SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 10 to 33-10888
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Post-Effective Amendment No. 10 to 33-10888
THE EHRENKRANTZ TRUST
(Exact Name of Registrant as Specified in Chapter)
598 Madison Ave., Fourteenth Floor, New York, NY 10022
(Name and Address of Principal Executive Office)
(800) 867-8600
(Registrant's Telephone Number, including area code)
LOUIS EHRENKRANTZ
598 Madison Avenue, Fourteenth Floor, New York, NY 10022
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
As soon as practicable after Amendment becomes effective.
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b)
_______on (date) pursuant to paragraph (b)
_______60 days after filing pursuant to paragraph (a)
_______on (date) pursuant to paragraph (a) of Rule 485.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2.
The Notice required by Rule 24f-2 was filed with the Commission on
February 15, 1996.
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THE EHRENKRANTZ TRUST
CROSS REFERENCE SHEET
Form N-1A Item
Number and Caption Heading in Prospectus
1. Cover Page Cover Page
2. Synopsis Not Applicable
3. Condensed Financial Information Condensed Financial Information
4. General Description The Ehrenkrantz Trust; The
of Registrant Ehrenkrantz Growth Fund; General
Information; Description of the
Fund
5. Management of the Fund Management, Investment Advisory
Services
6. Capital Stock and Other Description of the Fund;
Shareholder Securities,
Retirement Plans; Redemption of
Shares; Dividends, Distributions
and Taxes; Determination of Net
Asset Value.
7. Purchase of Securities Purchase of Shares;Determination
Being Offered of Net Asset Value; Investment
Objectives; Investment Strategy
8. Redemption of Repurchase Redemption of Shares
9. Legal Proceedings Not Applicable
<PAGE>
The Ehrenkrantz Trust
Prospectus 1730 K Street, N.W.
April 29, 1997 Washington, DC 20006
1-800-424-8570
In the Washington DC Area (202) 223-1000
______________________________________________________________________________
THE EHRENKRANTZ GROWTH FUND
The Ehrenkrantz Trust is a Massachusetts business trust organized as a
diversified, open-end management investment company offering redeemable
shares of beneficial interest. The Fund's investment objective is capital
appreciation, subject to varying market risks.
A Mutual Fund Managed by
Ehrenkrantz King Nussbaum, Inc.
1-800-867-8600
______________________________________________________________________________
This Prospectus is intended to set forth clearly information about the Fund
that a prospective investor should know before investing. Please read it and
retain it for future reference. Additional information about the Fund and
its performance, including the Statement of Additional Information dated
April 29, 1997, which is incorporated by reference into this Prospectus, has
been filed with the Securities and Exchange Commission and is available
without charge upon request to the Trust at Suite 904, 1730 K Street, N.W.,
Washington, DC 20006.
_____________________________________________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
_________________________________________________________________
<PAGE>
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
Sales load imposed on purchases*
Sales Load Imposed on Reinvested Dividends .....................None
Deferred Sales Load.............................................None
Redemption Fees.................................................None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees.................................................1.00%
12b-1 fees......................................................None
Other expenses:
Shareholder Services & Fund Accounting.....................0.64%
Audit fees ................................................0.09%
Custodian fees.............................................0.08%
Other (Refunds)............................................0.59%
Total Fund operating expenses** ................................2.40%
The purpose of the above table is to assist shareholders in understanding
the various costs and expenses that a shareholder will bear by investing in
the Trust. The percentages listed above, expressing various annual operating
expenses of the Fund, are based on amounts incurred by the Fund for the fiscal
year ended December 31, 1996.
EXAMPLE
You would pay the following
expenses on a $1,000 investment 1 year $25
assuming (1) 5% annual return 3 years $70
and (2) redemption at the end 5 years $130
of each time period: 10 years $270
NOTE: This example should not be considered a representation of past or future
expenses.
Actual expenses may be greater or less than those shown above.
*The Fund eliminated a 4.5% sales load effective January 1, 1994.
**The Advisor assumed certain operating expenses. It intends to continue to
do so but may discontinue such practice at any time upon thirty days written
notice to shareholders. In that event, the Fund could be responsible for
total expenses up to 2.5%. This assumes that 2.40% is representative of
annual Fund operating expenses as a percentage of the average net assets.
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TABLE OF CONTENTS
Page
Officers and Trustees...............................Back Cover
Condensed Financial Information..................... 4
The Ehrenkrantz Trust............................... 5
The Ehrenkrantz Growth Fund......................... 5
Investment Strategy................................. 5
Investment Policies................................. 5
Risk Factors........................................ 7
Management.......................................... 8
Investment Advisory Services........................ 8
Purchase of Shares.................................. 9
Shareholder Retirement Plans........................ 9
Redemption of Fund Shares........................... 10
Telephone Transactions.............................. 10
Dividends, Distributions and Taxes.................. 11
Determination of Net Asset Value.................... 11
Description of the Fund............................. 12
Shareholder Inquiries............................... 12
General Information................................. 12
Investment Application.............................. 13
No person has been authorized to give any information or to make any
representation other than those contained in this Prospectus and the Statement
of Additional Information dated April 29, 1997, and, if given or made, such
information or representations may not be relied upon as having been
authorized by the Fund. This Prospectus does not constitute an offer to sell
securities in any state or jurisdiction in which such offering may not
lawfully be made. The delivery of this Prospectus at any time shall not imply
that there has been no change in the affairs of the Fund since the date hereof.
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CONDENSED FINANCIAL INFORMATION
(Selected Per Share Data for a share outstanding
throughout the period indicated)
The Condensed Financial Information has been examined by Roy G. Hale, CPA,
the Fund's auditor, as indicated in his report dated February 17, 1997 on the
Fund's financial statements as of December 31, 1996 which are incorporated by
reference into the Fund's Statement of Additional Information. The Condensed
Financial Information should be read in conjunction with the Fund's financial
statements and notes thereto. The Statement of Additional Information may be
obtained from the Fund without charge. Additional information about the
Fund's performance is contained in the annual report, which may be obtained
without charge.
THE EHRENKRANTZ TRUST
Financial Highlights
for a Share Outstanding Throughout the Period Indicated**
<TABLE>
Ehrenkrantz Growth Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988
Investment income $.191 $.206 $.165 $.124 $.133 $.219 $.24 $.27 $.18
Other Income --- --- --- --- .001 .004 --- --- ---
Expenses .132 .111 .124 .093 .100 .099 .10 .08 .06
Net investment income .059 .095 .041 .031 .034 .124 .14 .19 .12
Distribution from net
investment income (1.09) (.095) (.035) (.033) (.182) (.115) (.13) (.38) (.12)
Distribution of
capital gains (.099) (.498) (.362) (.352) (.103) (.116) (.135) (.09) ---
Distribution considered
to be return of capital --- --- --- --- --- --- --- (.06) ---
Net realized and unrealized
gain (loss) on securities .173 .739 (.023) .217 .600 (.255) .74 .59 (.77)
Net increase (decrease) in
net asset value .024 .241 .379 .181 (.030) .484 (.380) .40 .59
NET ASSET VALUE:
Beginning of the period $5.42 $5.18 $5.56 $5.38 $5.41 $4.93 $5.31 $4.91 $4.29
End of period $5.44 $5.42 $5.18 $5.56 $5.38 $5.41 $4.93 $5.31 $4.88
Average annual total return 4.0% 16.0% 0.3% 10.0% 4.7% 14.7% (2.2%) 18.9% 16.6%
Ratio of operating expenses
to average net assets 2.4% 2.1% 2.3% 1.7% 1.9% 1.9% 2.1% 1.6% 1.5%
Ratio of net investment income
to average net assets 1.1% 1.8% 0.8% 0.6% 0.7% 2.4% 2.6% 3.7% 5.0%
Portfolio turnover rate 84.0% 79.0% 121.99% 137.2% 155.9% 109.0% 158.0% 164.0% 64.0%
Number of shares outstanding
at end of the period 1,164,284 1,266,708 1,210,727 1,148,084 1,146,531 1,168,900 1,184,082 1,63.267 594,900
<FN>
**The above per share information is based upon a monthly average of shares outstanding.
</FN>
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
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THE EHRENKRANTZ TRUST
The Ehrenkrantz Trust (the "Trust") is a diversified, open-end management
investment company commonly called a "mutual fund." It was organized as
a Massachusetts business trust in 1986 and commenced operations on January
1, 1987. The Trust has only one class of share of beneficial interest.
The shares presently are issued in one series: The Ehrenkrantz Growth Fund.
The Ehrenkrantz Undiscovered Equities Fund Series was merged into the
Growth Series on May 31, 1989.
THE EHRENKRANTZ GROWTH FUND
The primary investment objective of the Growth Fund is capital appreciation.
The underlying assets of this series will primarily be invested in both
listed and unlisted common stocks and convertible securities believed to
offer favorable possibilities of capital appreciation commensurate with
reasonable risk. Current income will be only a secondary consideration in
selecting portfolio securities. Securities will be selected by the
Investment Committee of Ehrenkrantz King Nussbaum, Inc., the Trust's
Investment Advisor, through application of the investment strategy which is
described below. No particular person is primarily responsible for making
recommendations to the committee.
INVESTMENT STRATEGY
In selecting portfolio securities for the Fund, the Investment Committee
goes beyond traditional financial analysis and brings other disciplines
into the selection process. They believe that financial analysis is not
enough and, hence, apply their expertise in the social sciences and mass
psychology when selecting securities for the Fund. The investment
philosophy applied by Louis Ehrenkrantz and the Investment Committee involves
a knowledge of history, the humanities, social sciences and technology. This
knowledge, they believe, allows them to anticipate social trends and,
consequently, select securities which will benefit from the evolution of
these trends. There can, of course, be no assurance that the Fund's
investment objectives will be achieved through application of this investment
strategy or that its shareholders will be protected from the risk of loss
inherent in stock ownership.
INVESTMENT POLICIES
In seeking to attain the Fund's investment objective, the Advisor intends
to invest the major portion of the Fund's assets in diversified portfolios
of common stocks and other equity-type securities which, in the opinion of
the Advisor, have capital appreciation possibilities consistent with the
strategy described above. Other equity-type securities will be limited to
convertible debentures, convertible preferred stock and warrants to purchase
common stock. Since the major portion of the portfolio is expected to consist
of common stocks and other equity-type securities, its net asset value will
likely be more volatile than portfolios containing a substantial amount of
fixed income securities.
Except as described herein, the Fund may invest in all types of common
stocks and other equity-type securities, without regard to any objective
investment criteria such as size, exchange listing, earnings history, book
value, share price or other factors. The selection of investments will
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depend solely on the Advisor's judgment that the investments selected
will further the attainment of the Fund's investment objective.
The Fund may invest in repurchase agreements. These involve the
acquisition by the Fund of an underlying debt instrument for a period usually
not exceeding one week, subject to an obligation of the seller to repurchase,
and the Fund to resell, the instrument at the fixed price. The Fund's
Custodian will have custody of securities acquired by the Fund under a
repurchase agreement. Under the Investment Company Act of 1940, repurchase
agreements may be considered loans by the Fund. In an attempt to reduce the
risk of incurring a loss on a repurchase agreement, the Fund will enter into
repurchase agreements with selected securities dealers or banks or other
recognized financial institutions and will require that additional securities
be deposited with it if the value of the securities purchased should decrease
below resale price. Certain costs may be incurred by the Fund in connection
with the sale of the securities if the seller does not repurchase them in
accordance with the repurchase agreement. The Fund will consider, on an
ongoing basis, the credit worthiness of the institutions with which it enters
into repurchase agreements.
The fund may invest up to 10% of its assets in securities of foreign
issuers. Such investments may involve risks which are in addition to the
usual risks inherent in domestic investments. These risks include political
or economic instability of the issuer or the country of issue, the difficulty
of predicting international trade patterns and the possible imposition of
exchange controls. Such securities may also be subject to greater
fluctuations in price than securities of U.S. corporations. In addition,
there may be less publicly available information about a foreign company than
a domestic company. Foreign companies generally are not subject to uniform
accounting, auditing and financial reporting standards comparable to those
applicable to domestic companies. Dividends and interest in foreign
securities may be subject to foreign withholding taxes, which would reduce
the Fund's income without providing a tax credit for the Fund's shareholders.
Although the Fund intends to invest in securities of foreign issuers domiciled
in nations which the Advisor considers as having stable and friendly
governments, there is the possibility of exploitation, confiscatory taxation,
currency blockage or political or social instability which could adversely
affect investments in those nations. Finally, in the event of a default on
any foreign debt obligations, it may be more difficult for the Fund to obtain
or to enforce a judgement against the issuer of such securities.
In addition to investment in common stocks and other equity-type
securities, the Fund may invest in debt obligations which, in the Advisor's
opinion, offer the possibility of capital appreciation. Such debt obligations
include those of the U.S. Government and its agencies, states and
municipalities and their agencies, or corporate issuers. The advisor does not
anticipate investing a significant portion of Fund assets in debt obligations
but has not set any limitation on the percentage of total assets that may be
so invested. The Fund also may invest up to 100% of its assets in U.S.
Government debt securities or cash for defensive purposes.
The Fund may write covered call options if, as a result thereof, the value
of the stocks underlying such calls does not exceed 25% of the Fund's net
assets.
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The foregoing investment policies are not fundamental and the Fund's
Board of Trustees may change such policies without shareholder approval. As
a matter of fundamental policy which cannot be changed without the approval
of a majority of the Fund's voting securities, the Fund will not:
1. Purchase the securities of any issuer if such purchase would cause more
than 5% of the value of the Fund's total assets to be invested in the
securities of any one issuer (except securities of the U.S. Government or any
agency thereof), nor purchase more than 10% of the outstanding securities of
any one issuer.
2. Borrow money except from banks for temporary or emergency purposes (but
not for the purpose of investing) and then only in an amount not to exceed 5%
of the value of the Fund's net assets at the time the borrowing is incurred.
3. Concentrate more than 25% of the Fund's assets in any one industry.
Certain other investment restrictions are set forth in the Statement of
Additional Information. The Advisor does not anticipate that the Fund's
portfolio turnover rate will exceed 200%. For instance, a rate of 100% would
result if all the securities in the portfolio at the beginning of an annual
period had been replaced by the end of the period.
There can, of course, be no assurance that the Fund's investment objective
can be achieved or that its shareholders will be protected from the risk of
loss inherent in stock ownership.
RISK FACTORS
The Fund's share price will fluctuate. When you sell your shares you may
lose money. Growth stocks can be volatile for several reasons. Since they
usually reinvest a high portion of earnings in their own businesses, they may
lack the comfortable dividend yield associated with value stocks that can
cushion total return in a bear market. Also, they normally carry a higher
price/earnings ration than many other stocks; consequently, if earning
expectations are not met, investors often punish growth stocks inordinately.
The Manager's investment philosophy involves, to an extent, the anticipation
of social trends. Such anticipation could, of course, be wrong, in which event
the Fund's investment objective might not be met, and shareholders would be
subject to risk of loss.
The Fund may invest in small capital equity securities. Such companies may
be under capitalized in comparison to other better capitalized companies.
Hence, the risk of loss with respect to such investments generally is greater.
The Fund may invest up to 10% of its assets in Foreign Securities. These
include nondollar-denominated securities traded outside of the U. S. and
dollar-denominated securities traded in the U. S. (such as ADRs). Such
investments increase a portfolio's diversification and may enhance return,
but they also involve some special risks, such as exposure to potentially
adverse local political and economic developments; nationalization and
exchange controls; potentially lower liquidity and higher volatility; possible
problems arising from accounting, disclosure, settlement,
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and regulatory practices that differ from U. S. standards; and the chance that
fluctuations in foreign exchange rates will decrease the investment's value
(favorable changes can increase its value). These risks are greater for
investments in emerging markets.
The Fund does not invest in below investment grade debt obligations.
The Fund's portfolio turnover rated for the fiscal years ending December
31, 1996, 1995 and 1994 were 84%, 79% and 122%, respectively. This
relatively high turnover rate may involve the payment of corresponding high
brokerage commissions which are payable by the Fund, the result of which is
to lower net asset value.
MANAGEMENT
The Fund's Investment Advisor is Ehrenkrantz King Nussbaum, Inc. ("EKN"),
formerly King Capital, Inc., a Delaware Corporation organized in 1986. The
Advisor was organized to act as advisor to the Fund. The Advisor's President
is Mr. Louis Ehrenkrantz, editor of The Ehrenkrantz Report, an investment
newsletter. Prior to management of this Fund, neither Mr. Ehrenkrantz nor the
Advisor has previously advised an investment company, however, Mr. Ehrenkrantz
has been publishing his views in the newsletter since 1977.
INVESTMENT ADVISORY SERVICES
The Fund has entered into an investment advisory agreement with EKN, under
the terms of which the Advisor is responsible for the general management of
the Fund, as well as for decisions to buy and sell securities for the Fund,
for broker-dealer selection and for negotiation of commission rates under
standards established and periodically reviewed by the Board of Trustees.
The Board has established procedures under which the Advisor may allocate
brokerage transactions to EKN provided that compensation to it on each
transaction is reasonable and fair compared to the commission, fees or other
remuneration received or to be received by other broker-dealers in connection
with comparable transactions involving similar securities during a comparable
period of time. In addition, consistent with the Rules of Fair Practice of
the National Association of Securities Dealers, Inc., and subject to seeking
the most favorable price and execution available and such other policies as
the Board may determine, the Advisor may consider services in connection with
the sale of shares as a factor in the selection of broker-dealers to execute
portfolio transactions for the Fund. (See "Portfolio Transactions and
Brokerage" in the Statement of Additional Information.) As compensation for
its services, the Fund pays to the Advisor a monthly advisory fee at the
annual rate of 1% of the average daily net asset value of its portfolio.
During the year ended December 31, 1996, the fund paid advisory fees of
$65,514. The advisory fee percentage is in excess of that paid by most other
mutual funds. Except for expenses which may be paid or assumed by the Advisor,
the Fund pays all of its operating expenses including, but not limited to, the
expenses of maintaining its own books of account; the expenses of maintaining
one or more of its custodians, transfer agents, dividend disbursing agents and
agents for administration of shareholder accounts; the expenses of computing
daily net asset value; the fees and expenses of the Trustees; the expenses of
meetings of shareholders; the expenses of printing and mailing shareholder
reports and other required reports and documents provided shareholders; taxes,
interest and commissions, SEC and state registration fees; the expenses of
Trust existence; all or
8
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part of the salaries of Fund officers and other employees who also may be
directors or officers or employees of the Advisor; the fees of its auditors
and legal counsel; travel, entertainment, publications, telephone and office
equipment expense; office space rent; and all other ordinary expenses of
operation. During the year ended December 31, 1996, the Fund paid operating
expenses, including advisory fees, of $160,904. These amounts resulted in a
ratio of operating expenses to average net assets of 2.4%. (See "Investment
Advisory Services" in the Statement of Additional Information.)
PURCHASE OF SHARES
Shares are offered continuously for sale at their offering price which is
the net asset value per share computed as described in "Determination of Net
Asset Value," below. There is no sales charge. Initial investments must be
at least $500 and subsequent investments must be at least $50.
Shares may be purchased on any business day by completing the application
included in this PROSPECTUS and forwarding it to the shareholder service agent.
Purchase orders for shares of the Fund received in proper form by the
shareholder agent prior to 4:00 PM on any day the New York Stock Exchange is
open are confirmed at the net asset value of the Fund's shares determined at
the close on that day.
Payment of the purchase price for shares is due no later than three (3)
business days from the purchase date.
Additions to an investment account may be made at any time by mailing a
check directly to the shareholder service agent along with the deposit stub
attached to the confirmation of each purchase.
Stock certificates are not necessary and complicate redemption. They will,
however, be issued upon written request.
All income dividends and all capital gains distributions payable on shares
of the Fund will be reinvested in additional Fund shares at the net asset
value in effect on the dividend or distribution record date unless you elect
otherwise by written notice to us. The Fund acts as your agent to reinvest
dividends and distributions in additional shares. You may at any time change
your election as to whether to receive dividends and distribution in cash or
to have them reinvested by giving written notice of such change of election.
Any such change of election applies to dividends and distributions, the
record date for which falls on or after the date the written notice is
received.
If you have any questions, contact the Fund toll free at 800-424-8570.
SHAREHOLDER RETIREMENT PLANS
Individuals, if qualified, may establish their own tax-sheltered
Individual Retirement Account ("IRA"). The Fund makes available a prototype
IRA Plan for adoption by individuals. A description of applicable service
fees and certain of the limitations on contributions and withdrawals, as well
as applicable forms, are available from the Trust upon request. The IRA
documents contain a disclosure statement which the IRS requires to be
furnished to individuals who are considering adopting an IRA.
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Because a retirement program involves commitments covering future years,
it is important that the investment objectives of the Fund in which one
chooses to invest be consistent with the participants' retirement objective.
Premature withdrawals from a retirement plan may result in adverse tax
consequences.
REDEMPTION OF FUND SHARES
You may withdraw money at any time by following the procedures set forth
below:
Accounts without share certificates -- simply send a signed request (all joint
owners must sign) stating the amount which you would like to withdraw. For
amounts over $1000 you will have to take your request to a commercial bank or
trust company and ask them to stamp your request with a "signature guarantee."
Your bank or trust company will know how to do this.
Accounts with share certificates -- (1) sign the share certificates (all joint
owners must sign); (2) take the certificates to your commercial bank or trust
company; (3) ask the bank or trust company to stamp the certificates with a
"signature guarantee" and (4) mail the certificates to the Fund at 1730 K
Street, N.W., Washington, DC 20006, along with a written request that we
redeem the shares.
TELEPHONE TRANSACTIONS
Telephone redemptions may be elected by checking the appropriate box on the
investment application. Those shareholders making such election will receive
a telephone redemption form which sets forth the conditions and potential
liabilities associated with such election. The Fund uses reasonable
procedures (including shareholder identity verification) to confirm that
instructions given by telephone are genuine and is not liable for acting on
these instructions. If these procedures are not followed, the Fund may be
liable for any losses that may result from acting on the instructions given.
Requests for redemptions by corporations, executors, administrators,
trustees or guardians may require further documentation. Please call or write
for details if you have one of these types of accounts.
The proceeds of redemptions are ordinarily paid by check within seven days
after receipt of a redemption request in proper form. Proceeds may also be
wired to a bank or trust company if you have authorized wire transfers on your
investment application. It is mandatory that the Funds redeem shares within
seven days of the request of a shareholder. However, if your check for the
purchase of such shares has not cleared, we will not mail redemption proceeds
until it has cleared. This may take fifteen (15) days.
The right of redemption may be suspended during any period when: (a)
trading on the New York Stock Exchange is restricted as determined by the
Securities and Exchange Commission, or such Exchange is closed for other than
weekends and holidays; (b) the Commission has by Order permitted such
suspension or (c) an emergency as determined by the Commission exists, making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practical.
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For Fund expense reasons we may close an account upon thirty (30) days
notice when the asset value of the remaining shares in an account is below
$500.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Fund will annually distribute to shareholders substantially all of its
taxable net investment income (consisting of dividend and interest income and
the excess, if any, of net short-term capital gains over net long-term capital
losses) in the forms of dividends. The Fund anticipates that it will
distribute substantially all of its "net capital gain" income (the excess of
net long-term capital gain over net short-term capital loss) for each taxable
year as a capital gain dividend. Each shareholder shall be deemed to have
elected to have the distribution reinvested on the distribution payment date
in whole or fractional shares at net asset value, unless the shareholder has
elected to receive the distributions in cash by so indicating on the
investment application.
The Fund has elected to be and has been taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended.
So long as the Fund qualifies for this tax treatment, the Fund will be
relieved of Federal income tax on amounts distributed to Shareholders, but
Shareholders, unless otherwise exempt, will pay income or capital gains taxes
on the amounts so distributed (except distributions treated as return of
capital) regardless of whether such distributions are paid in cash or
reinvested in additional Shares.
The Fund will be required in certain cases to withhold 20% of dividends
paid to any Shareholder who does not comply with the Fund's request for a tax
identification number, who provides an incorrect number, who is subject to
special withholding requirements by the Internal Revenue Service or who fails
to certify to the Fund that he is not subject to withholding.
Shareholders will be advised annually as to the Federal income tax
consequences of distributions made during the year. Shareholders are advised
to consult with their tax advisors concerning the application of state and
local taxes on investments in the Fund which may differ from the Federal
income tax consequences described above. For a more detailed discussion of
the tax treatment of dividends and distributions you may refer to the Fund's
Statement of Additional Information.
DETERMINATION OF NET ASSET VALUE
Net asset value per share for the Fund is determined as of the close of
trading of the New York Stock Exchange (currently 4:00 p.m., New York Time)
on days when the Exchange is open for business. It is computed by dividing
the value of net assets of the Fund (i.e., the value of the assets less
liabilities) by the total number of shares outstanding in the Fund. Portfolio
securities are valued at the last sales price on the national securities
exchange on which such securities are primarily traded. Securities not listed
on an exchange or securities in which there were no transactions are valued at
the most recent reported bid price. Any securities or other assets for which
market quotations are not readily available are valued at fair value as
determined in good faith by the Trustees. Debt securities having maturities
of less than 60 days are valued by the amortized cost method. Expenses and
fees, including the management fee, are accrued daily and taken into account
for the purpose of determining the net asset value.
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DESCRIPTION OF THE FUND
The Fund is a series of the Ehrenkrantz Trust which was organized as a
Massachusetts business trust on December 9, 1986. It commenced operations on
January 1, 1987. The Agreement and Declaration of Trust permits the Board of
Trustees to issue an unlimited number of full and fractional shares of
beneficial interest without par value, which may be issued in any number of
series (called Funds). The Ehrenkrantz Growth Fund is currently the only
series, although the Board of Trustees may from time to time issue other
series, the assets and liabilities of which will be separate and distinct from
any other series. A previously authorized series, The Ehrenkrantz
Undiscovered Equities Fund was merged into the Growth Fund on May 31, 1989.
Shares issued by a Fund have no preemptive, conversion or sinking fund rights.
Shareholders of a Fund have equal and exclusive rights as to dividends and
distributions as declared by that Fund and to the net assets of the Fund upon
liquidation or dissolution.
Voting rights are not cumulative, so that the holders of more than 50% of
the shares voting in any election of Trustees can, if they choose to do so,
elect all the Trustees. While the Funds are not required to, nor intend to,
hold annual meetings of shareholders, such meetings may be called by the
Trustees at their discretion or upon demand by the holders of 10% or more of
the outstanding shares of the Fund for the purpose of electing or removing
Trustees. As of December 31, 1996, EKN, the Fund's advisor, owned
approximately 3.12% of the outstanding shares of the Growth Fund, and may be
a "control person" of the Fund as that term is defined in the Investment
Company Act of 1940.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to the Fund at 1730 K Street,
N.W., Washington, DC 20006 (Telephone: 1-800-424-8570 or (202) 223-1000).
GENERAL INFORMATION
Roy G. Hale serves as the auditor for the Fund. Reports containing
financial statements, at least one of which will be audited, will be sent to
shareholders twice during the fiscal year of the Fund which ends on December
31.
Riggs National Bank, Washington, DC, serves as custodian of the Fund's
assets.
Steadman Security Corp., 1730 K Street, N.W., Washington DC 20006 serves
as the Fund's transfer and dividend disbursing agent and agent for
administration of shareholder accounts.
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THE EHRENKRANTZ TRUST
Board of Trustees and Officers
*LOUIS EHRENKRANTZ, Chairman
*IRWIN NUSSBAUM, President
*JOAN KING, Vice-President, Secretary
Treasurer
STANLEY H. BROWN, Financial
Journalist, Editorial Consultant
RICHARD GRAY, Private Investor
DONNA LEWIS, President
D.S. Lewis Co.
ROBERT R. PERRINE, Account
Executive/Announcer WQEW Radio
MIRIAM PRICE, Private Investor
*ARTHUR WALSH, Account Executive
Gruntal & Co., Inc.
* Interested Person of the Fund within the
meaning of Section 2(a)(19) under the
Investment Company Act of 1940.
Manager and Investment Advisor
EHRENKRANTZ KING NUSSBAUM, INC.
New York City, NY
Custodian
RIGGS NATIONAL BANK
Washington, DC
General Counsel
THOMAS C. HENRY
Washington, DC
Auditor
ROY G. HALE, CPA
La Plata, MD
Transfer Agent, Dividend Disbursing Agent and Agent for Administration of
Shareholder Accounts
STEADMAN SECURITY CORPORATION
1730 K Street, N.W.
Washington, DC 20006
(202) 223-1000
(800) 424-8570
<PAGE>
PROSPECTUS
April 29, 1997
The Ehrenkrantz Trust
EHRENKRANTZ
GROWTH FUND
A mutual fund
with the investment
objective of
growth of capital
Investment Adviser
Ehrenkrantz King Nussbaum, Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
THE EHRENKRANTZ TRUST
1730 K Street, N.W.
Washington, D.C. 20006
1-800-424-8570
202-223-1000
This Statement of Additional Information is not a prospectus and
should be read in conjunction with the prospectus of The Ehrenkrantz Trust
dated April 29, 1997. Requests for copies of the prospectus should be made
by writing to The Ehrenkrantz Trust, 1730 K Street, N.W., Washington, D.C.
20006 or by calling one of the numbers listed above.
<PAGE>
THE EHRENKRANTZ TRUST
Table of Contents
Page
INVESTMENT RESTRICTIONS 1
INVESTMENTS 3
TRUSTEES AND OFFICERS OF THE TRUST 5
PRINCIPAL SHAREHOLDERS 8
INVESTMENT ADVISOR 9
PORTFOLIO TRANSACTIONS AND BROKERAGE 11
CUSTODIAN 15
TAX STATUS 15
DETERMINATION OF THE NET ASSET VALUE 16
DIVIDENDS 16
SHAREHOLDER ACCOUNTS 16
AUDITORS 16
LEGAL COUNSEL 16
FEDERAL & STATE REGISTRATION OF SHARES 16
GENERAL INFORMATION 16
PERFORMANCE INFORMATION 18
FINANCIAL STATEMENTS Appended
No person has been authorized to give any information or to make any
representations other than those contained in this Statement of Additional
Information and the Prospectus dated April 29, 1997 and, if given or made,
such information or representations may not be relied upon as having been
authorized by the Trust. The delivery of this Statement of Additional
Information at any time shall not imply that there has been no change in the
affairs of the Trust since the date hereof.
This Statement of Additional Information does not constitute an offer
to sell securities.
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INVESTMENT RESTRICTIONS
In seeking to achieve its investment objective, the Fund has adopted
the following restrictions which are matters of fundamental policy and cannot
be changed without approval by the holders of the lesser of: (i) 67% of a
Fund's shares present or represented at a shareholders' meeting at which the
holders of more than 50% of such shares are present or represented; or (ii)
more than 50% of the outstanding shares of the Fund.
The Fund may not:
1. Purchase the securities of any issuer if such purchase would cause more
than 5% of the value of the Fund's total assets to be invested in securities
of any one issuer (except securities of the United States Government or any
instrumentality thereof), nor purchase more than 10% of the outstanding
securities of any one issuer.
2. Purchase securities of other investment companies.
3. Purchase or retain the securities of any issuer if those trustees, officers
or directors of the Trust or the Advisor owning individually more than 1/2 of
1% of the securities of such issuer together own more than 5% of the securities
of such issuer.
4. Purchase, hold or deal in commodities or commodity contracts or in real
estate, but this shall not prohibit the Fund from investing in marketable
securities of companies engaged in real estate activities or investments.
5. Borrow money except from banks for temporary or emergency purposes (but not
for the purchase of securities) and then only in an amount not to exceed 5% of
the value of the Fund's net assets at the time the borrowings incurred.
6. Pledge, mortgage, hypothecate or otherwise encumber any of it's assets.
7. Lend any money or other assets except through the purchase of a portion of
an issue of publicly distributed bonds, debentures or other debt securities,
or private issues of debt securities (subject to the limitation in Section 8
below), or the acquisition of repurchase agreements and commercial paper of
corporations.
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<PAGE>
8. Invest in restricted securities (restricted as to disposition under
Federal securities laws) or illiquid or other securities without readily
available market quotations, including repurchase agreements maturing in more
than seven days, if as a result of any such investment, more than 10% of the
Fund's total assets would be invested in restricted, illiquid or other
securities without readily available market quotations.
9. Act as an underwriter of securities of other issuers.
10. Invest in the securities of a company for the purpose of management or the
exercise of control.
11. Concentrate its investments in any particular industry or industries,
except that the Fund may invest not more than 25% of the value of its total
assets in a single industry.
12. Participate on a joint or joint and several basis in any trading account
in any securities.
13. Sell securities short except where a long position is held in the same
security which equals or exceeds the number of shares sold short.
14. Purchase any securities on margin.
15. Purchase the warrants of any issuer if, as a result, more than 2% of the
value of the total assets of the Fund would be invested in warrants which are
not listed on the New York Stock Exchange or American Stock Exchange, or more
than 5% of the value of the total assets of the Fund would be invested in
warrants whether or not so listed, such warrants in each case to be valued at
the lower of cost or market, but assigning no value to warrants acquired by
the Fund in units with or attached to debt securities.
16. Invest in interests in oil or other mineral exploration programs. If a
percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in market value of
the investment or the total assets will not constitute a violation of that
restriction.
3
<PAGE>
INVESTMENTS
The following information supplements the discussion of the Fund's
investment objectives and strategy which are described in detail in the
prospectus under the caption "Investment Objectives" and "Investment Strategy:"
WARRANTS
The Fund may invest in warrants; however, not more than 5% of its
assets (at the time of purchase) will be invested in warrants other than
warrants acquired in units or attached to other securities. Of such 5% not
more than 2% of assets at the time of purchase may be invested in warrants
that are not listed on the New York or American Stock Exchanges. Warrants
are pure speculation in that they have no voting rights, pay no dividends and
have no right with respect to the assets of the corporation issuing them.
Warrants basically are options to purchase equity securities at a specific
price valid for a specific period of time. They do not represent ownership of
the securities, but only the right to buy them. The prices of warrants do not
necessarily move parallel to the prices of the underlying securities.
The Fund may sell (write) covered call options on specific equity
securities. A call option gives the holder (buyer) the right to purchase a
security at a specified price (the exercise price) at any time before a
certain date (the expiration date). The Fund receives a premium (less a
commission) for writing the option which premium would partially or completely
offset any decline in price. If, for example, the Fund wrote an option at
$50 on the same 100 shares of ABC bought at $40 per share and now selling for
$50 per share, it might receive a premium of approximately $600. If the
market price of the underlying security declined to $45, the option will not
be exercised and the Fund could offset the unrealized loss of $500 by the
$600 premium. On the other hand, if the market price of the underlying
security increases to $55, the option would be exercised and the Fund will
have foregone the unrealized $1,500 gain for $1,000 gain plus the $600
premium. The Fund can also close out its position in the call option by
repurchasing the option contract separately and independent of any transaction
in the underlying security and, therefore,
4
<PAGE>
realize capital gain or loss. If the Fund could not enter into such a closing
purchase transaction, it may be required to hold a security that it may
otherwise have sold to protect against depreciation. Brokerage commissions
associated with selling options are proportionately higher than those
associated with general securities transactions.
PRIVATE PLACEMENTS (RESTRICTED SECURITIES)
The Fund may invest in restricted securities (privately placed
securities) and other securities without readily available market quotations
but will not acquire such securities and other illiquid securities or
securities without readily available market quotations, such as repurchase
agreements maturing in more than seven days, if as a result they would
comprise more than 10% of the value of the Fund's total assets. Restricted
securities may be sold only in privately negotiated transactions or in a
public offering with respect to which a registration statement is in effect
under the Securities Act of 1933. Where registration is required, the Fund
may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and
the time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, the Fund might obtain a less favorable price than prevailed
when it decided to sell. Restricted securities will be priced at fair value
as determined in good faith by the Board of Trustees. If through the
appreciation of restricted securities or the depreciation of unrestricted
securities, the Fund should be in a position where more than 10% of the value
of its net assets are invested in illiquid assets, including restricted
securities, the Fund will take appropriate steps to protect liquidity.
TRUSTEES AND OFFICERS OF THE TRUST
Trustees and Officers of the Trust, together with their principal
business occupations during the last five years, and other information are
shown below. Each Trustee who is deemed an "interested person," as defined
in the Investment Company Act of 1940 (the "Act") is indicated by an
asterisk *:
5
<PAGE>
Louis Ehrenkrantz, Trustee and Chairman *
Mr. Ehrenkrantz was a Registered Representative affiliated with
Merrill Lynch Pierce Fenner and Smith from 1960 to 1967. Thereafter, he was
an office manager of Francis I. DuPont & Co., Inc. until 1971. Between 1971
and 1973 he held various managerial positions with several large brokerage
firms, including Philips Appel and Walden, Josephthal & Co. and Andresen & Co.
In 1973, he formed Rosenkrantz, Ehrenkrantz, Lyon & Ross, where he served as
a director until November 1984, at which time he joined Reich & Co., Inc.
members of the New York and American Stock Exchanges, as a director of the
Ehrenkrantz & King Division and Vice-President of Reich. Mr. Ehrenkrantz
left Reich & Co. in October of 1990 and joined Ladenburg, Thalmann & Co.,
Inc., members of the New York and American Stock Exchanges, as Managing
Director. In August, 1993 he resigned his position with Ladenburg. Mr.
Ehrenkrantz is President and a director of the Advisor.
Irwin Nussbaum, Trustee and President *
Mr. Nussbaum was employed by E. Lowitz & Co., a New York Stock
Exchange, Inc. ("NYSE") member firm, from 1955 to 1972. In addition to his
other responsibilities, he supervised the over-the-counter trading department.
In 1972, he became the Manager of Retail Sales at Ross Low Bull, Inc. (Member
NYSE). From November 1973 through September 1982, Mr. Nussbaum was Director
of Institutional Sales and a Registered Representative at Shoenberg, Hieber
Inc. (Member NYSE). In October 1982, Mr. Nussbaum joined Reich & Co., Inc.
as co-director of the retail sales division and later as Executive Director of
the Ehrenkrantz & King Division and a Vice-President of Reich. Mr. Nussbaum
left Reich & Co. in October of 1990 and joined Ladenburg, Thalmann & Co.,
Inc. as an Executive Marketing Director. He resigned his position at
Ladenburg in August 1993. Mr. Nussbaum is also a partner in United Research
Capital Investors, a partnership formed to acquire an Options Trading Right
on the NYSE's Options Exchange, and he is the Options Right Holder on that
Exchange. Mr. Nussbaum is Executive Vice-President and a director of the
Advisor.
6
<PAGE>
Joan King, Trustee, Vice-President, Treasurer and Secretary *
Ms. King was a Registered Representative and General Partner of Ross
Low Bull & Co. from January 1965 through May 1971. She served as Executive
Vice-President and Chief Financial Officer of Ross Low Bull, Inc. from June
1971 through October 1973. During that period, she became the first female
Associate Member of the American Stock Exchange. In November 1973, she
became an officer and director of Shoenberg, Hieber Inc. In October 1982, she
joined Reich & Co., Inc. as co-director of the retail sales division and later
as a Director of the Ehrenkrantz & King Division and a Vice-President of Reich.
Ms. King is a partner in United Research Capital Investors. She left Reich &
Co. in October of 1990 and joined Ladenburg, Thalmann & Co., Inc. as an
Executive Marketing Director. She resigned her position at Ladenburg in
August 1993. She is Chairman, Secretary, Treasurer and a director of the
Advisor.
Stanley H. Brown
Mr. Brown is a financial journalist and editorial consultant. He was
formerly Senior Editor of Forbes Magazine, associate editor of Fortune Magazine
and news editor of Business Week.
Donna Lewis
Ms. Lewis is President of D. S. Lewis Co. and former president of
T. H. Angermeier, both jewelry companies.
Miriam Price
Ms. Price is a private investor. She is the former Office Manager of
C & M Manufacturing Co., Inc.
Arthur Walsh, Trustee *
Mr. Walsh has been an account executive with Gruntal & Co., Inc.,
Roseland, NJ since 1979.
Richard Gray, Trustee
From 1971 to 1990, Mr. Gray was President, Director and Principal
Shareholder of Silver, Gray & Co., Inc., a New York Stock Brokerage Firm. He
is presently a Private Investor.
7
<PAGE>
Robert R. Perrine, Trustee
Mr. Perrine is an Account Executive/Announcer for WQEW Radio, New York.
He was formerly an Account Executive for Jukebox Radio, New Jersey and was
National Sales Manager for WEVD Radio, New York.
As of December 31, 1996, the Officers and Trustees of the Trust owned
shares of beneficial interest in the Trust as follows:
TRUSTEE SHARES
Louis Ehrenkrantz 7,775
Irwin Nussbaum 7,086
Joan King 1,591
Arthur Walsh 684
Miriam Price 6,467
Robert R. Perrine 482
Trustees and Officers of the Trust who are officers or stockholders of
the Advisor do not receive any direct remuneration from the Trust for serving
as Trustees or officers but they may be considered to have received
remuneration indirectly. Those Trustees who are not so affiliated with the
Advisor may receive a fee for each Board of Trustees' meeting attended, plus
reimbursement for out-of-pocket expenses in attending meetings. During the
year ended December 31, 1996, they received no such fees or expense
reimbursements.
Some of the Trustees of the Fund are customers of, and have had
normal brokerage transactions with Ehrenkrantz King Nussbaum, Inc. in the
ordinary course of business. All such transactions were made on substantially
the same terms as those prevailing at the time for comparable transactions
with unrelated persons. Additional transactions may be expected to take place
in the future.
PRINCIPAL SHAREHOLDERS
As of December 31, 1996, the Advisor, Ehrenkrantz King Nussbaum, Inc.,
598 Madison Ave., 14th Floor, New York, NY 10022, owned 3.12% of the
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<PAGE>
outstanding shares of the Fund. As of December 31, 1996, Anne Jackson Wallach,
Eli Wallach, H & E Eisenstodt, and R. Weiner owned 7.0%, 10.0%, 3.5%, and
2.9% respectively of the outstanding shares of the Fund. No other person owns
more than 2% of the Fund's Shares.
INVESTMENTS ADVISOR
The Advisor to the Trust is Ehrenkrantz King Nussbaum, Inc. ("EKN"),
formerly King Capital, Inc. The principal stockholders of the Advisor are
Mr. Louis Ehrenkrantz, Mr. Irwin Nussbaum, Ms. Joan King, Mr. Richard Weiner
and Investor Resources Services, Inc. The address of each is 598 Madison Ave.,
14th Floor, New York, NY.
The Advisory Agreement is dated December 9, 1986. It is required to be
approved annually by the Board of Trustees or by vote of a majority of the
Fund's outstanding voting securities. In addition, and in either case, each
annual renewal must be approved by the vote of a majority of the Trustees who
are not parties to the Advisory Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement is terminable without penalty, on 60 days'
written notice, by the Trustees, by vote of a majority of the Fund's
outstanding voting securities, or by the Advisor, and will terminate
automatically in the event of its assignment.
Under the terms of the Advisory Agreement, the Advisor manages the day
to day operations of the Fund pursuant to direction by the Fund's Board of
Trustees. The Advisor is responsible for investment decisions and supplies
investment research and portfolio management.
Under the terms of the Advisory Agreement, the Trust pays all of its
ordinary expenses of operation, such expenses of operation including, but not
being limited to, the following: (i) the expenses of maintaining its own
books of account; (ii) the expenses of maintaining one or more of its
custodians, transfer agents, agents for administration of shareholder accounts
and dividend disbursing agents; (iii) the expenses of computing the daily net
asset value of
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<PAGE>
shares of the Trust; (iv) the fees and expenses of its Trustees, excluding
those Trustees who also may be Directors of the Advisor, and the fees and
expenses of the members of any Committee of the Trust excluding any members
who also may be Directors or officers or employees (or all of these) of the
Advisor, and who perform services therefore and are compensated thereby;
(v) the expenses of meetings of its shareholders; (vi) the expenses of
printing and mailing of all shareholder reports and other required reports and
documents provided shareholders, including, but not limited to, the cost of
printing and mailing prospectuses to shareholders; (vii) taxes of any kind
assessed against the Trust; (viii) interest and commissions; (ix) Securities
and Exchange Commission fees; (x) State registration fees; (xi) the expenses
of Trust existence; (xii) all or part of the salaries of the Trust officers
and other employees who also may be directors or officers or employees (or all
of these) of the Advisor; (xiii) the fees of its auditors; (xiv) the fees of
its legal counsel; (xv) travel, entertainment, publications, telephone, and
communications expense; (xvi) office space rent, and (xvii) all other ordinary
expenses of operation. The Trust also pays all extraordinary expenses of
whatever kind or nature, unless such expenses have been specifically assumed
by the Advisor. For the fiscal year ended December 31, 1996, the Advisor has
assumed some of the expenses of the Fund. It may discontinue doing so at any
time upon thirty days notice to shareholders.
The assets of the Trust received for the issue or sale of each series
(Fund) and all income, earnings, profits and proceeds thereof, subject only
to the rights of creditors, are especially allocated to such series, and
constitute the underlying assets of such series. The underlying assets of
each series are required to be segregated on the books of account, and are to
be charged with the liabilities in respect of such series and with a share of
the general liabilities of the Trust. Liabilities in respect to any two
series are to be allocated in proportion to the asset value of the respective
series except where direct expenses can otherwise be fairly made. The Trustees
have
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<PAGE>
the right to determine which liabilities are allocable to a given series,
and which are general or allocable to both series.
Because of various state law requirements, the Advisor must reimburse
the Fund for annual expenses to the extent that aggregate operating expenses
of the Fund (excluding interest, taxes, brokerage commissions and extraordinary
expenses such as litigation costs) exceed in any fiscal year 2.5% of the first
$30 million of net assets of the Fund; 2% of the next $70 million, and 1.5% of
average annual net assets of the Fund in excess of $100 million. For the
purpose of determining whether the Fund is entitled to reimbursement, the
expenses of the Fund are calculated on a yearly basis. If the Fund is entitled
to reimbursement, such reimbursement will be made within 120 days of fiscal
year end.
As compensation for its services, the Trust pays to the Advisor a
monthly advisory fee computed at the annual rate of 1% of the Fund's average
daily net asset value. The advisory fees paid by the Fund for the years 1996,
1995, 1994, were $65,514, $66,039, and $62,636 respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Advisor is responsible for decisions to buy and sell securities
for the Fund and for the placement of its portfolio business and the
negotiation of the commissions to be paid on such transactions. It is the
policy of the Advisor to seek the best execution at the best security price
available with respect to each transaction, in light of the overall quality of
brokerage and research services provided to the Advisor or the Fund. The best
price to the Fund means the best net price without regard to the mix between
purchase or sale price and commission, if any. In selecting broker-dealers
and in negotiating commission, the Advisor considers the firm's reliability,
the quality of its execution services on a continuing basis and its financial
condition. Brokerage may be allocated based on the sale of Fund shares
subject to the above constraints.
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<PAGE>
The Advisor intends to direct certain of the Fund's portfolio brokerage
business to EKN in its capacity as a broker dealer. The Fund will not deal
with EKN in any transaction in which EKN acts as a principal; that is, an
order will not be placed with EKN if execution of the trade involves EKN
serving as a principal with respect to any part of the Fund's order, nor will
the Fund buy or sell over-the-counter securities with EKN acting as market
maker. If EKN is participating in an underwriting or selling group, the Fund
may not buy portfolio securities from the group except in accordance with
rules of the SEC. The Advisor believes that the limitation will not affect
the Fund's ability to achieve its investment objective.
The portfolio transactions effected through EKN are subject to certain
policies and procedures incorporating the standards of Rule 17e-1 promulgated
under the Investment Company Act of 1940 which requires that the commissions
paid EKN must be "reasonable and fair compared to the commission, fee or
other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities during a comparable
period of time". Rule 17e-1 also contains requirements for the review of such
transactions by the Board of Trustees and requires the Advisor to furnish
reports and to maintain records in connection with such reviews. Pursuant to
rules promulgated under Section 11(a) of the Securities Exchange Act of 1934,
the Trustees have approved a written agreement that permits EKN to effect
Portfolio Transactions on National Securities Exchanges and to retain
compensation in connection with such transactions.
Messrs. Ehrenkrantz and Nussbaum and Ms. King, principal shareholders
of the Advisor maintain employment relationships with EKN. Hence, they may
share, indirectly, in commissions paid by the Fund to EKN. As a result of the
existence of the foregoing relationships among Mr. Ehrenkrantz, Mr. Nussbaum,
Ms. King and EKN, it is conceivable that conflicts of interests may arise from
time to time between the Fund and such parties.
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<PAGE>
Section 28(e) of the Securities Exchange Act of 1934 ("Section 28(e)")
permits an investment advisor, under certain circumstances, to cause an account
to pay a broker or dealer who supplies brokerage and research services a
commission for effecting a transaction in excess of the amount of commission
another broker or dealer would have charged for effecting the transaction.
Brokerage and research services, include (a) furnishing advice as to the value
of securities, the advisability of investing, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities, (b)
furnishing analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy, and the performance of
accounts and (c) effecting securities transactions and performing functions
incidental thereto (such as clearance, settlement and custody).
The Advisor may cause the Fund to pay a broker which provides brokerage
and research services to the Advisor a commission for effecting a securities
transaction in excess of the amount another broker would have charged for
effecting the transaction. The Advisor is of the opinion that the continued
receipt of supplemental investment research services from broker-dealers is
essential to its provision of high quality portfolio management services to
the Fund. Such higher commissions will not be paid by the Fund unless (a) the
Advisor determines in good faith that the amount is reasonable in relation to
the services in terms of the particular transaction or in terms of the
Advisor's overall responsibilities with respect to the accounts as to which it
exercises investment discretion, (b) such payment is made in compliance with
the provisions of Section 28(e), other applicable state and federal laws, and
the Advisory Agreement and (c) in the opinion of the Advisor, the total
commissions paid by the Fund will be reasonable in relation to the benefits to
the Fund over the long term. The investment advisory fee paid by the Fund
under the Advisory Agreement is not reduced as a result of the Advisor's
receipt of research services.
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<PAGE>
The Advisor seeks to allocate portfolio transactions equitably whenever
concurrent decisions are made to purchase or sell securities by the Fund. In
some cases, this procedure could have an adverse effect on the price or the
amount of securities available to a particular Fund. In making such
allocations between the Fund and such other client, the main factors considered
by the Advisor are the respective investment objectives, the relative size of
portfolio holdings of the same or comparable securities, the availability of
cash for investment, the size of investment commitments generally held, and
opinions of the persons responsible for recommending the investment. During
1994, 1995, and 1996, the Fund paid an aggregate of $15,529, $12,084, and
$7,695 respectively in commissions to broker-dealers for execution of
portfolio transactions. In 1995 and 1996, EKN effected transactions involving
$10,684 and $7,245 or 88% and 94% respectively of aggregate commissions.
The portfolio turnover rate of the Fund for each of the last three years has
been 1996 - 84%; 1995 - 79%; and 1994 - 121.99%.
CUSTODIAN
As custodian of the Fund's assets, The Riggs National Bank of
Washington has custody of all securities and cash of the Fund, delivers and
receives payment for securities sold, receives and pays for securities
purchased, collects income from investments and performs other duties, all as
directed by officers of the Fund. The custodian is in no way responsible for
any of the investment policies or decisions of the Fund.
TAX STATUS
The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986, as amended.
Dividends paid by the Fund may be eligible for the dividends-received
deduction for corporate shareholders. For tax purposes, it does not make any
difference whether dividends and capital gain distributions are paid in cash or
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<PAGE>
in additional shares. The Fund must declare dividends equal to at least 98%
of ordinary income (as of December 31) and capital gains (as of October 31) in
order to avoid a federal excise tax and distribute 100% of ordinary income and
capital gains as of December 31 to avoid federal income tax.
At the time of your purchase, the Fund's net asset value may reflect
undistributed income, capital gains or net unrealized appreciation of
securities held by the Fund. A subsequent distribution to you of such amounts,
although constituting a return of your investment, would be taxable as either
dividends or capital gain distributions. For federal income tax purposes, the
Fund is permitted to carry forward its net realized capital losses, if any,
for eight years and realize net capital gains up to the amount of such losses
without being required to pay taxes on, or distribute such gains. On December
31, 1996, the books of the Fund indicated that the Fund's aggregate net assets
included unrealized appreciation of $573,092.
If, in any taxable year, the Fund should not qualify as a regulated
investment company under the Code: (i) the Fund would be taxed at normal
corporate rates on the entire amount of its taxable income without deduction
for dividends or other distributions to shareholders; and (ii) the Fund's
distributions to the extent made out of the Fund's current or ordinary
dividends (regardless of whether they would otherwise have been considered
capital gain dividends).
Taxation of Foreign Shareholders
The Code provides that dividends from net income will be subject to
U. S. tax. For shareholders who are not engaged in a business in the U. S.,
this tax would be imposed at the rate of 30% upon the gross amount of the
dividends in the absence of a Tax Treaty providing for a reduced rate or
exemption from U. S. taxation. Distributions of net long-term capital gains
realized by the Fund are not subject to tax unless the foreign shareholder is
a nonresident alien individual who was physically present in the U. S. during
the tax year for more than 182 days.
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<PAGE>
DETERMINATION OF NET ASSET VALUE
As set forth in the Prospectus under the caption "Determination of
Net Asset Value" the net asset value of the Fund will be determined as of the
close of trading on each day the New York Stock Exchange is open for trading.
The New York Stock Exchange is open for trading Monday through Friday except
New Year's Day, Washington's Birthday, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day. Additionally, if any of
the aforementioned holidays falls on a Saturday, the New York Stock Exchange
will not be open for trading on the preceding Friday and when any such holiday
falls on a Sunday, the New York Stock Exchange will not be open for trading on
the succeeding Monday, unless unusual business conditions exist, such as the
ending of a monthly or the yearly accounting period.
DIVIDENDS
All income dividends and capital gain distributions will be invested
automatically in additional Fund shares, unless the Fund is otherwise notified
in writing.
SHAREHOLDER ACCOUNTS
A shareholder's account may be terminated by the Fund on not less than
30 days' notice if, at the time of any transfer or redemption of shares in the
account, the value of the remaining shares in the account, at the current
offering price, falls below $500, provided that such reduction in net asset
value below $500 is the result of withdraws and not market fluctuations. Upon
any such termination, the shares will be redeemed at the then current net
asset value and a check for the proceeds of redemption sent within seven days
of such redemption.
AUDITORS
Roy G. Hale, CPA, La Plata, MD, has been selected as the auditor for
the Fund.
16
<PAGE>
LEGAL COUNSEL
Thomas C. Henry, Esquire, whose address is 504 Talbot Street, St.
Michaels, MD 21663, is legal counsel to the Fund.
FEDERAL AND STATE REGISTRATION OF SHARES
The Fund's shares are registered for sale under the Securities Act of
1933, and the Fund or its shares are registered under the laws of those states
which require registration and in which Fund shares are offered for sale.
GENERAL INFORMATION
The Trust was formed in 1986 as a diversified, open-end management
investment company.
The Trust has been organized as an unincorporated business Trust under
the laws of the Commonwealth of Massachusetts pursuant to an Agreement and
Declaration of Trust dated December 19, 1986 (the "Trust Agreement") and
commenced operations as an investment company on January 1, 1987.
Shares do not have cumulative voting rights, which means that holders
of more than 50 percent of the shares voting for the election of Trustees can
elect all Trustees. Shares are transferable but have no preemptive,
conversion or subscription rights with respect to the election of Trustees
and the ratification of the selection of independent accountants. Meetings of
shareholders normally will not be held for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by shareholders, at which time the Trustees then in
office will call a shareholders' meeting for the election of Trustees.
Shareholders of record of no less than two-thirds of the outstanding shares of
the Fund may remove a Trustee through a declaration in writing or by vote
cast in person or by proxy at a meeting called for that purpose. Under the
Trust Agreement, the Trustees are required to call a meeting of shareholders
for the purpose of voting on the question of removal of any such Trustee when
requested in writing to do so by the shareholders of record of not less than
10 percent of the Trust's outstanding shares.
17
<PAGE>
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust Agreement disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Trust or a Trustee. The Trust Agreement provides for indemnification from the
Fund's property for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Trust itself would be unable to meet its
obligations, a possibility that the Trust believes is remote. Upon payment of
any liability incurred by the Trust, the shareholder paying the liability will
be entitled to reimbursement from the general assets of the Trust. The
Trustees intend to conduct the operations of the Trust in a manner so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Trust.
PERFORMANCE INFORMATION
For purposes of quoting and comparing the performance of the Fund to
that of other open-end diversified management investment companies and to stock
or other relevant indices in advertisements or in certain reports to
Shareholders, performance will be stated in terms of total return, rather than
in terms of yield. The total return quotations, under the rules of the
Securities and Exchange Commission, must be calculated according to the
following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods at
the end of the 1, 5 or 10 year periods (or fractional
portion thereof.)
18
<PAGE>
Under the foregoing formula the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and
will cover one, five and ten year periods or a shorter period dating from the
commencement of the Fund's operations. In calculating the ending redeemable
value, the maximum sales load is deducted from the initial $1,000 payment and
all dividends and distributions by the Fund are assumed to have been reinvested
at net asset value as described in the prospectus on the reinvestment dates
during the period. "T" in the formula above, is calculated by finding the
average annual compounded rates of return over the period that would equate
an assumed initial payment of $1,000 to the ending redeemable value. The Fund
may also from time to time include in such advertising total return figures
that are not calculated according to the formula set forth above in order to
compare more accurately the Fund's performance with other measures of
investment return.
For example, in comparing the Fund's total return with data published
by Lipper Analytical Servicing, Inc., the Fund calculates its aggregate and
average annual total return for the specified periods of time by assuming the
investment of $10,000 in Fund Shares and assuming the reinvestment of each
dividend or other distribution at net asset value on the reinvestment date.
For purpose of other comparisons, the Fund performs a second alternative
computation for its aggregate and average annual total return by assuming the
investment of $10,000 in Fund Shares and assuming no reinvestment of dividends
or other distributions. For these alternative computations, the Fund assumes
that the $10,000 invested in Fund Shares is net of all sales charges (as
distinguished from the computation required by the SEC where the $1,000
payment is reduced by sales charges before being invested in Fund Shares).
The Fund will, however, disclose the maximum sales charges and will also
disclose that the performance data do not reflect sales charges and that
inclusion of sales charges would reduce the performance quoted. Such
alternative total return information will be given no greater prominence in
such advertising than the
19
<PAGE>
information prescribed under SEC rules and all advertisements containing
performance data will include a legend disclosing that such performance data
represent past performance and that the investment return and principal value
and investment will fluctuate so that an investor's shares, when redeemed may
be worth more or less than their original cost.
20
<PAGE>
THE EHRENKRANTZ TRUST
COMPRISED OF
THE EHRENKRANTZ GROWTH FUND
FINANCIAL STATEMENTS
DECEMBER 31, 1996
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on
the Trust's Stock for the last eight years with the cumulative total return
(including the reinvestment of all dividends) of (i) Standard & Poor's 500
Stock index and (ii) the Lipper Analytical Securities Corporation-Growth &
Income Index. There can be no assurance that the performance of the Trust
will continue into the future with the same or similar trends depicted in the
graph below.
<TABLE>
<CAPTION>
Eight Year Cumulative Return
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996
Ehrenkrantz Trust 10,000 11,936 14,156 13,848 15,900 16,673 16,856 19,553 20,335
S&P 500 10,000 11,200 14,224 13,228 16,667 17,334 18,588 24,928 30,349
Lipper Analytical
Service 10,000 11,900 14,637 13,759 17,474 19,396 21,934 28,505 34,126
</TABLE>
Assumes $10,000 invested on January 1, 1988 in each of (i) the Trust's stock;
(ii) the S&P 500 Composite Stock Index and (iii) the Lipper Analytical
Securities Corporation-Growth & Income Index.
<PAGE>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
The stock market has ignored the potential synergy between the entertain-
ment and communications industries. The concentration of interest in
technology issues has blunted interest in the broader market, just as the rise
in the Dow Jones averages has created neglect of the secondary stocks.
It is our belief that the stocks that have led this market to new highs
are not likely to lead the market any further. It is more probable that the
less popular issues should lead the way for the next two years. It is this
area that we are concentrating on.
If you would like to discuss this strategy, especially if it relates to
the stocks in the portfolio, our unique offer remains: Louis Ehrenkrantz is
available each day at (212) 508-4701.
<PAGE>
<TABLE>
<CAPTION>
EHRENKRANTZ GROWTH FUND
Portfolio of Investments
DECEMBER 31, 1996
<S> <C> <C>
Market
Common Stocks - 100% Shares Value
Consumer Products - 5.1%
Avon Products, Inc. 2,000 114,250
Intimate Brands, Inc. 3,000 51,375
165,625
Communications - Media - 5.5%
Nextel Communications, Inc. 3,000 39,189
U.S. West Media Group, Inc. 3,000 55,125
Young Broadcasting, Inc. 'A' 3,000 87,750
182,064
Communications - Equipment - 7.0%
Airtouch Communications, Inc. 5,000 126,250
General Instrument Corporation 2,000 43,500
Verifone, Inc. 2,000 59,000
228,750
Defense - 7.0%
BTG, Inc. 5,000 132,500
Watkins Johnson Company 4,000 98,000
230,500
Electronics & Electrical Equipment - 7.7%
Comcast Class A SPL (non-vtg) 6,000 106,878
Comcast UK Cable Partners Ltd. 2,000 27,250
Philips Electronics N.V. 3,000 120,000
254,128
Entertainment - 2.2%
Alliance Communications Corporation 3,000 27,000
Cinemasters Groups, Inc. 2,000 6,740
Playboy Enterprises, Inc. Class B 4,000 39,000
72,740
Food - 3.1%
Dole Food Company 3,000 101,625
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
Ehrenkrantz Growth Fund
Portfolio of Investments
Page 2
<S> <C> <C>
Market
Common Stocks - 100% Shares Value
Household Products - 9.8%
Corning, Inc. 7,000 323,750
Manufacturing - 8.4%
Morningstar Group, Inc. 3,000 58,875
Polygram, N.V. 3,000 149,250
Singer Company N.V. 3,000 67,125
275,250
Medical Devices - 6.0%
Centocor, Inc. 2,000 71,500
St. Jude Medical, Inc. 3,000 127,125
198,625
Mining - 2.9%
Inco Ltd. 3,000 95,625
Oil - 7.4%
Mobile 2,000 244,500
Paper - 4.5%
Consolidated Papers, Inc. 3,000 147,375
Publishing - 9.6%
Tribune Company 4,000 315,500
Software - 3.9%
Electronic Data Systems, Inc. 3,000 129,750
Transportation - 1.2%
Fritz Companies, Inc. 3,000 38,250
Water Purification - 8.7%
Ionics, Inc. 6,000 288,000
Total Portfolio of Investments $3,292,057
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE EHRENKRANTZ GROWTH FUND
Statement of Assets and Liabilities
For the year ended December 31, 1996
<S> <C>
Assets:
Investments at market value (cost $3,292,057
$2,718,965) (Note 1)
Cash and Cash equivalents 3,069,661
Dividents and interest receivable 15,679
Total Assets 6,377,397
Liabilities
Accrued expenses 14,650
Total Liabilities 14,650
Net Assets applicable to outstanding shares $6,362,747
Net Asset Value (NAV) per share based on
1,164,284 shares of beneficial interest
(offering and redemption price) $ 5.47
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Ehrenkrantz Growth Fund
Statement of Assets and Liabilities
Page 2
Net assets consist of
Unrealized appreciation on investments $ 573,092
(Note 3)
Accumulated gains on investment
transactions 2,475
Undistributed net income 25,444
Paid in Capital 5,761,736
Net Assets $6,362,747
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE EHRENKRANTZ GROWTH FUND
Statement of Operations
For the year ended December 31, 1996
<S> <C> <C>
Investment income:
Dividends $ 44,598
Interest 187,029 $ 231,627
Expenses:
Management fees (Note 2) 65,514
Shareholder services & fund
accounting fees 42,500
Legal fees 19,827
Blue Sky registration fees 11,925
Audit fees 5,900
Custodian fees 5,116
Printing costs 3,386
Taxex 2,971
SEC filings 2,919
Miscellaneous expense 846
Total Expenses 160,904
Net investment income 70,723
Net realized gains on security
transactions 198,979
Net change in unrealized appreciation
on investments 11,171
Net gain on investments 210,150
Net increase in net assets resulting
from operations $280,873
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE EHRENKRANTZ GROWTH FUND
Statement of Changes in Net Assets
for the years ending December 31, 1996 and 1995
<S> <C> <C>
1996 1995
Operations:
Net investment income $ 70,723 $ 117,624
Net realized gain from
investments 198,979 617,288
Net change in unrealized
appreciation from investments 11,171 298,332
Net change in net assets resulting
from operations 280,873 1,033,244
Distribution to shareholders (252,574) (734,677)
Increase (decrease) in net assets
from trust share transactions (Note 4) (568,128) (289,846)
Change in net assets (539,829) 588,413
Net assets at the beginning of
the period 6,902,576 6,314,163
Net assets at the end of period $6,362,747 $6,902,576
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE EHRENKRANTZ GROWTH FUND
Notes to Financial Statements
For the year ending December 31, 1996
1. Significant accounting policies.
The Ehrenkrantz Trust was organized on December 9, 1986 under the laws of the
Commonwealth of Massachusetts and is a business entity commonly known as a
"Massachusetts Business Trust" with the authority to issue an unlimited number
of shares of beneficial interest of separate series, without par value. The
Trust consists of the Ehrenkrantz Growth Fund.
Security valuation.
Investments in securities are valued at the last reported sales price, for
NYSE, AMEX and NASDAQ National Market listed securities, on the last business
day of the period, or, in the absence of a recorded sale, and for securities
traded in the over-the-counter market, at the most recent reported bid price;
call options written are valued at the last quoted asked price. Short-term
investments are carried at no cost, which, when combined with accrued interest
receivable, approximates market value.
Federal income taxes.
It is the Fund's policy to comply with the requirements of the Internal
Revenue Code applicable to regulated investment companies and to distribute
substantially all of its taxable income and long-term capital gains to its
shareholders. Therefore, federal income tax provisions are not reflected in
the financial statements.
Other.
Security transactions are accounted for on the date the securities are
purchased or sold. Dividend income is recorded on the ex-dividend date.
In determining the net realized gain and loss from sale of securities, the
cost of securities sold is determined on the basis of identifying the specific
certificates delivered against each sale.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE EHRENKRANTZ GROWTH FUND
Notes to Financial Statements - (Continued)
2. Investment advisory agreement.
The Ehrenkrantz Growth Fund has entered into an investment advisory agreement
with Ehrenkrantz King Nussbaum, Inc. Under the terms of the advisory
agreement, the advisor manages the day to day operations of the Fund pursuant
to direction by the Ehrenkrantz Trust's Board of Trustees. The advisor is
responsible for investment decisions and supplies investment research and
portfolio management. As compensation for its services, the Fund pays to the
advisor a monthly advisory fee computed at the rate of 1% of the Fund's
average daily net asset value. The fee will be reduced for any fiscal year if
the Fund's expenses, as defined, exceed certain limitations.
3. Investment transactions.
Unrealized appreciation at
December 31, 1996 $ 672,382
Unrealized depreciation at
December 31, 1996 ( 99,290)
Net appreciation $ 573,092
Purchase and sale of securities other than short-term investments for the year
ended December 31, 1996 aggregated $2,767,852 and $2,588,207 respectively.
To the extent consistent with applicable law, statute, and regulations, the
Ehrenkrantz Trust's Board of Trustees determined that portfolio transactions
would be effected primarily through the firm of Ehrenkrantz King Nussbaum, Inc.
Over-the-counter purchases and sales are transacted directly with principal
market makers except in those cases in which better prices and executions may
be obtained elsewhere.
The accompanying notes are an integral part of the financial statements.
<PAGE>
THE EHRENKRANTZ GROWTH FUND
Notes to Financial Statements - (Continued)
4. Trust shares.
Transactions in trust shares were as follows:
<TABLE>
<S> <C> <C> <C> <C>
1996 1995
Shares Amount Shares Amount
Shares sold 32,724 $ 182,534 21,146 $ 120,725
Shares issued
from investments
or dividends 45,858 255,156 134,148 724,401
Shares
repurchased (181,006) (1,005,818) (99,313) (555,279)
Total change
in shares (102,424) $( 568,128) 55,981 $ 289,847
</TABLE>
<TABLE>
<CAPTION>
Shares outstanding:
<S> <C> <C>
1996 1995
Beginning of year 1,266,708 1,210,727
End of year 1,164,284 1,266,708
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
THE EHRENKRANTZ GROWTH FUND
Supplementary Information
1. Selected data for each trust share outstanding throughout calendar years
1996 and 1995.
<S> <C> <C>
1996 1995
Investment income $ .191 $ .206
Expenses .132 .111
Net income .059 .095
Distribution to shareholders ( .208) ( .593)
Net realized and unrealized
gain on securities .173 .739
Net increase (decrease) in net
asset value $ .024 $ .241
Net asset value:
Beginning of the period $ 5.42 $ 5.18
End of period $ 5.44 $ 5.42
Average annual total return 4.0% 16.0%
Ratio of operating expenses to
average net assets 2.4% 2.1%
Ratio of net investment income
to average net assets 1.1% 1.8%
Portfolio turnover rate 84.0% 79.0%
Number of shares outstanding
at end of the period 1,164,284 1,266,708
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
ROY G. HALE
Certified Public Accountant
PO Box 2634
La Plata, MD 20646
301-870-3374
800-286-4602
Trustees and Shareholders
The Ehrenkrantz Trust
New York, New York
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying statement of assets and liabilities of
The Ehrenkrantz Trust, including the schedule of portfolio investments, as of
December 31, 1996, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and selected per share data and ratios. The financial
statements and selected data and ratios are the responsibility of the Trust's
management. My responsibility is to express an opinion on the financial
statements and selected per share data and ratios based on my audit.
The audit was conducted in accordance with generally accepted auditing
standards, including confirmation of securities owned as of December 31, 1996,
by correspondence with the custodian. Those standards require that I plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and selected per share data are free of material misstatement. An
audit includes examining evidence, on a test basis, supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. I believe
that the audit provides a reasonable basis for my opinion.
In my opinion, the financial statements and selected per share data and
ratios referred to above present fairly, in all material aspects, the financial
position of The Ehrenkrantz Trust as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and selected per share data and
ratios, in conformity with generally accepted accounting principles.
/s/ Roy G. Hale
Roy G. Hale
Certified Public Accountant
February 17, 1997
La Plata, Maryland
<PAGE>
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
(a) Financial Statements:
Statement of Assets and Liabilities, Statement of Operations,
Statement of Changes in Net Assets, Condensed Financial
Information, Portfolio of Investments and related notes,
included in Part B of this Registration Statement.
(b) Exhibits:
(1) Agreements and Declaration of Trust (incorporated by
reference to Regis. State. No. 33-10888)
(2) By-Laws (incorporated by reference to Regis. State. No.
33-10888)
(4) Specimen Share Certificate (incorporated by reference to
Regis. State. No. 33-10888)
(5) Investment Advisory Agreement (incorporated by reference
to Regis. State. No. 33-10888)
(7) Distribution Agreement (incorporated by reference to
Regis. State. No. 3-10888, Amendment 5)
(8) Custodian Agreement (incorporated by reference to Regis.
State. No. 33-10888)
(10) Opinion and Consent of Counsel
(11) Consent of Independent Certified Public Accountants
Item 25. Persons Controlled by or under Common Control with Registrant.
As of December 31, 1996, Ehrenkrantz King Nussbaum, Inc. (EKN),
a Delaware Corporation and the Trust's Advisor, owned 3.12% of the Fund's
shares. The principal shareholders of EKN are Louis Ehrenkrantz (7.52%),
Irwin Nussbaum (7.52%), Joan King (7.52%), Richard Weiner (7.87%) and
Investor Resources Services, Inc. (7.87%).
Item 26. Number of Holders of Securities.
As of December 31, 1996, there were 343 shareholders of record.
Item 27. Indemnification.
Please see Article VI of By-Laws (Exhibit 2). Pursuant to Rule
484 under the Securities Act of 1933, as amended, the Registrant furnishes the
following undertaking:
"Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer of controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the 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 Act
and will be governed by the final adjudication of such issue."
Notwithstanding the provisions contained in the Registrant's
By-Laws, in the absence of authorization by the appropriate court on the
merits pursuant to Sections 4 and 5 of Article VI of said By-Laws, any
indemnification under said Article shall be
<PAGE>
made by Registrant only if authorized in the manner provided in either
subsection (a) or (b) of Section 6 of Article VI.
Item 28. Business and Other Connections of Investment Advisor.
Please see Parts A and B of this Registration Statement for
discussion of Investment Advisor.
Item 29. Principal Underwriters.
None
Item 30. Locations of Accounts and Records.
The accounts, books or other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the
Rules thereunder will be kept by the Registrant at its offices, 598 Madison
Ave., 14th Floor, New York, NY.
The Riggs National Bank, Washington, DC, acting as custodian
will maintain records relating to such activities. Steadman Security
Corporation, 1730 K Street, N. W., Washington, DC 20006, acting as Transfer
Agent and Agent for Administration of shareholder accounts, will maintain
records relating to such activities.
Item 31. Management Services.
There are no management-related service contracts not discussed
in Part A or Part B of this Registration Statement.
Item 32. Undertakings.
None.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, the State of
New York, this 17th day of April, 1997.
THE EHRENKRANTZ TRUST
(Registrant)
By: /s/ Irwin Nussbaum
Irwin Nussbaum
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to said Registration Statement has been signed below by the following
persons in the capacities and on the date indicated
SIGNATURE TITLE DATE
/s/ Louis Ehrenkrantz Chairman and Trustee April 17, 1997
Louis Ehrenkrantz
/s/ Irwin Nussbaum President and Trustee April 17, 1997
Irwin Nussbaum
/s/ Joan King Vice-President, Secretary, April 17, 1997
Joan King and Treasurer
/s/ Stanley Brown Trustee April 17, 1997
Stanley Brown
/s/ Donna Lewis Trustee April 17, 1997
Donna Lewis
/s/ Miriam Price Trustee April 17, 1997
Miriam Price
/s/ Arthur Walsh Trustee April 17, 1997
Arthur Walsh
/s/ Richard Gray Trustee April 17, 1997
Richard Gray
/s/ Robert R. Perrine Trustee April 17, 1997
Law Offices
Roberts & Henry
504 Talbot St.
P.O. Box 1138
St. Michaels, MD 21663
(410) 822-4456
April 29, 1997
The Ehrenkrantz Trust
598 Madison Ave., Fourteenth Floor
New York, NY 10022
Gentlemen:
The undersigned understands that The Ehrenkrantz Trust (the
"Registrant") has filed with the Securities and Exchange Commission,
Washington, DC a Post-Effective Amendment No. 10 to its Registration Statement,
on Form N-1A, under the Securities Act of 1933 and the Investment Company Act
of 1940.
The undersigned has examined the Registrant's agreement and Declaration
of Trust, By-Laws, the Registration Statement of Form N-1A including all
exhibits thereto, as well as such other records and documents as have been
deemed necessary. Based upon such examinations, the undersigned is of the
opinion that:
1. The Registrant has been duly organized and is validly existing
in good standing as a business trust under the laws of the Commonwealth of
Massachusetts; and
2. The shares of beneficial interest of the Registrant (or of any
series thereunder) to be offered to the public will be legally issued, fully
paid and non-assessable when said shares have been issued and sold in
accordance with the terms and in the manner set forth in the Registrant's
Registration Statement on Form N-1A.
The undersigned hereby consents to the filing of this opinion as an
exhibit to the Registrant's Registration Statement of Form N-1A.
Sincerely,
Roberts & Henry
By: /s/ Thomas C. Henry
Thomas C. Henry
ROY G. HALE
Certified Public Accountant
301-870-3374 P.O. Box 2634
800-286-4602 LaPlata, MD 20646
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNT
I hereby consent to the inclusion of my report, dated February 17, 1997, in
the Registration Statement being filed under the Securities Act of 1933 and
the Investment Company Act of 1940 by The Ehrenkrantz Growth Fund relating to
the financial statements, as of December 31, 1996, referred to therein.
I also consent to the reference to my practice as an independent certified
public accountant.
Roy G. Hale
Certified Public Accountant
February 21, 1996
La Plata, Maryland
<TABLE> <S> <C>
<ARTICLE> 6
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