<PAGE> 1
ANNUAL
REPORT
October 31, 1997
GRANUM
VALUE
FUND
Shareholder Services
1-888-5-GRANUM
(547-2686)
GRANUM CAPITAL MANAGEMENT, L.L.C.
Investment Adviser
<PAGE> 2
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
LETTER TO SHAREHOLDERS
NOVEMBER 1, 1997
Dear Shareholder:
From its commencement of operations on May 1, 1997 through its fiscal
year-end on October 31, 1997, the Granum Value Fund returned 16.95% versus
15.16% for the S&P 500. Our top five positions as of October 31, 1997 were Bank
of New York, Intel, Philip Morris, Federal National Mortgage, and Reynolds and
Reynolds.
The Fund benefited from generally favorable market conditions as well as
good stock selection during our first fiscal year. Our economy experienced solid
growth, low inflation, and rising equity prices during the period. We
acknowledge that six months is a short period of time, but nonetheless, the Fund
did, after fees, outperform the S&P 500 by nearly 2%.
In general, we will continue to seek good to great companies with great to
good managements having superior financial characteristics, specifically return
on equity and return on assets, and hence, the ability to grow their earnings at
a rate greater than the market, yet selling at discounts to the market. In the
past this investment approach has enabled us to generate superior returns.
We take seriously the trust you have placed in us and will do our utmost to
generate superior returns for you.
<TABLE>
<S> <C>
LEWIS M. EISENBERG WALTER F. HARRISON, III
Lewis M. Eisenberg Walter F. Harrison, III
Co-Chairman Co-Chairman
</TABLE>
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<PAGE> 3
GRANUM VALUE FUND
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FUND PERFORMANCE
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) GRANUM VALUE FUND S&P 500
<S> <C> <C>
5/1/97 10000 10000
5/31/97 10605 10609
6/30/97 10760 11084
7/30/97 11660 11966
8/31/97 11565 11296
9/30/97 12285 11914
10/31/97 11695 11516
</TABLE>
The Standard & Poor's 500 Stock Index (S&P 500) is an unmanaged,
capital-weighted index, representing the aggregate market value of the common
equity of 500 stocks primarily traded on the New York Stock Exchange. S&P 500
total return assumes all dividends are reinvested.
This chart assumes an initial gross investment of $10,000 made on May 1,
1997 (commencement of operations). Returns shown include the reinvestment of all
dividends. Past performance is not predictive of future performance. Investment
return and principal value will fluctuate, so that your shares, when redeemed,
may be worth more or less than the original cost.
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2
<PAGE> 4
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
COMMON STOCKS 71.7%*
------------------------
APARTMENT REITS 1.6%*
26,000 Ambassador Apartments,
Inc. $ 557,375
26,000 Walden Residential
Properties, Inc. 633,750
-----------
1,191,125
-----------
BANKS AND SAVINGS &
LOANS 3.4%*
9,100 First Republic Bank** 257,075
10,800 MSB Bancorp, Inc. 302,400
49,000 North Fork
Bancorporation, Inc. 1,442,437
14,800 PFF Bancorp, Inc.** 284,900
7,950 Queens County Bancorp,
Inc. 288,188
-----------
2,575,000
-----------
BUILDING & HOUSING 2.0%*
17,000 Beazer Homes USA,
Inc.**(1) 325,125
3,500 Del Webb Corporation 69,781
20,200 Forest City Enterprises,
Inc. Class A 1,166,550
-----------
1,561,456
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
BUSINESS SERVICES 4.4%*
197,300 Reynolds & Reynolds
Company Class A $ 3,378,762
-----------
COMPUTER HARDWARE 2.0%*
30,000 Electroglas, Inc.** 570,000
5,000 Fusion Systems
Corporation -- rights
** 5,312
36,000 Seagate Technology,
Inc.** 976,500
-----------
1,551,812
-----------
DEFENSE 0.5%*
6,200 Alliant Techsystems,
Inc.** 368,900
-----------
ENERGY SERVICES 0.5%*
6,000 Petroleum Geo-Services** 415,500
-----------
ENGINEERING &
CONSTRUCTION 0.4%*
12,700 The Turner Corporation** 276,225
-----------
ENTERTAINMENT & LEISURE
7.7%*
3,800 AMC Entertainment Inc.** 77,188
22,000 Brunswick Corporation(1) 742,500
237,400 Grand Casinos, Inc.** 3,190,063
75,000 Mirage Resorts** 1,875,000
-----------
5,884,751
-----------
</TABLE>
See Notes to the Financial Statements
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3
<PAGE> 5
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
FINANCIAL SERVICES 9.3%*
34,000 CMAC Investment
Corporation $ 1,859,375
47,700 DVI, Inc.** 921,206
73,000 Fannie Mae 3,535,937
12,300 Kansas City Southern
Industries, Inc. 375,150
5,000 Salomon, Inc. 388,438
-----------
7,080,106
-----------
FOOD, BEVERAGE & TOBACCO
5.0%*
96,000 Philip Morris Companies
Inc. 3,804,000
-----------
HEALTH CARE 0.4%*
10,000 Graham -- Field Health
Products, Inc.** 160,625
15,000 International Isotopes
Inc.** 140,625
-----------
301,250
-----------
HOTEL REITS 3.5%*
72,000 Equity Inns Inc. 1,134,000
77,000 RFS Hotel Investors,
Inc. 1,511,125
-----------
2,645,125
-----------
HOUSEHOLD PRODUCTS 1.2%*
63,300 The Maxim Group, Inc.** 894,113
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
INSURANCE 7.0%*
22,700 CNA Financial
Corporation** $ 2,816,219
2,000 Hartford Life, Inc.
Class A 73,875
54,200 Orion Capital
Corporation 2,439,000
-----------
5,329,094
-----------
MISCELLANEOUS 1.6%*
74,600 Compass Plastics &
Technologies, Inc. ** 643,425
6,000 NACCO Industries, Inc.
Class A 618,000
-----------
1,261,425
-----------
MORTGAGE REITS 6.2%*
24,000 Annaly Mortgage
Management, Inc.** 285,000
25,000 Hanover Capital Mortgage
Holdings, Inc.** 440,625
90,000 Imperial Credit
Commercial Mortgage
Investment Corp. ** 1,485,000
25,000 Novastar Financial,
Inc.** 450,000
48,000 Ocwen Asset Investment
Corp. 954,000
45,000 Redwood Trust, Inc. 1,130,625
-----------
4,745,250
-----------
</TABLE>
See Notes to the Financial Statements
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4
<PAGE> 6
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
OFFICE PRODUCTS 1.6%*
91,000 OfficeMax, Inc.** $ 1,217,125
-----------
PRINTING & PUBLISHING 1.4%*
47,200 Big Flower Press
Holding, Inc.** 1,038,400
-----------
RESTAURANTS 1.6%*
26,200 Cooker Restaurant
Corporation 262,000
41,000 Lone Star Steakhouse &
Saloon, Inc. ** 948,125
-----------
1,210,125
-----------
SHOPPING CENTER/
MALL REITS 2.8%*
33,000 Crown American Realty
Trust 311,437
98,400 FAC Realty Trust Inc.** 774,900
72,000 Prime Retail, Inc. 1,075,500
-----------
2,161,837
-----------
SOFTWARE 3.9%*
39,000 Computer Associates
International, Inc. 2,907,938
3,300 Platinum Technology,
Inc.** 80,025
-----------
2,987,963
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
- ---------- -----------
<C> <S> <C>
SPECIALTY CHEMICALS
1.4%*
24,700 General Chemical Group,
Inc.(1) $ 725,563
8,400 OM Group, Inc. 317,100
-----------
1,042,663
-----------
TELECOMMUNICATIONS 2.3%*
7,000 Asia Pacific Wire &
Cable Corporation** 64,750
21,000 Globalstar
Telecommunications
Ltd. 976,500
22,000 NTL Incorporated** 596,750
9,300 STARTEC Global
Communications
Corporation** 138,337
-----------
1,776,337
-----------
Total Common Stocks
(Cost of $51,446,851) 54,698,344
-----------
WARRANTS 11.2%*
-------------------
72,500 Intel Corp. expires
3/14/98** 4,105,312
34,800 The Bank of New York
Company, Inc. expires
11/29/98** 4,445,700
-----------
Total Warrants
(Cost $ 8,693,605) 8,551,012
-----------
</TABLE>
See Notes to the Financial Statements
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5
<PAGE> 7
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- -----------
<C> <S> <C>
VARIABLE RATE DEMAND
NOTES 19.7%*
------------------------
$2,819,234 American Family
Financial Services,
Inc. $ 2,819,234
2,568,288 Johnson Controls, Inc. 2,568,288
1,211,305 General Mills, Inc. 1,211,305
342,990 Sara Lee Corporation 342,990
3,424,709 Pitney Bowes Credit
Corp. 3,424,709
3,600,000 Warner - Lambert Company 3,600,000
1,066,322 Wisconsin Electric Power
Company 1,066,322
-----------
Total Variable Rate
Demand Notes
(Cost of $15,032,848) 15,032,848
-----------
Total Investments
(Cost of $75,173,304) $78,282,204
===========
</TABLE>
* Calculated as a percentage of net assets.
** Non-income producing security.
(1) All or a portion of the shares have been committed as collateral for written
put options.
See Notes to the Financial Statements
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6
<PAGE> 8
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $75,173,304).................. $78,282,204
Receivable for capital shares sold........................ 717,476
Dividends receivable...................................... 63,177
Interest receivable....................................... 57,598
Organizational expenses, net of accumulated
amortization............................................ 101,622
Other assets.............................................. 29,465
-----------
Total assets....................................... 79,251,542
-----------
LIABILITIES:
Payable for securities purchased.......................... 2,698,149
Payable to Investment Adviser............................. 108,109
Distribution fees payable................................. 29,866
Shareholder service fees payable.......................... 15,033
Put options written (Premiums received $51,630)........... 54,000
Accrued expenses and other liabilities.................... 83,786
-----------
Total liabilities.................................. 2,988,943
-----------
NET ASSETS.................................................. $76,262,599
===========
NET ASSETS CONSIST OF:
Capital stock............................................. $73,138,284
Accumulated undistributed net realized gain on investments
and option contracts expired or closed.................. 17,785
Net unrealized appreciation (depreciation) on:
Investments............................................. 3,108,900
Written options......................................... (2,370)
-----------
Total Net Assets................................... $76,262,599
===========
Shares of beneficial interest outstanding (unlimited
number of shares authorized, $.001 par value)........... 3,260,570
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $23.39
===========
</TABLE>
See Notes to the Financial Statements
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7
<PAGE> 9
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
MAY 1, 1997(1) THROUGH OCTOBER 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income........................................... $ 261,706
Interest income........................................... 194,580
----------
Total investment income................................. 456,286
----------
EXPENSES:
Investment advisory fees.................................. 286,528
Distribution fees......................................... 101,519
Shareholder servicing fees................................ 50,759
Administration fees....................................... 18,249
Transfer agent fees and expenses.......................... 18,770
Fund accounting fees...................................... 12,691
Custody fees.............................................. 7,267
Professional fees......................................... 39,989
Federal and state registration............................ 35,659
Trustees' fees and expenses............................... 20,450
Amortization of organizational expenses................... 11,326
Insurance expense......................................... 6,674
Reports to shareholders................................... 3,742
Other..................................................... 456
----------
Total expenses.......................................... 614,079
Expense reimbursement by Adviser........................ (52,009)
----------
Net expenses............................................ 562,070
----------
NET INVESTMENT LOSS......................................... (105,784)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments............................................. 81,042
Option contracts expired or closed...................... (36,425)
----------
Total realized gain....................................... 44,617
Change in unrealized appreciation on:
Investments............................................. 3,108,900
Written options......................................... (2,370)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 3,151,147
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $3,045,363
==========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
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8
<PAGE> 10
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
MAY 1, 1997(1) THROUGH OCTOBER 31, 1997
<TABLE>
<S> <C>
OPERATIONS:
Net investment loss....................................... $ (105,784)
Net realized gain on investments and option contracts
expired or closed....................................... 44,617
Change in unrealized appreciation on investments and
written options......................................... 3,106,530
-----------
Net increase in net assets resulting from operations.... 3,045,363
-----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................. 76,623,996
Cost of shares redeemed................................... (3,506,760)
-----------
Net increase in net assets from capital share
transactions.......................................... 73,117,236
-----------
TOTAL INCREASE IN NET ASSETS................................ 76,162,599
NET ASSETS:
Beginning of period....................................... 100,000
-----------
End of period............................................. $76,262,599
===========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
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9
<PAGE> 11
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
MAY 1, 1997(1) THROUGH OCTOBER 31, 1997
<TABLE>
<S> <C>
Selected per share data:(4)
Net asset value, beginning of period........................ $ 20.00
-------
Income from Investment Operations:
Net investment loss......................................... (0.03)
Net realized and unrealized gain on investments............. 3.42
-------
Total from investment operations............................ 3.39
-------
Net asset value, end of period.............................. $23.39
=======
Total return(2) 16.95%
Supplemental data and ratios:
Net assets, end of period (000's)........................... $76,263
Ratio of net expenses to average net assets:(3)
Before expense reimbursement.............................. 3.03%
After expense reimbursement............................... 2.77%
Ratio of net investment income to average net assets:(3)
Before expense reimbursement.............................. (0.78)%
After expense reimbursement............................... (0.52)%
Portfolio turnover rate..................................... 3.12%
Average commission rate paid................................ $0.0583
</TABLE>
(1) Commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) Information presented relates to a Share of Capital Stock of the Fund
outstanding for the entire period.
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
10
<PAGE> 12
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
1. ORGANIZATION
Granum Value Fund (the "Fund") is a non-diversified series of Granum Series
Trust (the "Trust"), an open-end management investment company. The Trust is a
Delaware business trust, organized pursuant to a Certificate of Trust dated
December 19, 1996. The Trust has established one series of its shares,
representing interests in the Fund. The investment objective of the Fund is to
seek capital appreciation. The Fund issued and sold 5,000 shares of its capital
stock at $20 per share on March 14, 1997. These shares were purchased by the
investment adviser of the Fund, Granum Capital Management, L.L.C. (the
"Adviser") to provide the Fund with its initial capital. The Fund commenced
operations on May 1, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
a) Investment Valuation - Securities are valued at market value as of the close
of trading on each business day when the New York Stock Exchange ("NYSE") is
open. Securities, other than stock options, listed on the NYSE or other
exchanges are valued on the basis of the last reported sale price on the
exchange on which they are primarily traded. However, if the last sale price on
the NYSE is different than the last sale price on any other exchange, the NYSE
price will be used. If there are no sales on that day, then the securities are
valued at the bid price on the NYSE or other primary exchange. Securities traded
on the over-the-counter market are valued on the basis of the last sales price
as reported by NASDAQ. If there are no sales on that day, then the securities
are valued at the mean between the closing bid and asked prices as reported by
NASDAQ. Stock options traded on national securities exchanges are valued at the
last sales price, or, if no sales are reported, at the bid price. Securities for
which market quotations are not readily available are valued at fair value as
determined pursuant to procedures adopted in good faith by the Board of
Trustees. Debt securities which mature in less than 60 days are valued at
amortized cost, which approximates market value.
b) Organization Costs - Costs incurred by the Fund in connection with the
organization, registration and the initial public offering of shares, are being
deferred and amortized over the period of benefit, but not to exceed sixty
months from the Fund's commencement of operations. These costs were advanced by
the Adviser and subsequently reimbursed by the Fund. The proceeds of any
redemption of the initial shares purchased by the Adviser (see Note 1) will be
reduced by a pro-rata portion of any then unamortized organizational expenses in
the same proportion as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of such redemption.
c) Written Option Accounting - The Fund writes put options on stock indices for
hedging purposes. When the Fund sells an option, an amount equal to the premium
received by the Fund is included in the Statement of Assets and Liabilities as
an asset and an equivalent liability. The amount of the liability is
subsequently marked-to-market to
- --------------------------------------------------------------------------------
11
<PAGE> 13
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
reflect the current value of the option written. Option contracts are valued at
the last sales price reported on the day of valuation. If no sale is reported,
the option contract written is valued at the bid price. When an option expires
on its stipulated expiration date or the Fund enters into a closing purchase
transaction, the Fund realizes a gain or loss if the cost of the closing
purchase transaction differs from the premium received when the option was sold
without regard to any unrealized gain or loss on the underlying stock index, and
the liability related to such option is eliminated.
d) Purchased Option Accounting - The Fund purchases put options on stock indices
to hedge against a general decline in the stock market or in a particular market
segment or industry. Premiums paid for option contracts purchased are included
in the Statement of Assets and Liabilities as an asset. Option contracts are
valued at the last sales price reported on the date of valuation. If no sale is
reported, the option contract purchased is valued at the current bid price. When
option contracts expire or are closed, realized gains or losses are recognized
without regard to any unrealized gains or losses on the underlying stock
indices.
e) Distribution to Shareholders - Dividends from net investment income and net
realized capital gains, if any, are declared and paid annually. The Fund may
periodically make reclassifications among certain of its capital accounts as a
result of the timing and characterization of certain income and realized gain
distributions determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. Accordingly, at
October 31, 1997, reclassifications were recorded from accumulated net
investment losses to reduce accumulated net realized gains by $26,832 and
capital stock by $78,952.
f) Federal Income Taxes - No provision for federal income taxes has been made
since the Fund intends to comply with the provisions under Subchapter M of the
Internal Revenue Code applicable to regulated investment companies and intends
to distribute investment company net taxable income and net capital gains to
shareholders.
g) Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
h) Other - Investment and shareholder transactions are recorded on trade date.
The Fund determines the gain or loss realized from the investment transactions
by comparing the original cost of the security lot sold with the net sales
proceeds. Dividend income is recognized on the ex-dividend date or as soon as
information is available, and interest income is recognized on an accrual basis.
- --------------------------------------------------------------------------------
12
<PAGE> 14
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. SHARES OF BENEFICIAL INTEREST
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $0.001 par value, of the Fund. Share transactions for the
period May 1, 1997 through October 31, 1997 were as follows:
<TABLE>
<S> <C>
Shares sold 3,407,243
Shares redeemed (151,673)
---------
Net increase 3,255,570
=========
</TABLE>
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, for the period May 1, 1997 through October 31, 1997 were
$56,549,814 and $989,160, respectively.
At October 31, 1997, gross unrealized appreciation and depreciation of
investments for tax purposes was as follows:
<TABLE>
<S> <C>
Appreciation $ 5,905,438
(Depreciation) (2,796,538)
-----------
Net unrealized appreciation
on investments $ 3,108,900
===========
</TABLE>
At October 31, 1997, the cost of investments for federal income tax purposes was
$75,157,889.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Investment Adviser - The Adviser provides investment advisory services to the
Fund pursuant to an investment advisory agreement dated March 13, 1997. Under
the terms of the agreement, the Adviser receives a fee, accrued daily and
payable monthly at the annual rate of 1.25% of the Fund's average daily net
assets (the "Basic Fee"), which is adjusted monthly (the "Monthly Performance
Adjustment") depending on the extent to which the investment performance of the
Fund, after expenses, exceeds or was exceeded by the percentage change in the
investment performance of the S&P 500 Index. The Monthly Performance Adjustment,
which commenced August 1, 1997, may increase or decrease the total advisory fee
payable to the Adviser (the "Total Advisory Fee") by up to 0.75% per year of the
value of the Fund's average daily net assets.
The Adviser reimbursed various expenses incurred by the Fund during the period
ended October 31, 1997 of $52,009. Further reimbursements of such expenses were
discontinued at such time as the Fund's assets were $20 million for a period of
30 days.
- --------------------------------------------------------------------------------
13
<PAGE> 15
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
Distribution Plan - Pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended, the Fund has adopted a distribution plan (the "Distribution
Plan"). Under the Distribution Plan, the Fund compensate its Distributors,
Mercer Allied Company ("Mercer") and Granum Securities L.L.C. ("Granum
Securities"), in consideration of the services they provide in connection with
the sale of the Fund's shares to investors ("Distribution Services") and for the
furnishing of account related services by the Distributors and securities
dealers to shareholders of the Fund ("Shareholder Services"). Shareholder
Services provided by the Distributors and securities dealers include responding
to shareholder inquiries regarding the Fund and their accounts with the Fund,
and providing shareholders with reports, information and services related to
their Fund accounts. Granum Securities is an affiliate of, and is under common
control with, the Adviser.
As compensation for Distribution Services, the Fund makes monthly payments to
the Distributors, computed at the annual rate of 0.50% of the Fund's average net
assets. From such compensation, the Distributors make payments to securities
dealers that have sold shares of the Fund to their customers in such amounts as
may be agreed to by the Distributors and dealers. As compensation for
Shareholder Services, the Fund makes monthly payments to the Distributors,
computed at the annual rate of 0.25% of the Fund's average net assets.
The Fund incurred the following expenses for Distribution and Shareholder
Services for the period ended October 31, 1997:
<TABLE>
<CAPTION>
DISTRIBUTION SHAREHOLDER
SERVICES SERVICES
------------ -----------
<S> <C> <C>
Mercer $99,830 $49,914
Granum Securities 1,689 845
</TABLE>
Other - Firstar Trust Company, a subsidiary of Firstar Corporation, a publicly
held bank holding company, serves as custodian, transfer agent, administrator
and accounting services agent for the Fund.
6. PUT OPTION CONTRACTS WRITTEN
The premium amount and the transactions related to put option contracts during
the period ended October 31, 1997, were as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS
PREMIUM AMOUNT (100 SHARES PER CONTRACT)
-------------- -------------------------
<S> <C> <C>
Options written $77,445 60
Options closed 25,815 20
------- --
Options outstanding at October 31, 1997, (S&P
Index, Expiration December 1997, Exercise Price
$820.00, Market Value $54,000.) $51,630 40
======= ==
</TABLE>
- --------------------------------------------------------------------------------
14
<PAGE> 16
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of
Granum Series Trust
We have audited the accompanying statement of assets and liabilities of Granum
Series Trust - Granum Value Fund (the "Fund"), including the schedule of
investments, as of October 31, 1997, and the related statement of operations,
statement of changes in net assets and the financial highlights for the period
from May 1, 1997 (commencement of operations) through October 31, 1997. These
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of October 31,1997 by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of October 31, 1997, and the results of its operations, changes in its
net assets and the financial highlights for the period from May 1, 1997
(commencement of operations) through October 31, 1997, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Milwaukee, Wisconsin
November 21, 1997
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