<PAGE> 1
SEMI-ANNUAL
REPORT
April 30, 1999
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 14, 1999
Dear Shareholder:
For the first six months of fiscal 1999, ending April 30, 1999, the total
return of Granum Value Fund was 13.8% versus 22.3% for the S&P 500*. Our top 5
positions as of April 30, 1999 were Bank of New York, Intel Corp., Federal
National Mortgage, Reynolds and Reynolds, and Computer Associates.
Our short-term performance has been negatively impacted by our value
discipline. We continue to resist chasing the latest fad or trend -- which in
the last 18 months has been to own very large capitalization companies,
particularly those with a technology flavor or internet exposure. Nevertheless,
since the beginning of April, our performance has improved. Many of our small
and mid-cap stocks, which had underperformed the S&P 500, are doing better. In
our view, many of our stocks are still very attractive and are poised for
significant revaluation. We believe that this presents a significant opportunity
for Granum Value Fund.
April, a month in which value strategy's performance was greater than two
standard deviations above norm, may well have been a turning point in the market
according to a Merrill Lynch study dated May 10, 1999. According to this study,
in ten cases since 1986 when value strategy's monthly performance was well above
normal (L 2 standard deviations), the value strategy has never provided a
negative absolute or relative return during the subsequent twelve month period.
While this study clearly does not guarantee outperformance by value investors
over the next twelve months, it suggests its likelihood.
Our top 30 positions, comprising more than 80% of the net assets of the
Fund, trade at approximately 15 times estimated 2000 earnings, while the S&P 500
trades at 26 times estimated earnings. This discount of 42% is the largest since
we began Granum Value Fund, representing a compelling opportunity for
shareholders in our view.
We are grateful for the trust you have placed in us.
<TABLE>
<S> <C>
/s/ WALTER F. HARRISON, III /s/ LEWIS M. EISENBERG
Walter F. Harrison, III Lewis M. Eisenberg
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, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
COMMON & PREFERRED STOCKS
100.1%*
------------------------
APARTMENT REITS 1.1%*
14,378 Apartment Investment and
Management Company $ 576,019
45,000 Walden Residential
Properties, Inc. 860,625
------------
1,436,644
------------
BANKS AND SAVINGS &
LOANS 16.9%*
418,400 The Bank of New York
Company, Inc. 16,736,000
26,000 Dime Bancorp, Inc. 599,625
9,100 First Republic Bank** 234,325
11,356 Hudson United Bancorp 401,718
81,000 North Fork
Bancorporation, Inc. 1,822,500
51,800 PFF Bancorp, Inc.** 969,631
11,925 Queens County Bancorp,
Inc. 418,866
------------
21,182,665
------------
BUILDING & HOUSING 3.8%*
83,900 Del Webb Corporation 1,940,188
68,800 Forest City Enterprises,
Inc. -- Class A 1,698,500
23,200 Simpson Manufacturing
Co., Inc.** 1,073,000
------------
4,711,688
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
BUSINESS SERVICES 6.3%*
63,800 American Bank Note
Holographics, Inc.** $ 163,487
26,000 Comdisco, Inc. 684,125
19,500 Convergys Corporation** 363,187
292,300 Reynolds & Reynolds
Company -- Class A 6,668,094
------------
7,878,893
------------
COMPUTER HARDWARE &
SERVICES 1.0%*
46,000 Seagate Technology,
Inc.** 1,282,250
------------
DEFENSE 0.4%*
6,200 Alliant Techsystems,
Inc.** 507,625
------------
ENERGY SERVICES 0.4%*
31,600 Petroleum Geo-Services** 529,300
------------
ENGINEERING &
CONSTRUCTION 1.0%*
66,050 The Turner Corporation** 1,201,284
------------
ENTERTAINMENT & LEISURE
6.7%*
27,000 Brunswick Corporation #+ 648,000
78,175 Lakes Gaming, Inc.** 752,434
161,300 Mirage Resorts, Inc.** 3,619,169
312,700 Park Place Entertainment
Corporation** 3,381,069
------------
8,400,672
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
2
<PAGE> 4
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
FINANCIAL SERVICES 9.2%*
49,000 CMAC Investment
Corporation #+ $ 2,247,875
94,600 DVI, Inc.** 1,342,137
103,700 Fannie Mae 7,356,219
47,100 Resource Bancshares
Mortgage Group, Inc 576,975
------------
11,523,206
------------
FOOD, BEVERAGES & TOBACCO
3.6%*
129,600 Philip Morris Companies,
Inc 4,544,100
------------
HEALTH CARE 1.2%*
51,500 Columbia/HCA Healthcare
Corporation 1,271,406
30,000 Cyberonics, Inc.** 243,750
------------
1,515,156
------------
HOTEL REITS 2.1%*
93,900 Equity Inns, Inc 862,706
125,400 RFS Hotel Investors, Inc 1,771,275
------------
2,633,981
------------
INSTRUMENTS & RELATED
PRODUCTS 1.9%*
90,400 Mettler-Toledo
International, Inc.** 2,361,700
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
INSURANCE 7.0%*
96,300 CNA Financial
Corporation** $ 3,930,244
36,400 Frontier Insurance Group,
Inc 502,775
132,800 Orion Capital Corporation 3,909,300
46,700 Preferred Employers
Holdings, Inc.** 373,600
------------
8,715,919
------------
MISCELLANEOUS 1.1%*
42,100 Ag Services of America,
Inc.** 660,444
56,000 Casino Data Systems** 178,500
27,900 Prison Realty Corporation 544,050
------------
1,382,994
------------
METAL PRODUCTS 0.7%*
39,000 Silgan Holdings, Inc.** 672,750
15,800 Wyman-Gordon Company** 221,200
------------
893,950
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
3
<PAGE> 5
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
MORTGAGE REITS 7.0%*
227,700 Annaly Mortgage
Management, Inc. $ 2,362,387
89,400 Anthracite Capital, Inc. 676,087
25,000 Hanover Capital Mortgage
Holdings, Inc. 142,188
255,400 Imperial Credit
Commercial Mortgage
Investment Corporation 2,506,113
25,000 Novastar Financial, Inc. 153,125
113,500 Ocwen Asset Investment
Corporation** 546,219
139,600 Redwood Trust, Inc. 2,347,025
------------
8,733,144
------------
OFFICE PRODUCTS 1.0%*
122,000 OfficeMax, Inc.** 1,235,250
------------
PHARMACEUTICALS 1.2%*
35,400 International Isotopes,
Inc.**#+ 371,700
24,400 Teva Pharmaceutical
Industries Limited 1,116,300
------------
1,488,000
------------
PRINTING & PUBLISHING
2.9%*
73,700 Big Entertainment,
Inc.**#+ 1,566,125
57,200 Big Flower Press Holding,
Inc.** 2,037,750
------------
3,603,875
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
PRIVATE PLACEMENTS 0.9%*
28,850 American Technology
Private Placement**#+ $ 337,184
151,500 Intertainer Income Series
C Preferred**#+ 833,250
------------
1,170,434
------------
RESTAURANTS 0.6%*
71,000 Lone Star Steakhouse &
Saloon, Inc.** 772,125
------------
RETAILING 0.9%*
117,000 The Maxim Group, Inc.** 943,312
12,900 Trans World Entertainment
Corporation** 197,531
------------
1,140,843
------------
SEMICONDUCTORS &
SEMICONDUCTOR CAPITAL
EQUIPMENT 9.4%*
30,000 Electroglas, Inc.** 410,625
185,000 Intel Corporation 11,319,688
------------
11,730,313
------------
SHOPPING CENTER/MALL
REITS 2.2%*
80,400 Capital Automotive REIT 1,045,200
53,000 Crown American Realty
Trust 384,250
98,400 Konover Property Trust,
Inc. 596,550
82,700 Prime Retail, Inc. 713,288
------------
2,739,288
------------
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
4
<PAGE> 6
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
<C> <S> <C>
SOFTWARE 6.5%*
108,500 Computer Associates
International, Inc.#+ $ 4,631,594
136,500 PLATINUM Technology
International, Inc.**#+ 3,480,750
------------
8,112,344
------------
SPECIALTY CHEMICALS 1.1%*
46,700 General Chemical Group,
Inc.#+ 855,194
12,400 OM Group, Inc. 451,050
------------
1,306,244
------------
TELECOMMUNICATIONS 2.0%*
42,000 Globalstar
Telecommunications
Limited**#+ 845,250
22,000 NTL Incorporated**#+ 1,677,500
------------
2,522,750
------------
Total Common & Preferred
Stocks
(Cost $118,224,893) 125,256,637
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
- ---------- ------------
WARRANTS 0.0%*
------------------
28,850 American Technology
Private Placement
Warrants, expires
11/30/01#+ --
63,125 Intertainer Warrants,
expires 5/12/00#+ --
------------
Total Warrants
(Cost $0) --
------------
CONTRACTS
(100
SHARES
PER
CONTRACT)
- ----------
<C> <S> <C>
PUT OPTIONS
PURCHASED 0.2%*
------------------
100 S&P 500 Index,
Expiration June 1999,
Exercise Price $1,275 $ 282,500
------------
Total Put Options
Purchased
(Cost $456,550) 282,500
------------
Total Investments
(Cost of $118,681,443) $125,539,137
============
</TABLE>
* Calculated as a percentage of net assets.
** Non-income producing security.
# All or a portion of this security has been loaned. See Note 7.
+ All or a portion of the shares have been committed as collateral for written
put options.
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
5
<PAGE> 7
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $118,681,443)................. $125,539,137
Dividends receivable...................................... 191,618
Organizational expenses, net of accumulated
amortization............................................ 67,830
Receivable for securities sold............................ 33,824
Interest receivable....................................... 6,220
Prepaid assets............................................ 35,147
Other assets.............................................. 1,076
------------
Total assets....................................... 125,874,852
------------
LIABILITIES:
Payable to custodian...................................... 508,524
Payable for securities purchased.......................... 45,489
Payable to Investment Adviser............................. 49,525
Distribution fees payable................................. 48,146
Shareholder service fees payable.......................... 24,763
Put options written (Premiums received $129,695).......... 55,000
Accrued expenses and other liabilities.................... 53,624
------------
Total liabilities.................................. 785,071
------------
NET ASSETS.................................................. $125,089,781
============
NET ASSETS CONSIST OF:
Capital stock............................................. $118,374,294
Accumulated undistributed net investment income........... 202,429
Accumulated undistributed net realized loss on
investments............................................. (419,331)
Net unrealized appreciation on
Investments............................................. 6,857,694
Written options......................................... 74,695
------------
Total Net Assets................................... $125,089,781
============
Shares of beneficial interest outstanding (unlimited
number of shares of beneficial interest authorized,
$.001 par value)........................................ 5,030,595
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $24.87
============
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
6
<PAGE> 8
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 1999 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes withheld of
$7,077)................................................. $ 1,237,533
Interest income........................................... 171,894
Income from securities lending............................ 7,763
------------
Total investment income................................. 1,417,190
------------
EXPENSES:
Investment advisory fees.................................. 309,847
Distribution fees......................................... 309,847
Shareholder servicing fees................................ 154,924
Administration fees....................................... 38,887
Transfer agent fees and expenses.......................... 24,822
Fund accounting fees...................................... 16,094
Custody fees.............................................. 14,776
Federal and state registration............................ 13,977
Professional fees......................................... 22,743
Reports to shareholders................................... 8,818
Amortization of organizational expenses................... 11,202
Trustees' fees and expenses............................... 31,713
Insurance expense......................................... 10,776
Other..................................................... 2,763
------------
Total expenses.......................................... 971,189
------------
NET INVESTMENT INCOME....................................... 446,001
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments.......................... (649,040)
Change in unrealized appreciation on investments.......... 15,900,698
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS...... 15,251,658
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $ 15,697,659
============
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
7
<PAGE> 9
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income..................................... $ 446,001 $ 186,501
Net realized gain (loss) on investments and option
contracts expired or closed............................. (649,040) 169,267
Change in unrealized appreciation (depreciation) on
investments............................................. 15,900,698 (12,074,839)
------------ -------------
Net increase (decrease) in net assets resulting from
operations............................................ 15,697,659 (11,719,071)
------------ -------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................ (408,522) --
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................. 4,719,329 64,968,735
Proceeds from shares issued to holders in reinvestment of
dividends............................................... 405,596 --
Cost of shares redeemed................................... (13,980,189) (10,856,355)
------------ -------------
Net increase (decrease) in net assets from capital share
transactions.......................................... (8,855,264) 54,112,380
------------ -------------
TOTAL INCREASE IN NET ASSETS................................ 6,433,873 42,393,309
------------ -------------
NET ASSETS:
Beginning of period....................................... 118,655,908 76,262,599
------------ -------------
End of period............................................. $125,089,781 $ 118,655,908
============ =============
</TABLE>
See Notes to the Financial Statements
- --------------------------------------------------------------------------------
8
<PAGE> 10
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997(1)
ENDED YEAR ENDED THROUGH
APRIL 30, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
-------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C>
Per share data:(4)
Net asset value, beginning of period..................... $ 21.93 $ 23.39 $ 20.00
-------- -------- -------
Income from Investment Operations:
Net investment income.................................... 0.09 0.03 (0.03)
Net realized and unrealized gain on investments.......... 2.93 (1.49) 3.42
-------- -------- -------
Total from investment operations......................... 3.02 (1.46) 3.39
-------- -------- -------
Less Distributions:
From net investment income............................... (0.08) -- --
-------- -------- -------
Net asset value, end of period........................... $ 24.87 $ 21.93 $ 23.39
======== ======== =======
Total return............................................. 13.77%(2) (6.24)% 16.95%(2)
Supplemental data and ratios:
Net assets, end of period (000's)........................ $125,090 $118,656 $76,263
Ratio of net expenses to average net assets
Before expense reimbursement........................... 1.57%(3) 1.88% 3.03%(3)
After expense reimbursement............................ 1.57%(3) 1.88% 2.77%(3)
Ratio of net investment income to average net assets
Before expense reimbursement........................... 0.72%(3) 0.39% (0.78)%(3)
After expense reimbursement............................ 0.72%(3) 0.39% (0.52)%(3)
Portfolio turnover rate.................................. 9.75% 3.45% 3.12%
</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
- --------------------------------------------------------------------------------
9
<PAGE> 11
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 1999 (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.
- --------------------------------------------------------------------------------
10
<PAGE> 12
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.
- --------------------------------------------------------------------------------
11
<PAGE> 13
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
3. SHARES OF BENEFICIAL INTEREST
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
-------------- ----------------
<S> <C> <C>
Shares sold 199,650 2,605,162
Shares reinvested 17,208 --
Shares redeemed (596,039) (455,956)
--------- ---------
Net increase (decrease) (379,181) 2,149,206
Shares outstanding:
Beginning of period 5,409,776 3,260,570
--------- ---------
End of period 5,030,595 5,409,776
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments, for the
six months ended April 30, 1999 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ------------------------ -----------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
- ---------- ----- ---------- -----
<S> <C> <C> <C>
$3,021,996 $10,995,892 $2,967,339 $8,607,419
</TABLE>
At April 30, 1999, gross unrealized appreciation and depreciation of investments
for tax purposes was as follows:
<TABLE>
<S> <C>
Appreciation $ 21,936,935
(Depreciation) (15,079,241)
------------
Net unrealized appreciation
on investments $ 6,857,694
============
</TABLE>
At April 30, 1999, the cost of investments for federal income tax purposes was
$118,681,443.
- --------------------------------------------------------------------------------
12
<PAGE> 14
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
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.
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 compensates 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 six months ended April 30, 1999:
<TABLE>
<CAPTION>
DISTRIBUTION SHAREHOLDER
SERVICES SERVICES
------------ -----------
<S> <C> <C>
Mercer $291,880 $145,940
Granum Securities 17,967 8,984
</TABLE>
Other - Firstar Mutual Fund Services, LLC, a subsidiary of Firstar Bank
Milwaukee, NA, a publicly held bank holding company, serves as transfer agent,
administrator and accounting services agent for the Fund.
Firstar Bank Milwaukee, NA serves as custodian for the Fund.
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13
<PAGE> 15
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, 1999, were as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS
PREMIUM AMOUNT (100 SHARES PER CONTRACT)
-------------- -------------------------
<S> <C> <C>
Options outstanding at October 31, 1998 $ -- --
Options written 129,695 100
--------- ----
Options outstanding at April 30, 1999, (S&P 500
Index, Expiration June 1999, Exercise Price
$1,125.00, Market Value $55,000) $ 129,695 100
========= ====
</TABLE>
7. SECURITIES LOANED
The Fund has entered into a securities lending arrangement with the custodian.
Under the terms of the agreement, the Fund receives 60% of the annual net income
from lending transactions. In exchange for such fees, the custodian is
authorized to loan securities on behalf of the Fund, against receipt of
collateral at least equal in value to the value of the securities loaned. Cash
collateral is invested by the custodian in money market instruments approved by
the Advisor. As of April 30, 1999, the Fund had on loan securities valued at
$10,506,400. Cash of $10,716,528 was received as collateral for the loans, and
has been invested in approved instruments. The Fund bears the risk of any
deficiency in the amount of collateral available for return to a borrower due to
a loss in an approved investment.
- --------------------------------------------------------------------------------
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<PAGE> 16
GRANUM VALUE FUND
- --------------------------------------------------------------------------------
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
