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November 06, 2001
Socially Responsive Fund Looks Worldwide for Corporate Responsibility
    by Robert Smith

Enterprise Global Socially Responsive Fund uses both positive and negative screening in targeting companies both inside and outside the U.S.

Launched in September of 2000, the Enterprise Global Socially Responsive Fund (ticker: EGSAX) seeks capital appreciation with a blend of value and growth large-cap stocks, primarily in equity securities in countries that are included in the Morgan Stanley Capital International World Index. This includes the U.S., Canada and Australia, with U.S. holdings accounting for a little over half the fund.

The Enterprise Global Socially Responsive Fund (GSR) is offered by the Enterprise Group of Funds, an Atlanta-based fund family comprised of 19 funds and managing over $9 billion in assets. Rockefeller & Co., Inc. manages the fund as a sub-advisor. The portfolio manager is Farha-Joyce Haboucha.

Of particular interest to Ms. Haboucha are companies taking the lead in human rights, public health, and social and environmental responsibility. The fund excludes firms that derive significant revenues from tobacco, alcohol, gambling, weapons, nuclear power, and genetically modified foods. GSR also screens for non-essential animal testing.

"We are very proactive in seeking out companies to invest in," Ms. Haboucha said. "Nowadays a company has to take a close look at itself and behave as a good corporate citizen. For instance with animal rights, we accept only necessary testing. We ask very detailed questions and require strict procedures that are very well overseen."

That detailed look at a possible investment carries over into an in-depth financial analysis as well. Research into the firm includes a very disciplined, bottom-up approach to analysis: developing an income statement, researching cash flow and creating a balance statement, and projecting these out for several years.

"We're trying to be precise about where the company will be three or four years from now," explained Ms. Haboucha. "If a company is growing, how is it financing that growth? You can run into problems if you're not projecting enough future investment in research and development and capital improvements to support that growth."

About 79 percent of the portfolio is in stocks and the remainder is in cash. The top ten holdings, which account for almost 22 percent of the fund, include Leggett & Platt (LEG), Unilever NV (UL), Continental Airlines (CAL), Delphi Automotive Systems (DPH) and Alcoa (AA). The highest percentages of holdings are, in descending order, consumer staples, technology, services, and financials.

According to Morningstar, GSR is down a little over 15 percent for the year. While not exactly stellar performance, it is doing better than most similar funds. GSR is in the 21st percentile when compared to its peers for one-year performance. It closed yesterday at $8.51.

Ms. Haboucha sees two reasons why the fund is doing better than the market in general, and both are the result of the extensive research done on the companies. The strong balance sheet and strong cash flow required of a company to be part of the fund is a big plus in getting firms through these down times in the market. And the social, environmental and governance reputation of a firm are becoming increasingly important to both investors and consumers, she said.

"One of the responsibilities of a board of directors now is to be aware of and maintain a company's reputation," Ms. Haboucha said. "This has especially been true in Europe, but now also in the U.S. How a company treats the community it is in and the environment it uses, and how management deals with employees, are all converging as equally important issues."

In keeping with that spirit of reputation and responsibility, Ms. Haboucha said she is preparing a set of proxy voting guidelines for the fund that will be posted online before the end of the year. The fund will publicly post online how it voted as well.


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