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File Number 2-28097
Amendment to the Prospectus
By Supplement or Sticker
Pursuant to Rule 497(e)
This information reflects changes to the Prospectus Sections, "Investment
Objective and Policies of the Fund" and "Management of the Fund/Fund Managers".
SUPPLEMENT TO THE ENTERPRISE GROUP OF FUNDS, INC. PROSPECTUS DATED OCTOBER 1,
1998.
These paragraphs supersede the paragraphs for Enterprise International Growth
Fund:
The Board of Directors named Vontobel USA Inc. ("Vontobel") Fund Manager
effective April 1, 1999. Vontobel was formed in 1984, and is a wholly-owned
subsidiary of Vontobel Holding Ltd., a Swiss bank holding company and an
affiliate of Bank J. Vontobel & Co. Ltd. of Zurich, Switzerland. Vontobel's
address is 450 Park Avenue, New York, New York 10022. Fabrizio Pierallini,
Senior Vice President/Managing Director of International Investments, is
responsible for the day-to-day management of the Fund. He has more than 17
years' investment industry experience. He joined Vontobel in 1994 in his
present position and previously served as Portfolio Manager for Swiss Bank
Corporation.
It is a fundamental policy of the Fund that it will invest at least 80% of its
total 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,
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certificates of deposit, foreign currency bankers acceptances, cash and cash
equivalents, time deposits, repurchase agree ments 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 International Growth Fund will invest primarily in equity securities, which
may achieve capital appreciation by selecting companies with superior potential
based on a series of macro and micro analyses. The International Growth Fund
may select its investments from companies which are listed on a securities
exchange or from companies whose securities have an established
over-the-counter market, and may make limited investments in "thinly traded"
securities.
The International Growth Fund will have at least 65% of its assets invested in
European and Pacific Basin equity securities. The International Growth Fund
intends to broadly diversify investments among countries and normally to have
represented in the portfolio business activities of not less than three
different countries. The selection of the securities in which the International
Growth Fund will invest will not be limited to companies of any particular
size, and will be based only upon the expected contribution such security will
make to its investment objective.
Using an approach that involves top-down country allocation combined with
bottom-up stock selection, the Fund Manager will seek to identify countries
where economic and political factors are likely to provide above-average
returns, and companies in such countries that
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are best positioned in their respective industries and are attractively valued.
In this regard the Fund Manager will allocate the assets of the International
Growth Fund principally between the European and Pacific regions. The
International Growth Fund will invest most of its assets in equity securities
of countries which are generally considered to have developed markets, such as
the United Kingdom, Germany, France, the Netherlands, Switzerland, Norway,
Spain, Japan, Hong Kong, Australia, and Singapore.
The Fund Manager's approach is governed by its belief that the principal
factors affecting an equity market's return are, on a country allocation basis,
the proportion of liquidity in the economy, and, on a stock selection basis,
consistent profit growth, a strong balance sheet and high returns on employed
capital and, in addition, that the effect of currency fluctuations on portfolio
returns can be reduced through a systematic hedging strategy.
For its country allocation, the Fund Manager analyzes approximately 35
international growth markets, which include the 20 markets currently comprised
in Morgan Stanley Capital International's Europe, Australia, and Far East Index
("EAFE"). The Fund Manager also gives consideration to such factors as market
liquidity, accessibility to foreign investors, regulatory protection of
shareholders, accounting and disclosure standards, and transferability of funds
and foreign exchange controls, if any.
Each factor is assigned a numerical value based on a scale determined by the
historic ranges. Based on the arithmetical sum of all such values, an
attractiveness ranking for each country in the Fund Manager's universe is
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produced on a quarterly basis. The use of three different sets of variables
in combination results in a higher degree of predictability of the valuation
model's output. Generally, the factors are equally weighted. In a few instances
a double weight is assigned if the predictive power of a particular factor has
historically been very high, like yield curve analysis, which is relevant in
all markets.
The valuation model's total return expectations provide a relative ranking in
descending order of attractiveness of all countries in the Fund Manager's
universe. It is not the Fund Manager's approach to make country "bets" by, for
example, significantly overweighting those countries showing the highest
expected return based on the output of the Fund Manager's valuation model.
Rather, the Fund Manager normalizes the distribution of country weights through
the use of a proprietary risk-variance matrix that establishes for each market
a minimum/maximum weight relative to the benchmark (EAFE). Since the Fund
Manager's country allocation valuation model cannot take into account exogenous
events impacting country stock market returns such as political events, social
unrest and currency turmoil, this matrix serves for risk control purposes.
Before a decision is made to increase or lower a country weight based on the
quantitative output of the valuation model, the Fund Manager reviews the
country's fundamental economic data that are not part of the country screening
process as well as its political situation. This systematic qualitative
analysis focuses on such macroeconomic data as GDP growth, external trade
balances, current account and balance of payments, external debt position and
debt service ratios, foreign reserve
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position, ability to finance deficits in external accounts, fiscal and exchange
rate policies, private and public savings rates, as well as inflationary
trends.
The Fund Manager believes this approach to be more useful than a rigid
discipline that ties the magnitude and timing of shifts in country weights
directly to changes in the expected returns for each country produced by the
Fund Manager's valuation model since the Fund Manager does not employ portfolio
optimization techniques.
The Fund Manager's stock selection process begins by screening a universe of
approximately 3000 stocks in a market capitalization range from approximately
$500 million to approximately $100 billion. The Fund Manager's screens are
designed to be representative of each market and generally cover a broad
cross-section of companies which together account for about 70% of total market
capitalization. The Fund Manager's approach is to look at companies whose
growth factors can be measured and compared. The Fund Manager's data series
focus on low price to sales ratios, consistent earnings growth, consistent
operating margins, high returns on equity relative to price to cash flow, and
healthy debt ratios. The Fund Manager defines cash flow as recurrent net profit
plus depreciation. Furthermore, the Fund Manager analyzes the share price in
relation to earnings before interest, taxes, depreciation and amortization, and
looks at the underlying trend of cash and retained earnings. The screens,
comprising multiple valuation ratios, are used to ensure rigor and consistency
in the Fund Manager's bottom-up research.
The Fund Manager supplements the above quantitative screening process by an
analysis of certain qualitative criteria,
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one of the most important of which is to identify strong, stable and reliable
management that maintains a company's market position through consistent unit
volume growth and gains in market share rather than a reliance on price
increases, exercises tight financial control and fosters a culture of market
responsiveness.
Based on the Fund Manager's ranking of approximately 3000 stocks in about 35
different international equity markets, the Fund Manager usually selects names
which appear in the top third of the quantitative screens for each country.
Based on the screening factors, these stocks typically show low historical
deviations of annual earnings, high returns on equity and low debt levels.
Position size at purchase ranges from about 0.7% to 1% of total portfolio
assets.
Within this range position size varies in proportion to the market
capitalization of the company within a given country's stock market. The Fund
Manager normally allows positions to reach a maximum of approximately 5% of
total assets.
Shifts in country weight are the principal cause for selling stocks. Stocks are
sold if a country's maximum weight-basis on the risk-variance matrix has been
exceeded. The Fund Manager may trim or sell positions if a name drops from the
top third of its quantitative screens due to price appreciation or if a
company's fundamentals have deteriorated.
Within each country, no conscious sector allocation decision is made. Sector
allocation is the result of the stock selection within each country.
As of December 31, 1998, Vontobel's assets under management for all clients
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approximated $2 billion. Usual investment minimum: $10,000,000. The management
fee is .85%, and the Fund Manager receives 0.40% for the first $100,000,000 of
assets under management; 0.35% for assets between $100,000,000 to $200,000,000;
0.30% for assets between $200,000,000 and $500,000,000; and 0.25% for assets in
excess of $500,000,000.
April 6, 1999
