<PAGE> 1
SEMI-ANNUAL
REPORT
April 30, 1998
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
JUNE 22, 1998
Dear Shareholder:
For the first six months of fiscal 1998, ending April 30, 1998, the total
return of Granum Value Fund was 15.4% versus 22.5% for the S&P 500. For its
first 12 months of operation, also ending April 30, 1998, Granum Value Fund had
a total return of 35.0% versus 41.1% for the S&P 500.* Our top 5 positions are
Bank of New York, Intel, Reynolds and Reynolds, Federal National Mortgage, and
Orion Capital.
We continue to believe that the long-term backdrop for financial assets in
general and equities in particular remains favorable, however, we have become
concerned about relatively high valuations among many of the large
capitalization companies. We have steadfastly refused to purchase companies at
projected price to earnings multiples of 30 or 40 in the hope that these
multiples might increase to 50 or 60. In our view, companies at these very high
price multiples at best offer modest long-term price appreciation potential, and
do not afford a sufficient margin of safety to the purchaser.
Notwithstanding the above, we are comfortable continuing to own and adding
to our positions. Our top 30 positions comprising more than 70% of the net
assets of the Fund, trade at approximately 14 times estimated 1999 earnings,
while the S&P 500 trades at 21 times estimated earnings. This discount of 33% is
the largest since we began Granum Value Fund.
We continue to work diligently on your behalf, and will do our utmost to
seek superior returns, without taking imprudent risks.
<TABLE>
<S> <C>
/s/ LEWIS M. EISENBERG /s/ WALTER F. HARRISON, III
- ---------------------- ---------------------------
Lewis M. Eisenberg Walter F. Harrison, III
Co-Chairman Co-Chairman
</TABLE>
*This data reflects past performance of the Fund, after expenses and assuming
reinvestment of all dividends and other distributions. The principal value of
an investment in the Fund will fluctuate and an investor's shares, when
redeemed, may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
<PAGE> 3
GRANUM VALUE FUND
================================================================================
SCHEDULE OF INVESTMENTS
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
COMMON STOCKS 95.1%
------------------------
APARTMENT REITS 1.4%
26,000 Ambassador Apartments,
Inc. $ 533,000
15,700 Boddie-Noell Properties,
Inc. 225,688
45,000 Walden Residential
Properties, Inc. 1,096,875
------------
1,855,563
------------
BANKS AND SAVINGS & LOANS
14.7%
200,200 The Bank of New York
Company, Inc. 11,824,313
10,000 The Chase Manhattan
Corporation 1,385,625
26,000 Dime Bancorp, Inc. 797,875
27,100 Fidelity National
Corporation** 386,175
9,100 First Republic Bank** 312,813
10,800 MSB Bancorp, Inc. 382,050
4,100 Net.B@nk, Inc.** 110,187
54,000 North Fork
Bancorporation, Inc. 2,004,750
15,000 Peoples Bancorp, Inc. 161,250
51,800 PFF Bancorp, Inc.** 1,048,950
7,950 Queens County Bancorp,
Inc. 363,712
------------
18,777,700
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
BUILDING & HOUSING 2.1%
17,000 Beazer Homes USA, Inc.** $ 414,375
23,500 Del Webb Corporation 615,406
28,200 Forest City Enterprises,
Inc. -- Class A 1,628,550
------------
2,658,331
------------
BUSINESS SERVICES 5.4%
7,900 Bell & Howell Company** 218,238
292,300 Reynolds & Reynolds
Company -- Class A 6,722,900
------------
6,941,138
------------
COMPUTER HARDWARE &
SERVICES 1.0%
46,000 Seagate Technology,
Inc.** 1,227,625
------------
DEFENSE 0.3%
6,200 Alliant Techsystems,
Inc.** 396,413
------------
ENERGY SERVICES 0.8%
15,000 Petroleum Geo-Services** 986,250
------------
ENGINEERING &
CONSTRUCTION 0.6%
25,300 The Turner Corporation** 752,675
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
2
<PAGE> 4
GRANUM VALUE FUND
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
ENTERTAINMENT & LEISURE
7.8%
3,800 AMC Entertainment Inc.** $ 73,150
27,000 Brunswick Corporation 877,500
311,700 Grand Casinos, Inc.** 5,474,231
161,300 Mirage Resorts,
Incorporated** 3,558,681
------------
9,983,562
------------
FINANCIAL SERVICES 10.7%
49,000 CMAC Investment
Corporation 3,163,563
67,700 DVI, Inc.** 1,599,413
103,700 Fannie Mae 6,209,037
14,300 Kansas City Southern
Industries, Inc. 646,181
10,000 PaineWebber Group Inc. 448,125
47,100 Resource Bancshares
Mortgage Group, Inc. 836,025
5,000 SLM Holding Corporation 213,437
8,475 Travelers Group Inc. 518,564
------------
13,634,345
------------
FOOD, BEVERAGE & TOBACCO
3.8%
129,600 Philip Morris Companies
Inc. 4,835,700
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
HEALTH CARE 2.0%
51,500 Columbia/HCA Healthcare
Corporation $ 1,696,281
37,100 Cyberonics, Inc.** 890,400
------------
2,586,681
------------
HOTEL REITS 3.1%
93,900 Equity Inns Inc. 1,385,025
121,000 RFS Hotel Investors, Inc. 2,586,375
------------
3,971,400
------------
HOUSEHOLD PRODUCTS 0.9%
63,300 The Maxim Group, Inc.** 1,139,400
------------
INSTRUMENTS & RELATED
PRODUCTS 0.5%
25,000 Measurement Specialities,
Inc.** 96,875
27,800 Mettler -- Toledo
International Inc.** 559,475
------------
656,350
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
3
<PAGE> 5
GRANUM VALUE FUND
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
INSURANCE 9.1%
1,000 Annuity and Life Re
(Holdings), Ltd.** $ 23,875
32,100 CNA Financial
Corporation** 4,748,794
24,000 Frontier Insurance Group,
Inc. 636,000
2,500 Hartford Life,
Inc. -- Class A 123,594
109,100 Orion Capital Corporation 6,082,325
------------
11,614,588
------------
MISCELLANEOUS 1.1%
74,600 Compass Plastics &
Technologies, Inc.** 317,050
1,300 Bandag Incorporated --
Class A 64,269
6,000 NACCO Industries, Inc. --
Class A 1,009,125
------------
1,390,444
------------
METAL PRODUCTS 1.3%
39,000 Silgan Holdings Inc.** 1,365,000
15,800 Wyman-Gordon Company** 319,950
------------
1,684,950
------------
MORTGAGE REITS 6.5%
67,000 Annaly Mortgage
Management, Inc.** 728,625
26,200 Anthracite Capital,
Inc.** 366,800
9,300 Chastain Capital
Corporation** 138,338
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
25,000 Hanover Capital Mortgage
Holdings, Inc.** $ 431,250
90,000 Imperial Credit
Commercial Mortgage
Investment Corp.** 1,299,375
25,000 Novastar Financial,
Inc.** 515,625
73,500 Ocwen Asset Investment
Corp. 1,350,562
139,600 Redwood Trust, Inc. 3,437,650
------------
8,268,225
------------
OFFICE PRODUCTS 1.6%
112,000 OfficeMax, Inc.** 2,107,000
------------
PHARMACEUTICALS 1.0%
23,300 CollaGenex
Pharmaceuticals, Inc.** 212,613
24,400 Teva Pharmaceutical
Industries Ltd. 1,043,100
------------
1,255,713
------------
PRINTING & PUBLISHING
1.1%
47,200 Big Flower Press Holding,
Inc.** 1,430,750
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
4
<PAGE> 6
GRANUM VALUE FUND
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
RESTAURANTS 1.4%
26,200 Cooker Restaurant
Corporation $ 307,850
71,000 Lone Star Steakhouse &
Saloon, Inc.** 1,508,750
------------
1,816,600
------------
SEMICONDUCTORS &
SEMICONDUCTOR CAPITAL
EQUIPMENT 6.4%
10,000 Align-Rite International,
Inc.** 163,750
92,500 Intel Corporation 7,475,156
30,000 Electroglas, Inc.** 506,250
------------
8,145,156
------------
SHOPPING CENTER/MALL
REITS 2.5%
39,700 Capital Automotive REIT 617,831
53,000 Crown American Reality
Trust 536,625
98,400 FAC Realty Trust Inc.** 910,200
82,700 Prime Retail, Inc. 1,173,306
------------
3,237,962
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
SOFTWARE 4.6%
98,500 Computer Associates
International, Inc. $ 5,768,406
3,300 Platinum Technology,
Inc.** 84,150
------------
5,852,556
------------
SPECIALTY CHEMICALS 1.4%
46,700 General Chemical Group,
Inc. 1,301,762
10,900 OM Group, Inc. 483,006
------------
1,784,768
------------
TELECOMMUNICATIONS 2.0%
7,000 Asia Pacific Wire & Cable
Corporation** 42,000
21,000 Globalstar
Telecommunications Ltd. 1,462,125
22,000 NTL Incorporated** 858,000
9,300 STARTEC Global
Communications
Corporation** 237,150
------------
2,599,275
------------
Total Common Stocks
(Cost $104,429,407) 121,591,120
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
5
<PAGE> 7
GRANUM VALUE FUND
================================================================================
SCHEDULE OF INVESTMENTS (CONTINUED)
APRIL 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
WARRANTS 0.1%
----------------
25,000 Hanover Capital Mortgage
Holdings, Inc., expires
9/15/00** $ 87,500
------------
Total Warrants
(Cost $67,006) 87,500
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------
<C> <S> <C>
VARIABLE RATE DEMAND
NOTES 4.6%
-------------------------
$ 717,637 General Mills, Inc. $ 717,637
2,437,678 Johnson Controls, Inc. 2,437,678
1,260,169 Pitney Bowes Credit Corp. 1,260,169
322,903 Sara Lee Corporation 322,903
1,237,464 Warner-Lambert Company 1,237,464
------------
Total Variable Rate
Demand Notes
(Cost of $5,975,851) 5,975,851
------------
Total Investments 99.8%
(Cost of $110,472,264) $127,654,471
------------
Other Assets less
Liabilities 0.2% $ 197,266
------------
NET ASSETS 100% $127,851,737
============
</TABLE>
** Non-income producing security.
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
6
<PAGE> 8
GRANUM VALUE FUND
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $110,472,264)................. $127,654,471
Cash...................................................... 50,668
Dividends receivable...................................... 146,000
Interest receivable....................................... 29,506
Organizational expenses, net of accumulated
amortization............................................ 90,420
Other assets.............................................. 54,470
------------
Total assets....................................... 128,025,535
------------
LIABILITIES:
Payable to Investment Adviser............................. 74,467
Distribution fees payable................................. 52,053
Shareholder service fees payable.......................... 26,094
Accrued expenses and other liabilities.................... 21,184
------------
Total liabilities.................................. 173,798
------------
NET ASSETS.................................................. $127,851,737
============
NET ASSETS CONSIST OF:
Capital stock............................................. $110,221,427
Accumulated undistributed net realized gain on investments
and option contracts expired or closed.................. 519,774
Net Investment loss....................................... (71,671)
Net unrealized appreciation (depreciation) on
Investments............................................. 17,182,207
------------
Total Net Assets................................... $127,851,737
============
Shares of beneficial interest outstanding (unlimited
number of shares authorized, $.001 par value)........... 4,737,061
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $26.99
============
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
7
<PAGE> 9
GRANUM VALUE FUND
================================================================================
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1998 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes withheld of $506)... $ 741,658
Interest income........................................... 242,394
-----------
Total investment income................................. 984,052
-----------
EXPENSES:
Investment advisory fees.................................. 499,448
Distribution fees......................................... 250,095
Shareholder servicing fees................................ 125,048
Administration fees....................................... 20,453
Transfer agent fees and expenses.......................... 17,919
Fund accounting fees...................................... 13,032
Custody fees.............................................. 14,842
Professional fees......................................... 43,049
Federal and state registration............................ 27,874
Trustees' fees and expenses............................... 20,272
Amortization of organizational expenses................... 11,202
Insurance expense......................................... 6,516
Reports to shareholders................................... 4,887
Other..................................................... 1,086
-----------
Total expenses.......................................... 1,055,723
-----------
NET INVESTMENT LOSS......................................... (71,671)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on:
Investments............................................. 460,014
Option contracts expired or closed...................... 41,975
-----------
Total realized gain....................................... 501,989
Change in unrealized appreciation on:
Investments............................................. 14,073,307
Written options......................................... 2,370
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 14,577,666
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $14,505,995
===========
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
8
<PAGE> 10
GRANUM VALUE FUND
================================================================================
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997(1)
ENDED THROUGH
APRIL 30, 1998 OCTOBER 31, 1997
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment loss....................................... $ (71,671) $ (105,784)
Net realized gain on investments and option contracts
expired or closed....................................... 501,989 44,617
Change in unrealized appreciation on investments and
written options......................................... 14,075,677 3,106,530
------------ -----------
Net increase in net assets resulting from operations.... 14,505,995 3,045,363
------------ -----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................. 37,767,824 76,623,996
Cost of shares redeemed................................... (684,681) (3,506,760)
------------ -----------
Net increase in net assets from capital share
transactions......................................... 37,083,143 73,117,236
------------ -----------
TOTAL INCREASE IN NET ASSETS................................ 51,589,138 76,162,599
NET ASSETS:
Beginning of period....................................... 76,262,599 100,000
------------ -----------
End of period............................................. $127,851,737 $76,262,599
============ ===========
</TABLE>
(1)Commencement of Operations
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
9
<PAGE> 11
GRANUM VALUE FUND
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997(1)
ENDED THROUGH
APRIL 30, 1998 OCTOBER 31, 1997
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
Selected per share data:(4)
Net asset value, beginning of period........................ $ 23.39 $ 20.00
-------- -------
Income from Investment Operations:
Net investment loss......................................... (0.02) (0.03)
Net realized and unrealized gain on investments............. 3.62 3.42
-------- -------
Total from investment operations............................ 3.60 3.39
-------- -------
Net asset value, end of period.............................. $ 26.99 $ 23.39
======== =======
Total return(2) 15.39% 16.95%
Supplemental data and ratios:
Net assets, end of period (000's)........................... $127,852 $76,263
Ratio of net expenses to average net assets:(3)
Before expense reimbursement.............................. 2.10% 3.03%
After expense reimbursement............................... 2.10% 2.77%
Ratio of net investment income to average net assets:(3)
Before expense reimbursement.............................. (0.14)% (0.78)%
After expense reimbursement............................... (0.14)% (0.52)%
Portfolio turnover rate..................................... 1.59% 3.12%
Average commission rate paid................................ $ 0.0595 $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
APRIL 30, 1998 (UNAUDITED)
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
in 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.
- --------------------------------------------------------------------------------
11
<PAGE> 13
GRANUM VALUE FUND
================================================================================
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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 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.
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 of the Fund, $0.001 par value. Share transactions were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997(1)
ENDED THROUGH
APRIL 30, 1998 OCTOBER 31, 1998
-------------- ----------------
<S> <C> <C>
Shares sold 1,648,235 3,407,243
Shares redeemed (171,744) (151,673)
--------- ---------
Net increase 1,476,491 3,255,570
Shares outstanding:
Beginning of period 3,260,070 5,000
--------- ---------
End of period 4,737,061 3,260,570
========= =========
</TABLE>
(1)Commencement of Operations
4. INVESTMENT TRANSACTIONS
The aggregate purchases and sales of investments, excluding short-term
investments, for the six months ended April 30, 1998 were $54,425,253 and
$1,449,680, respectively.
At April 30, 1998, gross unrealized appreciation and depreciation of investments
for tax purposes was as follows:
<TABLE>
<S> <C>
Appreciation $20,296,732
(Depreciation) (3,114,525)
-----------
Net unrealized appreciation
on investments $17,182,207
===========
</TABLE>
At April 30, 1998, the cost of investments for federal income tax purposes was
$110,472,264.
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"),
- --------------------------------------------------------------------------------
13
<PAGE> 15
GRANUM VALUE FUND
================================================================================
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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.
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 L.P. ("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 six months ended April 30, 1998:
<TABLE>
<CAPTION>
DISTRIBUTION SHAREHOLDER
SERVICES SERVICES
------------ -----------
<S> <C> <C>
Mercer $237,777 $118,811
Granum Securities 12,318 6,237
</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.
- --------------------------------------------------------------------------------
14
<PAGE> 16
GRANUM VALUE FUND
================================================================================
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
6. PUT OPTION CONTRACTS WRITTEN
The premium amount and the transactions related to put option contracts during
the six months ended April 30, 1998, were as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS
PREMIUM AMOUNT (100 SHARES PER CONTRACT)
-------------- -------------------------
<S> <C> <C>
Options outstanding at October 31, 1997, (S&P
Index, Expiration December 1997, Exercise Price
$820.00, Market Value $54,000.) $51,630 40
Options written -- --
Options closed (12,907) (10)
Options expired (38,723) (30)
------- ---
Options outstanding at April 30, 1998 -- --
======= ===
</TABLE>
This report is not authorized for distribution to prospective investors unless
preceded or accompanied by a currently effective prospectus of Granum Value
Fund. Please call 1-888-5-GRANUM (547-2686) for a free prospectus. Read it
carefully before you invest.
- --------------------------------------------------------------------------------
15
