks of a decline in securities prices
during the term of the option, the probability that closing purchase
transactions will be available if a sale of the securities is desired prior to
the exercise, or expiration of the options, and the cost of entering into such
transactions. A principal reason for writing calls on a securities portfolio is
to attempt to realize, through the receipt of premium income, a greater return
than would be earned on the securities alone. A covered call writer such as a
Fund, which owns the underlying security, has, in return for the premium, given
up the opportunity for profit from a price increase in the underlying security
above the exercise price, but it has retained the risk of loss should the price
of the security decline.
The writing of covered call options involves certain risks. A principal risk
arises because exchange and over-the-counter markets for options may be limited;
it is impossible to predict the amount of trading interest which may exist in
such options, and there can be no assurance that viable exchange and over-
the-counter markets will develop or continue. The Funds will write covered call
options only if there appears to be a liquid secondary market for such options.
If, however, an option is written and a liquid secondary market does not exist,
it may be impossible to effect a closing purchase transaction in the option. In
that event, the Fund may not be able to sell the underlying security until the
option expires or the option is exercised, even though it may be advantageous to
sell the underlying security before that time.
PUTS
The Funds, except the Government Securities Fund and the Money Market Fund, may
purchase put options ("Puts") which relate to (i) securities (whether or not
they hold such securities); (ii) Index Options (described below whether or not
they hold such Options); or (iii) broadly-based stock indexes. The Funds, except
the Government Securities Fund and Money Market Fund, may write covered put
options. The Fund will receive premium income from writing covered put options,
although it may be required, when the put is exercised, to purchase securities
at higher prices than the current market price. The High-Yield Bond Fund may
invest up to 10% of the value of the Fund in Puts.
FUTURES CONTRACTS
All Funds may, other than the Money Market Fund, enter into contracts for the
future acquisition or delivery of securities ("Futures Contracts") including
index contracts and foreign currencies, and may also purchase and sell call
options on Futures Contracts. These Funds may use this investment technique to
hedge against anticipated future adverse price changes which otherwise might
either adversely affect the value of the Fund's securities or currencies held in
the Fund, or to hedge anticipated future price changes which adversely affect
the prices of stocks, long-term bonds or currencies which the Fund intends to
purchase at a later date. Alternatively, the Funds may enter into Futures
Contracts in order to hedge against a change in interest rates which will result
in the premature call at par value of certain securities which the Fund has
purchased at a premium. If stock, bond or currency prices or interest rates move
in an unexpected manner, the Fund would not achieve the anticipated benefits of
Futures Contracts.
The use of Futures Contracts involves special considerations or risks not
associated with the primary activities engaged in by any Funds. Risks of
entering into Futures Contracts include: (1) the risk that the price of the
Futures Contracts may not move in the same direction as the price of the
securities in the various markets; (2) the risk that there will be no liquid
secondary market when the Fund attempts to enter into a closing position; (3)
the risk that the Fund will lose an amount in excess of the initial margin
deposit; and (4) the fact that the success or failure of these transactions for
the Fund depends on the ability of the Fund Manager to predict move-
THE ENTERPRISE Group of Funds, Inc.
32
<PAGE> 37
ments in stock, bond, currency prices and interest rates.
INDEX OPTIONS
All the Equity Funds may invest in options on stock indexes. These options are
based on indexes of stock prices that change in value according to the market
value of the stocks they include. Some stock index options are based on a broad
market index, such as the New York Stock Exchange Composite Index or the S&P
500. Other index options are based on a market segment or on stocks in a single
industry. Stock index options are traded primarily on securities exchanges.
Because the value of an index option depends primarily on movements in the value
of the index rather than in the price of a single security, whether a Fund will
realize a gain or loss from purchasing or writing an option on a stock index
depends on movements in the level of stock prices in the stock market generally
or, in the case of certain indexes, in an industry or market segment rather than
changes in the price of a particular security. Consequently, successful use of
stock index options by a Fund will depend on that Fund Manager's ability to
predict movements in the direction of the stock market generally or in a
particular industry. This requires different skills and techniques than
predicting changes in the value of individual securities.
INTEREST RATE SWAPS
In order to attempt to protect the Fund investments from interest rate
fluctuations, the Funds may engage in interest rate swaps. The Funds tend to use
interest rate swaps as a hedge and not as a speculative investment. Interest
rate swaps involve the exchange between the Fund and another party of their
respective rights to receive interest (e.g., an exchange of fixed rate payments
for floating rate payments). For example, if the Fund holds an interest-paying
security whose interest rate is reset once a year, it may swap the right to
receive interest at a rate that is reset daily. Such a swap position would
offset changes in the value of the underlying security because of subsequent
changes in interest rates. This would protect the Fund from a decline in the
value of the underlying security due to rising rates, but would also limit its
ability to benefit from falling interest rates.
The Fund will enter into interest rate swaps only on a net basis (i.e., the two
payments streams will be netted out, with Fund receiving or paying as the case
may be, only the net amount of the two payments). The net amount of the excess,
if any, of the Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis, and an amount of cash or
liquid high grade debt securities having an aggregate net asset value at least
equal to the accrued excess, will be maintained in a segregated account by the
Fund's custodian bank.
The use of interest rate swaps involves investment techniques and risks
different from those associated with ordinary portfolio security transactions.
If the Fund Manager is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund will
be less favorable than it would have been if this investment technique were
never used. Interest rate swaps do not involve the delivery of securities or
other underlying assets or principal. Thus, if the other party to an interest
rate swap defaults, the Fund's risk of loss consists of the net amount of
interest payments that the Fund is contractually entitled to receive.
FOREIGN CURRENCY VALUES AND TRANSACTIONS
Investments in foreign securities will usually involve currencies of foreign
countries, and the value of the assets of the International Growth Fund and the
Global Financial Services Fund (and of the other Funds that may invest in
foreign securities to a much lesser extent) as measured in United States dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the International Growth Fund may
incur costs in connection with conversions between various currencies.
The normal currency allocation of the International Growth Fund is identical to
the currency mix of the
THE ENTERPRISE Group of Funds, Inc.
33
<PAGE> 38
Benchmark. The Fund expects to maintain this normal currency exposure when
global currency markets are fairly priced relative to each other and relative to
associated risks. The Fund may actively deviate from such normal currency
allocations to take advantage of or to protect the Fund from risk and return
characteristics of the currencies and short-term interest rates when those
prices deviate significantly from fundamental value. Deviations from the
Benchmark are determined by the Fund Manager based upon its research.
To manage exposure to currency fluctuations, the Fund may alter equity or money
market exposures (in its normal asset allocation mix as previously identified),
enter into forward currency exchange contracts, buy or sell options, futures or
options on futures relating to foreign currencies and may purchase securities
indexed to currency baskets. The Fund will also use these currency exchange
techniques in the normal course of business to hedge against adverse changes in
exchange rates in connection with purchases and sales of securities. Some of
these strategies may require the Fund to set aside liquid assets in a segregated
custodial account to cover its obligations. These techniques are further
described below.
The Fund may conduct its foreign currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market
or through entering into contracts to purchase or sell foreign currencies at a
future date (i.e., "forward foreign currency" contract or "forward" contract). A
forward contract involves an obligation to purchase or sell a specific currency
amount at a future date, which may be any fixed number of days from the date of
the contract, agreed upon by the parties, at a price set at the time of the
contract. The Fund will convert currency on a spot basis from time to time and
investors should be aware of the potential costs of currency conversion.
When the Fund Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by repurchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
The Fund also may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage the
Fund's exposure to changes in currency exchange rates. Call options on foreign
currency written by the Fund will be "covered", which means that the Fund will
own an equal amount of the underlying foreign currency. With respect to put
options on foreign currency written by the Fund, the Fund will establish a
segregated account with its custodian bank consisting of cash, U.S. government
securities or other high-grade liquid debt securities in an amount equal to the
amount the Fund would be required to pay upon exercise of the put.
CERTAIN OTHER SECURITIES
Except as otherwise indicated, the Funds may purchase the following securities,
the purchase of which involves certain risks described below. Unless otherwise
indicated, a Fund will not purchase a category of such securities if the value
of such category, taken at current value, would exceed 5% of the Fund's total
assets.
MASTER DEMAND NOTES
All Funds may purchase variable amount master demand notes. Variable amount
master demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to arrangements
between the issuer and a
THE ENTERPRISE Group of Funds, Inc.
34
<PAGE> 39
commercial bank acting as agent for the payees of such notes whereby both
parties have the right to vary the amount of the outstanding indebtedness on the
notes. Since there is no secondary market for these notes, the appropriate Fund
Managers, subject to the overall review of the Fund's Directors and the Adviser,
monitor the financial condition of the issuers to insure that they are able to
repay the notes.
REPURCHASE AGREEMENTS
All Funds may enter into repurchase agreements having maturities of one business
day. When a Fund acquires securities from a bank or broker-dealer, it may
simultaneously enter into a repurchase agreement with the same seller pursuant
to which the seller agrees at the time of sale to repurchase the security at a
mutually agreed upon time and price. In such instances, the Fund's Custodian has
possession of the security or collateral for the seller's obligation. If the
seller should default on its obligation to repurchase the securities, the Fund
may experience delays, difficulties or other costs when selling the securities
held as collateral and may incur a loss if the value of the collateral declines.
The appropriate Fund Managers, subject to the overall review by the Fund's
Directors and the Adviser, monitor the value of the collateral as to repurchase
agreements, and they monitor the creditworthiness of the seller and must find it
satisfactory before engaging in repurchase agreements. The Funds enter into
repurchase agreements only with Federal Reserve member banks that have net worth
of at least $100,000,000 and outstanding commercial paper of the two highest
rating categories assigned by Moody's or S&P or with broker-dealers that are
registered with the Securities and Exchange Commission, are members of the
National Association of Securities Dealers, Inc. ("NASD") and have similarly
rated commercial paper outstanding. Any repurchase agreements entered into by
the Funds will be fully collateralized and marked to market daily, other than
those entered into by the Money Market Fund, which are valued on an amortized
cost basis.
RESTRICTED OR ILLIQUID SECURITIES
Each Fund may invest up to 10% of its net assets in restricted securities
(privately placed equity or debt securities) or other securities which are not
readily marketable.
FOREIGN SECURITIES
As noted above, the International Growth Fund will invest primarily in foreign
securities and the Global Financial Services Fund may invest 50% or more of its
total assets in such securities. All other Funds, except the Government
Securities Fund, the Tax-Exempt Income Fund and the Money Market Fund, may,
subject to the 20% limitation, invest in foreign securities as well as both
sponsored and unsponsored ADRs, and European Depository Receipts ("EDRs") which
are securities of U.S. issuers backed by securities of foreign issuers. There
may be less information available about unsponsored ADRs and EDRs, and
therefore, they may carry higher credit risks. The Funds may also invest in
securities of foreign branches of domestic banks and domestic branches of
foreign banks.
Investments in foreign equity and debt securities involve risks different from
those encountered when investing in securities of domestic issuers. The
appropriate Fund Managers and the Adviser, subject to the overall review of the
Fund's Directors, evaluate the risks and opportunities when investing in foreign
securities. Such risks include trade balances and imbalances and related
economic policies; currency exchange rate fluctuations; foreign exchange control
policies; expropriation or confiscatory taxation; limitations on the removal of
funds or other assets; political or social instability; the diverse structure
and liquidity of securities markets in various countries and regions; policies
of governments with respect to possible nationalization of their own industries;
and other specific local, political and economic considerations.
FORWARD COMMITMENTS
Securities may be purchased on a "when issued" or on a "forward delivery" basis,
which means it may take as long as 120 days before such obligations are deliv-
THE ENTERPRISE Group of Funds, Inc.
35
<PAGE> 40
ered to a Fund. The purpose of such investments is to attempt to obtain higher
rates of return or lower purchase costs than would be available for securities
purchased for immediate delivery. Securities purchased on a when issued or
forward delivery basis involve a risk that the value of the security to be
purchased may decline prior to the settlement date. In addition, if the dealer
through which the trade is made fails to consummate the transaction, the Fund
may lose an advantageous yield or price. The Fund does not accrue income prior
to delivery of the securities in the case of forward commitment purchases. The
5% limitation does not apply to the International Growth, Government Securities
and Tax-Exempt Income Funds which will have a 20% limitation.
TEMPORARY DEFENSIVE TACTICS
Any or all of the Funds may at times for defensive purposes, at the
determination of the Fund Manager, temporarily place all or a portion of their
assets in cash, short-term commercial paper (i.e. short-term unsecured
promissory notes issued by corporations to finance short-term credit needs),
United States Government securities, high-quality debt securities (including
"Eurodollar" and "Yankee Dollar" obligations, i.e., U.S. issuer borrowings
payable overseas in U.S. funds and obligations of foreign issuers payable in
U.S. funds), and obligations of banks when in the judgment of the Fund Manager
such investments are appropriate in light of economic or market conditions. The
Money Market Fund may at times for defensive purposes temporarily place all or a
portion of its assets in cash, when in the judgment of the Fund Manager such an
investment is appropriate in light of economic or market conditions. For
temporary defensive purposes, the International Growth Fund may invest in all of
the above, both foreign and domestic, including foreign currency, foreign time
deposits, and foreign bank acceptances. When a Fund takes a defensive position,
it may not be following the fundamental investment policy of the Fund.
PORTFOLIO TURNOVER
In carrying out the investment policies described in this Prospectus, each Fund
expects to engage in a substantial number of securities portfolio transactions,
and the rate of portfolio turnover will not be a limiting factor when a Fund
Manager deems it appropriate to purchase or sell securities for a Fund. However,
no Fund's annual portfolio turnover rate (other than the Money Market Fund for
which, due to the short-term nature of its investment, a portfolio turn-over
rate is not applicable and the High-Yield Bond Fund) is expected to exceed 100%.
A portfolio turnover rate is, in summary, the percentage computed by dividing
the lesser of a Fund's purchases or sales of securities by the average
investments of the Fund. High portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs which are borne
directly by a Fund. Each Fund intends to elect and to comply with the various
provisions of the IRC so as to qualify as a "regulated investment company"
thereunder. (See "Taxes".)
INVESTMENT
RESTRICTIONS
Except as indicated, each of the Funds has adopted certain investment
restrictions and limitations for the purpose of reducing their exposure in
specific situations.
No Fund will: (1) as to 75% of the assets of each Fund, invest more than 5% of
the value of its total assets in the securities of any single issuer (other than
cash items and U.S. government securities, as defined in the Investment Company
Act of 1940) if such purchase would cause more than 5% of the value of its
assets to be invested in the securities of such issuer; (2) purchase more than
10% of the voting securities of any issuer; (3) invest more than 5% of its total
assets in the securities of companies that have a continuous operating history
of less than three years (the Global Financial Services, High-Yield Bond and
Tax-Exempt Income Funds are not subject to this
THE ENTERPRISE Group of Funds, Inc.
36
<PAGE> 41
restriction); (4) except as to the Money Market Fund (as described below) and
the Global Financial Services Fund, invest more than 25% of its total assets in
any one industry, provided that: (i) this limitation does not apply to
investments in U.S. Government Securities as well as its agencies and
instrumentalities, general obligation bonds, or Municipal Securities other than
industrial development bonds issued by non-governmental users; and (ii) utility
companies will be divided according to their services (for example, gas, gas
transmission, electric, electric and gas, and telephone will each be considered
as a separate industry); (5) borrow money, except from a bank and only for
temporary or emergency purposes, and such borrowings will not exceed 5% of the
lower of the value or cost of the Fund's total assets; or (6) pledge, mortgage
or hypothecate its assets to an extent greater than 5% of the value of its total
assets. For purposes of restrictions (1) and (2), each Fund will regard the
entity which has ultimate responsibility for the payment of interest and
principal as the issuer. Notwithstanding restriction (4), the Money Market Fund
may invest in excess of 25% of its total assets in U.S. Government Securities as
well as its agencies and instrumentalities, and certain bank instruments issued
by domestic banks. See "Investment Restrictions" in the Statement of Additional
Information.
These investment limitations, and other limitations that are fundamental
policies, that are described in greater detail in the Statement of Additional
Information, may be changed only with the approval of the holders of a majority
of the shares of a Fund.
In addition, management of the Fund has adopted the following restrictions which
apply to all of the Funds and may be changed only by the Board of Directors of
the Fund. No Fund will: (A) lend its assets to any person or individual, except
by the purchase of bonds or other debt obligations customarily sold to
institutional investors; (B) invest more than 5% of the value of its net assets,
valued at the lower of cost or market, in warrants (Included within that amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange. Warrants
acquired by a Fund in units or attached to securities may be deemed to be
without value.), (C) invest in oil, gas, or other mineral leases, or (D) engage
in arbitrage transactions.
If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in the investment's percentage of the value of a Fund's
total assets resulting from a change in portfolio value or assets will not
constitute a violation of the percentage restrictions.
The Managed Fund will not invest more than 5% of the value of its total assets
in high-yield securities.
In order to qualify for federal income tax treatment as a regulated investment
company for a taxable year, each Fund must, among other things, (a) derive at
least 90% of its gross income during such taxable year from qualifying income
(i.e., dividends, interest, payments with respect to loans of stock and
securities, and gains from the sale or other disposition of stock or securities
or options thereon); (b) diversify its holdings so that, at the end of each
fiscal quarter of such taxable year, (i) at least 50% of the market value of its
total assets is represented by cash, cash items, U.S. Government Securities,
securities of other regulated investment companies, and other securities
limited, in the case of other securities for purposes of this calculation, in
respect of any one issuer, to an amount not greater than 5% of the value of its
total assets or 10% of the voting securities of the issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government Securities).
No Fund may invest more than 5% of its total assets in the securities of a
company that receives more than 15% of its revenues from "securities-related
activities." Securities-related activities are activities as a broker, dealer,
underwriter or investment adviser (a "securities issuer"). Further, immediately
after the purchase of an equity security of a securities issuer, no Fund may own
more than 5% of the outstanding securities of that class of the issuer's equity
securities. In addition, immediately after the purchase of any
THE ENTERPRISE Group of Funds, Inc.
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<PAGE> 42
securities issuer's debt securities, no Fund may own more than 10% of the
outstanding principal amount of the issuer's debt securities.
HOW TO PURCHASE
FUND SHARES
Enterprise Fund Distributors, Inc. ("the Distributor"), is the principal
underwriter for shares of the Fund. The Distributor, whose address is Atlanta
Financial Center, 3343 Peachtree Road, N.E., Suite 450, Atlanta, Georgia 30326,
is a subsidiary of Enterprise Capital Management, Inc. Purchases can be made
through most investment dealers who, as part of the service they provide, must
transmit orders promptly. The Funds offer four separate Classes of shares: Class
A, B, C and Y shares, each with a different combination of sales charges,
ongoing fees and other features. The offering of Class A, B, C and Y shares
presents the investor with the opportunity to choose the sales charge and
distribution fee arrangement which is most beneficial, depending on the amount
of purchase, the length of time the investor expects to hold the shares, and
other circumstances.
Each Class of shares of a Fund represents an identical interest in the
investment portfolio of that Fund and has the same rights, except that (i) the
Class A, B and C shares bear the expenses related to distribution and servicing
of such shares, (ii) the Class A, B and C shares have exclusive voting rights
with respect to matters related to distribution and servicing expenditures, and
(iii) and only Class B shares have a conversion feature. The Classes also have
separate exchange privileges. (See "How to Exchange Shares Among the Funds.")
The income attributable to each Class and the dividends payable on the shares of
each Class will be reduced by the amount of the distribution fee or service fee,
if any, payable by that Class. The distribution-related fees paid with respect
to any Class will not be used to finance the distribution expenditures of
another Class. Sales personnel may receive different compensation for selling
different Classes of shares.
The following table sets forth a summary of the distribution arrangements for
Class A, B and C shares of a Fund. A more detailed description of Class A, B and
C is set forth below.
<TABLE>
<CAPTION>
ANNUAL 12B-1
DISTRIBUTION OTHER
SALES CHARGE AND SERVICE FEE INFORMATION
------------ --------------- -----------
<S> <C> <C> <C>
Class
A...... Maximum 4.75% 0.45% Initial sales
initial sales distribution charge may be
charge (except fee (except waived or
Money Market) Money Market) reduced in
certain
circumstances.
$1 million
purchases,
pursuant to
waiver of
sales charge,
are subject to
a CDSC if
redeemed
within two
years.
Class
B...... CDSC for a 0.75% Shares convert
period of six distribution to Class A
years equal to fee and 0.25% Shares
5.00% during service fee approximately
the first year (except Money eight years
and declining Market) after
to 0.00% after purchase.
the sixth Available only
year. to investors
purchasing
less than
$250,000 in
the aggregate.
Class
C...... CDSC for a 0.75% Available only
period of one distribution to investors
year equal to fee and 0.25% purchasing
1.00% service fee less than
(except Money $1,000,000 in
Market) the aggregate.
</TABLE>
In deciding which Class of shares to purchase, you should consider, investment
goals, present and anticipated, purchase amounts, time horizons and
temperaments. In addition, consideration should be given to: (1) the length of
time you expect to hold your shares, (2) the amount of any applicable sales
charge (whether imposed at the time of purchase or upon redemption), (3) whether
you qualify for the reduction or waiver of any applicable sales charge, (4) the
various exchange privileges among different classes of shares and (5) the fact
that Class B shares automatically convert to Class A shares approximately eight
years after purchase. In addition, you should review certain eligibility
requirements that may apply to purchasing a particular class of shares. (See,
"Buying Class A Shares," "Buying Class B Shares" and "Buying Class C Shares"
below.)
THE ENTERPRISE Group of Funds, Inc.
38
<PAGE> 43
Initial investments per Class per Fund are subject to a minimum of $1,000, with
subsequent investments made in amounts of $50 or more through the Fund's
Transfer Agent or through dealers, subject to the following exceptions: (a) a
lower initial minimum of $250 is accepted in connection with the Retirement
Plans, with a minimum subsequent investment of $25; and (b) a lower initial
minimum of $100 is accepted in connection with the Automatic Bank Draft Plan,
with a minimum $25 for subsequent investments.
All purchases made by check should be in U.S. dollars and made payable to The
Enterprise Group of Funds, Inc., or in the case of a retirement account, the
custodian or trustee. Third-party checks will not be accepted. When purchases
are made by check or periodic account investment, redemptions will not be
allowed until the investment being redeemed has been in the account for seven
calendar days.
For accounts with balances under $1,000, an annual service charge of $25 per
account registration per Fund will apply, excluding Automatic Bank Draft Plan
Accounts, Automatic Investment Plan Accounts, Retirement Accounts and Savings
Plan Accounts.
From time to time, the Fund temporarily may suspend the offering of shares of
one or more of its Classes or Funds to new investors. During the period of such
suspension, persons who are already shareholders of any such Class or Fund
normally will be permitted to continue to purchase additional shares and to have
dividends reinvested.
Fund shares are purchased at the net asset value (plus, with the exception of
the Money Market Fund Class A Shares, the applicable sales charge) next
determined after the application for purchase of shares is received by the
Enterprise Shareholder Services Division of the Fund's Transfer Agent, National
Financial Data Services, Inc. (the "Transfer Agent"). The Distributor or the
Fund may reject any orders.
During the period from November 3, 1997, through December 31, 1997, the
Distributor reallowed the full applicable sales charge to certain broker/dealers
with respect to the sale of shares of the Growth and Income Fund, Equity Fund,
and Small Company Growth Fund of the Fund.
BUYING CLASS A. Class A Fund shares are offered to the public at the net asset
value next computed after receipt of the purchase order plus a maximum sales
charge as to all Funds, other than the Money Market Fund Class A Shares, which
carries no sales charge, of 4.75% of the offering price (4.99% of the amount
invested) on a single purchase of up to $100,000. The sales charge is reduced on
single purchases of $100,000 or more pursuant to the following table:
<TABLE>
<CAPTION>
DEALER
SALES CHARGE DISCOUNT
SALES CHARGE AS A OR AGENCY
AS A PERCENTAGE OF FEE AS A
PERCENTAGE OF AMOUNT PERCENTAGE OF
OFFERING PRICE INVESTED OFFERING PRICE*
-------------- ------------- ---------------
<S> <C> <C> <C>
Up to $99,999............... 4.75% 4.99% 4.00%
$100,000 up to $249,999..... 3.75% 3.90% 3.00%
$250,000 up to $499,999..... 2.50% 2.56% 2.00%
$500,000 up to $999,999..... 2.00% 2.04% 1.50%
$1,000,000 and up........... None None See Below
</TABLE>
- ---------------
* From time to time upon written notice to all of its dealers, the Distributor
may hold special promotions for specified periods during which the Distributor
may reallow dealer up to the full sales charges shown above. During such
periods, dealers may be deemed to have certain additional responsibilities
under the securities laws. In addition, the Distributor may sponsor sales
contests and provide to all qualifying dealers, from its own profits and
resources, additional compensation in the form of trips or merchandise.
Purchases of $1 million or more of Class A shares have no initial sales charge
but are subject to a contingent deferred sales charge ("CDSC") if held for less
than two years. The Distributor will pay authorized dealers an amount equal to
1% of the first $4.99 million of such purchases, plus .75 of 1% of amounts from
$5-19.99 million, plus .50 of 1% of amounts in excess of $20 million. A CDSC of
1% will be imposed on the proceeds of the redemption of shares if they are
redeemed within 24 months of the end of the calendar month of their purchase, in
an amount of the lesser of (A) the net asset value of shares at the time of
purchase or (B) the net value of the shares at the time of redemption. The CDSC
will be deducted from the redemption proceeds otherwise payable to the
shareholder and will be retained by the Distributor.
In determining the amount of purchase of Class A shares, the aggregate dollars
being invested in all Funds excluding all dollars that have never been
THE ENTERPRISE Group of Funds, Inc.
39
<PAGE> 44
subject to a sales charge at one time or pursuant to a Letter of Intent by the
investor, are aggregated to determine the applicable sales charge.
No sales charge applies to the reinvestment of dividends or capital gains
distributions, except for dividends earned on the Money Market Fund and
subsequently invested in a Fund other than the Money Market Fund.
No sales charge applies to purchases of Class A shares by any of the following:
(a) selling brokers, their employees and their registered representatives; (b)
employees, clients or direct referrals of any Fund Manager or of Evaluation
Associates, Inc. ("EAI"); (c) directors, former directors, employees or retirees
of the Fund or of The Mutual Life Insurance Company of New York ("MONY") and its
subsidiaries; (d) immediate family and employee benefit plans of any of the
foregoing; (e) certain employee benefit plans qualified under Sections 401 and
403 of the IRC, including salary reduction plans qualified under Section 401(k)
of IRC and certain payroll deduction plans, subject to minimum requirements with
respect to number of participants or plan assets which may be established by the
Distributor; (f) MONY and its subsidiaries; (g) clients of fee-based financial
planners; and (h) financial institutions and financial institutions' trust
departments for funds over which they exercise exclusive discretionary
investment authority and which are held in fiduciary, agency, advisory,
custodial or similar capacity.
In addition, members of certain associations, fraternal groups, franchise
organizations and unions may enter into an agreement with the distributor which
allows members to purchase shares of the Fund Class A shares at a sales load
equal to 75% of the percentages in the above table, subject to minimum
requirements, with respect to number of participants or plan assets which may be
established by the Distributor. The Dealer Discount will also be adjusted in
like manner.
An investor seeking a reduction in sales charge with respect to a waiver of
sales charge by reason of being a member of the above-described groups, must
describe the basis for the requested reduction or waiver in documents
accompanying any new investment. The Fund may terminate, or amend the terms of,
offering shares of the Fund at net asset value or at a reduced sales charge at
any time.
BUYING CLASS B SHARES. Purchases of Class B shares will be processed at the net
asset value next determined after receipt of your purchase order for less than
$250,000. While not subject to a front-end sales charge, Class B shares may be
subject to a CDSC upon redemption. If Class B shares of any Fund are redeemed
within six years after the date on which a purchase order for Class B shares was
accepted, a CDSC will be imposed by applying the appropriate percentage
indicated below to the lesser of: (1) the net asset value of such shares at the
time of purchase or (2) the net asset value of such shares at the time of
redemption. The CDSC will be deducted from the redemption proceeds otherwise
payable to the shareholder and will be retained by the Distributor. The CDSC to
be imposed on such share redemptions will be assessed according to the following
schedule:
<TABLE>
<CAPTION>
YEARS SINCE PURCHASE ORDER OF LESS APPLICABLE CLASS B
THAN $250,000 WAS ACCEPTED CONTINGENT DEFERRED SALES CHARGE
- ---------------------------------- --------------------------------
<S> <C>
Up to one year.................. 5.00%
One year or more but less than 2
years......................... 4.00%
Two years or more but less than 3
years......................... 4.00%
Three years or more but less than
4 years....................... 3.00%
Four years or more but less than 5
years......................... 2.00%
Five years or more but less than 6
years......................... 1.00%
Six or more years............... None
</TABLE>
CONVERSION OF CLASS B SHARES. Class B shares will automatically convert to
Class A shares of the same Fund eight years after the end of the calendar month
in which the purchase order for Class B shares was accepted, on the basis of the
relative net asset values of the two classes and subject to the following terms:
Class B shares acquired through the reinvestment of dividends and distributions
("reinvested Class B shares") will be converted to Class A shares on a pro rata
basis only when Class B shares not acquired through reinvestment of dividends or
distributions ("purchased Class B shares") are converted. The portion of
reinvested Class B shares to be converted
THE ENTERPRISE Group of Funds, Inc.
40
<PAGE> 45
will be determined by the ratio that the purchased Class B shares eligible for
conversion bear to the total amount of purchased Class B shares eligible in the
shareholder's account. For the purposes of calculating the holding period, Class
B shares will be deemed to have been issued on the sooner of: (a) the date on
which the issuance of Class B shares occurred, or (b) for Class B shares
obtained by an exchange or series of exchanges, the date on which the issuance
of the original Class B shares occurred. This conversion to Class A shares will
relieve Class B shares that have been outstanding for at least eight years (a
period of time sufficient for the Distributor to have been compensated for
distribution expenses related to such Class B shares) from the higher ongoing
distribution fee paid by Class B shares. Only Class B shares have this
conversion feature. Conversion of Class B shares to Class A shares is contingent
on the continuing availability of a private letter revenue ruling from the
Internal Revenue Service affirming that such conversion does not constitute a
taxable event for the shareholder under the IRC. If such revenue ruling or an
opinion of counsel is no longer available, conversion of Class B shares to Class
A shares would have to be suspended, and Class B shares would continue to be
subject to the Class B distribution fee until redeemed.
BUYING CLASS C SHARES. Class C shares are sold at net asset value per share
without an initial sales charge. However, if Class C shares are redeemed within
12 months of their purchase, a contingent deferred sales charge of 1.00% will be
deducted from the redemption proceeds. That sales charge will not apply to
shares purchased by the reinvestment of dividends or capital gains
distributions. The charge will be assessed on the lesser of the net asset value
of the shares at the time of redemption or the original purchase price. The
contingent deferred sales charge is not imposed on the amount of your account
value represented by the increase in net asset value over the initial purchase
price (including increased due to the reinvestment of dividends and capital
gains distributions). The Class C contingent deferred sales charge is paid to
the Distributor to reimburse its expenses of providing distribution-related
services to the Fund in connection with the sale of Class C shares.
To determine whether the contingent deferred sales charge applies to a
redemption, the Fund redeems shares in the following order: (1) shares acquired
by reinvestment of dividends and capital gains distributions, (2) shares held
for over 12 months, and (3) shares held the longest during the 12-month period.
REINVESTMENT PRIVILEGE. A shareholder of the Fund who redeems Shares and incurs
a contingent deferred sales charge ("CDSC") may utilize a one-time privilege to
reinvest up to the full amount redeemed at net asset value at the time of the
reinvestment in shares of the same Class of the Fund within 180 days of
redemption. The amount of any CDSC also will be reinvested. The reinvested
shares will retain their original cost and purchase date for the purposes of the
CDSC. The return of such CDSC may affect determination of gain or loss or the
original transaction for federal income tax purposes. The reinvestment privilege
may be terminated or modified at any time.
EXEMPTIONS FROM CLASS A, B AND C CDSC. No CDSC will be imposed when a
shareholder redeems Class A, B or C shares in the following instances: (a)
shares or amounts representing increases in the value of an account above the
net cost of the investment due to increases in the net asset value per share;
(b) shares acquired through reinvestment of income dividends or capital gains
distributions; (c) shares acquired by exchange from any Enterprise Fund, other
than the Class A Money Market Fund where the exchanged shares would not have
been subject to a CDSC upon redemption; and (d) Class A shares purchased in the
amount of $1 million or more if held for more than twenty-four (24) months,
Class B shares held for more than six years and Class C shares held for more
than one year.
The CDSC does not apply to purchases of Class A shares at net asset value
described under "Net Asset Value Purchases" above and will be waived in the
THE ENTERPRISE Group of Funds, Inc.
41
<PAGE> 46
case of redemptions of Class A, B or C shares in connection with (i)
distributions to participants or beneficiaries of plans qualified under Section
401(a) of the IRC or from custodial accounts under the IRC Section 403(b)(7),
individual retirement accounts under the IRC Section 408(a), deferred
compensation plans under the IRC section 457 and other employee benefit plans
("plans"), and returns of excess contributions made to these plans, (ii)
withdrawals under an automatic withdrawal plan where the annual withdrawal does
not exceed 10% of the value of the account (only for Class B shares); and (iii)
liquidation of a shareholder's account if the aggregate net asset value of
shares held in the account is less than the required minimum. A shareholder will
be credited with any CDSC paid in connection with the redemption of any Class A,
B shares if within 180 days after such redemption, the proceeds are invested in
the same Class of shares in the same and/or another Enterprise Fund.
In determining whether the Class A, B or C CDSC is payable, it will be assumed
that shares are not subject to a CDSC are redeemed first and that other shares
are then redeemed in the order purchased. No CDSC will be imposed on exchanges
to purchase shares of another Enterprise Fund although a CDSC will be imposed on
shares of the acquired Enterprise Fund purchased by exchange of shares subject
to a CDSC. The imposition of an assessment of a CDSC will occur as of the date
of the initial investment.
SPECIAL FIDUCIARY RELATIONSHIPS. The CDSC will not apply with respect to
purchase of Class A shares for which the selling dealer is not permitted to
receive a sales load or redemption fee imposed on a shareholder with whom such
dealer has a fiduciary relationship in accordance with provisions of the
Employee Retirement Income Security Act and regulations thereunder. If such
dealer agrees to the reimbursement provision described below, no sales charge
will be imposed on sales of $1,000,000 or more and the Distributor will pay to
the selling dealer a commission described above in "How to Buy Class A Shares."
For the period of 13 months from the date of the sales referred to in the above
paragraph, the distribution fee payable by a Fund to the Distributor pursuant to
the Fund's Distribution Plan in connection with such shares will be retained by
the Distributor. In the event of a redemption of any such shares within 24
months of purchase, the selling dealer will reimburse the Distributor for the
amount of commission paid less the amount of the distribution fee with respect
to such shares.
OTHER DEALER COMPENSATION. The Distributor will provide additional compensation
to dealers in connection with sales of shares of the Funds and other mutual
funds distributed by the Distributor including promotional gifts (which may
include gift certificates, dinners and other items), financial assistance to
dealers in connection with conferences, sales or training programs for their
employees, seminars for the public and advertising campaigns. In some instances,
these incentives may be made available only to dealers whose representatives
have sold or are expected to sell significant amounts of shares.
HOW THE NET ASSET VALUE IS COMPUTED. The net asset value per share for each
Class of each Fund of the Fund is determined by dividing the total value of the
Fund's investments and other assets, less any liabilities, by the total number
of outstanding shares of the Fund for each Class. Net asset value per share is
determined at the close of trading on each day the New York Stock Exchange is
open for trading except that net asset value per share of the International
Growth Fund may not, in certain circumstances, be determined on days when the
New York Stock Exchange is open for trading but one or more foreign stock
exchanges are not open for trading. The net asset value per share is effective
as of the time of computation. In determining net asset value, the price carried
by the composite tape of all national exchanges is used.
Domestic equity securities are valued at the last sale price or, in the absence
of any sale on that date, the closing bid price. Domestic equity securities
without last trade information are valued at the last bid price.
THE ENTERPRISE Group of Funds, Inc.
42
<PAGE> 47
Domestic equity securities, for which market quotations are not readily
available, and other assets are valued at fair value as determined in good faith
by the Board of Directors. Debt securities and foreign securities are valued on
the basis of independent pricing services approved by the Board of Directors,
and such pricing services generally follow the same procedures in valuing
foreign equity securities as are described above as to domestic equity
securities.
Securities held by the Money Market Fund are valued on an amortized cost basis.
The Securities and Exchange Commission's rules relating to the amortized cost
method involve valuing a security at its cost and amortizing any discount or
premium over the period until maturity, without taking into account the impact
of fluctuating interest rates on the market value of the security unless the
deviation from net asset value as calculated by using available market
quotations exceeds 1/2 of 1%. At that point, the Board of Directors will
promptly decide what action, if any, will be initiated. The Money Market Fund
seeks to maintain a constant net asset value of $1.00 but there can be no
assurance that the Money Market Fund will be able to maintain a stable net asset
value. The Money Market Fund will not maintain a dollar-weighted average
portfolio maturity which exceeds 90 days.
Although the legal rights of each class of shares are substantially identical,
the different expenses borne by each class will result in different net asset
values and dividends for each class. It is expected, however, that the net asset
values of the three classes will tend to converge immediately after the
recording of dividends, which will differ by approximately the amount of the
distribution and service related expense accrual differential among the classes.
SHARE CERTIFICATES. The Fund does not ordinarily issue certificates
representing shares of the Funds. Instead, shares are held on deposit for
shareholders by the Fund's Transfer Agent, which sends a statement of shares
owned in each Fund to shareholders following each transaction in the
shareholder's account. Certificates for full shares only (other than the Money
Market Fund) are available at no charge at any time upon written request to the
Transfer Agent. Special shareholder services such as telephone redemptions,
exchanges, electronic funds transfers and wire orders are not available as to
certificated shares.
SHAREHOLDER
SERVICES
For the convenience of investors, the following plans are available:
AUTOMATIC REINVESTMENT PLAN
Dividends and capital gains distributions may be automatically reinvested in the
same Class of shares or, at the investor's election, may be paid out in cash. No
sales charge is applied upon reinvestment of dividends or capital gains. This
does not apply to Money Market Fund dividends invested in another Fund.
AUTOMATIC BANK DRAFT PLAN
An investor's bank account may be debited monthly for automatic investment into
one or more of the Funds for each Class.
AUTOMATIC INVESTMENT PLAN
An investor may debit any Fund Account of a Class on a monthly basis for
automatic investments into one or more of the other Funds of the same Class. The
Fund from which the investment will be made is subject to the $1,000 minimum.
The investor may then choose to have $50 or more transferred to either an
established Enterprise Fund, or they may open a new account subject to an
initial minimum investment of $100.
LETTER OF INTENT INVESTMENTS
Any investor may execute a Letter of Intent covering purchases of Class A shares
of $100,000 or more, at the public offering price, of Fund shares to be made
within a period of 13 months. A reduced sales charge will be applicable to the
total dollar amount purchased in the 13-month period provided at least $100,000
is purchased. The minimum initial investment under a Letter of Intent is 5% of
the amount
THE ENTERPRISE Group of Funds, Inc.
43
<PAGE> 48
indicated in the Letter of Intent. Class A shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. When the full amount indicated has been purchased, the
escrow will be released. Class A investors wishing to enter into a Letter of
Intent in conjunction with their investment in shares of the Funds should
complete the appropriate portion of the new account application.
RIGHT OF ACCUMULATION DISCOUNT
Investors who make an additional purchase of Class A shares of the Fund which,
when combined with the value of their existing aggregate holdings of Class A
shares of the Funds of the Fund, each calculated at the then applicable net
asset value per share, at the time of the additional purchase, equals $100,000
or more, will be entitled to the reduced sales charge shown under "How to
Purchase Fund Shares" above on the full amount of each additional purchase. For
purposes of determining the discount, holdings of Fund shares of the investor's
spouse, immediate family or accounts controlled by the investor whether as a
single investor or trustee of a plan will be aggregated upon notification of
applicable accounts from the investor.
CHECK WRITING
Investors in the Money Market Fund Class A Shares with opening balances in
excess of $5,000 may redeem shares by check (a Redemption Check), as described
under "Redemptions" below.
BANK PURCHASE AND REDEMPTION PLAN
Any investor may initiate an ACH (Automatic Clearing House) Purchase or
Redemption directly to a bank account when proper instructions have been
established on the account.
SYSTEMATIC WITHDRAWAL PLAN
The owner of $5,000 or more of a class of a Fund's shares at the offering price
(net asset value plus, in the case of Class A shares, the initial sales charge)
may provide for the payment from the owner's account of any requested dollar
amount to be paid to the owner or a designated payee monthly, quarterly,
semiannually or annually. The payee may include a life insurance company,
including MONY, the parent of Enterprise Capital. The $5,000 minimum account
size is not applicable to Individual Retirement Accounts. The minimum periodic
payment is $100. The maximum annual rate at which Class B shares may be redeemed
under a systematic withdrawal plan is 10% of the net asset value of the account.
Shares are redeemed on the fifteenth day of the month or the preceding business
day if the fifteenth is a Saturday or Sunday. Any income or capital gain
dividends will be automatically reinvested at net asset value. A sufficient
number of full and fractional shares will be redeemed to make the designated
payment. Depending upon the size of the payments requested and fluctuations in
the net asset value of the shares redeemed, redemptions for the purpose of
making such payments may reduce or even exhaust the account.
The purchase of Class A shares while participating in a systematic withdrawal
plan will ordinarily be disadvantageous to the investor because the investor is
redeeming shares upon which a sales charge may have already been paid.
Therefore, a Fund will not knowingly permit additional investments of less than
$2,000 if the investor is at the same time making systematic withdrawals.
Enterprise will waive the contingent deferred sales charge on redemptions of
Class B and C shares made pursuant to a systematic withdrawal plan. The right is
reserved to amend the systematic withdrawal plan on 30 days' notice. The plan
may be terminated at any time by the investor or the Funds.
RETIREMENT PLANS
Shareholders may adopt Profit Sharing Plan, Money Purchase Plan, IRA and other
retirement plans funded
THE ENTERPRISE Group of Funds, Inc.
44
<PAGE> 49
by Fund shares and other investment which plans have been approved by the
Internal Revenue Service.
The costs of these plans (exclusive of the retirement plans on which a $10
annual custodial fee is charged) are paid by the Distributor, except for the
normal cost of issuing shares, which is paid by the Funds of the Fund.
Additional information concerning these plans is available from the Distributor
upon request.
HOW TO EXCHANGE
SHARES AMONG THE
FUNDS
An exchange represents the sale of shares of one Fund and the purchase of shares
of another, which may produce a gain or loss for tax purposes.
Shares of a Fund which are not subject to a CDSC exchange will be processed at
the net asset value next determined after the Transfer Agent receives your
exchange request. Shares of a Fund which are subject to a CDSC will be
exchangeable on the basis of the relative net asset value per share without
payment of any CDSC which might otherwise be due upon redemption of the shares
of the Fund. For purposes of computing the CDSC that may be payable upon a
disposition of the shares acquired in the exchange, the holding period for the
previously owned shares of the Fund is "tacked" to the holding period for the
newly acquired shares of the other Enterprise Fund. The exchange feature may be
modified or discontinued at any time, upon notice to shareholders in accordance
with applicable rules adopted by the Securities and Exchange Commission ("SEC").
Your exchange may be processed only if the shares of the Fund to be acquired are
eligible for sale in your state and if the exchange privilege may be legally
offered in your state.
EXCHANGES OF CLASS A SHARES. You may exchange your Class A shares for Class A
shares of any other Enterprise Fund. Class A shares of any Enterprise Fund
cannot be exchanged for Class B, C or Y shares of any other Enterprise Fund.
EXCHANGES OF CLASS B SHARES. Class B shares of all Enterprise Funds are
exchangeable for Class B shares of any other Enterprise Fund. Class B shares of
any Enterprise Fund cannot be exchanged for Class A, C or Y shares of any other
Enterprise Fund.
EXCHANGE OF CLASS C SHARES. Class C shares of all Enterprise Funds are
exchangeable for Class C shares of any other Enterprise Fund. Class C shares of
any Enterprise Fund cannot be exchanged for Class A, B or Y shares of any other
Enterprise Fund.
Exchanges may be directed by:
1. calling: Enterprise Shareholder Services
1-800-368-3527
2. writing: Enterprise Shareholder Services
P.O. Box 419731
Kansas City, MO 64141-6731
The minimum initial investment rules applicable to a Fund apply to any exchange
where the exchange results in a new account being opened in such Fund. Exchanges
into existing accounts are not subject to a minimum amount. Original investments
in the Money Market Fund which are transferred to other Funds are not considered
Fund exchanges but purchases.
To exchange by letter, state the name of the Fund you are exchanging from, the
account name(s) and address, the account number, the dollar amount or number of
shares to be exchanged, and the Fund into which you are exchanging. Sign your
name(s) exactly as it appears on your account statement.
The Fund reserves the right not to allow the exercise of the exchange privilege
in less than two-week intervals. The Fund reserves the right to restrict the
exchange from any Fund until funds have been held in that Fund for at least
seven days. The Fund further reserves the right to discontinue or modify the
exchange privilege on a prospective basis at any time, including a modification
of the amount or terms of a service fee.
In addition, with regard to exchange requests made by market timers on behalf of
clients, the Fund reserves the right to delay settlement up to seven days if it
is determined by the Fund Manager that immediate
THE ENTERPRISE Group of Funds, Inc.
45
<PAGE> 50
settlement would harm the Fund. Before engaging in an exchange transaction, a
shareholder should read carefully the parts of this Prospectus describing the
Fund into which the exchange will occur. See "Investment Objectives and Policies
of the Funds." Shareholders must elect to authorize the Fund's transfer agent to
act upon telephone exchange requests. Shareholders are subject to risk should
they elect to exchange by telephone in that neither the Fund nor the Transfer
Agent will be liable for properly acting upon telephone instructions believed to
be genuine. The Fund employs reasonable procedures to confirm that instructions
communicated by telephone are genuine, and should the Fund or its transfer agent
fail to institute such procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. Telephone exchanges are activated by
instructions received from a shareholder or any person claiming to act as the
shareholder's representative who can provide the Transfer Agent with account
registration information.
Exchanges are taxable as redemptions on which gains or losses may be recognized.
HOW TO REDEEM
FUND SHARES
Any shareholder may require the Fund to redeem his or her shares in any Fund.
The redemption price will be the net asset value per share next determined after
receipt of all required information.
REDEMPTIONS
Redemptions may be made: (1) by telephone; (2) in writing; (3) by wire, if the
appropriate request forms have been submitted; or (4) as to the Class A Money
Market Fund, by check writing. Payment for shares redeemed will be made within
seven days after the request has been properly made and received. Shares
purchased by check may be redeemed once the check has cleared, which may take up
to 10 days.
TELEPHONE REDEMPTIONS
The Fund accepts telephone requests for redemptions from shareholders who have
authorized this service. Telephone requests for redemption may be made by
calling the Transfer Agent at 1-800-368-3527. Anyone making a telephone
redemption request must furnish: (1) the name and address of record of the
registered owner(s); (2) the account number; (3) the amount to be withdrawn; and
(4) the name of the person making the request. Checks for telephone redemptions
will be issued only to the registered shareowner(s) and mailed to the last
address of record or exchanged into any other Fund. All telephone redemption
instructions are recorded and are limited to requests of $50,000 or less.
Shareholders also have the option to have redemption proceeds transferred
directly to a bank account through the Automatic Clearing House (ACH) system.
All applicable bank information must be established on the account before this
type of redemption is initiated. Shareholders are subject to risk should they
elect to redeem by telephone in that neither the Fund nor the Transfer Agent
will be liable for properly acting upon telephone instructions believed to be
genuine. Should the Fund or its transfer agent fail to utilize reasonable
procedures, the Fund may be liable for any losses due to unauthorized or
fraudulent instructions.
WRITTEN REDEMPTIONS
Redemption requests may be made in writing, accompanied by any issued share
certificates, to:
Enterprise Shareholder Services
P.O. Box 419731
Kansas City, MO 64141-6731
Such written redemption requests and any share certificates or a stock power
must be endorsed by the investor. A signature guarantee is required if the
redemption proceeds exceed $50,000 or the proceeds are to be sent to an address
other than the address of record or to a person other than the registered
holder. A signature guarantee may be secured from a member firm of a domestic
securities exchange or by a commercial bank, savings and loan association,
credit
THE ENTERPRISE Group of Funds, Inc.
46
<PAGE> 51
union or trust company. Further documentation may be requested, and a signature
guarantee is always required, from corporations, executors, administrators,
trustees or guardians.
WIRE REDEMPTIONS
For a separate $10 charge, redemptions for a maximum of $250,000 will be wired
at your request. On written requests, funds may be wired to any bank. On a
telephone request, funds may be wired only to the bank previously designated by
you in writing. If a shareholder has given authorization for expedited wire
redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single, previously designated bank account. Requests received
prior to 4:00 p.m. (Eastern time) by the Fund's Transfer Agent, will result in
shares being redeemed at the next determined net asset value, and the proceeds
normally will be sent to the designated bank account the following business day.
Delivery of the proceeds of a wire redemption request may be delayed by the Fund
for up to seven days if the Fund deems it appropriate under the then current
market conditions. Once authorization is on file, the Transfer Agent will honor
requests by any authorized person at 1-800-368-3527. This privilege may not be
used to redeem shares in certificated form. To change the name of the single
designated bank account to receive wire redemption proceeds, it is necessary to
send a written request with signature(s) guaranteed to the Transfer Agent.
CHECK WRITING
A check redemption feature is available on the Money Market Fund Class A shares
in accounts with opening balances of more than $5,000. Redemption Checks may be
made payable to the order of any person in any amount from $500 to $100,000. Up
to five Redemption Checks per month may be written without charge. Each
additional Redemption Check over five in any given month will be subject to a $5
fee. Redemption Checks are free and may be obtained by contacting Enterprise
Shareholder Services, at the telephone number or address set forth above. A $25
fee will be imposed on any account for stopping payment of a Redemption Check
upon request by the shareholder. It is not possible to use a Redemption Check to
close out an account since additional shares accrue daily. Redemptions by check
writing may be subject to a contingent deferred sales charge as described below.
The amount of the check will be honored in full only if there are sufficient
funds available in the account to cover the fee amount of the check plus
applicable contingent deferred sales charge, if any.
CONTINGENT DEFERRED SALES CHARGE --
LARGE ORDER NAV PURCHASE PRIVILEGE
A contingent deferred sales charge of 1% may be imposed upon redemption of Class
A shares that are purchased in an amount in excess of $1,000,000 if they are
redeemed within two years of purchase. The charge will not be imposed upon
redemption of reinvested dividends or share appreciation. The charge is applied
to the value of the shares redeemed excluding amounts not subject to the charge.
The contingent deferred sales charge will be waived in the event of: (a)
redemptions (other than redemption of the entire plan) by a participant-directed
qualified retirement plan described in Code Section 401(a) or a
participant-directed non-qualified deferred compensation plan described in Code
Section 457; (b) redemption of shares of a shareholder (including a registered
joint owner) who has died; (c) redemption of shares of a shareholder (including
a registered joint owner) who after purchase of the shares being redeemed
becomes totally disabled (as evidenced by a determination by the federal Social
Security Administration); and (d) redemptions under the Fund's Systematic
Withdrawal Plan at a maximum of 10% per year of the net asset value of the
account.
THE ENTERPRISE Group of Funds, Inc.
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CONTINGENT DEFERRED SALES CHARGE --
CLASS B AND C SHARES
A contingent deferred sales charge may be imposed upon redemption of Class B and
C shares. There is no such charge upon redemption of any share appreciation or
reinvested dividends on Class B and C shares. Appreciation is the difference
between the share cost of the lot (net asset value at time of purchase) and the
current price at the time of redemption multiplied by the number of shares
redeemed. Redemption must occur to realize appreciation.
The contingent deferred sales charge will be waived: (a) in the event of total
disability (as evidenced by a determination of the federal Social Security
Administration) of the shareholder (including a registered joint owner)
occurring after the purchase of shares being redeemed; (b) in the event of the
death of the shareholder (including registered joint owner); (c) for redemptions
made pursuant to a systematic withdrawal plan (see "Special
Features -- Systematic Withdrawal Plan" above); and (d) for redemptions made
pursuant to any IRA systematic withdrawal based on the shareholder's life
expectancy including, but not limited to, substantially equal periodic payments
described in IRC Section 72(t)(2)(A)(iv) prior to age 59 1/2 and required
minimum distributions after age 70 1/2.
The CDSC charge B shares is computed at the following rates applied to the value
of the shares redeemed excluding amounts not subject to the charge.
<TABLE>
<CAPTION>
CONTINGENT DEFERRED
YEAR OF REDEMPTION AFTER PURCHASE SALES CHARGE
- --------------------------------- -------------------
<S> <C>
First.......................... 5%
Second......................... 4%
Third.......................... 4%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
</TABLE>
The following example will illustrate the operation of the contingent deferred
sales charge. Assume that an investor takes a single purchase of $10,000 of the
Fund's Class B shares and that 16 months later the value of the shares has grown
by $1,000 through reinvested dividends and by an additional $1,000 in
appreciation to a total of $12,000. If the investor were then to redeem the
$6,000 in share value, the contingent deferred sales charge would be payable
only with respect to $5,000 because neither the $500 of reinvested dividends nor
the $500 of share appreciation is subject to the charge. The charge would be at
the rate of 4% ($200) because it was in the second year after the purchase was
made.
Class C shares are subject to a 1.00% CDSC for one year from the date the order
is received.
The rate of the contingent deferred sales charge is determined by the length of
the period of ownership. Investments are tracked on a daily basis. The period of
ownership for this purpose begins the first day in which the order for the
investment is received. For example, a Class B investment made in June, 1996
will be eligible for the 4% charge if redeemed on or after June 1, 1997. In the
event no specific order is requested, the redemption will be made first from
shares representing dividends and then from the earliest purchase of shares.
REDEMPTIONS -- GENERAL
The Fund's Articles of Incorporation provide that it may redeem its shares in
cash or with a pro rata portion of the assets of the appropriate Fund. To date,
all redemptions have been made in cash, and the Fund anticipates that all
redemptions will be made in cash in the future, but it reserves the right to
provide redemptions in assets of a Fund should considerations and the size of
the Fund require that method of redemption. The Fund has elected to commit
itself to pay in cash all requests for redemption by any shareholder of record,
limited in amount with respect to each shareholder during any 90-day period to
the lesser of: (i) $250,000 or (ii) 1% of the net asset value of the Fund at the
beginning of such period.
The Fund reserves the right to redeem an account at its option upon not less
than 45 days' written notice if an account's net asset value is $500 or less and
remains so during the notice period.
THE ENTERPRISE Group of Funds, Inc.
48
<PAGE> 53
DISTRIBUTION PLANS
Class A, Class B and Class C shares of each Fund have adopted a separate
Distribution Plan (the "Plans") pursuant to Rule 12b-1 under the Investment
Company Act of 1940. Under the Plans, Class A, Class B and Class C shares of
each of the Funds are authorized to pay the Distributor a distribution fee for
expenses incurred in connection with the distribution of shares of the Fund and
an account maintenance fee for shareholder servicing.
CLASS A SHARES. Class A shares of each Fund (except Money Market Fund) pay the
Distributor an account maintenance and distribution fee at the annual rates of
.45% of each Fund's average daily net assets attributable to Class A shares.
CLASS B SHARES. Class B shares of each Fund (except Money Market Fund) pay the
Distributor a distribution fee at the annual rate of .75% of each Fund's average
daily net assets attributable to Class B shares. Class B shares of each Fund
(except Money Market Fund) also pay an account maintenance fee at the annual
rate of .25% of each Fund's average daily net assets.
CLASS C SHARES. Class C shares of each Fund (except Money Market Fund) pay the
Distributor a distribution fee at the annual rate of .75% of each Fund's average
daily net assets attributable to Class C shares. Class C shares of each Fund
(except Money Market Fund) also pay an account maintenance fee at the annual
rate of .25% of each Fund's average daily net assets attributable to Class C
shares.
USE OF DISTRIBUTION AND ACCOUNT MAINTENANCE FEES. All or a portion of the
distribution fees paid by Class A, B or C shares may be used by the Distributor
to pay costs of printing reports and prospectuses for potential investors and
the costs of other distribution expenses. All or a portion of the account
maintenance fees paid by the Class A, Class B or Class C shares may be paid to
broker-dealers or others for the provision of personal continuing services to
shareholders, including such matters as responding to shareholder inquiries
concerning the status of their accounts and assistance in account maintenance
matters such as changes in address. Payments under the Plans are not limited to
amounts actually paid or expenses actually incurred by the Distributor but
cannot exceed the maximum rate set by the Plans or by the Board. It is,
therefore, possible that the Distributor may realize a profit in a particular
year as a result of these payments. The Plans have the effect of increasing the
Fund's expenses from what they would otherwise be. The Board reviews the Fund's
distribution and account maintenance fee payments and may reduce or eliminate
the fee at any time without further obligation of the Fund. The SAI contains
more information about the Adviser's Agreement and the Plans.
In addition to distribution and account maintenance fees paid by the Fund under
Class A, Class B and Class C Plans, Enterprise Capital (or one of its
affiliates) may make payments to dealers (including MONY Securities Corp.) and
other persons which distribute shares of the Funds (including Class Y shares).
Such payments may be calculated by reference to the net asset value of shares
sold by such persons or otherwise.
PERFORMANCE
COMPARISONS
Investors may look to mutual fund reporting services such as Lipper Analytical
Services, Inc., CDA Investment Technologies, Computer Directions Adviser
Services, Inc., Moody's Bond Survey Index, Nelson's Investment Manager Data
Base, Morningstar, Inc., Salomon Brothers Corporate Bond Rate-of-Return Index,
Shearson Lehman Municipal Bond Index, Bond-20 Bond Index and mortgage trade and
other publications to compare the performance of each Fund with other mutual
funds in that Fund's category. Comparative performance information from these
sources may be used by the Fund in advertising.
From time to time, articles about the Fund regarding its performance or ranking
may appear in national publications such as Kiplinger's Personal Finance
THE ENTERPRISE Group of Funds, Inc.
49
<PAGE> 54
Magazine, Money Magazine, Financial World, Morningstar, Dalbar, Value Line
Mutual Fund Survey, Forbes, Fortune, Business Week, Wall Street Journal,
Donaghue Mutual Funds and Barron's. Some of these publications may publish their
own rankings or performance reviews of mutual funds, including the Fund.
Reference to or reprints of such articles may be used in the Fund's promotional
literature.
From time to time, the Fund may advertise a Fund's "yield" and "total return."
Total return and yield are calculated separately for Class A, Class B, Class C
and Class Y shares. For Funds other than the Money Market Fund, the yield for
any 30-day (or one month) period is computed by dividing the net investment
income per share earned during such Period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one month) yield in accordance with a formula prescribed by the SEC which
provides for compounding on a semiannual basis.
Current annualized yield quotations for the Money Market Fund are based on the
Fund's net investment income per share for a seven-day period and exclude any
realized or unrealized gains or losses on portfolio securities. The yield is
computed by determining the net change in value for a hypothetical account
having a balance of one share at the beginning of the period, excluding any
realized or unrealized gains or losses, and dividing by the price per share at
the beginning of the period (expected to remain constant at $1). The net change
is then annualized by multiplying it by 365/7, with the current yield figure
carried to the nearest one-hundredth of one percent. The effective yield of the
Money Market Fund for a seven-day period is computed by expressing the
unannualized return for that period on a compounded, annualized basis.
A Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed in the same manner as yield except that actual income
dividends declared per share during the period in question are substituted for
net investment income per share.
Advertisements of a Fund's total return disclose the Fund's average annual
compounded total return for its most recently completed fiscal year and the
appropriate periods since the Fund's inception. The Fund's total return for each
such period is computed by finding, through the use of a formula prescribed by
the SEC, the average annual compounded rates of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund are assumed
to have been reinvested when received and the front end sales charge applicable
to sales of the Fund shares (other than the Money Market Fund) is assumed to
have been paid.
Any distribution rate, yield or total rate of return figure should not be
considered as representative of the performance of a Fund in the future. In
addition, the Income Funds' performance figures are not directly comparable to
those of bank deposits and other similar investments, which maintain a fixed
principal value and pay a fixed yield on the principal amount. These Funds' net
asset values are not fixed. They vary based not only upon the type, quality and
maturities of the securities held in the Funds, but also on the changes in the
current value of such securities and on changes in the Funds' expenses. For
narrative discussions of the Fund's performance including graphs comparing Funds
to various securities indexes, please request a copy of an Annual Report to
Shareholders from the Fund.
The Money Market Fund's actual yields will fluctuate, and are not necessarily
indicative of future actual yields. Actual yields are dependent on such
variables as portfolio quality, average portfolio maturity, the type of
instruments in which investments are made, changes in interest rates on money
market instruments, portfolio expenses and other factors.
THE ENTERPRISE Group of Funds, Inc.
50
<PAGE> 55
MANAGEMENT OF THE FUND
DIRECTORS
The Board of Directors of the Fund is responsible for the management of the
business of the Fund under the laws of Maryland, and it is primarily responsible
for reviewing the activities of the Adviser, the various Fund Managers and the
Distributor under the Investment Adviser's Agreement, the Fund Manager's
Agreements, the Distributor's Agreement and the Plans which relate to the
operations of the Fund and its Funds. Information concerning the Directors,
including their names, positions, terms of office and principal occupations
during the past five years, is contained in the Statement of Additional
Information.
INVESTMENT ADVISER ARRANGEMENTS
The Fund has entered into an Investment Adviser's Agreement with the Adviser
which, in turn, has entered into Fund Manager's Agreements with each of the Fund
Managers discussed below. The Adviser acts as the Fund Manager for the Money
Market Fund. It is the Adviser's responsibility to select, subject to the Board
of Directors' review and approval, Fund Managers who have distinguished
themselves by able performance in their respective areas of responsibility and
to review their continued performance. The Adviser is assisted in this duty by
Evaluation Associates, Inc., which has had 26 years of experience in evaluating
investment advisers for individuals and institutional investors.
The Adviser and the Fund have received an exemptive order from the Securities
and Exchange Commission which permits the Fund, subject to, among other things,
initial shareholder authority, to thereafter enter into or amend Fund Manager's
Agreements without obtaining shareholder approval each time. Shareholders voted
affirmatively to give the Fund this ongoing authority. With Board approval, the
Adviser is permitted to employ new Fund Managers for the Funds, change the terms
of the Fund Manager's Agreements or enter into a new Agreement with that Fund
Manager. Shareholders of a Fund continue to have the right to terminate the Fund
Manager's Agreement for the Fund at any time by a vote of the majority of the
outstanding voting securities of the Fund. Shareholders will be notified of any
Fund Manager changes or other material amendments to Fund Manager's Agreements
that occur under these arrangements.
The Adviser is also responsible for conducting all operations of the Fund except
those operations contracted to the Transfer Agent and Custodian. The Adviser is
a subsidiary of MONY, one of the nation's largest insurance companies. The
Adviser, which was incorporated in 1986, served as principal investment adviser
to Alpha Fund, Inc., the predecessor of the Fund's Growth Fund. The Adviser also
serves as investment adviser to Enterprise Accumulation Trust which had assets
of $4.2 billion at March 31, 1998. Performance of similar portfolios of
Enterprise Accumulation Trust may differ from the Fund due to a number of
factors including the size of the Funds, investment cash flows and redemptions.
The Adviser's address is Atlanta Financial Center, 3343 Peachtree Road, N.E.,
Suite 450, Atlanta, Georgia 30326.
As part of its operational responsibilities, the Adviser has undertaken to
review each of its internal systems and obtain assessments from each service
provider, including Fund Managers, of Year 2000 issues which could potentially
impact services to the Fund. The Adviser is unaware of any Year 2000 issues
which remain unresolved or have been identified as unresolvable. In addition,
the Adviser has established a timetable to periodically re-evaluate systems to
ensure that new issues or those which may not previously have been identified
are addressed and resolved in an expeditious manner. The Adviser does not
anticipate any material expenditures for monitoring Year 2000 issues.
FUND MANAGERS
The following sets forth certain information about each of the Fund Managers,
the annual rate of compensation as a percentage of the Fund's net assets paid
THE ENTERPRISE Group of Funds, Inc.
51
<PAGE> 56
to the Adviser ("Management Fee") and the portion of the Management Fee that the
Adviser pays to the respective Fund Managers. Fund Managers typically manage
assets for institutional investors and high net worth individuals. Collectively,
the Fund Managers manage assets in excess of $275 billion for all clients,
including The Enterprise Group of Funds.
GROWTH FUND
The Fund Manager of the Growth Fund is Montag & Caldwell, Inc. ("Montag &
Caldwell"). Its address is 1100 Atlanta Financial Center, 3343 Peachtree Road,
N.E., Atlanta, Georgia 30326, and it is controlled by Allegheny Corporation. It
has served as investment adviser to Alpha Fund, Inc., the predecessor of the
Growth Fund, since the Fund was organized in 1968. Montag & Caldwell and its
predecessors have been engaged in the business of providing investment
counseling to individuals and institutions since 1945. Ronald E. Canakaris,
President and Chief Investment Officer, is responsible for the day-to-day
investment management of the Fund and has more than 30 years' experience in the
investment industry. He has been President of Montag & Caldwell for more than 26
years and has served as Fund Manager since inception. Total assets under
management for all clients at March 31, 1998, approximated $20.6 billion. Usual
investment minimum: $40 million. Representative clients include: Black & Decker,
Bristol-Myers Squibb and Wake Forest University. The management fee paid by the
Growth Fund is .75% of net assets, and the Fund Manager receives .30% for assets
under management of that fee up to $100,000,000; .25% for assets from
$100,000,000 to $200,000,000; and .20% for assets greater than $200,000,000.
GROWTH AND INCOME FUND
The Fund Manager of the Growth and Income Fund is Retirement System Investors
Inc. ("RSI") which is a subsidiary of Retirement System Group Inc. Its address
is 317 Madison Ave., New York, New York 10017. James P. Coughlin, President and
Chief Investment Officer, is responsible for the day-to-day management of the
Fund and has more than 30 years' experience in the investment industry. He has
served as President and Chief Investment Officer of RSI since 1989. Total assets
under management for RSI were $549.7 million as of March 31, 1998. The
management fee is .75%, and the Fund Manager receives .30% for assets under
management of that fee up to $100,000,000; .25% on the next $100,000,000; and
.20% for assets greater than $200,000,000.
EQUITY FUND
The Fund Manager of the Equity Fund is OpCap Advisors which is a subsidiary of
Oppenheimer Capital, a general partnership. OpCap's address is One World
Financial Center, New York, New York 10281. Eileen Rominger, Managing Director
of Oppenheimer Capital, is responsible for the day-to-day management of the
Fund. Ms. Rominger has more than 19 years' experience in the investment industry
and has been Managing Director of Oppenheimer Capital since 1994 and previously
served as Senior Vice President. The Fund Manager had approximately $67.6
billion under management as of March 31, 1998. Usual investment minimum is $20
million. Representative clients include Pacific Telesis Group, Caterpillar, Inc.
and New York State Electric & Gas. The annual management fee is .75% and the
Fund Manager receives .40% for assets under management of that fee up to
$100,000,000 and .30% thereafter.
EQUITY INCOME FUND
The Fund Manager of the Equity Income Fund is 1740 Advisers, Inc. ("1740
Advisers"). It is a subsidiary of MONY. Its address is 1740 Broadway, New York,
New York 10019. John V. Rock, President and Director, is responsible for the
day-to-day investment management of the Fund and has more than 34 years'
experience in the investment industry. He has served as President of 1740
Advisers since 1974. Total assets under management (for the Equity Income Fund
and all other accounts managed) at March 31, 1998, were approximately $1.8
billion. Usual investment mini-
THE ENTERPRISE Group of Funds, Inc.
52
<PAGE> 57
mum: $20 million. The management fee paid by the Equity Income Fund is .75% of
net assets, and the Fund Manager receives .30% for assets under management of
that fee up to $100,000,000; and .25% on the next $100,000,000; and .20%
thereafter.
CAPITAL APPRECIATION FUND
The Fund Manager of the Capital Appreciation Fund is Provident Investment
Counsel, Inc. ("PIC"). PIC traces its origins to an investment partnership
formed in 1951. PIC is a wholly owned subsidiary of United Asset Management,
Inc. Its address is 300 North Lake Avenue, Pasadena, California 91101. Jeffrey
J. Miller is a Managing Director of the firm and is responsible for the
day-to-day management of the Fund. He has more than 25 years' experience in the
investment industry. He has been Managing Director of PIC since 1972. As of
March 31, 1998, total assets under management for all clients were $18.3
billion. Usual investment minimum: $5 million. Representative clients include:
Pennsylvania State Employees Retirement System, Kansas Public Employees
Retirement System and United Methodist Church Board of Pensions. The management
fee is .75% and the Fund Manager receives .50% for assets under management of
that fee up to $100,000,000; .45% for assets under management for the next
$100,000,000; .35% for assets greater than $200,000,000 up to $300,000,000; and
.30% thereafter.
SMALL COMPANY GROWTH FUND
The Fund Manager of the Small Company Growth Fund is Pilgrim Baxter &
Associates, Ltd. ("Pilgrim Baxter"). Pilgrim Baxter is a wholly owned subsidiary
of United Asset Management, Inc. Its offices are at 825 Duportail Road, Wayne,
Pennsylvania 19087. Michael D. Jones, Fund Manager/Analyst, is responsible for
the day-to-day management of the Fund and Gary Pilgrim, Chief Investment
Officer, acts as co-manager. They have more than 40 years' combined experience
in the investment industry. Mr. Pilgrim and Mr. Jones have been employed in
their present positions by Pilgrim Baxter since 1982 and 1995, respectively. Mr.
Jones previously served as Portfolio Manager at Bank of New York from 1990-1995.
As of March 31, 1998, total assets under management for all clients were $13.4
billion. Usual investment minimum: $20 million. The management fee is 1.00% and
the Fund Manager receives .65% for assets under management of that fee up to
$50,000,000; and .55% for assets under management for the next $50,000,000; and
.45% for assets thereafter.
SMALL COMPANY VALUE FUND
The Fund Manager of the Small Company Value Fund is Gabelli Asset Management
Company. Gabelli is a wholly owned subsidiary of Gabelli Funds, Inc. Its offices
are located at One Corporate Center, Rye, New York 10580. Gabelli's predecessor,
Gabelli & Company, Inc., was founded in 1977 by Mario J. Gabelli who has served
as its chief investment officer since inception and is responsible for the
day-to-day management of the Fund. He has more than 27 years' experience in the
investment industry. As of March 31, 1998, total assets under management for all
clients were $7.2 billion. Usual investment minimum is $1 million. The
management fee is .75% and the Fund Manager receives .40% for assets under
management of that fee up to $1 billion and .30% for assets in excess of $1
billion.
INTERNATIONAL GROWTH FUND
The Fund Manager of the International Growth Fund is Brinson Partners, Inc.
("Brinson"). Brinson is a wholly-owned subsidiary of UBS AG (United Bank of
Switzerland). Brinson's address is 209 South LaSalle Street, Chicago, Illinois
60604. Day-to-day management of this Fund is performed by a committee. The
Global Equity Committee is chaired by Richard Carr, Managing Director, who has
more than 32 years' experience in the investment industry. As of March 31, 1998,
Brinson's assets under management for all clients approximated $98 billion.
Usual investment minimum: $25 million. The management fee is .85%, and the Fund
Manager receives .45% for assets under management up to $100,000,000; .35% for
assets under management from $100,000,000 to
THE ENTERPRISE Group of Funds, Inc.
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<PAGE> 58
$200,000,000; .325% for assets from $200,000,0000 to $500,000,000; and .25% for
assets greater than $500,000,000.
GLOBAL FINANCIAL SERVICES FUND
The Fund Manager of the Global Financial Services Fund is Sanford C. Bernstein &
Co., Inc. ("Sanford Bernstein"). Sanford Bernstein's address is 767 Fifth
Avenue, New York, New York 10153-0185. Sanford Bernstein was established in 1967
and as of June 30, 1998, had $78 billion in assets under management. Day-to-day
management of this Fund is performed by a committee. Sanford Bernstein's Global
Investment Policy Group is chaired by Andrew S. Adelson, who has more than 20
years' experience in the investment industry. The management fee is .85% of
average daily net assets, and of that fee, the Fund Manager receives .50% for
assets up to $100 million; .40% for assets from $100 million to $300 million;
.30% for assets from $300 million to $500 million; and .25% for assets over $500
million.
GOVERNMENT SECURITIES FUND
The Fund Manager of the Government Securities Fund is TCW Funds Management, Inc.
The firm, founded in 1971, is a wholly owned subsidiary of TCW Management
Company, a Nevada corporation, whose direct and indirect subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. The firm's
address is 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017.
Philip A. Barach, Managing Director, and Jeffrey E. Gundlach, Managing Director,
are responsible for the day-to-day investment management of the Fund and have
more than 35 years' combined experience in the investment industry. They joined
TCW in 1987 and 1985, respectively, as Managing Directors. As of March 31, 1998,
TCW and its affiliated companies had approximately $51.6 billion under
management or committed for management in various fiduciary and advisory
capacities. Usual investment minimum: $35 million. The management fee is .60%
and the Fund Manager receives .30% for assets under management of that fee up to
$50,000,000 and .25% for assets under management greater than $50,000,000.
HIGH-YIELD BOND FUND
The Fund Manager of the High-Yield Bond Fund is Caywood-Scholl Capital
Management ("Caywood-Scholl"). This firm was formed in 1986 and is owned by its
employees. Caywood-Scholl Capital Management's address is 4350 Executive Drive,
Suite 125, San Diego, California 92121. James Caywood, Managing Director and
Chief Executive Officer, is responsible for the day-to-day management of the
Fund. He has more than 29 years' investment industry experience. He joined
Caywood-Scholl in 1986 as Managing Director and Chief Executive Officer.
Caywood-Scholl provides investment advice with respect to high-yield, low grade
fixed income instruments. As of March 31, 1998, assets under management for all
clients approximated $807 million. Usual investment minimum: $1 million. The
management fee is .60%, and the Fund Manager receives .30% for assets under
management of that fee up to $100,000,000 and .25% for assets above
$100,000,000.
TAX-EXEMPT INCOME FUND
The Fund Manager of the Tax-Exempt Income Fund is MBIA Capital Management Corp.
("MBIA"). It is a wholly owned subsidiary of MBIA, Inc. MBIA's address is 113
King Street, Armonk, New York 10504. Day-to-day management of the Fund is
performed by Robert M. Ohanesian, President and Chief Investment Officer; and
Gary S. Meserole, CFA, Vice President and Fund Manager, who have combined
experience of more than 38 years in the investment industry. Mr. Ohanesian
joined MBIA in 1994 and previously served as Director of Investments for Shields
Asset Management. Mr. Meserole joined MBIA in 1995 and previously served as Vice
President of MBIA Insurance Corporation. As of March 31, 1998, assets under
management for all clients approximated $11.5 billion. Usual investment minimum:
$10 million. The management fee is .50% and the Fund
THE ENTERPRISE Group of Funds, Inc.
54
<PAGE> 59
Manager receives .15% for assets under management of that fee.
MANAGED FUND
The Fund Manager of the Managed Fund is OpCap Advisors, a majority-owned
subsidiary of Oppenheimer Capital, a general partnership. Its address is One
World Financial Center, New York, New York 10281. Richard J. Glasebrook II,
Managing Director of Oppenheimer Capital is responsible for the day-to-day
management of the Fund. He has more than 24 years' investment industry
experience and has served as Managing Director of Oppenheimer Capital since 1994
and previously served as Senior Vice President. As of March 31, 1998,
Oppenheimer Capital and its affiliates had over $67.6 billion under management.
Its usual investment minimum is $20 million. The management fee is .75% and the
Fund Manager receives .40% for assets under management of that fee up to
$100,000,000 and .30% for assets in excess of $100,000,000.
MONEY MARKET FUND
The Fund Manager of the Money Market Fund is Enterprise Capital, a wholly owned
subsidiary of MONY. Its address is Atlanta Financial Center, 3343 Peachtree
Road, N.E., Suite 450, Atlanta, Georgia 30326. Enterprise Capital utilizes the
services of The Mutual Life Insurance Company of New York employees for certain
services relating to management of the Fund. Day-to-day management of the Fund
is performed by a committee. MONY's address is 1740 Broadway, New York, New York
10019. Enterprise Capital began operating as Fund Manager on May 1, 1992. Total
Fund assets at March 31, 1998, approximated $95 million. The management fee is
.35%.
PAYMENT OF EXPENSES
The Investment Adviser's Agreement obligates the Adviser to provide investment
advisory services to the Funds of the Fund and to furnish the Fund with certain
administrative, clerical, bookkeeping and statistical services, office space and
facilities and for paying the compensation of the officers of the Fund. Each
Fund pays all other expenses incurred in its operation, and a portion of the
Fund's general administrative expenses is allocated to each Fund either on the
basis of its asset size, on the basis of special needs of such Fund, or equally,
as is deemed appropriate. These expenses include expenses such as: custodial,
transfer agent, brokerage, auditing and legal services, the printing of
Prospectuses sent to existing shareholders, expenses relating to bookkeeping and
recording and determining the net asset value of shares, and the expenses of
qualification of a Fund's shares under the federal and state securities laws.
The Fund's Board of Directors annually reviews allocation of expenses among the
Funds.
The Adviser has advised the Fund that it will reimburse such portion of the fees
due to it under the Investment Adviser's Agreement as is necessary to assure,
for the period commencing January 1, 1998, and ending no earlier than December
31, 1998, that expenses incurred by the Funds will not exceed the following
percentages of average annual assets (annualized for periods of less than a
fiscal year): Growth (A) 1.60%; (B) 2.15%; (C) 2.15%; Growth and Income (A)
1.50%; (B) 2.05%; (C) 2.05%; Equity (A) 1.60%; (B) 2.15%; (C) 2.15%; Equity
Income (A) 1.50%; (B) 2.05%; (C) 2.05%; Capital Appreciation (A) 1.75%; (B)
2.30%; (C) 2.30%; Small Company Growth (A) 1.85%; (B) 2.40%; (C) 2.40%; Small
Company Value (A) 1.75%; (B) 2.30%; (C) 2.30%; International Growth (A) 2.00%;
(B) 2.55%; (C) 2.55%; Government Securities (A) 1.30%; (B) 1.85%; (C) 1.85%;
High-Yield Bond (A) 1.30%; (B) 1.85%; (C) 1.85%; Tax-Exempt Income (A) 1.10%;
(B) 1.65%; (C) 1.65%; Managed (A) 1.75%; (B) 2.30%; (C) 2.30%; and Money Market
(A) 0.70%; (B) 0.70%; (C) 0.70%. The Fund Managers have advised the Fund that
they may assist in a portion of the above-referenced reimbursement from time to
time.
The Adviser and the Fund entered into agreements pursuant to which the Adviser
advanced on behalf of the Fund $33,748 to cover the costs of expanding the
series to include a Small Company Value Fund;
THE ENTERPRISE Group of Funds, Inc.
55
<PAGE> 60
$34,116 of expanding the series to include a Managed Fund; and $40,378 for
expanding the series to include an Equity Fund and completing the appropriate
registrations under the Investment Company Act of 1940, the Securities Act of
1933, and certain state securities laws. The agreements provide that these
amounts will be repaid by each Fund, in five equal annual increments without
interest, commencing at the end of the first fiscal year at which each such Fund
have total net assets of $5 million or more. Each Fund has commenced such
payments.
TAXES
Each Fund of the Fund has qualified and intends to continue to qualify as a
"regulated investment company" in 1998 under the provisions of the IRC as
amended. For purposes of the IRC, each Fund is regarded as a separate regulated
investment company. If any Fund qualifies as a "regulated investment company'
and complies with provisions of the IRC which require regulated investment
companies to distribute substantially all of their net income (both ordinary
income and capital gain), the Fund will be relieved of federal income tax on the
income and capital gains distributed to shareholders.
Dividends declared out of a Fund's net investment income, taking account of its
net realized short-term capital gains to the extent that they exceed its net
realized long-term capital losses, are taxable to its shareholders as ordinary
income, whether such dividends are received in cash or additional shares. If,
for any taxable year, a Fund complies with certain requirements, some or all of
the dividends (excluding capital gain dividends, as defined in the IRC) received
by the Fund's corporate shareholders may qualify for the 70% dividends received
deduction available to corporations. Dividends paid by the Income Funds and the
International Growth Fund are not expected to be eligible for dividends received
deductions.
Distributions declared out of a Fund's realized net capital gain (realized net
capital gains from the sale of assets held for more than 12 months in excess of
realized net short-term capital losses) and designated by the Fund as a capital
gain dividend in a written notice to the shareholders are taxable to such
shareholders as capital gain without regard to the length of time a shareholder
has held stock of the Fund and regardless of whether paid in cash or additional
shares. Recent legislation created several classes of capital gains.
The Funds may be required to withhold for federal income taxes 31% ("Back-Up
Withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to comply with regulations requiring that they provide a
correct social security or taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to Back-up Withholding. Corporate shareholders and certain
other shareholders specified in the IRC are exempt from Back-Up Withholding.
Distributions from retirement plans are also subject to 20% federal withholding
if the shareholder fails to provide a tax identification number to the trustee
or custodian and funds are not rolled over.
No gain or loss will be recognized by Class B shareholders upon the conversion
of Class B shares into Class A shares.
Upon a sale or exchange of its shares, a shareholder will realize a taxable gain
or loss depending on its basis in the shares. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets in the shareholder's
hands. In the case of an individual, any such capital gain will be treated as
short-term capital gain if the shares were held for not more than 12 months,
gain taxable at the maximum rate of 28% if such shares were held for more than
12, but not more than 18 months, and gain taxable at the maximum rate of 20% if
such shares were held for more than 18 months. In the case of a corporation, any
such capital gain will be treated as long-term capital gain, taxable at the same
rates as ordinary income, if such shares were held for more than 12 months. Any
such capital loss will be long-term capital loss if the shares were held for
more than 12 months. A sale or exchange of shares held for six months or less,
how-
THE ENTERPRISE Group of Funds, Inc.
56
<PAGE> 61
ever, will be treated as long-term capital loss to the extent of any long-term
capital gains distributions with respect to such shares.
Generally, any loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
In certain circumstances (e.g., an exchange), a shareholder who has held shares
in a Fund for not more than 30 days may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain or
loss realized upon the sale or exchange of shares of the Fund.
TAX-EXEMPT INCOME FUND
Dividends derived from interest on Municipal Securities and designated by the
Fund as exempt interest dividends by written notice to the shareholders, under
existing law, are not subject to federal income tax. Dividends derived from net
capital gains realized by the Fund are taxable to shareholders as a capital gain
upon distribution. Any short-term capital gains or any taxable interest income
or accrued market discount realized by the Fund will be distributed as a taxable
ordinary income dividend distribution. These rules apply whether such
distribution is made in cash or in additional shares. The percentage of income
that is tax-exempt is applied uniformly to all distributions made by the Fund
during each year. As with shares in all Funds, a sale, exchange or redemption of
shares in the Tax-Exempt Income Fund is a taxable event and may result in
capital gain or loss. In addition, generally any capital loss realized from
shares held for six months or less is disallowed to the extent of tax-exempt
dividend income received.
The Tax-Exempt Income Fund declares and pays dividends monthly on the last
business day of the month. When a shareholder redeems shares of the Fund on
other than a dividend payment date, a portion of the shareholder's redemption
proceeds will represent accrued tax-exempt income which will be treated as part
of the amount realized for purposes of capital gains computations for federal
and state or local income tax purposes and will not be tax-exempt.
Income from certain "private activity" bonds issued after August 7, 1986, are
items of tax preference for the alternative minimum tax at a maximum rate of 28%
for individuals and 20% for corporations. If the Fund invests in private
activity bonds, shareholders may be subject to the alternative minimum tax on
that part of such Fund distributions derived from interest income on those
bonds. The Tax-Exempt Income Fund does not intend to invest more than 20% of its
assets in private activity bonds. In addition, a portion of a distribution
derived from any tax-exempt interest incurred, whether or not from private
activity bonds, will be taken into account in determining the corporate
alternative minimum tax. In higher income brackets, up to 85% of an individual's
Social Security benefits may be subject to federal income tax. Along with other
factors, total tax-exempt income, including any tax-exempt dividend income from
the Fund, is taken into account in determining that portion of Social Security
benefits which is taxed.
Any loss realized on this sale or exchange of shares of the Tax-Exempt Income
Fund held for six months or less will be disallowed to this effect of any
tax-exempt interest dividend received with respect to such shares.
The treatment for state and local tax purpose of distributions from the
Tax-Exempt Income Fund representing Municipal Securities interests will vary
according to the laws of state and local taxing authorities.
FOREIGN INCOME TAXES
Investment income received by the Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries which entitle the Fund to
a reduced rate of tax or exemption from tax on such income. It is
THE ENTERPRISE Group of Funds, Inc.
57
<PAGE> 62
impossible to determine the effective rate of foreign tax in advance since the
amount of these Fund's assets to be invested within various countries is not
known. The Fund intends to operate so as to obtain treaty-reduced rates of tax
where applicable.
To the extent that the International Growth Fund is liable for foreign income
taxes withheld at the source, the Fund also intends to operate so as to meet the
requirements of the IRC to "pass through" to the Fund's shareholders credits for
foreign income taxes paid, but there can be no assurance that the Fund will be
able to do so.
EXCISE TAX
The federal tax laws impose a 4% nondeductible excise tax on each regulated
investment company with respect to the amount, if any, by which such company
does not meet distribution requirements specified in such tax laws. Each Fund of
the Fund intends to comply with such distribution requirements and thus does not
expect to incur the 4% nondeductible excise tax.
GENERAL
The foregoing is a general and abbreviated summary of the applicable provisions
of the IRC and Treasury Regulations in effect, as currently interpreted by the
Courts and by the Internal Revenue Service in published revenue rulings and in
private letter rulings and is only applicable to U.S. persons. These
interpretations can be changed at any time. For the complete provisions,
reference should be made to the pertinent Code sections and the Treasury
Regulations promulgated thereunder. The above discussion covers only federal
income tax considerations with respect to the Funds and their shareholders.
State and local tax laws vary greatly, especially with regard to the treatment
of exempt-interest dividends. Shareholders should consult their own tax advisers
for more information regarding the federal, state, and local tax treatment of
each Fund's shareholders.
Statements indicating the tax status of distributions to each shareholder will
be mailed to each shareholder annually.
DIVIDENDS AND
DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of the net investment
income and realized net capital gains, if any, of each Fund. The per share
dividends and distribution on each class of shares of a Fund will be reduced as
a result of any service fees applicable to that class. For dividend purposes,
net investment income of each Fund will consist of substantially all dividends
received, interest accrued, net short-term capital gains realized by such Fund
less the estimated expenses of such Fund.
Unless shareholders request otherwise, by notifying the Fund's Transfer Agent,
dividends and capital gains distributions will be automatically reinvested in
shares of the respective Fund at net asset value; such reinvestments
automatically occur on the payment date of such dividends and capital gains
distributions. At the election of any shareholder, dividends or capital gains
distributions, or both, will be distributed in cash to such shareholders.
However, if it is determined that the U.S. Postal Service cannot properly
deliver Fund mailings to the shareholder, the respective Funds will terminate
the shareholder's election to receive dividends and other distributions in cash.
Thereafter, the shareholder's subsequent dividends and other distributions will
be automatically reinvested in additional shares of the respective Funds until
the shareholder notifies the Transfer Agent or the Fund in writing of his or her
correct address and requests in writing that the election to receive dividends
and other distributions in each be reinstated.
Distributions of capital gains from each of the Funds, other than the Money
Market Fund, are made annually. Dividends from investment income of the Equity
Funds (except the Equity Income Fund) and Managed Fund are declared and paid
annually. Dividends on the Equity Income Fund are paid semiannually.
THE ENTERPRISE Group of Funds, Inc.
58
<PAGE> 63
Dividends from investment income of the Income Funds are declared daily and paid
monthly. Dividends from investment income and any net realized capital gains of
the Money Market Fund are declared daily and reinvested monthly in additional
shares of the Money Market Fund at net asset value.
BROKERAGE
TRANSACTIONS
Each Fund Manager selects the brokerage firms which complete portfolio
transactions for that Fund, subject to the overall direction and review of the
Adviser and the Board of Directors of the Fund.
The initial criterion which must be met by any Fund Manager in selecting brokers
and dealers to effect securities transactions for a Fund is whether such brokers
and dealers can obtain the most favorable combination of price and execution for
the transaction. This does not mean that the execution decision must be based
solely on whether the lowest possible commission costs may be obtained. In
seeking to achieve the best combination of price and execution, the Fund
Managers evaluate the overall quality and reliability of broker-dealers and the
service they provide, including their general execution capability, reliability
and integrity, willingness to take positions in securities, general operational
capabilities and financial condition.
Subject to this primary objective, the Fund Managers may select for brokerage
transactions those firms which furnish brokerage and research services to the
Fund, the Adviser, and the respective Fund Managers, or those firms who agree to
pay certain of the Fund's expenses, including certain custodial and transfer
agent services, and, consistent with the National Association of Securities
Dealers, Inc. Conduct Rules, those firms which have been active in selling
shares of the Fund. Fund Managers may execute brokerage transactions through
affiliated broker/dealers, subject to compliance with applicable requirements of
the federal securities laws.
GENERAL
INFORMATION
ORGANIZATION OF THE FUND
The Fund was incorporated January 2, 1968, as Alpha Fund, Inc., and its name was
changed to The Enterprise Group of Funds, Inc. on September 14, 1987, and it
expanded into a series fund and Alpha Fund became the Growth Fund of the Fund.
The Money Market Fund was added commencing May 1, 1990; the Small Company Value
Fund was added commencing October 1, 1993; the Managed Fund was added commencing
October 3, 1994; the Growth and Income Fund, Equity Fund and Small Company
Growth Fund were added on May 1, 1997; and the Global Financial Services Fund
was added commencing October 1, 1998. Class B and Y shares were established May
1, 1995. Class C shares were established on May 1, 1997. The Fund is a Maryland
corporation. Each Fund of the Fund in the series is diversified, as that term is
defined in the Investment Company Act of 1940.
OTHER CLASSES OF SHARES
Each Fund currently offers four classes of shares, Class A, Class B, Class C and
Class Y, and may in the future offer additional classes. Class A, Class B and
Class C shares are the only classes of shares offered by this Prospectus. Class
Y shares are only available to certain institutional purchasers of $1 million or
more, and to The Mutual of New York Employee 401(k) Plan and the Enterprise
Capital Management, Inc. 401(k) Plan. Institutional investors eligible to
purchase Class Y shares include banks, savings institutions, trust companies,
insurance companies, investment companies as defined by the Investment Company
Act of 1940, pension or profit sharing trusts, certain wrap account clients of
broker/dealers, former shareholders of Retirement System Fund Inc. or other
financial institutional buyer. Wrap account clients of broker/dealers, former
Retirement System Fund Inc. shareholders, and direct referrals of Fund
THE ENTERPRISE Group of Funds, Inc.
59
<PAGE> 64
Managers are offered Class Y shares at a lower minimum purchase amount.
CAPITAL STOCK
The authorized capital stock of the Fund consists of Common Stock, par value
$0.10 per share. The shares of Common Stock are divided into thirteen series
with each series representing a separate Fund. The Board of Directors may
determine the number of authorized shares for each series and to create new
series of Common Stock. It is anticipated that new Classes will be authorized by
the Board from time to time as new Funds with separate investment objectives and
policies are established.
Each Class of shares is entitled to participate in dividends and distributions
declared by the respective Funds and in net assets of such Funds upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities, except that each Class will bear its own distribution and
shareholder servicing charges. The shares of each Fund, when issued, will be
fully paid and nonassessable, have no preference, preemptive, conversion,
exchange or similar rights, and will be freely transferable. Holders of shares
of any Fund are entitled to redeem their shares as set forth under "How to
Redeem Fund Shares."
VOTING RIGHTS
Shares of each Fund are entitled to one vote per share and fractional votes for
fractional shares. The Fund's shareholders have the right to vote on the
election of Directors of the Fund and on any and all other matters on which, by
law or the provisions of the Fund's bylaws, they may be entitled to vote.
Each series (i.e., Fund) of the Fund is further divided into four classes of
shares: Class A, Class B, Class C and Class Y. Class A, Class B, Class C and
Class Y shares represent interests in the same assets of a Fund and are
identical in all respects, except that Class A and Class B, and Class C shares
bear certain expenses related to distribution and servicing of such shares.
On matters relating to all Funds or Classes of shares and affecting all Funds or
Class of shares in the same manner, shareholders of all Funds or Classes of
shares are entitled to vote. On any matters affecting only one Fund, only the
shareholders of that Fund are entitled to vote. On matters relating to all the
Funds but affecting the Funds differently, separate votes by Fund are required.
Each Class has exclusive voting rights with respect to matters related to
distribution and servicing expenditures, as applicable.
The Fund and its Funds are not required by Maryland law to hold annual meetings
of shareholders under normal circumstances. The Board of Directors or the
shareholders may call special meetings of the shareholders for action by
shareholder vote, including the removal of any or all of the Directors, as may
be required by either the Articles of Incorporation or bylaws of the Fund, or
the Investment Company Act of 1940. Shareholders possess certain rights related
to shareholder communications which, if exercised, could facilitate the calling
by shareholders of a special meeting.
CUSTODIAN, TRANSFER AND DIVIDEND
DISBURSING AGENT
State Street Bank & Trust Company of Boston, Massachusetts, acts as Custodian of
the Fund's assets.
National Financial Data Services, Inc. acts as the Fund's Transfer Agent and
Dividend Disbursing Agent. National Financial Data Services, Inc. is a joint
venture of State Street Bank & Trust Company of Boston, Massachusetts, and DST
Systems, Inc. of Kansas City, Missouri.
REPORTS TO SHAREHOLDERS
The Fund sends to all its shareholders annual and semiannual reports, including
a list of investment securities held in the Funds.
THE ENTERPRISE Group of Funds, Inc.
60
<PAGE> 65
APPENDIX
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Securities are notes and bonds issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, the interest
on which is exempt from federal income taxes and, in certain instances,
applicable state or local income taxes. These securities are traded primarily in
the over-the-counter market.
Municipal Securities are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works and gas and electric utilities. Municipal
Securities may also be issued in connection with the refunding of outstanding
Municipal Securities obligations, obtaining funds to lend to other public
institutions and for general operating expenses. Industrial Development Bonds
("IDBs") are issued by or on behalf of public authorities to obtain funds to
provide privately operated facilities for business and manufacturing, housing,
sports, pollution control, and for airport, mass transit, port and parking
facilities and are considered tax-exempt bonds if the interest thereon is exempt
from federal income taxes.
The two principal classifications of tax-exempt bonds are "general obligation"
and "revenue." General obligation bonds are secured by the issuer's pledge of
its full faith and credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although IDBs are
issued by municipal authorities, they are generally secured only by the revenues
derived from payment of the industrial user. The payment of principal and
interest on IDBs is dependent solely upon the ability of the user of the
facilities financed by the bonds to meet its financial obligations and the
pledge, if any, of real and personal property so financed as security for such
payment.
Tax-exempt notes are of short maturity, generally less than three years. They
include such securities as Project Notes, Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes and Construction Loan Notes.
Tax-exempt commercial paper consists of short-term obligations generally having
a maturity of less than nine months.
New issues of Municipal Securities are normally offered on a when-issued basis,
which means that delivery and payment for these securities normally takes place
15 to 45 days after the date of commitment to purchase.
Yields of Municipal Securities depend upon a number of factors, including
economic, money and capital market conditions, the volume of Municipal
Securities available, conditions within the Municipal Securities market, and the
maturity, rating and size of individual offerings. Changes in market values of
Municipal Securities may vary inversely in relation to changes in interest
rates. The magnitude of changes in market values in response to changes in
market rates of interest typically varies in proportion to the quality and
maturity of obligations. In general, among Municipal Securities of comparable
quality, the longer the maturity, the higher the yield, and the greater
potential for price fluctuations.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Tax-Exempt Income Fund may invest in floating rate and variable rate
tax-exempt securities. These securities are normally IDBs or revenue bonds that
provide that the rate of interest is set as a specific percentage of a
designated base rate, such as rates of treasury bills or bonds or the prime rate
at a major commercial bank and provide that the holders of the securities can
demand payment of the obligation on short notice at par plus accrued interest,
which amount may be more or less than the amount initially paid for the bonds.
Floating rate securities have an interest rate which changes whenever there is a
change in the designated base interest rate, while
THE ENTERPRISE Group of Funds, Inc.
61
<PAGE> 66
variable rate securities provide for a specific periodic adjustment in the
interest rate. Frequently such securities are secured by letters of credit or
other credit support arrangements provided by banks. The quality of the
underlying credit or of the bank, as the case may be, must be equivalent to the
long-term bond or commercial paper rating stated above.
THE ENTERPRISE Group of Funds, Inc.
62
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<TABLE>
<S> <C>
(ENTERPRISE LOGO)
Mail to: The Enterprise Group of Funds, Inc.
P.O. Box 419731
Kansas City, MO 64141-6731
Make check payable to: The Enterprise Group of Funds, Inc.
For assistance call Enterprise Shareholder Services:
1-800-368-3527
</TABLE>
NEW ACCOUNT APPLICATION
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
1 TYPE OF ACCOUNT (PLEASE PRINT OR TYPE)
[ ] JOINT
[ ] INDIVIDUAL
SSN# ---------------------------------------
Name ---------------------------------------------
Joint Registrant (if any)
Name ---------------------------------------------
(Note: Use only the social security number of the first listed joint tenant)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
[ ] UNIFORM GIFT TO MINORS or [ ] UNIFORM TRANSFER TO MINORS
Name of Adult Custodian (only one permitted)
---------------------------------------------------------------------
Name of Minor (only one permitted)
------------------------------------------------------------------------------
Minor's Date of Birth Minor's Social Security Number
------------------ ------------------------------------------
under the ------------------------------ Uniform Gifts/Transfers to Minors Act
State of Residence of Minor
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
[ ] CORPORATION [ ] PARTNERSHIP Taxpayer ID#
-----------------------------------------------
or
[ ] TRUST [ ] OTHER Social Security #
--------------------------------------------
Name of Corporation, Partnership, Trust or Other
------------------------------------------------------------------
-----------------------------------------------------------------
Name of Trustee(s) (if Trust)
-------------------------------------------------------------------------------------
Date of Trust Agreement (if Trust)
--------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
2 MAILING ADDRESS
Street or PO Box
--------------------------------------------------------------------------------------------------
State ------------------ Zip Code ----------------
City
------------------------------------------------------
Daytime Telephone ---------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
3 INVESTMENT INFORMATION (IF NO CLASS INDICATED, INVESTMENT WILL BE MADE IN CLASS A SHARES)
TOTAL DOLLARS INVESTED $ ___________ ($1000 MINIMUM PER CLASS PER FUND)
CLASS OF SHARES (CHECK ONE)
A B C
Growth [ ] [ ] [ ]
$ ____________ or _____ %
Growth and Income [ ] [ ] [ ]
$ ____________ or _____ %
Equity [ ] [ ] [ ]
$ ____________ or _____ %
Equity Income [ ] [ ] [ ]
$ ____________ or _____ %
Capital Appreciation [ ] [ ] [ ]
$ ____________ or _____ %
Small Company Growth [ ] [ ] [ ]
$ ____________ or _____ %
Small Company Value [ ] [ ] [ ]
$ ____________ or _____ %
International Growth [ ] [ ] [ ]
$ ____________ or _____ %
Global Financial Services [ ] [ ] [ ]
$ ____________ or _____ %
Government Securities [ ] [ ] [ ]
$ ____________ or _____ %
High-Yield Bond [ ] [ ] [ ]
$ ____________ or _____ %
Tax-Exempt Income [ ] [ ] [ ]
$ ____________ or _____ %
Managed [ ] [ ] [ ]
$ ____________ or _____ %
Money Market [ ] [ ] [ ]
$ ____________ or _____ %
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 68
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
4 CUMULATIVE QUANTITY DISCOUNT
The following previously established Class A Enterprise Fund
Accounts qualify for inclusion with the account established
hereby under the Cumulative Quantity Discount (Right of
Accumulation) provisions of the Prospectus for a reduced
sales charge. (see terms and conditions in Prospectus)
Account number(s) and registration:
1. ---------------------------------------------------------
2. ---------------------------------------------------------
3. ---------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
5 LETTER OF INTENT -- OPTIONAL
(see terms and conditions in Prospectus) Class A Shares only
Although I am not obligated to do so, it is my intention to
invest over a 13 month period in shares of one or more of
the above funds an aggregate amount of at least equal to
that which is checked below:
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000
or more
Each purchase will be made at the then reduced offering
price applicable to the amount checked above, as described
in the Prospectus. By completing this Letter of Intent and
signing this application below, I agree to the terms and
conditions of the Letter of Intent and Escrow Account set
forth in the Prospectus.
In making purchases under this letter, the following are the
related accounts on which reduced offering prices are to
apply:
</TABLE>
<TABLE>
<S> <C>
Account number(s) and registration:
1. ---------------------------------------------------------
2. ---------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
6 DIVIDEND AND CAPITAL GAIN DISTRIBUTIONS
[ ] All distributions automatically reinvested
[ ] Income in cash, capital gains reinvested
[ ] Income reinvested, capital gains in cash
[ ] All distributions in cash by check
All distributions in cash, sent to bank account of record
[ ] (must complete Section 11)
Invest my income/capital gains (please circle one or both)
From the --------------------------- fund(s)
Into the --------------------------- fund (this account is
subject to the $1,000 minimum)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
7 TELEPHONE EXCHANGE PRIVILEGE AND/OR TELEPHONE REDEMPTION PRIVILEGE
Unless indicated below, I authorize the Transfer Agent to accept instructions from any person to exchange or
redeem shares in my account(s) by telephone, in accordance with the procedures and conditions set forth in
the Enterprise Funds current Prospectus. I understand that the exchange privilege is only available for
exchanges within the same class of shares.
[ ] I DO NOT WANT THE TELEPHONE EXCHANGE [ ] I DO NOT WANT THE TELEPHONE REDEMPTION
PRIVILEGE PRIVILEGE
Redemptions by telephone must be for an amount less than $50,000 and will be sent by check via U.S. Mail to
the address of record, or sent to the bank of record, if Section 7 is completed with bank instructions.
Redemptions of Class B and C shares may be subject to a contingent deferred sales charge, as set forth in
the Enterprise Funds Prospectus.
Neither the Fund nor the Transfer Agent will be liable for properly acting upon telephone instructions
believed to be genuine. Should the Fund or its Transfer Agent fail to utilize reasonable procedures, it may
be liable for any losses due to unauthorized or fraudulent instructions.
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
8 SIGNATURES
The undersigned warrants that I (we) have full authority to
make this application, am (are) of legal age and have
received and read a current Prospectus and agree to its
terms. I (we) certify that the information provided on this
form is correct and complete.
Unless indicated by the box below, the account owner is not
subject to backup withholding.
[ ] The undersigned is subject to backup withholding.
NOTE: Do not check this box indicating that you are subject
to backup withholding unless you have received such notice
from the Internal Revenue Service.
------------------------------------------------------------
Signature of Individual, Custodian or
Trustee Date
------------------------------------------------------------
Signature of Joint Registrant, if any Date
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
9 TO BE COMPLETED BY BROKER OR DEALER
Registered Representative Name
------------------------------------------------------------
Representative Number
------------------------------------------------------------
Broker/Dealer Name
------------------------------------------------------------
Branch Address
------------------------------------------------------------
------------------------------------------------
Branch Telephone Number ( )
------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 69
OPTIONAL FEATURES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
10 AUTOMATIC BANK DRAFT PLAN
With this plan, Enterprise will transfer money by ACH from
your bank account to your Enterprise Fund account(s) on a
monthly basis. The automatic bank draft plan is subject to a
$100 minimum initial investment and a $25 minimum subsequent
investment per fund.
[ ] Invest $ ------------------ into the
------------------------------------------------------------
[ ] Fund(s) on the --------- day of each month beginning
---------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
11 BANK ACCOUNT OF RECORD
(Please attach a voided check to this application)
Bank Name
------------------------------------------------------------
Bank Address
------------------------------------------------------------
City
--------------------------------------------- State
------------------ Zip Code ------------
Bank ABA # ------------------------------ Bank
Account # ---------------------------------------------
Account Name
------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
12 AUTOMATIC DOLLAR COST AVERAGING PLAN (REINVEST FROM YOUR
MONEY MARKET FUND)
With this plan, Enterprise will transfer money directly from
your Enterprise Money Market account into whichever
Enterprise funds you choose. This plan is subject to a
$1,000 minimum initial investment in the fund that is to be
debited. You may choose to have $50 or more transferred
within the same class of shares to either an established
Enterprise Fund, or you may open a new account subject to an
initial minimum of $100.
[ ] Invest $ ------------------ into the
------------------------------------------------------------
[ ] Fund(s) on the --------- day of each month beginning
---------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
13 CHECKWRITING
(Subject to a $5,000 minimum investment and $500 minimum per
check)
(OPTIONAL -- COMPLETE FOR ENTERPRISE CLASS A MONEY MARKET
FUND ONLY)
If you wish to have checkwriting privileges, complete and
sign below.
Account Name
------------------------------------------------------------
(must be the same as Shareholder Account
Registration)
Authorized Signature(s)
------------------------------------------------------------
------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
Check one:
--------------- All signatures required
--------------- One signature is required
--------------- Shareholder is a Trust, Corporation or other
organization
--------------- Total number of signatures required
In signing this signature card, the signator(s) signifies his/her
agreement to be subject to the rules and regulations of State Street
Bank and Trust Company pertaining thereto and as amended from time to
time and subject to the conditions printed in the Prospectus.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 70
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
14 SYSTEMATIC WITHDRAWAL PLAN
This plan makes it easy for you to receive regular income
from your investment, have checks deposited into your bank
account, or have this income sent to a third party. Minimum
account balance of $5,000 is required. For additional
information, please see the Prospectus.
I wish to open a systematic withdrawal account:
[ ] In a new account established with this application
[ ] In an existing account
-----------------------------------------------------------
Fund, account number and registration
Please redeem sufficient shares on the 15(th) day of the
month. ($100 minimum)
[ ] Monthly amount of $ ------------------
[ ] Quarterly amount of $ ------------------
[ ] Annual amount of $ --------------------
</TABLE>
<TABLE>
<S> <C> <C>
Check one:
[ ] Send checks to the address of registration.
[ ] Deposit checks into my bank account. (Section 11 of this
application must be completed.)
[ ] Send checks to the following third party:
------------------------------------------------------------
First Name Middle Initial Last Name
------------------------------------------------------------
Street Address
------------------------------------------------------------
City State Code Zip
------------------------------------------------------------
Your Signature (as on account)
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
15 SIGNATURES
The undersigned warrants that I (we) have full authority to
elect the above options for my Enterprise Account. If this
is a new account, this page must accompany a new account
application. If this is an existing account, please list the
account number below:
------------------------------------------------------------
Enterprise Account number and registration
------------------------------------------------------------
Signature of Individual, Custodian or
Trustee Date
------------------------------------------------------------
Signature of Joint Registrant, if
any Date
</TABLE>
<TABLE>
<S> <C>
NOTE:
IF THIS CHECKWRITING CARD (SEE REVERSE) IS SIGNED BY MORE DEPOSITOR(S) HEREBY AUTHORIZE THE ACCOUNT OR ITS REDEMPTION
THAN ONE PERSON, ALL CHECKS WILL REQUIRE ONLY ONE OF THE AGENT TO HONOR REDEMPTION REQUESTS PRESENTED IN THE ABOVE
SIGNATURES APPEARING EXACTLY AS ABOVE UNLESS OTHERWISE MANNER BY THE AGENT. THE ACCOUNT AND ITS REDEMPTION AGENT
INDICATED. EACH PERSON GUARANTEES THE GENUINENESS OF THE WILL NOT BE LIABLE FOR ANY LOSS, EXPENSE, COST OR DAMAGE
OTHER'S SIGNATURE. CHECKS MAY NOT BE FOR LESS THAN $500. ARISING OUT OF CHECK REDEMPTION. SHARES OF THE ACCOUNT WHICH
CANCELLED CHECKS WILL BE RETURNED ONCE MONTHLY FOLLOWING THE WERE PURCHASED BY CHECK WITHIN FIFTEEN (15) CALENDAR DAYS
MONTH IN WHICH THEY ARE CLEARED BY THE AGENT. WILL NOT BE REDEEMED UNTIL THE END OF SUCH TIME PERIOD. THE
AGENT HAS THE RIGHT NOT TO HONOR CHECKS IN AMOUNTS EXCEEDING
STATE STREET BANK AND TRUST COMPANY IS HEREBY APPOINTED THE VALUE OF THE DEPOSITOR(S) SHAREHOLDER ACCOUNT AT THE
AGENT (AGENT) BY THE PERSON(S) SIGNING THIS CARD (THE TIME THE CHECK IS PRESENTED FOR PAYMENT. IF YOUR ACCOUNT IS
"DEPOSITOR(S)") AND, AS AGENT, IS AUTHORIZED AND DIRECTED TO SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE, PLEASE SEE
PRESENT CHECKS DRAWN ON THIS CHECKING ACCOUNT TO THE THE PROSPECTUS FOR ADDITIONAL TERMS AND CONDITIONS.
DESIGNATED FUND ("ACCOUNT") OR ITS REDEMPTION AGENT AND AS THE AGENT RESERVES THE RIGHT TO CHANGE, MODIFY OR TERMINATE
REQUESTS TO REDEEM SHARES OF THE ACCOUNT REGISTERED IN THE THIS CHECKING ACCOUNT AT ANY TIME UPON NOTIFICATION MAILED
NAME OF THE DEPOSITOR(S) IN THE AMOUNTS OF SUCH CHECKS AND TO THE ADDRESS OF RECORD OF THE DEPOSITOR(S).
TO DEPOSIT THE PROCEEDS OF SUCH REDEMPTIONS. THE AGENT SHALL
BE LIABLE ONLY FOR ITS OWN NEGLIGENCE.
</TABLE>
<PAGE> 71
Investment Adviser
Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Distributor
Enterprise Fund Distributors, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Telephone: 1-800-432-4320 (Toll Free)
Custodian
State Street Bank and Trust Company
Boston, MA
Transfer Agent
National Financial Data Services, Inc.
1004 Baltimore Ave.,
2nd Floor Kansas City,
MO 64105-2112
Telephone: 1-800-368-3527 (Toll Free)
Independent Accountants
PricewaterhouseCoopers LLP
Atlanta, GA
Member - Investment Company Institute
[Enterprise Group of Funds(TM) Logo]
1-800-432-4320
www.enterprisefunds.com
<PAGE> 72
THE ENTERPRISE GROUP OF FUNDS, INC.
Atlanta Financial Center
3343 Peachtree Road, N.E., Suite 450
Atlanta, Georgia 30326
For Shareholder Information Call 1-800-368-3527
PROSPECTUS
DATED OCTOBER 1, 1998
The Enterprise Group of Funds, Inc. (the "Fund") is a series of mutual funds
that seeks to provide investors a broad range of investment alternatives through
its 14 separate Funds. Each Fund is managed as if it were a separate mutual fund
issuing its own shares. The Fund's principal investment adviser, Enterprise
Capital Management, Inc., selects separate sub-advisers referred to as "Fund
Managers" that provide investment advice for the Funds and that are selected on
the basis of able investment performance in their respective areas of
responsibility.
This Prospectus explains concisely what you should know about the Fund before
you invest. Please read this Prospectus and keep it for future reference. You
can find more detailed information about the Funds in a Statement of Additional
Information ("SAI"), dated October 1, 1998, which has been filed with the
Securities and Exchange Commission ("SEC"). The SAI is incorporated by reference
into this Prospectus (which means that it is legally part of the Prospectus).
You can obtain a free copy of the SAI by calling (800) 368-3527 or by writing to
the above address. The SEC maintains a Web site (http://www.sec.gov) that
contains the SAI, material incorporated by reference and other information
regarding the Funds.
Equity Funds
Growth Fund
Growth and Income Fund
Equity Fund
Equity Income Fund
Capital Appreciation Fund
Small Company Growth Fund
Small Company Value Fund
International Growth Fund
Global Financial Services Fund
Income Funds
Government Securities Fund
High-Yield Bond Fund
Tax-Exempt Income Fund
Flexible Fund
Managed Fund
Money Market Fund
Money Market Fund
LIKE ALL MUTUAL FUND SHARES, THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENTS IN THE MONEY MARKET FUND ARE NEITHER INSURED NOR GUARANTEED BY THE
U.S. GOVERNMENT. THERE IS NO ASSURANCE THAT THE MONEY MARKET FUND WILL BE ABLE
TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
THE HIGH-YIELD BOND FUND INVESTS SIGNIFICANTLY IN LOWER RATED BONDS, COMMONLY
REFERRED TO AS "JUNK BONDS." BONDS OF THIS TYPE ARE CONSIDERED TO BE SPECULATIVE
WITH REGARD TO THE PAYMENT OF INTEREST AND RETURN OF PRINCIPAL AND HAVE SPECIAL
RISKS. THEY MAY NOT BE SUITABLE FOR ALL INVESTORS. PLEASE READ THE RISK
INFORMATION CAREFULLY.
PLEASE NOTE THAT THESE FUNDS ARE NOT BANK DEPOSITS; ARE NOT FEDERALLY INSURED;
ARE NOT ENDORSED BY ANY BANK OR GOVERNMENT AGENCY; AND ARE NOT GUARANTEED TO
ACHIEVE THEIR GOAL(S).
THE ENTERPRISE Group of Funds, Inc.
<PAGE> 73
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SMALL SMALL
GROWTH AND EQUITY CAPITAL COMPANY COMPANY
GROWTH INCOME EQUITY INCOME APPRECIATION GROWTH VALUE
FUND FUND FUND FUND FUND FUND FUND
--------- ---------- --------- --------- ------------ --------- ---------
CLASS OF SHARES: Y Y Y Y Y Y Y
---------------- --------- ---------- --------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed on
Purchase (as a % of offering price)..... none none none none none none none
Maximum Deferred Sales Load............... none none none none none none none
Maximum Sales Load Imposed On Reinvested
Dividends............................... none none none none none none none
Exchange Fee.............................. none none none none none none none
Redemption Fee............................ none none none none none none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management Fee(1)......................... 0.75% 0.75% 0.75% 0.75% 0.75% 1.00% 0.75%
12b-1..................................... none none none none none none none
Other Expenses(2)......................... 0.22% 0.30% 0.40% 0.30% 0.45% 0.40% 0.55%
---- ---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES............. 0.97% 1.05% 1.15% 1.05% 1.20% 1.40% 1.30%
==== ==== ==== ==== ==== ==== ====
EXAMPLE 1: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment assuming
(a) payment of the maximum sales charge (none), (b) a 5% annual return, and (c) redemption at the end of the time period.
1 Year.................................... $ 10 $ 11 $ 12 $ 11 $ 12 $ 14 $ 13
3 Years................................... 31 33 37 33 38 44 41
5 Years................................... 54 58 63 58 66 77 71
10 Years.................................. 119 128 140 128 145 168 157
</TABLE>
THE EXAMPLES SHOULD NOT BE CONSIDERED INDICATIONS OF PAST OR FUTURE EXPENSES OR
PERFORMANCE, AND ACTUAL EXPENSES OR PERFORMANCE MAY VARY FROM THOSE SHOWN.
The purpose of this table is to help you understand the various costs and
expenses that you will bear directly or indirectly.
If your account balance is $1,000 or less, you will be charged a $25 account
maintenance fee. This fee does not apply to Automatic Bank Draft Plan Accounts,
Automatic Investment Plan Accounts, and Retirement Plans.
(1) These fees may be higher than that of other Funds. However, the Board of
Directors has determined that such fees are reasonable in light of the services,
investment decisions and investment techniques employed.
(2) Expenses for Equity, Equity Income, Capital Appreciation, Global
Financial Services and Tax-Exempt Income Class Y Shares represent estimates of
what these expenses are expected to be for the 1998 fiscal year. Expense
information has been restated for Tax-Exempt Income to reflect a reduction in
the maximum expense cap to 0.65% effective October 1, 1997.
THE ENTERPRISE Group of Funds, Inc.
2
<PAGE> 74
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
INTERNATIONAL GLOBAL GOVERNMENT HIGH-YIELD TAX-EXEMPT
GROWTH FINANCIAL SECURITIES BOND INCOME MANAGED
FUND SERVICES FUND FUND FUND FUND FUND
------------- ------------- ---------- ---------- ---------- -------
CLASS OF SHARES: Y Y Y Y Y Y
---------------- ------------- ------------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed on
Purchase (as a % of offering price)..... none none none none none none
Maximum Deferred Sales Load............... none none none none none none
Maximum Sales Load Imposed On Reinvested
Dividends............................... none none none none none none
Exchange Fee.............................. none none none none none none
Redemption Fee............................ none none none none none none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management Fee............................ 0.85% 0.85% 0.60% 0.60% 0.50% 0.75%
12b-1..................................... none none none none none none
Other Expenses(1)......................... 0.70% 0.45% 0.25% 0.25% 0.15% 0.29%
---- ---- ---- ---- ---- ----
TOTAL FUND OPERATING EXPENSES............. 1.55% 1.30% 0.85% 0.85% 0.65% 1.04%
==== ==== ==== ==== ==== ====
EXAMPLE 1: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment
assuming (a) payment of the maximum sales charge (none), (b) a 5% annual return, and (c) redemption at the end of the
time period.
1 Year.................................... $ 16 $ 13 $ 9 $ 9 $ 7 $ 11
3 Years................................... 49 41 27 27 21 33
5 Years................................... 84 -- 47 47 36 57
10 Years.................................. 185 -- 105 105 81 127
<CAPTION>
MONEY MARKET
FUND
------------
CLASS OF SHARES: Y
---------------- ------------
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Initial Sales Load Imposed on
Purchase (as a % of offering price)..... none
Maximum Deferred Sales Load............... none
Maximum Sales Load Imposed On Reinvested
Dividends............................... none
Exchange Fee.............................. none
Redemption Fee............................ none
ANNUAL FUND OPERATING EXPENSES
(AS A % OF AVERAGE NET ASSETS)
Management Fee............................ 0.35%
12b-1..................................... none
Other Expenses(1)......................... 0.35%
----
TOTAL FUND OPERATING EXPENSES............. 0.70%
====
EXAMPLE 1: You would pay the following expenses over the indicated periods in each of the Funds on a $1,000 investment
assuming (a) payment of the maximum sales charge (none), (b) a 5% annual return, and (c) redemption at the end of the
time period.
1 Year.................................... $ 7
3 Years................................... 22
5 Years................................... 39
10 Years.................................. 87
</TABLE>
THE ENTERPRISE Group of Funds, Inc.
3
<PAGE> 75
THE ENTERPRISE GROUP OF FUNDS, INC.
PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Set forth below are the 14 Funds, their Fund Managers, and investment
objectives. The Fund is a diversified, open-end management investment
company. Enterprise Capital Management, Inc. (the "Adviser") serves as
investment adviser. The Fund consists of common stock divided into 14
Funds consisting of four separate classes for each Fund. Shares are
transferable within each class.
<TABLE>
<CAPTION>
FUND MANAGER INVESTMENT OBJECTIVES
------------ ---------------------
<S> <C> <C> <C>
EQUITY FUNDS
GROWTH FUND Capital appreciation, primarily from investments
Montag & Caldwell, Inc. in common stocks.
Atlanta, Georgia
- ------------------------------------------------------------------------------------------------------------
GROWTH AND INCOME FUND Total return in excess of the total return of the
Retirement System Investors Inc. Lipper Growth and Income Mutual Funds Average
New York, New York measured over a period of three to five years, by
investing primarily in a broadly diversified group
of large capitalization stocks.
- ------------------------------------------------------------------------------------------------------------
EQUITY FUND Long term capital appreciation, primarily from
OpCap Advisors investments in securities of companies that are
New York, New York believed by the Fund Manager to be undervalued.
- ------------------------------------------------------------------------------------------------------------
EQUITY INCOME FUND A combination of growth and income to achieve an
1740 Advisers, Inc. above average and consistent total return,
New York, New York primarily from investments in dividend-paying
common stocks.
- ------------------------------------------------------------------------------------------------------------
CAPITAL APPRECIATION FUND Maximum capital appreciation, primarily through
Provident Investment Counsel, Inc. investment in common stock of companies that
Pasadena, California demonstrate accelerating earnings momentum and
consistently strong financial characteristics.
- ------------------------------------------------------------------------------------------------------------
SMALL COMPANY GROWTH FUND Capital appreciation by investing primarily in
Pilgrim Baxter & Associates, Ltd. common stocks of small capitalization companies
Wayne, Pennsylvania believed by the Fund Manager to have an outlook
for strong earnings growth and potential for
significant capital appreciation.
- ------------------------------------------------------------------------------------------------------------
SMALL COMPANY VALUE FUND Maximum capital appreciation, primarily through
Gabelli Asset Management Company investment in the equity securities of companies
Rye, New York that have a market capitalization of no more than
$1 billion.
- ------------------------------------------------------------------------------------------------------------
INTERNATIONAL GROWTH FUND Capital appreciation, primarily through a
Brinson Partners, Inc. diversified portfolio of non-U.S. equity
Chicago, Illinois securities.
- ------------------------------------------------------------------------------------------------------------
GLOBAL FINANCIAL SERVICES FUND Capital appreciation, primarily through investment
Sanford C. Bernstein & Co., Inc. in common stocks of domestic and foreign financial
New York, New York services companies.
- ------------------------------------------------------------------------------------------------------------
INCOME FUNDS
GOVERNMENT SECURITIES FUND Current income and safety of principal, primarily
TCW Funds Management, Inc. from securities that are obligations of the U.S.
Los Angeles, California Government, or its agencies, or its
instrumentalities.
- ------------------------------------------------------------------------------------------------------------
HIGH-YIELD BOND FUND Maximum current income, primarily from debt
Caywood-Scholl Capital Management securities that are rated Ba or lower by Moody's
San Diego, California Investors Service, Inc. or BB or lower by Standard
& Poor's Corporation.
- ------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INCOME FUND A high level of current income exempt from federal
MBIA Capital Management Corp. income tax, with consideration given to
Armonk, New York preservation of principal, primarily from
investment in a diversified Fund of long-term
investment grade municipal bonds.
- ------------------------------------------------------------------------------------------------------------
FLEXIBLE FUND
MANAGED FUND Growth of capital over time through investment in
OpCap Advisors a Fund consisting of common stocks, bonds and cash
New York, New York equivalents, the percentages of which will vary
based on the Fund Manager's assessments of
relative investment values.
- ------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
MONEY MARKET FUND The highest possible level of current income
Enterprise Capital Management, Inc. consistent with preservation of capital and
Atlanta, Georgia liquidity by investing in obligations maturing in
one year or less from the time of purchase.
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE ENTERPRISE Group of Funds, Inc.
4
<PAGE> 76
INVESTMENT RISK FACTORS
The risk characteristics of each Fund are different. In general, investors
should consider the following risks: An investment in any of the Funds carries
the risk that the net asset value of the Fund shares will fluctuate in response
to market conditions. Further, an investment in any of the Income Funds carries
the risk that the issuers of securities in the Income Funds may default on the
payment of principal and interest. An investment in the High-Yield Bond Fund
carries an increased risk that issuers of securities in which the High-Yield
Bond Fund invests may default in the payment of principal and interest as
compared to the risk of such defaults in the other Income Funds. In addition, an
investment in the High-Yield Bond Fund may be subject to certain other risks
relating to the market price, relative liquidity in the secondary market and
sensitivity to interest rate and economic changes of the noninvestment grade
securities in which the High-Yield Bond Fund invests that are higher than may be
associated with higher rated, investment grade securities. The Small Company
Growth and Small Company Value Funds carry an increased risk that smaller
capitalization companies may experience higher growth rates and higher failure
rates than do larger companies. The limited volume and frequency of trading of
small capitalization companies may subject their stocks to greater price
deviations than stocks of larger companies. The International Growth Fund and
the Global Financial Services Fund carry additional risks associated with
possibly less stable foreign securities and currencies. Because of the
short-term nature of the Money Market Fund's investments, an investment in
shares of the Money Market Fund is subject to relatively little market risk and
financial risk, but is subject to a high level of current income volatility. In
addition, the Money Market Fund uses the amortized cost method to value its Fund
securities and seeks to maintain a constant net asset value of $1.00 per share.
There is no assurance that this Fund will be able to maintain this constant net
asset value. See "Certain Investment Techniques and Associated Risks."
PURCHASE ALTERNATIVES
Each Fund offers four Classes of shares. Shares of each Class are generally
offered at the net asset value next determined after receipt of your purchase
order plus (i) an initial ("front-end") sales charge (Class A shares) or (ii) a
deferred sales charge (Class B and C shares). The following is a brief
description of the Y Class of shares offered. Class A, Class B, Class C Shares
are offered pursuant to a separate prospectus.
CLASS Y SHARES: Class Y shares do not incur an initial sales charge
when purchased. Class Y shares are not subject to any
ongoing distribution fees or service fees. Class Y
shares are subject to an investment of $1,000,000.
Institutional investors eligible to purchase Class Y
shares include banks, savings institutions, trust
companies, insurance companies, investment companies
as defined by the Investment Company Act of 1940,
pension or profit sharing trusts, certain wrap
account clients of broker/dealers, former
shareholders of Retirement System Fund Inc. ("RSF")
whose shares were merged into The Enterprise Group of
Funds, Inc., direct referrals of Fund Managers or
Evaluation Associates, Inc. ("EAI"), or other
financial institutional buyer. Wrap account clients
of broker/dealers, former RSF shareholders, and
direct referrals of Fund Managers or Evaluation
Associates, Inc. ("EAI") are offered Class Y shares
at a lower minimum purchase amount.
THE ENTERPRISE Group of Funds, Inc.
5
<PAGE> 77
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGH THE PERIODS INDICATED)
The audited financial highlights which follow are part of the Fund's financial
statements and are included in the Fund's Annual Report to Shareholders. The
Fund's 1997 Annual Report to Shareholders is incorporated by reference into the
Statement of Additional Information. The Annual Report to Shareholders may be
obtained without charge by calling the Fund at 800-368-3527. The Report contains
information about the performance of the Funds.
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED AUGUST 8 THROUGH
GROWTH FUND (CLASS Y) DECEMBER 31, 1997 DECEMBER 31, 1996
- ---------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of
period........................... $ 13.12 $ 11.96
Net investment income (loss)...... (0.02) 0.00
Net realized and unrealized gains
(losses) on investments.......... 4.27 1.90
---------------------------------------
Total from investment
operations....................... 4.25 1.90
---------------------------------------
Dividends from net investment
Income........................... 0.00 0.00
Distributions from net realized
Capital Gains.................... 0.35 0.74
---------------------------------------
Total distributions............... 0.35 0.74
---------------------------------------
Net asset value, end of period.... $ 17.02 $ 13.12
---------------------------------------
Total return...................... 32.40% 15.91%(B)
Net assets end of period (in
thousands)....................... $44,596 $ 2,339
Ratio of expenses to average net
assets........................... 0.97%(F) 1.10%(AF)
Ratio of expenses to average net
assets (excluding waivers)....... 0.97%(F) 1.10%(AF)
Ratio of net investment income
(loss) to average net assets..... (0.10)% 0.04%(A)
Ratio of net investment income
(loss) to average net assets
(excluding waivers).............. (0.10)% 0.04%(A)
Portfolio turnover................ 22.28% 29.90%(A)
Average commission per share(E)... $0.0509 $0.0636
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD YEAR ENDED SEPTEMBER 30,
OCTOBER 1 THROUGH ----------------------------------------------------------
GROWTH AND INCOME FUND (CLASS Y) DECEMBER 31, 1997 1997 1996 1995 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period.......................... $ 25.73 $ 20.11 $ 16.69 $12.72 $12.08 $10.98 $10.45
Net investment income (loss)..... 0.06 0.35 0.21 0.13 0.15 0.18 0.23
Net realized and unrealized
gains (losses) on
investments..................... 0.02 6.18 3.45 4.22 0.74 1.84 0.60
-------------------------------------------------------------------------------
Total from investment
operations...................... 0.08 6.53 3.66 4.35 0.89 2.02 0.83
-------------------------------------------------------------------------------
Dividends from net investment
income.......................... 0.11 0.20 0.24 0.16 0.14 0.28 0.08
Distributions from net realized
capital gains................... 0.46 0.71 0.00 0.22 0.11 0.64 0.22
-------------------------------------------------------------------------------
Total distributions.............. 0.57 0.91 0.24 0.38 0.25 0.92 0.30
-------------------------------------------------------------------------------
Net asset value, end of
period.......................... $ 25.24 $ 25.73 $ 20.11 $16.69 $12.72 $12.08 $10.98
-------------------------------------------------------------------------------
Total return..................... 0.31%(B) 33.55% 22.21% 35.24% 7.47% 19.39% 8.11%
Net assets end of period (in
thousands)...................... $15,542 $15,428 $ 8,865 $5,657 $3,639 $3,094 $1,049
Ratio of expenses to average net
assets.......................... 1.05%(A) 0.99% 0.97% 0.90% 0.90% 0.90% 0.90%
Ratio of expenses to average net
assets (excluding waivers)...... 1.68%(A) 2.20% 2.05% 2.20% 2.23% 3.33% 3.36%
Ratio of net investment income
(loss) to average net assets.... 0.96%(A) 0.88% 1.23% 1.52% 1.17% 1.31% 1.86%
Ratio of net investment income
(loss) to average net assets
(excluding waivers)............. 0.33% (A) (0.33)% 0.15% 0.22% (0.16)% (1.12)% (0.60)%
Portfolio turnover............... 1.46%(A) 15.69% 18.08% 25.49% 9.64% 21.79% 61.27%
Average commission per
share(E)........................ $0.0600 $0.0560 $0.0600
<CAPTION>
FOR THE PERIOD
MAY 10 THROUGH
GROWTH AND INCOME FUND (CLASS Y) SEPTEMBER 30, 1991
- -------------------------------- ------------------
<S> <C>
Net asset value, beginning of
period.......................... $10.00
Net investment income (loss)..... 0.14
Net realized and unrealized
gains (losses) on
investments..................... 0.31
Total from investment
operations...................... 0.45
Dividends from net investment
income.......................... 0.00
Distributions from net realized
capital gains................... 0.00
Total distributions.............. 0.00
Net asset value, end of
period.......................... $10.45
Total return..................... 4.50%(B)
Net assets end of period (in
thousands)...................... $1,560
Ratio of expenses to average net
assets.......................... 0.90%(A)
Ratio of expenses to average net
assets (excluding waivers)...... 2.70%(A)
Ratio of net investment income
(loss) to average net assets.... 3.31%(A)
Ratio of net investment income
(loss) to average net assets
(excluding waivers)............. 1.51%(A)
Portfolio turnover............... 12.49%
Average commission per
share(E)........................
</TABLE>
A Annualized
B Not Annualized
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
F Effective September 1, 1995, ratio includes expenses paid indirectly.
THE ENTERPRISE Group of Funds, Inc.
6
<PAGE> 78
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD YEAR ENDED SEPTEMBER 30,
OCTOBER 1 THROUGH --------------------------------------------------------------
SMALL COMPANY GROWTH FUND (CLASS Y) DECEMBER 31, 1997 1997 1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........ $ 26.62 $ 25.08 $ 19.05 $ 14.01 $ 14.74 $ 11.83 $ 10.54
Net investment income (loss)................ 0.16 (0.13) (0.17) (0.12) (0.04) (0.13) (0.17)
Net realized and unrealized gains (losses)
on investments............................. (2.80) 3.73 7.62 5.49 1.58 4.36 1.49
-----------------------------------------------------------------------------------
Total from investment operations............ (2.64) 3.60 7.45 5.37 1.54 4.23 1.32
-----------------------------------------------------------------------------------
Dividends from net investment income........ 0.00 0.00 0.00 0.00 0.00 0.11 0.00
Distributions from net realized capital
gains...................................... 0.55 2.06 1.42 0.33 2.27 1.21 0.01
Return of Capital........................... 0.00 0.00 0.00 0.00 0.00 0.00 0.02
-----------------------------------------------------------------------------------
Total distributions......................... 0.55 2.06 1.42 0.33 2.27 1.32 0.03
-----------------------------------------------------------------------------------
Net asset value, end of period.............. $ 23.43 $ 26.62 $ 25.08 $ 19.05 $ 14.01 $ 14.74 $ 11.83
-----------------------------------------------------------------------------------
Total return................................ (9.92)%(B) 16.24% 42.07% 39.20% 11.89% 38.05% 13.80%
Net assets end of period (in thousands)..... $13,540 $15,355 $ 6,609 $ 2,950 $ 1,825 $ 1,352 $ 684
Ratio of expenses to average net assets..... 1.40%(A) 1.84% 1.96% 1.85% 1.85% 1.85% 1.86%
Ratio of expenses to average net assets
(excluding waivers)........................ 1.96%(A) 3.08% 3.46% 5.15% 6.16% 8.06% 9.76%
Ratio of net investment income (loss) to
average net assets......................... (1.12)%(A) (1.30)% (1.43)% (1.33)% (1.37)% (1.34)% (1.10)%
Ratio of net investment income (loss) to
average net assets (excluding waivers)..... (1.68)%(A) (2.54)% (2.93)% (4.63)% (5.68)% (7.55)% (9.00)%
Portfolio turnover.......................... 23.68% 157.51% 77.94% 84.05% 72.59% 144.49% 138.46%
Average commission per share(E)............. $0.0518 $0.0503 $0.0486
<CAPTION>
FOR THE PERIOD
MAY 10 THROUGH
SEPTEMBER 30,
SMALL COMPANY GROWTH FUND (CLASS Y) 1991
- -------------------------------------------- -----------------
<S> <C>
Net asset value, beginning of period........ $ 10.00
Net investment income (loss)................ (0.02)
Net realized and unrealized gains (losses)
on investments............................. 0.56
Total from investment operations............ 0.54
Dividends from net investment income........ 0.00
Distributions from net realized capital
gains...................................... 0.00
Return of Capital........................... 0.00
Total distributions......................... 0.00
Net asset value, end of period.............. $ 10.54
Total return................................ 5.40%(B)
Net assets end of period (in thousands)..... $ 602
Ratio of expenses to average net assets..... 1.85%(A)
Ratio of expenses to average net assets
(excluding waivers)........................ 2.70%(A)
Ratio of net investment income (loss) to
average net assets......................... (0.46)%(A)
Ratio of net investment income (loss) to
average net assets (excluding waivers)..... (1.31)%(A)
Portfolio turnover.......................... 25.38%
Average commission per share(E).............
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
------------------------ MAY 25 THROUGH
SMALL COMPANY VALUE FUND (CLASS Y) 1997 1996 DECEMBER 31, 1995
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 5.77 $ 5.43 $ 5.37
Net investment income (loss)...................... 1.45 0.01 0.04
Net realized and unrealized gains(losses) on
investments...................................... 1.12 0.63 0.26
---------------------------------------------
Total from investment operations.................. 2.57 0.64 0.30
---------------------------------------------
Dividends from net investment income.............. 0.00 0.00 0.04
Distributions from net realized capital gains..... 0.53 0.30 0.20
---------------------------------------------
Total distributions............................... 0.53 0.30 0.24
---------------------------------------------
Net asset value, end of period.................... $ 7.81 $ 5.77 $ 5.43
---------------------------------------------
Total return...................................... 44.53% 11.83% 5.55%(B)
Net assets end of period (in thousands)........... $ 119 $ 1,926 $ 2,832
Ratio of expenses to average net assets........... 1.30% 1.30% 1.30%(A)
Ratio of expenses to average net assets (excluding
waivers)......................................... 1.85% 1.92% 1.81%(A)
Ratio of net investment income (loss) to average
net assets....................................... 2.74% 0.35% 0.18%(A)
Ratio of net investment income (loss) to average
net assets (excluding waivers)................... 2.19% (0.27)% (0.33)%(A)
Portfolio turnover................................ 62.51% 143.58% 36.50%(A)
Average commission per share(E)................... $0.0470 $0.0483
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
-------------------------- JULY 5 THROUGH
INTERNATIONAL GROWTH FUND (CLASS Y) 1997 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period.............. $ 17.10 $ 16.07 $14.93
Net investment income (loss)...................... 0.17 0.14 0.02
Net realized and unrealized gains(losses) on
investments...................................... 0.72 1.92 2.02
----------------------------------------------
Total from investment operations.................. 0.89 2.06 2.04
----------------------------------------------
Dividends from net investment income.............. 0.15 0.16 0.14
Distributions from net realized capital gains..... 1.13 0.87 0.76
----------------------------------------------
Total distributions............................... 1.28 1.03 0.90
----------------------------------------------
Net asset value, end of period.................... $ 16.71 $ 17.10 $16.07
----------------------------------------------
Total return...................................... 5.21% 12.86% 13.65%(B)
Net assets end of period (in thousands)........... $10,986 $ 8,828 $3,109
Ratio of expenses to average net assets........... 1.55% 1.55% 1.55%(A)
Ratio of expenses to average net assets (excluding
waivers)......................................... 1.66% 1.75% 1.75%(A)
Ratio of net investment income (loss) to average
net assets....................................... 0.95% 1.03% 0.26%(A)
Ratio of net investment income (loss) to average
net assets (excluding waivers) 0.84% 0.84% 0.05%(A)
Portfolio turnover................................ 27.08% 23.79% 31.10%(A)
Average commission per share(E)................... $0.0275 $0.0221
</TABLE>
A Annualized
B Not Annualized
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
7
<PAGE> 79
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 17 THROUGH
GOVERNMENT SECURITIES FUND (CLASS Y) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $11.87
Net investment income (loss)................................ 0.35
Net realized and unrealized gains(losses) on investments.... 0.15
------
Total from investment operations............................ 0.50
------
Dividends from net investment income........................ 0.35
Distributions from net realized capital gains............... 0.00
------
Total distributions......................................... 0.35
------
Net asset value, end of period.............................. $12.02
------
Total return................................................ 4.02%(B)
Net assets end of period (in thousands)..................... $7,569
Ratio of expenses to average net assets..................... 0.85%(A)
Ratio of expenses to average net assets (excluding
waivers)................................................... 1.02%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 6.40%(A)
Ratio of net investment income (loss) to average net assets
(excluding waivers) 6.23%(A)
Portfolio turnover.......................................... 9.61%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 25 THROUGH
HIGH-YIELD BOND FUND (CLASS Y) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $12.17
Net investment income (loss)................................ 0.67
Net realized and unrealized gains (losses) on investments... 0.18
------
Total from investment operations............................ 0.85
------
Dividends from net investment income........................ 0.67
Distributions from net realized capital gains............... 0.00
------
Total distributions......................................... 0.67
------
Net asset value, end of period.............................. $12.35
------
Total return................................................ 5.24%(B)
Net assets end of period (in thousands)..................... $ 809
Ratio of expenses to average net assets..................... 0.85%(A)
Ratio of expenses to average net assets (excluding
waivers)................................................... 1.02%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 8.26%(A)
Ratio of net investment income (loss) to average net assets
(excluding waivers)........................................ 8.09%(A)
Portfolio turnover.......................................... 175.38%(A)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
-------------------------- 7/5/95 THROUGH
MANAGED FUND (CLASS Y) 1997 1996 12/31/95
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 7.98 $ 6.70 $ 6.17
Net investment income (loss)......................... 0.08 0.09 0.03
Net realized and unrealized gains (losses) on
investments......................................... 1.64 1.42 0.57
----------------------------------------------
Total from investment operations..................... 1.72 1.51 0.60
----------------------------------------------
Dividends from net investment income................. 0.07 0.09 0.04
Distributions from net realized capital gains........ 0.36 0.14 0.03
----------------------------------------------
Total distributions.................................. 0.43 0.23 0.07
----------------------------------------------
Net asset value, end of period....................... $ 9.27 $ 7.98 $ 6.70
----------------------------------------------
Total return......................................... 21.60% 22.63% 9.80%(B)
Net assets end of period (in thousands).............. $80,879 $57,794 $26,664
Ratio of expenses to average net assets.............. 1.04% 1.12% 1.30%(A)
Ratio of expenses to average net assets (excluding
waivers)............................................ 1.04% 1.12% 1.41%(A)
Ratio of net investment income (loss) to average net
assets.............................................. 0.92% 1.57% 1.39%(A)
Ratio of net investment income (loss) to average net
assets (excluding waivers).......................... 0.92% 1.57% 1.28%(A)
Portfolio turnover................................... 28.17% 33.21% 26.40%(A)
Average commission per share(E)...................... $0.0552 $0.0551
</TABLE>
A Annualized
B Not Annualized
E Disclosure not applicable to periods prior to 1996. Represents average
commissions rate per share charged to the fund on purchase and sales of equity
investments on which commissions are charged during the period.
THE ENTERPRISE Group of Funds, Inc.
8
<PAGE> 80
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
JULY 17 THROUGH
MONEY MARKET FUND (CLASS Y) DECEMBER 31, 1997
- -------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period........................ $ 1.00
Net investment income (loss)................................ 0.02
Net realized and unrealized gains (losses) on investments... 0.00
------
Total from investment operations............................ 0.02
------
Dividends from net investment income........................ 0.02
Distributions from net realized capital gains............... 0.00
------
Total distributions......................................... 0.02
------
Net asset value, end of period.............................. $ 1.00
------
Total return................................................ 2.31%(B)
Net assets end of period (in thousands)..................... $2,700
Ratio of expenses to average net assets..................... 0.70%(A)
Ratio of expenses to average net assets (excluding
waivers)................................................... 0.95%(A)
Ratio of net investment income (loss) to average net
assets..................................................... 4.96%(A)
Ratio of net investment income (loss) to average net assets
(excluding waivers)........................................ 4.71%(A)
</TABLE>
A Annualized
B Not Annualized
THE ENTERPRISE Group of Funds, Inc.
9
<PAGE> 81
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The following descriptions of the Funds are intended to help you select the Fund
which is appropriate for your investment objective. You may wish to pursue your
objectives by investing in more than one Fund.
The investment objectives of each Fund may not be changed without approval of a
majority of the outstanding voting securities of that Fund.
EQUITY FUNDS
Under normal market conditions, at least 65% of the net asset value of the nine
Equity Funds will be invested in common equity securities. The remainder of the
Equity Funds' assets may be invested in repurchase agreements, bankers
acceptances, bank certificates of deposit, commercial paper and similar money
market instruments, convertible bonds, convertible preferred stock, preferred
stock, corporate bonds, U.S. Treasuries, notes and bonds, American Depository
Receipts ("ADRs"), European Depository Receipts ("EDRs"), rights and warrants.
The Growth, Growth and Income, Equity, Equity Income, Capital Appreciation,
Global Financial Services, Small Company Growth and Small Company Value Funds
invest in securities that are traded on national securities exchanges and in the
over-the-counter market. Each of these Funds, except the Global Financial
Services Fund, may invest up to 20% of its assets in foreign securities provided
they are listed on a domestic or foreign securities exchange or are represented
by ADRs. The Global Financial Services Fund may invest over 50% of its assets in
foreign securities. No Fund may invest more than 10% of its net assets in
illiquid, including restricted, securities. As noted below, the International
Growth Fund invests principally in the securities of foreign issuers listed on
recognized foreign exchanges, but may also invest in securities traded on the
over-the-counter market.
GROWTH FUND
The objective of the Growth Fund is appreciation of capital primarily through
investments in common stocks. The Fund's common stock selection emphasizes those
companies having growth characteristics, but the Fund's investment policy
recognizes that securities of other companies may be attractive for capital
appreciation purposes by virtue of special developments or depression in price
believed to be temporary. The potential for appreciation of capital is the basis
for investment decisions; any income is incidental.
GROWTH AND INCOME FUND
The objective of the Growth and Income Fund is to achieve a total return in
excess of the total return of the Lipper Growth and Income Mutual Funds Average,
measured over a period of three to five years, by investing primarily in a
broadly diversified group of large capitalization companies. The Fund seeks this
objective primarily through capital appreciation with income as a secondary
consideration. The Fund will invest in securities of companies which the Fund
Manager believes to be financially sound and will consider such factors as the
sales, growth and profitability prospects for the economic sector and markets in
which the company operates and for the services of products it provides; the
financial condition of the company; its ability to meet its liabilities and to
provide income in the form of dividends; the prevailing price of the security;
how that price compares to historical price levels of the security, to current
price levels in the general market, and to the prices of competing companies;
projected earnings estimates and earnings growth rate of the company, and the
relation of those figures to the current price.
In general, the Fund will invest in stocks of companies with market
capitalizations in excess of $750 million. Although there is no assurance that
the Fund will meet its objective, the securities held in the Growth and Income
Fund will generally reflect the price
THE ENTERPRISE Group of Funds, Inc.
10
<PAGE> 82
volatility of the broad equity market (i.e., the Standard & Poor's 500 Index).
EQUITY FUND
The investment objective of the Equity Fund is long term capital appreciation
through investment in securities (primarily equity securities) of companies that
are believed by the Fund Manager to be undervalued in the marketplace in
relation to factors such as the companies' assets or earnings. It is the Fund
Manager's intention to invest in securities of companies which in the Fund
Manager's opinion possess one or more of the following characteristics:
undervalued assets, valuable consumer or commercial franchises, securities
valuation below peer companies, substantial and growing cash flow and/or a
favorable price to book value relationship. Investment policies aimed at
achieving the Fund's objective are set in a flexible framework of securities
selection which primarily includes equity securities, such as common stocks,
preferred stocks, convertible securities, rights and warrants in proportions
which vary from time-to-time. Under normal circumstances at least 65% of the
Fund's assets will be invested in equity securities. The Fund will invest
primarily in stocks listed on the New York Stock Exchange. In addition, it may
also purchase securities listed on other domestic securities exchanges,
securities traded in the domestic over-the-counter market and foreign securities
provided that they are listed on a domestic or foreign securities exchange or
represented by ADRs listed on a domestic securities exchange or traded in the
United States over-the-counter market.
EQUITY INCOME FUND
The objective of the Equity Income Fund is a combination of growth and income to
achieve an above average and consistent total return, primarily from investments
in dividend-paying common stocks.
The Fund's principal criterion in stock selection is above-average yield, and it
uses this criterion as a discipline to enhance stability and reduce market risk.
Subject to this primary criterion, the Fund invests in stocks that have
relatively low price to earnings ratios or relatively low price to book value
ratios.
CAPITAL APPRECIATION FUND
The objective of the Capital Appreciation Fund is maximum capital appreciation,
primarily through investments in common stocks of companies that demonstrate
accelerating earnings momentum and consistently strong financial
characteristics.
The Fund invests primarily in common stocks of companies which meet the Fund
Manager's criteria of: (a) steadily increasing earnings; and (b) a three-year
average performance record of sales, earnings, dividend growth, pretax margins,
return on equity and reinvestment rate at an aggregate average of 1.5 times the
average performance of the Standard & Poor's 500 common stocks ("S&P 500") for
the same period. The Fund attempts to invest in a range of small, medium and
large companies designed to achieve an average capitalization of the companies
in which it invests that is less than the average capitalization of the S&P 500.
The potential for maximum capital appreciation is the basis for investment
decisions; any income is incidental.
SMALL COMPANY GROWTH FUND
The Small Company Growth Fund seeks capital appreciation and invests primarily
in common stocks of small capitalization companies believed by the Fund Manager
to have an outlook for strong earnings growth and potential for significant
capital appreciation. The Fund will normally be as fully invested as practicable
in common stocks and securities convertible into common stocks, but also may
invest up to 5% of its assets in warrants and rights to purchase common stocks.
In the option of the Fund Manager, there may be times when the shareholder's
best interests are best served and the investment objective is more likely to be
achieved by having varying amounts of the Fund's assets in convertible
securities. Under normal market conditions, the Fund will invest at least
THE ENTERPRISE Group of Funds, Inc.
11
<PAGE> 83
65% of its total assets in common stocks and convertible securities of small
capitalization companies (market capitalization of up to $1 billion). At certain
times that percentage may be substantially higher. Securities will be sold when
the Fund Manager believes that anticipated appreciation no longer probable,
alternative investments offer superior appreciation prospects, or the risk of a
decline in market price is too great. Because of its policy with respect to the
sales of investments, the Fund may from time to time realize short-term gains or
losses. The Fund will likely have somewhat greater volatility than the stock
market in general, a measured by the S&P 500 Index.
SMALL COMPANY VALUE FUND
The objective of the Small Company Value Fund is maximum capital appreciation,
primarily through investment of at least 65% of Fund assets in the common equity
securities of companies (based on the total outstanding common shares at the
time of investment) which have a market capitalization of up to $1 billion.
The Fund intends to invest the remaining 35% of its total assets in the same
manner but reserves the right to use some or all of the 35% to invest in equity
securities of companies (based on the total outstanding common shares at the
time of investment) which have a market capitalization of more than $1 billion.
In pursuing its objective, the Fund's strategy will be to invest in stocks of
companies with value that may not be fully reflected by current stock price.
Since small companies tend to be less actively followed by stock analysts, the
market may overlook favorable trends and then adjust its valuation more quickly
once investor interest has surfaced. The Fund Manager seeks out companies in the
public market that are selling at a discount to their private market value (PMV)
measured using proprietary research techniques in areas of core competencies.
The Fund Manager then determines whether there is an emerging catalyst that will
focus investor attention on the underlying assets of the company. Smaller
companies may be subject to a valuation catalyst such as increased investor
attention, takeover efforts or a change in management.
INTERNATIONAL GROWTH FUND
The objective of the International Growth Fund is capital appreciation,
primarily through a diversified Fund of non-U.S. equity securities.
It is a fundamental policy of the Fund that it will invest at least 80% of the
value of its assets (except when maintaining a temporary defensive position) in
equity securities of companies domiciled outside the United States. That portion
of the Fund not invested in equity securities is, in normal circumstances,
invested in U.S. and foreign government securities, high grade commercial paper,
certificates of deposit, foreign currency, banker acceptances, cash and cash
equivalents, time deposits, repurchase agreements and similar money market
instruments, both foreign and domestic. The Fund may invest in convertible debt
securities of foreign issuers which are convertible into equity securities at
such time as a market for equity securities is established in the country
involved.
The Fund Manager's investment perspective for the Fund is to invest in the
equity securities of non-U.S. markets and companies which are believed to be
undervalued based upon internal research and proprietary valuation systems. This
international equity strategy reflects the Fund Manager's decisions concerning
the relative attractiveness of asset classes, the individual international
equity markets, industries across and within those markets, other common risk
factors within those markets and individual international companies. The Fund
Manager initially identifi-es those securities which it believes to be
undervalued in relation to the issuer's assets, cash flow, earnings and
revenues. The relative performance of foreign currencies is an important factor
in the Fund's performance. The Fund Manager may manage the Fund's exposure to
various currencies to take advantage of different yield, risk and return
characteristics. The
THE ENTERPRISE Group of Funds, Inc.
12
<PAGE> 84
Fund Manager's proprietary valuation model determines which securities are
potential candidates for inclusion in the Fund.
The benchmark for the fund is the European, Australian, Far East ("EAFE") Index
(the "Benchmark"). The Benchmark is a market driven broad based index which
includes non-U.S. equity markets in terms of capitalization and performance. The
Benchmark is designed to provide a representative total return for all major
stock exchanges located outside the U.S. From time to time, the Fund Manager may
substitute securities in an equivalent index when it believes that such
securities in the index more accurately reflect the relevant international
market.
As a general matter, the Fund Manager will purchase for the Fund only securities
contained in the underlying index relevant to the Benchmark. Brinson Partners
will attempt to enhance the long-term risk and return performance of the Fund
relative to the Benchmark by deviating from the normal Benchmark mix of country
allocation and currencies in reaction to discrepancies between current market
prices and fundamental values. The active management process is intended to
produce a superior performance relative to the Benchmark index.
The Fund Manager will purchase securities of companies domiciled in a minimum of
8 to 12 countries outside the United States.
GLOBAL FINANCIAL SERVICES FUND
The investment objective of the Global Financial Services Fund is capital
appreciation. The Fund seeks to achieve its objective through investment in the
common stocks of domestic and foreign financial services companies. Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
financial services companies.
For Fund purposes, a financial services company is a firm that in its most
recent fiscal year either (i) derived at least 50% of its revenues or earnings
from financial services activities, or (ii) devoted at least 50% of its assets
to such activities. Financial services companies provide financial services to
consumers and businesses and include the following types of U.S. and foreign
firms: commercial banks, thrift institutions and their holding companies;
consumer and industrial finance companies; diversified financial services
companies; investment banks; securities brokerage and investment advisory firms;
financial technology companies; real estate-related firms; leasing firms; credit
card companies; government sponsored financial enterprises; investment
companies; insurance brokerages; and various firms in all segments of the
insurance industry such as multi-line property and casualty, and life insurance
companies and insurance holding companies.
The Fund will concentrate its investments in the financial services industry.
This policy may not be changed without the approval of a majority of the Fund's
shareholders.
The Fund Manager seeks to maximize returns by combining fundamental and
quantitative research to identify securities of financial services companies
that are attractively priced relative to their expected returns. Its research
analysts employ a long-term approach to forecasting the earnings and growth
potential of companies and attempt to construct global portfolios that produce
maximum returns at a given risk level.
INCOME FUNDS
Investors should refer to the Appendix to the Statement of Additional
Information for a description of the Moody's Investors Service, Inc. ("Moody's")
and Standard & Poor's ("S&P") ratings mentioned below.
GOVERNMENT SECURITIES FUND
The objective of the Government Securities Fund is current income and safety of
principal primarily from securities that are obligations of the U.S. Government,
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its agencies and instrumentalities ("U.S. Government Securities").
It is a fundamental policy of the Fund that under normal conditions at least 80%
of the value of its net assets will be invested in U.S. Government Securities.
Securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities are generally considered to be of the same or higher credit
quality as privately issued securities rated Aaa by Moody's or AAA by S&P.
U.S. Government Securities consist of direct obligations of the U.S. Treasury
(such as treasury bills, treasury notes and treasury bonds) and securities
issued or guaranteed by agencies and instrumentalities of the United States
Government. Those securities issued by agencies or instrumentalities may or may
not be backed by the full faith and credit of the United States. Examples of
full faith and credit securities are securities issued by the Government
National Mortgage Association ("GNMA Certificates"). Examples of agencies or
instrumentalities whose securities are not backed by the full faith and credit
of the United States are the Federal Farm Credit System, the Federal Home Loan
Banks, the Tennessee Valley Authority, the United States Postal Service and the
Export-Import Bank. The Fund may concentrate from time to time in different
securities described above in order to obtain the highest level of current
income and safety of principal.
The remainder of the Fund's assets may be invested in repurchase agreements,
bankers acceptances, bank certificates of deposit, commercial paper and similar
money market instruments, corporate bonds and other mortgage-related securities
(including collateralized mortgage obligations or "CMOs") rated Aaa by Moody's
or AAA by S&P at the time of the investment or determined by the Fund Manager to
be of comparable credit quality at the time of investment to such rated
securities. In making such investments, the Fund Manager seeks income but gives
careful attention to security of principal and considers such factors as
marketability and diversification. For a discussion of CMOs and related risks,
see "Certain Investment Techniques and Associated Risks".
As described in "Certain Investment Techniques and Associated Risks," the Fund
may write and sell covered call option contracts on securities that it owns (in
an effort to enhance income through hedging and other investment techniques) to
the extent of 20% of the value of its net assets at the time such option
contracts are written.
HIGH-YIELD BOND FUND
The objective of the High-Yield Bond Fund is maximum current income, primarily
from debt securities that are rated Ba or lower by Moody's or BB or lower by
Standard & Poor's.
It is a fundamental policy of the Fund that under normal circumstances it will
invest at least 80% of the value of its total assets in high-yielding, income-
producing corporate bonds that are rated B3 or better by Moody's or B- or better
by S&P. The corporate bonds in which the Fund invests are high-yielding but
normally carry a greater credit risk than bonds with higher ratings. In
addition, such bonds, commonly referred to as "junk bonds", may involve greater
volatility of price than higher-rated bonds. For a discussion of high-yield
securities and related risks, see "Certain Investment Techniques and Associated
Risks".
The Fund's investments are selected by the Fund Manager after careful
examination of the economic outlook to determine those industries that appear
favorable for investments. Industries going through a perceived decline
generally are not candidates for selection. After the industries are selected,
bonds of issuers within those industries are selected based on their
creditworthiness, their yields in relation to their credit and the relative
strength of their common stock prices. Companies near or in bankruptcy are not
considered for investment. The Fund does not purchase bonds which are rated Ca
or lower by Moody's or CC or lower by S&P or which, if unrated, in the judgment
of the Fund Manager have character-
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istics of such lower-grade bonds. Should an investment purchased with the
above-described credit quality requisites be downgraded to Ca or lower or CC or
lower, the Fund Manager shall have discretion to hold or liquidate the security.
Subject to the restrictions described above, under normal circumstances, up to
20% of the Fund's assets may include: (1) bonds rated Caa by Moody's or CCC by
S&P; (2) unrated debt securities which, in the judgment of the Fund Manager have
characteristics similar to those described above; (3) convertible debt
securities; (4) puts, calls and futures as hedging devices; (5) foreign issuer
debt securities; and (6) short-term money market instruments, including
certificates of deposit, commercial paper, U.S. Government Securities and other
income-producing cash equivalents. For a discussion of puts, calls, and futures
and their related risks, see "Certain Investment Techniques and Associated
Risks".
TAX-EXEMPT INCOME FUND
The objective of the Tax-Exempt Income Fund is a high level of current income
not includable in gross income for federal income tax purposes, with
consideration given to preservation of principal, primarily from investments in
a diversified Fund of long-term investment grade municipal bonds.
It is a fundamental policy of the Fund that under normal circumstances it will
invest at least 80% of its net assets in Municipal Securities (or futures
contracts or options on futures with respect thereto) which, at the time of
investment, are investment grade or in Municipal Securities which are not rated
if, based upon credit analysis by the Fund Manager, it is believed that such
securities are of comparable quality to such rated bonds.
The Fund invests primarily in investment grade "Municipal Securities" the
interest on which, in the opinion of counsel for issuers and the Fund, is not
includable in gross income for federal income tax purposes. Municipal Securities
are notes and bonds issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities. These securities are
traded primarily in the over-the-counter market. Such securities may have fixed,
variable or floating rates of interest. See the Appendix to this Prospectus for
a further description of Municipal Securities.
Investment grade securities are: bonds rated within the three highest ratings by
Moody's (Aaa, Aa, A) or S&P (AAA, AA, A); notes given one of the three highest
ratings by Moody's (MIGl, MIG2, MIG3) for notes; commercial paper rated P-l by
Moody's or A-1 by S&P; and variable rate securities rated VMIGl or VMIG2 by
Moody's.
While there are no maturity restrictions on the Municipal Securities in which
the Fund invests, the average maturity is expected to range between 10 and 25
years. The Fund Manager will actively manage the Fund, adjusting the average
Fund maturity and utilizing futures contracts and options on futures as a
defensive measure according to its judgment of anticipated interest rates.
During periods of rising interest rates and falling prices, a shorter weighted
average maturity may be adopted to cushion the effect of bond price declines on
the Fund's net asset value. When rates are falling and prices are rising, a
longer weighted average maturity rate may be adopted. For a discussion on
futures and their related risks, see "Certain Investment Techniques and
Associated Risks".
The Fund may also invest up to 20% of its net assets in cash, cash equivalents
and debt securities, the interest from which may be subject to federal income
tax. Investments in taxable securities will be limited to investment grade
corporate debt securities and U.S. Government Securities.
The Fund will not invest more than 20% of its net assets in Municipal Securities
the interest on which is subject to federal alternative minimum tax.
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FLEXIBLE FUND
MANAGED FUND
The objective of the Managed Fund is growth of capital over time through
investment in a Fund consisting of common stocks, bonds and cash equivalents,
the percentages of which will vary based on the Fund Manager's assessments of
the relative outlook for such investments. In seeking to achieve its investment
objective, the types of equity securities in which the Fund may invest will be
the same as those in which the Equity Funds invest. Debt securities are expected
to be predominantly investment grade intermediate to long term U.S. Government
and corporate debt, although the Fund will also invest in high quality short
term money market and cash equivalent securities and may invest almost all of
its assets in such securities when the Fund Manager deems it advisable in order
to preserve capital. In addition, the Fund may also invest up to 20% of its
assets in foreign securities provided that they are listed on a domestic or
foreign securities exchange or are represented by ADRs listed on a domestic
securities exchange or traded in the United States over-the-counter market.
The allocation of the Fund's assets among the different types of permitted
investments will vary from time to time based upon the Fund Manager's evaluation
of economic and market trends and its perception of the relative values
available from such types of securities at any given time. There is neither a
minimum nor a maximum percentage of the Fund's assets that may, at any given
time, be invested in any of the types of investments identified above.
Consequently, while the Fund will earn income to the extent it is invested in
bonds or cash equivalents, the Fund does not have any specific income objective.
MONEY MARKET FUND
The investment objective of the Money Market Fund is to provide the highest
possible level of current income, consistent with preservation of capital and
liquidity. Securities in which the Fund will invest may not yield as high a
level of current income as securities of lower quality and longer maturity which
generally have less liquidity and greater market risk. The Money Market Fund
seeks to achieve its objective by investing in a diversified portfolio of high
quality money market instruments, comprised of U.S. dollar-denominated
instruments which present minimal credit risks and are of eligible quality which
consist of the following:
1. obligations issued or guaranteed as to principal and interest by the United
States Government or any agency or authority controlled or supervised by and
acting as an instrumentality of the U.S. Government pursuant to authority
granted by Congress;
2. commercial paper, negotiable certificates of deposit, letters of credit, time
deposits and bankers' acceptances, of U.S. or foreign banks, and U.S. or
foreign savings and loans associations, which at the date of investment have
capital, surplus and undistributed profits as of the date of their most
recent published financial statements of $500,000,000 or greater;
3. short-term corporate debt instruments (commercial paper or variable amount
master demand notes) rated "A-1" or "A-2" by S&P or "Prime 1" or "Prime 2" by
Moody's or Tier 1 by any two Nationally Recognized Statistical Rating
Organization (NRSRO), or, if not rated, issued by a company rated at least
"A" by any two NRSROs and about which the Board of Directors of the Fund has
ratified the Fund Manager's independent determination that the instrument
presents minimal credit risks and is of high quality; however, investments in
securities of all issuers having the second highest overall rating (A-2/P-2)
assigned shall be limited to no more than five percent of the Fund's assets
at the time of purchase, with the investment of any one such issuer being
limited to not more than one percent of Fund assets at the time of purchase;
4. corporate obligations limited to non-convertible corporate debt securities
having one year or less
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remaining to maturity and which are rated "AA" or better by S&P or "Aa" or
better by Moody's; and
5. repurchase agreements with respect to any of the foregoing obligations.
The Money Market Fund will limit its investment in the securities of any one
issuer to no more than five percent of Fund assets, measured at the time of
purchase.
In addition, the Money Market Fund will not purchase any security, including any
repurchase agreement maturing in more than seven days, which is subject to legal
or contractual delays on resale or which is not readily marketable if more than
10% of the net assets of the Money Market Fund, taken at market value would be
invested in such securities.
After purchase by the Money Market Fund, a security may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Money
Market Fund. Neither event will require a sale of such security by the Money
Market Fund. The Fund Manager will consider such event in its determination of
whether the Money Market Fund should continue to hold the security provided that
the security presents minimal credit risks and that holding the security is in
the best interests of the Fund. To the extent Moody's or S&P may change their
rating systems generally (as described in the Appendix to the Statement of
Additional Information) the Money Market Fund will attempt to use comparable
ratings as standards for investments in accordance with investment policies
contained herein and in the Fund's Statement of Additional Information.
The dollar weighted average maturity of the Money Market Fund will be 90 days or
less.
All investments of the Money Market Fund will be limited to instruments which
the Board of Directors determines are of eligible quality, which, if instruments
of foreign issuers, are United States dollar-denominated instruments presenting
minimal credit risk, and all of which are either:
1. of those rated in the two highest rating categories by any NRSRO, or
2. if the instrument is not rated, of comparable quality as determined by the
Board of Directors.
Generally, instruments with NRSRO ratings in the two highest grades are
considered "high quality." All of the money market investments will mature in
397 days or less. The Money Market Fund will use the amortized cost method of
securities valuation, as described more fully in the Statement of Additional
Information.
CERTAIN
INVESTMENT
SECURITIES, TECHNIQUES
AND ASSOCIATED RISKS
Following is a description of certain investment techniques employed by the
Funds, and certain types of securities invested in by the Funds and associated
risks. Unless otherwise indicated, all of the Funds may use the indicated
techniques and invest in the indicated securities.
GENERAL RISKS ASSOCIATED WITH EQUITY FUNDS
The Equity Funds seek to reduce risk of loss of principal due to changes in the
value of individual stocks by investing in a diversified portfolio of common
stocks and through the use of options on stocks. Such investment techniques do
not, however, eliminate all risks. Investors should expect the value of the
Equity Funds and the net asset value of their shares to fluctuate based on
market conditions.
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Smaller capitalization companies may experience higher growth rates and higher
failure rates than do larger capitalization companies due to the risk related to
markets, market share, product performance and financial resources. The limited
volume and frequency of trading of small capitalization companies may subject
their stocks to greater price deviations than stocks of larger companies.
The International Growth Fund and the Global Financial Services Fund carry
additional risks associated with possibly less stable foreign securities and
currencies. For a discussion of these risks, please refer to "Foreign Currency
Values and Transactions".
GENERAL RISKS ASSOCIATED WITH INCOME FUNDS
Although the Income Funds seek to reduce credit risks, i.e., failure of obligors
to pay interest and principal, through careful selection of investments, and
they seek to reduce market risks resulting from fluctuations in the principal
value of debt obligations due to changes in prevailing interest rates by careful
timing of maturities of investments, such risks cannot be eliminated, and these
factors will affect the net asset value of shares in the Income Funds. The value
of debt obligations has an inverse relationship with prevailing interest rates.
GENERAL RISKS ASSOCIATED WITH FLEXIBLE FUND
The foregoing types of risks associated with equity and income funds also apply
to flexible funds.
GENERAL RISKS ASSOCIATED WITH
GLOBAL FINANCIAL SERVICES FUND
As stated above, the Global Financial Services Fund will concentrate its
investments in the financial services industry. As a result, market and economic
conditions and other risk factors particular to the financial services industry
will affect the Fund more than other mutual funds that are not similarly
concentrated. Generally, the financial services industry is extremely sensitive
to fluctuations in interest rates.
Financial services companies are subject to extensive government regulation
which may limit their activities and adversely affect their profitability. Some
financial services companies, e.g., insurance companies, are also subject to
severe market share competition and price competition. The removal of regulatory
barriers to entry into certain segments of the financial services industry may
increase competitive pressures on some companies. Financial services companies
in foreign countries are subject to similar regulatory concerns and risk factors
as domestic companies. Foreign companies, however, may face governmental
controls on interest rates, price and currency movements, and credit
availability. In addition, some foreign governments have taken steps to
nationalize banks and other financial services companies.
U.S. GOVERNMENT SECURITIES
Although the payment of interest and principal on a security may be guaranteed
by the United States Government or one of its agencies or instrumentalities, the
value of such fixed income securities and, consequently, the yield on and net
asset value of shares of the Government Securities Fund are not guaranteed by
the U.S. Government. The net asset value fluctuates in response to changes in
interest rates and market valuation. During periods of declining interest rates,
prepayment of mortgages underlying mortgage-backed securities can be expected to
accelerate. As a result, the Government Securities Fund's ability to maintain
positions in high-yielding, mortgage-backed securities, such as GNMA
Certificates, will be affected by reductions in the principal amounts of such
securities resulting from such prepayments, and its ability to reinvest the
returns of principal at comparable yields is subject to generally prevailing
interest rates at the time.
MORTGAGE-RELATED SECURITIES AND
ASSET-BACKED SECURITIES
Up to 20% of the net assets of the Government Securities Fund may be invested in
assets other than
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U.S. Government Securities, including collateralized mortgage related securities
("CMOs") and asset backed securities. These securities are considered to be
volatile and may be thinly traded. CMOs are obligations fully collateralized by
a portfolio of mortgages or mortgage-related securities. Payments of principal
and interest on the mortgages are passed through to the holders of the CMOs on
the same schedule as they are received, although certain classes of CMOs have
priority over others with respect to the receipt of prepayments on the
mortgages. Therefore, depending on the type of CMOs in which the Government
Securities Fund invests, the investment may be subject to a greater or lesser
risk of prepayment than other types of mortgage-related securities.
While there are many versions of CMOs and asset backed securities, some include
"Interest Only" or "IO" -- where all interest payments go to one class of
holders, "Principal Only" or "PO" -- where all of the principal goes to a second
class of holders, "Floaters" -- where the coupon rate floats in the same
direction as interest rates and "Inverse Floaters" -- where the coupon rate
floats in the opposite direction as interest rates. All these securities are
volatile; they also have particular risks in differing interest rate
environments as described below.
The yield to maturity on an IO class is extremely sensitive to the rate of
principal payments (including prepayments) on the related underlying mortgage
assets, and a rapid rate of principal payments may have a material adverse
effect on yield to maturity and, therefore, the market value of the IO. As
interest rates rise and fall, the value of IOs tends to move in the same
direction as interest rates. Accordingly, investment in IOs can theoretically be
expected to contribute to stabilizing a Fund's net asset value. However, if the
underlying mortgage assets experience greater than anticipated prepayments of
principal, the Fund may fail to fully recoup its initial investment in these
securities even if the securities are rated AAA or the equivalent. Conversely,
while the yield to maturity on a PO class is also extremely sensitive to rate of
principal payments (including prepayments) on the related underlying mortgage
assets, a slow rate of principal payments may have a material adverse effect on
yield to maturity and therefore the market value of the PO. As interest rates
rise and fall, the value of POs tends to move in the opposite direction from
interest rates. This is typical of most debt instruments. See "General Risks
Associated With Income Funds".
Floaters and Inverse Floaters ("Floaters") are extremely sensitive to the rise
and fall in interest rates. The coupon rate on these securities is based on
various benchmarks, such as LIBOR ("London Inter-Bank Offered Rate") and the
11th District cost of funds (the base rate). The coupon rate on Floaters can be
affected by a variety of terms. Floaters can be reset at fixed intervals over
the life of the Floater, float with a spread to the base rate, or be a certain
percentage rate minus a certain base rate. Some Floaters have floors below which
the interest rate cannot be reset and/or ceilings above which the interest rate
cannot be reset. The coupon rate and/or market value of Floaters tend to move in
the same direction as the base rate while the coupon rate and/or market value of
Inverse Floaters tend to move in the opposite direction from the base rate.
The market value of all CMOs and other asset-backed securities are determined by
supply and demand in the bid/ask market, interest rate movements, the yield
curve, forward rates, prepayment assumptions and credit of the underlying
issuer. Further, the price actually received on a sale may be different from
bids when security is being priced.
CMOs and asset-backed securities trade over a bid and ask market through several
large market makers. Due to the complexity and concentration of derivative
securities, the liquidity and, consequently, the volatility of these securities
can be sharply influenced by market demand.
Asset-backed and mortgage-related securities may not be readily marketable. To
the extent any of these securities are not readily marketable in the judgment of
the Fund Manager (subject to the oversight of the
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Board of Directors), the investment restriction limiting the Fund's investment
in illiquid instruments to not more than 10% of the value of its net assets will
apply. However, IOs and POs issued by the U.S. Government, its agencies and
instrumentalities, and backed by fixed-rate mortgages may be excluded from this
limit, if, in the judgment of the Fund Manager (subject to the oversight of the
Board of Directors) such IOs and POs are readily marketable. The Government
Securities Fund does not intend to invest in residual interests, privately
issued securities or subordinated classes of underlying mortgages.
HIGH-YIELD SECURITIES
Notwithstanding the investment policies and restrictions applicable to the
High-Yield Bond and Managed Funds which were designed to reduce risks associated
with such investments, high-yield securities may carry higher levels of risk
than many other types of income producing securities. These risks are of three
basic types: the risk that the issuer of the high-yield bond will default in the
payment of principal and interest; the risk that the value of the bond will
decline due to rising interest rates, economic conditions, or public perception;
and the risk that the investor in such bonds may not be able to readily sell
such bonds. Each of the major categories of risk are impacted by various
factors, as discussed below:
HIGH-YIELD BOND MARKET
The high-yield bond market is relatively new and has grown in the context of a
long economic expansion. Any downturn in the economy may have a negative impact
on the perceived ability of the issuer to make principal and interest payments
which may adversely affect the value of outstanding high-yield securities and
reduce market liquidity.
SENSITIVITY TO INTEREST RATE AND ECONOMIC CHANGES
In general, the market prices of bonds bear an inverse relationship to interest
rates; as interest rates increase, the prices of bonds decrease. The same
relationship may hold for high-yield bonds, but in the past high-yield bonds
have been somewhat less sensitive to interest rate changes than treasury and
investment grade bonds. While the price of high-yield bonds may not decline as
much, relatively, as the prices of treasury or investment grade bonds decline in
an environment of rising interest rates, the market price, or value, of a
high-yield bond will be expected to decrease in periods of increasing interest
rates, negatively impacting the net asset value of the High-Yield Bond Fund.
High-yield bond prices may not increase as much, relatively, as the prices of
treasury or investment grade bonds in periods of decreasing interest rates.
Payments of principal and interest on bonds are dependent upon the issuer's
ability to pay. Because of the generally lower creditworthiness of issuers of
high-yield bonds, changes in the economic environment generally, or in an
issuer's particular industry or business, may severely impact the ability of the
issuer to make principal and interest payments and may depress the price of
high-yield securities more significantly than such changes would impact higher
rated, investment grade securities.
PAYMENT EXPECTATIONS
Many high-yield bonds contain redemption or call provisions which might be
expected to be exercised in periods of decreasing interest rates. Should bonds
in which the High-Yield Bond Fund has invested be redeemed or called during such
an interest rate environment, the Fund would have to sell such securities
without reference to their investment merit and reinvest the proceeds received
in lower yielding securities, resulting in a decreased return for investors in
the High-Yield Bond Fund. In addition, such redemptions or calls may reduce the
High-Yield Bond Fund's asset base over which the Fund's investment expenses may
be spread.
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LIQUIDITY AND VALUATION
Because of periods of relative illiquidity, many high-yield bonds may be thinly
traded. As a result, the ability to accurately value high-yield bonds and
determine the net asset value of the High-Yield Bond Fund, as well as the Fund's
ability to sell such securities, may be limited. Public perception of and
adverse publicity concerning high-yield securities may have a significant
negative impact on the value and liquidity of high-yield securities, even though
not based on fundamental investment analysis.
TAX CONSIDERATIONS
To the extent that a Fund invests in securities structured as zero coupon bonds,
or other securities issued with original issue discount, the Fund will be
required to report interest income even though no cash interest payment is
received. Because such income is not represented by cash, the Fund may be
required to sell other securities in order to satisfy the distribution
requirements applicable to regulated investment companies under the Internal
Revenue Code of 1986 ("IRC").
FUND COMPOSITION
As of March 31, 1998, the High-Yield Bond Fund consisted of securities
classified as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
CATEGORY FUND
<S> <C>
BB.............................. 23%
B............................... 71%
CCC............................. 1%
Non-rated*...................... 5%
</TABLE>
- ---------------
* Equivalent ratings for these securities would have been B.
REITS
Each Fund may invest up to 10% of its total assets in the securities of real
estate investment trusts ("REITs"). REITs are pooled investment vehicles which
invest in real estate-related loans. The value of a REIT's shares generally is
affected by changes in the value of the underlying investments of the Trust.
HEDGING TRANSACTIONS
Except as otherwise indicated, the Fund Managers, other than for the Money
Market Fund, may engage in the following hedging transactions to seek to hedge
all or a portion of a Fund's assets against market value changes resulting from
changes in equity values, interest rates and currency fluctuations. Hedging is a
means of offsetting, or neutralizing, the price movement of an investment by
making another investment, the price of which should tend to move in the
opposite direction from the original investment.
The Funds will not engage in hedging transactions for speculative purposes but
only as a hedge against changes resulting from market conditions in the values
of securities owned or expected to be owned by the Funds. Unless otherwise
indicated, a Fund will not enter into a hedging transaction (except for closing
transactions) if, immediately thereafter, the sum of the amount of the initial
deposits and premiums on open contracts and options would exceed 5% of the
Fund's total assets taken at current value.
CERTAIN SECURITIES
The Funds may invest in the following described securities, except as otherwise
indicated. These securities are commonly referred to as derivatives. A Fund's
investment in such securities, in the aggregate, may not exceed 5% of net assets
at the time of investment; provided, however, that the International Growth
Fund, the High-Yield Bond Fund, and the Government Securities Fund may invest up
to 20% of their net assets in such securities.
CALL OPTIONS
The Funds, other than the Money Market Fund, may write (sell) call options that
are listed on national securities exchanges or are available in the over-the-
counter market through primary broker-dealers. Call
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<PAGE> 93
options are short-term contracts with a duration of nine months or less. Such
Funds of the Fund may only write call options which are "covered," meaning that
the Fund either owns the underlying security or has an absolute and immediate
right to acquire that security, without additional cash consideration, upon
conversion or exchange of other securities currently held in the Fund. In
addition, no Fund will, prior to the expiration of a call option, permit the
call to become uncovered. If a Fund writes a call option, the purchaser of the
option has the right to buy (and the Fund has the obligation to sell) the
underlying security at the exercise price throughout the term of the option. The
amount paid to the Fund by the purchaser of the option is the "premium." The
Fund's obligation to deliver the underlying security against payment of the
exercise price would terminate either upon expiration of the option or earlier
if the Fund were to effect a "closing purchase transaction" through the purchase
of an equivalent option on an exchange. The Fund would not be able to effect a
closing purchase transaction after it had received notice of exercise. The
International Growth Fund may purchase and write covered call options on foreign
and U.S. securities and indices and enter into related closing transactions.
Generally, such a Fund intends to write listed covered calls when it anticipates
that the rate of return from so doing is attractive, taking into consideration
the premium income to be received, the risks of a decline in securities prices
during the term of the option, the probability that closing purchase
transactions will be available if a sale of the securities is desired prior to
the exercise, or expiration of the options, and the cost of entering into such
transactions. A principal reason for writing calls on a securities portfolio is
to attempt to realize, through the receipt of premium income, a greater return
than would be earned on the securities alone. A covered call writer such as a
Fund, which owns the underlying security, has, in return for the premium, given
up the opportunity for profit from a price increase in the underlying security
above the exercise price, but it has retained the risk of loss should the price
of the security decline.
The writing of covered call options involves certain risks. A principal risk
arises because exchange and over-the-counter markets for options may be limited;
it is impossible to predict the amount of trading interest which may exist in
such options, and there can be no assurance that viable exchange and over-
the-counter markets will develop or continue. The Funds will write covered call
options only if there appears to be a liquid secondary market for such options.
If, however, an option is written and a liquid secondary market does not exist,
it may be impossible to effect a closing purchase transaction in the option. In
that event, the Fund may not be able to sell the underlying security until the
option expires or the option is exercised, even though it may be advantageous to
sell the underlying security before that time.
PUTS
The Funds, except the Government Securities Fund and the Money Market Fund, may
purchase put options ("Puts") which relate to (i) securities (whether or not
they hold such securities); (ii) Index Options (described below whether or not
they hold such Options); or (iii) broadly-based stock indexes. The Funds, except
the Government Securities Fund and Money Market Fund, may write covered put
options. The Fund will receive premium income from writing covered put options,
although it may be required, when the put is exercised, to purchase securities
at higher prices than the current market price. The High-Yield Bond Fund may
invest up to 10% of the value of the Fund in Puts.
FUTURES CONTRACTS
All Funds may, other than the Money Market Fund, enter into contracts for the
future acquisition or delivery of securities ("Futures Contracts") including
index contracts and foreign currencies, and may also purchase and sell call
options on Futures Contracts. These Funds may use this investment technique to
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hedge against anticipated future adverse price changes which otherwise might
either adversely affect the value of the Fund's securities or currencies held by
the Fund, or to hedge anticipated future price changes which adversely affect
the prices of stocks, long-term bonds or currencies which the Fund intends to
purchase at a later date. Alternatively, the Funds may enter into Futures
Contracts in order to hedge against a change in interest rates which will result
in the premature call at par value of certain securities which the Fund has
purchased at a premium. If stock, bond or currency prices or interest rates move
in an unexpected manner, the Fund would not achieve the anticipated benefits of
Futures Contracts.
The use of Futures Contracts involves special considerations or risks not
associated with the primary activities engaged in by any Funds. Risks of
entering into Futures Contracts include: (1) the risk that the price of the
Futures Contracts may not move in the same direction as the price of the
securities in the various markets; (2) the risk that there will be no liquid
secondary market when the Fund attempts to enter into a closing position; (3)
the risk that the Fund will lose an amount in excess of the initial margin
deposit; and (4) the fact that the success or failure of these transactions for
the Fund depends on the ability of the Fund Manager to predict movements in
stock, bond, and currency prices and interest rates.
INDEX OPTIONS
All the Equity Funds may invest in options on stock indexes. These options are
based on indexes of stock prices that change in value according to the market
value of the stocks they include. Some stock index options are based on a broad
market index, such as the New York Stock Exchange Composite Index or the S&P
500. Other index options are based on a market segment or on stocks in a single
industry. Stock index options are traded primarily on securities exchanges.
Because the value of an index option depends primarily on movements in the value
of the index rather than in the price of a single security, whether a Fund will
realize a gain or loss from purchasing or writing an option on a stock index
depends on movements in the level of stock prices in the stock market generally
or, in the case of certain indexes, in an industry or market segment rather than
changes in the price of a particular security. Consequently, successful use of
stock index options by a Fund will depend on that Fund Manager's ability to
predict movements in the direction of the stock market generally or in a
particular industry. This requires different skills and techniques than
predicting changes in the value of individual securities.
INTEREST RATE SWAPS
In order to attempt to protect the Fund investments from interest rate
fluctuations, the Funds may engage in interest rate swaps. The Funds tend to use
interest rate swaps as a hedge and not as a speculative investment. Interest
rate swaps involve the exchange between the Fund and another party of their
respective rights to receive interest (e.g., an exchange of fixed rate payments
for floating rate payments). For example, if the Fund holds an interest-paying
security whose interest rate is reset once a year, it may swap the right to
receive interest at a rate that is reset daily. Such a swap position would
offset changes in the value of the underlying security because of subsequent
changes in interest rates. This would protect the Fund from a decline in the
value of the underlying security due to rising rates, but would also limit its
ability to benefit from falling interest rates.
The Fund will enter into interest rate swaps only on a net basis (i.e., the two
payments streams will be netted out, with Fund receiving or paying as the case
may be, only the net amount of the two payments). The net amount of the excess,
if any, of the Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis, and an amount of cash or
liquid high grade debt securities
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having an aggregate net asset value at least equal to the accrued excess, will
be maintained in a segregated account by the Fund's custodian bank.
The use of interest rate swaps involves investment techniques and risks
different from those associated with ordinary portfolio security transactions.
If the Fund Manager is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund will
be less favorable than it would have been if this investment technique were
never used. Interest rate swaps do not involve the delivery of securities or
other underlying assets or principal. Thus, if the other party to an interest
rate swap defaults, the Fund's risk of loss consists of the net amount of
interest payments that the Fund is contractually entitled to receive.
FOREIGN CURRENCY VALUES AND TRANSACTIONS
Investments in foreign securities will usually involve currencies of foreign
countries, and the value of the assets of the International Growth Fund and the
Global Financial Services Fund (and of the other Funds that may invest in
foreign securities to a much lesser extent) as measured in United States dollars
may be affected favorably or unfavorably by changes in foreign currency exchange
rates and exchange control regulations, and the International Growth Fund may
incur costs in connection with conversions between various currencies.
The normal currency allocation of the International Growth Fund is identical to
the currency mix of the Benchmark. The Fund expects to maintain this normal
currency exposure when global currency markets are fairly priced relative to
each other and relative to associated risks. The Fund may actively deviate from
such normal currency allocations to take advantage of or to protect the Fund
from risk and return characteristics of the currencies and short-term interest
rates when those prices deviate significantly from fundamental value. Deviations
from the Benchmark are determined by the Fund Manager based upon its research.
To manage exposure to currency fluctuations, the Fund may alter equity or money
market exposures (in its normal asset allocation mix as previously identified),
enter into forward currency exchange contracts, buy or sell options, futures or
options on futures relating to foreign currencies and may purchase securities
indexed to currency baskets. The Fund will also use these currency exchange
techniques in the normal course of business to hedge against adverse changes in
exchange rates in connection with purchases and sales of securities. Some of
these strategies may require the Fund to set aside liquid assets in a segregated
custodial account to cover its obligations. These techniques are further
described below.
The Fund may conduct its foreign currency exchange transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market
or through entering into contracts to purchase or sell foreign currencies at a
future date (i.e., "forward foreign currency" contract or "forward" contract). A
forward contract involves an obligation to purchase or sell a specific currency
amount at a future date, which may be any fixed number of days from the date of
the contract, agreed upon by the parties, at a price set at the time of the
contract. The Fund will convert currency on a spot basis from time to time and
investors should be aware of the potential costs of currency conversion.
When the Fund Manager believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, the Fund may enter into a currency contract to sell, for a fixed
amount of U.S. dollars or other appropriate currency, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by repurchasing an "offsetting" contract with the same currency trader
obligating it to
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purchase, on the same maturity date, the same amount of the foreign currency.
The Fund may realize a gain or loss from currency transactions.
The Fund also may purchase and write put and call options on foreign currencies
(traded on U.S. and foreign exchanges or over-the-counter markets) to manage the
Fund's exposure to changes in currency exchange rates. Call options on foreign
currency written by the Fund will be "covered", which means that the Fund will
own an equal amount of the underlying foreign currency. With respect to put
options on foreign currency written by the Fund, the Fund will establish a
segregated account with its custodian bank consisting of cash, U.S. government
securities or other high grade liquid debt securities in an amount equal to the
amount the Fund would be required to pay upon exercise of the put.
CERTAIN OTHER SECURITIES
Except as otherwise indicated, the Funds may purchase the following securities,
the purchase of which involves certain risks described below. Unless otherwise
indicated, a Fund will not purchase a category of such securities if the value
of such category, taken at current value, would exceed 5% of the Fund's total
assets.
MASTER DEMAND NOTES
All Funds may purchase variable amount master demand notes. Variable amount
master demand notes are demand obligations that permit the investment of
fluctuating amounts at varying market rates of interest pursuant to arrangements
between the issuer and a commercial bank acting as agent for the payees of such
notes whereby both parties have the right to vary the amount of the outstanding
indebtedness on the notes. Since there is no secondary market for these notes,
the appropriate Fund Managers, subject to the overall review of the Fund's
Directors and the Adviser, monitor the financial condition of the issuers to
insure that they are able to repay the notes.
REPURCHASE AGREEMENTS
All Funds may enter into repurchase agreements having maturities of seven days
or less. When a Fund acquires securities from a bank or broker- dealer, it may
simultaneously enter into a repurchase agreement with the same seller pursuant
to which the seller agrees at the time of sale to repurchase the security at a
mutually agreed upon time and price. In such instances, the Fund's Custodian has
possession of the security or collateral for the seller's obligation. If the
seller should default on its obligation to repurchase the securities, the Fund
may experience delays, difficulties or other costs when selling the securities
held as collateral and may incur a loss if the value of the collateral declines.
The appropriate Fund Managers, subject to the overall review by the Fund's
Directors and the Adviser, monitor the value of the collateral as to repurchase
agreements, and they monitor the creditworthiness of the seller and must find it
satisfactory before engaging in repurchase agreements. The Funds enter into
repurchase agreements only with Federal Reserve member banks that have net worth
of at least $100,000,000 and outstanding commercial paper of the two highest
rating categories assigned by Moody's or S&P or with broker-dealers that are
registered with the Securities and Exchange Commission, are members of the
National Association of Securities Dealers, Inc. ("NASD") and have similarly
rated commercial paper outstanding. Any repurchase agreements entered into by
the Funds will be fully collateralized and marked to market daily, other than
those entered into by the Money Market Fund, which are valued on an amortized
cost basis.
RESTRICTED OR ILLIQUID SECURITIES
Each Fund may invest up to 10% of its net assets in restricted securities
(privately placed equity or debt securities) or other securities which are not
readily marketable.
FOREIGN SECURITIES
As noted above, the International Growth Fund will invest primarily in foreign
securities, and the Global
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Financial Services Fund may invest 50% or more of its total assets in such
securities. All other Funds, except the Government Securities Fund, the
Tax-Exempt Income Fund and the Money Market Fund may, subject to the 20%
limitation, invest in foreign securities as well as both sponsored and
unsponsored American Depository Receipts ("ADRs"), and European Depository
Receipts ("EDRs") which are securities of U.S. issuers backed by securities of
foreign issuers. There may be less information available about unsponsored ADRs
and EDRs, and therefore, they may carry higher credit risks. The Funds may also
invest in securities of foreign branches of domestic banks and domestic branches
of foreign banks.
Investments in foreign equity and debt securities involve risks different from
those encountered when investing in securities of domestic issuers. The
appropriate Fund Managers and the Adviser, subject to the overall review of the
Fund's Directors, evaluate the risks and opportunities when investing in foreign
securities. Such risks include trade balances and imbalances and related
economic policies; currency exchange rate fluctuations; foreign exchange control
policies; expropriation or confiscatory taxation; limitations on the removal of
funds or other assets; political or social instability; the diverse structure
and liquidity of securities markets in various countries and regions; policies
of governments with respect to possible nationalization of their own industries;
and other specific local, political and economic considerations.
FORWARD COMMITMENTS
Securities may be purchased on a "when issued" or on a "forward delivery" basis,
which means it may take as long as 120 days before such obligations are
delivered to a Fund. The purpose of such investments is to attempt to obtain
higher rates of return or lower purchase costs than would be available for
securities purchased for immediate delivery. Securities purchased on a when
issued or forward delivery basis involve a risk that the value of the security
to be purchased may decline prior to the settlement date. In addition, if the
dealer through which the trade is made fails to consummate the transaction, the
Fund may lose an advantageous yield or price. The Fund does not accrue income
prior to delivery of the securities in the case of forward commitment purchases.
The 5% limitation does not apply to the International Growth, Government
Securities and Tax-Exempt Income Funds which will have a 20% limitation.
TEMPORARY DEFENSIVE TACTICS
Any or all of the Funds may at times for defensive purposes, at the
determination of the Fund Manager, temporarily place all or a portion of their
assets in cash, short-term commercial paper (i.e. short-term unsecured
promissory notes issued by corporations to finance short-term credit needs),
United States Government securities, high-quality debt securities (including
"Eurodollar" and "Yankee Dollar" obligations, i.e., U.S. issuer borrowings
payable overseas in U.S. funds and obligations of foreign issuers payable in
U.S. funds), and obligations of banks when in the judgment of the Fund Manager
such investments are appropriate in light of economic or market conditions. The
Money Market Fund may at times for defensive purposes temporarily place all or a
portion of its assets in cash, when in the judgment of the Fund Manager such an
investment is appropriate in light of economic or market conditions. For
temporary defensive purposes, the International Growth Fund may invest in all of
the above, both foreign and domestic, including foreign currency, foreign time
deposits, and foreign bank acceptances. When a Fund takes a defensive position,
it may not be following the fundamental investment policy of the Fund.
PORTFOLIO TURNOVER
In carrying out the investment policies described in this Prospectus, each Fund
expects to engage in a substantial number of securities portfolio transactions,
and the rate of portfolio turnover will not be a limiting factor when a Fund
Manager deems it appropriate to purchase or sell securities for a Fund. How-
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ever, no Fund's annual portfolio turnover rate (other than the High-Yield Bond
Fund and the Money Market Fund for which, due to the short-term nature of its
investment, a portfolio turnover rate is not applicable) is expected to exceed
100%.
A portfolio turnover rate is, in summary, the percentage computed by dividing
the lesser of a Fund's purchases or sales of securities by the average
investments of the Fund. High portfolio turnover involves correspondingly
greater brokerage commissions and other transaction costs which are borne
directly by a Fund. Each Fund intends to elect and to comply with the various
provisions of the Internal Revenue Code so as to qualify as a "regulated
investment company" thereunder. (See "Taxes".)
INVESTMENT
RESTRICTIONS
Except as indicated, each of the Funds has adopted certain investment
restrictions and limitations for the purpose of reducing their exposure in
specific situations.
No Fund will: (1) as to 75% of the assets of each Fund, invest more than 5% of
the value of its total assets in the securities of any single issuer (other than
cash items and U.S. government securities, as defined in the Investment Company
Act of 1940) if such purchase would cause more than 5% of the value of its
assets to be invested in securities of such issuer; (2) purchase more than 10%
of the voting securities of any issuer; (3) invest more than 5% of its total
assets in the securities of companies that have a continuous operating history
of less than three years (the Global Financial Services, High-Yield Bond and
Tax-Exempt Income Funds are not subject to this restriction); (4) except as to
the Money Market Fund (as described below) and the Global Financial Services
Fund, invest more than 25% of its total assets in any one industry, provided
that: (i) this limitation does not apply to investments in U.S. Government
Securities as well as its agencies and instrumentalities, general obligation
bonds, or Municipal Securities other than industrial development bonds issued by
non-governmental users; and (ii) utility companies will be divided according to
their services (for example, gas, gas transmission, electric, electric and gas,
and telephone will each be considered as a separate industry); (5) borrow money,
except from a bank and only for temporary or emergency purposes, and such
borrowings will not exceed 5% of the lower of the value or cost of the Fund's
total assets; or (6) pledge, mortgage or hypothecate its assets to an extent
greater than 5% of the value of its total assets. For purposes of restrictions
(1) and (2), each Fund will regard the entity which has ultimate responsibility
for the payment of interest and principal as the issuer. Notwithstanding
restriction (4), the Money Market Fund may invest in excess of 25% of its total
assets in U.S. Government Securities as well as its agencies and
instrumentalities, and certain bank instruments issued by domestic banks. See
"Investment Restrictions" in the Statement of Additional Information.
These investment limitations, and other limitations that are fundamental
policies, that are described in greater detail in the Statement of Additional
Information, may be changed only with the approval of the holders of a majority
of the shares of a Fund.
In addition, management of the Fund has adopted the following restrictions which
apply to all of the Funds and may be changed only by the Board of Directors of
the Fund. No Fund will: (A) lend its assets to any person or individual, except
by the purchase of bonds or other debt obligations customarily sold to
institutional investors; (B) invest more than 5% of the value of its net assets,
valued at the lower of cost or market, in warrants (Included within that amount,
but not to exceed 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock Exchange. Warrants
acquired by a Fund in units or attached to securities may be deemed to be
without value.), (C) invest in oil, gas, or other mineral leases, or (D) engage
in arbitrage transactions.
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If a percentage restriction is adhered to at the time of an investment, a later
increase or decrease in the investment's percentage of the value of a Fund's
total assets resulting from a change in Fund value or assets will not constitute
a violation of the percentage restrictions.
The Managed Fund will not invest more than 5% of the value of its total assets
in high-yield securities.
In order to qualify for federal income tax treatment as a regulated investment
company for a taxable year, each Fund must, among other things, (a) derive at
least 90% of its gross income during such taxable year from qualifying income
(i.e., dividends, interest, payments with respect to loans of stock and
securities, and gains from the sale or other disposition of stock or securities
or options thereon); and (b) diversify its holdings so that, at the end of each
fiscal quarter of such taxable year, (i) at least 50% of the market value of its
total assets is represented by cash, cash items, U.S. Government Securities,
securities of other regulated investment companies, and other securities
limited, in the case of other securities for purposes of this calculation, in
respect of any one issuer, to an amount not greater than 5% of the value of its
total assets or 10% of the voting securities of the issuer, and (ii) not more
than 25% of the value of its assets is invested in the securities of any one
issuer (other than U.S. Government Securities).
No Fund may invest more than 5% of its total assets in the securities of a
company that receives more than 15% of its revenues from "securities-related
activities". Securities-related activities are activities as a broker, dealer,
underwriter or investment adviser (a "securities issuer"). Further, immediately
after the purchase of an equity security of a securities issuer, no Fund may own
more than 5% of the outstanding securities of that class of the issuer's equity
securities. In addition, immediately after the purchase of any securities
issuer's debt securities, no Fund may own more than 10% of the outstanding
principal amount of the issuer's debt securities.
HOW TO PURCHASE
FUND SHARES
Enterprise Fund Distributors, Inc. ("the Distributor"), is the principal
underwriter for shares of the Fund. The Distributor, whose address is Atlanta
Financial Center, 3343 Peachtree Road, N.E., Suite 450, Atlanta, Georgia 30326,
is a subsidiary of Enterprise Capital Management, Inc. Purchases can be made
through most investment dealers who, as part of the service they provide, must
transmit orders promptly. The Funds offer four separate Classes of shares: Class
A, B, C and Y shares, each with a different combination of sales charges,
ongoing fees an other features.
The four Classes also have separate exchange privileges. (See "How to Exchange
Shares Among the Funds.") The income attributable to each class and the
dividends payable on the shares of each class will be reduced by the amount of
the distribution fee or service fee, if any, payable by that class.
Class Y shares do not bear a sales charge or distribution fee. Institutional
investors eligible to purchase Class Y shares include banks, savings
institutions, trust companies, insurance companies, investment companies as
defined by the Investment Company Act of 1940, pension or profit sharing trust,
certain wrap account clients of broker/dealers, former shareholders of
Retirement System Investors, Inc. ("RSI"), direct referrals of Fund Managers or
EAI, or other financial institutional buyer. Wrap account clients of
broker/dealers, former RSI shareholders, and direct referrals of Fund Managers
or Evaluation Associates, Inc. ("EAI") are offered Class Y shares at a lower
minimum purchase amount.
All purchases made by check should be in U.S. dollars and made payable to The
Enterprise Group of Funds, Inc., or in the case of a retirement account, the
custodian or trustee. Third party checks will not be accepted. When purchases
are made by check or periodic account investment, redemptions will not be
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<PAGE> 100
allowed until the investment being redeemed has been in the account for 15
calendar days.
For accounts with balances under $1,000, an annual service charge of $25 per
account registration per Fund will apply.
From time to time, the Fund temporarily may suspend the offering of shares of
one or more of its Classes or Funds to new investors. During the period of such
suspension, persons who are already shareholders of any such Class or Fund
normally will be permitted to continue to purchase additional shares and to have
dividends reinvested.
Fund shares are purchased at the net asset value next determined after the
application for purchase of shares is received by the Enterprise Shareholder
Services Division of the Fund's Transfer Agent, National Financial Data
Services, Inc. (the "Transfer Agent"). The Distributor or the Fund may reject
any orders.
DEALER COMPENSATION. The Distributor will provide additional compensation to
dealers in connection with sales of shares of the Funds and other mutual funds
distributed by the Distributor ("Enterprise Funds") including promotional gifts
(which may include gift certificates, dinners and other items), financial
assistance to dealers in connection with conferences, sales or training programs
for their employees, seminars for the public and advertising campaigns. In some
instances, these incentives may be made available only to dealers whose
representatives have sold or are expected to sell significant amounts of shares.
In addition to distribution and service fees paid the Fund under Class A, Class
B and Class C Plans, the Adviser (or one of its affiliates) may make payments to
dealers (including MONY Securities Corp.) and other persons which distribute
shares of the Funds (including Class Y shares). Such payments may be calculated
by reference to the net asset value of shares sold by such persons or otherwise.
HOW THE NET ASSET VALUE IS COMPUTED. The net asset value per share for each
Class of each Fund of the Fund is determined by dividing the total value of the
Fund's investments and other assets, less any liabilities, by the total number
of outstanding shares of the Fund for each Class. Net asset value per share is
determined at the close of trading on each day the New York Stock Exchange is
open for trading except that net asset value per share of the International
Growth Fund may not, in certain circumstances, be determined on days when the
New York Stock Exchange is open for trading but one or more foreign stock
exchanges are not open for trading. The net asset value per share is effective
as of the time of computation. In determining net asset value, the price carried
by the composite tape of all national exchanges is used.
Domestic equity securities are valued at the last sale price or, in the absence
of any sale on that date, the closing bid price. Domestic equity securities
without last trade information are valued at the last bid price. Domestic equity
securities, for which market quotations are not readily available, and other
assets are valued at fair value as determined in good faith by the Board of
Directors. Debt securities and foreign securities are valued on the basis of
independent pricing services approved by the Board of Directors, and such
pricing services generally follow the same procedures in valuing foreign equity
securities as are described above as to domestic equity securities.
Securities held by the Money Market Fund are valued on an amortized cost basis.
The Securities and Exchange Commission's rules relating to the amortized cost
method involve valuing a security at its cost and amortizing any discount or
premium over the period until maturity, without taking into account the impact
of fluctuating interest rates on the market value of the security unless the
deviation from net asset value as calculated by using available market
quotations exceeds 1/2 of 1%. At that point, the Board of Directors will
promptly decide what action, if any, will be initiated. The Money Market Fund
seeks to maintain a constant net asset value of $1.00 but there can be no
assurance that the Money Market Fund will be able to maintain a stable net asset
value. The Money
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<PAGE> 101
Market Fund will not maintain a dollar weighted average Fund maturity which
exceeds 90 days.
Although the legal rights of each class of shares are substantially identical,
the different expenses borne by each class will result in different net asset
values and dividends for each class. It is expected, however, that the net asset
values of the three classes will tend to converge immediately after the
recording of dividends, which will differ by approximately the amount of the
distribution and service related expense accrual differential among the classes.
Share Certificates. The Fund does not ordinarily issue certificates
representing shares of the Funds. Instead, shares are held on deposit for
shareholders by the Fund's Transfer Agent, which sends a statement of shares
owned in each Fund to shareholders following each transaction in the
shareholder's account. Certificates for full shares only (other than the Money
Market Fund) are available at no charge at any time upon written request to the
Transfer Agent. Special shareholder services such as telephone redemptions,
exchanges, electronic funds transfers and wire orders are not available as to
certificated shares.
SHAREHOLDER
SERVICES
For the convenience of investors, the following plans are available:
AUTOMATIC REINVESTMENT PLAN
Dividends and capital gains distributions may be automatically reinvested in the
same Class of shares or, at the investor's election, may be paid out in cash. No
sales charge is applied upon reinvestment of dividends or capital gains.
AUTOMATIC INVESTMENT PLAN
An investor may debit any Fund Account of a Class on a monthly basis for
automatic investments into one or more of the other Funds of the same Class. The
Fund from which the investment will be made is subject to the $1,000 minimum.
The investor may then choose to have $50 or more transferred to either an
established Enterprise Fund, or they may open a new account subject to an
initial minimum investment of $100.
BANK PURCHASE AND REDEMPTION PLAN
Any investor may initiate an ACH (Automatic Clearing House) Purchase or
Redemption directly to a bank account when proper instructions have been
established on the account.
RETIREMENT PLANS
Shareholders may adopt Profit Sharing Plan, Money Purchase Plan and other
retirement plans funded by Fund shares and other investment which plans have
been approved by the Internal Revenue Service.
The costs of these plans (exclusive of the retirement plans on which a $10
annual custodial fee is charged) are paid by the Distributor, except for the
normal cost of issuing shares, which is paid by the Funds of the Fund.
Additional information concerning these plans is available from the Distributor
upon request.
HOW TO EXCHANGE
SHARES AMONG THE
FUNDS
An exchange represents the sale of shares of one Fund and the purchase of shares
of another, which may produce a gain or loss for tax purposes. Class Y shares
may be exchanged for Class Y shares of any other Fund. Class Y shares cannot be
exchanged for Class A, B or C shares.
Shares of a Fund will be processed at the net asset value next determined after
the Transfer Agent receives your exchange request. The exchange feature may be
modified or discontinued at any time, upon notice to shareholders.
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Exchanges may be directed by:
1. calling: Enterprise Shareholder Services
1-800-368-3527
2. writing: Enterprise Shareholder Services
P.O. Box 419731
Kansas City, MO 64141-6731
To exchange by letter, state the name of the Fund you are exchanging from, the
account name(s) and address, the account number, the dollar amount or number of
shares to be exchanged, and the Fund into which you are exchanging. Sign your
name(s) exactly as it appears on your account statement.
The minimum initial investment rules applicable to a Fund apply to any exchange
where the exchange results in a new account being opened in such Fund. Exchanges
into existing accounts are not subject to a minimum amount. Original investments
in the Money Market Fund which are transferred to other Funds are not considered
Fund exchanges but purchases.
The Fund reserves the right not to allow the exercise of the exchange privilege
in less than two-week intervals. The Fund reserves the right to restrict the
exchange from any Fund until funds have been held in that Fund for at least
seven days. The Fund further reserves the right to discontinue or modify the
exchange privilege on a prospective basis at any time, including a modification
of the amount or terms of a service fee.
In addition, with regard to exchange requests made by market timers on behalf of
clients, the Fund reserves the right to delay settlement up to seven days if it
is determined by the Fund Manager that immediate settlement would harm the Fund.
Before engaging in an exchange transaction, a shareholder should read carefully
the parts of this Prospectus describing the Fund into which the exchange will
occur. See "Investment Objectives and Policies of the Funds." Shareholders must
elect to authorize the Fund's transfer agent to act upon telephone exchange
requests. Shareholders are subject to risk should they elect to exchange by
telephone in that neither the Fund nor the Transfer Agent will be liable for
properly acting upon telephone instructions believed to be genuine. The Fund
employs reasonable procedures to confirm that instructions communicated by
telephone are genuine, and should the Fund or its transfer agent fail to
institute such procedures, the Fund may be liable for any losses due to
unauthorized or fraudulent instructions. Telephone exchanges are activated by
instructions received from a shareholder or any person claiming to act as the
shareholder's representative who can provide the Transfer Agent with account
registration information.
Exchanges are taxable as redemptions on which gains or losses may be recognized.
HOW TO REDEEM
FUND SHARES
Any shareholder may require the Fund to redeem his or her shares in any Fund.
The redemption price will be the net asset value per share next determined after
receipt of all required information.
REDEMPTIONS
Redemptions may be made: (1) by telephone; (2) in writing; or (3) by wire, if
the appropriate request forms have been submitted. Payment for shares redeemed
will be made within seven days after the request has been properly made and
received. Shares purchased by check may be redeemed once the check has cleared,
which may take up to 10 days.
TELEPHONE REDEMPTIONS
The Fund accepts telephone requests for redemptions from shareholders who have
authorized this service. Telephone requests for redemption may be made by
calling the Transfer Agent at 1-800-368-3527. Anyone making a telephone
redemption request must furnish: (1) the name and address of record of the
registered owner(s); (2) the account number; (3) the amount to be withdrawn; and
(4) the name of the person
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making the request. Checks for telephone redemptions will be issued only to the
registered shareowner(s) and mailed to the last address of record or exchanged
into any other Fund. All telephone redemption instructions are recorded and are
limited to requests of $50,000 or less. Shareholders also have the option to
have redemption proceeds transferred directly to a bank account through the
Automatic Clearing House (ACH) system. All applicable bank information must be
established on the account before this type of redemption is initiated.
Shareholders are subject to risk should they elect to redeem by telephone in
that neither the Fund nor the Transfer Agent will be liable for properly acting
upon telephone instructions believed to be genuine. Should the Fund or its
transfer agent fail to utilize reasonable procedures, the Fund may be liable for
any losses due to unauthorized or fraudulent instructions.
WRITTEN REDEMPTIONS
Redemption requests may be made in writing, accompanied by any issued share
certificates, to:
Enterprise Shareholder Services
P.O. Box 419731
Kansas City, MO 64141-6731
Such written redemption requests and any share certificates or a stock power
must be endorsed by the investor. A signature guarantee is required if the
redemption proceeds exceed $50,000 or the proceeds are to be sent to an address
other than the address of record or to a person other than the registered
holder. A signature guarantee may be secured from a member firm of a domestic
securities exchange or by a commercial bank, savings and loan association,
credit union or trust company. Further documentation may be requested, and a
signature guarantee is always required, from corporations, executors,
administrators, trustees or guardians.
WIRE REDEMPTIONS
For a separate $10 charge, redemptions for a maximum of $250,000 will be wired
at your request. On written requests, funds may be wired to any bank. On a
telephone request, funds may be wired only to the bank previously designated by
you in writing. If a shareholder has given authorization for expedited wire
redemption, shares can be redeemed and the proceeds sent by federal wire
transfer to a single, previously designated bank account. Requests received
prior to 4:00 p.m. (New York time) by the Fund's Transfer Agent, will result in
shares being redeemed at the next determined net asset value, and the proceeds
normally will be sent to the designated bank account the following business day.
Delivery of the proceeds of a wire redemption request may be delayed by the Fund
for up to seven days if the Fund deems it appropriate under the then current
market conditions. Once authorization is on file, the Transfer Agent will honor
requests by any authorized person at 1-800-368-3527. This privilege may not be
used to redeem shares in certificated form. To change the name of the single
designated bank account to receive wire redemption proceeds, it is necessary to
send a written request with signature(s) guaranteed to the Transfer Agent.
REDEMPTIONS -- GENERAL
The Fund may redeem its shares in cash or with a pro rata portion of the assets
of the appropriate Fund. To date, all redemptions have been made in cash, and
the Fund anticipates that all redemptions will be made in cash in the future,
but it reserves the right to provide redemptions in assets of a Fund should
considerations and the size of the Fund require that method of redemption. The
Fund has elected to commit itself to pay in cash all requests for redemption by
any shareholder of record, limited in amount with respect to each shareholder
during any 90-day period to the lesser of: (i) $250,000 or (ii) 1% of the net
asset value of the Fund at the beginning of such period.
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The Fund reserves the right to redeem an account at its option upon not less
than 45 days' written notice if an account's net asset value is $500 or less and
remains so during the notice period.
PERFORMANCE
COMPARISONS
Investors may look to mutual fund reporting services such as Lipper Analytical
Services, Inc., CDA Investment Technologies, Computer Directions Adviser
Services, Inc., Moody's Bond Survey Index, Nelson's Investment Manager Data
Base, Morningstar, Inc., Salomon Brothers Corporate Bond Rate-of-Return Index,
Shearson Lehman Municipal Bond Index, Bond-20 Bond Index and mortgage trade and
other publications to compare the performance of each Fund with other mutual
funds in that Fund's category. Comparative performance information from these
sources may be used by the Fund in advertising.
From time to time, articles about the Fund regarding its performance or ranking
may appear in national publications such as Kiplinger's Personal Finance
Magazine, Money Magazine, Financial World, Morningstar, Dalbar, Value Line
Mutual Fund Survey, Forbes, Fortune, Business Week, Wall Street Journal,
Donaghue and Barron's. Some of these publications may publish their own rankings
or performance reviews of mutual funds, including the Fund. Reference to or
reprints of such articles may be used in the Fund's promotional literature.
From time to time, the Fund may advertise a Fund's "yield" and "total return."
Total return and yield are calculated separately for Class A, Class B, Class C
and Class Y shares. For Funds other than the Money Market Fund, the yield for
any 30-day (or one month) period is computed by dividing the net investment
income per share earned during such Period by the maximum public offering price
per share on the last day of the period, and then annualizing such 30-day (or
one month) yield in accordance with a formula prescribed by the SEC which
provides for compounding on a semiannual basis.
Current annualized yield quotations for the Money Market Fund are based on the
Fund's net investment income per share for a seven-day period and exclude any
realized or unrealized gains or losses on Fund securities. The yield is computed
by determining the net change in value for a hypothetical account having a
balance of one share at the beginning of the period, excluding any realized or
unrealized gains or losses, and dividing by the price per share at the beginning
of the period (expected to remain constant at $1). The net change is then
annualized by multiplying it by 365/7, with the current yield figure carried to
the nearest one-hundredth of one percent. The effective yield of the Money
Market Fund for a seven-day period is computed by expressing the unannualized
return for that period on a compounded, annualized basis.
A Fund may also advertise in items of sales literature an "actual distribution
rate" which is computed in the same manner as yield except that actual income
dividends declared per share during the period in question are substituted for
net investment income per share.
Advertisements of the Fund's total return disclose the Fund's average annual
compounded total return for its most recently completed fiscal year and the
appropriate periods since the Fund's inception. The Fund's total return for each
such period is computed by finding, through the use of a formula prescribed by
the SEC, the average annual compounded rates of return over the period that
would equate an assumed initial amount invested to the value of the investment
at the end of the period. For purposes of computing total return, income
dividends and capital gains distributions paid on shares of the Fund are assumed
to have been reinvested when received and the front end sales charge applicable
to sales of the Fund shares (other than the Money Market Fund) is assumed to
have been paid.
Any distribution rate, yield or total rate of return figure should not be
considered as representative of
THE ENTERPRISE Group of Funds, Inc.
33
<PAGE> 105
the performance of a Fund in the future. In addition, the Income Funds'
performance figures are not directly comparable to those of bank deposits and
other similar investments, which maintain a fixed principal value and pay a
fixed yield on the principal amount. These Funds' net asset values are not
fixed. They vary based not only upon the type, quality and maturities of the
securities held in the Funds, but also on the changes in the current value of
such securities and on changes in the Funds' expenses. For narrative discussions
of the Fund's performance including graphs comparing Funds to various securities
indexes, please request a copy of an Annual Report to Shareholders from the
Fund.
The Money Market Fund's actual yields will fluctuate, and are not necessarily
indicative of future actual yields. Actual yields are dependent on such
variables as portfolio quality, average portfolio maturity, the type of
instruments in which investments are made, changes in interest rates on money
market instruments, portfolio expenses and other factors.
MANAGEMENT OF THE FUND
DIRECTORS
The Board of Directors of the Fund is responsible for the management of the
business of the Fund under the laws of Maryland, and it is primarily responsible
for reviewing the activities of the Adviser, the various Fund Managers and the
Distributor under the Investment Adviser's Agreement, the Fund Manager's
Agreements, the Distributor's Agreement and the Plans which relate to the
operations of the Fund and its Funds. Information concerning the Directors,
including their names, positions, terms of office and principal occupations
during the past five years, is contained in the Statement of Additional
Information.
INVESTMENT ADVISER ARRANGEMENTS
The Fund has entered into an Investment Adviser's Agreement with the Adviser
which, in turn, has entered into Fund Manager's Agreements with each of the Fund
Managers discussed below. The Adviser acts as the Fund Manager for the Money
Market Fund. It is the Adviser's responsibility to select, subject to the Board
of Directors' review and approval, Fund Managers who have distinguished
themselves by able performance in their respective areas of responsibility and
to review their continued performance. The Adviser is assisted in this duty by
Evaluation Associates, Inc., which has had 26 years of experience in evaluating
investment advisers for individuals and institutional investors.
The Adviser and the Fund have received an exemptive order from the Securities
and Exchange Commission which permits the Fund, subject to, among other things,
initial shareholder authority, to thereafter enter into or amend Fund Manager's
Agreements without obtaining shareholder approval each time. Shareholders voted
affirmatively to give the Fund this ongoing authority. With Board approval, the
Adviser is permitted to employ new Fund Managers for the Funds, change the terms
of the Fund Manager's Agreements or enter into a new Agreement with that Fund
Manager. Shareholders of a Fund continue to have the right to terminate the Fund
Manager's Agreement for the Fund at any time by a vote of the majority of the
outstanding voting securities of the Fund. Shareholders will be notified of any
Fund Manager changes or other material amendments to Fund Manager's Agreements
that occur under these arrangements.
The Adviser is also responsible for conducting all operations of the Fund except
those operations contracted to the Transfer Agent and Custodian. The Adviser is
a subsidiary of MONY, one of the nation's largest insurance companies. The
Adviser, which was incorporated in 1986, served as principal investment adviser
to Alpha Fund, Inc., the predecessor of the Fund's Growth Fund. Enterprise
Capital also serves as investment adviser to Enterprise Accumulation Trust which
had assets of $4.2 billion at March 31, 1998. Performance of similar portfolios
of Enterprise Accumulation Trust may differ from the Fund due to a
THE ENTERPRISE Group of Funds, Inc.
34
<PAGE> 106
number of factors including the size of the Funds, investment cash flows and
redemptions. The Adviser's address is Atlanta Financial Center, 3343 Peachtree
Road, N.E., Suite 450, Atlanta, Georgia 30326.
As part of its operational responsibilities, the Adviser has undertaken to
review each of its internal systems and obtain assessments from each service
provider, including Fund Managers, of Year 2000 issues which could potentially
impact services to the Fund. The Adviser is unaware of any Year 2000 issues
which remain unresolved or have been identified as unresolvable. In addition,
the Adviser has established a timetable to periodically re-evaluate systems to
ensure that new issues or those which may not previously have been identified
are addressed and resolved in an expeditious manner. The Adviser does not
anticipate any material expenditures for monitoring Year 2000 issues.
FUND MANAGERS
The following sets forth certain information about each of the Fund Managers,
the annual rate of compensation as a percentage of the Fund's net assets paid to
the Adviser ("Management Fee") and the portion of the Management Fee that the
Adviser pays to the respective Fund Managers. Typical minimum investment
requirements for the Fund Managers range from $1,000,000 to $35,000,000. Due to
these high minimums, this level of professional management was previously
reserved for institutional investors and high net worth individuals.
Collectively, the Fund Managers manage assets in excess of $275 billion for all
clients, including The Enterprise Group of Funds, Inc.
GROWTH FUND
The Fund Manager of the Growth Fund is Montag & Caldwell, Inc. ("Montag &
Caldwell"). Its address is 1100 Atlanta Financial Center, 3343 Peachtree Road,
N.E., Atlanta, Georgia 30326, and it is controlled by Allegheny Corporation. It
has served as investment adviser to Alpha Fund, Inc., the predecessor of the
Growth Fund, since the Fund was organized in 1968. Montag & Caldwell and its
predecessors have been engaged in the business of providing investment
counseling to individuals and institutions since 1945. Ronald E. Canakaris,
President and Chief Investment Officer, is responsible for the day-to-day,
investment management of the Fund and has more than 30' years experience in the
investment industry. He has been President of Montag & Caldwell for more than 26
years and has served as Fund Manager since inception. Total assets under
management for all clients at March 31, 1998, approximated $20.6 billion. Usual
investment minimum: $40 million. Representative clients include: Black & Decker;
Bristol-Myers Squibb; and Wake Forest University. The management fee paid by the
Growth Fund is .75% of net assets, and the Fund Manager receives .30% for assets
under management of that fee up to $100,000,000; .25% for assets from
$100,000,000 to $200,000,000; and .20% for assets greater than $200,000,000.
GROWTH AND INCOME FUND
The Fund Manager of the Growth and Income Fund is Retirement System Investors
Inc. ("RSI") which is a subsidiary of Retirement System Group Inc. Its address
is 317 Madison Ave., New York, New York 10017. James P. Coughlin, President and
Chief Investment Officer, is responsible for the day-to-day, management of the
Fund and has more than 30 years' experience in the investment industry. He has
served as President and Chief Investment Officer with RSI since 1989. Total
assets under management for RSI were $549.7 million as of March 31, 1998. The
Management Fee is .75%, and the Fund Manager receives 30% of that fee for assets
under management up to $100,000,000; .25% on the next $100,000,000; and .20% for
assets greater than $200,000,000.
EQUITY FUND
The Fund Manager of the Equity Fund is OpCap Advisors which is a subsidiary of
Oppenheimer Capital, a general partnership. OpCap's address is One World
Financial Center, New York, New York
THE ENTERPRISE Group of Funds, Inc.
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<PAGE> 107
10281. Eileen Rominger, Managing Director of Oppenheimer Capital, is responsible
for the day-to-day management of the Fund. Ms. Rominger has more than 19 years'
experience in the investment industry and has been Managing Director of
Oppenheimer Capital since 1994 and previously served as Senior Vice President.
The Fund Manager had approximately $67.6 billion under management as of March
31, 1998. Usual investment minimum is $20 million. The management fee is .75%
and the Fund Manager receives .40% of that fee for assets under management up to
$100,000,000 and .30% of that fee thereafter.
EQUITY INCOME FUND
The Fund Manager of the Equity Income Fund is 1740 Advisers, Inc. ("1740
Advisers"). It is a subsidiary of MONY. Its address is 1740 Broadway, New York,
New York 10019. John V. Rock, President and Director, is responsible for the
day-to-day investment management of the Fund and has more than 34 years
experience in the investment industry. He has served as President of 1740
Advisers since 1974. Total assets under management (for the Equity Income Fund
and all other accounts managed) at March 31, 1998, were approximately $1.8
billion. Usual investment minimum: $20 million. The management fee paid by the
Equity Income Fund is .75% of net assets, and the Fund Manager receives .30% of
that fee for assets under management up to $100,000,000; and .25% on the next
$100,000,000; and .20% thereafter.
CAPITAL APPRECIATION FUND
The Fund Manager of the Capital Appreciation Fund is Provident Investment
Counsel, Inc. ("PIC"). PIC traces its origins to an investment partnership
formed in 1951. PIC is a wholly-owned subsidiary of United Asset Management,
Inc. Its address is 300 North Lake Avenue, Pasadena, California 91101. Jeffrey
J. Miller is a Managing Director of the firm and is responsible for the
day-to-day management of the Fund. He has more than 25 years' experience in the
investment industry. He has been Managing Director of PIC since 1972. As of
March 31, 1998, total assets under management for all clients were $18.3
billion. Usual investment minimum: $5 million. Representative clients include:
Pennsylvania State Employees Retirement System, Kansas Public Employees
Retirement System and United Methodist Church Board of Pensions. The management
fee is .75% and the Fund Manager receives .50% of that fee for assets under
management up to $100,000,000; .45% for assets under management for the next
$100,000,000; .35% for assets greater than $200,000,000 up to $300,000,000; and
.30% thereafter.
SMALL COMPANY GROWTH FUND
The Fund Manager of the Small Company Growth Fund is Pilgrim Baxter &
Associates, Ltd. ("Pilgrim Baxter"). Pilgrim Baxter is a wholly-owned subsidiary
of United Asset Management, Inc. Its offices are at 825 Duportail Road, Wayne,
Pennsylvania 19087. Michael D. Jones, Fund Manager/Analyst, is responsible for
the day-to-day management of the Fund and Gary Pilgrim, Chief Investment
Officer, acts as co-manager. They have more than 40 years' combined experience
in the investment industry. Mr. Pilgrim and Mr. Jones have been employed in
their present positions by Pilgrim Baxter since 1982 and 1995, respectively. Mr.
Jones previously served as Portfolio Manager for Bank of New York from
1990-1975. As of March 31, 1998, total assets under management for all clients
were $13.4 billion. Usual investment minimum: $20 million. The management fee is
1.00% and the Fund Manager receives .65% of that fee for assets under management
up to $50,000,000; and .55% for assets under management for the next
$50,000,000; and .45% for assets thereafter.
SMALL COMPANY VALUE FUND
The Fund Manager of the Small Company Value Fund is Gabelli Asset Management
Company ("Gabelli"). Gabelli is a wholly-owned subsidiary of Gabelli Funds, Inc.
Its offices are located at One
THE ENTERPRISE Group of Funds, Inc.
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Corporate Center, Rye, New York 10580. Gabelli's predecessor, Gabelli & Company,
Inc., was founded in 1977 by Mario J. Gabelli who has served as its chief
investment officer since inception. He is responsible for the day-to-day
management of the Fund. He has more than 27 years' experience in the investment
industry. As of March 31, 1998, total assets under management for all clients
were $7.2 billion. Usual investment minimum is $1 million. The management fee is
.75% and the Fund Manager receives .40% of that fee for assets under management
up to $1 billion and .30% for assets in excess of $1 billion.
INTERNATIONAL GROWTH FUND
The Fund Manager of the International Growth Fund is Brinson Partners, Inc.
("Brinson"). Brinson is a wholly-owned subsidiary of UBS AG (United Bank of
Switzerland). Brinson's address is 209 South LaSalle Street, Chicago, Illinois
60604. Day-to-day management of this Fund is performed by a committee. The
Global Equity Committee is chaired by Richard Carr, who has more than 32 years'
experience in the investment industry. As of March 31, 1998, Brinson's assets
under management for all clients approximated $98 billion. Usual investment
minimum: $25 million. The management fee is .85%, and the Fund Manager receives
.45% of that fee for assets under management up to $100 million; .35% for assets
under management from $100,000,000 to $200,000,000; .325% for assets from
$200,000,000 to $500,000,000; and .25% for assets greater than $500,000,000.
GLOBAL FINANCIAL SERVICES FUND
The Fund Manager of the Global Financial Services Fund is Sanford C. Bernstein &
Co., Inc. ("Sanford Bernstein"). Sanford Bernstein's address is 767 Fifth
Avenue, New York, New York 10153-0185. Sanford Bernstein was established in 1967
and as of June 30, 1998, had $78 billion in assets under management. Day-to-day
management of this Fund is performed by a committee. Sanford Bernstein's Global
Investment Policy Group is chaired by Andrew S. Adelson, who has more than 20
years' experience in the investment industry. The management fee is .85% of
average daily net assets, and of that fee, the Fund Manager receives .50% for
assets up to $100 million; .40% for assets from $100 million to $300 million;
.30% for assets from $300 million to $500 million; and .25% for assets over $500
million.
GOVERNMENT SECURITIES FUND
The Fund Manager of the Government Securities Fund is TCW Funds Management, Inc.
The firm, founded in 1971, is a wholly-owned subsidiary of TCW Management
Company, a Nevada corporation, whose direct and indirect subsidiaries, including
Trust Company of the West and TCW Asset Management Company, provide a variety of
trust, investment management and investment advisory services. The firm's
address is 865 South Figueroa Street, Suite 1800, Los Angeles, California 90017.
Philip A. Barach, Managing Director, and Jeffrey E. Gundlach, Managing Director,
are responsible for the day-to-day investment management of the Fund and have
more than 35 years' combined experience in the investment industry. They joined
TCW in 1987 and 1985, respectively. As of March 31, 1998 TCW and its affiliated
companies had approximately $51.6 billion under management or committed for
management in various fiduciary and advisory capacities. Usual investment
minimum: $35 million. The management fee is .60% and the Fund Manager receives
.30% of that fee for assets under management up to $50,000,000 and .25% for
assets under management greater than $50,000,000.
HIGH-YIELD BOND FUND
The Fund Manager of the High-Yield Bond Fund is Caywood-Scholl Capital
Management ("Caywood-Scholl"). This firm was formed in 1986 and is owned by its
employees. Caywood-Scholl Capital Management's address is 4350 Executive Drive,
Suite 125, San Diego, California 92121. James Caywood, Managing Director and
Chief Executive Officer, is responsible for the day-to-day management of the
Fund. He has
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more than 29 years' investment industry experience. He joined Caywood-Scholl in
1986. Caywood-Scholl provides investment advice as managing Director and Chief
Executive Officer with respect to high yield, low grade fixed income
instruments. As of March 31, 1998, assets under management for all clients
approximated $807 million. Usual investment minimum: $1 million. The management
fee is .60%, and the Fund Manager receives .30% of that fee for assets up to
$100,000,000 and .25% for assets above $100,000,000.
TAX-EXEMPT INCOME FUND
The Fund Manager of the Tax-Exempt Income Fund is MBIA Capital Management Corp.
("MBIA"). It is a wholly-owned subsidiary of MBIA, Inc. MBIA's address is 113
King Street, Armonk, New York 10504. Day-to-day management of the Fund is
performed by Robert M. Ohanesian, President and Chief Investment Officer who has
25 years' investment industry experience. Mr. Ohanesian joined MBIA in 1994 and
previously served as Director of Investments for Shields Asset Management. As of
March 31, 1998, assets under management for all clients approximated $11.5
billion. Usual investment minimum: $10 million fee. The management fee is .50%
and the Fund Manager receives .15% for assets under management of that fee.
MANAGED FUND
The Fund Manager of the Managed Fund is OpCap Advisors, a majority owned
subsidiary of Oppenheimer Capital, a general partnership. Its address is One
World Financial Center, New York, New York 10281. Richard J. Glasebrook II,
Managing Director of Oppenheimer Capital is responsible for the day-to-day
management of the Fund. He has more than 24 years' investment industry
experience and has served as managing Director with Oppenheimer Capital since
1994 and previously served as Senior Vice President. As of March 31, 1998,
Oppenheimer Capital and its affiliates had over $67.6 billion under management.
Its usual investment minimum is $20 million. The management fee is .75% and the
Fund Manager receives .40% of that fee for assets up to $100,000,000 and .30%
for assets in excess of $100,000,000.
MONEY MARKET FUND
The Fund Manager of the Money Market Fund is Enterprise Capital, a wholly-owned
subsidiary of MONY. Its address is Atlanta Financial Center, 3343 Peachtree
Road, N.E., Suite 450, Atlanta, Georgia 30326. Enterprise Capital utilizes the
services of MONY employees for certain services relating to management of the
Fund. Day-to-day management of the Fund is performed by a committee. MONY's
address is 1740 Broadway, New York, New York 10019. Enterprise Capital began
operating as Fund Manager on May 1, 1992. Total Fund assets at March 31, 1998,
approximated $95 million. The management fee is .35%.
PAYMENT OF EXPENSES
The Investment Adviser's Agreement obligates Enterprise Capital to provide
investment advisory services to the Funds of the Fund and to furnish the Fund
with certain administrative, clerical, bookkeeping and statistical services,
office space and facilities and for paying the compensation of the officers of
the Fund. Each Fund pays all other expenses incurred in its operation, and a
portion of the Fund's general administrative expenses is allocated to each Fund
either on the basis of its asset size, on the basis of special needs of such
Fund, or equally, as is deemed appropriate. These expenses include expenses such
as: custodial, transfer agent, brokerage, auditing and legal services, the
printing of Prospectuses sent to existing shareholders, expenses relating to
bookkeeping and recording and determining the net asset value of shares, and the
expenses of qualification of a Fund's shares under the federal and state
securities laws. The Fund's Board of Directors annually reviews allocation of
expenses among the Funds.
Enterprise Capital has advised the Fund that it will reimburse such portion of
the fees due to it under the
THE ENTERPRISE Group of Funds, Inc.
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Investment Adviser's Agreement as is necessary to assure, for the period
commencing January 1, 1998 and ending no earlier than December 31, 1998, that
expenses incurred by the Funds will not exceed the following percentages of
average annual assets for the Y Class (annualized for periods of less than a
fiscal year): Growth 1.15%; Growth and Income 1.05%; Equity 1.15%; Equity Income
1.05%; Capital Appreciation 1.30%; Small Company Growth 1.40%; Small Company
Value 1.30%; International Growth 1.55%; Government Securities 0.85%; High-Yield
Bond 0.85%; Tax-Exempt Income 0.65%; Managed 1.55% and Money Market 0.70%. The
Fund Managers have advised the Fund that they may assist in a portion of the
above-referenced reimbursement from time to time.
Enterprise Capital and the Fund entered into agreements pursuant to which
Enterprise Capital advanced on behalf of the Fund $33,748 to cover the costs of
expanding the series to include a Small Company Value Fund; $34,116 of expanding
the series to include a Managed Fund; and approximately $40,378 for the Equity
Fund and completing the appropriate registrations under the Investment Company
Act of 1940, the Securities Act of 1933, and certain state securities laws. The
agreements provide that these amounts will be repaid by each Fund, in five equal
annual increments without interest, commencing at the end of the first fiscal
year at which each such Fund have total net assets of $5 million or more. Each
Fund has commenced such payments.
TAXES
Each Fund of the Fund has qualified and intends to continue to qualify as a
"regulated investment company" in 1998 under the provisions of the IRC, as
amended. For purposes of the IRC, each Fund is regarded as a separate regulated
investment company. If any Fund qualifies as a "regulated investment company"
and complies with provisions of the IRC which require regulated investment
companies to distribute substantially all of their net income (both ordinary
income and capital gain), the Fund will be relieved of federal income tax on the
amounts distributed to shareholders.
Dividends declared out of a Fund's net investment income, taking account of its
net realized short-term capital gains to the extent that they exceed its net
realized long-term capital losses are taxable to its shareholders as ordinary
income, whether such dividends are received in cash or additional shares. If,
for any taxable year, a Fund complies with certain requirements, some or all of
the dividends (excluding capital gain dividends, as defined in the IRC) received
by the Fund's corporate shareholders may qualify for the 70% dividends received
deduction available to corporations. Dividends paid by the Income Funds and the
International Growth Fund are not expected to be eligible for dividends received
deductions.
Distributions declared out of a Fund's realized net capital gain (realized net
capital gains from the sale of assets held for more than 12 months in excess of
realized net short-term capital losses) and designated by the Fund as a capital
gain dividend in a written notice to the shareholders are taxable to such
shareholders as capital gain without regard to the length of time a shareholder
has held stock of the Fund and regardless of whether paid in cash or additional
shares. Recent legislation created several classes of capital gains.
The Funds may be required to withhold for federal income taxes 31% ("Back-Up
Withholding") of the distributions and the proceeds of redemptions payable to
shareholders who fail to comply with regulations requiring that they provide a
correct social security or taxpayer identification number or to make required
certifications, or who have been notified by the Internal Revenue Service that
they are subject to Back-up Withholding. Corporate shareholders and certain
other shareholders specified in the IRC are exempt from Back-Up Withholding.
Distributions from retirement plans are also subject to 20% federal withholding
if the shareholder fails to
THE ENTERPRISE Group of Funds, Inc.
39
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provide a tax identification number to the trustee or custodian and funds are
not rolled over.
No gain or loss will be recognized by Class B shareholders upon the conversion
of Class B shares into Class A shares.
Upon a sale or exchange of its shares, a shareholder will realize a taxable gain
or loss depending on its basis in the shares. Such gain or loss will be treated
as capital gain or loss if the shares are capital assets in the shareholder's
hands. In the case of an individual, any such capital gain will be treated as
short-term capital gain if the shares were held for not more than 12 months,
gain taxable at the maximum rate of 28% if such shares were held for more than
12, but not more than 18 months, and gain taxable at the maximum rate of 20% if
such shares were held for more than 18 months. In the case of a corporation, any
such capital gain will be treated as long-term capital gain, taxable at the same
rates as ordinary income, if such shares were held for more than 12 months. Any
such capital loss will be long-term capital loss if the shares were held for
more than 12 months. A sale or exchange of shares held for six months or less,
however, will be treated as long-term capital loss to the extent of any
long-term capital gains distributions with respect to such shares.
Generally, any loss realized on a sale or exchange of shares of the Fund will be
disallowed if other Fund shares are acquired (whether through the automatic
reinvestment of dividends or otherwise) within a 61-day period beginning 30 days
before and ending 30 days after the date that the shares are disposed of. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss.
In certain circumstances (e.g., an exchange), a shareholder who has held shares
in a Fund for not more than 30 days may not be allowed to include certain sales
charges incurred in acquiring such shares for purposes of calculating gain or
loss realized upon the sale or exchange of shares of the Fund.
TAX-EXEMPT INCOME FUND
Dividends derived from interest on Municipal Securities and designated by the
Fund as exempt interest dividends by written notice to the shareholders, under
existing law, are not subject to federal income tax. Dividends derived from net
capital gains realized by the Fund are taxable to shareholders as a capital gain
upon distribution. Any short-term capital gains or any taxable interest income
or accrued market discount realized by the Fund will be distributed as a taxable
ordinary income dividend distribution. These rules apply whether such
distribution is made in cash or in additional shares. The percentage of income
that is tax-exempt is applied uniformly to all distributions made by the Fund
during each year. As with shares in all Funds, a sale, exchange or redemption of
shares in the Tax-Exempt Income Fund is a taxable event and may result in
capital gain or loss. In addition, generally any capital loss realized from
shares held for six months or less is disallowed to the extent of tax-exempt
dividend income received.
The Tax-Exempt Income Fund declares and pays dividends monthly on the last
business day of the month. When a shareholder redeems shares of the Fund on
other than a dividend payment date, a portion of the shareholder's redemption
proceeds will represent accrued tax-exempt income which will be treated as part
of the amount realized for purposes of capital gains computations for federal
and state or local income tax purposes and will not be tax-exempt.
Income from certain "private activity" bonds issued after August 7, 1986, are
items of tax preference for the alternative minimum tax at a maximum rate of 28%
for individuals and 20% for corporations. If the Fund invests in private
activity bonds, shareholders may be subject to the alternative minimum tax on
that part of such Fund distributions derived from interest income on those
bonds. The Tax-Exempt Income Fund does not intend to invest more than 20% of its
assets in private activity bonds. In addition, a portion of a distribution
derived from any tax-
THE ENTERPRISE Group of Funds, Inc.
40
<PAGE> 112
exempt interest incurred, whether or not from private activity bonds, will be
taken into account in determining the corporate alternative minimum tax. In
higher income brackets, up to 85% of an individual's Social Security benefits
may be subject to federal income tax. Along with other factors, total tax-exempt
income, including any tax-exempt dividend income from the Fund, is taken into
account in determining that portion of Social Security benefits which is taxed.
Any loss realized on this sale or exchange of shares of the Tax-Exempt Income
Fund held for six months or less will be disallowed to this effect of any
tax-exempt interest dividend received with respect to such shares.
The treatment for state and local tax purpose of distributions from the
Tax-Exempt Income Fund representing Municipal Securities interests will vary
according to the laws of state and local taxing authorities.
FOREIGN INCOME TAXES
Investment income received by a Fund from sources within foreign countries may
be subject to foreign income taxes withheld at the source. The United States has
entered into tax treaties with many foreign countries which entitle the Fund to
a reduced rate of tax or exemption from tax on such income. It is impossible to
determine the effective rate of foreign tax in advance since the amount of these
Fund's assets to be invested within various countries is not known. The Funds
intend to operate so as to obtain treaty-reduced rates of tax where applicable.
To the extent that the International Growth Fund is liable for foreign income
taxes withheld at the source, the Fund also intends to operate so as to meet the
requirements of the IRC to "pass through" to the Fund's shareholders credits for
foreign income taxes paid, but there can be no assurance that the Fund will be
able to do so.
EXCISE TAX
The Federal tax laws impose a four percent nondeductible excise tax on each
regulated investment company with respect to the amount, if any, by which such
company does not meet distribution requirements specified in such tax laws. Each
Fund of the Fund intends to comply with such distribution requirements and thus
does not expect to incur the four percent nondeductible excise tax.
GENERAL
The foregoing is a general and abbreviated summary of the applicable provisions
of the IRC and Treasury Regulations in effect, as currently interpreted by the
Courts and by the Internal Revenue Service in published revenue rulings and in
private letter rulings and is only applicable to U.S. persons. These
interpretations can be changed at any time. For the complete provisions,
reference should be made to the pertinent Code sections and the Treasury
Regulations promulgated thereunder. The above discussion covers only federal
income tax considerations with respect to the Funds and their shareholders.
State and local tax laws vary greatly, especially with regard to the treatment
of exempt-interest dividends. Shareholders should consult their own tax advisers
for more information regarding the federal, state, and local tax treatment of
each Fund's shareholders.
Statements indicating the tax status of distributions to each shareholder will
be mailed to each shareholder annually.
DIVIDENDS AND
DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of the net investment
income and realized net capital gains, if any, of each Fund. The per share
dividends and distribution on each class of shares of a Fund will be reduced as
a result of any service fees applicable to that class. For dividend purposes,
net investment
THE ENTERPRISE Group of Funds, Inc.
41
<PAGE> 113
income of each Fund will consist of substantially all dividends received,
interest accrued, net short-term capital gains realized by such Fund less the
estimated expenses of such Fund.
Unless shareholders request otherwise, by notifying the Fund's Transfer Agent,
dividends and capital gains distributions will be automatically reinvested in
shares of the respective Fund at net asset value; such reinvestments
automatically occur on the payment date of such dividends and capital gains
distributions. At the election of any shareholder, dividends or capital gains
distributions, or both, will be distributed in cash to such shareholders.
However, if it is determined that the U.S. Postal Service cannot properly
deliver Fund mailings to the shareholder, the respective Funds will terminate
the shareholder's election to receive dividends and other distributions in cash.
Thereafter, the shareholder's subsequent dividends and other distributions will
be automatically reinvested in additional shares of the respective Funds until
the shareholder notifies the Transfer Agent or the Fund in writing of his or her
correct address and requests in writing that the election to receive dividends
and other distributions in each be reinstated.
Distributions of capital gains from each of the Funds, other than the Money
Market Fund, are made annually. Dividends from investment income of the Equity
Funds (except the Equity Income Fund) and Managed Fund are declared and paid
annually. Dividends on the Equity Income Fund are paid semiannually. Dividends
from investment income of the Income Funds are declared daily and paid monthly.
Dividends from investment income and any net realized capital gains of the Money
Market Fund are declared daily and reinvested monthly in additional shares of
the Money Market Fund at net asset value.
BROKERAGE
TRANSACTIONS
Each Fund Manager selects the brokerage firms which complete portfolio
transactions for that Fund, subject to the overall direction and review of
Enterprise Capital and the Board of Directors of the Fund.
The initial criterion which must be met by any Fund Manager in selecting brokers
and dealers to effect securities transactions for a Fund is whether such brokers
and dealers can obtain the most favorable combination of price and execution for
the transaction. This does not mean that the execution decision must be based
solely on whether the lowest possible commission costs may be obtained. In
seeking to achieve the best combination of price and execution, the Fund
Managers evaluate the overall quality and reliability of broker-dealers and the
service they provide, including their general execution capability, reliability
and integrity, willingness to take positions in securities, general operational
capabilities and financial condition.
Subject to this primary objective, the Fund Managers may select for brokerage
transactions those firms which furnish brokerage and research services to the
Fund, the Adviser, and the respective Fund Managers, or those firms who agree to
pay certain of the Fund's expenses, including certain custodial and transfer
agent services, and, consistent with the National Association of Securities
Dealers, Inc. Conduct Rules, those firms which have been active in selling
shares of the Fund. Fund Managers may execute brokerage transactions through
affiliated broker/dealers, subject to compliance with applicable requirements of
Federal securities laws.
THE ENTERPRISE Group of Funds, Inc.
42
<PAGE> 114
GENERAL
INFORMATION
ORGANIZATION OF THE FUND
The Fund was incorporated January 2, 1968, as Alpha Fund, Inc., and its name was
changed to The Enterprise Group of Funds, Inc. on September 14, 1987, and it
expanded into a series fund and Alpha Fund became the Growth Fund of the Fund.
The Money Market Fund was added commencing May 1, 1990; the Small Company Value
Fund was added commencing October 1, 1993; the Managed Fund was added commencing
October 3, 1994; and the Growth and Income Fund, Equity Fund and Small Company
Growth Fund were added on May 1, 1997, and the Global Financial Services Fund
was added commencing October 1, 1998. Class B and Y shares were established May
1, 1995; Class C shares were established on May 1, 1997. The Fund is a Maryland
corporation. Each Fund of the Fund in the series is diversified, as that term is
defined in the Investment Company Act of 1940.
OTHER CLASSES OF SHARES
Each Fund currently offers four classes of shares, Class A, Class B, Class C and
Class Y, and may in the future offer additional classes. Class Y shares are the
only classes of shares offered by this Prospectus. Class Y shares are only
available to certain institutional purchasers of $1 million or more and to The
Mutual of New York Employee 401(k) Plan and the Enterprise Capital Management,
Inc. 401(k) Plan. Institutional investors eligible to purchase Class Y shares
include banks, savings institutions, trust companies, insurance companies,
investment companies as defined by the Investment Company Act of 1940, pension
or profit sharing trusts, certain wrap account clients of broker/dealers, former
shareholders of Retirement System Fund Inc., direct referrals of Fund Managers
and EAI or other financial institutional buyer. Wrap account clients of
broker/dealers, former Retirement System Fund Inc. shareholders, and direct
referrals of Fund Managers and EAI are offered Class Y shares at a lower minimum
purchase amount.
CAPITAL STOCK
The authorized capital stock of the Fund consists of Common Stock, par value
$0.10 per share. The shares of Common Stock are divided into 13 series with each
series representing a separate Fund. The Board of Directors may determine the
number of authorized shares for each series and to create new series of Common
Stock. It is anticipated that new classes will be authorized by the Board from
time to time as new Funds with separate investment objectives and policies are
established.
Each class of shares is entitled to participate in dividends and distributions
declared by the respective Funds and in net assets of such Funds upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities, except that each Class will bear its own distribution and
shareholder servicing charges. The shares of each Fund, when issued, will be
fully paid and nonassessable, have no preference, preemptive, conversion,
exchange or similar rights, and will be freely transferable. Holders of shares
of any Fund are entitled to redeem their shares as set forth under "How to
Redeem Fund Shares."
VOTING RIGHTS
Shares of each Fund are entitled to one vote per share and fractional votes for
fractional shares. The Fund's shareholders have the right to vote on the
election of Directors of the Fund and on any and all other matters on which, by
law or the provisions of the Fund's bylaws, they may be entitled to vote.
Each series (i.e., Fund) of the Fund is further divided into four classes of
shares: Class A, Class B, Class C and Class Y. Class A, Class B, Class C and
Class Y shares represent interests in the same assets of a Fund and are
identical in all respects, except that Class A and Class B, and Class C shares
bear certain expenses related to distribution and servicing of such shares.
THE ENTERPRISE Group of Funds, Inc.
43
<PAGE> 115
On matters relating to all Funds or Classes of shares and affecting all Funds or
Class of shares in the same manner, shareholders of all Funds or Classes of
shares are entitled to vote. On any matters affecting only one Fund, only the
shareholders of that Fund are entitled to vote. On matters relating to all the
Funds but affecting the Funds differently, separate votes by Fund are required.
Each class has exclusive voting rights with respect to matters related to
distribution and servicing expenditures, as applicable.
The Fund and its Funds are not required by Maryland law to hold annual meetings
of shareholders under normal circumstances. The Board of Directors or the
shareholders may call special meetings of the shareholders for action by
shareholder vote, including the removal of any or all of the Directors, as may
be required by either the Articles of Incorporation or bylaws of the Fund, or
the Investment Company Act of 1940. Shareholders possess certain rights related
to shareholder communications which, if exercised, could facilitate the calling
by shareholders of a special meeting.
CUSTODIAN, TRANSFER AND
DIVIDEND DISBURSING AGENT
State Street Bank & Trust Company of Boston, Massachusetts acts as Custodian of
the Fund's assets.
National Financial Data Services, Inc. acts as the Fund's Transfer Agent and
Dividend Disbursing Agent. National Financial Data Services, Inc. is a joint
venture of State Street Bank & Trust Company of Boston, Massachusetts and DST
Systems, Inc. of Kansas City, Missouri.
REPORTS TO SHAREHOLDERS
The Fund sends to all its shareholders annual and semiannual reports, including
a list of investment securities held in the Funds.
APPENDIX
DESCRIPTION OF MUNICIPAL SECURITIES
Municipal Securities are notes and bonds issued by or on behalf of states,
territories and possessions of the United States and the District of Columbia
and their political subdivisions, agencies and instrumentalities, the interest
on which is exempt from federal income taxes and, in certain instances,
applicable state or local income taxes. These securities are traded primarily in
the over-the-counter market.
Municipal Securities are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works and gas and electric utilities. Municipal
Securities may also be issued in connection with the refunding of outstanding
Municipal Securities obligations, obtaining funds to lend to other public
institutions and for general operating expenses. Industrial Development Bonds
("IDBs") are issued by or on behalf of public authorities to obtain funds to
provide privately operated facilities for business and manufacturing, housing,
sports, pollution control, and for airport, mass transit, port and parking
facilities and are considered tax-exempt bonds if the interest thereon is exempt
from federal income taxes.
The two principal classifications of tax-exempt bonds are "general obligation"
and "revenue." General obligation bonds are secured by the issuer's pledge of
its full faith and credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although IDBs are
issued by municipal authorities, they are generally secured only by the revenues
derived from payment of the industrial user. The payment of principal and
interest on IDBs is dependent solely upon the ability of the user of the
facilities financed by the bonds to meet its financial
THE ENTERPRISE Group of Funds, Inc.
44
<PAGE> 116
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
Tax-exempt notes are of short maturity, generally less than three years. They
include such securities as Project Notes, Tax Anticipation Notes, Revenue
Anticipation Notes, Bond Anticipation Notes and Construction Loan Notes.
Tax-exempt commercial paper consists of short term obligations generally having
a maturity of less than nine months.
New issues of Municipal Securities are normally offered on a when-issued basis,
which means that delivery and payment for these securities normally takes place
15 to 45 days after the date of commitment to purchase.
Yields of Municipal Securities depend upon a number of factors, including
economic, money and capital market conditions, the volume of Municipal
Securities available, conditions within the Municipal Securities market, and the
maturity, rating and size of individual offerings. Changes in market values of
Municipal Securities may vary inversely in relation to changes in interest
rates. The magnitude of changes in market values in response to changes in
market rates of interest typically varies in proportion to the quality and
maturity of obligations. In general, among Municipal Securities of comparable
quality, the longer the maturity, the higher the yield, and the greater
potential for price fluctuations.
FLOATING RATE AND VARIABLE RATE SECURITIES
The Tax-Exempt Income Fund may invest in floating rate and variable rate
tax-exempt securities. These securities are normally IDBs or revenue bonds that
provide that the rate of interest is set as a specific percentage of a
designated base rate, such as rates of treasury bills or bonds or the prime rate
at a major commercial bank and provide that the holders of the securities can
demand payment of the obligation on short notice at par plus accrued interest,
which amount may be more or less than the amount initially paid for the bonds.
Floating rate securities have an interest rate which changes whenever there is a
change in the designated base interest rate, while variable rate securities
provide for a specific periodic adjustment in the interest rate. Frequently such
securities are secured by letters of credit or other credit support arrangements
provided by banks. The quality of the underlying credit or of the bank, as the
case may be, must be equivalent to the long-term bond or commercial paper rating
stated above.
THE ENTERPRISE Group of Funds, Inc.
45
<PAGE> 117
Investment Adviser
Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Distributor
Enterprise Fund Distributors, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Telephone: 1-800-432-4320 (Toll Free)
Custodian
State Street Bank and Trust Company
Boston, MA
Transfer Agent
National Financial Data Services, Inc.
1004 Baltimore Ave.,
2nd Floor Kansas City,
MO 64105-2112
Telephone: 1-800-368-3527 (Toll Free)
Independent Accountants
PricewaterhouseCoopers LLP
Atlanta, GA
Member - Investment Company Institute
[Enterprise Group of Funds(TM) Logo]
1-800-432-4320
www.enterprisefunds.com
<PAGE> 118
A N N U A L R E P O R T
DECEMBER 31, 1997
[PICTURE]
THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 119
THE ENTERPRISE GROUP OF FUNDS, INC.
Enterprise Growth Portfolio
Enterprise Equity Portfolio
Enterprise Growth and Income Portfolio
Enterprise Equity Income Portfolio
Enterprise Capital Appreciation Portfolio
Enterprise Small Company Growth Portfolio
Enterprise Small Company Value Portfolio
Enterprise International Growth Portfolio
Enterprise Government Securities Portfolio
Enterprise High-Yield Bond Portfolio
Enterprise Tax-Exempt Income Portfolio
Enterprise Managed Portfolio
Enterprise Money Market Portfolio
<PAGE> 120
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
The Enterprise Growth Portfolio
Manager's Comments................................................................................ 3
Portfolio of Investments.......................................................................... 6
The Enterprise Equity Portfolio
Manager's Comments................................................................................ 7
Portfolio of Investments.......................................................................... 10
The Enterprise Growth and Income Portfolio
Manager's Comments................................................................................ 12
Portfolio of Investments.......................................................................... 15
The Enterprise Equity Income Portfolio
Manager's Comments................................................................................ 17
Portfolio of Investments.......................................................................... 20
The Enterprise Capital Appreciation Portfolio
Manager's Comments................................................................................ 23
Portfolio of Investments.......................................................................... 26
The Enterprise Small Company Growth Portfolio
Manager's Comments................................................................................ 28
Portfolio of Investments.......................................................................... 31
The Enterprise Small Company Value Portfolio
Manager's Comments................................................................................ 33
Portfolio of Investments.......................................................................... 37
The Enterprise International Growth Portfolio
Manager's Comments................................................................................ 40
Portfolio of Investments.......................................................................... 44
The Enterprise Government Securities Portfolio
Manager's Comments................................................................................ 49
Portfolio of Investments.......................................................................... 52
The Enterprise High-Yield Bond Portfolio
Manager's Comments................................................................................ 54
Portfolio of Investments.......................................................................... 57
The Enterprise Tax-Exempt Income Portfolio
Manager's Comments................................................................................ 62
Portfolio of Investments.......................................................................... 65
The Enterprise Managed Portfolio
Manager's Comments................................................................................ 68
Portfolio of Investments.......................................................................... 72
The Enterprise Money Market Portfolio
Manager's Comments................................................................................ 74
Portfolio of Investments.......................................................................... 76
Statement of Assets and Liabilities................................................................. 78
Statement of Operations............................................................................. 80
Statement of Changes in Net Assets.................................................................. 82
Financial Highlights................................................................................ 86
Notes to Financial Statements....................................................................... 112
</TABLE>
Returns in this report are historical and do not guarantee future performance of
any fund. Investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than their cost.
<PAGE> 121
ENTERPRISE
GROUP OF FUNDS
- --------------------------------------------------------------------------------
MESSAGE FROM THE CHAIRMAN
Dear Fellow Shareholders:
Investors in U.S. stock mutual funds enjoyed another stellar year in 1997 as
the longest bull run in stock-market history continued. For the year, the
average diversified U.S. stock fund returned 24.36 percent, according to Lipper
Analytical Services, Inc. The good news extended to the bond market, as well,
which recorded an impressive rally during the second half of the year. Lipper
concluded that the average taxable-bond fund gained 8.67 percent in 1997, while
the average tax-free bond fund recorded 8.24 percent in total returns, which
include price changes and reinvested dividends.
1997 IN REVIEW
Stocks, as measured by the S&P 500 Composite Index, achieved an improbable
third consecutive rise of more than 20 percent in 1997. The S&P 500 gained 33.4
percent, inclusive of reinvested dividends and interest, which marked the 15th
calendar-year advance for the index in the past 16 years. Nearly ideal economic
conditions in the U.S. -- solid earnings gains and low unemployment combined
with almost non-existent inflationary pressure -- spurred the Dow Jones
Industrial Average to a 24.9 percent rise and the Nasdaq Composite Index to a
22.3 percent gain. Even small-cap stocks, as measured by the Russell 2000 Index,
showed marked improvement from 1996 by gaining 22.4 percent.
The headiness caused by all of this good news was tempered by a volatile
fourth quarter marked by the record one-day drop of 554 points by the Dow on
October 27. Although the fourth quarter barely detracted from the gains of the
first three quarters -- the average U.S. stock fund declined just 1.54 percent
according to Lipper -- it served as a reminder to investors of the value of
long-term investment planning and portfolio diversification. Much of the
volatility stemmed from the ongoing financial uncertainty in Southeast Asia,
where several economies suffered the effects of wild stock market swings caused
by weak currencies and bad loans by financial institutions.
During the second half of 1997, the "Asian flu" spread throughout Thailand,
Indonesia, the Philippines, Hong Kong, South Korea and Malaysia. As Japan,
traditionally the region's financial leader, struggled to turn around its own
economy, the leadership for an Asian bailout fell to the U.S. and the
International Monetary Fund.
In the fixed income arena, several factors cheered bond investors. Falling
inflation, little action by the Federal Reserve, a budget deficit shrinking
faster than predicted and a flattening yield curve raised prices on almost all
types of bonds. The yield on the 30-year Treasury bond, traditionally a
bellwether for the fixed income markets, hit a 1997 high of 7.2 percent in April
before closing the year below the psychologically important 6 percent barrier at
5.92 percent.
LOOKING TO 1998
We believe, as do our portfolio managers, that although the financial
problems in Southeast Asia will have an as-yet-undetermined effect on the
profits of some U.S. corporations, the overall strength of the American economy
may provide a scenario for further positive returns for U.S. stocks in 1998. We
must emphasize, however, that an expectation of the level of returns we have
experienced during the past three years is an unrealistic one in light of the
historical record. Past results do not guarantee future performance. Long-term
investors may potentially reduce their dependence upon short-term results by
exercising patience and examining the allocation of their investment portfolios
with professional financial advisors.
The Enterprise Group of Funds earned an outstanding vote of recognition
within the mutual fund industry in the DALBAR 1997 Broker/Dealer General Opinion
Survey, being ranked No. 1 overall among small mutual fund complexes. As a
result, we earned the prestigious DALBAR Crystal Pyramid Award for 1997. This
was the 11th
THE ENTERPRISE GROUP OF FUNDS, INC. 1
<PAGE> 122
annual survey conducted by DALBAR, Inc., which provides research and
publications to financial services institutions. The survey focused on the
investment performance, marketing support and operations support delivered by
mutual fund families. For the purposes of the survey, small mutual fund
complexes were defined as those whose assets under management were $8 billion or
less.
Effective July 17, Enterprise made available to its shareholders two new
portfolios, the Enterprise Growth and Income Portfolio and the Enterprise Small
Company Growth Portfolio. These portfolios emerged from Retirement System Fund
Inc. when Enterprise acquired the advisory services for that fund from
Retirement System Investors Inc., which had served as investment adviser to the
funds since their inception in May 1991. Retirement System Investors continues
to manage the Enterprise Growth and Income Portfolio, which offers a blend of
large-cap value and large-cap growth investment styles. Pilgrim Baxter &
Associates, Ltd., now manages the Enterprise Small Company Growth Portfolio.
During 1997, the Enterprise Growth, Growth and Income, Capital Appreciation,
Small Company Value and Government Securities Portfolios, in particular,
received favorable media recognition relative to their mutual fund peer groups
due to their performance. We will continue in 1998 and beyond to provide
investors with a wide selection of mutual funds to cover the spectrum of
investment needs.
1998 will also mark the 30th anniversary of the Enterprise Growth Portfolio,
subadvised by Montag & Caldwell, Inc. The Enterprise Growth Portfolio continues
to receive industry recognition for its long-term investment performance.
We are proud of our success to date and appreciate your confidence in The
Enterprise Group of Funds as we continue our primary mission of adding value to
your investment portfolio by providing you with access to some of the most
accomplished institutional investment firms in the industry.
Sincerely,
/s/ VICTOR UGOLYN
Victor Ugolyn
Chairman, President and Chief Executive Officer
2 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 123
THE ENTERPRISE GROWTH PORTFOLIO
MONTAG & CALDWELL, INC.
Atlanta, Georgia
INVESTMENT MANAGEMENT
Montag & Caldwell served as investment adviser to Alpha Fund, Inc., the
predecessor of the Growth Portfolio, since the Fund was organized in 1967.
Montag & Caldwell manages approximately $15.5 billion for institutional clients,
and its normal investment minimum is $40 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Growth Portfolio is to seek appreciation of
capital primarily through investments in common stocks.
INVESTMENT PHILOSOPHY
The equity selection process is a low-risk, growth stock approach. Valuation is
the key selection criterion that makes its investment style risk-averse. Montag
& Caldwell also emphasizes growth characteristics because it is seeking not only
companies with shares that are attractively priced but also those that may
experience strong earnings growth relative to other companies.
1997 PERFORMANCE REVIEW
As anticipated, 1997 proved to be a volatile year for the stock market but
equities still managed to produced positive returns for the third straight year.
After enduring a weak first quarter the stock market rebounded strongly during
the middle quarters, only to languish in the fourth quarter as Asia's economic
ills dominated investor concerns. During the year, the portfolio benefited
initially from its exposure to consumer, health care and technology holdings,
which responded to nearly perfect investment conditions: moderate economic
growth, lower-than-expected inflation, corporate profits growing at a healthy
rate, and interest rates remaining steady to lower. Late weakness in many of
these positions, reflecting their exposure to the Asian financial uncertainty,
caused a consolidation of portfolio gains, however.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH PORTFOLIO-A ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
Average Annual With Load 25.53% 20.59% 17.92%
Average Annual Without Load 31.76% 21.77% 18.50%
S&P 500* 33.36% 20.27% 18.06%
Lipper Growth Fund Index** 28.08% 17.08% 16.08%
Enterprise Growth
Portfolio-A S&P 500 Lipper Growth Fund Index
12/31/87 $9,525.32 $10,000.00 $10,000.00
1988 $10,696.93 $11,661.00 $11,413.00
1989 $13,162.58 $15,356.37 $14,548.15
1990 $12,863.79 $14,878.79 $13,761.10
1991 $18,239.56 $19,412.35 $18,760.50
1992 $19,417.84 $20,891.58 $20,191.93
1993 $21,474.19 $22,997.45 $22,610.92
1994 $21,261.59 $23,301.01 $22,255.93
1995 $29,761.98 $32,057.53 $29,522.49
1996 $39,464.39 $39,417.94 $34,683.02
1997 $51,998.27 $52,567.77 $44,422.02
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 3
<PAGE> 124
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH PORTFOLIO-B ONE YEAR INCEPTION
<S> <C> <C> <C>
Annualized Return With CDSC 27.15% 32.34%
Annualized Return Without CDSC 31.15% 33.27%
S&P 500* 33.36% 29.47%
Lipper Growth Fund Index** 28.08% 24.88%
*From 5/1/95-12/31/97
Enterprise Growth Lipper Growth
Portfolio-B S&P 500 Fund Index
5/1/95 $10,000.00 $10,000.00 $10,000.00
1995 $12,465.80 $12,162.34 $12,030.00
1996 $16,421.20 $14,948.98 $14,132.84
1997 $21,136.40 $19,935.95 $18,101.35
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH PORTFOLIO-C INCEPTION
<S> <C> <C> <C>
Cumulative Return With CDSC 20.91%
Cumulative Return Without CDSC 21.91%
S&P 500* 22.56%
Lipper Growth Fund Index** 23.10%
*From 5/1/97-12/31/97
Enterprise Growth
Portfolio-C S&P 500 Lipper Growth Fund Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $12,090.60 $12,256.00 $12,310.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR INCEPTION
<S> <C> <C> <C>
Enterprise Growth Portfolio-Y 32.40% 39.16%
S&P 500* 33.36% 37.24%
Lipper Growth Fund Index** 28.08% 30.81%
*From 8/31/96-12/31/97
Enterprise Growth
Portfolio-Y S&P 500 Lipper Growth Fund Index
8/31/96 $10,000.00 $10,000.00 $10,000.00
1996 $11,738.41 $11,439.00 $11,172.00
1997 $15,541.65 $15,255.05 $14,309.10
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The S&P 500 index is an unmanaged index that includes 500 companies that tend
to be leaders in important industries within the U.S. economy and excludes any
transaction or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
4 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 125
FUTURE INVESTMENT STRATEGY
Stock market returns may be respectable, but more subdued, in 1998. The
prospects for sustained growth in the economy and corporate profits, along with
low inflation and steady to lower bond yields, potentially suggest a continued
good fundamental setting for equities. Tempering this favorable outlook may be
lower corporate profit gains and stock market valuations that accurately reflect
these good economic fundamentals.
The outlook for the shares of high-quality growth companies remains bright. Most
of these companies operate globally and while there may be weakness in the
developing economies of the world, such as Southeast Asia, other economies may
be making good progress. The tendency for strength in some economic regions to
offset weakness in other areas, combined with dynamic global opportunities and
competitive advantages, have enabled these companies to produce consistently
solid earnings growth during the years. In the year ahead, the more predictable
and above-average earnings gains of these companies may be particularly
attractive as overall corporate profit growth slows.
Montag & Caldwell particularly favors the shares of multinational consumer and
health care companies with strong product offerings that are value-added and
proprietary in nature. Such products are generally used each day. Even in a U.S.
recession, demand remains relatively strong for products such as soft drinks,
detergents, blades and razors, as well as for pharmaceuticals. While the
portfolio's technology commitments have been reduced due to valuation, product
transition and macroeconomic issues, the outlook is still good for technology
spending as companies seek to position themselves better for the dynamic and
challenging global market environment.
Lastly, the outlook may be especially promising for these globally exposed
companies in the second half of 1998. By then, foreign economies in both
developed and developing parts of the world should be improving and, at the same
time, currency translations from a strong U.S. dollar may have a less negative
impact on reported sales and earnings. In the meantime, the shares of these
companies may hold their own as relative earnings and valuation positions
improve in a moderating corporate profit environment with steady to lower bond
yields.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 5
<PAGE> 126
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 96.20% AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
BUSINESS SERVICES -- 4.23%
- --------------------------------------------------------------------------------
Interpublic Group of Companies Inc................ 280,000 $ 13,947,500
Manpower Inc...................................... 400,000 14,100,000
------------
28,047,500
CAPITAL GOODS & SERVICES -- 3.10%
- --------------------------------------------------------------------------------
General Electric Company.......................... 280,000 20,545,000
COMPUTER HARDWARE -- 10.76%
- --------------------------------------------------------------------------------
3Com Corporation (Rts) (a)........................ 220,000 7,686,250
Adaptec Inc. (a).................................. 290,000 10,766,250
Cisco Systems Inc. (a)............................ 510,000 28,432,500
Compaq Computer
Corporation (a)................................... 330,000 18,624,375
Seagate Technology (a)............................ 300,000 5,775,000
------------
71,284,375
COMPUTER SERVICES -- 2.51%
- --------------------------------------------------------------------------------
Solectron Corporation (a)......................... 400,000 16,625,000
COMPUTER SOFTWARE -- 7.94%
- --------------------------------------------------------------------------------
Electronic Arts (a)............................... 400,000 15,125,000
Microsoft Corporation (a)......................... 200,000 25,850,000
Oracle System Corporation (a)..................... 520,000 11,602,500
------------
52,577,500
CONGLOMERATES -- 3.63%
- --------------------------------------------------------------------------------
Cendant Corporation............................... 700,000 24,062,500
CONSUMER NON-DURABLES -- 9.99%
- --------------------------------------------------------------------------------
Gillette Company.................................. 280,000 28,122,500
Mattel Inc........................................ 335,200 12,486,200
Procter & Gamble Company.......................... 320,000 25,540,000
------------
66,148,700
ENTERTAINMENT & LEISURE -- 3.21%
- --------------------------------------------------------------------------------
Walt Disney Company............................... 215,000 21,298,438
FINANCE -- 3.23%
- --------------------------------------------------------------------------------
American Express Company.......................... 240,000 21,420,000
FOOD & BEVERAGES & TOBACCO -- 6.69%
- --------------------------------------------------------------------------------
Coca-Cola Company................................. 440,000 29,315,000
Pioneer Hi Bred International
Inc............................................... 140,000 15,015,000
------------
44,330,000
HEALTH CARE -- 3.24%
- --------------------------------------------------------------------------------
Medtronic Inc..................................... 410,000 21,448,125
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
HOTELS & RESTAURANTS -- 5.60%
- --------------------------------------------------------------------------------
Cracker Barrel Old Country Store.................. 225,000 $ 7,509,375
Marriott International Inc........................ 220,000 15,235,000
McDonald's Corporation............................ 300,000 14,325,000
------------
37,069,375
INSURANCE -- 3.04%
- --------------------------------------------------------------------------------
American International Group Inc.................. 185,000 20,118,750
MEDICAL INSTRUMENTS -- 2.51%
- --------------------------------------------------------------------------------
Boston Scientific Corporation..................... 362,600 16,634,275
PHARMACEUTICALS -- 17.27%
- --------------------------------------------------------------------------------
Bristol Myers Squibb Company...................... 267,500 25,312,187
Johnson & Johnson................................. 400,000 26,350,000
Eli Lilly & Company............................... 300,000 20,887,500
Merck & Company Inc............................... 190,000 20,187,500
Pfizer Inc........................................ 290,300 21,645,494
------------
114,382,681
RETAIL -- 5.27%
- --------------------------------------------------------------------------------
Gap Inc........................................... 420,000 14,883,750
Home Depot Inc.................................... 340,000 20,017,500
------------
34,901,250
TECHNOLOGY -- 2.18%
- --------------------------------------------------------------------------------
Intel Corporation................................. 205,300 14,422,325
TELECOMMUNICATIONS -- 1.80%
- --------------------------------------------------------------------------------
Ericsson L M Tel Company (ADR).................... 320,000 11,940,000
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $470,569,547).................................. 637,255,794
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.12%
- --------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
5.00% due 01/02/98
Collateral: U.S. Treasury Note $20,890,000, 5.625%
due 10/31/99 Value $21,045,568.................... $ 20,630,000 20,630,000
------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $20,630,000)................................... 20,630,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $491,199,547).................................. $657,885,794
OTHER ASSETS LESS LIABILITIES -- 0.68%.......................... 4,523,154
------------
NET ASSETS -- 100%.............................................. $662,408,948
- --------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
ADR American Depository Receipts
See notes to financial statements.
6 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 127
THE ENTERPRISE EQUITY PORTFOLIO
OPCAP ADVISORS
New York, New York
INVESTMENT MANAGEMENT
OpCap Advisors, a wholly owned subsidiary of Oppenheimer Capital, became
investment adviser to this Enterprise fund on May 1, 1997. Oppenheimer Capital
manages approximately $61 billion for institutional clients, and its normal
investment minimum is $10 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Equity Portfolio is long-term capital
appreciation primarily from investments in securities of companies that are
believed by the portfolio manager to be undervalued in the marketplace in
relation to factors such as the companies' assets or earnings.
INVESTMENT PHILOSOPHY
OpCap Advisors' investment process uses a fundamental, bottom-up process of
value investing. The security selection process focuses on well-positioned
companies that generate high returns on assets and free cash flow, have strong
barriers to competition, have managements oriented to shareholder interests and
sell at reasonable valuation levels. A complete qualitative review of the
business relative to its peers and its history is the key to the process. OpCap
seeks securities whose undervaluation is great enough to provide significant
upside reward with modest downside risk.
1997 PERFORMANCE REVIEW
As the stock market rose in 1997, OpCap maintained an above-average cash
position because it became somewhat difficult to find superior companies that
were underpriced. As of December 31, 1997, the portfolio's net assets were
allocated 87 percent to common stocks and 13 percent to cash and cash
equivalents. This cash position provides a resource to purchase quality stocks
opportunistically when they become available at favorable prices. The
portfolio's large cash position should serve shareholders well if the Asian
financial crisis continues to buffet the stock market.
The portfolio achieved satisfactory results in 1997. OpCap achieved these
results by being disciplined in its philosophy of investing in superior
companies that have strong competitive positions, generate high cash flow and
effectively deploy that cash to benefit shareholders. Some of its more recent
additions to the portfolio included the common stocks of ACE Ltd., AFLAC Inc.,
EXEL Ltd., Polaroid Corp., and UCAR International. OpCap liquidated portfolio
positions in Allegheny Teledyne Inc., Anheuser Busch Companies Inc., Boeing Co.,
Commscope Inc. and Computer Associates International.
THE ENTERPRISE GROUP OF FUNDS, INC. 7
<PAGE> 128
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY PORTFOLIO-A INCEPTION
<S> <C> <C> <C>
Average Annual With Load 15.52%
Average Annual Without Load 21.30%
S&P 500* 22.56%
Lipper Growth Fund Index** 23.10%
*From 5/1/97-12/31/97
Enterprise Lipper Growth
Equity Portfolio-A S&P 500 Fund Index
5/1/97 $9,523.81 $10,000.00 $10,000.00
1997 $11,552.00 $12,256.00 $12,310.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY PORTFOLIO-B INCEPTION
<S> <C> <C> <C>
Annualized Return With CDSC 15.80%
Annualized Return Without CDSC 20.80%
S&P 500* 22.56%
Lipper Growth Fund Index** 23.10%
*From 5/1/97-12/31/97
Enterprise Equity Lipper Growth
Portfolio-B S&P 500 Fund Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $11,580.30 $12,256.00 $12,310.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY PORTFOLIO-C INCEPTION
<S> <C> <C> <C>
Cumulative Return With CDSC 19.89%
Cumulative Return Without CDSC 20.89%
S&P 500* 22.56%
Lipper Growth Fund Index** 23.10%
*From 5/1/97-12/31/97
Enterprise Equity
Portfolio-C S&P 500 Lipper Growth Fund Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $11,989.20 $12,256.00 $12,310.00
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The S&P 500 index is an unmanaged index that includes 500 companies that tend
to be leaders in important industries within the U.S. economy and excludes any
transaction or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
8 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 129
FUTURE INVESTMENT STRATEGY
A tight U.S. job market and the Asian crisis may approximately offset each other
in their impact on the U.S. economy. Inflation probably may not pick up
markedly, nor does OpCap believe the U.S. will slide into a recession. Whether
the stock market indexes will rise or fall in 1998 is a matter of conjecture.
There could be a high level of market volatility until these issues sort
themselves out, but volatility creates opportunities to buy stocks at favorable
prices.
OpCap continues to invest for the long term in superior businesses that are
reasonably valued, especially those which generate a high level of cash
throughout the economic cycle. By being disciplined in this value approach,
OpCap seeks to control risk, and match or exceed its benchmarks regardless of
economic or market trends.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 9
<PAGE> 130
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 87.32% AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
ADVERTISING -- 3.20%
- --------------------------------------------------------------------------------
Omnicom Group Inc................................. 4,000 $ 169,500
AEROSPACE -- 4.09%
- --------------------------------------------------------------------------------
Lockheed Martin Corporation....................... 2,200 216,700
BANKING -- 9.54%
- --------------------------------------------------------------------------------
BankBoston Corporation............................ 1,600 150,300
Citicorp.......................................... 1,200 151,725
Wells Fargo & Company............................. 600 203,662
-----------
505,687
CAPITAL GOODS & SERVICES -- 3.86%
- --------------------------------------------------------------------------------
General Electric Company.......................... 400 29,350
Textron Inc....................................... 2,800 175,000
-----------
204,350
CHEMICALS -- 2.04%
- --------------------------------------------------------------------------------
Du Pont (E. I.) De Nemours & Company.............. 1,800 108,113
COMPUTER HARDWARE -- 1.21%
- --------------------------------------------------------------------------------
Wang Labs Inc. New................................ 2,900 64,163
CONSUMER NON-DURABLES -- 2.32%
- --------------------------------------------------------------------------------
Avon Products Inc................................. 2,000 122,750
CONSUMER PRODUCTS -- 2.39%
- --------------------------------------------------------------------------------
Polaroid Corporation.............................. 2,600 126,587
DRUGS & MEDICAL PRODUCTS -- 3.21%
- --------------------------------------------------------------------------------
Becton, Dickinson & Company....................... 3,400 170,000
ELECTRICAL EQUIPMENT -- 3.97%
- --------------------------------------------------------------------------------
Avnet Inc......................................... 2,100 138,600
UCAR International Inc............................ 1,800 71,887
-----------
210,487
ENTERTAINMENT & LEISURE -- 2.23%
- --------------------------------------------------------------------------------
Sabre Group Holdings Inc.......................... 4,100 118,388
FOOD & BEVERAGES & TOBACCO -- 1.72%
- --------------------------------------------------------------------------------
Sysco Corporation................................. 2,000 91,125
HEALTH CARE -- 2.63%
- --------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
Tenet Healthcare Corporation (a).................. 4,200 139,125
HOTELS & RESTAURANTS -- 3.33%
- --------------------------------------------------------------------------------
McDonald's Corporation............................ 3,700 $ 176,675
INSURANCE -- 18.91%
- --------------------------------------------------------------------------------
ACE Ltd........................................... 1,600 154,400
AFLAC Inc......................................... 3,100 158,487
American International Group Inc.................. 650 70,688
Everest Reinsurance Holdings...................... 1,200 49,500
EXEL Ltd.......................................... 2,500 158,438
General Re Corporation............................ 700 148,400
Mid Ocean Ltd..................................... 1,500 81,375
Renaissance Holdings Ltd.......................... 4,100 180,912
-----------
1,002,200
MACHINERY -- 6.58%
- --------------------------------------------------------------------------------
Caterpillar Inc................................... 4,200 203,962
Dover Corporation................................. 4,000 144,500
-----------
348,462
MISC. FINANCIAL SERVICES -- 4.87%
- --------------------------------------------------------------------------------
Countrywide Credit Industries Inc................. 2,100 90,037
Federal Home Loan Mortgage Corporation............ 4,000 167,750
-----------
257,787
RETAIL -- 3.98%
- --------------------------------------------------------------------------------
May Department Stores Company..................... 4,000 210,750
RUBBER & PLASTICS -- 2.54%
- --------------------------------------------------------------------------------
Armstrong World Industries Inc.................... 1,800 134,550
TELECOMMUNICATIONS -- 2.10%
- --------------------------------------------------------------------------------
Sprint Corporation................................ 1,900 111,388
TRANSPORTATION -- 2.60%
- --------------------------------------------------------------------------------
AMR Corporation (a)............................... 500 64,250
Canadian Pacific Ltd.............................. 2,700 73,575
-----------
137,825
TOTAL COMMON STOCKS
(IDENTIFIED COST $4,251,976).................................... 4,626,612
- --------------------------------------------------------------------------------
</TABLE>
10 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 131
EQUITY PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 12.25%
- --------------------------------------------------------------------------------
Deere (John) Capital Corporation 5.73% due
01/28/98.......................................... $100,000 $ 99,570
Ford Motor Credit Company 5.71% due 01/05/98...... 200,000 199,873
IBM Credit Corporation 5.70% due 01/09/98......... 100,000 99,874
American Express Credit Corporation, 5.75% due
01/14/98.......................................... 250,000 249,481
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $648,798)...................................... 648,798
- --------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
SHORT TERM GOVERNMENT SECURITIES -- 0.28%
- --------------------------------------------------------------------------------
Federal Home Loan Bank Consolidated Dsc Note,
5.43% due 01/20/98................................ $ 15,000 $ 14,957
-----------
TOTAL SHORT TERM GOVERNMENT SECURITIES
(IDENTIFIED COST $14,957)....................................... 14,957
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $4,915,731).................................... $ 5,290,367
OTHER ASSETS LESS LIABILITIES -- 0.15%.......................... 8,134
-----------
NET ASSETS 100%................................................. $ 5,298,501
- --------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 11
<PAGE> 132
THE ENTERPRISE GROWTH AND INCOME PORTFOLIO
RETIREMENT SYSTEM INVESTORS INC.
New York, New York
INVESTMENT MANAGEMENT
Retirement System Investors Inc. ("RSI") has served as investment adviser to the
Growth and Income Portfolio since 1991. RSI manages more than $511 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Growth and Income Portfolio is a total return in
excess of the total return of the Lipper Growth and Income Mutual Funds Index
measured over a new period of three to five years, by investing primarily in a
broadly diversified group of large-capitalization stocks.
INVESTMENT PHILOSOPHY
RSI uses a fundamental analysis approach, including both qualitative and
quantitative factors, applied to a universe of well-established companies. The
portfolio manager seeks to identify reasonable valuations among this group of
stocks. Forward earnings projections and relative valuation parameters are used
to determine price objectives and return potential.
ANNUAL PERFORMANCE REVIEW, OCTOBER 1, 1996 THROUGH SEPTEMBER 30, 1997
Large-cap stocks showed substantial strength as the period began, weakening as
investor sentiment became more bearish, and finally rising relentlessly until a
late summer swoon softened the advance. Overall, the stock market moved tangibly
higher during the year, setting numerous new highs in the popular averages along
the way.
The economic news was very favorable during the year, meaning the economy was
growing not too fast and not too slow, but just right for investors. Inflation
news was positive with growth in both the producer and consumer price indexes
bordering on a flat trend. Interest rates have drifted lower, flows into mutual
funds have continued and stock prices have responded positively.
RSI's stock selection in the latter part of the year emphasized value, focusing
on the lower price/earning multiple issuers -- indifferent to sector -- as the
large-cap growth issues became more sensitive to investor sentiment. RSI
continued to buy on weakness in individual securities, where fundamentals remain
in place, and on corrections in the general market.
THREE MONTHS ENDED DECEMBER 31, 1997 PERFORMANCE REVIEW
Even as the final quarter of calendar 1997 saw tumbling currencies and rising
interest rates in Southeast Asia spur concern among U.S. investors that U.S.
exports would taper off and corporate profits would slide, equity markets still
managed, after incurring a sharp sell-off in October, to rebound and close just
a bit below their highs for the calendar year. It was the third consecutive
calendar year of strong gains for equities. Interest rates were declining,
inflation remained under control, job growth and income growth continued strong,
corporate earnings were up and cash inflows into equity mutual funds remained at
high levels.
The Growth and Income Portfolio's 1997 returns were enhanced by its holdings in
technology, financial services and drugs, while basic material and capital goods
issues held back portfolio results.
12 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 133
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH & INCOME PORTFOLIO-A INCEPTION
<S> <C> <C> <C>
Average Annual With Load -4.79%
Average Annual Without Load -0.03%
S&P 500* 2.43%
Lipper Growth & Income Fund Index** 2.18%
*From 7/31/97-12/31/97 Enterprise Lipper Growth &
Growth & Income Portfolio-A S&P 500 Income Fund Index
7/31/97 $9,523.28 $10,000.00 $10,000.00
9/30/97 $9,501.00 $9,957.00 $10,111.00
1997 $9,520.52 $10,243.00 $10,218.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH & INCOME PORTFOLIO-B INCEPTION
<S> <C> <C> <C>
Annualized Return With CDSC -5.24%
Annualized Return Without CDSC -0.24%
S&P 500* 2.43%
Lipper Growth & Income Fund Index** 2.18%
*From 7/31/97-12/31/97
Enterprise Growth & Income Portfolio-B S&P 500 Lipper Growth & Income Fund Index
7/31/97 $10,000.00 $10,000.00 $10,000.00
9/30/97 $9,913.00 $9,957.00 $10,011.00
1997 $9,475.69 $10,243.00 $10,218.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GROWTH & INCOME PORTFOLIO-C INCEPTION
<S> <C> <C> <C>
Cumulative Return With CDSC -1.21%
Cumulative Return Without CDSC -0.21%
S&P 500* 2.43%
Lipper Growth & Income Fund Index** 2.18%
*From 7/31/97-12/31/97
Enterprise Growth & Income Portfolio-C S&P 500 Lipper Growth & Income Fund Index
7/31/97 $10,000.00 $10,000.00 $10,000.00
9/30/97 $9,959.00 $9,957.00 $10,111.00
1997 $9,878.78 $10,243.00 $10,218.00
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 13
<PAGE> 134
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR 5 YEAR INCEPTION
<S> <C> <C> <C>
Enterprise Growth & Income Portfolio-Y 27.65% 21.56% 19.05%
S&P 500* 33.36% 20.27% 17.84%
Lipper Growth & Income Fund Index** 26.96% 18.06% 16.21%
*From 5/31/91-12/31/97
Enterprise Growth & Income Portfolio-Y S&P 500 Lipper Growth & Income Fund Index
5/31/91 $10,000.00 $10,000.00 $10,000.00
1991 $11,311.45 $10,895.00 $10,703.00
1992 $11,889.47 $11,725.20 $11,733.70
1993 $13,791.78 $12,907.10 $13,449.70
1994 $14,584.81 $13,077.47 $13,394.02
1995 $19,864.51 $17,991.99 $17,564.92
1996 $24,723.37 $22,122.95 $21,199.11
9/30/97 $31,459.00 $28,679.00 $26,633.00
1997 $31,559.38 $29,503.16 $26,914.38
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption that at original purchase.
* The S&P 500 index is an unmanaged index that includes 500 companies that tend
to be leaders in important industries within the U.S. economy and excludes any
transaction or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
The Asian currency and economic problems and their impact on domestic business
and consumer behavior constitute the chief unknown in the 1998 outlook. The
risks to earnings growth and profit margins are that pricing pressures may
intensify as U.S. companies feel pressure from Asian competitors to cut prices,
just as tight labor markets are pushing up U.S. wages, and that earnings will be
negatively affected by adverse foreign currency translations and weak exports.
On balance, there may be a choppy trading range stock market in 1998 with upside
potential more in line with a marginal earnings growth projection of five
percent or more. Earnings valuations at 19 to 20 times prospective earnings,
though high by historical standards, may move a bit higher if inflation and
interest rates decline further. Conversely, downside market risks may increase
if the impact of the Asian crisis is not contained and the impact spills over
into the U.S. economy.
RSI plans to maintain its strategy of being opportunistic in seeking out good
companies at attractive prices -- usually during periods of market uncertainty
or temporary setbacks. The Asian economic crisis needs to be better understood
or discounted, which might take a few quarters. Until then, RSI plans to be
deliberate in new investments, perhaps even letting cash reserves build.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
14 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 135
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 81.70% AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
AEROSPACE -- 6.08%
- --------------------------------------------------------------------------------
Allied Signal Inc................................. 18,600 $ 724,237
Boeing Company.................................... 2,600 127,238
Lockheed Martin Corporation....................... 5,800 571,300
-----------
1,422,775
BANKING -- 6.20%
- --------------------------------------------------------------------------------
BankAmerica Corporation........................... 5,200 379,600
Chase Manhattan Corporation....................... 5,176 566,772
Citicorp.......................................... 3,000 379,312
Morgan J P & Company Inc.......................... 1,100 124,163
-----------
1,449,847
BASIC INDUSTRIES -- 3.95%
- --------------------------------------------------------------------------------
Aluminum Company America.......................... 4,000 281,500
Du Pont (E. I.) De Nemours & Company.............. 10,700 642,669
-----------
924,169
BUILDING & CONSTRUCTION -- 2.01%
- --------------------------------------------------------------------------------
Armstrong World Industries Inc.................... 4,600 343,850
Medusa Corporation................................ 1,900 79,444
Southdown Inc..................................... 800 47,200
-----------
470,494
COMPUTER HARDWARE -- 13.77%
- --------------------------------------------------------------------------------
Cisco Systems Inc. (a)............................ 3,600 200,700
E M C Corporation (Massachusetts) (a)............. 39,300 1,078,294
Hewlett Packard Company........................... 5,200 325,000
IBM............................................... 8,200 857,412
Intel Corporation................................. 6,200 435,550
Xerox Corporation................................. 4,400 324,775
-----------
3,221,731
COMPUTER SOFTWARE -- 7.55%
- --------------------------------------------------------------------------------
BMC Software Inc. (a)............................. 900 59,063
Cadence Design Systems Inc. (a)................... 14,400 352,800
Computer Associates International Inc............. 13,650 721,744
Oracle System Corporation (a)..................... 6,000 133,875
Sterling Commerce Inc. (a)........................ 13,000 499,687
-----------
1,767,169
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
CRUDE & PETROLEUM -- 5.28%
- --------------------------------------------------------------------------------
British Petroleum (ADR)........................... 2,300 $ 183,281
Exxon Corporation................................. 7,700 471,144
Royal Dutch Petroleum (ADR)....................... 3,100 167,981
Texaco Inc........................................ 7,600 413,250
-----------
1,235,656
ELECTRICAL EQUIPMENT -- 7.68%
- --------------------------------------------------------------------------------
Dresser Industries Inc............................ 9,100 381,631
Emerson Electric Company.......................... 15,700 886,069
General Electric Company.......................... 7,200 528,300
-----------
1,796,000
ENTERTAINMENT & LEISURE -- 0.98%
- --------------------------------------------------------------------------------
Callaway Golf Company............................. 8,000 228,500
FINANCE -- 1.04%
- --------------------------------------------------------------------------------
Travelers Inc..................................... 4,500 242,438
FOOD & BEVERAGES & TOBACCO -- 3.02%
- --------------------------------------------------------------------------------
Dole Food Inc..................................... 9,400 430,050
Philip Morris Companies Inc....................... 6,100 276,406
-----------
706,456
INSURANCE -- 3.78%
- --------------------------------------------------------------------------------
Allstate Corporation.............................. 5,600 508,900
SunAmerica Inc.................................... 8,750 374,062
-----------
882,962
MACHINERY -- 6.71%
- --------------------------------------------------------------------------------
Cincinnati Milacron Inc........................... 11,200 290,500
Deere & Company................................... 5,700 332,381
Ingersoll Rand Company............................ 3,000 121,500
Snap On Inc....................................... 18,300 798,337
U. S. Filter Corporation (a)...................... 900 26,944
-----------
1,569,662
METALS & MINING -- 1.81%
- --------------------------------------------------------------------------------
Potash Corp Saskatchewan Inc...................... 5,100 423,300
MISC. FINANCIAL SERVICES -- 1.93%
- --------------------------------------------------------------------------------
Federal National Mortgage Association............. 7,900 450,794
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 15
<PAGE> 136
GROWTH AND INCOME PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
PHARMACEUTICALS -- 4.04%
- --------------------------------------------------------------------------------
Johnson & Johnson................................. 5,800 $ 382,075
Lilly Eli & Company............................... 800 55,700
Pfizer Inc........................................ 6,800 507,025
-----------
944,800
RETAIL -- 2.15%
- --------------------------------------------------------------------------------
Federated Department Stores Inc. (Delaware) (a)... 8,100 348,806
Tiffany & Company New............................. 4,300 155,069
-----------
503,875
TELECOMMUNICATIONS -- 3.72%
- --------------------------------------------------------------------------------
GTE Corporation................................... 6,100 318,725
Lucent Technologies Inc........................... 2,004 160,070
Tellabs Inc. (a).................................. 7,400 391,275
-----------
870,070
TOTAL COMMON STOCKS
(IDENTIFIED COST $13,160,251)................................... 19,110,698
- --------------------------------------------------------------------------------
PREFERRED STOCK -- 1.27%
- --------------------------------------------------------------------------------
INSURANCE -- 1.27%
- --------------------------------------------------------------------------------
SunAmerica Inc.................................... 6,400 298,000
-----------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $259,114)...................................... 298,000
- --------------------------------------------------------------------------------
COMMERCIAL PAPER -- 8.54%
- --------------------------------------------------------------------------------
Marsh & McLennan Cos Incorporated, 6.00% due
01/05/98.......................................... $1,000,000 999,333
Merrill Lynch & Company Inc. 6.00% due 01/02/98... 1,000,000 999,833
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $1,999,166).................................... 1,999,166
- --------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
SHORT TERM GOVERNMENT SECURITIES -- 5.56%
- --------------------------------------------------------------------------------
Federal Home Loan Bank Consolidated Dsc Note,
4.75% due 01/02/98................................ $1,300,000 $ 1,299,829
-----------
TOTAL SHORT TERM GOVERNMENT SECURITIES
(IDENTIFIED COST $1,299,828).................................... 1,299,829
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.25%
- --------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
2.00% due 01/02/98
Collateral: U.S. Treasury Note $525,000, 6.25% due
03/31/99 Value $536,657........................... 525,000 525,000
-----------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $525,000)...................................... 525,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $17,243,360)................................... $23,232,693
OTHER ASSETS LESS LIABILITIES -- 0.68%.......................... 159,191
-----------
NET ASSETS -- 100%.............................................. $23,391,884
- --------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
See notes to financial statements.
16 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 137
THE ENTERPRISE EQUITY INCOME PORTFOLIO
1740 ADVISERS, INC.
New York, New York
INVESTMENT MANAGEMENT
1740 Advisers has been an investment adviser to the Enterprise Equity Income
Portfolio since its inception. 1740 Advisers manages more than $1 billion for
institutional clients, and its normal investment minimum is $20 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Equity Income Portfolio is to seek a combination
of growth and income to achieve an above-average and consistent total return,
primarily from investments in dividend-paying common stocks.
INVESTMENT PHILOSOPHY
Above-average returns can be achieved by buying undervalued, out-of-favor stocks
and selling them after the market has recognized and corrected their
undervaluation. Dividend yield relative to the S&P 500 is the measure of the
value used in this strategy. It provides a disciplined approach to buy and sell
decisions, enhances stability in the portfolio and lessens overall market risk.
1997 PERFORMANCE REVIEW
Economic news has been very favorable for the investment markets this year.
Inflation has been almost unnoticeable with both the producer and consumer price
indices showing flat trends. The economy and corporate profits enjoyed sustained
growth, and bond yields were steady to lower, suggesting a good fundamental
setting for equities. It was a bookend year for the Equity Income Portfolio with
the portfolio showing strength in the middle quarters but weakness at the
beginning and end, in line with overall market returns. As a whole, though, 1997
was a good year for the Equity Income Portfolio. Generally, portfolio returns
were helped at various times throughout the year by exposure to financial,
communication, health care, energy and cyclical stocks. The portfolio's lack of
exposure to technology issues was both good and bad in terms of performance as
this sector experienced extreme periods of volatility throughout the year.
THE ENTERPRISE GROUP OF FUNDS, INC. 17
<PAGE> 138
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY INCOME
PORTFOLIO-A ONE YEAR FIVE YEAR
<S> <C> <C> <C> <C>
Average Annual With Load 21.99% 16.72%
Average Annual Without Load 28.08% 17.85%
S&P 500/Barra Value Index* 29.98% 20.68%
Lipper Equity Income Fund Index** 27.51% 17.30%
Enterprise Equity Income
Portfolio-A S&P 500/Barra Value Index
12/31/87 $ 9,522.32 $ 10,000.00
1988 $ 10,820.40 $ 12,167.00
1989 $ 12,719.71 $ 15,346.24
1990 $ 11,677.58 $ 14,295.02
1991 $ 14,428.35 $ 17,519.98
1992 $ 15,651.73 $ 19,364.83
1993 $ 17,756.58 $ 22,966.69
1994 $ 17,670.46 $ 22,822.00
1995 $ 23,571.86 $ 31,266.14
1996 $ 27,782.03 $ 38,141.56
1997 $ 35,583.78 $ 49,576.40
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY INCOME
PORTFOLIO-A TEN YEAR
<S> <C>
Average Annual With Load 13.53%
Average Annual Without Load 14.09%
S&P 500/Barra Value Index* 17.36%
Lipper Equity Income Fund Index** 15.45%
Enterprise Equity Income
Portfolio-A Lipper Equity Income Fund Index
12/31/87 $ 10,000.00
1988 $ 11,706.00
1989 $ 14,356.24
1990 $ 13,622.63
1991 $ 17,257.15
1992 $ 18,938.00
1993 $ 21,748.40
1994 $ 21,548.31
1995 $ 27,976.18
1996 $ 32,981.11
1997 $ 42,054.22
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY INCOME
PORTFOLIO-B ONE YEAR INCEPTION
<S> <C> <C> <C>
Annualized Return With CDSC 23.35% 23.57%
Annualized Return Without CDSC 27.35% 24.61%
S&P 500/Barra Value Index* 29.98% 27.61%
Lipper Equity Income Fund Index** 27.51% 23.89%
*From 5/1/95-12/31/97
Enterprise Equity Income
Portfolio-B S&P 500/Barra Value Index Lipper Equity Income Fund Index
5/1/95 $10,000.00 $10,000.00 $10,000.00
1995 $12,057.10 $12,097.02 $11,790.00
1996 $14,133.33 $14,757.16 $13,899.23
1997 $17,598.80 $19,181.35 $17,722.91
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE EQUITY INCOME
PORTFOLIO-C INCEPTION
<S> <C> <C> <C>
Cumulative Return With CDSC 17.21%
Cumulative Return Without CDSC 18.21%
S&P 500/Barra Value Index* 23.11%
Lipper Equity Income Fund Index** 21.27%
*From 5/1/97-12/31/97
Enterprise Equity Income
Portfolio-C S&P 500/Barra Value Index Lipper Equity Income Fund Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $11,720.00 $12,311.00 $12,127.00
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original price.
* The S&P 500/Barra Value Index is an unmanaged index that excludes transaction
or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
18 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 139
FUTURE INVESTMENT STRATEGY
The turmoil in Southeast Asia has clearly increased the risk level for the U.S.
stock market. Uncertainty has risen and the ultimate impact on U.S. companies'
business earnings is unknown as the situation changes day-by-day. Earnings
growth may be slower as a result of less demand from a large and fast-growing
part of the world. Pricing power, which was already weak, may likely weaken
further as a result of the deflationary forces at work in Southeast Asia. The
impact on the U.S. economy might be slightly positive as a result of slower
growth, lower inflation and interest rates, and a stronger dollar. The U.S. may
be viewed as a safe haven and this should help bonds, but the stock market will
continue to consolidate or correct until the impact on earnings becomes clearer.
The Equity Income Portfolio is defensive by nature as a result of its
above-average dividend yield requirement. The current strategy for the portfolio
is also defensive. The cyclical or economically sensitive sectors have been
reduced, especially those related to basic materials and capital spending.
Defensive and domestic sectors are being emphasized, particularly telephones,
electric and gas utilities and health care. Financial stocks continue as an
overweight but emphasis is being slowly switched toward domestic names in
regional banks and insurance.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 19
<PAGE> 140
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
COMMON STOCKS -- 89.31% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
AEROSPACE -- 2.69%
- ------------------------------------------------------------------------------
Northrop Grumman Corporation...................... 10,000 $ 1,150,000
Timken Company.................................... 30,000 1,031,250
United Technologies Corporation................... 14,000 1,019,375
------------
3,200,625
AUTOMOTIVE -- 2.71%
- ------------------------------------------------------------------------------
Eaton Corporation................................. 15,000 1,338,750
Ford Motor Company Delaware....................... 20,000 973,750
General Motors Corporation........................ 15,000 909,375
------------
3,221,875
BANKING -- 9.50%
- ------------------------------------------------------------------------------
BankBoston Corporation............................ 18,000 1,690,875
Bankers Trust New York Corporation................ 10,000 1,124,375
Chase Manhattan Corporation....................... 12,000 1,314,000
First Union Corporation........................... 25,000 1,281,250
Fleet Financial Group Inc......................... 10,000 749,375
Mellon Bank Corporation........................... 18,000 1,091,250
NationsBank Corporation........................... 15,000 912,188
Washington Mutual Inc............................. 22,500 1,435,781
Wells Fargo & Company............................. 5,000 1,697,187
------------
11,296,281
CAPITAL GOODS & SERVICES -- 8.18%
- ------------------------------------------------------------------------------
Cooper Industries Inc............................. 20,000 980,000
General Electric Company.......................... 50,000 3,668,750
General Signal Corporation........................ 30,000 1,265,625
Harsco Corporation................................ 25,000 1,078,125
Textron Inc....................................... 20,000 1,250,000
Xerox Corporation................................. 20,000 1,476,250
------------
9,718,750
CHEMICALS -- 2.91%
- ------------------------------------------------------------------------------
Du Pont (E. I.) De Nemours & Company.............. 24,000 1,441,500
Monsanto Company.................................. 20,000 840,000
Olin Corporation.................................. 25,000 1,171,875
------------
3,453,375
COMMUNICATIONS -- 0.71%
- ------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Frontier Corporation.............................. 35,000 842,188
CONSUMER DURABLES -- 2.39%
- ------------------------------------------------------------------------------
Dana Corporation.................................. 30,000 $ 1,425,000
Emerson Electric Company.......................... 25,000 1,410,937
------------
2,835,937
CONSUMER NON-DURABLES -- 1.54%
- ------------------------------------------------------------------------------
Avon Products Inc................................. 20,000 1,227,500
Eastman Kodak Company............................. 10,000 608,125
------------
1,835,625
CONSUMER PRODUCTS -- 1.24%
- ------------------------------------------------------------------------------
Colgate Palmolive Company......................... 20,000 1,470,000
CRUDE & PETROLEUM -- 0.85%
- ------------------------------------------------------------------------------
MCN Energy Group Inc.............................. 5,000 201,875
Royal Dutch Pete Co............................... 15,000 812,813
------------
1,014,688
ELECTRONICS -- 1.24%
- ------------------------------------------------------------------------------
Amp Inc........................................... 35,000 1,470,000
ENERGY -- 10.50%
- ------------------------------------------------------------------------------
Amoco Corporation................................. 7,000 595,875
Atlantic Richfield Company........................ 10,000 801,250
British Petroleum PLC (ADR)....................... 11,088 883,575
Chevron Corporation............................... 10,000 770,000
Consolidated Natural Gas Company.................. 20,000 1,210,000
Dresser Industries Inc............................ 35,000 1,467,812
El Paso Natural Gas Company....................... 20,000 1,330,000
Exxon Corporation................................. 17,000 1,040,188
Mobil Corporation................................. 12,000 866,250
Questar Corporation............................... 16,000 714,000
Texaco Inc........................................ 15,000 815,625
Williams Companies Inc............................ 70,000 1,986,250
------------
12,480,825
FINANCE -- 3.89%
- ------------------------------------------------------------------------------
Bank Of New York Company Inc...................... 20,000 1,156,250
BankAmerica Corporation........................... 20,000 1,460,000
H F Ahmanson & Company............................ 30,000 2,008,125
------------
4,624,375
</TABLE>
20 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 141
EQUITY INCOME PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
FOOD & BEVERAGES & TOBACCO -- 2.77%
- ------------------------------------------------------------------------------
Fortune Brands Inc................................ 20,000 $ 741,250
Gallaher Group P L C.............................. 15,000 320,625
General Mills Inc................................. 8,000 573,000
Philip Morris Companies Inc....................... 25,000 1,132,812
Quaker Oats Company............................... 10,000 527,500
------------
3,295,187
FOREST PRODUCTS -- 0.10%
- ------------------------------------------------------------------------------
Timber Group...................................... 5,000 113,438
HOTELS & RESTAURANTS -- 0.45%
- ------------------------------------------------------------------------------
Felcor Suite Hotels Inc........................... 15,000 532,500
INSURANCE -- 3.19%
- ------------------------------------------------------------------------------
Cigna Corporation................................. 8,000 1,384,500
Lincoln National Corporation...................... 15,000 1,171,875
St Paul Companies Inc............................. 15,000 1,230,937
------------
3,787,312
MACHINERY -- 1.14%
- ------------------------------------------------------------------------------
Pitney Bowes Inc.................................. 15,000 1,349,063
MISC. FINANCIAL SERVICES -- 0.96%
- ------------------------------------------------------------------------------
Federal National Mortgage Association............. 20,000 1,141,250
PAPER & FOREST PRODUCTS -- 0.69%
- ------------------------------------------------------------------------------
Georgia Pacific Corporation....................... 5,000 303,750
International Paper Company....................... 12,000 517,500
------------
821,250
PHARMACEUTICALS -- 7.75%
- ------------------------------------------------------------------------------
American Home Products Corporation................ 18,000 1,377,000
Baxter International Inc.......................... 20,000 1,008,750
Bristol Myers Squibb Company...................... 12,000 1,135,500
Lilly Eli & Company............................... 20,000 1,392,500
Merck & Company Inc............................... 9,000 956,250
Schering Plough Corporation....................... 14,000 869,750
Smithkline Beecham P L C (ADR).................... 24,000 1,234,500
Warner-Lambert Company............................ 10,000 1,240,000
------------
9,214,250
PUBLISHING -- 1.37%
- ------------------------------------------------------------------------------
McGraw Hill Inc................................... 22,000 1,628,000
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
RAW MATERIALS -- 3.38%
- ------------------------------------------------------------------------------
Carpenter Technology Corporation.................. 15,000 $ 720,937
Freeport McMoRan Copper & Gold Inc................ 10,000 153,125
Kimberly Clark Corporation........................ 12,000 591,750
Minnesota Mining & Manufacturing Company.......... 10,000 820,625
Reynolds Metals Company........................... 10,000 600,000
Union Camp Corporation............................ 10,000 536,875
Weyerhaeuser Company.............................. 12,000 588,750
------------
4,012,062
REAL ESTATE -- 3.29%
- ------------------------------------------------------------------------------
Bay Apartment Communities......................... 10,000 390,000
Crescent Real Estate Equities..................... 15,000 590,625
Developers Diversified Realty..................... 10,000 382,500
Equity Office Properties Trust.................... 15,000 473,438
Equity Residential Properties Trust............... 10,000 505,625
Health Care Property Investors Inc................ 15,000 567,187
Irvine Apartment Communities Inc.................. 15,000 477,187
Public Storage Inc................................ 18,000 528,750
------------
3,915,312
RETAIL -- 0.88%
- ------------------------------------------------------------------------------
J C Penney Inc.................................... 6,000 361,875
Sears Roebuck & Company........................... 15,000 678,750
------------
1,040,625
TECHNOLOGY -- 1.95%
- ------------------------------------------------------------------------------
Harris Corporation Delaware....................... 30,000 1,376,250
Thomas & Betts Corporation........................ 20,000 945,000
------------
2,321,250
TELECOMMUNICATIONS -- 9.16%
- ------------------------------------------------------------------------------
Ameritech Corporation............................. 20,000 1,610,000
AT & T Corporation................................ 25,000 1,531,250
Bell Atlantic Corporation......................... 25,000 2,275,000
BellSouth Corporation............................. 20,000 1,126,250
GTE Corporation................................... 20,000 1,045,000
SBC Communications Inc............................ 25,000 1,831,250
Sprint Corporation................................ 25,000 1,465,625
------------
10,884,375
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 21
<PAGE> 142
EQUITY INCOME PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
TRANSPORTATION -- 1.17%
- ------------------------------------------------------------------------------
Norfolk Southern Corporation...................... 25,000 $ 770,313
Union Pacific Corporation......................... 10,000 624,375
------------
1,394,688
UTILITIES -- 2.71%
- ------------------------------------------------------------------------------
American Electric Power Inc....................... 17,000 877,625
Carolina Power & Light Company.................... 13,000 551,688
FPL Group Inc..................................... 15,000 887,812
U.S. West Communications Group.................... 20,000 902,500
------------
3,219,625
------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $73,191,130)................................. 106,134,731
- ------------------------------------------------------------------------------
PREFERRED STOCK -- 0.24%
- ------------------------------------------------------------------------------
INSURANCE -- 0.24%
- ------------------------------------------------------------------------------
Aetna Inc......................................... 4,000 286,000
------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $305,489).................................... 286,000
- ------------------------------------------------------------------------------
COMMERCIAL PAPER -- 8.89%
- ------------------------------------------------------------------------------
Associates Corporation of North America, 5.65% due
01/20/98.......................................... $2,000,000 1,994,036
Bell Atlantic Financial Services 6.00% due
01/21/98.......................................... 500,000 498,333
CIT Group Holdings Inc. 5.56% due 01/20/98........ 400,000 398,826
Merrill Lynch & Company Inc. 5.63% due 01/16/98... 1,300,000 1,296,950
National Rural Utilities Cooperative Finance,
5.57% due 02/12/98................................ 1,500,000 1,490,253
Sears Roebuck Acceptance Corporation, 5.81% due
01/09/98.......................................... 300,000 299,613
<CAPTION>
NUMBER
OF SHARES
OR
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Ford Motor Credit Company 5.65% due 02/02/98...... $1,500,000 $ 1,492,467
Ford Motor Credit Company 5.75% due 01/30/98...... 1,500,000 1,493,052
Prudential Funding Corporation 5.51% due
01/06/98.......................................... 1,300,000 1,299,005
Prudential Funding Corporation 5.59% due
01/07/98.......................................... 300,000 299,721
------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $10,562,256)................................. 10,562,256
- ------------------------------------------------------------------------------
SHORT TERM GOVERNMENT SECURITIES -- 1.09%
- ------------------------------------------------------------------------------
Federal National Mortgage Association Discount
Notes, 5.45% due 01/16/98......................... 1,300,000 1,297,048
------------
TOTAL SHORT TERM GOVERNMENT SECURITIES
(IDENTIFIED COST $1,297,048).................................. 1,297,048
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.37%
- ------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
2.00% due 01/02/98
Collateral: U.S. Treasury Bond $340,000, 8.5% due
2/15/20 Value $450,819............................ 440,000 440,000
------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $440,000).................................... 440,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $85,795,923)................................. $118,720,035
OTHER ASSETS LESS LIABILITIES -- 0.10%........................ 123,685
------------
NET ASSETS 100%............................................... $118,843,720
- ------------------------------------------------------------------------------
</TABLE>
ADR American Depository Receipt
See notes to financial statements.
22 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 143
THE ENTERPRISE CAPITAL APPRECIATION PORTFOLIO
PROVIDENT INVESTMENT COUNSEL, INC.
Pasadena, California
INVESTMENT MANAGEMENT
Provident Investment Counsel has been investment adviser to the Enterprise
Capital Appreciation Portfolio since inception. Provident Investment Counsel
manages approximately $18 billion for institutional clients, and its usual
investment minimum is $5 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Capital Appreciation Portfolio is to seek
maximum capital appreciation, primarily through investment in common stock of
companies that demonstrate accelerating earnings momentum and consistently
strong financial characteristics.
INVESTMENT PHILOSOPHY
Provident's investment philosophy is based on the belief that, over time, the
reason the price of a company's stock increases is because its earnings are
increasing. The investment strategy seeks to create a portfolio of companies
that, in aggregate, is growing its earnings at a faster and more consistent rate
than is the overall market.
1997 PERFORMANCE REVIEW
U.S. equity investors enjoyed a third straight year of excellent returns in
1997. Notably, almost all of the year's gains was made in only three
months--May, June and July. The U.S. equity markets did manage to post a modest
advance in the fourth quarter, but only with the help of a year-end rally.
Fourth-quarter gains were small in comparison to the significant returns of the
preceding periods, but were achieved in an environment of high uncertainty and
increased volatility.
The longevity of the current economic expansion linked with continued strong
corporate earnings growth provided the fundamental underpinning for the year's
advance. Inflation remained surprisingly tame despite the lowest unemployment
levels in 24 years. Despite a generally favorable economic environment, it was
also a year of increasing volatility in the equity markets.
As in previous years, liquidity provided support for stocks. During the first
four months of 1997, cash flow found the path of least resistance, favoring
mega-capitalization shares. In May, the market began to broaden as investors
focused on the excellent earnings growth and valuation opportunities in other
large, midsize and small-capitalization stocks. The Capital Appreciation
Portfolio participated fully in this broad market move through the third
quarter.
Fears related to the direct earnings impact on U.S. companies roiled domestic
markets during the fourth quarter as the extent of Asia's economic and currency
crisis became apparent to U.S. investors. Additionally, a flight to liquidity
saw money flows returning to the same large-capitalization shares favored in the
first quarter.
THE ENTERPRISE GROUP OF FUNDS, INC. 23
<PAGE> 144
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-A ONE YEAR FIVE YEAR
<S> <C> <C> <C> <C>
Average Annual With Load 14.55% 11.36%
Average Annual Without Load 20.27% 12.45%
S&P 500/Barra Growth Index* 36.54% 19.65%
Lipper Cap. Appr. Fund Index** 19.86% 15.40%
Enterprise Capital Appreciation
Portfolio-A S&P 500/Barra Growth Index
12/31/87 $ 9,526.76 $ 10,000.00
1988 $ 10,092.65 $ 11,195.00
1989 $ 13,551.40 $ 15,269.98
1990 $ 14,071.77 $ 15,300.52
1991 $ 22,379.75 $ 21,171.33
1992 $ 23,684.49 $ 22,244.72
1993 $ 25,036.87 $ 22,618.43
1994 $ 24,170.60 $ 23,326.38
1995 $ 30,382.44 $ 32,218.40
1996 $ 35,401.62 $ 39,944.37
1997 $ 42,577.53 $ 54,540.05
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-A TEN YEAR
<S> <C>
Average Annual With Load 15.59%
Average Annual Without Load 16.15%
S&P 500/Barra Growth Index* 18.49%
Lipper Cap. Appr. Fund Index** 15.00%
Enterprise Capital Appreciation
Portfolio-A Lipper Cap. Appr. Fund Index
12/31/87 $ 10,000.00
1988 $ 11,285.00
1989 $ 14,478.66
1990 $ 13,352.22
1991 $ 18,367.31
1992 $ 19,755.88
1993 $ 22,867.43
1994 $ 22,304.89
1995 $ 29,351.00
1996 $ 33,738.98
1997 $ 40,439.54
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-B ONE YEAR INCEPTION
<S> <C> <C>
Annualized Return With CDSC 15.60% 19.49%
Annualized Return Without CDSC 19.60% 20.59%
S&P 500/Barra Growth Index* 36.54% 31.43%
Lipper Cap Appr. Fund Index** 19.86% 21.06%
*From 5/1/95-12/31/97
Enterprise Capital Appreciation
Portfolio-B S&P 500/Barra Growth Index
5/1/97 $10,000.00 $10,000.00
1995 $11,898.80 $12,258.67
1996 $13,787.14 $15,198.30
1997 $16,088.73 $20,751.75
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-B
<S> <C>
Annualized Return With CDSC
Annualized Return Without CDSC
S&P 500/Barra Growth Index*
Lipper Cap Appr. Fund Index**
*From 5/1/95-12/31/97
Lipper Cap Appr. Fund Index
5/1/97 $10,000.00
1995 $12,093.00
1996 $13,900.90
1997 $16,661.62
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-C INCEPTION
<S> <C> <C>
Cumulative Return With CDSC 21.35%
Cumulative Return Without CDSC 22.35%
S&P 500/Barra Growth Index* 21.99%
Lipper Cap. Appr. Fund Index** 23.11%
*From 5/1/97-12/31/97
Enterprise Capital Appreciation
Portfolio-C S&P 500/Barra Growth Index
5/1/97 $10,000.00 $10,000.00
1997 $12,134.60 $12,199.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE CAPITAL APPRECIATION
PORTFOLIO-C
<S> <C>
Cumulative Return With CDSC
Cumulative Return Without CDSC
S&P 500/Barra Growth Index*
Lipper Cap. Appr. Fund Index**
*From 5/1/97-12/31/97
Lipper Cap. Appr. Fund Index
5/1/97 $10,000.00
1997 $12,311.00
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than original purchase.
* The S&P 500/Barra Growth Index is an unmanaged index that excludes any
transaction or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
24 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 145
FUTURE INVESTMENT STRATEGY
In 1998, visible and sustainable earnings and revenue growth may become a key
focal point for investors, particularly in light of slower domestic growth
resulting from the Asian economic crisis. True to its "bottom-up approach," the
Capital Appreciation Portfolio invests in established, profitable, well-managed
businesses with diversified customer bases. These companies share the superior
financial characteristics of high earnings and revenue growth, high return on
equity and reinvestment rates. Furthermore, these companies strive to maintain
high profit margins regardless of the economic environment, an especially
important factor given potentially increasing foreign price competition.
In the environment of global volatility and slowing earnings growth, portfolios
that exhibit consistent, strong revenue and earnings growth may prove attractive
to investors in 1998. The companies in this portfolio are growing earnings at
twice the rate of the 20 largest S&P 500 companies. The earnings growth in this
portfolio is complemented by excellent revenue growth, high profit margins, high
returns to equity and low debt levels. Thus, the quality of earnings growth may
be superior because it may be more visible and sustainable than that of the
average company. Despite the gains of the last three years, these companies
still offer reasonable price-to-earnings valuation levels and remain deserving
investment selections in 1998.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 25
<PAGE> 146
CAPITAL APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 98.56% AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
COMPUTER HARDWARE -- 1.04%
- --------------------------------------------------------------------------------
Dell Computer Corporation (a)..................... 15,000 $ 1,260,000
COMPUTER SERVICES -- 3.67%
- --------------------------------------------------------------------------------
HBO & Company..................................... 60,000 2,880,000
Sungard Data Systems Inc. (a)..................... 50,000 1,550,000
-------------
4,430,000
COMPUTER SOFTWARE -- 4.12%
- --------------------------------------------------------------------------------
Compusa Inc. (a).................................. 35,000 1,085,000
Microsoft Corporation (a)......................... 21,200 2,740,100
Sterling Commerce Inc. (a)........................ 30,000 1,153,125
-------------
4,978,225
CONGLOMERATES -- 1.14%
- --------------------------------------------------------------------------------
Cendant Corporation (a)........................... 40,000 1,375,000
CRUDE & PETROLEUM -- 2.14%
- --------------------------------------------------------------------------------
Petroleum Geo Services (ADR) (a).................. 40,000 2,590,000
ENERGY -- 6.53%
- --------------------------------------------------------------------------------
AES Corporation (a)............................... 80,000 3,730,000
Global Marine Inc. (a)............................ 100,000 2,450,000
Tosco Corporation................................. 45,000 1,701,563
-------------
7,881,563
FINANCE -- 11.43%
- --------------------------------------------------------------------------------
Associates First Capital Corporation.............. 44,900 3,193,512
CIT Group Inc..................................... 45,000 1,451,250
MBNA Corporation.................................. 207,168 5,658,276
State Street Corporation.......................... 60,000 3,491,250
-------------
13,794,288
HEALTH CARE -- 9.55%
- --------------------------------------------------------------------------------
Healthsouth Corporation (a)....................... 110,000 3,052,500
Medtronic Inc..................................... 70,600 3,693,263
Omnicare Inc...................................... 58,000 1,798,000
Pfizer Inc........................................ 40,000 2,982,500
-------------
11,526,263
INSURANCE -- 3.53%
- --------------------------------------------------------------------------------
American International Group Inc.................. 14,775 1,606,781
MGIC Investment Corporation....................... 40,000 2,660,000
-------------
4,266,781
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
MACHINERY -- 7.40%
- --------------------------------------------------------------------------------
Cooper Cameron Corporation (a).................... 22,000 $ 1,342,000
Tyco International Ltd. New....................... 135,200 6,092,450
United States Filter Corporation (a).............. 50,000 1,496,875
-------------
8,931,325
MEDICAL INSTRUMENTS -- 1.55%
- --------------------------------------------------------------------------------
Guidant Corporation............................... 30,000 1,867,500
MEDICAL SERVICES -- 3.46%
- --------------------------------------------------------------------------------
Health Management Associates Inc. (a)............. 44,095 1,113,399
Quintiles Transnational Corporation (a)........... 80,000 3,060,000
-------------
4,173,399
MISC. FINANCIAL SERVICES -- 2.63%
- --------------------------------------------------------------------------------
Federal National Mortgage Association............. 55,600 3,172,675
OIL SERVICES -- 10.44%
- --------------------------------------------------------------------------------
Nabors Industries Inc. (a)........................ 48,000 1,509,000
Parker Drilling Company (a)....................... 90,100 1,098,094
Reading & Bates Corporation (a)................... 65,000 2,721,875
Santa Fe International Corporation................ 60,000 2,441,250
Schlumberger Ltd.................................. 60,000 4,830,000
-------------
12,600,219
PAPER PRODUCTS -- 0.68%
- --------------------------------------------------------------------------------
Staples Inc. (a).................................. 29,350 818,131
PHARMACEUTICALS -- 8.68%
- --------------------------------------------------------------------------------
Dura Pharmaceuticals Inc. (a)..................... 30,000 1,376,250
Elan PLC (ADR) (a)................................ 54,000 2,764,125
Lilly Eli & Company............................... 60,000 4,177,500
McKesson Corporation.............................. 20,000 2,163,750
-------------
10,481,625
RETAIL -- 13.37%
- --------------------------------------------------------------------------------
Costco Companies Inc. (a)......................... 65,000 2,900,625
CVS Corporation................................... 32,000 2,050,000
Dollar General Corporation........................ 70,000 2,537,500
Family Dollar Stores Inc.......................... 70,000 2,051,875
General Nutrition Companies Inc. (a).............. 11,000 374,000
Kohls Corporation (a)............................. 38,000 2,588,750
Proffitts Inc. (a)................................ 50,000 1,421,875
</TABLE>
26 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 147
CAPITAL APPRECIATION PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
Safeway Inc. (a).................................. 35,000 $ 2,213,750
-------------
16,138,375
TECHNOLOGY -- 1.98%
- --------------------------------------------------------------------------------
Lucent Technologies Inc........................... 30,000 2,396,250
TELECOMMUNICATIONS -- 5.22%
- --------------------------------------------------------------------------------
ADC Telecommunications Inc. (a)................... 40,000 1,670,000
Ericsson L M Tel Company (ADR).................... 40,000 1,492,500
Tellabs Inc. (a).................................. 28,000 1,480,500
Worldcom Inc. (a)................................. 55,000 1,663,750
-------------
6,306,750
TOTAL COMMON STOCKS
(IDENTIFIED COST $75,336,801 )................................... 118,988,369
- --------------------------------------------------------------------------------
SHORT TERM INSTRUMENTS -- 1.66%
- --------------------------------------------------------------------------------
Ford Motor Credit Company
Discount Cp Yrs 1+2, 5.84% due
01/22/98.......................................... $ 2,000,000 2,000,000
-------------
TOTAL SHORT TERM INSTRUMENTS
(IDENTIFIED COST $2,000,000)..................................... 2,000,000
- --------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.96%
- --------------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement, 4.00% due
01/02/98
Collateral: U.S. Treasury Bond,
$895,000, 8.5% due 2/15/20 Value
$1,186,715........................................ $ 1,160,000 $ 1,160,000
-------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $1,160,000)..................................... 1,160,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $78,496,801).................................... $ 122,148,369
OTHER ASSETS LESS LIABILITIES -- (1.18)%......................... (1,422,824)
-------------
NET ASSETS 100%.................................................. $ 120,725,545
- --------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
ADR American Depository Receipts
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 27
<PAGE> 148
THE ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO
PILGRIM BAXTER & ASSOCIATES, LTD.
Wayne, Pennsylvania
INVESTMENT MANAGEMENT
Pilgrim Baxter & Associates, Ltd., which has approximately $14 billion in assets
under management, became manager of the portfolio on April 1, 1997. Pilgrim
Baxter's normal investment minimum for a separate account is $20 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Small Company Growth Portfolio is to seek
capital appreciation by investing primarily in common stocks of
small-capitalization companies believed by the portfolio manager to have an
outlook for strong earnings growth and potential for significant capital
appreciation.
INVESTMENT PHILOSOPHY
Pilgrim Baxter is a growth-stock investor, and believes the mission of any
portfolio of equity investments is to capture the growth exhibited by the
underlying assets in investment returns over time. Given that premise, superior
returns may be achieved by investing in those companies which exhibit
exceptional growth characteristics and internal reinvestment rates capable of
funding that growth into the future. Pilgrim Baxter focuses on bottom-up stock
selection using a combination of rigorous fundamental research and quantitative
techniques.
ANNUAL PERFORMANCE REVIEW, OCTOBER 1, 1996 THROUGH SEPTEMBER 30, 1997
The last 12 months have proven overall to be strong for companies in the
small-cap universe. While patience has been required to experience performance
commensurate with earnings, there appears to be no indication of any
deterioration in fundamentals.
Strong returns from the technology sector, as well as contributions from energy
and finance, have helped portfolio performance recover from earlier weakness.
Portfolio returns were further supported by stable-to-lower interest rates and
an improved investor attitude, as the year unfolded, toward small-cap growth
stocks in anticipation of stronger earnings.
Two groups that have been especially solid performers for most of this period
have been the financial and energy sectors. However, in both cases, stock
selection was key to participating in the returns enjoyed by these groups. While
Pilgrim Baxter increased exposure to these stocks, especially in the energy
sector, we have been determined to avoid being overwhelmed by the euphoria in a
group that has not historically had solid and sustainable fundamentals. Our
exposure to this or any sector is grounded in our bottom-up approach to stock
selection and could change dramatically as we evaluate each current or potential
position on its own merits.
THREE MONTHS ENDED DECEMBER 31, 1997 PERFORMANCE REVIEW
During the three months ended December 31, 1997, exogenous factors relating to
foreign economies and the general fear of a slowing economy hit small-cap stocks
especially hard as the year came to a close. With investors fearful of the
implications of a broad-based selling panic in the emerging Asian markets,
fourth-quarter returns were negatively impacted.
Financials, energy and technology sold off during October and November. The
continued drop in interest rates and expected solid earnings would normally put
a floor under stock valuations. Unfortunately, the far reaching impact of the
Asian crisis is as yet undetermined.
28 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 149
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO-A INCEPTION
<S> <C> <C> <C>
Average Annual With Load -8.17%
Average Annual Without Load -3.59%
Russell 1000 Growth* 0.28%
Lipper Small Cap Fund Index** 2.58%
*From 7/31/97-12/31/97
Enterprise Small Lipper Small Cap
Company Growth Portfolio-A Russell 1000 Growth Fund Index
7/31/97 $9,524.36 $10,000.00 $10,000.00
9/30/97 $10,207.00 $10,978.00 $10,897.00
1997 $9,182.63 $10,028.00 $10,258.00
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
decreased $1,024 compared to a decrease of $368 and an increase of $150 in the
Russell 2000 Index and the Russell 1000 Growth Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO-B INCEPTION
<S> <C> <C>
Annualized Return With CDSC -8.79%
Annualized Return Without CDSC -3.79%
Russell 1000 Growth* 0.28%
Lipper Small Cap Fund Index** 2.58%
*From 7/31/97-12/31/97
Enterprise Small Company Growth Portfolio-B Russell 1000 Growth
7/31/97 $10,000.00 $10,000.00
9/30/97 $10,699.00 $10,978.00
1997 $9,120.95 $10,028.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO-B
<S> <C>
Annualized Return With CDSC
Annualized Return Without CDSC
Russell 1000 Growth*
Lipper Small Cap Fund Index**
*From 7/31/97-12/31/97
Lipper Small Cap Fund Index
7/31/97 $10,000.00
9/30/97 $10,897.00
1997 $10,258.00
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
decreased $1,578 compared to a decrease of $368 and an increase of $150 in the
Russell 2000 Index and the Russell 1000 Growth Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO-C INCEPTION
<S> <C> <C>
Cumulative Return With CDSC -4.83%
Cumulative Return Without CDSC -3.83%
Russell 1000 Growth* 0.28%
Lipper Small Cap Fund Index** 2.58%
*From 7/31/97-12/31/97
Enterprise Small Company Growth Portfolio-C Russell 1000 Growth
7/31/97 $10,000.00 $10,000.00
9/30/97 $10,695.00 $10,976.00
1997 $9,516.92 $10,028.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY GROWTH PORTFOLIO-C
<S> <C>
Cumulative Return With CDSC
Cumulative Return Without CDSC
Russell 1000 Growth*
Lipper Small Cap Fund Index**
*From 7/31/97-12/31/97
Lipper Small Cap Fund Index
7/31/97 $10,000.00
9/30/97 $10,897.00
1997 $10,258.00
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
decreased $1,178 compared to a decrease of $442 and an increase of $150 in the
Russell 2000 Index and the Russell 1000 Growth Index, respectively.
THE ENTERPRISE GROUP OF FUNDS, INC. 29
<PAGE> 150
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR 5 YEAR
<S> <C> <C>
Enterprise Small Company Growth Portfolio-Y 9.95% 22.16%
Russell 1000 Growth Index* 30.48% 18.41%
Lipper Small Cap Fund Index** 15.05% 15.05%
*From 5/31/91-12/31/97
Enterprise Small Company Growth Portfolio-Y Russell 1000 Growth Index
5/31/91 $10,000.00 $10,000.00
1991 $12,062.05 $11,511.60
1992 $14,075.21 $12,088.33
1993 $17,696.76 $12,438.89
1994 $19,531.91 $12,769.77
1995 $27,258.73 $17,518.84
1996 $34,828.48 $21,569.20
9/30/97 $42,531.00 $27,627.00
1997 $38,293.92 $28,143.49
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
INCEPTION
<S> <C>
Enterprise Small Company Growth Portfolio-Y 22.59%
Russell 1000 Growth Index* 17.00%
Lipper Small Cap Fund Index** 15.53%
*From 5/31/91-12/31/97
Lipper Small Cap Fund Index
5/31/91 $10,000.00
1991 $11,557.00
1992 $12,850.23
1993 $15,024.49
1994 $14,952.37
1995 $19,680.31
1996 $22,506.40
9/30/97 $28,213.00
1997 $25,893.61
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
decreased $4,237 compared to a decrease of $945 and an increase of $420 in the
Russell 2000 Index and the Russell 1000 Growth Index, respectively.
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than original purchase.
* The Russell 1000 Growth Index is an unmanaged index that excludes any
transaction or holding charges. The Russell 1000 Growth Index replaces the
Russell 2000 Index as the broad-based comparison to the Small Company Growth
Portfolio as it more appropriately reflects the securities market in which the
Portfolio invests.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
For 1998, the Asian contagion has become the focal point of the investment
outlook. The recent developments in Asia have added a large dose of uncertainty
to the global economic expansion, the deflationary impact of the crisis on world
trade and how government policymakers respond to the challenges. While the Asian
situation will contribute to near-term financial market volatility, the focus
will clearly turn to the solid domestic fundamentals in the United States. The
resultant impact from Southeast Asia, Brazil and others may probably be modestly
negative on economic growth and earnings, with milder industrial commodity and
goods-related inflation, leading to a friendlier central bank policy. The
International Monetary Fund-led financial rescue package should help alleviate
the immediate financial pressures in these countries and with time provide the
needed catalyst to more sound economic expansion.
As always, the combination of change and confusion has produced a difficult
environment for smaller-cap growth stocks with a notable weakening in technology
stocks in November. Despite this and the style's relative underperformance
during the past 18 months, the prospects for a small-cap recovery and the
likelihood of superior relative returns going forward may be favorable.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
30 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 151
SMALL COMPANY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 96.57% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
ADVERTISING -- 1.35%
- ------------------------------------------------------------------------------
Lamar Advertising Company (a)..................... 7,500 $ 298,125
APPAREL & TEXTILES -- 3.90%
- ------------------------------------------------------------------------------
North Face Inc. (a)............................... 11,000 242,000
Stage Stores Inc. (a)............................. 6,100 227,987
Wolverine World Wide Inc.......................... 17,240 390,055
-----------
860,042
BUSINESS SERVICES -- 3.45%
- ------------------------------------------------------------------------------
Caribiner International Inc. (a).................. 4,600 204,700
Central Parking Corporation....................... 4,850 219,766
Pre Paid Legal Services Inc....................... 9,800 335,037
-----------
759,503
COMMUNICATIONS -- 2.24%
- ------------------------------------------------------------------------------
Pacific Gateway Exchange
Inc. (a).......................................... 7,300 392,831
Telephone Save Holdings Inc. (a).................. 5,100 101,363
-----------
494,194
COMPUTER HARDWARE -- 1.25%
- ------------------------------------------------------------------------------
Apex PC Solutions Inc. (a)........................ 7,300 161,513
Yurie Systems Inc................................. 5,600 113,050
-----------
274,563
COMPUTER SERVICES -- 9.73%
- ------------------------------------------------------------------------------
Computer Horizons Corporation (a)................. 12,398 564,109
Computer Task Group
Inc. (Rts)........................................ 16,800 597,450
Pegasystems Inc. (a).............................. 12,400 250,325
Remedy Corporation (a)............................ 3,800 79,800
Sapient Corporation (a)........................... 5,700 349,125
Technology Solutions Company (a).................. 11,550 304,631
-----------
2,145,440
COMPUTER SOFTWARE -- 9.35%
- ------------------------------------------------------------------------------
BEA Systems Inc. (a).............................. 16,700 289,119
HNC Software Inc. (a)............................. 6,300 270,900
JDA Software Group Inc. (a)....................... 7,700 269,500
Summit Design Inc................................. 11,100 115,163
Veritas Software Corporation (a).................. 7,400 377,400
Viasoft Inc. (a).................................. 6,200 261,950
Visio Corporation (a)............................. 6,000 230,250
Wind River Systems Inc. (a)....................... 6,200 246,062
-----------
2,060,344
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
CONSUMER DURABLES -- 0.32%
- ------------------------------------------------------------------------------
United Natural Foods Inc.......................... 2,700 $ 70,200
CONSUMER PRODUCTS -- 0.99%
- ------------------------------------------------------------------------------
Blyth Industries Inc. (a)......................... 7,325 219,292
CONSUMER SERVICES -- 3.28%
- ------------------------------------------------------------------------------
Corestaff Inc. (a)................................ 12,487 330,905
Transaction Systems Architects Inc. (a)........... 10,300 391,400
-----------
722,305
ENERGY -- 2.93%
- ------------------------------------------------------------------------------
Gulf Islands Fabrication Inc...................... 6,100 122,000
Gulfmark Offshore Inc. (a)........................ 4,800 158,400
Halter Marine Group Inc........................... 5,400 155,925
Patterson Energy Inc. (a)......................... 5,400 208,913
-----------
645,238
ENTERTAINMENT & LEISURE -- 1.68%
- ------------------------------------------------------------------------------
Regal Cinemas Inc. (a)............................ 13,300 370,738
FINANCE -- 0.85%
- ------------------------------------------------------------------------------
Healthcare Financial Partners
Inc............................................... 5,300 188,150
FOOD & BEVERAGES & TOBACCO -- 1.56%
- ------------------------------------------------------------------------------
Suiza Foods Corporation........................... 5,770 343,676
HEALTH CARE -- 7.64%
- ------------------------------------------------------------------------------
Alternative Living Services
Inc. (a).......................................... 10,400 307,450
Concentra Managed Care Inc........................ 8,000 270,000
FPA Medical Management Inc. (a)................... 14,200 264,475
Pediatrix Medical Group (a)....................... 9,400 401,850
Rural Metro Corporation (a)....................... 13,200 440,550
-----------
1,684,325
HOTELS & RESTAURANTS -- 3.64%
- ------------------------------------------------------------------------------
American Skiing Company........................... 12,200 181,475
Prime Hospitality Corporation..................... 5,700 116,137
Vistana Inc. (a).................................. 21,900 503,700
-----------
801,312
MANUFACTURING -- 1.54%
- ------------------------------------------------------------------------------
Vitesse Semiconductor Corporation (a)............. 9,000 339,750
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 31
<PAGE> 152
SMALL COMPANY GROWTH PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
MEDICAL SERVICES -- 3.74%
- ------------------------------------------------------------------------------
National Surgery Centers Inc. (a)................. 17,925 $ 470,531
Renal Treatment Centers Inc. (a).................. 4,700 169,788
Total Renal Care Holdings Inc. (a)................ 6,733 185,157
-----------
825,476
MISC. FINANCIAL SERVICES -- 4.28%
- ------------------------------------------------------------------------------
Amresco Inc....................................... 17,500 529,375
Franchise Mortgage Acceptance Company............. 6,900 126,788
Sirrom Capital Corporation........................ 5,500 286,687
-----------
942,850
OIL SERVICES -- 2.01%
- ------------------------------------------------------------------------------
Cliffs Drilling Company........................... 3,600 179,550
Pool Energy Services Company (a).................. 5,700 126,825
UTI Energy Corporation............................ 5,300 137,138
-----------
443,513
PHARMACEUTICALS -- 5.09%
- ------------------------------------------------------------------------------
Dura Pharmaceuticals Inc. (a)..................... 5,550 254,606
Incyte Pharmaceuticals Inc. (a)................... 5,900 265,500
Jones Medical Industries Inc...................... 2,200 84,150
Medicis Pharmaceutical Corporation (a)............ 9,050 462,681
Pharmerica Inc.................................... 5,200 53,950
-----------
1,120,887
PRINTING & PUBLISHING -- 2.25%
- ------------------------------------------------------------------------------
Applied Graphics Technologies (a)................. 9,300 495,225
RETAIL -- 2.66%
- ------------------------------------------------------------------------------
Guitar Center Inc. (a)............................ 9,100 209,300
Insight Enterprises Inc. (a)...................... 10,250 376,688
-----------
585,988
TECHNOLOGY -- 12.81%
- ------------------------------------------------------------------------------
Comverse Technology Inc. (a)...................... 8,700 339,300
DSP Communications Inc. (a)....................... 8,100 97,200
Helix Technology Corporation...................... 8,400 163,800
Network Appliance Inc. (a)........................ 11,400 404,700
P-Com Inc. (a).................................... 16,400 282,900
Remec Inc. (a).................................... 5,600 126,000
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Sawtek Inc. (a)................................... 5,300 $ 139,788
Security Dynamics Technologies Inc. (a)........... 8,500 303,875
Semtech Corporation............................... 4,500 176,062
Uniphase Corporation (a).......................... 7,800 322,725
Waters Corporation (a)............................ 12,400 466,550
-----------
2,822,900
TELECOMMUNICATIONS -- 3.07%
- ------------------------------------------------------------------------------
Digital Lightwave Inc............................. 7,600 99,750
Intermediate Telephone Inc. (a)................... 10,100 195,687
Sykes Enterprises Inc. (a)........................ 8,150 158,925
Tekelec Inc. (a).................................. 7,300 222,650
-----------
677,012
TRANSPORTATION -- 0.55%
- ------------------------------------------------------------------------------
MotivePower Industries Inc........................ 5,200 120,900
WASTE MANAGEMENT -- 4.41%
- ------------------------------------------------------------------------------
American Disposal Services Inc. (a)............... 9,900 361,350
Eastern Environmental Services Inc. (a)........... 14,300 314,600
Tetra Tech Inc. (a)............................... 14,775 295,500
-----------
971,450
TOTAL COMMON STOCKS
(IDENTIFIED COST $19,012,036)................................... 21,283,398
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.70%
- ------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
2.00% due 01/02/98
Collateral: U.S. Treasury Note $790,000, 9.25% due
08/15/98 Value $833,450........................... $815,000 815,000
-----------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $815,000)...................................... 815,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $19,827,036)................................... $22,098,398
OTHER ASSETS LESS LIABILITIES -- (0.27)%........................ (60,315)
-----------
NET ASSETS -- 100%.............................................. $22,038,083
- ------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
See notes to financial statements.
32 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 153
THE ENTERPRISE SMALL COMPANY VALUE PORTFOLIO
GAMCO INVESTORS, INC.
Rye, New York
INVESTMENT MANAGEMENT
GAMCO Investors, Inc., which manages more than $6 billion for institutional
clients and whose normal investment minimum is $500,000, became manager of the
portfolio on July 1, 1996.
INVESTMENT OBJECTIVE
The objective of the Enterprise Small Company Value Portfolio is to seek maximum
capital appreciation, primarily through investment in the equity securities of
companies that have a market capitalization of no more than $1 billion.
INVESTMENT PHILOSOPHY
GAMCO's focus is on free cash flow, which it believes to be the best barometer
of a business' value. Rising free cash flow often foreshadows net earnings
improvement. GAMCO also looks at long-term earnings trends, and analyzes on and
off balance sheet assets and liabilities. GAMCO wants to know everything and
anything that will add or detract from its private market value estimates.
Finally GAMCO looks for a catalyst: something happening in the company's
industry or indigenous to the company itself that will reveal value.
1997 PERFORMANCE REVIEW
The strong portfolio performance in 1997 was the result of GAMCO's sector bets
on cable television and cable television networks, its positioning in niche
industrial companies, its focus on corporate restructurings and some good
old-fashioned stock picking.
Cable television stocks, particularly Cablevision Systems (up 210 percent in
1997) went from the doghouse to the penthouse for two reasons: Cash flows
exceeded analysts' consensus expectations and cable developed a technology
mantra, with Microsoft's Bill Gates committing $1 billion to the proposition
that coaxial cable would be the highway of choice for internet transmission to
American homes. The cable industry is in great shape except for the political
jawboning over cable rates that is likely to take place in an election year like
1998.
GAMCO's positioning in niche industrial companies also contributed to returns.
These companies reflect the new competitive strengths of American industry, the
prospect of improving earnings and the likelihood that smaller niche players
would be targeted by larger competitors. In 1997, stocks like Goulds Pumps and
Brad Ragan were strong performers on takeovers.
Corporate restructurings helped boost portfolio performance in 1997. The
splitting of Culbro (up 71 percent) into General Cigar and Griffin Land
Resources was a primary example of this activity.
The marketplace is in the early stages of the third great wave of mergers and
acquisitions, triggered by General Electric's hostile bid to acquire Kemper in
March 1994. The first wave was in the 1960s, with conglomerates buying companies
to build diversified empires. The second wave in the 1980s was led by the
financial engineers -- leveraged buyout specialists preying on undervalued
companies. The current wave is being propelled by strategic corporate
THE ENTERPRISE GROUP OF FUNDS, INC. 33
<PAGE> 154
buyers looking to extend product lines and distribution systems through the
acquisition of companies in related businesses and consolidators, savvy
individuals creating operational and financial leverage by consolidating
fragmented industries. GAMCO believes this wave will be the strongest of all.
For the last five years American companies have been able to boost earnings
through technology-oriented productivity gains and extensive cost cutting.
Progress will continue on these fronts but much of the work has already been
done. Limited pricing flexibility in an increasingly global economy will
restrain profit margins. Many companies will become increasingly dependent on
growth through the acquisition of complimentary businesses.
The portfolio has benefited from several deals throughout the year. In addition
to those mentioned above, the portfolio reaped profits on General Host, Black
Entertainment Television, International Family Entertainment, Lin Television and
Fieldcrest Cannon.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-A ONE YEAR THREE YEAR
AVERAGE ANNUAL WITH LOAD 37.31% 18.65%
<S> <C> <C> <C> <C>
Average Annual Without Load 44.24% 20.60%
Russell 1000 Value* 35.18% 31.52%
Lipper Small Cap Fund Index** 15.05% 20.09%
*From 10/1/93-12/31/97
Enterprise Small Company Value
Portfolio-A Russell 1000 Value Index
10/1/93 $ 9,523.81 $ 10,000.00
12/31/93 $ 10,087.60 $ 9,973.00
1994 $ 10,121.90 $ 9,774.54
1995 $ 11,061.61 $ 13,523.07
1996 $ 12,309.36 $ 16,449.47
1997 $ 17,755.03 $ 22,236.39
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-A INCEPTION*
AVERAGE ANNUAL WITH LOAD 14.46%
<S> <C>
Average Annual Without Load 15.78%
Russell 1000 Value* 20.68%
Lipper Small Cap Fund Index** 13.18%
*From 10/1/93-12/31/97
Enterprise Small Company Value
Portfolio-A Lipper Small Cap Fund Index
10/1/93 $ 10,000.00
12/31/93 $ 10,269.00
1994 $ 9,776.09
1995 $ 12,867.29
1996 $ 14,715.03
1997 $ 16,929.64
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
increased $5,446 compared to $4,462 and $5,787 in the Wilshire Small Cap Index
and the Russell 1000 Value Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C>
Annualized Return With CDSC 39.40% 20.83%
Annualized Return Without CDSC 43.40% 21.91%
Russell 1000 Value* 35.18% 29.96%
Lipper Small Cap Fund Index** 15.05% 19.71%
*From 5/1/95-12/31/97
Enterprise Small Company Value
Portfolio-B Russell 1000 Value
5/1/95 $10,000.00 $10,000.00
1995 $10,686.60 $12,247.16
1996 $11,837.55 $14,897.44
1997 $16,575.04 $20,138.36
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-B
<S> <C>
Annualized Return With CDSC
Annualized Return Without CDSC
Russell 1000 Value*
Lipper Small Cap Fund Index**
*From 5/1/95-12/31/97
Lipper Small Cap Fund Index
5/1/95 $10,000.00
1995 $12,291.00
1996 $14,055.99
1997 $16,171.41
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
increased $4,737 compared to $4,233 and $5,241 in the Wilshire Small Cap Index
and the Russell 1000 Value Index, respectively.
34 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 155
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-C INCEPTION*
<S> <C> <C>
Cumulative Return With CDSC 33.68%
Cumulative Return Without CDSC 34.68%
Russell 1000 Value* 26.49%
Lipper Small Cap Fund Index** 28.08%
*From 5/1/97-12/31/97
Enterprise Small Company Value
Portfolio-C Russell 1000 Value
5/1/97 $10,000.00 $10,000.00
1997 $13,368.40 $12,649.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE SMALL COMPANY VALUE
PORTFOLIO-C
<S> <C>
Cumulative Return With CDSC
Cumulative Return Without CDSC
Russell 1000 Value*
Lipper Small Cap Fund Index**
*From 5/1/97-12/31/97
Lipper Small Cap Fund Index
5/1/97 $10,000.00
1997 $12,808.00
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
increased $5,247 compared to $4,111 and $5,029 in the Wilshire Small Cap Index
and the Russell 1000 Value Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR INCEPTION*
<S> <C> <C>
Enterprise Small Company Value
Portfolio-Y 44.53% 22.83%
Russell 1000 Value Index* 35.18% 29.96%
Lipper Small Cap Fund Index** 15.05% 19.71%
*From 5/31/95-12/31/97
Enterprise Small Company Value
Portfolio-Y Russell 1000 Value Index
5/31/95 $10,000.00 $10,000.00
1995 $10,535.90 $11,752.42
1996 $11,782.30 $14,295.65
1997 $17,028.96 $19,324.86
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
<S> <C>
Enterprise Small Company Value
Portfolio-Y
Russell 1000 Value Index*
Lipper Small Cap Fund Index**
*From 5/31/95-12/31/97
Lipper Small Cap Fund Index
5/31/95 $10,000.00
1995 $12,102.00
1996 $13,839.85
1997 $15,922.74
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original price.
* The Russell 1000 Value Index is an unmanaged index that excludes any
transaction or holding charges. The Russell 1000 Value Index replaces the
Wilshire Small Cap Index as the broad-based comparison to the Small Company
Value Portfolio as it more appropriately reflects the securities market in which
the Portfolio invests.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
Looking ahead to 1998, although sensitive to the impact of labor and
commodities, inflation may remain in check. Barring any synchronized worldwide
economic upswing, a relative low probability considering Asian economic
weakness, interest rates may be stable. In general, corporate earnings growth
may be respectable, in the seven to nine percent range. With expectations high,
there may be more earnings disappointments in the year ahead. Merger,
acquisition and restructuring activity may remain strong. If this scenario
unfolds, the market may be in line with corporate earnings.
GAMCO is concerned about several potential problems: The ripple effect on U.S.
profits from the currency debacle in Southeast Asia and a potential run on Latin
American currencies and economies; an upswing in wage inflation;
THE ENTERPRISE GROUP OF FUNDS, INC. 35
<PAGE> 156
upward pressure on interest rates; and the potential for a 1999 lame-duck
Clinton administration. Last, but certainly not least, the level of the market
is a concern. Valuations are high by most measures and the overall equity market
does not appear to have a margin of safety.
GAMCO believes deals may have a favorable impact on many of the portfolio's
holdings. With the lower longer term capital gain rate of 20 percent, the
owner/managers of many companies in the portfolio may be tempted to monetize
their investments. This will be an important source of profits for the
portfolio.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
36 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 157
SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 87.88% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
ADVERTISING -- 1.43%
- ------------------------------------------------------------------------------
Ackerley Inc...................................... 59,000 $ 999,312
AEROSPACE -- 7.70%
- ------------------------------------------------------------------------------
Ametek Aerospace Products Inc..................... 14,500 391,500
Coltec Industries Inc. (a)........................ 20,000 463,750
Curtiss Wright Corporation........................ 20,000 726,250
Gencorp Inc....................................... 20,000 500,000
Moog Inc. (a)..................................... 6,000 209,625
Sequa Corporation (Class A) (a)................... 20,000 1,301,250
Sequa Corporation (Class B) (a)................... 5,000 370,000
SPS Technologies Inc.............................. 33,000 1,439,625
-----------
5,402,000
APPAREL & TEXTILES -- 0.09%
- ------------------------------------------------------------------------------
Carlyle Inds. Inc................................. 40,000 60,000
AUTOMOTIVE -- 7.43%
- ------------------------------------------------------------------------------
Clarcor Inc....................................... 12,000 355,500
Echlin Inc........................................ 25,000 904,687
Modine Manufacturing Company...................... 40,000 1,365,000
Navistar International Corporation Inc. (a)....... 10,000 248,125
Scheib Earl Inc................................... 80,000 640,000
Standard Motor Products Inc....................... 27,000 609,188
Superior Inds International Inc................... 1,000 26,813
Wynns International Inc........................... 33,351 1,063,063
-----------
5,212,376
BROADCASTING -- 8.67%
- ------------------------------------------------------------------------------
BET Holdings Inc. (a)............................. 35,000 1,911,875
Chris Craft Industries Inc........................ 15,000 784,687
Gray Communications Systems Inc. (Class B)........ 13,000 334,750
GST Telecommunications Inc........................ 60,000 712,500
Lin Television Corporation (a).................... 17,000 926,500
Paxson Communications Corporation................. 50,000 368,750
United Television Inc............................. 10,000 1,038,750
-----------
6,077,812
BUSINESS SERVICES -- 0.14%
- ------------------------------------------------------------------------------
Nashua Corporation................................ 8,500 99,875
CABLE -- 5.09%
- ------------------------------------------------------------------------------
Cablevision Systems Corporation (a)............... 33,000 3,159,750
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Century Communications Corporation................ 30,000 $ 292,500
Mercom Inc........................................ 12,000 114,000
-----------
3,566,250
CAPITAL GOODS & SERVICES -- 0.55%
- ------------------------------------------------------------------------------
AAR Corporation................................... 10,000 387,500
CHEMICALS -- 0.99%
- ------------------------------------------------------------------------------
Church & Dwight Inc............................... 12,000 336,750
Lawter International Inc.......................... 33,000 358,875
-----------
695,625
COMPUTER HARDWARE -- 0.12%
- ------------------------------------------------------------------------------
Cerion Technologies Inc. (a)...................... 42,000 82,688
COMPUTER SOFTWARE -- 0.17%
- ------------------------------------------------------------------------------
Software Artistry Inc. (a)........................ 5,000 121,563
CONSUMER DURABLES -- 0.60%
- ------------------------------------------------------------------------------
Envirosource Inc. (a)............................. 100,000 300,000
Oneida Ltd........................................ 4,500 120,094
-----------
420,094
CONSUMER SERVICES -- 1.12%
- ------------------------------------------------------------------------------
Berlitz International Inc. (a).................... 11,000 286,000
ITT Educational Services Inc...................... 10,000 223,125
Mikasa Inc........................................ 19,000 276,688
-----------
785,813
ELECTRICAL EQUIPMENT -- 2.33%
- ------------------------------------------------------------------------------
Ampco Pittsburgh Corporation...................... 30,000 586,875
Oak Technology.................................... 5,000 32,500
Portec Inc........................................ 25,000 362,500
Thomas Industries Inc............................. 33,000 651,750
-----------
1,633,625
ENERGY -- 2.05%
- ------------------------------------------------------------------------------
USX Delhi Group................................... 70,000 1,435,000
ENTERTAINMENT & LEISURE -- 7.05%
- ------------------------------------------------------------------------------
Ascent Entertainment Group Inc.................... 42,000 435,750
Bull Run Corporation Georgia...................... 40,000 153,750
Florida Panthers Holdings Inc..................... 15,000 258,750
Gaylord Entertainment Company New................. 40,000 1,277,500
GC Companies Inc.................................. 15,000 710,625
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 37
<PAGE> 158
SMALL COMPANY VALUE PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
HSN Inc........................................... 23,000 $ 1,184,500
Ticketmaster Group Inc............................ 40,000 920,000
-----------
4,940,875
FINANCE -- 1.47%
- ------------------------------------------------------------------------------
Advest Group Inc.................................. 7,500 185,156
Pioneer Group Inc................................. 30,000 843,750
-----------
1,028,906
FOOD & BEVERAGES & TOBACCO -- 3.22%
- ------------------------------------------------------------------------------
Brunos Inc. (a)................................... 29,000 59,813
Celestial Seasonings Inc. (a)..................... 30,000 945,000
Chock Full O Nuts Corporation..................... 25,000 175,000
Eskimo Pie Corporation............................ 33,000 379,500
General Cigar Holdings Inc.
(Class A) (a)..................................... 5,000 106,562
General Cigar Holdings Inc.
(Class B) (a)..................................... 8,000 170,500
Giant Foods Inc................................... 12,000 404,250
Vermont Pure Holdings Ltd......................... 5,000 20,000
-----------
2,260,625
HOTELS & RESTAURANTS -- 1.20%
- ------------------------------------------------------------------------------
Aztar Corporation (a)............................. 65,000 406,250
Trump Hotels & Casino Resorts Inc................. 65,000 434,688
-----------
840,938
INSURANCE -- 0.93%
- ------------------------------------------------------------------------------
Liberty Corporation............................... 14,000 654,500
MACHINERY -- 5.82%
- ------------------------------------------------------------------------------
Baldwin Technology Company Inc. (a)............... 20,000 100,000
Banner Aerospace Inc.............................. 25,000 276,563
Commercial Intertech Corporation.................. 3,000 62,250
Culligan Water Technologies Inc................... 2,260 113,565
Daniel Industries Inc............................. 15,000 288,750
Fairchild Corporation............................. 35,000 870,625
Hach Company...................................... 8,400 106,050
Hach Company (Class A)............................ 8,400 78,750
Idex Corporation.................................. 10,000 348,750
Katy Industries Inc............................... 40,000 815,000
Kollmorgen Corporation............................ 29,000 531,062
Nortek Inc........................................ 18,500 491,406
-----------
4,082,771
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
MANUFACTURING -- 1.74%
- ------------------------------------------------------------------------------
Fedders Corporation............................... 65,000 $ 398,125
Industrial Distribution Group Inc................. 1,500 23,531
Oil Dri Corporation of America.................... 10,000 165,000
Ralcorp Holdings Inc. New......................... 5,000 84,688
Strattec Security Corporation..................... 8,000 204,000
Trimas Corporation................................ 10,000 343,750
-----------
1,219,094
METALS & MINING -- 0.29%
- ------------------------------------------------------------------------------
TVX Gold Inc...................................... 60,000 202,500
MISC. FINANCIAL SERVICES -- 1.16%
- ------------------------------------------------------------------------------
Data Broadcasting Corporation..................... 50,000 281,250
Midland Company................................... 8,500 535,500
-----------
816,750
PAPER PRODUCTS -- 0.57%
- ------------------------------------------------------------------------------
Greif Brothers Corporation........................ 12,000 402,000
PHARMACEUTICALS -- 2.83%
- ------------------------------------------------------------------------------
Carter Wallace Inc................................ 50,000 843,750
Ivax Corporation.................................. 65,000 438,750
Natures Sunshine Products Inc..................... 6,000 156,000
Twinlab Corporation............................... 22,000 544,500
-----------
1,983,000
PRINTING & PUBLISHING -- 3.34%
- ------------------------------------------------------------------------------
Lee Enterprises Inc............................... 18,000 532,125
Media General Inc................................. 28,000 1,170,750
Meredith Corporation.............................. 8,000 285,500
Nelson Thomas Inc................................. 19,500 225,469
Price Communications Corporation.................. 15,000 128,437
-----------
2,342,281
PUBLISHING -- 0.68%
- ------------------------------------------------------------------------------
McClatchy Newspapers Inc.......................... 13,500 367,031
Topps Inc......................................... 50,000 110,938
-----------
477,969
REAL ESTATE -- 2.35%
- ------------------------------------------------------------------------------
Catellus Development Corporation (a).............. 60,000 1,200,000
Griffin Land & Nurseries Inc...................... 29,000 449,500
-----------
1,649,500
RETAIL -- 2.46%
- ------------------------------------------------------------------------------
</TABLE>
38 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 159
SMALL COMPANY VALUE PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Lillian Vernon Corporation........................ 25,000 $ 415,625
Neiman Marcus Group Inc........................... 33,000 998,250
Ragan Brad Inc.................................... 7,900 276,500
Valuevision International Inc..................... 10,000 38,125
-----------
1,728,500
SECURITY & INVESTIGATION SERVICES -- 2.50%
- ------------------------------------------------------------------------------
Pittway Corporation............................... 6,000 417,750
Rollins Inc....................................... 60,000 1,218,750
Wackenhut Corporation............................. 5,000 115,937
-----------
1,752,437
TELECOMMUNICATIONS -- 3.74%
- ------------------------------------------------------------------------------
Aerial Communications Inc......................... 50,000 356,250
Associated Group Inc. (a)......................... 1,500 44,438
Atlantic Tele Network Inc......................... 25,000 271,875
Centennial Cellular Corporation (a)............... 15,000 307,500
Comsat Corporation................................ 28,000 679,000
Shared Tech Fairchild Inc......................... 50,000 731,250
Telephone & Data Systems Inc...................... 5,000 232,812
-----------
2,623,125
TRANSPORTATION -- 2.78%
- ------------------------------------------------------------------------------
GATX Corporation.................................. 16,000 1,161,000
Hudson General Corporation........................ 14,500 696,000
Transpro Inc...................................... 10,000 90,000
-----------
1,947,000
UTILITIES -- 5.06%
- ------------------------------------------------------------------------------
Citizens Utilities Company Delaware............... 50,500 486,062
Tejas Gas Corporation Delaware.................... 50,000 3,062,500
-----------
3,548,562
WIRELESS COMMUNICATIONS -- 0.21%
- ------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Teligent Inc...................................... 6,000 $ 147,750
TOTAL COMMON STOCKS
(IDENTIFIED COST $52,737,253)................................... 61,628,616
- ------------------------------------------------------------------------------
U.S. TREASURY BILLS -- 13.27%
- ------------------------------------------------------------------------------
U.S. Treasury Bill
4.94% due 01/02/98................................ $ 760,000 759,896
U.S. Treasury Bill
4.95% due 01/08/98................................ 605,000 604,418
U.S. Treasury Bill
4.95% due 02/12/98................................ 169,000 168,024
U.S. Treasury Bill
5.06% due 01/29/98................................ 2,014,000 2,006,074
U.S. Treasury Bill
5.09% due 01/22/98................................ 3,500,000 3,489,608
U.S. Treasury Bill
5.10% due 01/22/98................................ 1,000,000 997,025
U.S. Treasury Bill
5.11% due 01/08/98................................ 88,000 87,912
U.S. Treasury Bill
5.12% due 01/22/98................................ 726,000 723,832
U.S. Treasury Bill
5.17% due 01/22/98................................ 466,000 464,594
-----------
TOTAL U.S. TREASURY BILLS
(IDENTIFIED COST $9,301,383).................................... 9,301,383
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $62,038,636)................................... $70,929,999
OTHER ASSETS LESS LIABILITIES -- (1.15)%........................ (803,940)
-----------
NET ASSETS -- 100%.............................................. $70,126,059
- ------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 39
<PAGE> 160
THE ENTERPRISE INTERNATIONAL GROWTH PORTFOLIO
BRINSON PARTNERS, INC.
Chicago, Illinois
INVESTMENT MANAGEMENT
Brinson Partners, Inc., is a global investment management firm with offices in
Chicago, London and Tokyo, and became manager of the Enterprise International
Growth Portfolio on October 1, 1994. Brinson Partners manages approximately $90
billion for institutional clients, and its normal investment minimum is $25
million.
INVESTMENT OBJECTIVE
The objective of the Enterprise International Growth Portfolio is to seek
capital appreciation, primarily through a diversified portfolio of non-U.S.
equity securities.
INVESTMENT PHILOSOPHY
Brinson Partners believes that discrepancies exist between prices and
fundamental values, both across and within the international equity markets. It
takes advantage of these discrepancies by using a disciplined approach to
measure fundamental value from the perspective of the long-term investor. This
international equity strategy reflects the manager's decisions about the
relative attractiveness of the asset class, the individual equity markets,
currencies, the industries across and within those markets, other common risk
factors within those markets and individual international companies.
1997 PERFORMANCE REVIEW
For the year ended December 31, 1997, the portfolio showed a slight gain.
Currency allocation and security selection added value, which was partially
offset by market selection. Within markets, the five percent allocation to cash
detracted from results as most markets outside of the Pacific region registered
strong double-digit returns. The underweight in Switzerland also detracted but
the portfolio's underweight to the turbulent Pacific region added value. The
overweight of the U.S. dollar and underweight in the Japanese yen and core
European currencies contributed to the positive results. Within Japan, the
underweight position in the poorly performing banks and financial sectors and
the emphasis on blue-chip exporters, pharmaceuticals, electricals, and insurance
companies added value.
Continental European markets were strong performers during the course of the
first 10 months, despite reacting negatively in October to the banking and
currency crisis in Asia, as investors began to incorporate the anticipated
negative consequences of a slowdown in this region's overall demand. Commodity
and basic industry companies, luxury goods and spirits manufacturers, as well as
companies engaged in infrastructure, construction and commodity goods projects
and multinational banks were particularly vulnerable. Despite this, during the
full year, European markets registered high double-digit returns, reflecting an
environment of benign inflation, low interest rates, improving growth and
ongoing company restructuring.
In January 1997, the portfolio held underweights in the four relevant Southeast
Asia countries: Japan, Hong Kong, Malaysia and Singapore. Brinson Partners
gradually increased exposure to Malaysia and Singapore to a modest overweight
using defensive issues as the market declines there offered attractive
opportunities to gain superior long-term returns. Conversely, in recognition of
a number of vulnerabilities in the Japanese economy, Brinson reduced
40 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 161
exposure there in July and again in early December to the current level of a six
percent underweight. Furthermore, the manager reinstated a partial hedge on the
yen in October that has proven beneficial. The portfolio has been substantially
underweight in Japanese banks for a sustained period as those institutions
sorted through their property loan problems of the early '90s and Brinson
further cut that position by selling Sumitomo Trust and Sanwa Bank in November.
The portfolio remains underweight in Hong Kong equities and has fully hedged the
currency exposure.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE INTERNATIONAL GROWTH
PORTFOLIO-A ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C> <C> <C>
Average Annual With Load -0.21% 11.28% 7.41%
Average Annual Without Load 4.75% 12.37% 7.93%
EAFE Index* 1.78% 11.39% 6.25%
Lipper International Fund Index** 7.27% 13.28% 9.64%
Enterprise International Growth Lipper International Fund
Portfolio-A EAFE Index Index
12/31/87 $ 9,523.81 $ 10,000.00 $ 10,000.00
1988 $ 10,247.62 $ 12,827.00 $ 11,590.00
1989 $ 12,046.31 $ 14,178.97 $ 14,176.89
1990 $ 10,191.18 $ 10,854.00 $ 12,423.21
1991 $ 11,505.84 $ 12,170.59 $ 14,059.34
1992 $ 11,402.29 $ 10,689.43 $ 13,457.60
1993 $ 15,518.51 $ 14,169.91 $ 18,730.29
1994 $ 15,081.67 $ 15,272.32 $ 18,591.69
1995 $ 17,369.56 $ 16,984.35 $ 20,454.58
1996 $ 19,509.49 $ 18,011.90 $ 23,406.17
1997 $ 20,436.19 $ 18,332.52 $ 25,107.80
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE INTERNATIONAL GROWTH
PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C> <C>
Annualized Return With CDSC 0.17% 9.85%
Annualized Return Without CDSC 4.17% 11.12%
EAFE Index* 1.78% 4.88%
Lipper International Fund Index** 7.27% 11.45%
*From 5/1/95-12/31/97
Enterprise International Growth Lipper International Fund
Portfolio-B EAFE Index Index
5/1/95 $10,000.00 $10,000.00 $10,000.00
1995 $11,387.70 $10,521.74 $10,883.00
1996 $12,722.34 $11,158.31 $12,453.42
1997 $12,852.86 $11,356.93 $13,358.78
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 41
<PAGE> 162
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE INTERNATIONAL GROWTH
PORTFOLIO-C INCEPTION*
<S> <C> <C> <C>
Cumulative Return With CDSC 1.07%
Cumulative Return Without CDSC 2.07%
EAFE Index* 2.85%
Lipper International Fund Index** 4.18%
*From 5/1/97-12/31/97
Enterprise International Growth Lipper International Fund
Portfolio-C EAFE Index Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $10,107.20 $10,285.00 $10,418.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR INCEPTION*
<S> <C> <C> <C>
Enterprise International Growth
Portfolio-Y 5.21% 11.20%
EAFE Index* 1.78% 4.06%
Lipper International Fund Index** 7.27% 9.62%
*From 7/31/95-12/31/97
Enterprise International Growth Lipper International Fund
Portfolio-Y EAFE Index Index
7/31/95 $10,000.00 $10,000.00 $10,000.00
1995 $10,890.74 $10,203.00 $10,176.00
1996 $12,291.29 $10,820.28 $11,644.40
1997 $12,931.67 $11,012.88 $12,490.94
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The EAFE Index is an unmanaged index that excludes transaction or holding
charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
The Japanese equity market represents the largest underweight in the portfolio.
In the other developed markets, Brinson continues to emphasize New Zealand and
Australia, Germany, Belgium and the United Kingdom. The portfolio is neutrally
positioned in Finland and Spain, and invested but quite underweight in Hong
Kong, Switzerland, the Netherlands, Canada and France. Brinson also recently
established a position in Sweden, which ranks reasonably in relative
attractiveness. The portfolio continues to maintain a five percent strategic
cash position reflecting Brinson's view that non-U.S. equity markets are
expensive.
42 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 163
In addition to the currency underweights in the Japanese yen and the Hong Kong
dollar, the portfolio maintains an underweight exposure to the overvalued U.K.
pound. These underweights are primarily hedged into the U.S. dollar. The New
Zealand dollar is modestly attractive and represents a small overweight
position. This overweight is the result of allowing the currency to mirror the
overweight market allocation.
The portfolio continues to undergo restructuring in order to reduce its overall
level of risk and, in particular, to minimize its exposure to economically
sensitive sectors such as steel. Brinson, however, is finding attractive
valuations in U.K. food manufacturers. They are undergoing extensive
restructuring in the form of cost cutting, personnel reductions and plant
modernizations. Within Japan, the portfolio continues to maintain its
underweight to Japanese banks and overweight to the Japanese electronic
industry. The thrust of Brinson's strategy in Asia (ex-Japan) is to underweight
interest rate and economically sensitive stocks, such as banking, property and
construction. In addition, highly leveraged stocks and stocks with foreign
currency debt have been underweighted. Brinson emphasizes securities with
defensive earnings, such as utilities, consumer non-durables and export
carriers, which are less exposed to weakening domestic economies.
As with all international growth funds, the Enterprise International Growth
Portfolio carries additional risks associated with possibly less stable foreign
securities and currencies, lack of uniform accounting standards and political
instability.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 43
<PAGE> 164
INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 93.63% AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
AUSTRALIA -- 4.38%
- ---------------------------------------------------------------------------------
Amcor Ltd......................................... 11,800 $ 51,912
Boral Ltd......................................... 30,600 77,381
Brambles Industries Ltd........................... 6,000 119,075
Broken Hill Proprietary........................... 40,500 376,141
Coca Cola Amatil.................................. 7,000 52,311
CSR Ltd........................................... 26,000 88,116
David Jones Ltd................................... 76,500 86,256
Lend Lease Corporation............................ 5,665 110,765
Mayne Nickless Ltd................................ 10,000 52,857
MIM Holdings Ltd.................................. 51,177 31,353
National Australia Bank........................... 28,000 391,076
News Corporation.................................. 59,219 326,908
Pacific Dunlop Ltd................................ 41,500 87,905
Qantas Airways Ltd................................ 41,455 73,382
Rio Tinto Ltd..................................... 16,100 187,859
Santos Ltd........................................ 8,000 32,952
Telstra Corporation............................... 15,000 31,675
Westpac Bank Corporation.......................... 47,500 303,885
WMC Ltd........................................... 28,000 97,632
Woolworths Ltd.................................... 15,000 50,152
-------------
2,629,593
BELGIUM -- 3.56%
- ---------------------------------------------------------------------------------
Bruxelles Lambert Groupe.......................... 800 115,732
Delhaize Le Lion.................................. 4,100 208,038
Electrabel........................................ 1,690 390,902
Fortis AG......................................... 1,462 305,019
Fortis AG (Rts) (a)............................... 112 15
Generale De Banque................................ 400 174,084
Generale De Banque (Wts) (a)...................... 300 769
Kredietbank....................................... 380 159,483
Kredietbank (Vvrp)................................ 9 3,777
Petrofina SA...................................... 725 267,587
Society General De Belgique....................... 1,150 105,220
Solvay............................................ 2,410 151,556
Tractebel CAP..................................... 2,000 174,354
Union Miniere (a)................................. 1,104 76,578
-------------
2,133,114
CANADA -- 3.05%
- ---------------------------------------------------------------------------------
Agrium Inc........................................ 4,800 57,941
Alcan Aluminum Ltd................................ 3,000 82,712
Bank Montreal..................................... 2,800 124,124
Barrick Gold Corporation.......................... 1,700 31,703
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Canadian National Railway Company................. 2,400 $ 113,026
Canadian Pacific Ltd.............................. 7,400 199,363
Hudsons Bay Company............................... 3,000 66,863
Imasco Ltd........................................ 1,400 49,963
Imperial Oil Ltd.................................. 2,700 173,822
Magna International Inc........................... 900 56,681
Moore Corporation Ltd............................. 2,500 38,400
Newbridge Networks Corporation (a)................ 1,100 38,526
Noranda Inc....................................... 2,900 49,921
Northern Telecom Ltd.............................. 700 62,283
Nova Corporation Alberta.......................... 10,200 97,071
Potash Corp Saskatchewan Inc...................... 1,100 91,599
Royal Bank Canada Montreal........................ 3,300 174,578
Seagram Ltd....................................... 2,100 67,965
Telus Corporation................................. 5,100 112,417
Transcanada Pipelines Ltd......................... 3,800 84,826
Westcoast Energy Inc.............................. 2,400 55,673
-------------
1,829,457
FINLAND -- 0.67%
- ---------------------------------------------------------------------------------
Cultor Oyj........................................ 400 21,721
Merita A Ltd...................................... 9,600 52,483
Metsa Serla Oy.................................... 2,500 19,492
Nokia Oy.......................................... 2,600 184,592
Outokumpu Oy...................................... 2,200 26,839
Rauma Oy.......................................... 94 1,466
Sampo Insurance A................................. 800 25,977
Upm Kymmene Oy.................................... 3,400 67,988
-------------
400,558
FRANCE -- 5.79%
- ---------------------------------------------------------------------------------
Accor............................................. 624 116,018
Alcatel Alsthom................................... 1,102 140,073
Axa Uap........................................... 2,360 182,612
Axa Uap CVG....................................... 1,860 1,823
Banque National Paris A........................... 2,380 126,504
Cie Bancaire SA................................... 45 7,290
Cie De St Gobain.................................. 1,333 189,369
Cie Fin Paribas................................... 1,300 112,968
CSF Thomson....................................... 3,600 113,470
Dexia France...................................... 1,112 128,780
Elf Aquitaine..................................... 1,836 213,542
France Telecom.................................... 4,700 170,476
Generale Des Eaux................................. 1,355 189,117
Generale Des Eaux (Wts) (a)....................... 1,905 1,295
</TABLE>
44 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 165
INTERNATIONAL GROWTH PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Groupe Danone..................................... 500 $ 89,308
Lafarge Coppee SA................................. 1,100 72,176
Lagardere......................................... 3,430 113,412
Michelin.......................................... 2,557 128,732
Pechiney.......................................... 2,830 111,723
Peugeot SA........................................ 1,460 184,122
Pinault Printemps Redo............................ 300 160,056
Rhone Poulenc Ord A............................... 3,996 179,002
Seita............................................. 4,000 143,557
Soc Generale...................................... 1,345 183,252
Suez Lyonnaise Des Eaux........................... 1,663 184,026
Total Company..................................... 1,735 188,822
Usinor............................................ 2,900 41,872
-------------
3,473,397
GERMANY -- 10.06%
- ---------------------------------------------------------------------------------
Allianz AG........................................ 2,510 650,190
BASF AG........................................... 3,700 131,118
Bayer AG.......................................... 9,100 339,932
Bayer Motoren Werken.............................. 305 228,036
Commerzbank AG.................................... 7,500 295,172
Continental AG.................................... 7,000 154,479
Daimler Benz AG................................... 3,500 245,532
Deutsche Bank AG.................................. 7,300 515,356
Deutsche Telekom.................................. 25,250 475,117
Hochtief AG....................................... 1,950 76,962
Hoechst AG........................................ 2,900 101,559
Man AG............................................ 440 127,430
Mannesmann AG..................................... 520 262,753
Metro AG.......................................... 5,128 183,861
Munchener Ruckvers................................ 1,270 478,646
Preuss AG......................................... 710 216,676
Rheim - West Elektr AG............................ 5,150 276,258
Schering AG....................................... 2,900 279,691
Siemens AG........................................ 5,600 331,527
Veba AG........................................... 6,030 410,615
Volkswagen AG..................................... 450 253,148
-------------
6,034,058
HONG KONG -- 1.02%
- ---------------------------------------------------------------------------------
Cheung Kong (Holdings)............................ 16,000 104,788
Citic Pacific Limited............................. 7,000 27,823
CLP Holdings...................................... 9,500 52,716
Hang Seng Bank.................................... 7,000 67,525
Hong Kong & China Gas............................. 38,000 73,558
Hong Kong Telecommunications...................... 41,000 84,391
Hutchison Whampoa................................. 19,000 119,164
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Sun Hung Kai Properties........................... 8,000 $ 55,749
Swire Pacific..................................... 5,000 27,423
-------------
613,137
IRELAND -- 0.29%
- ---------------------------------------------------------------------------------
Smurfit (Jefferson) Group......................... 63,000 174,877
ITALY -- 4.39%
- ---------------------------------------------------------------------------------
Assic Generali.................................... 12,810 314,638
Banca Commerciale Italiana........................ 33,000 114,726
Credito Italiano.................................. 49,000 151,100
Danieli Di Risp................................... 15,000 53,929
Edison SPA........................................ 14,000 84,681
Eni (ADR)......................................... 3,400 194,013
Eni Ord........................................... 37,000 209,785
IMI............................................... 13,000 154,324
INA............................................... 53,000 107,408
Mediobanca SPA.................................... 7,000 54,963
Montedison SPA.................................... 166,820 149,846
Rinascente (LA)................................... 16,400 122,374
Rinascente (Wts) (a).............................. 400 484
Rinascente Savings (Risp)......................... 14,000 52,233
SAI Di Risp....................................... 15,000 66,139
Soc Italiano...................................... 18,000 74,279
Telecom Italia Mobile............................. 34,000 156,930
Telecom Italia Mobile Di Risp..................... 78,000 221,786
Telecom Italia Spa................................ 16,665 106,453
Telecom Italia Spa Risp........................... 55,450 244,494
-------------
2,634,585
JAPAN -- 19.16%
- ---------------------------------------------------------------------------------
Amada Company..................................... 25,000 92,862
Asahi Glass Company............................... 18,000 85,471
Bank of Tokyo/ Mitsubishi......................... 22,000 303,286
Canon Inc......................................... 20,000 465,651
Canon Sales Company Inc........................... 8,000 91,292
Citizen Watch Company............................. 23,000 154,132
Dai Nippon Printng................................ 22,000 412,805
Daiichi Pharmaceutical............................ 20,000 225,167
Daikin Kogyo...................................... 25,000 94,202
Daiwa House Industries Co......................... 12,000 63,414
Denso Corporation................................. 13,000 233,974
Fanuc Co.......................................... 9,300 351,857
Fujitsu........................................... 15,000 160,833
Hitachi........................................... 48,000 341,886
Honda Motor Company............................... 8,000 293,482
Hoya Corporation.................................. 3,000 94,202
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 45
<PAGE> 166
INTERNATIONAL GROWTH PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
INAX Corporation.................................. 18,000 $ 52,248
Ito Yokado Company................................ 9,000 458,375
Kaneka Corporation................................ 25,000 112,775
Keio Teito Electric Rail.......................... 28,000 107,008
Kinki Nippon Railway.............................. 28,000 149,468
Kirin Brewery Company............................. 27,000 196,446
Kokuyo Company.................................... 8,000 137,857
Kuraray Company Ltd............................... 29,000 239,871
Kyocera Corporation............................... 3,000 136,019
Marui Company..................................... 13,000 202,114
Matsushita Electric Ind........................... 36,000 526,614
Mitsubishi Paper.................................. 29,000 40,645
NGK Insulators.................................... 39,000 346,481
Nintendo.......................................... 2,400 235,276
Nippon Meat Packer................................ 16,000 218,121
Nippon Steel Corporation.......................... 19,000 28,085
Okumura........................................... 25,000 59,355
Osaka Gas Corporation............................. 46,000 104,986
Sankyo Pharmaceutical Company..................... 18,000 406,678
Secom Company..................................... 6,000 383,243
Seino Transport................................... 16,000 79,773
Sekisui House..................................... 37,000 237,750
Sony Corporation.................................. 5,400 479,743
Sumitomo Bank..................................... 26,000 296,699
Sumitomo Chemical Industries...................... 28,000 64,333
Sumitomo Electric Industries...................... 20,000 272,651
Takeda Chemical Industries........................ 15,000 427,357
TDK Corporation................................... 4,000 301,447
Tokio Marine & Fire............................... 22,000 249,368
Tokyo Electric Power.............................. 6,300 114,835
Tokyo Steel Manufacturing......................... 11,000 37,152
Tonen Corporation................................. 18,000 97,051
Toray Industries Inc.............................. 86,000 385,311
Toshiba Corporation............................... 57,000 237,045
Toyo Suisan Kaisha................................ 13,000 90,005
Toyota Motor Corporation.......................... 14,000 401,011
Yamazaki Baking Company........................... 12,000 116,719
-------------
11,494,431
MALAYSIA -- 1.41%
- ---------------------------------------------------------------------------------
Hume Industries Berhad............................ 17,000 17,833
Kuala Lumpur Kepong............................... 45,500 97,680
Land & General Holdings........................... 47,000 8,700
Malayan Banking Berhad............................ 20,000 58,105
Malaysia International Shipping................... 23,000 33,706
Nestle Malaysia Berhad............................ 10,000 46,279
New Straits Times Press........................... 20,000 24,785
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Perusahaan Otomobl................................ 11,000 $ 10,747
Petronas Gas Berha................................ 20,000 45,507
Public Bank Berhad Foreign........................ 24,333 8,383
Public Bank Berhad Local.......................... 24,000 7,466
Public Bank FGN (Rts) (a)......................... 4,866 0
Resorts World Berhad.............................. 21,000 35,365
Rothmans of Pall Mall............................. 11,000 85,551
Sime Darby Berhad................................. 66,000 63,463
Telekom Malaysia.................................. 47,000 138,964
Tenaga Nasional................................... 55,000 117,367
UMW Holdings Berhad............................... 7,000 5,309
United Engineers (Malay).......................... 13,000 10,829
YTL Corporation Berhad............................ 19,500 26,321
YTL Power International........................... 500 384
-------------
842,744
NETHERLANDS -- 4.40%
- ---------------------------------------------------------------------------------
ABN Amro Holdings................................. 11,179 217,775
Akzo Nobel NV..................................... 350 60,346
Elsevier NV....................................... 13,100 211,910
Heineken NV....................................... 900 156,684
Hoogovens & Staalf................................ 1,241 50,861
ING NTFL.......................................... 6,465 272,291
KLM............................................... 1,725 63,805
KPN NV............................................ 6,524 272,202
Philips Electronics............................... 3,500 209,898
Royal Dutch Petroleum............................. 15,180 833,247
Unilever NV Cva................................... 4,760 293,443
-------------
2,642,462
NEW ZEALAND -- 3.02%
- ---------------------------------------------------------------------------------
Brierley Investment NPV........................... 361,000 257,826
Carter Holt Harvey NPV............................ 124,000 191,522
Fletcher Challenge Building....................... 46,000 94,019
Fletcher Challenge Energy......................... 50,000 175,066
Fletcher Challenge Forest Division NPV............ 106,433 88,374
Fletcher Challenge Paper.......................... 92,000 120,194
Lion Nathan Limited............................... 35,000 78,446
Telecom Corporation of New Zealand................ 154,000 746,658
Telecom Corporation of New Zealand (ADR).......... 1,600 62,000
-------------
1,814,105
SINGAPORE -- 1.64%
- ---------------------------------------------------------------------------------
City Developments................................. 14,000 64,788
</TABLE>
46 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 167
INTERNATIONAL GROWTH PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
DBS Lands......................................... 27,000 $ 41,329
Elec & Eltek International........................ 3,300 15,114
Foreign Reg Bank Singapore........................ 12,000 102,521
Fraser & Neave.................................... 4,000 17,324
Hotel Properties.................................. 44,000 28,715
Keppel Corporation................................ 15,000 43,073
Keppel Land Ltd................................... 17,000 23,400
Natsteel Ltd...................................... 10,000 13,527
Overseas Chinese Bank............................. 16,200 94,192
Singapore Airlines................................ 22,000 143,578
Singapore Press Holdings.......................... 7,000 87,630
Singapore Telecom................................. 102,000 190,021
United Overseas Bank.............................. 19,000 105,399
Wing Tai Holdings................................. 11,000 12,857
-------------
983,468
SPAIN -- 2.34%
- ---------------------------------------------------------------------------------
Acerinox SA....................................... 200 29,629
Banco Bilbao Vizcaya.............................. 4,800 155,327
Banco Central Hispanoamericano.................... 4,100 99,842
Banco Popular Esp................................. 1,520 106,255
Banco Santander................................... 3,750 125,287
Corp Mapfre Sa.................................... 1,400 37,125
Empresa Nac Electricid............................ 9,400 166,899
Formento di Const Y Contra........................ 2,000 76,140
Gas Natural Sdg................................... 1,900 98,523
Iberdrola SA...................................... 10,600 139,501
Repsol SA (ADR)................................... 2,540 108,369
Tabacalera SA..................................... 200 16,213
Telefonica De Espana.............................. 5,800 165,606
Vallehermoso SA................................... 1,300 39,849
Viscofan Envoltura................................ 1,600 40,171
-------------
1,404,736
SWEDEN -- 1.66%
- ---------------------------------------------------------------------------------
ABB Ab............................................ 4,500 53,275
Astra Ab.......................................... 10,400 180,103
Electrolux Ab..................................... 700 48,577
Ericsson Lm Tel................................... 3,600 135,342
Hennes And Mauritz................................ 2,500 110,203
Nordbanken Holding................................ 23,900 135,154
Securitas Ab...................................... 1,500 45,340
Skanska Ab........................................ 1,300 53,294
Svenska Handelsbanken............................. 2,100 72,602
Swedish Match..................................... 18,200 60,744
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Volvo Ab.......................................... 3,800 $ 101,941
-------------
996,575
SWITZERLAND -- 4.71%
- ---------------------------------------------------------------------------------
ABB Ag Series A................................... 55 69,070
Credit Suisse Group............................... 1,803 278,865
Holderbk Fn Glarus................................ 95 77,498
Nestle SA......................................... 217 325,084
Novartis AG....................................... 452 733,124
Roche Holdings AG................................. 51 506,265
Sairgroup (a)..................................... 57 78,018
Schw Ruckversicher................................ 128 239,321
SchweizBankgesellschaft........................... 132 190,791
Sulzer AG......................................... 98 62,105
Swiss Life........................................ 123 96,552
Zurich Versicherung............................... 354 168,618
-------------
2,825,311
UNITED KINGDOM -- 22.08%
- ---------------------------------------------------------------------------------
Abbey National.................................... 15,000 270,027
Barclays PLC...................................... 8,000 212,972
Bass.............................................. 10,200 158,662
BAT Industries.................................... 71,300 650,196
BG................................................ 71,911 323,632
Billiton PLC...................................... 58,000 148,613
Booker PLC........................................ 33,600 176,602
British Energy.................................... 35,000 243,172
British Petroleum................................. 41,577 550,003
British Sky Broadcasting.......................... 20,000 149,796
British Steel..................................... 55,000 118,342
British Telecom................................... 66,000 520,051
BTR PLC........................................... 29,000 87,644
Cable & Wireless.................................. 16,000 140,598
Cadbury Schweppes................................. 27,000 272,507
Centrica.......................................... 61,500 90,407
Charter........................................... 14,259 175,419
Coats Viyella PLC................................. 62,800 93,866
Diageo PLC........................................ 32,300 295,504
FKI............................................... 68,750 215,681
General Electric Company.......................... 64,600 418,586
Glaxo Wellcome.................................... 37,200 886,869
Great Universal Stores............................ 24,000 302,351
Greenalls Group................................... 20,000 143,883
Hanson PLC........................................ 29,437 131,331
Hillsdown Holdings................................ 75,000 182,317
House of Fraser PLC............................... 79,500 262,463
HSBC Holdings..................................... 16,000 415,224
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 47
<PAGE> 168
INTERNATIONAL GROWTH PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
Inchcape.......................................... 41,000 $ 109,768
Legal & General Group............................. 36,500 318,941
Lloyds TSB Group PLC.............................. 55,232 718,545
Marks & Spencer................................... 43,000 425,241
Mirror Group...................................... 78,800 252,387
National Westminster Bank......................... 16,000 265,954
Northern Foods.................................... 46,000 199,465
Peninsular and Oriental Steam Nav................. 26,500 301,419
Reckitt & Colman.................................. 8,650 135,683
Reuters Holdings.................................. 18,000 196,607
Rio Tinto Corporation............................. 17,100 210,791
RJB Mining........................................ 42,000 87,611
Royal Sun Alliance Ins............................ 20,538 206,787
Scottish Hydro.................................... 19,500 160,784
Sears............................................. 91,200 79,392
Sedgwick Group.................................... 60,400 140,874
Smithkline Beecham................................ 38,400 395,777
Tate & Lyle PLC................................... 19,000 156,350
TESCO............................................. 29,800 245,731
Thames Water...................................... 20,300 302,252
Unilever.......................................... 17,600 151,391
Vodafone Group.................................... 40,400 291,971
Williams Holdings................................. 46,000 255,376
-------------
13,245,815
TOTAL COMMON STOCKS
(IDENTIFIED COST $53,421,077).................................... 56,172,423
- ---------------------------------------------------------------------------------
PREFERRED STOCK -- 0.65%
- ---------------------------------------------------------------------------------
AUSTRALIA -- 0.13%
- ---------------------------------------------------------------------------------
News Corporation.................................. 15,116 74,815
GERMANY -- 0.27%
- ---------------------------------------------------------------------------------
Henkel Kgaa....................................... 2,600 164,040
ITALY -- 0.25%
- ---------------------------------------------------------------------------------
Fiat SPA.......................................... 98,100 149,729
-------------
TOTAL PREFERRED STOCK
(IDENTIFIED COST $369,264)....................................... $ 388,584
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.98%
- ---------------------------------------------------------------------------------
Arco Coal Australia
5.90% due 01/23/98
Collateral:....................................... $ 1,000,000 $ 996,394
General Electric Capital Corporation Discount
5.78%, due 01/14/98............................... 800,000 798,330
-------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $1,794,724)..................................... 1,794,724
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 2.88%
- ---------------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement, 4.00% due 01/02/98
Collateral: U.S. Treasury Note,
$1,750,000 5.625% due 10/31/99 Value $1,763,032... 1,725,000 1,725,000
-------------
TOTAL REPURCHASE AGREEMENTS
(IDENTIFIED COST $1,725,000)..................................... 1,725,000
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $57,310,065).................................... $ 60,080,731
OTHER ASSETS LESS LIABILITIES -- (0.14)%......................... (84,538)
-------------
NET ASSETS -- 100%............................................... $ 59,996,193
- ---------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
(Rts) Rights
(Wts) Warrants
ADR American Depository Receipts
See notes to financial statements.
48 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 169
THE ENTERPRISE GOVERNMENT SECURITIES PORTFOLIO
TCW FUNDS MANAGEMENT, INC.
Los Angeles, California
INVESTMENT MANAGEMENT
TCW Funds Management is a wholly owned subsidiary of TCW Management Company. TCW
manages more than $50 billion for institutional clients, and its normal
investment minimum is $25 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Government Securities Portfolio is to seek
current income and safety of principal, primarily from securities that are
obligations of the U.S. Government, its agencies or its instrumentalities.
INVESTMENT PHILOSOPHY
TCW's investment process is grounded in long-term value considerations. It does
not attempt to forecast short-term trends in interest rates and therefore, does
not frequently alter average portfolio maturities. The process focuses on
controlling the variables that are known and can be managed, such as the term
structure of interest rates, mortgage prepayment rates and security structure.
The portfolio remains substantially invested in mortgage-backed products under
the great majority of market conditions.
1997 PERFORMANCE REVIEW
The year was a strong one for fixed income investments, thanks to declining
inflationary pressures, a complacent Federal Reserve and strong investor demand
for all types of bonds. After beginning the year at 6.64 percent, the yield on
the 30-year benchmark U.S. Treasury bond rose to 7.10 percent by early April due
to market fears that the Fed would initiate another series of rate increases. A
steady stream of positive inflation reports, however, gave the Federal Reserve
no reason to raise interest rates and investors gained confidence and began
buying bonds. The bond market recovered fully from its weak first quarter and
gained some ground. During the second half of the year bond fund returns were
further bolstered by a "flight to quality" as investors moved money out of Asia
and into the traditional safe haven of the U.S. investment grade sector. By
December 31, the yield on the benchmark 30-year U.S. Treasury bond had fallen to
5.92 percent, its lowest level in more than four years.
During the first half of the year, stable prepayment rates and strong investor
demand brought mortgage spreads into their highest levels seen in a decade, yet
the sector retained much of its yield advantage over other fixed income
securities. In the second half of the year, the mortgage sector fared less well.
Declining interest rates intensified investors' fears about accelerating
prepayment rates and spreads widened.
THE ENTERPRISE GROUP OF FUNDS, INC. 49
<PAGE> 170
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GOVERNMENT SECURITIES
PORTFOLIO-A ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
Average Annual With Load 3.25% 5.65% 7.43%
Average Annual Without Load 8.39% 6.67% 7.93%
Lehman Brothers Int. Gov't Bond* 7.72% 6.39% 8.13%
Lipper General US Gov't Bond Index** 8.81% 6.02% 7.75%
Enterprise Government Lehman Brothers Lipper General US
Securities Portfolio-A Int. Gov't Bond Gov't Bond Index
12/31/87 $ 9,522.29 $ 10,000.00 $ 10,000.00
1988 $ 9,950.79 $ 10,640.00 $ 10,666.00
1989 $ 10,945.87 $ 11,989.15 $ 11,989.65
1990 $ 11,974.78 $ 13,135.31 $ 12,951.22
1991 $ 13,483.61 $ 14,988.71 $ 14,845.98
1992 $ 14,818.48 $ 16,027.43 $ 15,751.59
1993 $ 16,196.60 $ 17,336.87 $ 17,062.12
1994 $ 14,932.62 $ 17,033.47 $ 16,253.38
1995 $ 17,769.82 $ 19,487.99 $ 19,006.70
1996 $ 18,887.54 $ 20,279.21 $ 19,388.43
1997 $ 20,472.20 $ 21,844.76 $ 21,096.55
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
increased $1,584 compared to $2,037 and $1,566 in the Lehman Brothers
Intermediate Government Corporate Bond Index and the Lehman Brothers
Intermediate Government Bond Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GOVERNMENT SECURITIES
PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C>
Annualized Return With CDSC 3.81% 7.66%
Annualized Return Without CDSC 7.81% 8.97%
Lehman Brothers Int. Gov't Bond Index* 7.72% 7.63%
Lipper General US Gov't Fund Index** 8.81% 7.95%
*From 5/1/95-12/31/97
Enterprise Government Securities
Portfolio-B Lehman Brothers Int. Gov't Bond Index
5/1/95 $10,000.00 $10,000.00
1995 $11,047.00 $10,858.63
1996 $11,666.74 $11,299.49
1997 $12,177.91 $12,171.81
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GOVERNMENT SECURITIES
PORTFOLIO-B
<S> <C>
Annualized Return With CDSC
Annualized Return Without CDSC
Lehman Brothers Int. Gov't Bond Index*
Lipper General US Gov't Fund Index**
*From 5/1/95-12/31/97
Lipper General US Gov't Fund Index
5/1/95 $10,000.00
1995 $11,052.45
1996 $11,274.43
1997 $12,267.70
</TABLE>
During 1997, an investment in the above hypothetical shareholder account
increased $511 compared to $1,109 and $873 in the Lehman Brothers Intermediate
Government Corporate Bond Index and the Lehman Brothers Intermediate Government
Bond Index, respectively.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GOVERNMENT SECURITIES
PORTFOLIO-C INCEPTION*
<S> <C> <C>
Cumulative Return With CDSC 6.49%
Cumulative Return Without CDSC 7.49%
Lehman Brothers Int. Gov't Bond Index* 6.74%
Lipper General US Gov't Fund Index** 8.14%
*From 5/1/97-12/31/97
Enterprise Government Securities
Portfolio-C Lehman Brothers Int. Gov't Bond Index
5/1/97 $10,000.00 $10,000.00
1997 $10,648.90 $10,674.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE GOVERNMENT SECURITIES
PORTFOLIO-C
<S> <C>
Cumulative Return With CDSC
Cumulative Return Without CDSC
Lehman Brothers Int. Gov't Bond Index*
Lipper General US Gov't Fund Index**
*From 5/1/97-12/31/97
Lipper General US Gov't Fund Index
5/1/97 $10,000.00
1997 $10,814.15
</TABLE>
50 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 171
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
INCEPTION*
<S> <C> <C>
Enterprise Government Securities
Portfolio-Y 3.23%
Lehman Brothers Int. Gov't Bond Index* 2.93%
Lipper General US Gov't Fund Index** 3.23%
*From 7/31/97-12/31/97
Enterprise Government Securities
Portfolio-Y Lehman Brothers Int. Gov't Bond Index
7/31/97 $10,000.00 $10,000.00
1997 $10,322.58 $10,293.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
<S> <C>
Enterprise Government Securities
Portfolio-Y
Lehman Brothers Int. Gov't Bond Index*
Lipper General US Gov't Fund Index**
*From 7/31/97-12/31/97
Lipper General US Gov't Fund Index
7/31/97 $10,000.00
1997 $10,323.03
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The Lehman Brothers Intermediate Government Corporate Bond Index is an
unmanaged broad based index that excludes transaction and holding charges. The
Lehman Brothers Intermediate Government Bond Index replaces the Lehman Brothers
Intermediate Government Corporate Bond Index as the broad-based comparison to
the Government Securities Portfolio as it more appropriately reflects the
securities market in which the Portfolio invests.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
The weakness in Asia may be likely to have a positive effect on the U.S. bond
market. If it takes a sizable bite out of U.S. exports and economic growth
slows, inflationary pressures are less likely to emerge and reduce bond returns.
The problems in Asia have also discouraged the Fed from raising interest rates,
which has been another positive for the U.S. market. High-grade U.S. bonds have
emerged from the turmoil of global equity markets as attractive investments.
TCW maintains a positive outlook on the mortgage sector for a number of reasons.
First and foremost is its emphasis on call protection and mitigating the
potentially negative affects of rapid prepayments on returns. This emphasis has
helped in previous periods of declining interest rates and TCW expects this
focus to continue to help its efforts. Furthermore, TCW anticipates an increase
in volatility that should create trading opportunities with the potential to
enhance performance. Finally, the strong technical factors that persisted for
much of last year remain in place today. There continues to be a constant demand
for mortgage product because of its attractive yield and the strong presence
maintained by the agencies.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 51
<PAGE> 172
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
U.S. GOVERNMENT & AGENCY OR PRINCIPAL
OBLIGATIONS -- 88.78% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANKS -- .23%
- ------------------------------------------------------------------------------
Federal Home Loan Banks 5.20%, due 10/20/00....... $ 200,000 $ 200,054
FEDERAL HOME LOAN PARTICIPATION CERTIFICATES -- 12.15%
- ------------------------------------------------------------------------------
FHLPC 7.00%, due 09/01/17......................... 1,976,169 1,994,053
FHLPC 7.00%, due 10/01/17......................... 2,640,940 2,664,867
FHLPC 9.00%, due 10/01/22......................... 1,625,925 1,725,838
FHLPC 10.00%, due 10/01/18........................ 1,217,279 1,307,528
FHLPC 10.00%, due 07/01/20........................ 1,994,756 2,145,180
FHLPC 10.00%, due 10/01/20........................ 908,393 980,638
-----------
10,818,104
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 24.55%
- ------------------------------------------------------------------------------
GNMA 6.625%, due 11/15/28......................... 4,838,747 4,792,876
GNMA 7.00%, due 10/15/33.......................... 14,896,056 14,942,532
GNMA 7.50%, due 04/15/23.......................... 739,613 757,393
GNMA 7.50%, due 05/15/23.......................... 682,561 698,874
GNMA 7.50%, due 05/15/23.......................... 635,097 650,225
GNMA 9.00%, due 08/15/16.......................... 7,441 7,917
-----------
21,849,817
FEDERAL HOUSING ADMINISTRATION -- 35.48%
- ------------------------------------------------------------------------------
FHA 6.75%, due 11/01/28........................... 2,227,808 2,172,113
FHA 7.00%, due 10/01/28........................... 2,326,984 2,303,714
FHA 7.18%, due 02/20/29........................... 3,417,450 3,396,091
FHA 7.625%, due 06/01/28.......................... 3,716,441 3,767,542
FHA 7.75%, due 05/01/18........................... 6,349,982 6,524,607
FHA 7.75%, due 04/01/28........................... 3,882,094 3,988,852
FHA 7.80%, due 09/01/23........................... 2,774,323 2,850,617
FHA 8.65%, due 06/01/27........................... 3,667,077 3,850,431
FHA 8.70%, due 12/01/27........................... 2,580,409 2,715,881
-----------
31,569,848
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 15.73%
- ------------------------------------------------------------------------------
FNMA Medium Term Note 6.25%, due 01/14/04......... 250,000 248,318
FNMA Medium Term Note 6.28%, due 02/03/04......... 190,000 188,803
FNMA Principal Strip 7.70%, due 08/10/04.......... 125,000 113,398
FNMA 5.50%, due 01/01/09.......................... 2,058,235 1,998,546
FNMA 5.50%, due 02/01/09.......................... 3,542,342 3,440,075
FNMA 6.50%, due 02/01/09.......................... 163,632 163,780
FNMA 7.00%, due 03/01/14.......................... 1,824,749 1,837,504
FNMA 8.00%, due 11/01/16.......................... 2,814,055 2,926,617
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
FNMA 9.50%, due 08/01/20.......................... $1,035,118 $ 1,104,306
FNMA 9.50%, due 10/01/20.......................... 1,161,667 1,238,581
FNMA 10.00%, due 07/01/20......................... 235,710 254,604
FNMA 10.00%, due 07/01/20......................... 447,704 483,471
-----------
13,998,003
U.S. TREASURY NOTES -- 0.64%
- ------------------------------------------------------------------------------
U.S. Treasury Note 8.875%, due 05/15/00........... 380,000 407,124
U.S. Treasury Note Strip Zero Coupon, due
02/15/98.......................................... 65,000 64,561
U.S. Treasury Note Strip Zero Coupon, due
02/15/98.......................................... 100,000 99,330
-----------
571,015
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(IDENTIFIED COST $78,919,002)................................... 79,006,841
- ------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS (V) -- 4.25%
- ------------------------------------------------------------------------------
Federal Home Loan Mortgage Corporation 6.545%, due
08/15/23.......................................... 1,291,553 999,339
Federal Home Loan Mortgage Corporation 8.80%, due
12/15/23.......................................... 2,222,727 2,089,364
Federal National Mortgage Association 15.50%, due
03/25/23.......................................... 100,127 106,134
Federal National Mortgage Association Remic 6.50%,
due 06/25/23...................................... 500,000 489,800
Federal National Mortgage Association Remic 7.00%,
due 07/25/05...................................... 102,551 102,619
-----------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS (V)
(IDENTIFIED COST $4,003,787).................................... 3,787,256
- ------------------------------------------------------------------------------
COMMERCIAL PAPER -- 4.94%
- ------------------------------------------------------------------------------
International Lease Finance Corporation 6.05%, due
01/09/98.......................................... $4,400,000 4,394,084
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $4,394,084).................................... 4,394,084
- ------------------------------------------------------------------------------
</TABLE>
52 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 173
GOVERNMENT SECURITIES PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS -- 1.61%
- ------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement
4.00%, due 01/02/98...............................
Collateral: U.S. Treasury Note, $1,455,000 5.625%
due 11/30/99 Value $1,458,638..................... $1,430,000 $ 1,430,000
-----------
TOTAL REPURCHASE AGREEMENTS
(IDENTIFIED COST $1,430,000).................................... 1,430,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $88,746,873)................................... $88,618,181
OTHER ASSETS LESS LIABILITIES -- 0.42%.......................... 371,793
-----------
NET ASSETS -- 100%.............................................. $88,989,974
- ------------------------------------------------------------------------------
</TABLE>
(v) Variable interest rate security; interest rate is as of December 31, 1997.
The maturity date shown is the next interest reset date.
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 53
<PAGE> 174
THE ENTERPRISE HIGH-YIELD BOND PORTFOLIO
CAYWOOD-SCHOLL CAPITAL MANAGEMENT
San Diego, California
INVESTMENT MANAGEMENT
Caywood-Scholl has been investment adviser to the Enterprise High-Yield Bond
Portfolio since its inception in 1987. Caywood-Scholl manages more than $719
million for institutional clients, and its normal investment minimum is $1
million.
INVESTMENT OBJECTIVE
The objective of the Enterprise High-Yield Bond Portfolio is to seek maximum
current income, primarily from debt securities that are rated Ba or lower by
Moody's Investors Service, Inc., or BB or lower by Standard & Poor's.
INVESTMENT PHILOSOPHY
Caywood-Scholl's investment philosophy of seeking relative value and avoiding
risk is credit-research driven. The discipline of credit research facilitates
the informed use of a variety of lower-rated securities in aggressive fixed
income investing.
1997 PERFORMANCE REVIEW
The 1997 high-yield new issuance was a record $125.1 billion. For comparison,
1996 issuance was $73.4 billion. The estimated size of the high-yield market is
now $454 billion. Because spreads did not widen, 1997 was also a record year in
terms of new money committed to the high-yield market. Mutual fund inflows
reached a new high at $17.3 billion, coupon interest was estimated at $32
billion, and structured products contributed an estimated $5 billion to $8
billion. Accordingly, it appears that significant new funds were invested by
financial institutions, pension funds and foreign buyers. As a result, for the
majority of the year demand exceeded supply, causing spreads to tighten in
virtually all sectors.
Given the strong economic conditions that prevailed through 1997 and the
substantial amounts of liquidity in the U.S. financial system, it is not
surprising that defaults among high-yield issuers remained below their historic
averages.
However, 1997 also saw the decoupling of the U.S. Treasury and stock markets,
creating greater uncertainty in the high-yield market place. The decoupling is
the result of the economic crisis in Asia, with both markets forecasting slower
economic conditions. The magnitude of the impact and its duration are of great
importance to the high-yield market.
54 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 175
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE HIGH-YIELD BOND
PORTFOLIO-A ONE YEAR FIVE YEAR TEN YEAR
<S> <C> <C> <C>
Average Annual With Load 7.84% 10.66% 9.75%
Average Annual Without Load 13.18% 11.74% 10.28%
Lehman BB Index* 12.64% 11.52% 11.49%
Lipper High-Yield Bond Fund Index** 12.91% 11.50% 10.88%
Lipper High-Yield
Enterprise High-Yield Bond
Portfolio-A Lehman BB Index Bond Fund Index
12/31/87 $9,523.81 $10,000.00 $10,000.00
1988 $10,676.19 $11,377.00 $11,357.00
1989 $10,601.46 $12,265.54 $11,042.41
1990 $9,382.29 $12,274.13 $9,814.49
1991 $12,478.45 $15,346.34 $13,761.88
1992 $14,562.35 $17,198.65 $16,288.57
1993 $17,125.32 $19,928.07 $19,520.22
1994 $17,133.20 $19,850.35 $18,801.87
1995 $19,874.51 $24,185.67 $22,069.64
1996 $22,414.47 $26,343.03 $24,863.88
1997 $25,368.70 $29,672.79 $28,073.80
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE HIGH-YIELD BOND
PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C> <C>
Annualized Return With CDSC 8.59% 11.12%
Annualized Return Without CDSC 12.59% 12.36%
Lehman BB Index* 12.64% 11.77%
Lipper High-Yield Bond Fund Index** 12.91% 13.08%
*From 5/1/95-12/31/97
Enterprise High-Yield Bond
Portfolio-B Lehman BB Index Lipper High-Yield Bond Fund Index
5/1/95 $10,000.00 $10,000.00 $10,000.00
1995 $10,812.00 $10,971.00 $10,917.37
1996 $12,126.74 $11,949.61 $12,299.62
1997 $13,253.37 $13,460.04 $13,887.50
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE HIGH-YIELD BOND
PORTFOLIO-C INCEPTION*
<S> <C> <C> <C>
Cumulative Return With CDSC 9.87%
Cumulative Return Without CDSC 10.87%
Lehman BB Index* 10.16%
Lipper High-Yield Bond Fund Index** 11.52%
*From 5/1/97-12/31/97
Enterprise High-Yield Bond
Portfolio-C Lehman BB Index Lipper High-Yield Bond Fund Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $10,987.40 $11,016.00 $11,151.68
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 55
<PAGE> 176
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
INCEPTION*
<S> <C> <C> <C>
Enterprise High-Yield Bond
Portfolio-Y 4.38%
Lehman BB Index* 3.10%
Lipper High-Yield Bond Fund Index** 4.11%
*From 7/31/97-12/31/97
Enterprise High-Yield Bond
Portfolio-Y Lehman BB Index Lipper High-Yield Bond Fund Index
7/31/97 $10,000.00 $10,000.00 $10,000.00
1997 $10,438.40 $10,310.00 $10,411.07
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The Lehman BB Index is an unmanaged index which excludes transaction and
holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
FUTURE INVESTMENT STRATEGY
The consensus is the Federal Reserve is on hold or may possibly consider an ease
in interest rates. Therefore the interest rate picture is at worst benign or
possibly constructive for the fixed income market. Key determinants for the
market in 1998 may be the extent the domestic economy slows in reaction to the
developments in Asia and the continuation of strong corporate cash flow. A
significant slowdown in economic activity may likely result in a decline in
equity prices. How sharp the decline is and its impact on the stock market will
be important. A relatively stable stock market, combined with 2.0 percent Gross
Domestic Product growth may lead to a stable high-yield market. As long as
default rates remain below or near their historic average the technical picture
should remain sound.
To date the impact of the Asia crisis upon the high-yield market has been
minimal. The technical balance of the market is favorable and may be expected to
remain so for the short term, so long as the stock market does not drop
substantially from its present levels. If the U.S. stock market begins to
discount significantly slower economic conditions, this may likely result in
wider spreads in the high-yield market. As always, Caywood-Scholl will emphasize
selectivity in the investment process, looking for those securities that offer
the most attractive risk-adjusted returns.
Like all investments in high-yield bond funds, an investment in the Enterprise
High-Yield Bond Portfolio carries an increased risk that issuers of securities
in which the High-Yield Bond Portfolio invests may default in the payment of
principal and interest as compared to the risk of such defaults in other income
portfolios. In addition, an investment in the High-Yield Bond Portfolio may be
subject to certain other risks relating to the market price, relative liquidity
in the secondary market and sensitivity to interest rate and economic changes on
the noninvestment grade securities in which the High-Yield Bond Portfolio
invests that are higher than may be associated with higher-rated, investment
grade securities.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
56 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 177
HIGH-YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
CORPORATE BONDS, CONVERTIBLE SECURITIES & COMMON & OR PRINCIPAL
PREFERRED STOCKS -- 82.16% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
ADVERTISING -- 0.76%
- ------------------------------------------------------------------------------
Universal Outdoor Inc. 9.75%,
due 10/15/06...................................... $ 600,000 $ 674,125
APPAREL & TEXTILES -- 0.45%
- ------------------------------------------------------------------------------
Brazos Sportswear Inc. 10.50%,
due 07/01/07...................................... 400,000 399,000
AUTOMOTIVE -- 0.83%
- ------------------------------------------------------------------------------
United Auto Group Inc. 11.00%,
due 07/15/07...................................... 750,000 733,125
BANKING -- 2.46%
- ------------------------------------------------------------------------------
Bay View Capital Corporation Delaware 9.125%, due
08/15/07.......................................... 650,000 667,875
DVI Inc. 9.875%, due 02/01/04..................... 550,000 572,000
Imperial Credit Industries Inc.
9.875%, due 01/15/07.............................. 700,000 687,750
Southern Pacific Funding Corporation 11.50%, due
11/01/04.......................................... 250,000 248,750
-----------
2,176,375
BROADCASTING -- 7.02%
- ------------------------------------------------------------------------------
Chancellor Radio Broadcasting
8.125%, due 12/15/07.............................. 1,000,000 980,000
Echostar Communications Corporation Zero Coupon,
due 06/01/04...................................... 1,000,000 913,750
Fox Kids Worldwide Inc. Zero Coupon, due
11/01/07.......................................... 750,000 445,312
Fox Kids Worldwide Inc. 9.25%, due 11/01/07....... 600,000 580,500
Fox/Liberty Networks Llc/Fln 8.875%, due
08/15/07.......................................... 900,000 897,750
Fox/Liberty Networks Llc/Fln
Zero Coupon, due 08/15/07......................... 250,000 160,313
Rogers Communications Inc.
8.875%, due 07/15/07.............................. 500,000 500,000
Rogers Communications Inc.
9.125%, due 01/15/06.............................. 150,000 152,250
Sinclair Broadcast Group Inc.
8.75%, due 12/15/07............................... 750,000 755,625
TCI Satellite Entertainment Inc.
Zero Coupon, due 02/15/07......................... 1,250,000 835,937
-----------
6,221,437
BUILDING & CONSTRUCTION -- 1.20%
- ------------------------------------------------------------------------------
Building Materials Corporation America 8.00%, due
10/15/07.......................................... 450,000 451,125
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Nortek Inc. 9.125%,
due 09/01/07...................................... $ 600,000 $ 613,500
-----------
1,064,625
CABLE -- 4.13%
- ------------------------------------------------------------------------------
Adelphia Communications Corporation 9.25%, due
10/01/02.......................................... 250,000 255,000
Adelphia Communications Corporation 10.50%, due
07/15/04.......................................... 650,000 700,375
Cablevision Systems Corporation
7.875%, due 12/15/07.............................. 500,000 510,495
Century Communications Corporation 9.50%, due
03/01/05.......................................... 200,000 210,500
Century Communication
Corporation 9.75%, due 02/15/02................... 350,000 369,250
TCI Communications Inc. 6.875%, due 02/15/06...... 1,600,000 1,609,168
-----------
3,654,788
CHEMICALS -- 2.31%
- ------------------------------------------------------------------------------
General Chemical Corporation
9.25%, due 08/15/03............................... 550,000 570,625
Huntsman Polymers Corporation
11.75%, due 12/01/04.............................. 250,000 280,313
PCI Chemical Canada Inc. 9.25%, due 10/15/07...... 500,000 499,375
Pioneer Americas Acquisition Corporation 9.25%,
due 06/15/07...................................... 700,000 700,000
-----------
2,050,313
COMMUNICATIONS -- 4.73%
- ------------------------------------------------------------------------------
Globalstar L P 10.75%, due 11/01/04............... 500,000 488,750
Globalstar L P 11.375%,
due 02/15/04...................................... 700,000 705,250
Globalstar L P/Globalstar Capital
11.25%, due 06/15/04.............................. $ 100,000 100,750
Globalstar Telecommunications (Wts) (a) Wts
Expires 2/15/04................................... 700 79,800
Iridium Capital Corporation
13.00%, due 07/15/05.............................. $ 900,000 946,125
Iridium Capital Corporation
14.00%, due 07/15/05.............................. $ 800,000 876,000
Iridium World Communications (Wts) (a)............ 550 77,000
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 57
<PAGE> 178
HIGH-YIELD BOND PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Orion Network Systems Inc.
Zero Coupon, due 01/15/07......................... $ 850,000 $ 660,875
Orion Network Systems Inc.
Zero Coupon, due 01/15/07......................... 350,000 259,437
-----------
4,193,987
CONSUMER PRODUCTS -- 3.00%
- ------------------------------------------------------------------------------
CLN Holdings Inc. Zero
Coupon, due 05/15/01.............................. 550,000 365,750
E & S Holdings Corporation
10.375%, due 10/01/06............................. 400,000 370,000
French Fragrances Inc.
10.375%, due 05/15/07............................. 450,000 473,625
Mediq Inc. 7.50%, due 07/15/03.................... 940,000 962,325
Sealy Mattress Company
Zero Coupon, due 12/15/07......................... 800,000 485,000
-----------
2,656,700
CONTAINERS/PACKAGING -- 5.73%
- ------------------------------------------------------------------------------
Buckeye Cellulose Corporation
8.50%, due 12/15/05............................... 200,000 205,500
Huntsman Packaging Corporation
9.125%, due 10/01/07.............................. 200,000 206,000
Owens Illinois Inc. 8.10%,
due 05/15/07...................................... 1,850,000 1,980,536
Plastic Containers Inc. 10.00%,
due 12/15/06...................................... 300,000 315,750
Printpack Inc. 9.875%,
due 08/15/04...................................... 500,000 531,250
Printpack Inc.
10.625%, due 08/15/06............................. 400,000 425,000
Stone Container Corporation
10.75%, due 10/01/02.............................. 550,000 567,875
United States Can Corporation
10.125%, due 10/15/06............................. 800,000 844,000
-----------
5,075,911
CRUDE & PETROLEUM -- 0.28%
- ------------------------------------------------------------------------------
Clark Refining & Marketing Inc.
8.875%, due 11/15/07.............................. 250,000 251,875
ENERGY -- 1.93%
- ------------------------------------------------------------------------------
Canadian First Oil Ltd.
8.75%, due 09/15/07............................... 300,000 303,375
Chesapeake Energy Corporation
9.125%, due 04/15/06.............................. 200,000 206,000
Clark USA Inc. 10.875%,
due 12/01/05...................................... 1,100,000 1,197,625
-----------
1,707,000
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
ENTERTAINMENT & LEISURE -- 2.01%
- ------------------------------------------------------------------------------
AMF Group Inc. 10.875%,
due 03/15/06...................................... $1,000,000 $ 1,096,250
Cobblestone Golf Group Inc.
11.50%, due 06/01/03.............................. 400,000 435,000
Livent Inc. 9.375%, due 10/15/04.................. 250,000 250,000
-----------
1,781,250
FINANCE -- 0.93%
- ------------------------------------------------------------------------------
Western Financial Savings
Bank Orange California
8.875%, due 08/01/07.............................. 500,000 482,500
Western Financial Savings Bank Orange California
8.50%,
due 07/01/03...................................... 350,000 341,688
-----------
824,188
FOOD & BEVERAGES & TOBACCO -- 6.05%
- ------------------------------------------------------------------------------
Jitney Jungle Stores America Inc.
10.375%, due 09/15/07............................. 850,000 879,750
NBTY Inc. 8.625%, due 09/15/07.................... 1,000,000 1,000,000
North Atlantic Trading Inc.
11.00%, due 06/15/04.............................. 500,000 523,750
Ralphs Grocery Company
10.45%, due 06/15/04.............................. 300,000 337,500
Ralphs Grocery Company
11.00%, due 06/15/05.............................. 750,000 855,000
Randalls Food Markets Inc.
9.375%, due 07/01/07.............................. 1,000,000 1,030,000
Shoppers Food Warehouse Corporation 9.75%, due
06/15/04.......................................... 300,000 306,750
Twin Laboratories Inc. 10.25%,
due 05/15/06...................................... 400,000 430,000
-----------
5,362,750
GAMING -- 1.11%
- ------------------------------------------------------------------------------
Trump Atlantic City Associates
11.25%, due 05/01/06.............................. 1,000,000 980,000
HEALTH CARE -- 4.74%
- ------------------------------------------------------------------------------
Amerisource Distribution Corporation Class C...... 209 0
</TABLE>
58 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 179
HIGH-YIELD BOND PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Dade International Inc. 11.125%,
due 05/01/06...................................... $ 450,000 $ 500,625
Fresenius Med Care Capital Trust Preferred Secs... 250 262,500
Kinetic Concepts Inc. 9.625%,
due 11/01/07...................................... 350,000 355,250
Mariner Health Group Inc.
9.50%, due 04/01/06............................... 650,000 676,000
Maxxim Medical Inc. 10.50%,
due 08/01/06...................................... 1,000,000 1,082,500
Quest Diagnostics Inc. 10.75%,
due 12/15/06...................................... 750,000 821,250
Vencor Inc. 8.625%, due 07/15/07.................. 500,000 500,000
-----------
4,198,125
HOTELS & RESTAURANTS -- 3.17%
- ------------------------------------------------------------------------------
AFC Enterprises Inc. 10.25%,
due 05/15/07...................................... 550,000 580,250
Apple South Inc. 9.75%,
due 06/01/06...................................... 350,000 371,000
Foodmaker Corporation 9.75%,
due 11/01/03...................................... 350,000 353,500
Foodmaker Inc. (Wts) (a).......................... 250 4,750
Hammon John Q. Hotels
8.875%, due 02/15/04.............................. 300,000 306,375
HMH Properties Inc. 8.875%,
due 07/15/07...................................... 800,000 842,000
Perkins Family Restaurants L P
10.125%, due 12/15/07............................. 350,000 354,375
-----------
2,812,250
MACHINERY -- 1.55%
- ------------------------------------------------------------------------------
Axiohm Inc. 9.75%, due 10/01/07................... 500,000 507,500
Bucyrus International Inc. 9.75%,
due 09/15/07...................................... 350,000 353,500
Park Ohio Industries Inc.
9.25%, due 12/01/07............................... 500,000 511,875
-----------
1,372,875
MEDICAL INSTRUMENTS -- 0.29%
- ------------------------------------------------------------------------------
Physician Sales & Service Inc.
8.50%, due 10/01/07............................... 250,000 256,875
METALS & MINING -- 3.01%
- ------------------------------------------------------------------------------
Kaiser Aluminum & Chemical Corporation 10.875%,
due 10/15/06...................................... 500,000 543,750
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Oregon Steel Mills Inc. 11.00%,
due 06/15/03...................................... $ 650,000 $ 702,000
WCI Steel Inc. 10.00%, due 12/01/04............... 1,000,000 1,025,000
Wheeling Pittsburgh Corporation
9.25%, due 11/15/07............................... 400,000 392,000
-----------
2,662,750
OIL SERVICES -- 0.36%
- ------------------------------------------------------------------------------
Pride Petroleum Services Inc.
9.375%, due 05/01/07.............................. 300,000 322,500
PAPER & FOREST PRODUCTS -- 0.66%
- ------------------------------------------------------------------------------
Maxxam Group Inc. 11.25%,
due 08/01/03...................................... 550,000 583,000
PHARMACEUTICALS -- 0.91%
- ------------------------------------------------------------------------------
Pharmaceutical Fine Chemicals
9.75%, due 11/15/07............................... 800,000 810,000
PRINTING & PUBLISHING -- 1.60%
- ------------------------------------------------------------------------------
American Lawyer Media Inc.
9.75%, due 12/15/07............................... 250,000 253,750
Time Warner Inc. 7.75%,
due 06/15/05...................................... 750,000 795,000
Von Hoffmann Press Inc.
10.375%, due 05/15/07............................. 350,000 373,188
-----------
1,421,938
REAL ESTATE -- 0.57%
- ------------------------------------------------------------------------------
Crown Castle International Corporation Zero
Coupon, due 11/15/07.............................. 800,000 504,000
RETAIL -- 1.78%
- ------------------------------------------------------------------------------
Ann Taylor Inc. 8.75%, due 06/15/00............... 579,000 578,276
Cole National Group Inc.
8.625%, due 08/15/07.............................. 900,000 895,500
Michaels Stores Inc. 6.75%,
due 01/15/03...................................... 100,000 102,000
-----------
1,575,776
TELECOMMUNICATIONS -- 14.84%
- ------------------------------------------------------------------------------
American Communications Services Inc. (Wts) (a)... 800 75,200
American Communications Services Inc. Zero Coupon,
due 11/01/05...................................... 1,100,000 880,000
Call-Net Enterprises
Zero Coupon, due 08/15/07......................... 300,000 205,125
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 59
<PAGE> 180
HIGH-YIELD BOND PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
CCPR Services Inc. 10.00%,
due 02/01/07...................................... $1,000,000 $ 997,500
Comcast Cellular Holdings Inc.
9.50%, due 05/01/07............................... 1,300,000 1,358,500
ICG Holdings Inc. Zero Coupon, due 05/01/06....... 1,350,000 1,012,500
Intermedia Communications Inc.
Deposit Share 1/100 Junior Preferred Cnv E 144A... 7,500 197,813
Intermedia Communications Inc.
8.50%, due 01/15/08............................... 600,000 600,000
Intermedia Communications Inc.
8.875%, due 11/01/07.............................. 200,000 206,000
McLeod USA Inc. Zero Coupon, due 03/01/07......... 800,000 581,000
Metronet Communications Corp Zero Coupon, due
11/01/07.......................................... 500,000 305,625
Metronet Communications Corporation 12.00%, due
08/15/07.......................................... 150,000 173,250
Nextel Communications Inc.
Zero Coupon, due 09/15/07......................... 1,550,000 980,375
Nextel Communications Inc.
Zero Coupon, due 10/31/07......................... 500,000 304,375
Nextlink Communications Inc.
9.625%, due 10/01/07.............................. 250,000 256,875
Pagemart (Wts) (a)................................ 3,450 24,150
Pagemart Nationwide Inc........................... 1,750 17,500
RCN Corporation Zero Coupon, due 10/15/07......... 850,000 534,437
RCN Corporation 10.00%,
due 10/15/07...................................... 250,000 257,500
Rogers Cantel Inc. 8.80%, due 10/01/07............ 1,050,000 1,047,375
Sprint Spectrum L P Zero Coupon, due 08/15/06..... 1,250,000 978,125
Sprint Spectrum L P 11.00%,
due 08/15/06...................................... 650,000 729,625
Teleport Communications Group
Zero Coupon, due 07/01/07......................... 1,200,000 984,000
Winstar Equipment Corporation
12.50%, due 03/15/04.............................. 400,000 445,000
-----------
13,151,850
TEXTILES -- 1.63%
- ------------------------------------------------------------------------------
Polymer Group Inc. 9.00%,
due 07/01/07...................................... 550,000 548,625
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Carter William Company Acquired 10.375%, due
12/01/06.......................................... $ 850,000 $ 896,750
-----------
1,445,375
TRANSPORTATION -- 0.32%
- ------------------------------------------------------------------------------
Atlas Air Inc. 12.25%,
due 12/01/02...................................... 250,000 279,688
UTILITIES -- 1.42%
- ------------------------------------------------------------------------------
Calenergy Inc. 7.63%,
due 10/15/07...................................... 250,000 251,227
Ferrellgas Partners L P 9.375%,
due 06/15/06...................................... 550,000 581,625
Midland Cogeneration Venture L P
10.33%, due 07/23/02.............................. 188,369 202,496
Midland Funding Corporation
10.33%, due 07/23/02.............................. 202,832 218,045
-----------
1,253,393
WASTE MANAGEMENT -- 0.37%
- ------------------------------------------------------------------------------
Allied Waste N A Inc. 10.25%,
due 12/01/06...................................... 300,000 328,125
TOTAL CORPORATE BONDS, CONVERTIBLE SECURITIES & COMMON STOCKS
(IDENTIFIED COST $70,425,062)................................... 72,785,969
- ------------------------------------------------------------------------------
FOREIGN BONDS -- 10.29%
- ------------------------------------------------------------------------------
APPAREL & TEXTILES -- 0.29%
- ------------------------------------------------------------------------------
Reliance Industries Ltd. 8.25%,
due 01/15/27...................................... 250,000 260,505
BASIC INDUSTRIES -- 1.22%
- ------------------------------------------------------------------------------
Cemex S A 12.75%, due 07/15/06.................... 900,000 1,080,000
BROADCASTING -- 1.40%
- ------------------------------------------------------------------------------
Grupo Televisa S A De C V 11.375%, due 05/15/03... 700,000 764,750
Grupo Televisa S A De C V
11.875%, due 05/15/06............................. 150,000 170,062
TV Azteca S A De C V 10.125%,
due 02/15/04...................................... 300,000 309,750
-----------
1,244,562
CABLE -- 0.70%
- ------------------------------------------------------------------------------
Kabelmedia Holding Zero Coupon, due 08/01/06...... 850,000 623,688
CONTAINERS/PACKAGING -- 0.74%
- ------------------------------------------------------------------------------
</TABLE>
60 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 181
HIGH-YIELD BOND PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Viacap Sa De C V 11.375%, due 05/15/07............ $ 600,000 $ 652,500
ENERGY -- 0.73%
- ------------------------------------------------------------------------------
Petroleos Mexicanos 8.85%, due 09/15/07........... 250,000 247,670
Petroleos Mexicanos 9.00%, due 06/01/07........... 400,000 399,740
-----------
647,410
GOVERNMENT BOND -- 3.05%
- ------------------------------------------------------------------------------
Argentina Global 11.00%, due 10/09/06............. 350,000 374,500
Argentina Rep 11.00%, due 10/09/06................ 550,000 591,250
Mexico United Mexico States 9.875%, due
01/15/07.......................................... 950,000 990,750
Russian Federation 10.00%, due 06/26/07........... 300,000 274,500
St. Petersburg Russia 9.50%, due 06/18/02......... 300,000 267,750
Turkiye Cumhuriyeti 10.00%, due 09/19/07.......... 200,000 203,740
-----------
2,702,490
PAPER & FOREST PRODUCTS -- 0.86%
- ------------------------------------------------------------------------------
Indah Kiat Finance Mautitius Limited 10.00%, due
07/01/07.......................................... 450,000 373,500
Pindo Deli Finance Mauritius Ltd. 10.75%, due
10/01/07.......................................... 450,000 385,875
-----------
759,375
TELECOMMUNICATIONS -- 0.44%
- ------------------------------------------------------------------------------
Hermes Europe Railtel B V 11.50%, due 08/15/07.... 350,000 387,625
TRANSPORTATION -- 0.86%
- ------------------------------------------------------------------------------
TFM S A Ce C V 10.25%,
due 06/15/07...................................... 250,000 256,875
Transportacion Maritima Mexica 10.00%, due
11/15/06.......................................... 500,000 502,500
-----------
759,375
TOTAL FOREIGN BONDS
(IDENTIFIED COST $8,839,163).................................... 9,117,530
- ------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
U.S. TREASURY BONDS -- 2.38%
- ------------------------------------------------------------------------------
U.S.Treasury Bonds 6.375%,
due 08/15/27...................................... $2,000,000 $ 2,110,480
TOTAL U.S. TREASURY BONDS
(IDENTIFIED COST $2,056,314).................................... 2,110,480
- ------------------------------------------------------------------------------
U.S. TREASURY NOTES -- 1.16%
- ------------------------------------------------------------------------------
U.S. Treasury Note 6.125%, due 08/15/07........... 1,000,000 1,027,440
TOTAL U.S. TREASURY NOTES
(IDENTIFIED COST $1,014,147).................................... 1,027,440
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 2.85%
- ------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement
4.00%, due 01/02/98 Collateral: U.S. Treasury Note
$2,570,000 5.625% due 11/30/99 Value $2,576,425... 2,525,000 2,525,000
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $2,525,000).................................... 2,525,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $84,924,620)................................... $87,566,419
OTHER ASSETS LESS LIABILITIES -- 1.16%.......................... 1,025,510
-----------
NET ASSETS 100%................................................. $88,591,929
- ------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 61
<PAGE> 182
THE ENTERPRISE TAX-EXEMPT INCOME PORTFOLIO
MBIA CAPITAL MANAGEMENT CORP.
Armonk, New York
INVESTMENT MANAGEMENT
Morgan Stanley Asset Management, Inc., was the investment adviser to the
Enterprise Tax Exempt Income Portfolio from January 1, 1992, through December
31, 1997. MBIA Capital Management Corp. became manager of the Enterprise
Tax-Exempt Income Portfolio on January 1, 1998. MBIA Capital Management Corp.
manages approximately $11 billion for institutional clients, and its normal
investment minimum is $10 million.
INVESTMENT OBJECTIVE
The investment objective of the Enterprise Tax-Exempt Income Portfolio is to
seek a high level of current income exempt from federal income tax, with
consideration given to preservation of principal, primarily from investment in a
diversified portfolio of long-term investment-grade municipal bonds.
INVESTMENT PHILOSOPHY
MBIA Capital Management uses a value-driven, bottom-up investment selection
process. Recognition that interest rate movement is uncertain and that yield is
a dominant source of return drives its decisions. The key to performance is to
buy yield at the right price, in the right sector and in the right part of the
yield curve.
1997 PERFORMANCE REVIEW (MORGAN STANLEY ASSET MANAGEMENT, INC.)
The municipal bond market produced solid returns for the year. Benefiting from
the turmoil in the broader global marketplace, municipals, while lagging
treasuries, finished the year with three straight quarters in which yields
declined. While the major inflationary measures had already been remarkably
well-behaved, the Asian crisis further reduced inflation expectations, causing
long rates to fall. In addition, the rapid decline in the U.S. budget deficit
has reduced the outlook for the future issuance of treasury securities, further
supporting the treasury rally that spilled over into the municipal bond market.
The low interest rate levels in 1997 led to an increase in both new money and
refunding issuance in the municipal bond market. The growing demand for public
works along with lower absolute interest rates and improving state and local
finances together combined to fuel the increase. Bonds issued for educational
purposes led the stampede of issuance, followed by health care and
transportation sectors. The demand side of the equation was led by the healthy
appetite of insurance companies spurred on by attractive municipal/treasury
ratios and individual investors who became enamored with bonds as they were not
so subtly reminded that equity markets can decline.
62 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 183
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-A ONE YEAR FIVE YEAR
<S> <C> <C>
Average Annual With Load 1.88% 4.82%
Average Annual Without Load 6.96% 5.85%
Lehman Municipal Bond Index* 9.20% 7.37%
Lipper General Municipal Debt Index** 9.03% 6.90%
Enterprise Tax-Exempt Income
Portfolio-A Lehman Municipal Bond Index
12/31/87 $9,527.19 $10,000.00
1988 $10,565.65 $11,015.00
1989 $11,482.75 $12,202.42
1990 $12,138.42 $13,091.97
1991 $13,489.42 $14,682.65
1992 $14,552.39 $15,977.66
1993 $16,118.23 $17,939.71
1994 $15,200.46 $17,017.61
1995 $17,457.72 $19,988.89
1996 $18,075.73 $20,876.39
1997 $19,333.80 $22,797.02
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-A TEN YEAR
<S> <C>
Average Annual With Load 6.81%
Average Annual Without Load 7.33%
Lehman Municipal Bond Index* 8.59%
Lipper General Municipal Debt Index** 8.29%
Lipper General Municipal Debt Index
12/31/87 $10,000.00
1988 $11,166.00
1989 $12,278.13
1990 $13,014.82
1991 $14,581.81
1992 $15,879.59
1993 $17,853.42
1994 $16,775.07
1995 $19,678.84
1996 $20,327.65
1997 $22,163.24
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C>
Annualized Return With CDSC 2.36% 4.81%
Annualized Return Without CDSC 6.36% 6.18%
Lehman Municipal Bond Index* 9.20% 8.70%
Lipper General Municipal Debt Index** 9.03% 8.18%
*From 5/1/95-12/31/97
Enterprise Tax-Exempt Income
Portfolio-B Lehman Municipal Bond Index
5/1/95 $10,000.00 $10,000.00
1995 $10,718.20 $10,957.45
1996 $11,035.46 $11,443.96
1997 $11,337.31 $12,496.80
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-B
<S> <C>
Annualized Return With CDSC
Annualized Return Without CDSC
Lehman Municipal Bond Index*
Lipper General Municipal Debt Index**
*From 5/1/95-12/31/97
Lipper General Municipal Debt Index
5/1/95 $10,000.00
1995 $10,954.14
1996 $11,315.31
1997 $12,337.08
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-C INCEPTION*
<S> <C> <C>
Cumulative Return With CDSC 5.14%
Cumulative Return Without CDSC 6.14%
Lehman Municipal Bond Index* 8.55%
Lipper General Municipal Debt Index** 8.60%
*From 5/1/97-12/31/97
Enterprise Tax-Exempt Income
Portfolio-C Lehman Municipal Bond Index
5/1/97 $10,000.00 $10,000.00
1997 $10,513.60 $10,855.00
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE TAX-EXEMPT INCOME
PORTFOLIO-C
<S> <C>
Cumulative Return With CDSC
Cumulative Return Without CDSC
Lehman Municipal Bond Index*
Lipper General Municipal Debt Index**
*From 5/1/97-12/31/97
Lipper General Municipal Debt Index
5/1/97 $10,000.00
1997 $10,860.40
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The Lehman Municipal Bond Index is an unmanaged index which excludes
transaction and holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
THE ENTERPRISE GROUP OF FUNDS, INC. 63
<PAGE> 184
FUTURE INVESTMENT STRATEGY (MBIA)
The Asian financial crisis continues to be the focus of domestic equity and
fixed income markets and is likely to remain so until economic reform measures
are instituted. The U.S. bond market has rallied as investors wary of equity and
emerging market debt look to bonds as a safe haven. The flight to quality may
especially benefit treasuries and municipal bonds. MBIA, therefore, expects
investors to increase their exposure to both treasuries and municipal bonds at
the expense of equities.
Municipal bonds are extremely attractive relative to treasuries on a historical
basis. Yield ratios are approaching 90 percent, levels the market has not
experienced since the flat tax scare of 1996 and which cannot be sustained,
given current tax rates. Credit spreads on municipals remain tight and have been
relatively unaffected by Asia. MBIA sees this as an opportunity to upgrade
portfolios at little sacrifice in potential yield. MBIA continues to emphasize
better-structured bonds as a way to reduce reinvestment risk and to realize the
greatest return from the bond market rally.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
64 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 185
TAX-EXEMPT INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
MUNICIPAL BONDS -- 96.42% AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
ALABAMA -- 1.01%
- ----------------------------------------------------------------------------------
Alabama Housing Finance Authority Single
Family Mortgage Revenue Home Mortgage Series
A-1 6.55% due 10/01/14........................ $ 250,000 $ 270,758
ARIZONA -- 3.60%
- ----------------------------------------------------------------------------------
Salt River Project, Arizona Agriculture Import
and Power District Electric System Revenue
5.00% due 01/01/30............................ 1,000,000 964,700
CALIFORNIA -- 1.03%
- ----------------------------------------------------------------------------------
California State General Obligation Bonds
6.10% due 09/01/04............................ 150,000 165,645
Los Angeles County, California Sales Tax
Series A Revenue 6.75% due 07/01/18
Prerefunded 07/01/01 at 102................... 100,000 110,434
-------------
276,079
DELAWARE -- 0.41%
- ----------------------------------------------------------------------------------
Delaware Transportation Authority Systems
Revenue 6.50% due 07/01/11 Prerefunded
07/01/01 at 102............................... 100,000 109,458
FLORIDA -- 8.82%
- ----------------------------------------------------------------------------------
Broward County, Broward Recovery Revenue 7.95%
due 12/01/08.................................. 310,000 337,460
Florida State Board Education Capital Outlay
Series C 5.50% due 06/01/23................... 1,500,000 1,529,640
Florida State Board Education Capital Outlay
Series A 7.25% due 06/01/23................... 170,000 184,759
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
Orlando Florida Utilities Commission Water and
Electric Revenue Refunding Sub Series D 6.75%
due 10/01/17.................................. $ 250,000 $ 307,380
-------------
2,359,239
GEORGIA -- 2.01%
- ----------------------------------------------------------------------------------
Atlanta Downtown Development Authority
Underground Atlanta Project 6.25% due
10/01/12...................................... 500,000 538,145
IDAHO -- 1.35%
- ----------------------------------------------------------------------------------
Idaho Housing Agency Single Family Mortgage
Revenue Series F-2 (AMT) 7.80% due 01/01/23... 340,000 360,777
LOUISIANA -- 1.23%
- ----------------------------------------------------------------------------------
Louisiana State Offshore Term Authority
Deepwater Port Revenue Series E 7.60% due
09/01/10...................................... 300,000 328,317
MARYLAND -- 3.98%
- ----------------------------------------------------------------------------------
Maryland State General Obligation Bonds 5.50%
due 02/01/07.................................. 1,000,000 1,064,470
MASSACHUSETTS -- 2.96%
- ----------------------------------------------------------------------------------
Massachusetts State Housing Finance Agency
Revenue Residential FNMA Collateral-A 6.90%
due 11/15/24.................................. 750,000 792,300
MICHIGAN -- 4.07%
- ----------------------------------------------------------------------------------
Michigan State Building Authority Revenue
Series I 6.40% due 10/01/04................... 1,000,000 1,089,110
MISSOURI -- 0.46%
- ----------------------------------------------------------------------------------
Missouri State Housing Development Community
Mortgage Single Family GNMA Revenue Series B
(AMT) 8.25% due 05/01/19...................... 120,000 123,986
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 65
<PAGE> 186
TAX-EXEMPT INCOME PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
NEBRASKA -- 3.88%
- ----------------------------------------------------------------------------------
Omaha Public Power District Nebraska Electric
Revenue 5.60% due 02/01/12.................... $ 1,000,000 $ 1,038,290
NEVADA -- 7.50%
- ----------------------------------------------------------------------------------
Clark County School District Series A MBIA
7.00% due 06/01/11............................ 750,000 919,957
Nevada State General Obligation Bonds 6.25%
due 07/01/12 Prefunded 07/01/02 at 101........ 1,000,000 1,087,040
-------------
2,006,997
NEW MEXICO -- 1.54%
- ----------------------------------------------------------------------------------
New Mexico Mortgage Finance Authority Single
Family Mortgage 7.80% due 09/01/17............ 395,000 413,253
NEW YORK -- 11.61%
- ----------------------------------------------------------------------------------
New York State Local Government Assistance
7.00% due 04/01/21 Prerefunded 04/01/01 at
102........................................... 200,000 221,222
New York State Mortgage Agency Revenue 7.95%
due 10/01/14.................................. 200,000 205,090
New York State Power Authority Revenue &
General Purpose Series CC 5.00% due
01/01/09...................................... 1,200,000 1,217,568
Triborough Bridge & Tunnel Authority, New York
General Purpose Series A 6.00% due 01/01/10... 1,300,000 1,462,058
-------------
3,105,938
OHIO -- 0.23%
- ----------------------------------------------------------------------------------
Ohio Housing Finance Agency Single Family
Mortgage Revenue GNMA (AMT) 8.25% due
12/15/19...................................... 60,000 62,573
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
OKLAHOMA -- 6.01%
- ----------------------------------------------------------------------------------
Tulsa, Oklahoma General Obligation Bonds 6.30%
due 06/01/17.................................. $ 1,500,000 $ 1,607,520
OREGON -- 1.57%
- ----------------------------------------------------------------------------------
Oregon State General Obligation Bonds 7.00%
due 12/01/11.................................. 400,000 419,588
PENNSYLVANIA -- 3.08%
- ----------------------------------------------------------------------------------
Philadelphia Pennsylvania Hospitals & Higher
Education Facilities Hospital Revenue 6.50%
due 02/15/09 Prerefunded 02/15/02 at 102...... 750,000 825,578
SOUTH CAROLINA -- 0.19%
- ----------------------------------------------------------------------------------
Charleston County South Carolina Resource
Recovery Revenue (AMT) 9.25% due 01/01/10..... 50,000 51,500
TEXAS -- 8.34%
- ----------------------------------------------------------------------------------
Brazos River Authority Texas Revenue 8.25% due
05/01/15...................................... 150,000 154,940
Houston Texas General Obligation Bonds 6.00%
due 03/01/05.................................. 500,000 532,135
San Antonio, Revenue Refunding General
Obligation Bonds 5.75% due 08/01/13........... 975,000 1,007,721
Texas Housing Agency Residential Development
Revenue Series A GNMA Collateral 7.60% due
07/01/16...................................... 95,000 98,787
Texas State Department Housing Community
Affairs Home Mortgage Revenue GNMA Collateral
Series A 6.95% due 07/01/23................... 410,000 438,228
-------------
2,231,811
</TABLE>
66 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 187
TAX-EXEMPT INCOME PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
UTAH -- 0.25%
- ----------------------------------------------------------------------------------
Utah State Housing Finance Agency Single
Family Mortgage Series E (AMT) 9.00% due
01/01/19...................................... $ 60,000 $ 65,772
VIRGINIA -- 11.65%
- ----------------------------------------------------------------------------------
Fairfax County, Virginia General Obligation
Bonds 5.40% due 05/01/11...................... 1,000,000 1,039,110
Fairfax County, Virginia Water Authority
Revenue 5.75% due 04/01/29.................... 1,000,000 1,020,090
Virginia State Transportation Board Revenue
6.00% due 04/01/10............................ 1,000,000 1,058,150
-------------
3,117,350
WASHINGTON -- 7.95%
- ----------------------------------------------------------------------------------
Tacoma, Washington Electric Systems Revenue
AMBAC 6.15% due 01/01/08...................... 1,000,000 1,072,160
Washington State General Obligation Series 93A
5.75% due 10/01/17............................ 1,000,000 1,055,740
-------------
2,127,900
WISCONSIN -- 1.69%
- ----------------------------------------------------------------------------------
Wisconsin Housing & Economic Development
Authority Home Ownership Revenue Series A
7.75% due 09/01/17............................ 430,000 452,579
TOTAL MUNICIPAL BONDS
(IDENTIFIED COST $24,044,194)..................................... 25,803,988
- ----------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ----------------------------------------------------------------------------------
SHORT-TERM TAX-EXEMPT INVESTMENTS -- 2.62%
- ----------------------------------------------------------------------------------
CALIFORNIA -- 0.38%
- ----------------------------------------------------------------------------------
California Pollution Control Financing (v)
Adjustment Adjusted Tend Southern California
Edison D 3.45% due 02/28/08................... $ 100,000 $ 100,000
NEW YORK -- 2.24%
- ----------------------------------------------------------------------------------
New York City Municipal Water Finance
Authority (v) Systems Revenue Series C 3.75%
due 06/15/22.................................. 400,000 400,000
New York New York (v) Series A9 3.75% due
08/01/17...................................... 200,000 200,000
-------------
600,000
TOTAL SHORT-TERM TAX-EXEMPT INVESTMENTS
(IDENTIFIED COST $700,000)........................................ 700,000
- ----------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $24,744,194)..................................... $ 26,503,988
OTHER ASSETS LESS LIABILITIES -- 0.96%............................ 258,220
-------------
NET ASSETS -- 100%................................................ $ 26,762,208
- ----------------------------------------------------------------------------------
</TABLE>
AMT Securities subject to Alternative Minimum Tax
(v) Variable interest rate security; Interest rate is as of December 31, 1997,
and is adjusted daily. Maturity date shown is the next interest reset date.
See notes to financial statements
THE ENTERPRISE GROUP OF FUNDS, INC. 67
<PAGE> 188
THE ENTERPRISE MANAGED PORTFOLIO
OPCAP ADVISORS
New York, New York
INVESTMENT MANAGEMENT
OpCap Advisors, a wholly owned subsidiary of Oppenheimer Capital, became
investment adviser to this new Enterprise fund on October 1, 1994. Oppenheimer
Capital manages approximately $61 billion for institutional clients, and its
normal investment minimum is $10 million.
INVESTMENT OBJECTIVE
The objective of the Enterprise Managed Portfolio is to seek growth of capital
over time through investment in a portfolio consisting of common stocks, bonds
and cash equivalents, the percentages of which will vary based on the manager's
assessment of relative investment values.
INVESTMENT PHILOSOPHY
OpCap's investment process seeks to take advantage of opportunities in all
market sectors by shifting the investment mix among stock, bonds and money
market instruments. The focus of the investment process is to identify quality
companies that are undervalued in the market. The average annual return on
equity of these companies is in excess of the average return on equity of the
companies in the S&P 500 Index, while the average price-to-earnings ratio of
these companies is significantly below the price-to-earnings ratio for those
companies. This combination of high returns on equity and low security
valuations helps preserve capital in down markets and provides opportunity for
investment profit over time.
1997 PERFORMANCE REVIEW
The recent volatility of the U.S. dollar and other currencies, coupled with the
Asian financial crisis, has caused some investors to be concerned about the
outlook for large U.S. multinational companies. As a result, some of these
companies' stocks fared worse in 1997 than those of more purely domestic
companies. Such companies owned by the portfolio include McDonald's Corp. and
Citicorp.
At the end of 1997, the portfolio's net assets were allocated 82 percent to
common stocks and 18 percent to cash and cash equivalents.
Some of the stocks owned by the portfolio delivered exceptional returns in 1997.
Many were in the financial services sector, which in general performed well.
They included, among others, Federal Home Loan Mortgage Corp. (Freddie Mac), a
home mortgage company, and ACE Ltd., a Bermuda based provider of excess
directors and officers liability insurance. Freddie Mac's stock was up 52
percent for the year, while ACE stock rose more than 60 percent.
A few other holdings were disappointing. The market price of McDonald's Corp.,
the fast-food chain, increased only about five percent in 1997 and the market
price of Boeing Co., the aircraft manufacturer, declined. Boeing's stock
suffered when it became apparent the company was experiencing production
problems. OpCap expects these problems to last through mid-1998, after which
cash flow should accelerate.
68 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 189
OpCap recently established a new position in the common stock of Time Warner,
Inc., and eliminated the portfolio's holdings in Freeport McMoRan Copper & Gold,
Hercules, Inc., Tele-Communications Inc., Union Pacific Corp. and Waste
Management, Inc.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE MANAGED PORTFOLIO-A ONE YEAR THREE YEAR INCEPTION*
<S> <C> <C> <C> <C> <C>
Average Annual With Load 15.26% 24.72% 21.96%
Average Annual Without Load 21.05% 26.72% 23.81%
S&P 500* 33.36% 31.13% 28.40%
Lipper Flexible Portfolio Fund
Index** 18.77% 18.74% 16.51%
*From 10/1/94-12/31/97
Lipper Flexible Portfolio Fund
Enterprise Managed Portfolio-A S&P 500 Index
10/1/94 $ 9,523.81 $ 10,000.00 $ 10,000.00
1995 $ 12,905.21 $ 13,753.25 $ 12,135.30
1996 $ 15,754.68 $ 16,904.12 $ 13,840.31
1997 $ 19,071.03 $ 22,543.33 $ 16,438.14
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE MANAGED PORTFOLIO-B ONE YEAR INCEPTION*
<S> <C> <C> <C>
Annualized Return With CDSC 16.45% 21.77%
Annualized Return Without CDSC 20.45% 22.84%
S&P 500* 33.36% 29.47%
Lipper Flexible Portfolio Fund
Index** 10.77% 17.88%
*From 5/1/95-12/31/97
Enterprise Managed Lipper Flexible Portfolio Fund
Portfolio-B S&P 500 Index
5/1/95 $10,000.00 $10,000.00 $10,000.00
1995 $11,383.20 $12,162.54 $11,455.00
1996 $14,382.90 $14,948.98 $13,064.43
1997 $16,924.21 $19,935.95 $15,516.62
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 69
<PAGE> 190
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ENTERPRISE MANAGED PORTFOLIO-C INCEPTION*
<S> <C> <C> <C>
Cumulative Return With CDSC 15.74%
Cumulative Return Without CDSC 16.74%
S&P 500* 22.56%
Lipper Flexible Portfolio Fund
Index** 23.10%
*From 5/1/97-12/31/97
Lipper Flexible Portfolio Fund
Enterprise Managed Portfolio-C S&P 500 Index
5/1/97 $10,000.00 $10,000.00 $10,000.00
1997 $13,573.70 $12,256.00 $12,310.00
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDING DECEMBER 31, 1997
ONE YEAR INCEPTION*
<S> <C> <C> <C>
Enterprise Managed Portfolio-Y 21.60% 21.61%
S&P 500* 33.36% 27.88%
Lipper Flexible Portfolio Fund
Index** 18.77% 16.12%
*From 7/31/95-12/31/97
Lipper Flexible Portfolio Fund
Enterprise Managed Portfolio-Y S&P 500 Index
7/31/95 $10,000.00 $10,000.00
1995 $10,770.77 $11,067.84
1996 $13,208.20 $13,603.48
1997 $16,061.17 $18,141.60
</TABLE>
Enterprise performance numbers include the maximum sales charge and all fees.
Remember that historic performance does not predict future performance. Shares
may be worth more or less at redemption than at original purchase.
* The S&P 500 index is an unmanaged index which includes 500 companies which
tend to be leaders in important industries within the U.S. economy and excludes
any transaction or holding charges.
** Lipper Analytical Services is an independent reporting service that measures
the performance of most mutual funds. The performance results reflect an
unmanaged index and are net of all expenses other than sales charges and
redemption fees.
70 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 191
FUTURE INVESTMENT STRATEGY
OpCap is a long-term investor in superior businesses that may increase the value
of shareholders' capital through all market conditions. The objectives of this
strategy are to preserve capital and generate excellent returns for the
portfolio's shareholders. While one cannot take lightly the impact of the
current economic difficulties in Asia, we believe each of the multinational
businesses owned by the portfolio may benefit substantially longer term even if
experiencing some short-term weakness. For instance, one of McDonald's biggest
challenges in Asia had been the very high cost of store locations in cities.
These locations are now "on sale" for roughly half the price in many locations.
OpCap believes a tight U.S. job market and the Asian crisis may approximately
offset each other in their impact on the U.S. economy. It is probable,
therefore, that inflation will not pick up markedly, nor will the U.S. slide
into a recession. Whether the stock market indexes will rise or fall in 1998 is
a matter of conjecture, however, there may be a high level of market volatility
until these issues sort themselves out. Volatility creates opportunities to buy
stocks at favorable prices.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 71
<PAGE> 192
MANAGED PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMON STOCKS -- 81.66% AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
AEROSPACE -- 6.84%
- ---------------------------------------------------------------------------------
Boeing Company.................................... 270,000 $ 13,213,125
Lockheed Martin Corporation....................... 100,000 9,850,000
Loral Space & Communications (a).................. 45,000 964,688
-------------
24,027,813
AUTOMOTIVE -- 1.59%
- ---------------------------------------------------------------------------------
LucasVarity PLC (ADR)............................. 160,000 5,580,000
BANKING -- 13.94%
- ---------------------------------------------------------------------------------
BankBoston Corporation............................ 105,000 9,863,437
Citicorp.......................................... 120,000 15,172,500
First Empire State Corporation.................... 15,000 6,975,000
Wells Fargo & Company............................. 50,000 16,971,875
-------------
48,982,812
CHEMICALS -- 8.24%
- ---------------------------------------------------------------------------------
Du Pont (E. I.) de Nemours & Company.............. 260,000 15,616,250
Monsanto Company.................................. 190,000 7,980,000
Solutia Inc....................................... 200,000 5,337,500
-------------
28,933,750
COMPUTER SOFTWARE -- 1.13%
- ---------------------------------------------------------------------------------
Computer Associates International Inc............. 75,000 3,965,625
CONSUMER NON-DURABLES -- 3.82%
- ---------------------------------------------------------------------------------
Mattel Inc........................................ 360,000 13,410,000
CONSUMER PRODUCTS -- 0.95%
- ---------------------------------------------------------------------------------
Nike Inc.......................................... 85,000 3,336,250
DRUGS & MEDICAL PRODUCTS -- 1.99%
- ---------------------------------------------------------------------------------
Becton, Dickinson & Company....................... 140,000 7,000,000
ELECTRICAL EQUIPMENT -- 1.44%
- ---------------------------------------------------------------------------------
Varian Associates Inc............................. 100,000 5,056,250
ELECTRONICS -- 0.61%
- ---------------------------------------------------------------------------------
Unitrode Corporation (a).......................... 100,000 2,150,000
ENERGY -- 0.91%
- ---------------------------------------------------------------------------------
Triton Energy Ltd. (a)............................ 110,000 3,210,625
FINANCE -- 2.03%
- ---------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
American Express Company.......................... 80,000 7,140,000
HOTELS & RESTAURANTS -- 3.81%
- ---------------------------------------------------------------------------------
McDonald's Corporation............................ 280,000 $ 13,370,000
INSURANCE -- 6.10%
- ---------------------------------------------------------------------------------
ACE Ltd........................................... 50,000 4,825,000
EXEL Ltd.......................................... 210,000 13,308,750
Travelers Property Casualty Corporation........... 75,000 3,300,000
-------------
21,433,750
MACHINERY -- 5.39%
- ---------------------------------------------------------------------------------
Caterpillar Inc................................... 260,000 12,626,250
Tenneco Inc....................................... 160,000 6,320,000
-------------
18,946,250
MISC. FINANCIAL SERVICES -- 9.60%
- ---------------------------------------------------------------------------------
Countrywide Credit Industries Inc................. 130,000 5,573,750
Federal Home Loan Mortgage Corporation............ 420,000 17,613,750
Federal National Mortgage Association............. 184,700 10,539,444
-------------
33,726,944
PAPER & FOREST PRODUCTS -- 2.32%
- ---------------------------------------------------------------------------------
Champion International Corporation................ 180,000 8,156,250
PRINTING & PUBLISHING -- 3.53%
- ---------------------------------------------------------------------------------
Time Warner Inc................................... 200,000 12,400,000
PUBLISHING -- 0.37%
- ---------------------------------------------------------------------------------
Donnelley R R & Sons Company...................... 35,100 1,307,475
TECHNOLOGY -- 4.07%
- ---------------------------------------------------------------------------------
Intel Corporation................................. 74,200 5,212,550
National Semiconductor Corporation (a)............ 350,000 9,078,125
-------------
14,290,675
TELECOMMUNICATIONS -- 2.98%
- ---------------------------------------------------------------------------------
Tele-Communications Inc. New...................... 370,000 10,475,625
TOTAL COMMON STOCKS
(IDENTIFIED COST $214,110,107)................................... 286,900,094
- ---------------------------------------------------------------------------------
</TABLE>
72 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 193
MANAGED PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
COMMERCIAL PAPER -- 14.76%
- ---------------------------------------------------------------------------------
Deere (John) Capital Corporation 5.73% due
01/28/98.......................................... $ 10,000,000 $ 9,957,025
General Electric Capital Corporation, 5.75% due
02/02/98.......................................... 7,000,000 6,964,222
General Motors Acceptance Corporation, 5.86% due
01/14/98.......................................... 15,000,000 14,968,259
IBM Credit Corporation 5.74% due 01/21/98......... 10,000,000 9,968,111
Ford Motor Credit Company 5.80% due 01/07/98...... 10,000,000 9,990,333
-------------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $51,847,950).................................... 51,847,950
- ---------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ---------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 3.58%
- ---------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
5.00% due 01/02/98
Collateral: U.S. Treasury Bond $9,665,000, 8.5%
due 02/15/20 Value $12,815,191.................... $ 12,560,000 $ 12,560,000
-------------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $12,560,000).................................... 12,560,000
- ---------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $278,518,057)................................... $ 351,308,044
OTHER ASSETS LESS LIABILITIES -- 0.00%........................... 7,599
-------------
NET ASSETS 100%.................................................. $ 351,315,643
- ---------------------------------------------------------------------------------
</TABLE>
(a) Non-income Producing
ADR American Depository Receipts
Ltd Limited
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 73
<PAGE> 194
THE ENTERPRISE MONEY MARKET PORTFOLIO
ENTERPRISE CAPITAL MANAGEMENT, INC.
Atlanta, Georgia
INVESTMENT MANAGEMENT
Enterprise Capital Management is a wholly owned subsidiary of the Mutual Life
Insurance Company of New York, and has managed the Enterprise Money Market
Portfolio since May 1, 1992.
INVESTMENT OBJECTIVE
The objective of the Enterprise Money Market Portfolio is the highest possible
level of current income consistent with the preservation of capital and
liquidity in obligations maturing in one year or less from the time of purchase.
An investment in the portfolio is neither insured nor guaranteed by the U.S.
Government and there can be no assurance that the portfolio will be able to
maintain a stable net asset value of $1.00. Past performance is no guarantee of
future results and the yield will fluctuate.
INVESTMENT PHILOSOPHY
Enterprise invests primarily in high-quality (A-1/P-1) short-term money market
instruments, principally commercial paper. While interest rate projection is not
a key component of the management style, Enterprise does emphasize purchases
primarily in a maturity range of 60 to 120 days to provide flexibility in
responding to significant changes in the market.
1997 PERFORMANCE REVIEW
While the U.S. economy remained buoyant throughout the year, inflation was
conspicuously absent in both the consumer and producer sectors. The Consumer
Price Index increased 1.7 percent for all of 1997, compared to a 3.3 percent
gain in 1996. Wholesale prices reflected in the Producer Price Index, fell 1.2
percent for the year versus a 2.8 percent increase for 1996. Wage inflation was
modest and not yet passed through in the form of higher prices to consumers. In
sum, while economic indicators point to a strong economy on an above-trend
growth track, the near absence of inflation, recent drop in commodity prices and
potential drag stemming from Asia's difficulties left the Fed on hold as far as
a change in interest rates. In fact market sentiment shifted to the view that
the next Fed move will be an easing, a conclusion Enterprise has not yet
adopted.
The yield curve during the year grew increasingly flat. Investors responded to
the problems in Asia, rebounding economic conditions and the Fed's restraint
against additional tightening of monetary policy by continuing a rally on the
long end begun after the March 1997 Fed move. Interest rates on the long
treasury declined by 72 basis points during the year from a yield of 6.64
percent at the end of 1996 to 5.92 percent at year-end. However, yields on the
short end have been somewhat reluctant to move lower, with the yield on the
three-month Treasury Bill backing up from 5.09 percent at the end of the third
quarter to 5.34 percent at year-end.
The 30-day and seven-day effective yields of the Enterprise Money Market
Portfolio were 4.85 percent and 4.91 percent, respectively, as of December 31,
1997, after charges imposed by the portfolio with an average maturity of 35
days. The 30-day and seven-day current yields of the Enterprise Money Market
Portfolio were 4.75 percent and 4.81 percent, respectively, as of December 31,
1997.
74 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 195
FUTURE INVESTMENT STRATEGY
The prevailing market sentiment is that the Federal Open Market Committee may be
on hold near-term with the expectation that an eventual easing may be undertaken
perhaps in the second quarter. The portfolio is being managed to react quickly
to the change of investor expectations. Short maturity investments allow
flexibility, while some longer maturity investments lock in yields.
THE VIEWS EXPRESSED IN THIS REPORT REFLECT THOSE OF THE PORTFOLIO MANAGER ONLY
THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE COVER. THE
MANAGER'S VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS.
THE ENTERPRISE GROUP OF FUNDS, INC. 75
<PAGE> 196
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
COMMERCIAL PAPER -- 86.87% AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
American Express Credit Corporation, 5.60% due
02/02/98.......................................... $3,000,000 $ 2,985,066
Asset Backed Securities Investment Trust Series
1997-C, 5.69% due 06/15/98........................ 2,500,000 2,500,000
Asset Backed Securities Investment Trust Series
1997-E, 5.63% due 08/15/98........................ 1,000,000 1,000,000
Asset Backed Securities Investment Trust Series
1997-I, 5.69% due 10/15/98........................ 2,000,000 2,000,000
Associates Corporation Of North America, 5.60% due
01/13/98.......................................... 1,500,000 1,497,200
Avco Financial Services Inc. 5.55% due 01/09/98... 1,500,000 1,498,150
Avco Financial Services Inc. 5.60% due 02/17/98... 1,000,000 992,689
Bell Atlantic Financial Services 5.82% due
01/12/98.......................................... 3,500,000 3,493,776
Bellsouth Telecommunications Inc., 6.10% due
01/13/98.......................................... 2,000,000 1,995,933
British Province of Columbia 5.68% due 02/12/98... 2,500,000 2,483,433
Capital One Funding Corporation 6.00% due
03/01/17.......................................... 2,400,000 2,400,000
CIT Group Holdings Inc. 5.56% due 01/20/98........ 1,400,000 1,395,892
Conagra Inc. 6.15% due 01/02/98................... 600,000 599,898
CSX Corporation 6.15% due 01/16/98................ 600,000 598,463
Export Development Corp 5.53% due 01/16/98........ 2,750,000 2,743,664
Ford Motor Canada 5.75% due 03/25/98.............. 1,000,000 986,743
Ford Motor Canada 5.84% due 01/27/98.............. 1,600,000 1,593,252
General Electric Capital Corporation, 5.50% due
01/07/98.......................................... 2,000,000 1,998,167
General Motors Acceptance Corporation, 5.54% due
01/20/98.......................................... 500,000 498,538
General Motors Acceptance Corporation, 5.55% due
01/20/98.......................................... 1,500,000 1,495,606
Goldman Sachs Group L P Discount 5.95% due
01/05/98.......................................... 1,000,000 999,339
Heller Financial Inc. 6.05% due 01/20/98.......... 2,600,000 2,591,698
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Household International Incorporated, 5.87% due
01/14/98.......................................... $1,700,000 $ 1,696,396
Lehman Brothers Incorporated 5.90% due 01/08/98... 700,000 699,197
Lehman Brothers Incorporated 6.20% due 01/30/98... 2,600,000 2,587,014
Mellon Bank N A 5.65% due 02/20/98................ 2,500,000 2,480,382
Merrill Lynch & Company Inc. 5.63% due 01/30/98... 2,000,000 1,990,929
National Rural Utilities Cooperative Finance,
5.57% due 02/12/98................................ 2,500,000 2,483,754
Province De Quebec 5.70% due 01/27/98............. 3,500,000 3,485,592
Prudential Funding Corporation 5.51% due
01/06/98.......................................... 2,500,000 2,498,087
Sanwa Business Credit Corporation, 6.60% due
01/02/98.......................................... 1,000,000 999,817
Sanwa Business Credit Corporation, 6.70% due
01/06/98.......................................... 1,000,000 999,069
Sanwa Business Credit Corporation, 6.75% due
01/13/98.......................................... 500,000 498,875
Sears Roebuck Acceptance Corporation, 5.56% due
01/12/98.......................................... 2,500,000 2,495,753
Sears Roebuck Acceptance Corporation, 6.07% due
01/09/98.......................................... 750,000 748,988
Sony Capital Corporation 5.73% due 01/07/98....... 1,200,000 1,198,854
Textron Inc. 6.10% due 01/02/98................... 700,000 699,881
Toronto Dominion Holdings 5.53% due 01/02/98...... 2,000,000 1,999,693
Union Bancal Commercial Funding 5.54% due
01/23/98.......................................... 2,000,000 1,993,229
-----------
TOTAL COMMERCIAL PAPER
(IDENTIFIED COST $67,903,017)................................... 67,903,017
- ------------------------------------------------------------------------------
CERTIFICATE OF DEPOSITS -- 7.03%
- ------------------------------------------------------------------------------
Bank Of Nova Scotia 5.74% due 02/20/98............ 3,500,000 3,500,000
National Westminster Bank Plc 5.86% due
08/10/98.......................................... 2,000,000 1,998,920
-----------
TOTAL CERTIFICATES OF DEPOSIT
(IDENTIFIED COST $5,498,920).................................... 5,498,920
- ------------------------------------------------------------------------------
</TABLE>
76 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 197
MONEY MARKET PORTFOLIO -- (Continued)
- --------------------------------------------------------------------------------
Portfolio of Investments
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
SHORT TERM GOVERNMENT SECURITIES -- 3.20%
- ------------------------------------------------------------------------------
Federal Home Loan Bank 5.69% due 10/02/98......... $1,500,000 $ 1,500,036
Federal Home Loan Bank 5.81% due 08/20/98......... 1,000,000 1,000,000
-----------
TOTAL SHORT TERM GOVERNMENT SECURITIES
(IDENTIFIED COST $2,500,036).................................... 2,500,036
- ------------------------------------------------------------------------------
<CAPTION>
NUMBER
OF SHARES
OR PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT -- 0.58%
- ------------------------------------------------------------------------------
State Street Bank & Trust Repurchase Agreement,
2.00% due 01/02/98
Collateral: U.S. Treasury Bond $350,000 8.5% due
2/15/20 Value $464,078............................ $ 450,000 $ 450,000
-----------
TOTAL REPURCHASE AGREEMENT
(IDENTIFIED COST $450,000)...................................... 450,000
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS
(IDENTIFIED COST $76,351,973)................................... $76,351,973
OTHER ASSETS LESS LIABILITIES -- 2.32%.......................... 1,815,191
-----------
NET ASSETS -- 100%.............................................. $78,167,164
- ------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 77
<PAGE> 198
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
GROWTH EQUITY AND INCOME EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------
Investments at value $ 657,885,794 $ 5,290,367 $ 23,232,693 $ 118,720,035
- -------------------------------------------------------------------------------------------
Foreign currency at value
(identified cost-$760,389) -- -- -- --
- -------------------------------------------------------------------------------------------
Receivable for fund shares
sold 8,488,748 7,452 272,193 405,024
- -------------------------------------------------------------------------------------------
Receivable for investments
sold -- -- -- 48,781
- -------------------------------------------------------------------------------------------
Dividends and interest
receivable 412,379 2,881 14,018 169,732
- -------------------------------------------------------------------------------------------
Due from investment adviser -- 12,198 9,344 21,957
- -------------------------------------------------------------------------------------------
Forward currency contracts
(net) receivable -- -- -- --
- -------------------------------------------------------------------------------------------
Cash and other assets -- 87,486 7,197 --
- -------------------------------------------------------------------------------------------
Total assets $ 666,786,921 $ 5,400,384 $ 23,535,445 $ 119,365,529
- -------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------
Payable for fund shares
redeemed 2,612,461 -- -- 43,557
- -------------------------------------------------------------------------------------------
Payable for investments
purchased -- -- 102,609 --
- -------------------------------------------------------------------------------------------
Dividends and distributions
payable 1,018,368 2,842 7,310 277,829
- -------------------------------------------------------------------------------------------
Investment advisory fee
payable 407,702 3,227 14,143 74,428
- -------------------------------------------------------------------------------------------
Distribution fee payable 313,809 2,847 4,060 53,972
- -------------------------------------------------------------------------------------------
Other accrued expenses 25,633 92,967 15,439 72,023
- -------------------------------------------------------------------------------------------
Total liabilities $ 4,377,973 $ 101,883 $ 143,561 $ 521,809
- -------------------------------------------------------------------------------------------
NET ASSETS $ 662,408,948 $ 5,298,501 $ 23,391,884 $ 118,843,720
- -------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------
Accumulated paid-in capital 490,855,608 4,950,779 17,395,398 84,049,286
- -------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) -- -- 2,090 61,487
- -------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on investments 4,867,093 (26,914) 5,063 1,808,835
- -------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on futures -- -- -- --
- -------------------------------------------------------------------------------------------
Unrealized appreciation
(depreciation) of investments
and foreign currencies
denominated amounts 166,686,247 374,636 5,989,333 32,924,112
- -------------------------------------------------------------------------------------------
Net assets $ 662,408,948 $ 5,298,501 $ 23,391,884 $ 118,843,720
- -------------------------------------------------------------------------------------------
CLASS A: NET ASSETS $ 424,279,667 $ 3,195,511 $ 4,031,673 $ 97,932,144
- -------------------------------------------------------------------------------------------
Shares outstanding 25,089,213 536,398 160,033 3,706,922
- -------------------------------------------------------------------------------------------
Net asset value and redemption
price per share $16.91 $5.96 $25.19 $26.42
- -------------------------------------------------------------------------------------------
Sales charge per share $0.84 $0.30 $1.26 $1.32
- -------------------------------------------------------------------------------------------
Maximum offering price per
share, including sales charge
of 4.75% $17.75 $6.26 $26.45 $27.74
- -------------------------------------------------------------------------------------------
CLASS B: NET ASSETS $ 166,931,724 $ 1,820,101 $ 3,256,881 $ 19,054,734
- -------------------------------------------------------------------------------------------
Shares outstanding 10,021,998 306,328 129,481 727,993
- -------------------------------------------------------------------------------------------
Net asset value and offering
price per share $16.66 $5.94 $25.15 $26.17
- -------------------------------------------------------------------------------------------
CLASS C: NET ASSETS $ 26,601,337 $ 282,889 $ 561,260 $ 1,856,842
- -------------------------------------------------------------------------------------------
Shares outstanding 1,578,485 47,595 22,316 70,580
- -------------------------------------------------------------------------------------------
Net asset value and offering
price per share $16.85 $5.94 $25.15 $26.31
- -------------------------------------------------------------------------------------------
CLASS Y: NET ASSETS $ 44,596,220 $ -- $ 15,542,070 $ --
- -------------------------------------------------------------------------------------------
Shares outstanding 2,620,250 -- 615,725 --
- -------------------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share $17.02 $-- $25.24 $--
- -------------------------------------------------------------------------------------------
INVESTMENTS AT COST $ 491,199,547 $ 4,915,731 $ 17,243,360 $ 85,795,923
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
78 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 199
<TABLE>
<CAPTION>
SMALL
CAPITAL COMPANY SMALL INTERNATIONAL GOVERNMENT HIGH-YIELD
APPRECIATION GROWTH COMPANY VALUE GROWTH SECURITIES BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------------------------------
Investments at value $ 122,148,369 $ 22,098,398 $ 70,929,999 $ 60,080,731 $ 88,618,181 $ 87,566,419
- -------------------------------------------------------------------------------------------------------------------------
Foreign currency at value
(identified cost-$760,389) -- -- -- 747,977 -- --
- -------------------------------------------------------------------------------------------------------------------------
Receivable for fund shares
sold 105,979 189,108 667,139 98,428 113,493 359,075
- -------------------------------------------------------------------------------------------------------------------------
Receivable for investments
sold -- 89,820 62,114 67,032 -- --
- -------------------------------------------------------------------------------------------------------------------------
Dividends and interest
receivable 59,550 2,515 26,023 152,630 606,360 1,714,748
- -------------------------------------------------------------------------------------------------------------------------
Due from investment adviser -- 7,909 5,354 40,429 15,466 21,944
- -------------------------------------------------------------------------------------------------------------------------
Forward currency contracts
(net) receivable -- -- -- 234,297 -- --
- -------------------------------------------------------------------------------------------------------------------------
Cash and other assets 47,803 -- 12,664 22,692 -- 1,984
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 122,361,701 $ 22,387,750 $ 71,703,293 $ 61,444,216 $ 89,353,500 $ 89,664,170
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------------------------------
Payable for fund shares
redeemed 77,966 8,767 134,916 118,768 133,158 33,033
- -------------------------------------------------------------------------------------------------------------------------
Payable for investments
purchased 777,097 277,350 1,157,110 1,065,970 -- 795,747
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
payable 524,056 14,624 195,645 113,562 81,707 111,329
- -------------------------------------------------------------------------------------------------------------------------
Investment advisory fee
payable 75,060 17,737 42,420 43,593 44,725 44,116
- -------------------------------------------------------------------------------------------------------------------------
Distribution fee payable 48,613 4,437 36,030 24,084 36,492 42,330
- -------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 133,364 26,752 11,113 82,046 67,444 45,686
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 1,636,156 $ 349,667 $ 1,577,234 $ 1,448,023 $ 363,526 $ 1,072,241
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 120,725,545 $ 22,038,083 $ 70,126,059 $ 59,996,193 $ 88,989,974 $ 88,591,929
- -------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Accumulated paid-in capital 76,502,164 19,990,041 60,739,034 57,523,493 93,184,298 85,789,329
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) -- -- -- 45,473 -- --
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on investments 571,813 (223,320) 495,662 (578,999) (4,065,632) 223,106
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on futures -- -- -- -- -- (62,305)
- -------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation
(depreciation) of investments
and foreign currencies
denominated amounts 43,651,568 2,271,362 8,891,363 3,006,226 (128,692) 2,641,799
- -------------------------------------------------------------------------------------------------------------------------
Net assets $ 120,725,545 $ 22,038,083 $ 70,126,059 $ 59,996,193 $ 88,989,974 $ 88,591,929
- -------------------------------------------------------------------------------------------------------------------------
CLASS A: NET ASSETS $ 112,737,548 $ 4,861,339 $ 45,309,826 $ 38,019,525 $ 68,638,637 $ 66,421,709
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 3,172,535 207,861 5,844,506 2,274,882 5,707,542 5,379,222
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption
price per share $35.54 $23.39 $7.75 $16.71 $12.03 $12.35
- -------------------------------------------------------------------------------------------------------------------------
Sales charge per share $1.77 $1.17 $0.39 $0.85 $0.60 $0.62
- -------------------------------------------------------------------------------------------------------------------------
Maximum offering price per
share, including sales charge
of 4.75% $37.31 $24.56 $8.14 $17.56 $12.63 $12.97
- -------------------------------------------------------------------------------------------------------------------------
CLASS B: NET ASSETS $ 7,861,977 $ 2,841,856 $ 22,012,800 $ 9,877,638 $ 12,284,637 $ 19,898,363
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 225,323 121,823 2,885,408 597,427 1,021,654 1,611,496
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and offering
price per share $34.89 $23.33 $7.63 $16.53 $12.02 $12.35
- -------------------------------------------------------------------------------------------------------------------------
CLASS C: NET ASSETS $ 126,020 $ 795,036 $ 2,684,053 $ 1,113,310 $ 497,845 $ 1,462,767
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 3,557 34,086 346,982 66,820 41,397 118,461
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and offering
price per share $35.43 $23.32 $7.74 $16.66 $12.03 $12.35
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y: NET ASSETS $ -- $ 13,539,852 $ 119,380 $ 10,985,720 $ 7,568,855 $ 809,090
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding -- 577,931 15,277 657,357 629,566 65,526
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share $-- $23.43 $7.81 $16.71 $12.02 $12.35
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AT COST $ 78,496,801 $ 19,827,036 $ 62,038,636 $ 57,310,065 $ 88,746,873 $ 84,924,620
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAX-EXEMPT
INCOME MANAGED MONEY MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------------- -------------
<S> <C> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------------------
Investments at value $ 26,503,988 $ 351,308,044 $ 76,351,973
- ---------------------------------------------------------------------------------------------------------
Foreign currency at value
(identified cost-$760,389) -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Receivable for fund shares
sold 680 755,354 4,145,011
- -------------------------------------------------------------------------------------------------------------------------
Receivable for investments
sold -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Dividends and interest
receivable 456,868 169,250 144,460
- -------------------------------------------------------------------------------------------------------------------------
Due from investment adviser 20,411 -- 21,272
- -------------------------------------------------------------------------------------------------------------------------
Forward currency contracts
(net) receivable -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Cash and other assets 20,041 229,224 141,760
- -------------------------------------------------------------------------------------------------------------------------
Total assets $ 27,001,988 $ 352,461,872 $ 80,804,476
- -------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------------------------------------------------------------
Payable for fund shares
redeemed 105,287 218,679 2,467,599
- -------------------------------------------------------------------------------------------------------------------------
Payable for investments
purchased -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Dividends and distributions
payable 67,979 410,430 15,984
- -------------------------------------------------------------------------------------------------------------------------
Investment advisory fee
payable 11,263 220,721 21,769
- -------------------------------------------------------------------------------------------------------------------------
Distribution fee payable 11,413 153,550 21,049
- -------------------------------------------------------------------------------------------------------------------------
Other accrued expenses 43,838 142,849 110,911
- -------------------------------------------------------------------------------------------------------------------------
Total liabilities $ 239,780 $ 1,146,229 $ 2,637,312
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 26,762,208 $ 351,315,643 $ 78,167,164
- -------------------------------------------------------------------------------------------------------------------------
ANALYSIS OF NET ASSETS
- -------------------------------------------------------------------------------------------------------------------------
Accumulated paid-in capital 25,002,395 278,149,429 78,167,164
- -------------------------------------------------------------------------------------------------------------------------
Undistributed net investment
income (loss) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on investments 19 376,227 --
- -------------------------------------------------------------------------------------------------------------------------
Accumulated net realized gain
(loss) on futures -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Unrealized appreciation
(depreciation) of investments
and foreign currencies
denominated amounts 1,759,794 72,789,987 --
- -------------------------------------------------------------------------------------------------------------------------
Net assets $ 26,762,208 $ 351,315,643 $ 78,167,164
- -------------------------------------------------------------------------------------------------------------------------
CLASS A: NET ASSETS $ 23,694,668 $ 156,608,488 $ 68,465,856
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 1,698,887 16,925,856 68,465,856
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and redemption
price per share $13.95 $9.25 $1.00
- -------------------------------------------------------------------------------------------------------------------------
Sales charge per share $0.70 $0.46 --
- -------------------------------------------------------------------------------------------------------------------------
Maximum offering price per
share, including sales charge
of 4.75% $14.65 $9.71 $1.00
- -------------------------------------------------------------------------------------------------------------------------
CLASS B: NET ASSETS $ 2,883,323 $ 110,213,485 $ 5,980,247
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 206,727 11,999,101 5,980,247
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and offering
price per share $13.95 $9.19 $1.00
- -------------------------------------------------------------------------------------------------------------------------
CLASS C: NET ASSETS $ 184,217 $ 3,614,264 $ 1,020,966
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding 13,208 392,464 1,020,966
- -------------------------------------------------------------------------------------------------------------------------
Net asset value and offering
price per share $13.95 $9.21 $1.00
- -------------------------------------------------------------------------------------------------------------------------
CLASS Y: NET ASSETS $ -- $ 80,879,406 $ 2,700,095
- -------------------------------------------------------------------------------------------------------------------------
Shares outstanding -- 8,721,945 2,700,095
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, offering and
redemption price per share $-- $9.27 $1.00
- -------------------------------------------------------------------------------------------------------------------------
INVESTMENTS AT COST $ 24,744,194 $ 278,518,057 $ 76,351,973
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 79
<PAGE> 200
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
GROWTH
AND GROWTH EQUITY CAPITAL
GROWTH EQUITY INCOME AND INCOME INCOME APPRECIATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- --------- --------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
10/1/97- 10/1/96-
INVESTMENT INCOME: 12/31/97 9/30/97
- ---------------------------------------------------------------------------------------------------------------------------
Dividends $ 2,884,404(2) $ 25,170(2) $ 67,631(2) $ 176,910 $ 2,264,555(2) $ 510,236(2)
- ---------------------------------------------------------------------------------------------------------------------------
Interest 918,321 14,805 35,456 51,917 535,273 200,262
- ---------------------------------------------------------------------------------------------------------------------------
Total 3,802,725 39,975 103,087 228,827 2,799,828 710,498
- ---------------------------------------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------------------------------------
Management fees 3,331,589 15,970 38,283 78,818 739,501 903,281
- ---------------------------------------------------------------------------------------------------------------------------
Distribution fees, Class A 1,402,951 6,778 2,806 427 389,808 512,845
- ---------------------------------------------------------------------------------------------------------------------------
Distribution fees, Class B 974,967 5,598 4,960 1,103 115,503 64,302
- ---------------------------------------------------------------------------------------------------------------------------
Distribution fees, Class C 88,865 634 777 95 4,258 417
- ---------------------------------------------------------------------------------------------------------------------------
Distribution fees, Class Y 22,502
- ---------------------------------------------------------------------------------------------------------------------------
Transfer agent fees 596,611 40,436 19,846 81,581 224,935 321,112
- ---------------------------------------------------------------------------------------------------------------------------
Custodian and accounting
fees 90,953(1) 24,195 10,165 12,109 52,123 47,765
- ---------------------------------------------------------------------------------------------------------------------------
Audit and legal fees 60,661 13,421 5,073 18,179 29,328 31,441
- ---------------------------------------------------------------------------------------------------------------------------
Reports to shareholders 128,632 13,200 5,798 25,489 46,177 74,698
- ---------------------------------------------------------------------------------------------------------------------------
Registration fees 43,489 5,481 4,449 25,737 42,534 40,828
- ---------------------------------------------------------------------------------------------------------------------------
Directors' fees 4,571 3,176 1,015 7,889 4,572 4,572
- ---------------------------------------------------------------------------------------------------------------------------
Other expenses 50,513 7,881 979 758 11,649 17,544
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 6,773,802 136,770 94,151 274,687 1,660,388 2,018,805
- ---------------------------------------------------------------------------------------------------------------------------
Less: Expense
reimbursement (58,412)(1) (99,274) (31,988) (151,471) (115,504) --
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses, net of
reimbursement 6,715,390 37,496 62,163 123,216 1,544,884 2,018,805
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (2,912,665) 2,479 40,924 105,611 1,254,944 (1,308,307)
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
security transactions 18,241,515 60,709 69,380 348,420 9,306,031 15,731,336
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain on foreign
currency transactions -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized loss from
futures transactions -- -- -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments
and foreign currency
related transactions 89,190,233 374,636 (22,006) 3,204,139 12,427,285 7,731,763
- ---------------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 107,431,748 435,345 47,374 3,552,559 21,733,316 23,463,099
- ---------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 104,519,083 $ 437,824 $ 88,298 $ 3,658,170 $ 22,988,260 $ 22,154,792
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Reflects total expense before reduction for brokerage commission credits
which are reflected as expense reimbursement.
(2) Net of foreign taxes withheld of $8,262 for Growth, $74 for Equity, $24 for
Growth and Income, $8,754 for Equity Income, $5,768 for Capital
Appreciation, $173,266 for International Growth, $366 for High-Yield Bond
and $17,741 for Managed.
See notes to financial statements.
80 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 201
<TABLE>
<CAPTION>
SMALL SMALL SMALL
COMPANY COMPANY COMPANY INTERNATIONAL GOVERNMENT HIGH-YIELD
GROWTH GROWTH VALUE GROWTH SECURITIES BOND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
10/1/97- 10/1/96-
INVESTMENT INCOME: 12/31/97 9/30/97
- -----------------------------------------------------------------------------------------------------------------------
Dividends $ 6,256 $ 9,782 $ 413,752 $ 1,215,471(2) $ -- $ 28,625(2)
- -----------------------------------------------------------------------------------------------------------------------
Interest 8,416 51,580 241,068 191,520 5,995,972 6,865,976
- -----------------------------------------------------------------------------------------------------------------------
Total 14,672 61,362 654,820 1,406,991 5,995,972 6,894,601
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------------------------
Management fees 51,613 118,526 275,321 478,833 483,366 436,989
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class A 4,364 1,174 120,773 170,870 309,926 266,469
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class B 5,248 974 87,187 75,658 83,531 129,485
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class C 1,035 318 6,279 4,452 1,099 3,653
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class Y 20,407
- -----------------------------------------------------------------------------------------------------------------------
Transfer agent fees 20,498 82,617 115,333 172,007 168,431 133,755
- -----------------------------------------------------------------------------------------------------------------------
Custodian and accounting
fees 11,097 58,789 49,795 172,738 49,866 64,619
- -----------------------------------------------------------------------------------------------------------------------
Audit and legal fees 5,056 18,179 22,339 25,186 27,064 26,398
- -----------------------------------------------------------------------------------------------------------------------
Reports to shareholders 5,823 25,489 20,550 29,271 31,204 24,579
- -----------------------------------------------------------------------------------------------------------------------
Registration fees 4,450 25,737 46,150 43,260 41,799 42,748
- -----------------------------------------------------------------------------------------------------------------------
Directors' fees 1,015 7,889 4,571 4,572 4,572 4,572
- -----------------------------------------------------------------------------------------------------------------------
Other expenses 1,002 600 12,911 9,827 8,478 8,530
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 111,201 360,699 761,209 1,186,674 1,209,336 1,141,797
- -----------------------------------------------------------------------------------------------------------------------
Less: Expense
reimbursement (28,296) (148,473) (69,743) (62,527) (130,007) (123,123)
- -----------------------------------------------------------------------------------------------------------------------
Total expenses, net of
reimbursement 82,905 212,226 691,466 1,124,147 1,079,329 1,018,674
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (68,233) (150,864) (36,646) 282,844 4,916,643 5,875,927
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
security transactions (158,828) 523,987 4,633,929 2,832,942 (70,610) 2,743,109
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on foreign
currency transactions -- -- -- 118,763 -- --
- -----------------------------------------------------------------------------------------------------------------------
Net realized loss from
futures transactions -- -- -- -- -- (62,305)
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments
and foreign currency
related transactions (1,916,083) 2,373,082 7,400,618 (1,379,627) 1,607,251 349,675
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS (2,074,911) 2,897,069 12,034,547 1,572,078 1,536,641 3,030,479
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ (2,143,144) $ 2,746,205 $ 11,997,901 $ 1,854,922 $ 6,453,284 $ 8,906,406
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
TAX-
EXEMPT MONEY
INCOME MANAGED MARKET
PORTFOLIO PORTFOLIO PORTFOLIO
----------- ------------ -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------------
Dividends $ -- $ 3,283,501(2) $ --
- ---------------------------------------------------------------------------------------------------
Interest 1,614,084 2,388,229 3,696,185
- ----------------------------------------------------------------------------------------------------------------
Total 1,614,084 5,671,730 3,696,185
- -----------------------------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------------------------
Management fees 141,160 2,180,923 231,118
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class A 117,327 600,976 180,719
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class B 21,263 849,143 37,787
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class C 331 9,806 1,326
- -----------------------------------------------------------------------------------------------------------------------
Distribution fees, Class Y
- -----------------------------------------------------------------------------------------------------------------------
Transfer agent fees 55,953 492,357 229,207
- -----------------------------------------------------------------------------------------------------------------------
Custodian and accounting
fees 35,360 75,136 42,996
- -----------------------------------------------------------------------------------------------------------------------
Audit and legal fees 20,795 49,279 21,750
- -----------------------------------------------------------------------------------------------------------------------
Reports to shareholders 20,807 104,828 24,575
- -----------------------------------------------------------------------------------------------------------------------
Registration fees 40,800 58,546 51,820
- -----------------------------------------------------------------------------------------------------------------------
Directors' fees 4,572 4,572 4,572
- -----------------------------------------------------------------------------------------------------------------------
Other expenses 4,664 48,387 14,934
- -----------------------------------------------------------------------------------------------------------------------
Total expenses 463,032 4,473,953 840,804
- -----------------------------------------------------------------------------------------------------------------------
Less: Expense
reimbursement (108,255) -- (158,757)
- -----------------------------------------------------------------------------------------------------------------------
Total expenses, net of
reimbursement 354,777 4,473,953 682,047
- -----------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 1,259,307 1,197,777 3,014,138
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
security transactions 372,519 12,784,062 --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain on foreign
currency transactions -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net realized loss from
futures transactions -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments
and foreign currency
related transactions 229,121 38,518,875 --
- -----------------------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 601,640 51,302,937 --
- -----------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS $ 1,860,947 $ 52,500,714 $ 3,014,138
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 81
<PAGE> 202
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY GROWTH AND
PORTFOLIO INCOME PORTFOLIO
------------- ---------------------------------------------
GROWTH FOR THE FOR THE
PORTFOLIO PERIOD PERIOD
----------------------------- MAY 1, 1997 OCTOBER 1, FOR YEAR
YEAR ENDED YEAR ENDED THROUGH 1997 THROUGH YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1997 1997 1996
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ (2,912,665) $ (762,775) $ 2,479 $ 40,924 $ 105,611 $ 85,853
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 18,241,515 11,317,236 60,709 69,380 348,420 364,855
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments 89,190,233 36,890,580 374,636 (22,006) 3,204,139 980,258
- -----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 104,519,083 47,445,041 437,824 88,298 3,658,170 1,430,966
- -----------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
A -- -- (2,460) (18,371) --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
B -- -- -- (11,694) --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
C -- -- (208) (2,192) --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
Y -- -- -- (69,364) (93,534) (86,059)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class A (8,614,445) (10,559,038) (52,758) (71,049) --
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class B (3,431,799) (1,957,665) (30,175) (57,595) --
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class C (493,612) -- (4,690) (9,938) --
- -----------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y (906,323) (124,046) -- (273,727) (338,162) --
- -----------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (13,446,179) (12,640,749) (90,291) (513,930) (431,696) (86,059)
- -----------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 260,192,148 106,776,181 2,924,258 3,059,535 1,088,636 --
- -----------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 8,246,727 10,017,857 55,088 86,011 --
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (108,981,528) (74,805,079) (59,944) (160,185) -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A 159,457,347 41,988,959 2,919,402 2,985,361 1,088,636 --
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 117,131,669 28,798,411 1,782,097 2,266,006 977,832 --
- -----------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 3,282,897 1,812,775 27,982 66,791 --
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (7,865,656) (1,074,883) (56,145) (8,694) (30) --
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B 112,548,910 29,536,303 1,753,934 2,324,103 977,802 --
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 28,408,390 -- 306,566 459,347 97,483 --
- -----------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 478,133 -- 4,380 11,908 --
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (2,696,749) -- (33,314) (2,071) (75) --
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C 26,189,774 -- 277,632 469,184 97,408 --
- -----------------------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------------------
Shares sold 44,900,757 5,950,078 -- 382,747 4,708,756 2,533,992
- -----------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 480,824 124,046 -- 341,911 431,185 86,059
- -----------------------------------------------------------------------------------------------------------------------------
Shares redeemed (7,816,150) (3,959,203) -- (313,478) (1,767,589) (757,380)
- -----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y 37,565,431 2,114,921 -- 411,180 3,372,352 1,862,671
- -----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 335,761,462 73,640,183 4,950,968 6,189,828 5,536,198 1,862,671
- -----------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 426,834,366 108,444,475 5,298,501 5,764,196 8,762,672 3,207,578
- -----------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------------
Beginning of period $ 235,574,582 $ 127,130,107 $ -- $ 17,627,688 $ 8,865,016 $ 5,657,438
- -----------------------------------------------------------------------------------------------------------------------------
End of period $ 662,408,948 $ 235,574,582 $ 5,298,501 $ 23,391,884 $ 17,627,688 $ 8,865,016
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
82 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 203
<TABLE>
<CAPTION>
SMALL
COMPANY GROWTH
PORTFOLIO
EQUITY CAPITAL ---------------------------
INCOME APPRECIATION FOR THE
PORTFOLIO PORTFOLIO PERIOD
--------------------------- --------------------------- OCTOBER 1, FOR YEAR
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1997 THROUGH ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER
1997 1996 1997 1996 1997 30, 1997
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 1,254,944 $ 1,289,804 $ (1,308,307) $ (1,109,093) $ (68,233) $ (150,864)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 9,306,031 5,664,492 15,731,336 10,763,909 (158,828) 523,987
- -----------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments 12,427,285 4,614,269 7,731,763 9,326,093 (1,916,083) 2,373,082
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 22,988,260 11,568,565 22,154,792 18,980,909 (2,143,144) 2,746,205
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
A (1,072,290) (1,197,980) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
B (119,901) (63,375) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
C (10,306) -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
Y -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class A (6,834,121) (4,726,758) (15,427,334) (11,466,091) (111,554) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class B (1,334,999) (369,926) (1,092,295) (501,250) (64,497) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class C (130,982) -- (17,309) -- (18,302) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y -- -- -- -- (310,189) (665,013)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (9,502,599) (6,358,039) (16,536,938) (11,967,341) (504,542) (665,013)
- -----------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------
Shares sold 17,272,166 9,911,599 8,448,481 19,727,741 3,329,056 1,977,903
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 7,703,613 5,727,817 14,967,124 10,709,311 109,857 --
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (12,389,236) (10,005,618) (31,521,891) (43,391,759) (177,096) (23,177)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A 12,586,543 5,633,798 (8,106,286) (12,954,707) 3,261,817 1,954,726
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------
Shares sold 12,399,165 4,189,055 2,827,251 2,946,771 2,166,644 1,059,895
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 1,368,111 392,623 1,059,795 466,933 61,101 --
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (1,216,943) (155,615) (1,112,978) (331,951) (230,849) (23,506)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B 12,550,333 4,426,063 2,774,068 3,081,753 1,996,896 1,036,389
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------
Shares sold 1,846,156 -- 124,776 -- 645,548 189,019
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 124,710 -- 16,626 -- 17,752 --
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (11,463) -- (1,512) -- (26,689) (170)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C 1,959,403 -- 139,890 -- 636,611 188,849
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------------
Shares sold -- -- -- -- 384,008 10,548,168
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions -- -- -- -- 301,209 656,535
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed -- -- -- -- (651,790) (4,317,735)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y -- -- -- -- 33,427 6,886,968
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 27,096,279 10,059,861 (5,192,328) (9,872,954) 5,928,751 10,066,932
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 40,581,940 15,270,387 425,526 (2,859,386) 3,281,065 12,148,124
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period $ 78,261,780 $62,991,393 $120,300,019 $123,159,405 $18,757,018 $ 6,608,894
- -----------------------------------------------------------------------------------------------------------------------
End of period $118,843,720 $78,261,780 $120,725,545 $120,300,019 $22,038,083 $18,757,018
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
SMALL
COMPANY VALUE
PORTFOLIO
FOR YEAR ---------------------------
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER DECEMBER 31, DECEMBER 31,
30, 1996 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ (61,578) $ (36,646) $ (24,765)
- ----------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 697,630 4,633,929 1,473,113
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options -- --
- --------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments 926,887 7,400,618 795,406
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 1,562,939 11,997,901 2,243,755
- -----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
A -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
B -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
C -- --
- -----------------------------------------------------------------------------------------------------------------------
Net investment income, Class
Y -- -- --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class A (2,902,903) (868,453)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class B (1,418,458) (131,977)
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class C (172,913) --
- -----------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y (252,458) (7,578) (100,931)
- -----------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (252,458) (4,501,852) (1,101,361)
- -----------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- -----------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------
Shares sold -- 24,183,248 4,307,659
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 2,817,488 831,465
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed -- (5,179,631) (8,474,210)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A -- 21,821,105 (3,335,086)
- -----------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------
Shares sold -- 17,761,763 1,845,129
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 1,337,536 122,778
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed -- (912,538) (260,393)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B -- 18,186,761 1,707,514
- -----------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------
Shares sold -- 2,602,460 --
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 158,448 --
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed -- (49,665) --
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C -- 2,711,243 --
- -----------------------------------------------------------------------------------------------------------------------
CLASS Y
- -----------------------------------------------------------------------------------------------------------------------
Shares sold 2,748,861 133,172 847,748
- -----------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 250,995 7,533 1,728
- -----------------------------------------------------------------------------------------------------------------------
Shares redeemed (651,909) (2,069,409) (1,938,659)
- -----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y 2,347,947 (1,928,704) (1,089,183)
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 2,347,947 40,790,405 (2,716,755)
- -----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 3,658,428 48,286,454 (1,574,361)
- -----------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------------------------------
Beginning of period $ 2,950,466 $21,839,605 $23,413,966
- -----------------------------------------------------------------------------------------------------------------------
End of period $ 6,608,894 $70,126,059 $21,839,605
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 83
<PAGE> 204
STATEMENTS OF CHANGES IN NET ASSETS -- (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL GOVERNMENT
GROWTH SECURITIES
PORTFOLIO PORTFOLIO
----------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 282,844 $ 269,629 $ 4,916,643 $ 5,172,678
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 2,951,705 2,656,487 (70,610) 342,253
- ---------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options -- -- -- --
- ---------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments (1,379,627) 2,020,264 1,607,250 (754,744)
- ---------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 1,854,922 4,946,380 6,453,283 4,760,187
- ---------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- ---------------------------------------------------------------------------------------------
Net investment income, Class
A (143,750) (173,156) (4,240,611) (4,942,104)
- ---------------------------------------------------------------------------------------------
Net investment income, Class
B (7,274) (13,172) (463,583) (230,737)
- ---------------------------------------------------------------------------------------------
Net investment income, Class
C (4,922) -- (5,921) --
- ---------------------------------------------------------------------------------------------
Net investment income, Class
Y (89,451) (79,688) (206,528) --
- ---------------------------------------------------------------------------------------------
Net realized gains on
investments Class A (2,418,648) (1,684,658) -- --
- ---------------------------------------------------------------------------------------------
Net realized gains on
investments Class B (631,985) (208,721) -- --
- ---------------------------------------------------------------------------------------------
Net realized gains on
investments Class C (71,424) -- -- --
- ---------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y (692,785) (424,530) -- --
- ---------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (4,060,239) (2,583,925) (4,916,643) (5,172,841)
- ---------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- ---------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------
Shares sold 9,664,091 9,214,469 9,968,742 8,082,041
- ---------------------------------------------------------------------------------------------
Reinvestment of
distributions 2,483,065 1,776,922 3,239,373 3,653,159
- ---------------------------------------------------------------------------------------------
Shares redeemed (7,918,925) (6,715,142) (19,528,142) (23,815,232)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A 4,228,231 4,276,249 (6,320,027) (12,080,032)
- ---------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------
Shares sold 8,132,892 3,267,075 7,500,863 4,496,001
- ---------------------------------------------------------------------------------------------
Reinvestment of
distributions 618,379 213,154 366,928 177,788
- ---------------------------------------------------------------------------------------------
Shares redeemed (2,560,054) (393,878) (1,468,710) (1,153,825)
- ---------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B 6,191,217 3,086,351 6,399,081 3,519,964
- ---------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------
Shares sold 1,623,970 -- 491,753 --
- ---------------------------------------------------------------------------------------------
Reinvestment of
distributions 64,561 -- 5,436 --
- ---------------------------------------------------------------------------------------------
Shares redeemed (411,829) -- (1,730) --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C 1,276,702 -- 495,459 --
- ---------------------------------------------------------------------------------------------
CLASS Y
- ---------------------------------------------------------------------------------------------
Shares sold 5,152,548 6,700,676 7,776,475 --
- ---------------------------------------------------------------------------------------------
Reinvestment of
distributions 782,252 504,218 203,007 --
- ---------------------------------------------------------------------------------------------
Shares redeemed (3,371,537) (1,819,421) (476,237) --
- ---------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y 2,563,263 5,385,473 7,503,245 --
- ---------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 14,259,413 12,748,073 8,077,758 (8,560,068)
- ---------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 12,054,096 15,110,528 9,614,398 (8,972,722)
- ---------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------
Beginning of period $ 47,942,097 $ 32,831,569 $ 79,375,576 $ 88,348,298
- ---------------------------------------------------------------------------------------------
End of period $ 59,996,193 $ 47,942,097 $ 88,989,974 $ 79,375,576
- ---------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements.
84 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 205
<TABLE>
<CAPTION>
HIGH-YIELD TAX-EXEMPT MANAGED
BOND PORTFOLIO INCOME PORTFOLIO PORTFOLIO
----------------------------- --------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
------------- ------------- ------------ ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 5,875,927 $ 4,626,639 $ 1,259,307 $ 1,503,075 $ 1,197,777 $ 1,722,342
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
investments 2,743,109 746,203 372,519 54,614 12,784,062 4,191,029
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options (62,305) (16,406) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments 349,675 1,549,219 229,121 (497,297) 38,518,875 25,922,892
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 8,906,406 6,905,655 1,860,947 1,060,392 52,500,714 31,836,263
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
A (4,853,097) (4,227,766) (1,174,218) (1,437,694) (591,297) (799,735)
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
B (972,857) (398,943) (83,769) (65,432) (7,511) (286,048)
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
C (24,986) -- (1,321) -- (18,130) --
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
Y (24,987) -- -- -- (607,068) (643,498)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class A -- -- (322,461) -- (5,861,184) (1,790,459)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class B -- -- (39,833) -- (4,171,627) (1,012,095)
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class C -- -- (2,497) -- (136,070) --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y -- -- -- -- (3,007,927) (1,018,912)
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (5,875,927) (4,626,709) (1,624,099) (1,503,126) (14,400,814) (5,550,747)
- ---------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 20,360,902 12,189,056 2,691,749 2,501,597 52,752,538 48,360,893
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 3,697,275 3,065,474 1,171,184 1,077,601 6,249,605 2,491,364
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (14,219,658) (15,310,792) (8,876,454) (8,294,044) (21,520,190) (10,298,814)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A 9,838,519 (56,262) (5,013,521) (4,714,845) 37,481,953 40,553,443
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 14,068,528 5,149,262 1,466,262 1,482,068 45,496,427 35,850,528
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 701,407 269,854 100,177 57,257 3,984,094 1,222,567
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (3,320,942) (754,001) (728,264) (403,587) (6,915,745) (2,767,399)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B 11,448,993 4,665,115 838,175 1,135,738 42,564,776 34,305,696
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 1,690,084 -- 181,367 -- 3,630,893 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 18,460 -- 3,787 -- 143,683 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (255,370) -- -- -- (69,464) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C 1,453,174 -- 185,154 -- 3,705,112 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 775,896 -- -- -- 29,017,460 30,665,682
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 24,887 -- -- -- 3,614,889 1,662,410
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (897) -- -- -- (19,022,024) (8,914,287)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y 799,886 -- -- -- 13,610,325 23,413,805
- ---------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 23,540,572 4,608,853 (3,990,192) (3,579,107) 97,362,166 98,272,944
- ---------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 26,571,051 6,887,799 (3,753,344) (4,021,841) 135,462,066 124,558,460
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of period $ 62,020,878 $ 55,133,079 $ 30,515,552 $ 34,537,393 $ 215,853,577 $ 91,295,117
- ---------------------------------------------------------------------------------------------------------------------------
End of period $ 88,591,929 $ 62,020,878 $ 26,762,208 $ 30,515,552 $ 351,315,643 $ 215,853,577
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
MONEY MARKET
PORTFOLIO
-------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 3,014,138 $ 2,023,539
- -------------------------------------------------------------------------------
Net realized gain (loss) on
investments -- --
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on
futures and options -- --
- ---------------------------------------------------------------------------------------------------------------
Net change in unrealized
gain (loss) of investments -- --
- ---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets resulting from
operations 3,014,138 2,023,539
- ---------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
A (2,766,936) (1,984,743)
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
B (181,537) (38,796)
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
C (6,468) --
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income, Class
Y (59,197) --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class A -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class B -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class C -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gains on
investments Class Y -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total dividends and
distributions to shareholders (3,014,138) (2,023,539)
- ---------------------------------------------------------------------------------------------------------------------------
FROM CAPITAL SHARE
TRANSACTIONS:
- ---------------------------------------------------------------------------------------------------------------------------
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 186,445,537 155,780,333
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 2,799,348 1,843,341
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (179,852,529) (138,874,791)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class A 9,392,356 18,748,883
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 16,428,666 4,456,552
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 165,715 35,289
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (11,957,685) (3,542,604)
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class B 4,636,696 949,237
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 3,804,829 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 5,853 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (2,789,716) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class C 1,020,966 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y
- ---------------------------------------------------------------------------------------------------------------------------
Shares sold 3,225,033 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
distributions 55,490 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares redeemed (580,428) --
- ---------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) -
Class Y 2,700,095 --
- ---------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets resulting from
capital share transactions 17,750,113 19,698,120
- ---------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in
net assets 17,750,113 19,698,120
- ---------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------------------------------------------------------
Beginning of period $ 60,417,051 $ 40,718,931
- -------------------------------------------------------------------------------------------------------------------------
End of period $ 78,167,164 $ 60,417,051
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 85
<PAGE> 206
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
(A) Annualized.
(B) Not annualized.
(C) Total return does not include one time sales charge.
(D) Total return does not include contingent deferred sales charge.
(E) Disclosure not applicable to periods prior to 1996. Represents average
commission rate per share charged to the fund on purchases and sales of
equity investments on which commissions were charged during the period.
(F) Effective September 1, 1995, ratio includes expenses paid indirectly.
(G) Based on average monthly shares outstanding.
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
GROWTH PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.10 $ 10.44 $ 7.76 $ 8.26 $ 7.96
Net Investment Income (Loss) (0.07) (0.04) (0.03) (0.02) 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 4.23 3.44 3.13 (0.06) 0.84
--------- --------- --------- -------- --------
Total from Investment Operations 4.16 3.40 3.10 (0.08) 0.85
--------- --------- --------- -------- --------
Dividends from Net Investment Income -- -- -- -- 0.01
Distributions from Capital Gains 0.35 0.74 0.42 0.42 0.54
--------- --------- --------- -------- --------
Total Distributions 0.35 0.74 0.42 0.42 0.55
--------- --------- --------- -------- --------
Net Asset Value End of Period $ 16.91 $ 13.10 $ 10.44 $ 7.76 $ 8.26
--------- --------- --------- -------- --------
Total Return(C) 31.76% 32.60% 39.99% (0.99)% 10.59%
Net Assets End of Period (in thousands) $ 424,280 $ 196,752 $ 122,559 $ 88,375 $ 90,902
Ratio of Expenses to Average Net Assets 1.43%(F) 1.53%(F) 1.60% 1.56% 1.60%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.43%(F) 1.53%(F) 1.60% 1.56% 1.61%
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.55)% (0.39)% (0.35)% (0.30)% 0.10%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.55)% (0.39)% (0.35)% (0.30)% 0.06%
Portfolio Turnover Rate 22.28% 29.90% 45.30% 64.50% 107.90%
Average commission per share(E) $ 0.0509 $ 0.0636
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
----------------------- -------------------------
GROWTH PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 12.97 $ 10.41 $ 8.69
Net Investment Income (Loss) (0.11) (0.06) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 4.15 3.36 2.16
--------- -------- ------
Total from Investment Operations 4.04 3.30 2.14
--------- -------- ------
Dividends from Net Investment Income -- -- --
Distributions from Capital Gains 0.35 0.74 0.42
--------- -------- ------
Total Distributions 0.35 0.74 0.42
--------- -------- ------
Net Asset Value End of Period $ 16.66 $ 12.97 $10.41
--------- -------- ------
Total Return(D) 31.15% 31.73% 24.66%(B)
Net Assets End of Period (in thousands) $ 166,932 $ 36,483 $4,572
Ratio of Expenses to Average Net Assets 1.98%(F) 2.10%(F) 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.98%(F) 2.10%(F) 2.15%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.10)% (0.96)% (0.82)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.10)% (0.96)% (0.82)%(A)
Portfolio Turnover Rate 22.28% 29.90% 45.30%(A)
Average commission per share(E) $ 0.0509 $ 0.0636
</TABLE>
See notes to financial statements.
86 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 207
GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
5/1/97 THROUGH
GROWTH PORTFOLIO (CLASS C) 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 14.11
Net Investment Income (Loss) (0.06)
Net Realized and Unrealized Gain (Loss) on
Investments 3.15
-------
Total from Investment Operations 3.09
-------
Dividends from Net Investment Income --
Distributions from Capital Gains 0.35
-------
Total Distributions 0.35
-------
Net Asset Value End of Period $ 16.85
-------
Total Return(D) 21.91%
Net Assets End of Period (in thousands) $ 26,601
Ratio of Expenses to Average Net Assets 1.97%(F)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.97%(F)
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.10)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.10)%
Portfolio Turnover Rate 22.28%
Average commission per share(E) $ 0.0509
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
YEAR ENDED -------------------------
GROWTH PORTFOLIO (CLASS Y) DECEMBER 31, 1997 8/8/96 THROUGH 12/31/96
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.12 $ 11.96
Net Investment Income (Loss) (0.02) --
Net Realized and Unrealized Gain (Loss) on
Investments 4.27 1.90
------- -------
Total from Investment Operations 4.25 1.90
------- -------
Dividends from Net Investment Income -- --
Distributions from Capital Gains 0.35 0.74
------- -------
Total Distributions 0.35 0.74
------- -------
Net Asset Value End of Period $ 17.02 $ 13.12
------- -------
Total Return 32.40% 15.91%(B)
Net Assets End of Period (in thousands) $44,596 $ 2,339
Ratio of Expenses to Average Net Assets 0.97%(F) 1.10%(A)(F)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 0.97%(F) 1.10%(A)(F)
Ratio of Net Investment Income (loss) to Average
Net Assets (0.10)% 0.04%(A)
Ratio of Net Investment Income (loss) to Average
Net Assets (Excluding Waivers) (0.10)% 0.04%(A)
Portfolio Turnover Rate 22.28% 29.90%(A)
Average commission per share(E) $0.0509 $0.0636
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 87
<PAGE> 208
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
EQUITY PORTFOLIO (CLASS A) 05/01/97 THROUGH 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 5.00
Net Investment Income (Loss) 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 1.05
-------
Total from Investment Operations 1.06
-------
Dividends from Net Investment Income --
Distributions from Capital Gains 0.10
-------
Total Distributions 0.10
-------
Net Asset Value End of Period $ 5.96
-------
Total Return(C) 21.30%(B)
Net Assets End of Period (in thousands) $ 3,196
Ratio of Expenses to Average Net Assets 1.60%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 6.52%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.26%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (4.66)%(A)
Portfolio Turnover Rate 68.73%(A)
Average commission per share(E) $ 0.0564
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
EQUITY PORTFOLIO (CLASS B) 05/01/97 THROUGH 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 5.00
Net Investment Income (Loss) (0.00)
Net Realized and Unrealized Gain (Loss) on
Investments 1.04
-------
Total from Investment Operations 1.04
-------
Dividends from Net Investment Income --
Distributions from Capital Gains 0.10
-------
Total Distributions 0.10
-------
Net Asset Value End of Period $ 5.94
-------
Total Return(D) 20.80%(B)
Net Assets End of Period (in thousands) $ 1,820
Ratio of Expenses to Average Net Assets 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 6.21%(A)
Ratio of Net Investment Income (loss) to Average
Net Assets (0.23)%(A)
Ratio of Net Investment Income (loss) to Average
Net Assets (Excluding Waivers) (4.29)%(A)
Portfolio Turnover Rate 68.73%(A)
Average commission per share(E) $ 0.0564
</TABLE>
See notes to financial statements.
88 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 209
EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
EQUITY PORTFOLIO (CLASS C) 05/01/97 THROUGH 12/31/97
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 5.00
Net Investment Income (Loss) 0.00
Net Realized and Unrealized Gain (Loss) on
Investments 1.04
-------
Total from Investment Operations 1.04
-------
Dividends from Net Investment Income --
Distributions from Capital Gains 0.10
-------
Total Distributions 0.10
-------
Net Asset Value End of Period $ 5.94
-------
Total Return(D) 20.89%(B)
Net Assets End of Period (in thousands) $ 283
Ratio of Expenses to Average Net Assets 2.15%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 6.01%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.21)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (4.07)%(A)
Portfolio Turnover Rate 68.73%(A)
Average commission per share(E) $ 0.0564
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 89
<PAGE> 210
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
10/1/97 7/17/97
GROWTH AND INCOME PORTFOLIO (CLASS A) THROUGH 12/31/97 THROUGH 9/30/97
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 25.71 $ 25.05
Net Investment Income (Loss) 0.01 --
Net Realized and Unrealized Gain (Loss) on
Investments 0.04 0.66
------- -------
Total from Investment Operations 0.05 0.66
------- -------
Dividends from Net Investment Income 0.11 --
Distributions from Capital Gains 0.46 --
------- -------
Total Distributions 0.57 --
------- -------
Net Asset Value End of Period $ 25.19 $ 25.71
------- -------
Total Return(C) 0.20%(B) 2.63%
Net Assets End of Period (in thousands) $ 4,032 $ 1,109
Ratio of Expenses to Average Net Assets 1.50%(A) 1.50%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.11%(A) 4.47%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.56%(A) 0.07%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.04)%(A) (2.90)%
Portfolio Turnover Rate 1.46%(A) 15.69%
Average commission per share(E) $0.0600 $0.0560
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
10/1/97 7/17/97
GROWTH AND INCOME PORTFOLIO (CLASS B) THROUGH 12/31/97 THROUGH 9/30/97
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 25.68 $ 25.05
Net Investment Income (Loss) (0.01) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments 0.03 0.64
------- -------
Total from Investment Operations 0.02 0.63
------- -------
Dividends from Net Investment Income 0.09 --
Distributions from Capital Gains 0.46 --
------- -------
Total Distributions 0.55 --
------- -------
Net Asset Value End of Period $ 25.15 $ 25.68
------- -------
Total Return(D) 0.07%(B) 2.51%
Net Assets End of Period (in thousands) $ 3,257 $ 992
Ratio of Expenses to Average Net Assets 2.05%(A) 2.05%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.66%(A) 4.59%
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.02)%(A) (0.34)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.63)%(A) (2.87)%
Portfolio Turnover Rate 1.46%(A) 15.69%
Average commission per share(E) $0.0600 $0.0560
</TABLE>
See notes to financial statements.
90 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 211
GROWTH AND INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
10/1/97 7/17/97
GROWTH AND INCOME PORTFOLIO (CLASS C) THROUGH 12/31/97 THROUGH 9/30/97
- --------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 25.68 $ 25.05
Net Investment Income (Loss) (0.02) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments 0.05 0.64
------- -------
Total from Investment Operations 0.03 0.63
------- -------
Dividends from Net Investment Income 0.10 --
Distributions from Capital Gains 0.46 --
Other 0.00 --
------- -------
Total Distributions 0.56 --
------- -------
Net Asset Value End of Period $ 25.15 $ 25.68
------- -------
Total Return(D) 0.10%(B) 2.51%
Net Assets End of Period (in thousands) $ 561 $ 99
Ratio of Expenses to Average Net Assets 2.05%(A) 2.05%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.64%(A) 4.60%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.03%(A) (0.39)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.56)%(A) (2.94)%
Portfolio Turnover Rate 1.46%(A) 15.69%
Average commission per share(E) $0.0600 $0.0560
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
10/1/97 YEAR YEAR YEAR YEAR YEAR
THROUGH ENDED ENDED ENDED ENDED ENDED
GROWTH AND INCOME PORTFOLIO (CLASS Y) 12/31/97 9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 25.73 $ 20.11 $ 16.69 $ 12.72 $ 12.08 $ 10.98
Net Investment Income (Loss) 0.06 .35 0.21 0.13 0.15 0.18
Net Realized and Unrealized Gain (Loss) on
Investments 0.02 6.18 3.45 4.22 0.74 1.84
------- -------- -------- -------- -------- --------
Total from Investment Operations 0.08 6.53 3.66 4.35 0.89 2.02
------- -------- -------- -------- -------- --------
Dividends from Net Investment Income 0.11 .20 0.24 0.16 0.14 0.28
Distributions from Capital Gains 0.46 0.71 -- 0.22 0.11 0.64
Other 0.00 -- -- -- -- --
------- -------- -------- -------- -------- --------
Total Distributions 0.57 .91 0.24 0.38 0.25 0.92
------- -------- -------- -------- -------- --------
Net Asset Value End of Period 25.24 $ 25.73 $ 20.11 $ 16.69 $ 12.72 $ 12.08
------- -------- -------- -------- -------- --------
Total Return 0.31%(B) 33.55% 22.21% 35.24% 7.47% 19.39%
Net Assets End of Period (in thousands) $15,542 $ 15,428 $ 8,865 $ 5,657 $ 3,639 $ 3,094
Ratio of Expenses to Average Net Assets 1.05%(A) .99% 0.97% 0.90% 0.90% 0.90%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.68%(A) 2.20% 2.05% 2.20% 2.23% 3.33%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.96%(A) 0.88% 1.23% 1.52% 1.17% 1.31%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 0.33%(A) (0.33)% 0.15% 0.22% (0.16)% (1.12)%
Portfolio Turnover Rate 1.46%(A) 15.69% 18.08% 25.49% 9.64% 21.79%
Average commission per share(E) $0.0600 $ 0.0560 $ 0.0600 -- -- --
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 91
<PAGE> 212
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
EQUITY INCOME PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 22.44 $ 20.73 $ 16.43 $ 17.75 $ 16.93
Net Investment Income (Loss) 0.17 0.41 0.45 0.44 0.52
Net Realized and Unrealized Gain (Loss) on
Investments 5.95 3.27 5.00 (0.53) 1.74
-------- -------- -------- -------- --------
Total from Investment Operations 6.12 3.68 5.45 (0.09) 2.26
-------- -------- -------- -------- --------
Dividends from Net Investment Income 0.15 0.40 0.45 0.44 0.50
Distributions from Capital Gains 1.99 1.57 0.70 0.79 0.94
-------- -------- -------- -------- --------
Total Distributions 2.14 1.97 1.15 1.23 1.44
-------- -------- -------- -------- --------
Net Asset Value End of Period $ 26.42 $ 22.44 $ 20.73 $ 16.43 $ 17.75
-------- -------- -------- -------- --------
Total Return(C) 28.08% 17.86% 33.38% (0.49)% 13.45%
Net Assets End of Period (in thousands) $ 97,932 $ 72,647 $ 61,906 $ 50,926 $ 49,920
Ratio of Expenses to Average Net Assets 1.50% 1.50% 1.50% 1.50% 1.50%
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 1.62% 1.68% 1.78% 1.73% 1.91%
Ratio of Net Investment Income to Average Net
Assets 1.35% 1.87% 2.33% 2.50% 2.90%
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 1.23% 1.69% 2.06% 2.30% 2.51%
Portfolio Turnover Rate 32.89% 33.22% 25.60% 41.40% 39.90%
Average commission per share(E) $ 0.0600 $ 0.0615
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------- -------------------------
EQUITY INCOME PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 22.30 $ 20.67 $18.12
Net Investment Income (Loss) $ 0.12 0.24 0.29
Net Realized and Unrealized Gain (Loss) on
Investments 5.83 3.30 3.40
-------- -------- ------
Total from Investment Operations 5.95 3.54 3.69
-------- -------- ------
Dividends from Net Investment Income 0.09 0.34 0.44
Distributions from Capital Gains 1.99 1.57 0.70
-------- -------- ------
Total Distributions 2.08 1.91 1.14
-------- -------- ------
Net Asset Value End of Period $ 26.17 $ 22.30 $20.67
-------- -------- ------
Total Return(D) 27.35% 17.22% 20.57%(B)
Net Assets End of Period (in thousands) $ 19,055 $ 5,615 $1,086
Ratio of Expenses to Average Net Assets 2.05% 2.05% 2.05%(A)
Ratio of Expenses to Average Net Assets
(Excluding Waivers) 2.17% 2.23% 2.23%(A)
Ratio of Net Investment Income to Average Net
Assets 0.77% 1.32% 1.56%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 0.65% 1.14% 1.33%(A)
Portfolio Turnover Rate 32.89% 33.22% 25.60%(A)
Average commission per share(E) $ 0.0600 $ 0.0615
</TABLE>
See notes to financial statements.
92 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 213
EQUITY INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
EQUITY INCOME PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 24.26
Net Investment Income (Loss) 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 4.14
-------
Total from Investment Operations 4.18
-------
Dividends from Net Investment Income 0.14
Distributions from Capital Gains 1.99
-------
Total Distributions 2.13
-------
Net Asset Value End of Period 26.31
-------
Total Return(D) 18.21%(B)
Net Assets End of Period (in thousands) $ 1,857
Ratio of Expenses to Average Net Assets 2.05%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.20%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.69%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 0.54%(A)
Portfolio Turnover Rate 32.89%(A)
Average commission per share(E) $0.0600
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 93
<PAGE> 214
CAPITAL APPRECIATION PORTFOLIO
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
CAPITAL APPRECIATION PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 34.21 $ 32.54 $ 28.54 $ 31.10 $ 29.42
Net Investment Income (Loss) (0.37) (0.31) (0.25) (0.13) (0.15)
Net Realized and Unrealized Gain (Loss) on
Investments 7.31 5.69 7.59 (0.95) 1.83
--------- --------- --------- --------- ---------
Total from Investment Operations 6.94 5.38 7.34 (1.08) 1.68
--------- --------- --------- --------- ---------
Dividends from Net Investment Income -- -- -- -- --
Distributions from Capital Gains 5.61 3.71 3.34 1.48 --
--------- --------- --------- --------- ---------
Total Distributions 5.61 3.71 3.34 1.48 --
--------- --------- --------- --------- ---------
Net Asset Value End of Period $ 35.54 $ 34.21 $ 32.54 $ 28.54 $ 31.10
--------- --------- --------- --------- ---------
Total Return(C) 20.27% 16.52% 25.72% (3.46)% 5.71%
Net Assets End of Period (in thousands) $ 112,738 $ 115,253 $ 121,207 $ 101,237 $ 103,187
Ratio of Expenses to Average Net Assets 1.65% 1.60%(F) 1.65% 1.66% 1.64%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.65% 1.60%(F) 1.65% 1.66% 1.64%
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.06)% (0.87)% (0.82)% (0.50)% (0.60)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.06)% (0.87)% (0.82)% (0.50)% (0.60)%
Portfolio Turnover Rate 60.73% 66.42% 65.20% 74.40% 61.90%
Average commission per share(E) $ 0.0463 $ 0.0486
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- -------------------------
CAPITAL APPRECIATION PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 33.86 $ 32.42 $30.04
Net Investment Income (Loss) (0.45) (0.35) (0.12)
Net Realized and Unrealized Gain (Loss) on
Investments 7.09 5.50 5.84
-------- -------- ------
Total from Investment Operations 6.64 5.15 5.72
-------- -------- ------
Dividends from Net Investment Income -- -- --
Distributions from Capital Gains 5.61 3.71 3.34
-------- -------- ------
Total Distributions 5.61 3.71 3.34
-------- -------- ------
Net Asset Value End of Period $ 34.89 $ 33.86 $32.42
-------- -------- ------
Total Return(D) 19.60% 15.87% 18.99%(B)
Net Assets End of Period (in thousands) $ 7,862 $ 5,047 $1,953
Ratio of Expenses to Average Net Assets 2.21% 2.14%(F) 2.08%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.21% 2.14%(F) 2.08%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.61)% (1.43)% (1.41)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.61)% (1.43)% (1.41)%(A)
Portfolio Turnover Rate 60.73% 66.42% 65.20%(A)
Average commission per share(E) $ 0.0463 $ 0.0486
</TABLE>
See notes to financial statements.
94 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 215
CAPITAL APPRECIATION PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM
CAPITAL APPRECIATION PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
-------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 33.54
Net Investment Income (Loss) (0.19)
Net Realized and Unrealized Gain (Loss) on
Investments 7.69
-------
Total from Investment Operations 7.50
-------
Dividends from Net Investment Income 0.00
Distributions from Capital Gains 5.61
-------
Total Distributions 5.61
-------
Net Asset Value End of Period $ 35.43
-------
Total Return(D) 22.35%(B)
Net Assets End of Period (in thousands) $ 126
Ratio of Expenses to Average Net Assets 2.21%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.21%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.88)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.88)%(A)
Portfolio Turnover Rate 60.73%(A)
Average commission per share(E) $0.0463
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 95
<PAGE> 216
SMALL COMPANY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE PERIOD
SMALL COMPANY GROWTH PORTFOLIO (CLASS A) 10/1/97 THROUGH 12/31/97 7/17/97 THROUGH 9/30/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 26.61 $ 24.54
Net Investment Income (Loss) 0.18 (0.05)
Net Realized and Unrealized Gain (Loss) on
Investments (2.85) 2.12
------- -------
Total from Investment Operations (2.67) 2.07
------- -------
Dividends from Net Investment Income -- --
Distributions from Capital Gains 0.55 --
------- -------
Total Distributions 0.55 --
------- -------
Net Asset Value End of Period $ 23.39 $ 26.61
------- -------
Total Return(C) (10.04)%(B) 8.44%
Net Assets End of Period (in thousands) $ 4,861 $ 2,102
Ratio of Expenses to Average Net Assets 1.85%(A) 1.85%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.38%(A) 4.48%
Ratio of Net Investment Income to Average Net
Assets (1.56)%(A) (1.61)%
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) (2.09)%(A) (4.25)%
Portfolio Turnover Rate 23.68%(A) 157.51%
Average commission per share(E) $0.0518 $0.0503
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE PERIOD
SMALL COMPANY GROWTH PORTFOLIO (CLASS B) 10/1/97 THROUGH 12/31/97 7/17/97 THROUGH 9/30/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 26.58 $ 24.54
Net Investment Income (Loss) 0.15 (0.05)
Net Realized and Unrealized Gain (Loss) on
Investments (2.86) 2.09
------- -------
Total from Investment Operations (2.70) 2.04
------- -------
Dividends from Net Investment Income -- --
Distributions from Capital Gains 0.55 --
------- -------
Total Distributions 0.55 --
------- -------
Net Asset Value End of Period $ 23.33 $ 26.58
------- -------
Total Return(D) (10.16)%(B) 8.31%
Net Assets End of Period (in thousands) $ 2,842 $ 1,099
Ratio of Expenses to Average Net Assets 2.40%(A) 2.40%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.93%(A) 5.52%
Ratio of Net Investment Income (Loss) to Average
Net Assets (2.11)%(A) (2.18)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (2.64)%(A) (5.29)%
Portfolio Turnover Rate 23.68%(A) 157.51%
Average commission per share(E) $0.0518 $0.0503
</TABLE>
See notes to financial statements.
96 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 217
SMALL COMPANY GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD FROM FOR THE PERIOD
SMALL COMPANY GROWTH PORTFOLIO (CLASS C) 10/1/97 THROUGH 12/31/97 7/17/97 THROUGH 9/30/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 26.57 $ 24.54
Net Investment Income (Loss) 0.16 (0.07)
Net Realized and Unrealized Gain (Loss) on
Investments (2.86) 2.10
------- -------
Total from Investment Operations (2.70) 2.03
------- -------
Dividends from Net Investment Income -- --
Distributions from Capital Gains 0.55 --
Other -- --
------- -------
Total Distributions 0.55 --
------- -------
Net Asset Value End of Period $ 23.32 $ 26.57
------- -------
Total Return(D) (10.16)%(B) 8.27%
Net Assets End of Period (in thousands) $ 795 $ 201
Ratio of Expenses to Average Net Assets 2.40%(A) 2.40%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.93%(A) 5.91%
Ratio of Net Investment Income (Loss) to Average
Net Assets (2.11)%(A) (2.15)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (2.64)%(A) (5.65)%
Portfolio Turnover Rate 23.68%(A) 157.51%
Average commission per share(E) $0.0518 $0.0503
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM YEAR YEAR YEAR YEAR YEAR
10/1/97 THROUGH ENDED ENDED ENDED ENDED ENDED
SMALL COMPANY GROWTH PORTFOLIO (CLASS Y) 12/31/97 9/30/97 9/30/96 9/30/95 9/30/94 9/30/93
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 26.62 $ 25.08 $ 19.05 $ 14.01 $ 14.74 $ 11.83
Net Investment Income (Loss) 0.16 (0.13) (0.17) (0.12) (0.04) (0.13)
Net Realized and Unrealized Gain (Loss) on
Investments (2.81) 3.73 7.62 5.49 1.58 4.36
------- -------- -------- -------- -------- --------
Total from Investment Operations (2.64) 3.60 7.45 5.37 1.54 4.23
------- -------- -------- -------- -------- --------
Dividends from Net Investment Income -- -- -- -- -- 0.11
Distributions from Capital Gains 0.55 2.06 1.42 0.33 2.27 1.21
Other -- --
------- -------- -------- -------- -------- --------
Total Distributions 0.55 2.06 1.42 0.33 2.27 1.32
------- -------- -------- -------- -------- --------
Net Asset Value End of Period $ 23.43 $ 26.62 $ 25.08 $ 19.05 $ 14.01 $ 14.74
------- -------- -------- -------- -------- --------
Total Return (9.92)%(B) 16.24% 42.07% 39.20% 11.89% 38.05%
Net Assets End of Period (in thousands) $13,540 $ 15,355 $ 6,609 $ 2,950 $ 1,825 $ 1,352
Ratio of Expenses to Average Net Assets 1.40%(A) 1.84% 1.96% 1.85% 1.85% 1.85%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.96%(A) 3.08% 3.46% 5.15% 6.16% 8.06%
Ratio of Net Investment Income (Loss) to Average
Net Assets (1.12)%(A) (1.30)% (1.43)% (1.33)% (1.37)% (1.34)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (1.68)%(A) (2.54)% (2.93)% (4.63)% (5.68)% (7.55)%
Portfolio Turnover Rate 23.68%(A) 157.51% 77.94% 84.05% 72.59% 144.49%
Average commission per share(E) $0.0518 $ 0.0503 $ 0.0486 -- -- --
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 97
<PAGE> 218
SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
----------------------------------------- -------------------------
SMALL COMPANY VALUE PORTFOLIO (CLASS A) 1997 1996 1995 1994 10/1/93 THROUGH 12/31/93
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 5.74 $ 5.43 $ 5.17 $ 5.29 $ 5.00
Net Investment Income (Loss) 0.01 (0.01) 0.02 0.03 0.01
Net Realized and Unrealized Gain (Loss) on
Investments 2.53 0.62 0.46 (0.01) 0.29
-------- -------- -------- -------- ------
Total from Investment Operations 2.54 0.61 0.48 0.02 0.30
-------- -------- -------- -------- ------
Dividends from Net Investment Income -- -- 0.02 0.03 0.01
Distributions from Capital Gains 0.53 0.30 0.20 0.11 --
-------- -------- -------- -------- ------
Total Distributions 0.53 0.30 0.22 0.14 0.01
-------- -------- -------- -------- ------
Net Asset Value End of Period $ 7.75 $ 5.74 $ 5.43 $ 5.17 $ 5.29
-------- -------- -------- -------- ------
Total Return(C) 44.24% 11.28% 9.28% 0.34% 5.92%(B)
Net Assets End of Period (in thousands) $ 45,310 $ 17,308 $ 19,720 $ 22,120 $8,118
Ratio of Expenses to Average Net Assets 1.75% 1.75% 1.75% 1.75% 1.75%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.95% 2.38% 2.21% 2.15% 4.00%(A)
Ratio of Net Investment Income to Average Net
Assets 0.05% (0.13)% 0.32% 0.60% 0.10%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) (0.15)% (0.76)% (0.14)% 0.18% (1.54)%(A)
Portfolio Turnover Rate 62.51% 143.58% 36.50% 16.70% --%
Average commission per share(E) $ 0.0470 $ 0.0483
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- -------------------------
SMALL COMPANY VALUE PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 5.69 $ 5.41 $ 5.28
Net Investment Income (Loss) -- (0.03) (0.01)
Net Realized and Unrealized Gain (Loss) on
Investments 2.47 0.61 0.36
-------- -------- ------
Total from Investment Operations 2.47 0.58 0.35
-------- -------- ------
Dividends from Net Investment Income -- -- 0.02
Distributions from Capital Gains 0.53 0.30 0.20
-------- -------- ------
Total Distributions 0.53 0.30 0.22
-------- -------- ------
Net Asset Value End of Period $ 7.63 $ 5.69 $ 5.41
-------- -------- ------
Total Return(D) 43.40% 10.77% 6.87%(B)
Net Assets End of Period (in thousands) $ 22,013 $ 2,606 $ 862
Ratio of Expenses to Average Net Assets 2.30% 2.30% 2.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.44% 2.92% 2.78%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.67)% (0.77)% (0.40)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.81)% (1.39)% (0.90)%(A)
Portfolio Turnover Rate 62.51% 143.58% 36.50%(A)
Average commission per share(E) $ 0.0470 $ 0.0483
</TABLE>
See notes to financial statements.
98 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 219
SMALL COMPANY VALUE PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
SMALL COMPANY VALUE PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 6.14
Net Investment Income (Loss) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 2.15
-------
Total from Investment Operations 2.13
-------
Dividends from Net Investment Income --
Distributions from Capital Gains 0.53
-------
Total Distributions 0.53
-------
Net Asset Value End of Period $ 7.74
-------
Total Return(D) 34.68%(B)
Net Assets End of Period (in thousands) $ 2,684
Ratio of Expenses to Average Net Assets 2.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.38%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.88)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.95)%(A)
Portfolio Turnover Rate 62.51%(A)
Average commission per share(E) $0.0470
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- --------------------------
SMALL COMPANY VALUE PORTFOLIO (CLASS Y) 1997 1996 5/25/95 THROUGH 12/31/95
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 5.77 $ 5.43 $ 5.37
Net Investment Income (Loss) 1.45 0.01 0.04
Net Realized and Unrealized Gain (Loss) on
Investments 1.12 0.63 0.26
-------- -------- ------
Total from Investment Operations 2.57 0.64 0.30
-------- -------- ------
Dividends from Net Investment Income -- -- 0.04
Distributions from Capital Gains 0.53 0.30 0.20
-------- -------- ------
Total Distributions 0.53 0.30 0.24
-------- -------- ------
Net Asset Value End of Period $ 7.81 $ 5.77 $ 5.43
-------- -------- ------
Total Return 44.53% 11.83% 5.55%(B)
Net Assets End of Period (in thousands) $ 119 $ 1,926 $ 2,832
Ratio of Expenses to Average Net Assets 1.30% 1.30% 1.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.85% 1.92% 1.81%(A)
Ratio of Net Investment Income to Average Net
Assets 2.74% 0.35% 0.18%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 2.19% (0.27)% (0.33)%(A)
Portfolio Turnover Rate 62.51% 143.58% 36.50%(A)
Average commission per share(E) $ 0.0470 $ 0.0483
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 99
<PAGE> 220
INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 17.10 $ 16.08 $ 14.70 $ 17.44 $ 13.23
Net Investment Income (Loss) 0.08 0.10 0.11 (0.01) (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 0.73 1.88 2.12 (0.49) 4.79
-------- -------- -------- -------- --------
Total from Investment Operations 0.81 1.98 2.23 (0.50) 4.77
-------- -------- -------- -------- --------
Dividends from Net Investment Income 0.07 0.09 0.09 -- --
Distributions from Capital Gains 1.13 0.87 0.76 2.24 0.17
Other -- -- -- -- 0.39
-------- -------- -------- -------- --------
Total Distributions 1.20 0.96 0.85 2.24 0.56
-------- -------- -------- -------- --------
Net Asset Value End of Period $ 16.71 $ 17.10 $ 16.08 $ 14.70 $ 17.44
-------- -------- -------- -------- --------
Total Return(C) 4.75% 12.32% 15.17% (2.82)% 36.05%
Net Assets End of Period (in thousands) $ 38,020 $ 34,837 $ 28,628 $ 27,523 $ 22,900
Ratio of Expenses to Average Net Assets 2.00% 2.00% 2.00% 2.00% 2.00%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.11% 2.19% 2.40% 2.51% 3.06%
Ratio of Net Investment Income (Loss) to Average
Net Assets 0.50% 0.61% 0.70% (0.20)% (0.10)%
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 0.39% 0.42% 0.30% (0.70)% (1.15)%
Portfolio Turnover Rate 27.08% 23.79% 31.10% 116.10% 70.10%
Average commission per share(E) $ 0.0275 $ 0.0221
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------- -------------------------
INTERNATIONAL GROWTH PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 16.97 $ 16.02 $14.82
Net Investment Income (Loss) 0.01 0.01 (0.02)
Net Realized and Unrealized Gain (Loss) on
Investments 0.69 1.87 2.08
-------- -------- ------
Total from Investment Operations 0.70 1.88 2.06
-------- -------- ------
Dividends from Net Investment Income 0.01 0.06 0.10
Distributions from Capital Gains 1.13 0.87 0.76
Other -- -- --
-------- -------- ------
Total Distributions 1.14 0.93 0.86
-------- -------- ------
Net Asset Value End of Period $ 16.53 $ 16.97 $16.02
-------- -------- ------
Total Return(D) 4.17% 11.72% 13.88%(B)
Net Assets End of Period (in thousands) $ 9,878 $ 4,276 $1,094
Ratio of Expenses to Average Net Assets 2.55% 2.55% 2.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.67% 2.75% 2.75%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.06)% 0.09% (0.65)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.18)% (0.11)% (0.85)%(A)
Portfolio Turnover Rate 27.08% 23.79% 31.10%(A)
Average commission per share(E) $ 0.0275 $ 0.0221
</TABLE>
See notes to financial statements.
100 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 221
INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
INTERNATIONAL GROWTH PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 17.51
Net Investment Income (Loss) (0.03)
Net Realized and Unrealized Gain (Loss) on
Investments 0.39
-------
Total from Investment Operations 0.36
-------
Dividends from Net Investment Income 0.08
Distributions from Capital Gains 1.13
-------
Total Distributions 1.21
-------
Net Asset Value End of Period $ 16.66
-------
Total Return(D) 2.07%(B)
Net Assets End of Period (in thousands) $ 1,113
Ratio of Expenses to Average Net Assets 2.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.75%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.51)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.71)%(A)
Portfolio Turnover Rate 27.08%(A)
Average commission per share(E) $0.0275
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- -------------------------
INTERNATIONAL GROWTH PORTFOLIO (CLASS Y) 1997 1996 7/5/95 THROUGH 12/31/95
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 17.10 $ 16.07 $14.93
Net Investment Income (Loss) 0.17 0.14 0.02
Net Realized and Unrealized Gain (Loss) on
Investments 0.72 1.92 2.02
-------- -------- ------
Total from Investment Operations 0.89 2.06 2.04
-------- -------- ------
Dividends from Net Investment Income 0.15 0.16 0.14
Distributions from Capital Gains 1.13 0.87 0.76
-------- -------- ------
Total Distributions $ 1.28 1.03 0.90
-------- -------- ------
Net Asset Value End of Period $ 16.71 $ 17.10 $16.07
-------- -------- ------
-------- -------- ------
Total Return 5.21% 12.86% 13.65%(B)
Net Assets End of Period (in thousands) $ 10,986 $ 8,828 $3,109
Ratio of Expenses to Average Net Assets 1.55% 1.55% 1.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.66% 1.75% 1.75%(A)
Ratio of Net Investment Income to Average Net
Assets 0.95% 1.03% 0.26%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 0.84% 0.84% 0.05%(A)
Portfolio Turnover Rate 27.08% 23.79% 31.10%(A)
Average commission per share(E) $ 0.0275 $ 0.0221
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 101
<PAGE> 222
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 11.80 $ 11.83 $ 10.62 $ 12.44 $ 12.47
Net Investment Income (Loss) 0.73 0.74 0.76 0.87 0.92
Net Realized and Unrealized Gain (Loss) on
Investments 0.23 (0.03) 1.21 (1.82) 0.21
-------- -------- -------- -------- ---------
Total from Investment Operations 0.96 0.71 1.97 (0.95) 1.13
-------- -------- -------- -------- ---------
Dividends from Net Investment Income 0.73 0.74 0.76 0.87 0.92
Distributions from Capital Gains -- -- -- -- 0.24
-------- -------- -------- -------- ---------
Total Distributions 0.73 0.74 0.76 0.87 1.16
-------- -------- -------- -------- ---------
Net Asset Value End of Period $ 12.03 $ 11.80 $ 11.83 $ 10.62 $ 12.44
-------- -------- -------- -------- ---------
Total Return(C) 8.39% 6.29% 19.00% (7.81)% 9.26%
Net Assets End of Period (in thousands) $ 68,639 $ 73,693 $ 86,224 $ 84,431 $ 106,541
Ratio of Expenses to Average Net Assets 1.30% 1.30% 1.30% 1.30% 1.30%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.46% 1.42% 1.44% 1.35% 1.44%
Ratio of Net Investment Income to Average Net
Assets 6.16% 6.35% 6.66% 7.60% 7.20%
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 6.00% 6.23% 6.52% 7.59% 7.03%
Portfolio Turnover Rate 9.61% 0.17% --% 27.20% 90.10%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
------------------ -------------------------
GOVERNMENT SECURITIES PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 11.79 $ 11.83 $11.12
Net Investment Income (Loss) 0.66 0.68 0.44
Net Realized and Unrealized Gain (Loss) on
Investments 0.23 (0.04) 0.71
-------- ------- ------
Total from Investment Operations 0.89 0.64 1.15
-------- ------- ------
Dividends from Net Investment Income 0.66 0.68 0.44
Distributions from Capital Gains -- -- --
-------- ------- ------
Total Distributions(D) 0.66 0.68 0.44
-------- ------- ------
Net Asset Value End of Period $ 12.02 $ 11.79 $11.83
-------- ------- ------
Total Return 7.81% 5.61% 10.47%(B)
Net Assets End of Period (in thousands) $ 12,285 $ 5,683 $2,124
Ratio of Expenses to Average Net Assets 1.85% 1.85% 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.01% 1.96% 1.91%(A)
Ratio of Net Investment Income to Average Net
Assets 5.55% 5.79% 5.64%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 5.39% 5.68% 5.58%(A)
Portfolio Turnover Rate 9.61% 0.17% --%(A)
</TABLE>
See notes to financial statements.
102 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 223
GOVERNMENT SECURITIES PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
GOVERNMENT SECURITIES PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $11.63
Net Investment Income (Loss) 0.46
Net Realized and Unrealized Gain (Loss) on
Investments 0.40
------
Total from Investment Operations 0.86
------
Dividends from Net Investment Income 0.46
Distributions from Capital Gains --
------
Total Distributions 0.46
------
Net Asset Value End of Period $12.03
------
Total Return(D) 7.49%(B)
Net Assets End of Period (in thousands) $ 498
Ratio of Expenses to Average Net Assets 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.03%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 5.39%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 5.21%(A)
Portfolio Turnover Rate 9.61%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
7/17/97 THROUGH
GOVERNMENT SECURITIES PORTFOLIO (CLASS Y) 12/31/97
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $11.87
Net Investment Income (Loss) 0.35
Net Realized and Unrealized Gain (Loss) on
Investments 0.15
------
Total from Investment Operations 0.50
------
Dividends from Net Investment Income 0.35
Distributions from Capital Gains --
------
Total Distributions 0.35
------
Net Asset Value End of Period $12.02
------
Total Return 4.02%(B)
Net Assets End of Period (in thousands) $7,569
Ratio of Expenses to Average Net Assets 0.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.02%(A)
Ratio of Net Investment Income to Average Net
Assets 6.40%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 6.23%(A)
Portfolio Turnover Rate 9.61%(A)
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 103
<PAGE> 224
HIGH-YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
----------------------------------------------------
HIGH-YIELD BOND PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 11.84 $ 11.39 $ 10.72 $ 11.70 $ 10.83
Net Investment Income (Loss) 0.99 0.94 0.99 0.97 0.95
Net Realized and Unrealized Gain (Loss) on
Investments 0.51 0.45 0.67 (0.97) 0.89
-------- -------- -------- -------- --------
Total from Investment Operations 1.50 1.39 1.66 -- 1.84
-------- -------- -------- -------- --------
Dividends from Net Investment Income 0.99 0.94 0.99 0.98 0.97
Distributions from Capital Gains -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions 0.99 0.94 0.99 0.98 0.97
-------- -------- -------- -------- --------
Net Asset Value End of Period $ 12.35 $ 11.84 $ 11.39 $ 10.72 $ 11.70
-------- -------- -------- -------- --------
Total Return(C) 13.18% 12.78% 16.00% 0.05% 17.58%
Net Assets End of Period (in thousands) $ 66,422 $ 54,129 $ 52,182 $ 44,822 $ 44,361
Ratio of Expenses to Average Net Assets 1.30% 1.30% 1.30% 1.30% 1.30%(G)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.47% 1.50% 1.52% 1.45% 1.59%
Ratio of Net Investment Income to Average Net
Assets 8.20% 8.21% 8.80% 8.60% 8.20%
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 8.03% 8.01% 8.58% 8.52% 7.95%
Portfolio Turnover Rate 175.38% 180.13% 88.50% 113.00% 121.20%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- -------------------------
HIGH-YIELD BOND PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 11.84 $ 11.39 $11.11
Net Investment Income (Loss) 0.77 0.88 0.61
Net Realized and Unrealized Gain (Loss) on
Investments 0.51 0.45 0.28
-------- -------- ------
Total from Investment Operations 1.28 1.33 0.89
-------- -------- ------
Dividends from Net Investment Income 0.77 0.88 0.61
Distributions from Capital Gains -- -- --
-------- -------- ------
Total Distributions 0.77 0.88 0.61
-------- -------- ------
Net Asset Value End of Period $ 12.35 $ 11.84 $11.39
-------- -------- ------
Total Return(D) 12.59% 12.16% 8.12%(B)
Net Assets End of Period (in thousands) $ 19,898 $ 7,892 $2,951
Ratio of Expenses to Average Net Assets 1.85% 1.85% 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.02% 2.05% 2.09%(A)
Ratio of Net Investment Income to Average Net
Assets 7.51% 7.74% 7.84%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 7.35% 7.55% 7.68%(A)
Portfolio Turnover Rate 175.38% 180.13% 88.50%(A)
</TABLE>
See notes to financial statements.
104 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 225
HIGH-YIELD BOND PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
5/1/97 THROUGH
HIGH-YIELD BOND PORTFOLIO (CLASS C) 12/31/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 11.71
Net Investment Income (Loss) 0.61
Net Realized and Unrealized Gain (Loss) on
Investments 0.64
-------
Total from Investment Operations 1.25
-------
Dividends from Net Investment Income 0.61
Distributions from Capital Gains --
-------
Total Distributions 0.61
-------
Net Asset Value End of Period $ 12.35
-------
Total Return(D) 10.87%(B)
Net Assets End of Period (in thousands) $ 1,463
Ratio of Expenses to Average Net Assets 1.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.01%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 6.84%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 6.68%(A)
Portfolio Turnover Rate 175.38%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
7/25/97
THROUGH
HIGH-YIELD BOND PORTFOLIO (CLASS Y) 12/31/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 12.17
Net Investment Income (Loss) 0.67
Net Realized and Unrealized Gain (Loss) on
Investments 0.18
-------
Total from Investment Operations 0.85
-------
Dividends from Net Investment Income 0.67
Distributions from Capital Gains --
-------
Total Distributions 0.67
-------
Net Asset Value End of Period $ 12.35
-------
Total Return 5.24%(B)
Net Assets End of Period (in thousands) $ 809
Ratio of Expenses to Average Net Assets 0.85%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.02%(A)
Ratio of Net Investment Income to Average Net
Assets 8.26%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 8.09%(A)
Portfolio Turnover Rate 175.38%(A)
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 105
<PAGE> 226
TAX-EXEMPT INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
TAX-EXEMPT INCOME PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.83 $ 13.99 $ 12.80 $ 14.31 $ 13.60
Net Investment Income (Loss) 0.63 0.64 0.65 0.67 0.70
Net Realized and Unrealized Gain (Loss) on
Investments 0.31 (0.16) 1.21 (1.48) 0.73
-------- -------- -------- -------- --------
Total from Investment Operations 0.94 0.48 1.86 (0.81) 1.43
-------- -------- -------- -------- --------
Dividends from Net Investment Income 0.63 0.64 0.65 0.68 0.70
Distributions from Capital Gains 0.19 -- 0.02 0.02 0.02
-------- -------- -------- -------- --------
Total Distributions 0.82 0.64 0.67 0.70 0.72
-------- -------- -------- -------- --------
Net Asset Value End of Period $ 13.95 $ 13.83 $ 13.99 $ 12.80 $ 14.31
-------- -------- -------- -------- --------
Total Return(C) 6.96% 3.54% 14.85% (5.69)% 10.76%
Net Assets End of Period (in thousands) $ 23,695 $ 28,478 $ 33,626 $ 34,297 $ 41,702
Ratio of Expenses to Average Net Assets 1.22% 1.25% 1.25% 1.25% 1.25%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.60% 1.41% 1.42% 1.28% 1.39%
Ratio of Net Investment Income to Average Net
Assets 4.50% 4.64% 4.82% 5.00% 4.90%
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 4.12% 4.48% 4.65% 4.97% 4.79%
Portfolio Turnover Rate 0.94% 0.91% 0.75% 25.70% 8.30%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
----------------- -------------------------
TAX-EXEMPT INCOME PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 13.83 $ 13.99 $13.44
Net Investment Income (Loss) 0.55 0.56 0.38
Net Realized and Unrealized Gain (Loss) on
Investments 0.31 (0.16) 0.57
------- ------- ------
Total from Investment Operations 0.86 0.40 0.95
------- ------- ------
Dividends from Net Investment Income 0.55 0.56 0.38
Distributions from Capital Gains 0.19 -- 0.02
------- ------- ------
Total Distributions 0.74 0.56 0.40
------- ------- ------
Net Asset Value End of Period $ 13.95 $ 13.83 $13.99
------- ------- ------
Total Return(D) 6.36% 2.96% 7.18%(B)
Net Assets End of Period (in thousands) $ 2,883 $ 2,037 $ 912
Ratio of Expenses to Average Net Assets 1.76% 1.80% 1.80%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.16% 1.96% 1.98%(A)
Ratio of Net Investment Income to Average Net
Assets 3.94% 4.07% 4.08%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 3.54% 3.92% 3.94%(A)
Portfolio Turnover Rate 0.94% 0.91% 0.75%(A)
</TABLE>
See notes to financial statements.
106 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 227
TAX-EXEMPT INCOME PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
5/1/97 THROUGH
TAX-EXEMPT INCOME PORTFOLIO (CLASS C) 12/31/97
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $13.68
Net Investment Income (Loss) 0.36
Net Realized and Unrealized Gain (Loss) on
Investments 0.46
------
Total from Investment Operations 0.82
------
Dividends from Net Investment Income 0.36
Distributions from Capital Gains 0.19
------
Total Distributions 0.55
------
Net Asset Value End of Period $13.95
------
Total Return(D) 6.14%(B)
Net Assets End of Period (in thousands) $ 184
Ratio of Expenses to Average Net Assets 1.67%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.34%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 3.99%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 3.32%(A)
Portfolio Turnover Rate 0.94%(A)
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 107
<PAGE> 228
MANAGED PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, FOR THE PERIOD
------------------------------- -------------------------
MANAGED PORTFOLIO (CLASS A) 1997 1996 1995 10/1/94 THROUGH 12/31/94
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 7.97 $ 6.70 $ 4.91 $ 5.00
Net Investment Income (Loss) 0.04 0.06 0.04 0.01
Net Realized and Unrealized Gain (Loss) on Investments 1.64 1.41 1.81 (0.09)
--------- --------- --------- ------
Total from Investment Operations 1.68 1.47 1.85 (0.08)
--------- --------- --------- ------
Dividends from Net Investment Income 0.04 0.06 0.03 0.01
Distributions from Capital Gains 0.36 0.14 0.03 --
--------- --------- --------- ------
Total Distributions 0.40 0.20 0.06 0.01
--------- --------- --------- ------
Net Asset Value End of Period $ 9.25 $ 7.97 $ 6.70 $ 4.91
--------- --------- --------- ------
Total Return(C) 21.05% 22.08% 37.68% (1.58)%(B)
Net Assets End of Period (in thousands) $ 156,608 $ 101,022 $ 47,839 $ 7,872
Ratio of Expenses to Average Net Assets 1.49% 1.57% 1.75% 1.75%(A)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 1.49% 1.57% 1.90% 3.71%(A)
Ratio of Net Investment Income to Average Net Assets 0.47% 1.12% 1.09% 1.30%(A)
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers) 0.47% 1.12% 0.94% (0.32)%(A)
Portfolio Turnover Rate 28.17% 33.21% 26.40% 27.10%(A)
Average commission per share(E) $ 0.0552 $ 0.0551
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
-------------------- -----------------------
MANAGED PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 7.93 $ 6.68 $ 5.68
Net Investment Income (Loss) (0.01) 0.02 0.01
Net Realized and Unrealized Gain (Loss) on Investments 1.63 1.41 1.05
--------- --------- -------
Total from Investment Operations 1.62 1.43 1.06
--------- --------- -------
Dividends from Net Investment Income -- 0.04 0.03
Distributions from Capital Gains 0.36 0.14 0.03
--------- --------- -------
Total Distributions 0.36 0.18 0.06
--------- --------- -------
Net Asset Value End of Period $ 9.19 $ 7.93 $ 6.68
--------- --------- -------
Total Return(D) 20.45% 21.50% 18.38%(B)
Net Assets End of Period (in thousands) $ 110,213 $ 57,037 $ 16,792
Ratio of Expenses to Average Net Assets 2.04% 2.13% 2.30%(A)
Ratio of Expenses to Average Net Assets (Excluding Waivers) 2.04% 2.13% 2.45%(A)
Ratio of Net Investment Income to Average Net Assets (0.09)% 0.52% 0.31%(A)
Ratio of Net Investment Income to Average Net Assets
(Excluding Waivers) (0.09)% 0.52% 0.14%(A)
Portfolio Turnover Rate 28.17% 33.21% 26.40%(A)
Average commission per share(E) $ 0.0552 $ 0.0551
</TABLE>
See notes to financial statements.
108 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 229
MANAGED PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MANAGED PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 8.24
Net Investment Income (Loss) (0.00)
Net Realized and Unrealized Gain (Loss) on
Investments 1.38
-------
Total from Investment Operations 1.38
-------
Dividends from Net Investment Income 0.05
Distributions from Capital Gains 0.36
-------
Total Distributions 0.41
-------
Net Asset Value End of Period $ 9.21
-------
Total Return(D) 16.74%(B)
Net Assets End of Period (in thousands) $ 3,614
Ratio of Expenses to Average Net Assets 2.06%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 2.06%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (0.18)%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) (0.18)%(A)
Portfolio Turnover Rate 28.17%(A)
Average commission per share $ 0.0552
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31, FOR THE PERIOD
------------------- -----------------------
MANAGED PORTFOLIO (CLASS Y) 1997 1996 7/5/95 THROUGH 12/31/95
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 7.98 $ 6.70 $ 6.17
Net Investment Income (Loss) 0.08 0.09 0.03
Net Realized and Unrealized Gain (Loss) on
Investments 1.64 1.42 0.57
-------- -------- -------
Total from Investment Operations 1.72 1.51 0.60
-------- -------- -------
Dividends from Net Investment Income 0.07 0.09 0.04
Distributions from Capital Gains 0.36 0.14 0.03
-------- -------- -------
Total Distributions 0.43 0.23 0.07
-------- -------- -------
Net Asset Value End of Period $ 9.27 $ 7.98 $ 6.70
-------- -------- -------
Total Return 21.60% 22.63% 9.80%(B)
Net Assets End of Period (in thousands) $ 80,879 $ 57,794 $26,664
Ratio of Expenses to Average Net Assets 1.04% 1.12% 1.30%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.04% 1.12% 1.41%(A)
Ratio of Net Investment Income to Average Net
Assets 0.92% 1.57% 1.39%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 0.92% 1.57% 1.28%(A)
Portfolio Turnover Rate 28.17% 33.21% 26.40%(A)
Average commission per share(E) $ 0.0552 $ 0.0551
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 109
<PAGE> 230
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
MONEY MARKET PORTFOLIO (CLASS A) 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net Investment Income (Loss) 0.05 0.04 0.05 0.03 0.02
-------- -------- -------- -------- --------
Total from Investment Operations 0.05 0.04 0.05 0.03 0.02
-------- -------- -------- -------- --------
Dividends from Net Investment Income 0.05 0.04 0.05 0.03 0.02
-------- -------- -------- -------- --------
Total Distributions 0.05 0.04 0.05 0.03 0.02
-------- -------- -------- -------- --------
Net Asset Value End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Total Return(C) 4.69% 4.51% 5.05% 3.34% 2.24%
Net Assets End of Period (in thousands) $ 68,466 $ 59,074 $ 40,325 $ 32,334 $ 18,302
Ratio of Expenses to Average Net Assets 1.00% 1.00% 1.00% 1.00% 1.00%
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.24% 1.18% 1.35% 1.33% 1.72%
Ratio of Net Investment Income to Average Net
Assets 4.59% 4.42% 4.92% 3.30% 2.20%
Ratio of Net Investment to Average Net Assets
(Excluding Waivers) 4.35% 4.24% 4.57% 3.08% 1.47%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, FOR THE PERIOD
----------------- -------------------------
MONEY MARKET PORTFOLIO (CLASS B) 1997 1996 5/1/95 THROUGH 12/31/95
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value Beginning of Period $ 1.00 $ 1.00 $1.00
Net Investment Income (Loss) 0.04 0.04 0.03
------- ------- -----
Total from Investment Operations 0.04 0.04 0.03
------- ------- -----
Dividends from Net Investment Income 0.04 0.04 0.03
------- ------- -----
Total Distributions 0.04 0.04 0.03
------- ------- -----
Net Asset Value End of Period $ 1.00 $ 1.00 $1.00
------- ------- -----
Total Return(D) 4.11% 3.94% 2.95%(B)
Net Assets End of Period (in thousands) $ 5,980 $ 1,344 $ 394
Ratio of Expenses to Average Net Assets 1.55% 1.55% 1.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.79% 1.73% 1.88%(A)
Ratio of Net Investment Income to Average Net
Assets 4.09% 3.85% 4.23%(A)
Ratio of Net Investment Income to Average Net
Assets (Excluding Waivers) 3.85% 3.68% 3.90%(A)
</TABLE>
See notes to financial statements.
110 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 231
MONEY MARKET PORTFOLIO
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD IS AS FOLLOWS:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
-----------------------
MONEY MARKET PORTFOLIO (CLASS C) 5/1/97 THROUGH 12/31/97
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 1.00
Net Investment Income (Loss) 0.02
------
Total from Investment Operations 0.02
------
Dividends from Net Investment Income 0.02
------
Total Distributions 0.02
------
Net Asset Value End of Period $ 1.00
------
Total Return(D) 2.86%(B)
Net Assets End of Period (in thousands) $1,021
Ratio of Expenses to Average Net Assets 1.55%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 1.85%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 4.15%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 3.85%(A)
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
------------------------
MONEY MARKET PORTFOLIO (CLASS Y) 7/17/97 THROUGH 12/31/97
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Asset Value Beginning of Period $ 1.00
Net Investment Income (Loss) 0.02
------
Total from Investment Operations 0.02
------
Dividends from Net Investment Income 0.02
------
Total Distributions 0.02
------
Net Asset Value End of Period $ 1.00
------
Total Return 2.31%(B)
Net Assets End of Period (in thousands) $2,700
Ratio of Expenses to Average Net Assets 0.70%(A)
Ratio of Expenses to Average Net Assets (Excluding
Waivers) 0.95%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets 4.96%(A)
Ratio of Net Investment Income (Loss) to Average
Net Assets (Excluding Waivers) 4.71%(A)
</TABLE>
See notes to financial statements.
THE ENTERPRISE GROUP OF FUNDS, INC. 111
<PAGE> 232
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
1. ORGANIZATION OF THE FUND
The Enterprise Group of Funds, Inc. (the "Fund") is registered under The
Investment Company Act of 1940 as an open-end management investment company and
consists of the Growth, Equity, Growth and Income, Equity Income, Capital
Appreciation, Small Company Growth, Small Company Value, International Growth,
Government Securities, High-Yield Bond, Tax-Exempt Income, Managed and Money
Market Portfolios.
Prior to July 17, 1997, the Growth and Income and Small Company Growth
Portfolios were part of Retirement System Fund, Inc. ("RSF"). On July 17, 1997,
the Fund acquired all of the assets and liabilities of these RSF portfolios. The
acquisition, which was approved by the shareholders of Retirement System Fund,
Inc. was accomplished by an even exchange of shares of the Fund for the shares
then outstanding of RSF as follows:
<TABLE>
<CAPTION>
PORTFOLIO SHARES RSF NAV
- -------------------------------------------------------------------------------- ---------- -----------
<S> <C> <C>
Growth and Income 600,588 $ 25.21
Small Company Growth 578,969 24.76
</TABLE>
In addition, on July 17, 1997, the Fund acquired the net assets of the
Intermediate-Term Fixed-Income Fund and Money Market Fund which were combined
with the net assets of the Fund's Government Securities and Money Market
Portfolios, respectively.
Based on the opinion of Fund counsel, the reorganization qualified as a tax-free
reorganization for federal income tax purposes with no gain or loss recognized
to the funds or their shareholders. The net assets of the corresponding RSF
Growth and Income Portfolio, Small Company Growth Portfolio, Government
Securities Portfolio and Money Market Portfolio were $15,141,711, $14,335,622,
$6,865,850 and $2,061,980, respectively. The tax and book year-end of the Growth
and Income and Small Company Growth Portfolios has been changed to December 31
after the close of the previous year end September 30, 1997.
The Fund offers Class A, B, C and Y shares. Shares of each Class represent an
identical interest in the investments of their respective portfolios and
generally have the same rights, but are offered with different sales charge and
distribution fee arrangements. Class A shares are subject to a maximum sales
charge of 4.75%. Upon redemption, Class B shares are subject to a maximum
contingent sales charge of 5%, which declines to zero after six years and which
is based on the lesser of net asset value at the time of purchase or redemption.
Class B shares will automatically convert to Class A shares of the same fund
eight years after purchase. On May 1, 1997, the Fund began offering Class C
shares which are subject to a maximum contingent sales charge of 1%, which
declines to zero after one year and which is based on the lesser of net asset
value at the time of purchase or redemption. Class Y shares are not subject to
sales charges.
112 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 233
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION -- Domestic equity securities are valued at the last sale
price or, in the absence of any sale on that date, the closing bid price.
Domestic equity securities without last trade information are valued at the last
bid price. Debt securities and foreign securities are valued on the basis of
independent pricing services approved by the Board of Directors, and such
pricing services generally follow the same procedures in valuing foreign equity
securities as are described above as to domestic equity securities. Securities
held by the Money Market Portfolio are valued on an amortized cost basis. Under
the amortized cost method, a security is valued at its cost and any discount or
premium is amortized over the period until maturity, without taking into account
the impact of fluctuating interest rates on the market value of the security
unless the aggregate deviation from net asset value as calculated by using
available market quotations exceeds 1/2 of 1%.
SPECIAL VALUATION RISKS -- As part of its investment program, the Government
Securities Portfolio invests in collateralized mortgage obligations ("CMOs").
Payments of principal and interest on the mortgages are passed through to the
holders of the CMOs on the same schedule as they are received, although certain
classes of CMOs have priority over others with respect to the receipt of
prepayments on the mortgages. Therefore, depending on the type of CMOs in which
the Government Securities Portfolio invests, the investment may be subject to a
greater valuation risk due to prepayment than other types of mortgage-related
securities.
The high-yield securities in which the High-Yield Bond Portfolio may invest may
be considered speculative in regard to the issuer's continuing ability to meet
principal and interest payments. The value of the lower-rated securities in
which the High-Yield Bond Portfolio may invest will be affected by the
creditworthiness of individual issuers, general economic and specific industry
conditions, and will fluctuate inversely with changes in interest rates. In
addition, the secondary trading market for lower-quality bonds may be less
active and less liquid than the trading market for higher-quality bonds.
REPURCHASE AGREEMENTS -- Each portfolio may acquire securities subject to
repurchase agreements. Under a typical repurchase agreement, a Portfolio would
acquire a debt security for a relatively short period (usually for one day and
not more than one week) subject to an obligation of the seller to repurchase and
of the Portfolio to resell the debt security at an agreed-upon higher price,
thereby establishing a fixed investment return during the Portfolio's holding
period. Under each repurchase agreement, the Portfolio receives, as collateral,
securities whose market value is at least equal to the repurchase price.
FUTURES CONTRACTS -- A futures contract is an agreement between two parties to
buy and sell a financial instrument at a set price on a future date. Upon
entering into such a contract a Portfolio is required to pledge to the broker an
amount of cash or securities equal to the minimum "initial margin" requirements
of the exchange. Pursuant to the contract, the Portfolio agrees to receive from
or pay to the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as "variation margin" and
are recorded by the Portfolio as unrealized appreciation or depreciation. When
the contract is closed the Portfolio records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed and reverses any unrealized appreciation or
depreciation previously recorded.
FOREIGN CURRENCY TRANSLATION -- Securities, other assets and liabilities of the
International Growth Portfolio whose values are initially expressed in foreign
currencies are translated to U.S. dollars at the bid price of such currency
THE ENTERPRISE GROUP OF FUNDS, INC. 113
<PAGE> 234
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
against U.S. dollars last quoted by a major bank. Dividend and interest income
and certain expenses denominated in foreign currencies are marked-to-market
daily based on daily exchange rates and exchange gains and losses are realized
upon ultimate receipt or disbursement. The fund does not isolate that portion of
its realized and unrealized gains on investments from changes in foreign
exchange rates from fluctuations arising from changes in the market prices of
the investments.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are
accounted for on the trade date. Realized gains and losses from investment
transactions are determined on the basis of identified cost and realized gains
and losses from currency transactions are determined on the basis of average
cost. Dividend income received and distributions to shareholders are recognized
on the ex-dividend date, and interest income is recognized on the accrual basis.
Premium and discounts on securities are amortized for both financial and tax
purposes.
EXPENSES -- Each portfolio and class bears expenses incurred specifically on its
behalf as well as a portion of the common expenses of the Fund. No class has
preferential dividend rights; differences in per share dividend rates are
generally due to differences in separate class expenses.
FEDERAL INCOME TAXES -- No provision for federal income or excise taxes is
required, because the Fund intends to continue to qualify as a regulated
investment company and distribute all of its taxable income to shareholders.
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS -- Preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that may affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Portfolios are charged management fees by Enterprise Capital Management,
Inc. ("Enterprise Capital") for furnishing management and administrative
services. Enterprise Capital has also agreed to reimburse the Portfolios for
expenses incurred in excess of a percentage of average net assets. Enterprise
Fund Distributors, Inc. (the "Distributor"), a wholly owned subsidiary of
Enterprise Capital, serves as principal underwriter for shares of the Fund. The
Directors of the Fund have adopted a Distributor's Agreement and Plan of
Distribution (the "Plan") pursuant to rule 12b-1 under the Investment Company
Act of 1940. The Plan provides that each Portfolio will pay
114 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 235
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
the Distributor a distribution fee, accrued daily and payable monthly. The
management fee, distribution fee, and maximum expense amounts are equal to the
following annual percentage of average net assets for each class of shares:
<TABLE>
<CAPTION>
MAXIMUM
DISTRIBUTION FEE EXPENSE AMOUNT
--------------------------- -----------------------------
PORTFOLIO MANAGEMENT FEE A B C Y A B C Y
- ----------------------------------- -------------- ---- ----- ----- ---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Growth .75% .45% 1.00% 1.00% none 1.60% 2.15% 2.15% 1.15%
Equity .75% .45% 1.00% 1.00% none 1.60% 2.15% 2.15% 1.15%
Growth and Income .75% .45% 1.00% 1.00% none 1.50% 2.05% 2.05% 1.05%
Equity Income .75% .45% 1.00% 1.00% none 1.50% 2.05% 2.05% 1.05%
Capital Appreciation .75% .45% 1.00% 1.00% none 1.75% 2.30% 2.30% 1.30%
Small Company Growth 1.00% .45% 1.00% 1.00% none 1.85% 2.40% 2.40% 1.40%
Small Company Value .75% .45% 1.00% 1.00% none 1.75% 2.30% 2.30% 1.30%
International Growth .85% .45% 1.00% 1.00% none 2.00% 2.55% 2.55% 1.55%
Government Securities .60% .45% 1.00% 1.00% none 1.30% 1.85% 1.85% .85%
High-Yield Bond .60% .45% 1.00% 1.00% none 1.30% 1.85% 1.85% .85%
Tax-Exempt Income .50% .45% 1.00% 1.00% none 1.10% 1.65% 1.65% .65%
Managed .75% .45% 1.00% 1.00% none 1.75% 2.30% 2.30% 1.30%
Money Market .35% .30% .85% .85% none 1.00% 1.55% 1.55% .70%
</TABLE>
Prior to October 1, 1997, the maximum expense amount for the Tax-Exempt Income
Portfolio was 1.25%, 1.80%, 1.80%, and .80% for Classes A, B, C, and Y,
respectively.
Prior to July 17, 1997, Retirement System Investors Inc. ("RSI") served as
adviser, Retirement Systems Distributors Inc. ("RSD") served as distributor, and
Retirement Systems Consultants Inc. ("RSC") served as transfer agent and
registrar to RSF. The fees paid to RSI, RSD, and RSC as a percentage of net
assets and in dollars are as follows:
<TABLE>
<CAPTION>
PORTFOLIO RSI MANAGEMENT FEE RSD DISTRIBUTION FEE RSC SERVICE FEE
- ------------------------------------------------ ---------------------- ----------------------- -------------------
<S> <C> <C> <C>
Growth and Income .60% .25% .60%
Small Company Growth (10/1/96-3/31/97) 1.20% .25% .60%
Small Company Growth (4/1/97-7/16/97) .85% .25% .60%
</TABLE>
<TABLE>
<CAPTION>
RSD DISTRIBUTION
PORTFOLIO RSI MANAGEMENT FEE FEE RSC SERVICE FEE
- ----------------------------------------------- ------------------- ------------------- ---------------
<S> <C> <C> <C>
Growth and Income $ 54,002 $ 22,502 $ 54,002
Small Company Growth 85,221 20,407 48,979
</TABLE>
MAXIMUM EXPENSE AMOUNTS -- For the period October 1, 1996, through July 16,
1997, RSF waived .20% of its management fee on Small Company Growth. In
addition, RSD limited its distribution fee for Growth and Income and Small
Company Growth to .20% for the period October 1, 1996, through July 16, 1997.
For the period October 1, 1996, through July 16, 1997, RSF and its affiliates
reimbursed fees for the Growth and Income and Small Company Growth Portfolios
amounting to $80,829 and $72,400, respectively.
THE ENTERPRISE GROUP OF FUNDS, INC. 115
<PAGE> 236
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
Enterprise Capital is a wholly owned subsidiary of The Mutual Life Insurance
Company of New York, Inc. ("MONY") MONY and its subsidiaries and affiliates had
the following investments in the portfolios as of December 31, 1997:
<TABLE>
<CAPTION>
PORTFOLIO A B C Y
- ------------------------------------------------------------ ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Growth $ 197,832 -- $ 1,225 --
Equity 1,210,536 $ 1,208 1,209 --
Growth and Income 1,028 1,026 1,026 --
Equity Income 1,094,659 -- 1,179 --
Capital Appreciation -- -- 1,223 --
Small Company Growth 976 973 973 --
Small Company Value 319,382 -- 1,351 --
International Growth 2,387,191 -- 1,028 $10,919,839
Government Securities 1,132,110 -- 1,076 --
High-Yield Bond 102,098 -- 1,112 --
Tax-Exempt Income -- -- 1,062 --
Managed 2,814,593 -- 1,167 77,606,554
Money Market -- -- 1,029 --
</TABLE>
Enterprise Capital has subadvisory agreements with various investment advisors
as Portfolio Managers for the Portfolios of the Fund. The management fee, as a
percentage of average net assets of a Portfolio, is paid to Enterprise Capital
which pays a portion of the fee to the Portfolio Manager. 1740 Advisers, Inc., a
wholly owned subsidiary of MONY, is the Portfolio Manager for the Equity Income
Portfolio. For the year ended December 31, 1997, Enterprise Capital incurred
subadvisory fees payable to 1740 Advisers, Inc., related to the Equity Income
Portfolio of $29,056.
The portion of sales charges paid to MONY Securities Corporation, a wholly owned
subsidiary of MONY, from the proceeds of the sale of fund shares was $6,308,464
for the year ended December 31, 1997. The portion of sales charges paid to the
Distributor was $1,231,024 for the year ended December 31, 1997.
The Distributor uses its distribution fee from the Fund to pay expenses on
behalf of the Fund related to the distribution and servicing of its shares.
These expenses include a service fee to securities dealers that enter into a
sales agreement with the Distributor. During 1997, the Distributor incurred
$1,083,135 of services fees payable to MONY Securities Corporation.
4. FINANCIAL INSTRUMENTS
As part of its investment program, the International Growth Portfolio utilizes
forward currency exchange contracts to manage exposure to currency fluctuations
and hedge against adverse changes in connection with purchases and sales of
securities. The Portfolio will enter into forward contracts only for hedging
purposes. The Portfolio may be required to set aside liquid assets in a
segregated custodial account to cover its obligations. At December 31, 1997, the
International Growth Portfolio had entered into various forward currency
exchange contracts under which it is
116 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 237
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
obligated to exchange currencies at specified future dates. Risks arise from the
possible inability of counterparties to meet the terms of their contracts and
from movements in currency values. Outstanding contracts at December 31, 1997,
are as follows:
<TABLE>
<CAPTION>
CONTRACT TO NET UNREALIZED
SETTLEMENT ------------------------------------ APPRECIATION/
DATE RECEIVE DELIVER (DEPRECIATION)
- ---------- ----------------- ----------------- ---------------
<C> <S> <C> <C>
1/20/98 USD 1,257,269 AUD 1,700,000 $ 148,801
1/20/98 USD 1,204,489 BEL 44,000,000 15,555
1/20/98 CAD 1,400,000 USD 1,033,973 (53,595)
1/20/98 CHF 3,300,000 USD 2,288,171 (24,234)
1/20/98 USD 760,982 CHF 1,100,000 6,337
1/20/98 DEM 822,000 USD 458,577 (1,510)
1/20/98 USD 310,980 DEM 550,000 4,886
1/20/98 DKK 3,500,000 USD 518,488 (7,151)
1/20/98 FRF 7,000,000 USD 1,145,827 18,602
1/20/98 USD 3,677,200 GBP 2,200,000 67,210
1/20/98 USD 900,131 HKD 7,000,000 (2,460)
1/20/98 HKD 2,400,000 USD 307,207 2,253
1/20/98 USD 308,462 ITL 525,000,000 11,739
1/20/98 JPY 441,000,000 USD 3,748,482 (361,192)
1/20/98 USD 2,350,874 JPY 281,000,000 192,533
1/20/98 USD 525,328 MYR 1,400,000 165,086
1/20/98 USD 477,147 NLG 950,000 8,035
1/20/98 NLG 2,000,000 USD 998,029 (10,424)
1/20/98 NOK 2,400,000 USD 341,710 (16,373)
1/20/98 SEK 11,000,000 USD 1,420,546 (34,356)
1/20/98 USD 981,646 SEK 7,600,000 23,914
1/20/98 USD 613,079 SGD 900,000 80,641
---------------
$ 234,297
---------------
---------------
</TABLE>
As part of its investment program, the High-Yield Bond Portfolio enters into
futures contracts to hedge against anticipated future price and interest rate
changes. Risks of entering into futures contracts include: (1) the risk that the
price of the futures contracts may not move in the same direction as the price
of the securities in the various markets; (2) the risk that there will be no
liquid secondary market when the Portfolio attempts to enter into a closing
position, (3) the risk that the Portfolio will lose an amount in excess of the
initial margin deposit; and (4) the fact that the success or failure of these
transactions for the Portfolio depends on the ability of the Portfolio Manager
to predict movements in stock, bond, and currency prices and interest rates.
There were no open futures contracts at December 31, 1997, in the High-Yield
Bond Portfolio.
THE ENTERPRISE GROUP OF FUNDS, INC. 117
<PAGE> 238
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
For the year ended December 31, 1997, purchases and sales proceeds of
investments, other than short-term investments, were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT OTHER INVESTMENT
OBLIGATIONS SECURITIES
------------------------ -------------------------
PORTFOLIO PURCHASES SALES PURCHASES SALES
- ------------------------------------------------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Growth -- -- $400,262,393 $94,233,790
Equity -- -- 5,435,366 1,244,128
Growth and Income -- -- 3,801,558 262,855
Equity Income -- -- 43,593,059 29,148,264
Capital Appreciation -- -- 70,559,804 95,909,382
Small Company Growth -- -- 10,114,510 4,748,258
Small Company Value -- -- 49,067,852 20,573,402
International Growth -- -- 25,212,967 14,219,663
Government Securities $15,304,375 $10,114,437 -- --
High-Yield Bond 4,817,738 1,764,961 138,147,090 119,892,429
Tax-Exempt Income -- -- 260,505 4,978,989
Managed -- -- 113,942,080 69,217,684
</TABLE>
118 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 239
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
5. FUND SHARE TRANSACTIONS
At December 31, 1997, the Fund, excluding the Money Market Portfolio, has
300,000,000 authorized shares at $.10 par value. The Money Market Portfolio has
500,000,000 authorized shares at $.10 par value. The following tables summarize
the fund share activity for the years ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
GROWTH AND INCOME
GROWTH PORTFOLIO EQUITY PORTFOLIO PORTFOLIO
------------------------ ---------------------- -------------------------------------
YEAR YEAR YEAR YEAR THREE MONTHS YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, SEPT. 30, SEPT. 30,
1997 1996 1997 1996 1997 1997 1996
----------- ----------- ----------- --------- ------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 16,798,417 8,738,168 537,283 -- 119,722 43,148 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 488,201 764,679 9,243 -- 3,414 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (7,220,904) (6,216,899) (10,128) -- (6,251) -- --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 10,065,714 3,285,948 536,398 -- 116,885 43,148 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 7,535,787 2,318,350 311,371 -- 88,542 38,624 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 196,989 139,776 4,711 -- 2,656 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (523,041) (85,206) (9,754) (340) (1) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 7,209,735 2,372,920 306,328 -- 90,858 38,623 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 1,710,077 -- 52,431 -- 18,085 3,842 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 28,376 -- 737 -- 473 -- --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (159,968) -- (5,573) -- (81) (3) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 1,578,485 -- 47,595 -- 18,477 3,839 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold 2,914,866 467,776 -- -- 14,920 216,623 138,929
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 28,250 9,455 -- -- 13,546 20,982 5,104
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (501,167) (298,930) -- -- (12,369) (78,821) (42,161)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 2,441,949 178,301 -- -- 16,097 158,784 101,872
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Increase (Decrease) 21,295,883 5,837,169 890,321 -- 242,317 244,394 101,872
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 119
<PAGE> 240
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL APPRECIATION SMALL COMPANY
EQUITY INCOME PORTFOLIO PORTFOLIO GROWTH PORTFOLIO
------------------------ ------------------------ ---------------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED THREE MONTHS YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, ENDED SEPT. 30, SEPT. 30,
1997 1996 1997 1996 DEC. 31, 1997 1997 1996
----------- ----------- ----------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 658,272 445,852 226,042 575,596 131,634 79,965 --
- --------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 291,471 255,843 421,161 312,878 4,697 -- --
- --------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (480,133) (451,181) (843,612) (1,243,989) (7,480) (955) --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 469,610 250,514 (196,409) (355,515) 128,851 79,010 --
- --------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 471,024 188,604 76,065 84,267 87,205 42,270 --
- --------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 52,259 17,631 30,380 13,789 2,619 -- --
- --------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (47,084) (6,975) (30,197) (9,219) (9,338) (933) --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 476,199 199,260 76,248 88,837 80,486 41,337 --
- --------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 66,249 -- 3,123 -- 26,874 7,580 --
- --------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 4,740 -- 469 -- 761 -- --
- --------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (409) -- (35) -- (1,122) (7) --
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 70,580 -- 3,557 -- 26,513 7,573 --
- --------------------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold -- -- -- -- 15,422 481,796 125,953
- --------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions -- -- -- -- 12,856 30,325 13,991
- --------------------------------------------------------------------------------------------------------------------------
Shares Redeemed -- -- -- -- (27,103) (198,869) (31,299)
- --------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) -- -- -- -- 1,175 313,252 108,645
- --------------------------------------------------------------------------------------------------------------------------
Total Net Increase (Decrease) 1,016,389 449,774 (116,604) (266,678) 237,025 441,172 108,645
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
120 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 241
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL COMPANY VALUE INTERNATIONAL GROWTH GOVERNMENT SECURITIES
PORTFOLIO PORTFOLIO PORTFOLIO
------------------------ ------------------------ ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 3,235,542 747,903 528,097 547,159 840,014 693,755
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 364,015 144,852 148,597 103,914 274,184 314,104
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (768,577) (1,511,602) (438,610) (394,928) (1,654,266) (2,050,440)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 2,830,980 (618,847) 238,084 256,145 (540,068) (1,042,581)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 2,379,023 323,495 448,885 194,193 633,414 385,535
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 175,399 21,578 37,407 12,561 30,968 15,300
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (127,118) (46,439) (140,802) (23,124) (124,591) (98,589)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 2,427,304 298,634 345,490 183,630 539,791 302,246
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 332,692 -- 85,857 -- 41,088 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 20,471 -- 3,875 -- 453 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (6,181) -- (22,912) -- (144) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) 346,982 -- 66,820 -- 41,397 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold 21,005 150,961 276,478 399,982 652,423 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of Distributions 963 293 46,815 29,486 16,945 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (340,603) (339,207) (182,169) (106,743) (39,802) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) (318,635) (187,953) 141,124 322,725 629,566 --
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Increase (Decrease) 5,286,631 (508,166) 791,518 762,500 670,686 (740,335)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 121
<PAGE> 242
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
HIGH-YIELD BOND TAX-EXEMPT INCOME
PORTFOLIO PORTFOLIO MANAGED PORTFOLIO
------------------------ ---------------------- ------------------------ MONEY MARKET PORTFOLIO
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED ----------------------------
DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, DEC. 31, YEAR ENDED YEAR ENDED
1997 1996 1997 1996 1997 1996 DEC. 31, 1997 DEC. 31, 1996
----------- ----------- ---------- ---------- ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CLASS A
Shares sold 1,682,960 1,061,881 193,960 182,258 5,986,736 6,602,960 186,445,536 155,780,333
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
Distributions 306,270 266,718 84,287 78,413 675,645 312,623 2,799,349 1,843,341
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (1,180,212) (1,340,318) (638,188) (604,753) (2,408,149) (1,385,991) (179,852,529) (138,874,791)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) 809,018 (11,719) (359,941) (344,082) 4,254,232 5,529,592 9,392,356 18,748,883
- ---------------------------------------------------------------------------------------------------------------------------
CLASS B
Shares sold 1,161,593 449,539 104,859 107,623 5,149,999 4,899,330 16,428,666 4,456,552
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
Distributions 57,929 23,405 7,203 4,171 433,505 154,174 165,715 35,289
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (274,381) (65,696) (52,601) (29,665) (776,922) (374,396) (11,957,685) (3,542,604)
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) 945,141 407,248 59,461 82,129 4,806,582 4,679,108 4,636,696 949,237
- ---------------------------------------------------------------------------------------------------------------------------
CLASS C
Shares sold 137,745 -- 12,937 -- 384,001 -- 3,804,829 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
Distributions 1,503 -- 271 -- 15,601 -- 5,853 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (20,787) -- 0 -- (7,138) -- (2,789,719) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) 118,461 -- 13,208 -- 392,464 -- 1,020,963 --
- ---------------------------------------------------------------------------------------------------------------------------
CLASS Y
Shares sold 63,572 -- -- -- 3,318,402 4,254,875 3,225,033 --
- ---------------------------------------------------------------------------------------------------------------------------
Reinvestment of
Distributions 2,027 -- -- -- 389,953 208,342 55,490 --
- ---------------------------------------------------------------------------------------------------------------------------
Shares Redeemed (73) -- -- -- (2,225,883) (1,204,112) (580,428) --
- ---------------------------------------------------------------------------------------------------------------------------
Net Increase
(Decrease) 65,526 -- -- -- 1,482,472 3,259,105 2,700,095 --
- ---------------------------------------------------------------------------------------------------------------------------
Total Net Increase
(Decrease) 1,938,146 395,529 (287,272) (261,953) 10,935,750 13,467,805 17,750,110 19,698,120
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
In the Growth and Income Portfolio, two shareholders owned 14.42% of the fund as
of December 31, 1997.
122 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 243
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
6. TAX BASIS UNREALIZED GAIN (LOSS) OF INVESTMENTS AND DISTRIBUTIONS
At December 31, 1997, the cost of securities for federal income tax purposes,
the aggregate gross unrealized gain for all securities for which there was an
excess of value over tax cost and the aggregate gross unrealized loss for all
securities for which there was an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
NET
UNREALIZED UNREALIZED UNREALIZED
PORTFOLIO TAX COST GAIN LOSS GAIN (LOSS)
- ---------------------------------------------------------------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Growth $491,684,576 $176,118,738 $(9,917,520) $166,201,218
- -----------------------------------------------------------------------------------------------------------------------------
Equity 4,915,731 402,325 (27,689) 374,636
- -----------------------------------------------------------------------------------------------------------------------------
Growth and Income 17,245,348 6,061,161 (73,816) 5,987,345
- -----------------------------------------------------------------------------------------------------------------------------
Equity Income 85,840,471 33,483,933 (604,369) 32,879,564
- -----------------------------------------------------------------------------------------------------------------------------
Capital Appreciation 78,496,801 44,292,716 (641,148) 43,651,568
- -----------------------------------------------------------------------------------------------------------------------------
Small Company Growth 19,853,958 3,296,594 (1,052,154) 2,244,440
- -----------------------------------------------------------------------------------------------------------------------------
Small Company Value 62,051,868 9,946,273 (1,068,142) 8,878,131
- -----------------------------------------------------------------------------------------------------------------------------
International Growth 58,336,382 8,798,970 (7,054,621) 1,744,349
- -----------------------------------------------------------------------------------------------------------------------------
Government Securities 88,746,873 608,153 (736,845) (128,692)
- -----------------------------------------------------------------------------------------------------------------------------
High-Yield Bond 84,876,880 3,120,105 (430,566) 2,689,539
- -----------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Income 24,744,194 1,766,951 (7,157) 1,759,794
- -----------------------------------------------------------------------------------------------------------------------------
Managed 278,520,855 77,525,752 (4,738,563) 72,787,189
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for futures and
options transactions, foreign currency transactions, pay downs, market
discounts, losses deferred due to wash sales, investments in passive foreign
investment companies, and excise tax regulations.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Any taxable gain remaining
at fiscal year end is distributed in the following year.
At December 31, 1997, the following Portfolios had capital loss carryforwards
for federal tax purposes of:
<TABLE>
<CAPTION>
EXPIRING
BALANCE THROUGH
----------- --------
<S> <C> <C>
Government Securities Portfolio $ 4,065,514 2004
- ---------------------------------------------------------------------------------------------
Money Market Portfolio 4,140 2005
- ---------------------------------------------------------------------------------------------
</TABLE>
THE ENTERPRISE GROUP OF FUNDS, INC. 123
<PAGE> 244
NOTES TO FINANCIAL STATEMENTS -- (Continued)
- --------------------------------------------------------------------------------
December 31, 1997
- --------------------------------------------------------------------------------
The capital gains distribution paid to shareholders for 1997, whether taken in
additional shares or cash, is as follows:
<TABLE>
<CAPTION>
20% CAPITAL 28% CAPITAL
GAINS GAINS
------------ ------------
<S> <C> <C>
Growth Portfolio $ 11,502,466 $ 1,933,365
- --------------------------------------------------------------------------------------------------
Growth and Income 337,504 66,433
- --------------------------------------------------------------------------------------------------
Equity Income Portfolio 3,942,594 3,910,954
- --------------------------------------------------------------------------------------------------
Capital Appreciation Portfolio 13,135,869 3,401,068
- --------------------------------------------------------------------------------------------------
Small Company Growth 209,625 294,917
- --------------------------------------------------------------------------------------------------
Small Company Value Portfolio 614,465 843,454
- --------------------------------------------------------------------------------------------------
International Growth Portfolio 843,959 1,024,026
- --------------------------------------------------------------------------------------------------
Tax-Exempt Income Portfolio 295,151 69,640
- --------------------------------------------------------------------------------------------------
Managed Portfolio 3,315,174 3,849,340
- --------------------------------------------------------------------------------------------------
</TABLE>
The Tax-Exempt Income Portfolio has designated all income dividends paid as
exempt interest dividends. Thus 100% of the net investment income distributions
are exempt from federal income tax.
7. SUBSEQUENT EVENTS
Effective January 1, 1998, the 12b-1 Distribution Fee has been eliminated on the
Money Market Portfolio.
Effective January 1, 1998, the Portfolio Manager for the Tax-Exempt Income
Portfolio has been changed to MBIA Capital Management Corp.
124 THE ENTERPRISE GROUP OF FUNDS, INC.
<PAGE> 245
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of The Enterprise Group of Funds,
Inc.:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of the Growth, Equity, Growth and Income, Equity
Income, Capital Appreciation, Small Company Growth, Small Company Value
(formerly Small Company), International Growth, Government Securities,
High-Yield Bond, Tax-Exempt Income, Managed and Money Market Portfolios of The
Enterprise Group of Funds, Inc. as of December 31, 1997, the statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years (or periods) in the period then ended of Growth, Equity
Income, Capital Appreciation, Small Company Value (formerly Small Company),
International Growth, Government Securities, High-Yield Bond, Tax-Exempt Income,
Managed, and Money Market Portfolios; the statement of operations, statement of
changes in net assets and financial highlights of the Equity Portfolio for the
period May 1, 1997 through December 31, 1997; and the statements of operations,
statements of changes in net assets and financial highlights of Growth and
Income and Small Company Growth Portfolios for the periods October 1, 1997
through December 31, 1997 and for the year (or period) ended September 30, 1997.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on the
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended September 30, 1996 and the financial
highlights for each of the four years in the period ended September 30, 1996 for
Growth and Income and Small Company Growth Portfolios of The Enterprise Group of
Funds, Inc. were audited by other auditors whose report dated November 15, 1996,
expressed an unqualified opinion thereon.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Growth, Equity, Growth and Income, Equity Income, Capital Appreciation, Small
Company Growth, Small Company Value (formerly Small Company), International
Growth, Government Securities, High-Yield Bond, Tax-Exempt Income, Managed and
Money Market Portfolios of The Enterprise Group of Funds, Inc. as of December
31, 1997, the results of their operations, and the changes in their net assets,
and their financial highlights for each of the respective periods stated in the
first paragraph, in conformity with generally accepted accounting principles.
Atlanta, Georgia
February 19, 1998
THE ENTERPRISE GROUP OF FUNDS, INC. 125
<PAGE> 246
(This page has been left blank intentionally.)
<PAGE> 247
(This page has been left blank intentionally.)
<PAGE> 248
(This page has been left blank intentionally.)
<PAGE> 249
DIRECTORS AND OFFICERS
DIRECTORS
Victor Ugolyn
CHAIRMAN AND DIRECTOR
Arthur T. Dietz Arthur Howell
DIRECTOR DIRECTOR
William A. Mitchell, Jr. Lonnie H. Pope
DIRECTOR DIRECTOR
Samuel J. Foti Michael I. Roth
DIRECTOR DIRECTOR
OFFICERS
Victor Ugolyn
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Phillip G. Goff
VICE PRESIDENT
Herbert M. Williamson Catherine R. McClellan
TREASURER AND SECRETARY
ASSISTANT SECRETARY
<PAGE> 250
INVESTMENT ADVISER
Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
DISTRIBUTOR
Enterprise Fund Distributors, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Suite 450
Atlanta, GA 30326-1022
Telephone: 1-800-432-4320
CUSTODIAN
State Street Bank and Trust Company
Boston, MA
TRANSFER AGENT
National Financial Data Services, Inc.
1004 Baltimore Ave., 2nd Floor
Kansas City, MO 64105-2112
Telephone: 1-800-368-3527
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Atlanta, GA
MEMBER - INVESTMENT COMPANY INSTITUTE
[LOGO] ENTERPRISE
GROUP OF FUNDS
INVEST WITH THE PROS THE PROFESSIONALS USE
1-800-432-4320
www.enterprisegroup.com
THIS REPORT IS NOT TO BE USED IN CONNECTION WITH
THE OFFERING OF SHARES OF THE FUND UNLESS ACCOMPANIED OR
PRECEDED BY AN EFFECTIVE PROSPECTUS.
<PAGE> 251
[ENTERPRISE LOGO] ENTERPRISE
GROUP OF FUNDS
Atlanta Financial Center
3343 Peachtree Road, Suite 450
Atlanta, Georgia 30326-1022
STATEMENT OF ADDITIONAL INFORMATION
EQUITY FUNDS:
Growth Fund
Growth and Income Fund
Equity Fund
Equity Income Fund
Capital Appreciation Fund
Small Company Growth Fund
Small Company Value Fund
International Growth Fund
Global Financial Services Fund
INCOME FUNDS:
Government Securities Fund
High-Yield Bond Fund
Tax-Exempt Income Fund
FLEXIBLE FUND:
Managed Fund
MONEY MARKET FUND:
Money Market Fund
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the Fund's Prospectus.
A copy of the Prospectus may be obtained by writing to the Fund at
3343 Peachtree Road, N.E., Suite 450, Atlanta, Georgia 30326, or by calling the
Fund at the following numbers:
1-800-432-4320
1-800-368-3527 (SHAREHOLDER SERVICES)
The date of the Prospectus to which this Statement of Additional
Information relates is October _________, 1998
The date of this Statement of Additional Information is October
_________, 1998.
<PAGE> 252
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
General Information and History
(See Prospectus - General Information) 3
Investment Objectives and Policies
(See Prospectus - Investment Objectives and 3
Policies of the Funds)
Fund Turnover 5
Management of the Fund
(See Prospectus - Management of the Fund) 5
Investment Advisory and Other Services
Investment Advisory Agreement 8
Fund Managers
Distributor's Agreements and Plans of Distribution 10
Miscellaneous 10
(See Prospectus - Management of the Fund)
Purchase, Redemption and Pricing of Securities Being Offered 10
Services for Investors
(See Prospectus - How to Purchase Fund Shares;
How to Redeem Fund Shares)
Redemptions in Kind 12
Determination of Net Asset Value 12
Fund Transactions and Brokerage 13
Performance Comparisons 13
Custodian 14
Independent Accountants 14
Taxes 14
Financial Statements 15
Appendix 16
</TABLE>
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<PAGE> 253
GENERAL INFORMATION AND HISTORY
The Enterprise Group of Funds, Inc. (the "Fund") was incorporated
January 2, 1968, as Alpha Fund, Inc. Its name was changed to The Enterprise
Group of Funds, Inc. on September 14, 1987, and at that same time: (i) the
Fund's Board of Directors was authorized to establish any number of series of
common stock of the Fund, each of which series would represent stock in a
separate Fund; (ii) each outstanding share of the common stock of Alpha Fund,
Inc. became one share of the newly established Growth Fund; and (iii) the Fund
was reincorporated as a Maryland corporation with the shares of the Common
Stock of the Fund divided into nine classes consisting of a separate class for
each Fund. On May 31, 1989, the Fund's GNMA and Corporate Funds were combined
with the Government Securities Fund reducing the number of Fund Funds to eight.
Effective May 1, 1990, the Fund added its Money Market Fund. Effective April
21, 1993, the Fund liquidated the Precious Metals Fund. Effective October 1,
1993, the Fund added its Small Company Value Fund and effective October 3,
1994, the Fund added its Managed Fund. Effective May 1, 1995, the Fund added
Class B and Class Y shares. Effective May 1, 1997, the Fund added Class C
Shares and the Equity, Growth and Income and Small Company Growth Funds.
Effective October 1, 1998, the Fund added its Global Financial Services Fund.
INVESTMENT OBJECTIVES AND POLICIES
INTERNATIONAL GROWTH FUND - Capital appreciation, primarily through a
diversified Fund of non-U.S. equity securities.
The International Growth Fund Manager believes that, over the long
term, investing across international equity markets based upon discrepancies
between market prices and fundamental values may achieve a positive enhancement
for the Fund's investment performance relative to the returns from the
Benchmark.
Fundamental value is considered to be the current value of long-term,
sustainable future cash flows derived from a given asset class or security. In
determining fundamental value, the Fund Manager examines the relative price to
value of the investment opportunity based upon the prospects for relative
economic growth among countries, regions or geographic areas; expected levels
of inflation; government policies influencing business conditions; and the
outlook for currency relationships. Investment decisions are based on
comparisons of current market prices to fundamental values.
Although it may invest anywhere in the world, it is expected that the
Fund will primarily invest in the equity markets included in the Morgan Stanley
Capital International Non-U.S. Equity (Free) Index which currently are Japan,
the United Kingdom, Germany, France, Canada, Italy, the Netherlands, Australia,
Switzerland, Spain, Hong Kong, Belgium, Singapore, Malaysia, Sweden, Denmark,
Norway, New Zealand, Austria, Finland and Ireland. The composition of the Index
may change over time, according to criteria established by Morgan Stanley.
The "Asset Allocation Mix," set forth below, represents the asset
allocation mix based on the Benchmark as of December 31, 1997, and may shift
over time as the Benchmark index weights change.
<TABLE>
<CAPTION>
Asset Class Asset Allocation Mix Asset Class Strategy Ranges
- ----------- -------------------- ---------------------------
<S> <C> <C>
Non-U.S. Equities 100% 80-100%
Cash and Cash 0% 0-20%
---
Equivalents 100%
</TABLE>
The "asset class strategy ranges" indicated above are the ranges
within which the Fund expects to make its active asset allocations to specific
asset classes. Under all but unusual market conditions, the Fund expects to
adhere to the strategy ranges set forth above. However, the Fund's strategy
ranges may be exceeded by the Fund under unusual market conditions.
The investment policies of the Funds along with a description of the
securities in which the Funds invest, certain risks connected with investments
in the Funds, and a description of investment techniques used by the Funds are
set forth in the Prospectus.
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<PAGE> 254
GLOBAL FINANCIAL SERVICES FUND - Sanford C. Bernstein & Co., Inc. (the
"Fund Manager") systematically applies a marriage of fundamental and
quantitative research to identify securities that are attractively priced
relative to their expected returns and to develop a portfolio that trades off
risk and reward over full market cycles.
The Global Financial Services Fund employs research-driven, value-based
investment philosophy that the Fund Manager utilized for more than two
decades. The Fund Manager approach rests on the premise that the capital
markets are inefficient: Value distortions are common in all markets, with
their dimensions ranging from minor to extreme.
In addition to targeting high return potential, process is also geared to
control volatility. To evaluate the potential risk/reward tradeoff The Fund
Manager incorporates the use of a number of proprietary models including an
optimization model, a multi-factor risk model, a country valuation model, a
currency valuation model, an earnings revision model, and a relative return
trends model. The actual construction of the portfolio considers not only this
fundamental risk/reward profile of stocks, but also the appropriate timing for
the transactions.
The Global Financial Services Fund invests almost exclusively in financial
services stocks with average holdings of between 55 and 75 stocks. In general
the Fund will be invested 70% in the US and 30% in foreign financial stocks and
currency exposures will be actively managed. Countries eligible for inclusion
into this service will be limited to the developed market as represented by the
Morgan Stanley EAFE index with Canada. The Fund Manager will not make
investments in emerging markets. The Fund is broadly diversified
geographically, typically with holdings in ten or more foreign countries. The
vast majority of the investments are made in common and preferred stocks with a
fully invested posture being the norm. Individual security positions are
controlled so that no single holding will dominate the portfolio;
The Fund Manager employs a centralized investment approach in all portfolios.
The Global Investment Policy Group uses its many years of experience and market
memory to review analysts' latest research findings and forecasts. The group
integrates the work of analysts, economists and the quantitative group,
systematically applying valuation and portfolio construction processes to
select securities. The portfolio managers then apply the Investment Policy
Group's decisions, deviating only to conform to Fund objectives.
Sanford Bernstein employs 129 analysts who take an intensive, long-term
approach to forecasting earnings power and growth. Organized in global industry
teams so that they can discern companies' strategies, cost pressures and
competition in a global context, Sanford Bernstein analysts are centrally
located so that the senior professionals can control the quality of their
findings.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which
cannot be changed as to any individual Fund without approval by the holders of
a majority of the outstanding shares of the relevant Fund. (As used - in this
Statement of Additional Information, "a majority of the outstanding shares of
the relevant Fund" means the lesser of (i) 67% of the shares of the relevant
Fund represented at a meeting at which more than 50% of the outstanding shares
of that Fund are represented in person or by proxy or (ii) more than 50% of the
outstanding shares of the relevant Fund.) Except as otherwise set forth, none
of the Funds may:
1. As to 75% of the assets of any Fund, purchase the securities of any
issuer if such purchase would cause more than 5% of the value of its assets to
be invested in the securities of such issuer (except U.S. Government securities
or those of its agencies or instrumentalities), or purchase more than 10% of
the outstanding securities, or more than 10% of the outstanding voting
securities, of any issuer.
2. Purchase securities of any company with a record of less than three
years, continuous operation (including that of predecessors) if such securities
would cause the Fund's investment in such companies taken at cost to exceed 5%
of the value of the Fund's total assets. (The Global Financial Services
High-Yield Bond and Tax-Exempt Income Funds are not subject to this
restriction.)
3. Purchase securities on margin, but it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities and may make initial and maintenance margin deposits in connection
with options and futures contracts as permitted by its investment program.
4. Make short sales of securities, unless at the time of such sale, it
owns, or has the right to acquire at no additional cost to the Fund as the
result of the ownership of convertible or exchange securities, an equal amount
of such securities, and it will retain such securities so long as it is in a
short portion as to them. In no event will a Fund make short sales of
securities in such a manner that the value of its net assets used to cover such
sales would exceed 15% of the value of its net assets at any time. The short
sales of the type described above, which are called "short sales against the
box," may be used by a Fund when management believes that they will protect
profits or limit losses in investments.
5. Borrow money, except that a Fund may borrow from banks as a
temporary measure for emergency purposes and not for investment, in which case
such borrowings may not be in excess of the lesser of: (a) 5% of its total
assets taken at cost; or (b) 5% of the value of its assets at the time that the
loan is made. A Fund will not purchase securities while borrowings are
outstanding. A Fund will not pledge, mortgage or hypothecate its assets taken
at market value to an extent greater than the lesser of 10% of the value of its
net assets or 15% of the value of its total assets taken at cost.
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<PAGE> 255
6. Purchase or retain the securities of any issuer if those officers
and directors of the Fund or of its investment advisor holding individually
more than 1/2 of 1% of the securities of such issuer together own more than 5%
of the securities of such issuer. (The Global Financial Services Fund is not
subject to this restriction).
7. Purchase the securities of any other investment company except in
the open market in a transaction involving no commission or profit to a sponsor
or dealer (other than the customary sales load or broker's commission) or as a
part of a merger, consolidation, acquisition or reorganization.
8. Invest in real estate; this restriction does not prohibit the Fund
from investing in the securities of real estate investment trusts.
9. Invest for the purpose of exercising control of management of any
company.
10. Underwrite securities issued by others except to the extent that
the disposal of an investment position may qualify any Fund or the Fund as an
underwriter as that term is defined under the Securities Act of 1933, as
amended,
11. Except for the Money Market Fund and the Global Financial Services
Fund, make any investment which would cause more than 25% of the total assets of
the Portfolio to be invested in securities issued by companies principally
engaged in any one industry; provided, however, that: (i) this limitation does
not apply to investments in U.S. Government Securities as well as its agencies
and instrumentalities, general obligation bonds, municipal securities other than
industrial development bonds issued by non-governmental users, and (ii) utility
companies will be divided according to their services (for example, gas, gas
transmission, electric, electric and gas, and telephone will each be considered
a separate industry). The Money Market Fund may invest more than 25% of its
total assets in U.S. Government Securities as well as its agencies and
instrumentalities and certain bank instruments issued by domestic banks. The
instruments in which the Money Market Fund may invest in excess of 25%, in the
aggregate, of its total assets are letters of credit and guarantees, negotiable
certificates of deposit, time deposits, commercial paper and bankers acceptances
meeting the investment criteria for the Money Market Fund. The Global Financial
Services Fund will invest 25% or more of its total assets in companies in the
financial services industry.
12. Participate with others in any trading account. This restriction
does not prohibit the Fund or any Fund from combining portfolio orders with
those of other Funds or other clients of the investment adviser or Fund Managers
when to do so would permit the Fund and one or more Portfolios to obtain a
large-volume discount from ordinary brokerage commissions when negotiated rates
are available. (See "Fund Transactions and Brokerage" below.) (The Global
Financial Service Fund is not subject to this restriction).
13. Invest more than 10% of the value of its assets in securities
which are subject to legal or contractual restrictions on resale or are
otherwise not readily salable. (The Global Financial Services Fund is not
subject to this restriction.)
14. Issue senior securities, except as permitted by the Investment
Company Act of 1940 and rules thereunder.
15. Invest in commodities or commodities contracts, except the Funds
may purchase and sell options, futures contracts and options on futures
contracts in accordance with their investment policies as set forth in this
registration statement.
16. Make loans, except by purchasing debt securities or entering into
repurchase agreements, in each case in accordance with its investment policies
as set forth in this registration statement.
In addition, management of the Fund has adopted the following
restrictions which apply to all of the Fund and may be changed only by the Board
of Directors of the Fund. No Fund will: (i) lend its assets to any person or
individual, except by the purchase of bonds or other debt obligations
customarily sold to institutional investors, (ii) invest more than 5% of the
value of its net assets, valued at the lower of cost or market, in warrants
(Included in that amount, but not to exceed 2% of the value of the Fund's net
assets, may be warrants which are not listed on the
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<PAGE> 256
New York or American Stock Exchanges. Warrants acquired by a Fund in units or
attached to securities may be deemed to be without value.), (iii) invest in
oil, gas, or other mineral leases or engage in arbitrage transactions, or (iv)
invest more than 15% of its total assets in the securities of real estate
investment trusts ("REITs").
PORTFOLIO TURNOVER
Portfolio turnover for the Enterprise High-Yield Bond Fund in 1996 and
1997 was attributable to several factors, including a declining level of
interest rates, a reduction in risk premiums, and healthy stock and bank loan
markets. As a result of these conditions, the Fund experienced an abnormally
high amount of redemptions and tenders for existing positions. The Fund Manager
has taken measures to potentially improve the overall call protection of the
Fund in order to capture the total return potentially made available by
declining medium and long-term interest rates.
During 1996, the portfolio turnover rate for the Small Company Value
Fund exceeded 100% due to a change in management style which resulted with the
appointment of a new Fund Manager.
MANAGEMENT OF THE FUND
The directors and officers of the Fund, and their principal
occupations during the past five years, are set forth below. Directors who are
"interested persons", as defined in the 1940 Act, are denoted by an asterisk.
As to their duties relative to the Fund, the address of each is Atlanta
Financial Center, 3343 Peachtree Road, N.E., Ste. 450, Atlanta, GA 30326.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
NAME, AGE AND POSITION WITH THE FUND PAST FIVE YEARS
------------------------------------ ---------------
<S> <C>
Arthur T. Dietz (74) President, ATD Advisory Corp. since 1996; President and Chief Executive Officer,
Director Strategic Fund Management, Inc., 1987-1995; Mills B. Lane Professor of Finance and
Member of the Audit Committee Banking, Emory University, 1954-1988; Trustee, Enterprise Accumulation Trust.
*Samuel J. Foti (46) President and Chief Operating Officer, MONY since 1994; Executive Vice President,
Director MONY (1991-1994); Trustee, MONY since 1993; Senior Vice President, MONY (1989 -
1991); Director, MONY Life Insurance Co. of America since 1989; Director, MONY
Brokerage, Inc. since 1990; Director, MONY International Holdings, Inc. since
1994; Director, MONY Life Insurance Company of the Americas, Ltd. since 1994, MONY
Bank & Trust Co. of the Americas, Ltd. since 1994; Director, Life Insurance
Marketing and Research Associates; Chairman, Life Insurance Marketing and Research
Associates 1996 - 1997; Trustee, Enterprise Accumulation Trust.
Arthur Howell (79) Of Counsel, law firm of Alston & Bird, Atlanta, Georgia; President, Summit
Director Director Industries, Inc.; Chair Crescent Banking Co., Inc.; President,
Chairman of Audit Committee Jonesheirs, Trustee, Enterprise Accumulation Trust.
William A. Mitchell, Jr.(58) President/CEO, Carter & Associates (real estate development), Atlanta, Georgia
Director since 1994; Director, John Wieland Homes since 1992; Trustee, Enterprise
Accumulation Trust.
Lonnie H. Pope (64) Chief Executive Officer, Longleaf Industries, Inc. (1996-present); formerly
Director President and Chief Executive Officer of AFF, Inc.; Trustee, Enterprise
Member of the Audit Committee
Accumulation Trust
*Michael I. Roth (52) Chairman and Chief Executive Officer, MONY since 1993; President and Chief
Director Executive Officer, MONY (1991-1993); Director, MONY Life Insurance Company of
America since 1991; Director, ARES Holdings Inc. since 1995; 1740 Advisers, Inc.
since 1992; MONY CS, Inc. since 1989; Executive Vice President and Chief Financial
Officer, MONY (1989-1991); Executive Vice President and Chief Financial Officer,
Primerica Corporation (1987); Executive Vice President, Primerica Corporation
(1982-1987); Trustee, Enterprise Accumulation Trust; Director, American Council of
Life Insurance (ACLI); Director, the Life Insurance Counsel of New York; Director,
Pitney Bowes, Inc.; Director, Promus Hotel Corporation.
*Victor Ugolyn (50) Chairman, President and Chief Executive Officer, The Enterprise Group of Funds,
Director Inc. since 1991; Chairman, President and Chief Executive Officer, Enterprise
Capital and Enterprise Fund Distribu
</TABLE>
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<PAGE> 257
<TABLE>
<S> <C>
Inc. since 1991; Chairman, President and Chief Executive Officer, Enterprise
Accumulation Trust; Vice Chairman and Chief Marketing Officer, Value Line
Securities, Inc. (1986-1991).
Catherine R. McClellan (42) Secretary, Enterprise Accumulation Trust; Senior Vice President, Secretary and
Secretary Chief Counsel, Enterprise Capital Management, Inc.; Senior Vice President,
Secretary and Chief Counsel, Enterprise Fund Distributors, Inc.
Herbert M. Williamson (47) Assistant Secretary and Treasurer, Enterprise Accumulation Trust, Enterprise
Treasurer Capital Management, Inc. and Enterprise Fund Distributors, Inc.
Phillip G. Goff (34) Vice President and Chief Financial Officer, Enterprise Accumulation Trust,
Vice President Enterprise Capital Management, Inc. and Enterprise Fund Distributors, Inc. 1995 -
present; Audit Manager, Coopers & Lybrand LLP, 1991 - 1995.
</TABLE>
* Messrs. Foti, Roth and Ugolyn are "interested persons" of the Fund,
of Enterprise Capital Management, Inc. (the "Adviser"), and of
Enterprise Fund Distributors, Inc. (the distributor the Fund's
Shares), as that term is defined in the Investment Act of 1940.
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<PAGE> 258
At December 31, 1997, the officers and directors of the Fund as a group owned
less than one percent of the shares of each Fund.
The Fund pays fees to those directors who are not "interested persons" of the
Fund at the rate of $10,000 per director per year plus $1,000 for each special
or committee meeting attended. The Fund pays no salaries, fees or compensation
to any of its officers, since these expenses are borne by the Adviser. No fees
were paid to the "interested" directors of the Fund.
The following sets forth compensation paid to each of the Directors during
1997:
<TABLE>
<CAPTION>
(1) (2) (3) (4)(5)
NAME AGGREGATE PENSION OR ESTIMATED TOTAL
COMPENSA- RETIREMENT ANNUAL COMPENSATION
TION FROM BENEFITS BENEFITS FROM REGISTRANT
REGISTRANT ACCRUED AS UPON AND FUND COMPLEX
PART OF RETIREMENT PAID TO
FUND DIRECTORS*
<S> <C> <C> <C> <C>
Expenses
Arthur T. Dietz $13,500 None None $27,000
Arthur Howell $13,000 None None $26,000
William A. Mitchell, Jr. $12,500 None None $25,000
Lonnie H. Pope $13,500 None None $27,000
</TABLE>
* Each Director received fees for services as a Trustee of Enterprise
Accumulation Trust.
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<PAGE> 259
INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISORY AGREEMENT
The Fund has entered into an Investment Advisory Agreement (the
"Adviser's Agreement") with Enterprise Capital Management, Inc. (the "Adviser")
which, in turn, has entered into Fund Manager's Agreements with each of the Fund
Managers as discussed in the Prospectus. The Adviser functions as the adviser to
the Money Market Fund. The Adviser is a subsidiary of The Mutual Life Insurance
Company of New York ("MONY"), one of the nation's largest insurance companies.
Enterprise Capital was incorporated in 1986. The Adviser's address is 3343
Peachtree Road, Suite 450, Atlanta, Georgia 30326. Victor Ugolyn, who is
President of the Fund, is also Chairman of the Board and President of the
Adviser.
The Adviser's Agreement obligates the Adviser to provide investment
advisory services to the Funds of the Fund, to furnish the Fund with certain
administrative, clerical, bookkeeping and statistical services, office space and
facilities, and to pay the compensation of the officers of the Fund. Each Fund
pays all other expenses incurred in its operation, and a portion of the Fund's
general administrative expenses are allocated to the Portfolios either on the
basis of their asset size, on the basis of special needs of any Fund, or equally
as is deemed appropriate. The Funds' Board of Directors annually reviews
allocation of expenses among the Portfolios.
The Adviser's Agreement authorizes the Adviser to enter into
subadvisory agreements with various investment advisers as Fund Managers for the
Funds of the Fund. The Fund Manager's Agreements are substantially the same in
all material respects except for the names of the Fund Managers and the rates of
compensation, which consist of a portion of the management fee that is paid by
the Fund to the Adviser and which the Adviser pays to the Fund Managers.
The Adviser and the Fund have received an exemptive order from
the Securities and Exchange Commission which permits the Fund, subject to, among
other things, initial shareholder authority, to thereafter enter into or amend
Fund Manager Agreements without obtaining shareholder approval each time.
Shareholders voted affirmatively to give the Fund this ongoing authority. With
Board approval, the Adviser is permitted to employ new Fund Managers for the
Funds, change the terms of the Fund Manager Agreements or enter into a new
Agreement with that Fund Manager. Shareholders of a Fund continue to have the
right to terminate the Fund Manager's Agreement for the Fund at any time by a
vote of the majority of the outstanding voting securities of the Fund.
Shareholders will be notified of any Fund Manager changes or other material
amendments to Fund Manager Agreements that occur under these arrangements.
The Adviser is the Fund Manager of the Money Market Fund. It
utilizes the services of The Mutual Life Insurance Company of New York employees
for certain services relating to management of the Fund. These services include
but are not limited to the initial credit review of approved issuers and
trading. All such services are provided on a cost reimbursement basis.
Expenses that are borne directly by the Funds incurring such costs
include redemption expenses, expenses of portfolio transactions, shareholder
servicing costs, mailing costs, expenses of registering the shares under federal
and state securities laws, accounting and pricing costs (including the daily
calculation of net asset value and daily dividends), interest, certain taxes,
legal services, auditing services, charges of the custodian and transfer agent,
and other expenses attributable to an individual account. Expenses which are
generally allocated either on the basis of size or equally among the respective
Funds include director fees, legal expenses, state franchise taxes, costs of
printing of proxies, prospectuses, registration statements and shareholder
reports, printing and issuance of stock certificates and other expenses properly
payable by the Fund that are allocable to the respective Funds. Litigation
costs, if any, may be directly allocable to the Funds or allocated on the basis
of the size of the respective Funds. The Board of Directors has determined that
this is an appropriate method of allocation of expenses.
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<PAGE> 260
The Advisor has advised the Fund that it will reimburse such portion of
the fees due to it under the Adviser's Agreement as is necessary to assure, for
the period commencing January 1, 1998, and ending no earlier than December 31,
1998, that expenses incurred by the Funds will not exceed those which appear as
part of the Expense table, page 2, to the Prospectus. This commitment was also
in effect from January 1, 1989, through December 31, 1997.
The tables below sets forth the 1997, 1996 and 1995 breakdown by Fund
of (1) the investment advisory fee paid to the Adviser, (2) the percentage of
the Management Fee to be paid by the Adviser to the Fund Manager, (3) the fund
management fee paid by the Adviser to the Fund Manager, (4) the net advisory fee
left to the Adviser after payment of the fund management fee, and (5) the amount
of the expense reimbursement paid by the Adviser to the Fund to assure that
expenses incurred by the Fund did not exceed 2.0% of average annual net assets
for the Equity Fund and 1.3% of average annual net assets for the Income Funds.
To the extent that the Management Fee equals or exceeds .75% of the average
daily net asset values of a Fund, such fee is higher than the fee charged to
most investment companies. However, the Board of Directors has determined that
such fees are reasonable in light of the services, investment decisions and
investment techniques employed by the Funds.
<TABLE>
<CAPTION>
1997
FUND (1) (2) (3) (4) (5)
- ----
<S> <C> <C> <C> <C> <C>
Growth $3,331,589 31% 1,038,424 2,293,165 --
Equity 15,970 53% 8,516 7,453 99,274
Growth and Income 63,099 40% 25,240 37,859 102,630
Equity Income 739,501 40% 293,217 446,285 115,504
Capital Appreciation 903,281 66% 591,969 311,312 --
Small Company Growth 84,918 65% 55,197 29,721 104,369
Small Company Value 275,321 53% 146,838 128,483 69,743
International Growth 478,833 53% 253,500 225,333 62,527
Government Securities 483,366 47% 226,402 256,963 130,007
High-Yield Bond 436,989 50% 218,495 218,494 123,123
Tax-Exempt Income 141,160 50% 70,580 70,580 108,255
Managed 2,180,923 45% 972,369 1,208,554 --
Money Market 231,118 -- -- 231,118 158,757
1996
FUND
- ----
Growth $1,282,393 37% 474,978 807,415 --
Equity Income 523,261 40% 209,391 313,870 126,447
Capital Appreciation 935,780 65% 611,348 324,432 --
Small Company Value 153,784 47% 72,105 81,679 128,396
International Growth 353,427 53% 187,181 166,246 80,932
Government Securities 490,882 47% 229,645 261,237 94,868
High-Yield Bond 339,960 50% 170,056 169,904 114,041
Tax-Exempt Income 162,828 50% 81,452 81,376 51,959
Managed 1,164,633 49% 568,181 596,452 --
Money Market 160,844 -- -- 160,844 82,594
1995
FUND
- ----
Growth $797,410 38% 305,619 491,791 4,398
Equity Income 418,724 40% 167,490 251,234 150,764
Capital Appreciation 876,619 66% 562,933 313,686 --
Small Company Value 176,021 40% 72,927 103,094 108,702
</TABLE>
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<PAGE> 261
<TABLE>
<S> <C> <C> <C> <C> <C>
International Growth 241,255 63% 120,627 120,628 109,484
Government Securities 516,491 50% 258,246 258,245 117,348
High-Yield Bond 304,716 50% 152,368 152,368 113,327
Tax-Exempt Income 172,474 50% 86,237 86,237 59,601
Managed 311,097 53% 164,881 146,216 58,261
Money Market 122,090 -- -- 122,090 121,372
</TABLE>
DISTRIBUTOR'S AGREEMENTS AND PLANS OF DISTRIBUTION
The Distributor's Agreements and Plans of Distribution (the "12b-1
Plans") between the Fund and Enterprise Fund Distributors, Inc. (the
"Distributor"), pursuant to which the Distributor serves as principal
underwriter of the Fund's shares, is described in the Prospectus. The 12b-1
Plans provide for the payment by the Fund to the Distributor of a daily
distribution fee.
DISTRIBUTION FEES AND COMMISSIONS
FOR ENTERPRISE FUND DISTRIBUTORS, INC. ("EFD")
<TABLE>
<CAPTION>
DISTRIBUTION COMMISSION & CDSC COMMISSIONS MARKETING & TRAVEL,
FEES PAID TO SALES FEES COLLECTED & AND FEES PAID ADVERTISING TELEPHONE &
EFD PAID TO EFD PAID TO EFD TO DEALERS FEES PAID OTHER
AUTHORIZED
FEES PAID
<S> <C> <C> <C> <C> <C> <C>
1997 $6,667,912 $1,244,343 $ 13,318 $ 4,320,682 $2,143,274 $ 3,103,754
1996 $3,696,663 $ 692,305 $ 131,372 $ 2,043,128 $1,108,160 $ 1,512,246
1995 $2,487,595 $ 505,970 $ 3,074 $ 1,255,109 $ 543,135 $ 1,192,256
</TABLE>
MISCELLANEOUS
The terms of each of the Investment Adviser's Agreement, the
Distributor's Agreements and 12b-1 Plans, the Transfer Agent Agreement, the
Accounting Agreement and the Fund Manager's Agreements (collectively, the
"Agreements") provide that each such Agreement: (i) will automatically
terminate upon "assignment," as such term is defined in the Investment Company
Act of 1940 (the "1940 Act"); (ii) must be approved annually by the Fund's
Board of Directors or by vote of a majority of the outstanding voting
securities; and (iii) must be approved annually in person by vote of a majority
of the directors of the Fund who are not parties to such contract or
"interested persons" (as such term is defined in the 1940 Act) of such party.
Each Agreement further provides that it can be terminated without penalty by
either party thereto upon 60 days written notice to the other party. The Fund's
Board of Directors most recently approved continuance of the Investment
Adviser's Agreement, the Fund Manager's Agreements and the Distributor's
Agreements and 12b-1 Plans on February 19, 1998.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED
Information concerning purchase and redemption of shares of the Fund's
Funds, as well as information concerning computation of net asset value
per share is set forth in the Fund's Prospectus.
SERVICES FOR INVESTORS
For the convenience of investors, the following plans are available.
Investors should realize that none of these plans can guarantee profit or
insure against loss. The costs of these shareholder plans (exclusive of the
employee benefit plans) are paid by the Distributor, except for the
normal cost of issuing shares, which is paid by the Fund.
AUTOMATIC REINVESTMENT PLAN. All shareholders, unless they request otherwise,
are enrolled in the Automatic Reinvestment Plan under which dividends and
capital gains distributions on their shares are automatically reinvested
-11-
<PAGE> 262
in shares of the same Class of Fund(s) at the net asset value per share
computed on the record date of such dividends and capital gains distributions.
The Automatic Reinvestment Plan may be terminated by participants or by the
Fund at any time. No sales charge is applied upon reinvestment of dividends or
capital gains.
AUTOMATIC BANK DRAFT PLAN. An Automatic Bank Draft Plan is available for
investors who wish to purchase shares of one or more of the Funds in amounts of
$25 or more on a regular basis by having the amount of the investment
automatically deducted from the investor's checking account. The minimum
initial investment for this Plan is $100. Forms authorizing this service are
available from the Fund.
AUTOMATIC INVESTMENT PLAN. An investor may debit any Class of a Fund Account on
a monthly basis for automatic investments into one or more of the other Funds of
the same Class. The Fund from which the investment will be made is subject to
the $1,000 minimum. The investor may then choose to have $50 or more transferred
to either an established Enterprise Fund, or they may open a new account subject
to an initial minimum investment of $100.
LETTER OF INTENT INVESTMENTS. Any investor may execute a Letter of Intent
covering purchases of Class A shares of $100,000 or more, at the public
offering price, of Fund shares to be made within a period of 13 months. A
reduced sales charge will be applicable to the total dollar amount of Class A
shares purchased in the 13-month period provided at least $100,000 is
purchased. The minimum initial investment under a Letter of Intent is 5% of the
amount indicated in the Letter of Intent. Shares purchased with the first 5% of
such amount will be held in escrow (while remaining registered in the name of
the investor) to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not purchased, and
such escrowed shares will be involuntarily redeemed to pay the additional sales
charge, if necessary. When the full amount indicated has been purchased, the
escrow will be released.
Investors wishing to enter into a Letter of Intent in conjunction with
their investment in Class A shares of the Funds should complete the appropriate
portion of the new account application.
RIGHT OF ACCUMULATION DISCOUNT. Investors who make an additional purchase of
Class A shares of the Fund which, when combined with the value of their existing
aggregate holdings of shares of the Fund of the Fund, each calculated at the
then applicable net asset value per share, at the time of the additional
purchase, equals $100,000 or more, will be entitled to the reduced sales charge
shown under "How to Purchase Fund Shares" in the Prospectus on the full amount
of each additional purchase. For purposes of determining the discount, holdings
of Fund shares of the investor's spouse, immediate family or accounts controlled
by the investor, whether as a single investor or trustee of, or participant in,
pooled and similar accounts, will be aggregated.
CHECKWRITING. A check redemption feature is available on the Money Market Fund
Class A shares with opening balances of $5,000 or more. Redemption checks may be
made payable to the order of any person in any amount from $500 to $100,000. Up
to five redemption checks per month may be written without charge. Each
additional redemption check over five in a given month will be subject to a $5
fee. Redemption checks are free and may be obtained from the Transfer Agent or
by contacting the Adviser. A $25 fee will be imposed on any account for stopping
payment of a redemption check upon request of the shareholder. It is not
possible to use a redemption check to close out an account since additional
shares accrue daily.
SYSTEMATIC WITHDRAWAL PLAN. Investors may elect a Systematic Withdrawal Plan
under which a fixed sum will be paid monthly, quarterly, or annually. There is
no minimum withdrawal payment required. Shares in the Plan are held on deposit
in noncertificate form and any capital gain distributions and dividends from
investment income are invested in additional shares of the Fund(s)at net asset
value. Shares in the Plan account are then redeemed at net asset value to make
each withdrawal payment. Redemptions for the purpose of withdrawals are made on
or about the 15th day of the month of payment at that day's closing net asset
value, and checks are mailed within five days of the redemption date. Such
distributions are subject to applicable taxation.
Because withdrawal payments may include a return of principal,
redemptions for the purpose of making such payments may reduce or even use up
the investment, depending upon the size of the payments and the
-12-
<PAGE> 263
fluctuations of the market price of the underlying Fund securities. For this
reason, the payments cannot be considered as a yield of income on the
investment.
RETIREMENT PLANS. The Fund offers various Retirement Plans: IRA (generally for
all individuals with employment income); 403(b)(7) (for employees of certain
tax-exempt organizations and schools); and corporate pension and profit sharing
(including a 401(k) option) plans. For full details as to these plans, you
should request a copy of the plan document from Enterprise Distributors. After
reading the plan, you may wish to consult a competent financial or tax adviser
if you are uncertain that the plan is appropriate for your needs.
REDEMPTIONS IN KIND
The Fund's Articles of Incorporation provide that it may redeem its
shares in cash or with a pro rata portion of the assets of the Fund. To date,
all redemptions have been made in cash, and the Fund anticipates that all
redemptions will be made in cash in the future. In order to meet the
requirements of certain state laws, the Fund has elected, pursuant to Rule
18f-1 under the 1940 Act, to commit itself to pay in cash all requests for
redemption by any shareholder of record, limited in amount with respect to each
shareholder during any 90-day period to the lesser of: (i) $250,000; or (ii) 1%
of the net asset value of the Fund at the beginning of such period. If shares
are redeemed through a distribution of Fund securities, the recipient would
incur brokerage commissions upon the sale of such securities.
DETERMINATION OF NET ASSET VALUE
The net asset value of each Fund's shares is determined once daily as
of the close of the New York Stock Exchange on each day on which the Exchange
is open for trading. The net asset value of a share is computed by dividing the
value of the net asset of the Fund by the total number of shares outstanding.
MONEY MARKET FUND
The net asset value of the Money Market Fund is computed by dividing
the total value of the Fund's assets, less liabilities (including dividends
payable), by the number of shares outstanding. The assets are determined by
valuing the Fund securities at amortized cost, pursuant to Rule 2a-7. The
amortized cost method of valuation involves valuing a security at cost at the
time of purchase and thereafter assuming a constant amortization to maturity of
any discount or premium, regardless of the impact of fluctuating interest rates
on the market value of the instrument.
The purpose of the amortized cost method of valuation is to attempt to
maintain a constant net asset value per share of $1.00. While this method
provides certainty in valuation, it may result in periods during which value,
as determined by amortized cost, is higher or lower than the price the Fund
would receive if it sold its Fund securities. Under the direction of the Board
of Directors, certain procedures have been adopted to monitor and stabilize the
price per share. Calculations are made to compare the value of the Fund
securities, valued at amortized cost, with market values. Market valuations are
obtained by using actual quotations provided by market makers, estimates of
market value, or values obtained from yield data relating to classes of money
market instruments published by reputable sources at the bid prices for those
instruments. If a deviation of 1/2 of 1% or more between the $1.00 per share
net asset value and the net asset value calculated by reference to market
valuations has occurred, or if there are any other deviations which the Board
of Directors believes will result in dilution or other unfair results material
to shareholders, the Board of Directors will consider what action, if any,
should be initiated.
The market value of debt securities usually reflects yields generally
available on securities of similar quality. When yields decline, the market
value of a Fund holding higher yielding securities can be expected to increase;
when yields increase, the market value of a Fund invested at lower yields can
be expected to decline. In addition, if the Fund has net redemptions at a time
when interest rates have increased, the Fund may be forced to sell Fund
securities prior to maturity at a price below the Fund's carrying value. Also,
rather than market value, any yield quoted may be different from the yield that
would result if the entire Fund were valued at market value, since the
amortized cost method does not take market fluctuations into consideration.
-13-
<PAGE> 264
OTHER FUNDS
The net asset value of Funds other than the Money Market Fund is
computed by dividing the total value of the series' securities and other
assets, less liabilities, by the number of series shares then outstanding.
Securities other than money market instruments maturing in 60 days or less
which are traded on a national exchange are valued at the last sale price as of
the close of business on the day the securities are being valued, or, lacking
any sales, at the last bid price. Securities other than money market
instruments maturing in 60 days or less traded in the over-the-counter market
are valued at the last bid price or at yield equivalent as obtained from one or
more dealers that make markets in the securities. Securities which are traded
both in the over-the-counter market and on a national exchange are valued
according to the broadest and most representative market, and it is expected
that for debt securities this ordinarily will be the over-the-counter market.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by or under the supervision of
the Board of Directors. Money market instruments with maturities of 60 days or
less are valued using the amortized cost method of valuation.
FUND TRANSACTIONS AND BROKERAGE
The portfolio transactions and brokerage policies of the Fund are set
forth in the Prospectus. In the last three fiscal years ended December 31, the
Fund has paid the following aggregate amounts for brokerage commissions on
transactions in Fund securities: 1997 - $1,124,684; 1996 - $762,622; 1995 -
$489,729.
PERFORMANCE COMPARISONS
From time to time the Fund may advertise a Fund's average annual
total return, other total return data, or yield. Total return figures are based
on a Portfolio's historical performance and are not intended to indicate future
performance.
Average annual total return quotations for the specified periods are
computed by finding the average annual compounded rates of return (based on net
investment income and any realized and unrealized capital gains or losses on
portfolio investments over such periods) that would equate the initial amount
invested to the redeemable value of such investment at the end of each period.
Average annual total return is computed assuming all dividends and
distributions are reinvested and taking into account all applicable recurring
and nonrecurring expenses.
Each Fund also may quote annual, average annual and annualized
total return and aggregate total return performance data, both as a percentage
and as a dollar amount based on a hypothetical $1,000 investment. Such data
will be computed as described above, except that as required by the periods of
the quotations, actual annual, annualized or aggregate data, rather than
average annual data may be quoted. Actual annual or annualized total return
data generally will be lower than average total return data since the average
rates of return reflect compounding of return; aggregate total return data
generally will be higher than average annual total return data since the
aggregate rates of return reflect compounding over a longer period of time.
Yield quotations for each Fund, other than Money Market Fund will be
computed based on a 30-day period by dividing (a) the net income based on the
yield of each security earned during the period by (b), the average number of
shares outstanding during the period that were entitled to receive dividends,
multiplied by the maximum offering price per share on the last day of the
period.
Yield quotations for the Money Market Fund will be computed based on a
seven day period by determining the net change, exclusive of capital changes and
income other than investment income, in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the period,
subtracting a hypothetical charge reflecting deductions from shareholder
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
multiplying the base period return by (365/7) with the resulting yield figure
carried to at least the nearest hundredth of one percent.
-14-
<PAGE> 265
From time to time, a Fund's performance and performance of comparable
investments may be compared to that of the Consumer Price Index or various
unmanaged indexes such as the Dow Jones Industrial Average, the Standard &
Poor's 500 Stock Index, the Lehman Brothers Government/Corporate Bond Index,
the Salomon Brothers Low Grade Index, the Lehman Brothers Government Bond
Index, Lehman Brothers Mortgage Backed Index, Lehman Brothers Municipal Bond
Index, Morgan Stanley Goldmine Index, the Salomon Brothers Analytical Record of
Yield and Yield Spreads, and the Salomon Brothers World Money Market Index; and
it may also be compared to the performance of other appropriate fixed income or
equity mutual funds or mutual fund indexes as reported by Lipper Analytical
Services, Inc. ("Lipper") or CDA Investment Technologies, Inc. ("CDA"). Lipper
and CDA are widely recognized independent mutual fund reporting services.
Lipper and CDA performance calculations are based upon changes in net asset
value with all dividends reinvested and do not include the effect of any sales
charges. Also, a Fund's performance may be compared to the historical returns
of various investments, performances indexes of those investments or economic
indicators, included but not limited to stocks, bonds, certificates of deposit,
money market deposit accounts, money market funds and US Treasury Bills.
Certain of these alternative investments may offer fixed rates of return and
guaranteed principal and may be insured. Betas utilized will be calculated by
CDA Investment Technologies, Inc.
The Fund's performance may be compared in advertising to the
performance of other mutual funds in general or the performance of particular
types of mutual funds, especially those with similar objectives. Lipper
Analytical Services, Inc. ("Lipper"), an independent mutual fund performance
rating service headquartered in Summit, New Jersey, provides rankings which may
be used from time to time.
The Fund may be compared in advertising to Certificates of Deposit
("CDs") or other investments issued by banks. The Fund differs from bank
investments in that bank products offer fixed or variable rates; principal is
fixed and may be insured. Money markets seek to maintain a stable net asset
value and yield fluctuates. Further, the Fund may offer greater liquidity or
higher potential returns than CDs.
The Fund may advertise examples of the effects of periodic investment
plans, including the principal of dollar cost averaging. Dollar cost averaging
programs provide an opportunity to invest a fixed dollar amount in a fund at
periodic intervals, thereby purchasing fewer shares when the price is high and
more shares when the price is low. While such a strategy does not assure a
profit guard against loss in a declining market, the investor's cost per share
can be lower if fixed numbers of shares had been purchased at periodic
intervals. In evaluating such a plan, consideration should be given to the
shareholder's ability to continue purchasing shares through periods of low
price levels.
CUSTODIAN
State Street Bank and Trust Company whose address is One Heritage
Drive, The Joseph Palmer Building, North Quincy, Massachusetts, 02171, has been
retained to act as custodian of the assets of the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, whose address is 1100 Campanile Building,
Atlanta, Georgia, 30309, has been retained to serve as the Fund's independent
accountants.
TAXES
See the Prospectus for information concerning taxes.
-15-
<PAGE> 266
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Annual
Report
Page
Number
------
<S> <C>
Financial Statements
Portfolios of Investment Securities,
December 31, 1997............................................................... 6
Statement of Assets and Liabilities,
December 31, 1997............................................................... 78
Statements of Operations for the
Year Ended December 31, 1997.................................................... 80
Statements of Changes in Net Assets
for Each of the Two Years Ended
December 31, 1996 and 1997...................................................... 82
Financial Highlights.............................................................................. 86
Notes to Financial Statements..................................................................... 112
Report of Independent Accountants................................................................. 125
</TABLE>
-16-
<PAGE> 267
APPENDIX
RATINGS OF CORPORATE DEBT SECURITIES
MOODY'S INVESTORS SERVICE, INC.(1)
Aaa - Bonds rated Aaa are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge."
Aa - Bonds rated Aa are judged to be of high quality by all standards. Together
with the Aaa group they comprise what are generally known as high grade bonds.
A - Bonds rated A possess many favorable investment attributes and are to be
considered as upper medium grade obligations.
Baa - Bonds rated Baa are considered as medium grade obligations, i.e., they
are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds rated Ba are judged to have speculative elements: their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterize
bonds in this case.
B - Bonds rated B generally lack characteristics of the desirable investment.
Assurance of interest and principal payments of or maintenance of other terms
of the contract over any long period of time may be small.
Caa - Bonds rated Caa are of poor standing. Such issues may be in default or
there may be present elements of danger with respect to principal or interest.
Ca - Bonds rated Ca represent obligations which are speculative in a high
degree. Such issues are often in default or have other marked short-comings.
- ---------------------
(1) Moody's applies numerical modifiers, 1, 2 and 3 in generic rating
classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
-17-
<PAGE> 268
STANDARD & POOR'S CORPORATION(2)
AAA - Bonds rated AAA have the highest rating assigned by Standard & Poor's to
a debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the highest-rated issues only in a small degree.
A - Bonds rated A have a strong capacity to pay interest and repay principal,
although they are somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than bonds in higher-rated categories.
BBB - Bonds rated BBB are regarded as having an adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher-rated categories.
BB,B,CCC,CC - Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominately speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
- ----------------------
(2) Plus (+) or Minus (-): The ratings from AA to BB may be modified by
the addition of a plus or minus sign
to show relative
standing within the major rating categories.
-18-
<PAGE> 269
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
The audited financial statements as to the Fund are in the 1997 Annual
Report to Shareholders, a copy of which is filed herewith.
Portfolio of Assets and Liabilities, December 31, 1997
Statement of Assets and Liabilities, December 31, 1997
Statement of Operations for the Year Ended December 31, 1997
Statement of Changes in Net Assets for each of the Two Years Ended
December 31, 1996 and 1997
(b) Exhibits:
(1) Registrant's charter: Filed with Amendment No. 39, dated
April 28, 1994, and incorporated herewith; Amendment to
Charter dated April 26, 1995 filed with Amendment No. 43
dated April 26, 1995, and incorporated herewith.
(2) By-Laws: Filed with Amendment No. 39, dated April 28, 1994,
and incorporated herewith; Amendment to By-Laws, dated
November 17, 1994 filed with Amendment No. 43 dated April 26,
1995, and incorporated herewith.
(3) Not applicable.
(4) Specimen share certificate: Filed with Amendment No. 29,
dated November 27, 1987 and incorporated herewith.
(5) Investment Advisory Agreement: Filed with Amendment No. 39,
dated April 28, 1994, and incorporated herewith.
(6) (i) Distributor's Agreements: Filed with Amendment No.
48, dated March 3, 1998, and incorporated herewith.
(ii) Prototype Soliciting Broker/Dealer Agreement: Filed
with Amendment No. 48, dated March 3, 1998 and
incorporated herewith.
(7) Not applicable.
(8) Form of Custodian Contract: Filed with Amendment No. 39,
dated April 28, 1994, and incorporated herewith.
(9) Not applicable.
(10) Not applicable.
(11) Consent of PricewaterhouseCoopers LLP: Filed herewith as
Exhibit 11.
(12) All financial statements required to be filed under Item 23
are included in the 1997 Annual Report to Shareholders a copy
of which is filed herewith.
(13) Not applicable.
(14) Not applicable.
(15) Distribution Agreements: Filed with Amendment No. 48, dated
March 3, 1998, and incorporated herewith.
<PAGE> 270
(16) Computation of performance: Included in Part A herein and
incorporated by reference.
(17) All financial statements required to be filed under Item 23
are included in the 1997 Annual Report to Shareholders, a
copy of which is be filed herewith.
(18) All financial statements required to be filed under Item 23
are included in the 1997 Annual Report to Shareholders, a
copy of which is filed herewith.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT.
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record
Holders
as of the date of this
Title of Class Registration Statement
----------------------------- ----------------------
<S> <C>
Shares of Beneficial Interest 162,394
</TABLE>
ITEM 27. INDEMNIFICATION
Reference is made to the provisions of Article Sixth of
Registrant's Articles of Incorporation filed as Exhibit
24(b)(1) to this Registration Statement.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of Registrant pursuant to
the foregoing provision or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment of
Registrant of expenses incurred or paid by a director,
officer or controlling person of Registrant in the successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person, Registrant
will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.
ITEM 28. (a) Business and Other Connections of Investment Adviser.
See "Management of the Fund" in the Prospectus and
"Investment Advisory and Other Services" in the
Statement of Additional Information for information
regarding the business and other connections of the
Investment Adviser.
(b) Business and Other Connections of Officers and
Directors of Investment Adviser
For information as the business, profession,
vocation or employment of a substantial nature of
each of the officers and directors of Enterprise
Capital Management, Inc. reference is made to Part B
of this Registration Statement and to the
registration of Form ADV of Enterprise Capital
Management, Inc. filed under the Investment Adviser
Act of 1940, which is incorporated herein by
reference.
<PAGE> 271
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Enterprise Fund Distributors, Inc. is the principal
underwriter of the Fund's shares.
(b) The information contained in the registration on
Form BD of Enterprise Fund Distributors, Inc., filed
under the Securities Exchange Act of 1934, is
incorporated herein by reference.
(c) Not Applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
<TABLE>
<CAPTION>
Entity Function Address
- -------------------- ---------- ------------------------------------
<S> <C> <C>
The Enterprise Group Registrant Atlanta Financial Center
of Funds, Inc. 3343 Peachtree Road, N.E., Suite 450
Atlanta, GA 30326-1022
Enterprise Capital Investment Same as above.
Management, Inc. Adviser
Enterprise Fund Distributor Same as above.
Distributors, Inc.
</TABLE>
THE RECORDS OF THE PORTFOLIO MANAGERS ARE KEPT AT THE FOLLOWING LOCATIONS:
Growth Fund Montag & Caldwell, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E.
Atlanta, GA 30326-1450
Growth & Income Retirement Systems Investors, Inc.
Fund 317 Madison
New York, NY 10122
Equity Fund OpCap Advisors
One World Financial Center
New York, NY 10281
Equity Income 1740 Advisers, Inc.
Fund 1740 Broadway
New York, NY 10019
Capital Appreciation Provident Investment Counsel
Fund 300 North Lake Avenue
Pasadena, CA 91101
Small Company Growth Pilgrim Baxter Associates, Ltd.
Fund 825 Duportail Road
Wayne, PA 19087
Small Company Value Gabelli Asset Management Company
Fund One Corporate Center
Rye, New York 10580
International Growth Brinson Partners, Inc.
Fund 209 South LaSalle Street
Chicago, IL 609604
Global Financial Services Sanford C. Bernstein & Co., Inc.
Fund 767 Fifth Avenue
New York, NY 10153-0185
Government Securities TCW Funds Management, Inc.
Fund 865 South Figueroa Street, Suite 1800
Los Angeles, CA 90017
High-Yield Bond Caywood-Scholl Capital Management
Fund 4350 Executive Drive, Suite 125
San Diego, CA 92121
<PAGE> 272
Tax-Exempt Income Fund MBIA Capital Management Corp.
113 King Street
Armonk, NY 10504
Managed Fund OpCap Advisors
One World Financial Center
New York, New York 10281
Money Market Fund Enterprise Capital Management, Inc.
Atlanta Financial Center
3343 Peachtree Road, N.E., Suite 450
Atlanta, GA 30326
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) not applicable
(b) not applicable
<PAGE> 273
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Atlanta,
State of Georgia on the 13th day of July, 1998.
THE ENTERPRISE GROUP OF FUNDS, INC.
By:/s/ Victor Ugolyn
---------------------------------------------------------------
Victor Ugolyn, Chairman, President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement of the Registrant has
been signed below by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C>
/s/ Victor Ugolyn Chairman, President and July 13, 1998
- ------------------------------ Chief Executive Officer
Victor Ugolyn
/s/ Phillip G. Goff Principal Financial and July 13, 1998
- ------------------------------ Accounting Officer
Phillip G. Goff
/s/ Arthur T. Dietz Director July 13, 1998
- ------------------------------
Arthur T. Dietz
/s/ Samuel J. Foti Director July 13, 1998
- ------------------------------
Samuel J. Foti
/s/ Arthur Howell Director July 13, 1998
- ------------------------------
Arthur Howell
/s/ Lonnie H. Pope Director July 13, 1998
- ------------------------------
Lonnie H. Pope
/s/ William A. Mitchell, Jr. Director July 13, 1998
- ------------------------------
William A. Mitchell, Jr.
/s/ Michael I. Roth Director July 13, 1998
- ------------------------------
Michael I. Roth
</TABLE>
<PAGE> 1
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 50 to the
registration statement under the Securities Act of 1933 (file number 2-28097)
of our report dated February 19, 1997 on our audit of the financial statements
and financial highlights of The Enterprise Group of Funds, Inc. appearing in
the Registrant's 1997 Annual Report. We also consent to the reference to our
Firm under the caption "Independent Accountants."
PricewaterhouseCoopers LLP
Atlanta, Georgia
July 10, 1998
