<PAGE> 1
SEMI-ANNUAL
REPORT
April 30, 2000
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, 2000
Dear Shareholder:
For the first six months of fiscal 2000, ending April 30, 2000, the total
return of Granum Value Fund was 10.52% versus 7.19% for the S&P 500*. Our top 5
positions as of April 30, 2000 were Intel Corp., Bank of New York, Computer
Associates, Reynolds and Reynolds, and Federal National Mortgage.
During the period our performance has been positively impacted by our value
discipline. Recently, we have witnessed the beginnings of an investor sentiment
shift away from momentum and towards fundamental analysis-price/earnings ratio,
return on equity, return on assets, and price/book value. In short, the market
appears to be returning to our fundamental investment approach.
Our top 30 positions, comprising more than 85% of the net assets of the
Fund, trade at approximately 16 times estimated 2001 earnings, while the S&P 500
trades at 24 times estimated earnings. This discount of 33% represents a
compelling opportunity for shareholders in our view.
Granum Value Fund will continue to seek investments in 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 over an
extended period of time, yet selling at discounts to the market. In the past,
this investment approach has enabled us to generate superior returns.
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
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $96,676,400).................. $118,385,446
Short-term investments of collateral received for
securities loaned....................................... 8,404,900
Receivable for investments sold........................... 287,080
Dividends receivable...................................... 143,819
Organizational expenses, net of accumulated
amortization............................................ 45,178
Interest receivable....................................... 8,667
Prepaid assets............................................ 21,999
Other assets.............................................. 9,641
------------
Total assets....................................... 127,306,730
------------
LIABILITIES:
Collateral for securities loaned.......................... 8,404,900
Payable to custodian...................................... 529,179
Payable for securities purchased.......................... 82,500
Payable to Investment Adviser............................. 196,768
Distribution fees payable................................. 49,092
Shareholder service fees payable.......................... 24,596
Accrued expenses and other liabilities.................... 59,983
------------
Total liabilities.................................. 9,347,018
------------
NET ASSETS.................................................. $117,959,712
============
NET ASSETS CONSIST OF:
Capital stock............................................. $ 97,477,495
Accumulated undistributed net investment loss............. (375,969)
Accumulated net realized loss on investments and option
contracts expired or closed............................. (850,860)
Net unrealized appreciation on investments................ 21,709,046
------------
Total Net Assets................................... $117,959,712
============
Shares of beneficial interest outstanding (unlimited
number of shares of beneficial interest authorized,
$.001 par value)........................................ 4,243,068
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $27.80
============
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
2
<PAGE> 4
GRANUM VALUE FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
SIX MONTHS ENDED APRIL 30, 2000 (UNAUDITED)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes withheld of
$1,107)................................................. $ 1,129,953
Interest income........................................... 49,276
Securities lending income................................. 8,050
-----------
Total investment income................................. 1,187,279
-----------
EXPENSES:
Investment advisory fee................................... 680,878
Distribution fees......................................... 304,141
Shareholder servicing fees................................ 152,070
Administration fees....................................... 41,309
Professional fees......................................... 35,833
Transfer agent fees and expenses.......................... 26,236
Trustees' fees and expenses............................... 22,729
Fund accounting fees...................................... 16,514
Reports to shareholders................................... 9,100
Custody fees.............................................. 13,832
Federal and state registration............................ 13,769
Amortization of organizational expenses................... 11,264
Insurance expense......................................... 10,192
Other..................................................... 3,542
-----------
Total expenses.......................................... 1,341,409
-----------
NET INVESTMENT LOSS......................................... (154,130)
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on:
Investments............................................. 2,708,937
Option contracts expired or closed...................... (613,258)
Change in unrealized appreciation on investments.......... 10,327,490
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 12,423,169
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $12,269,039
===========
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
3
<PAGE> 5
GRANUM VALUE FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
-------------- ----------------
(UNAUDITED)
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ (154,130) $ 795,783
Net realized gain (loss) on investments and option
contracts expired or closed............................. 2,095,679 (3,311,316)
Change in unrealized appreciation on investments.......... 10,327,490 20,349,865
------------ ------------
Net increase in net assets resulting from operations.... 12,269,039 17,834,332
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................ (654,795) (408,522)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................. 2,716,693 7,819,670
Proceeds from shares issued to holders in reinvestment of
dividends............................................... 649,489 405,596
Cost of shares redeemed................................... (18,724,894) (22,602,804)
------------ ------------
Net decrease in net assets from capital share
transactions.......................................... (15,358,712) (14,377,538)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (3,744,468) 3,048,272
------------ ------------
NET ASSETS:
Beginning of period....................................... 121,704,180 118,655,908
------------ ------------
End of period*............................................ $117,959,712 $121,704,180
============ ============
* Including undistributed net investment income (loss)
of...................................................... $ (375,969) $ 432,956
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
4
<PAGE> 6
GRANUM VALUE FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1997(1)
ENDED YEAR ENDED YEAR ENDED THROUGH
APRIL 30, 2000 OCTOBER 31, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997
-------------- ---------------- ---------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Per share data:(4)
Net asset value, beginning of period....... $ 25.29 $ 21.93 $ 23.39 $ 20.00
-------- -------- -------- -------
Income from Investment Operations:
Net investment income (loss)............... (0.04) 0.16 0.03 (0.03)
Net realized and unrealized gain (loss) on
investments.............................. 2.69 3.28 (1.49) 3.42
-------- -------- -------- -------
Total from investment operations........... 2.65 3.44 (1.46) 3.39
-------- -------- -------- -------
Less distributions:
Dividends from net investment income....... (0.14) (0.08) -- --
-------- -------- -------- -------
Net asset value, end of period............. $ 27.80 $ 25.29 $ 21.93 $ 23.39
======== ======== ======== =======
Total return............................... 10.52%(2) 15.69% (6.24)% 16.95%(2)
Supplemental data and ratios:
Net assets, end of period (000's).......... $117,960 $121,704 $118,656 $76,263
Ratio of net expenses to average net assets
Before expense reimbursement............. 2.21% (3) 1.59% 1.88% 3.03%(3)
After expense reimbursement.............. 2.21% (3) 1.59% 1.88% 2.77%(3)
Ratio of net investment income to average
net assets
Before expense reimbursement............. (0.25)%(3) 0.64% 0.17% (0.78)%(3)
After expense reimbursement.............. (0.25)%(3) 0.64% 0.17% (0.52)%(3)
Portfolio turnover rate.................... 15.00% 18.18% 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
--------------------------------------------------------------------------------
5
<PAGE> 7
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
COMMON STOCKS 98.5%
------------------------
BANKS AND SAVINGS &
LOANS 17.2%
363,800 The Bank of New York
Company, Inc. $ 14,938,538
73,200 Dime Bancorp, Inc. 1,372,500
12,600 Firstar Corporation 313,425
17,196 Hudson United Bancorp 387,985
81,000 North Fork
Bancorporation, Inc. 1,311,188
140,585 Ocwen Financial
Corporation* 1,019,241
51,800 PFF Bancorp, Inc. 728,438
11,925 Queens County Bancorp,
Inc. 242,227
------------
20,313,542
------------
BUILDING & HOUSING 3.6%
83,900 Del Webb Corporation 1,253,256
102,800 Forest City Enterprises,
Inc. -- Class A 2,994,050
------------
4,247,306
------------
BUSINESS SERVICES 7.3%
26,000 Comdisco, Inc. 807,625
19,500 Convergys Corporation* 858,000
292,300 Reynolds & Reynolds
Company -- Class A 6,942,125
------------
8,607,750
------------
COMPUTER HARDWARE &
SERVICES 0.7%
15,900 Seagate Technology, Inc.* 807,919
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
DEFENSE 0.6%
9,400 Alliant Techsystems,
Inc.* $ 654,475
------------
ENERGY SERVICES 2.0%
75,000 Citizens Utilities
Company -- Class B* 1,204,687
71,600 Petroleum Geo-Services* 1,163,500
------------
2,368,187
------------
ENTERTAINMENT &
LEISURE 7.3%
27,000 Brunswick Corporation 518,062
150,000 Casino Data Systems* 721,875
83,200 Hollywood.com, Inc.* 1,164,800
78,175 Lakes Gaming, Inc.* 640,058
414,000 Park Place Entertainment
Corporation* 5,304,375
27,200 WMS Industries Inc.* 238,000
------------
8,587,170
------------
FINANCIAL SERVICES 11.8%
80,000 Ag Services of America,
Inc.* 1,690,000
51,300 The CIT Group,
Inc. -- Class A 868,894
140,000 DVI, Inc.* 1,942,500
103,700 Fannie Mae 6,254,406
56,000 Radian Group, Inc. 2,852,500
67,100 Resource Bancshares
Mortgage Group, Inc. 335,500
------------
13,943,800
------------
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
6
<PAGE> 8
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
HEALTH CARE 1.2%
51,500 Columbia/HCA Healthcare
Corporation $ 1,464,531
------------
HOTEL REITS 2.8%
93,900 Equity Inns Inc. 622,087
217,100 RFS Hotel Investors, Inc. 2,632,338
------------
3,254,425
------------
INSTRUMENTS & RELATED
PRODUCTS 2.4%
82,000 Mettler-Toledo
International, Inc.* 2,829,000
------------
INSURANCE 5.4%
110,500 CNA Financial
Corporation* 3,397,875
101,200 Everest Reinsurance
Holdings 2,960,100
------------
6,357,975
------------
MORTGAGE REITS 3.5%
83,200 Annaly Mortgage
Management, Inc. 717,600
110,000 Anthracite Capital, Inc. 783,750
181,300 Redwood Trust, Inc. 2,662,844
------------
4,164,194
------------
PHARMACEUTICALS 1.8%
48,800 Teva Pharmaceutical
Industries Ltd. 2,147,200
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
PRINTING & PUBLISHING
1.0%
97,700 Hollinger International
Inc. $ 1,233,462
------------
PRIVATE PLACEMENTS 1.3%
28,850 American Technology
Convertible Preferred
(Acquired 12/22/98;
Cost $288,500)(a)(b)* 418,325
151,500 Intertainer Inc. Series C
Convertible Preferred
(Acquired 2/12/99; Cost
$833,250)(a)(b)* 1,125,645
------------
1,543,970
------------
RESTAURANTS 0.7%
71,000 Lone Star Steakhouse &
Saloon, Inc.* 838,688
------------
RETAILING 0.5%
147,000 Flooring America Inc.* 404,250
62,500 The Good Guys* 179,688
------------
583,938
------------
SEMICONDUCTORS &
SEMICONDUCTOR CAPITAL
EQUIPMENT 12.8%
118,900 Intel Corporation 15,078,006
------------
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
7
<PAGE> 9
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
SHOPPING CENTER/MALL
REITS 1.7%
120,000 Capital Automotive REIT $ 1,672,500
53,000 Crown American Realty
Trust 294,812
------------
1,967,312
------------
SOFTWARE 5.9%
125,000 Computer Associates
International, Inc. 6,976,562
------------
SPECIALTY CHEMICALS 2.1%
79,300 Gentek, Inc. 1,065,594
30,600 OM Group, Inc. 1,407,600
------------
2,473,194
------------
TELECOMMUNICATIONS 4.9%
42,000 Globalstar
Telecommunications
Ltd.* 493,500
68,750 NTL Incorporated* 5,259,375
------------
5,752,875
------------
Total Common Stocks
(Cost $94,528,513) 116,195,481
------------
PRIVATE PLACEMENT
WARRANTS 0.2%
---------------------
28,850 American Technology
Warrants, expires
11/30/01, (Acquired
12/22/98; Cost
$0)(a)(b) 73,270
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
3,166 Big Entertainment, Inc.
Warrants, expires
5/17/04 (Acquired
5/17/99; Cost $0)(a)(b) $ 11,038
31,250 The Good Guys Warrants,
expires 8/17/01
(Acquired 8/17/99; Cost
$0)(a)(b) 18,128
26,800 International Isotopes
Warrants, expires
5/28/02 (Acquired
5/28/99; Cost $0)(a)(b) 30,048
63,125 Intertainer Inc.
Warrants, expires
5/12/00 (Acquired
2/12/99; Cost $0)(a)(b) 52,394
------------
Total Warrants (Cost $0) 184,878
------------
<CAPTION>
CONTRACTS
(100 SHARES
PER CONTRACT)
-------------
<C> <S> <C>
PUT OPTIONS
PURCHASED 0.5%
------------------
400 Nasdaq-100 Shares,
Expiration June 2000,
Exercise Price $87 190,000
400 Nasdaq-100 Index,
Expiration June 2000,
Exercise Price $100 430,000
------------
Total Put Options
Purchased (Cost
$762,800) 620,000
------------
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
8
<PAGE> 10
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
APRIL 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
---------- ------------
<C> <S> <C>
VARIABLE RATE
DEMAND NOTES 1.2%
---------------------
$ 900,064 American Family Demand Note,
5.76% $ 900,064
149,213 Sara Lee Corporation, 5.76% 149,213
282,652 Warner Lambert Demand Note,
5.76% 282,652
53,158 Wisconsin Corp. Central
Credit Union Demand Note,
5.83% 53,158
------------
Total Variable Rate Demand
Notes (Cost $1,385,087) 1,385,087
------------
Total Investments (Cost
$96,676,400) 100.4% $118,385,446
------------
Other liabilities in excess
of other assets (0.4%) (425,734)
------------
NET ASSETS 100% $117,959,712
============
</TABLE>
* Non-income producing security.
(a) Restricted Security.
(b) Board Valued Security.
See Notes to the Financial Statements
--------------------------------------------------------------------------------
9
<PAGE> 11
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
APRIL 30, 2000 (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 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. As of April 30, 2000, fair value securities represent 1.46% of the
Fund's investments, at value. Debt securities which mature in less than 60 days
are valued at amortized cost, which approximates market value.
b) Restricted Securities - The Fund owns investment securities which are
unregistered and thus restricted as to resale. These securities are valued by
the Board of Trustees after giving due consideration to pertinent factors
including recent private sales, market conditions and the issuer's financial
performance. Where future disposition of these securities requires registration
under the Securities Act of 1933, the Fund has the right to include these
securities in such registration, generally without cost to the Fund. The Fund
has no right to require registration of unregistered securities. At April 30,
2000, the Fund held restricted securities with an aggregate market value of
$1,728,848 representing 1.47% of the net assets of the Fund.
c) 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
--------------------------------------------------------------------------------
10
<PAGE> 12
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
subsequently reimbursed by the Fund. The proceeds of any redemption of the 5,000
initial shares purchased by the Adviser 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.
d) Written Option Accounting - The Fund may write 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.
e) 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.
f) 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.
g) 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 substantially all of its investment company net taxable income and
net capital gains to shareholders.
h) 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.
--------------------------------------------------------------------------------
11
<PAGE> 13
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
i) 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.
The Fund may utilize derivative instruments including written options, purchased
options and other instruments with similar characteristics to the extent that
they are consistent with the Fund's investment objectives and limitations. The
use of these instruments may involve additional investment risks including the
possibility of illiquid markets or imperfect correlation between the value of
the instruments and the underlying securities.
3. SHARES OF BENEFICIAL INTEREST
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
Shares sold 103,117 325,475
Shares reinvested 25,135 17,208
Shares redeemed (697,048) (940,595)
--------- ---------
Net decrease (568,796) (597,912)
Shares outstanding:
Beginning of period 4,811,864 5,409,776
--------- ---------
End of period 4,243,068 4,811,864
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments, for the
six months ended April 30, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------ ------------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
---------- ----- ---------- -----
<S> <C> <C> <C>
$0 $18,053,072 $0 $32,231,422
</TABLE>
--------------------------------------------------------------------------------
12
<PAGE> 14
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
At April 30, 2000, gross unrealized appreciation and depreciation of investments
for tax purposes was as follows:
<TABLE>
<S> <C>
Appreciation $ 31,763,282
(Depreciation) (10,295,146)
------------
Net unrealized appreciation
on investments $ 21,468,136
============
</TABLE>
At April 30, 2000, the cost of investments for federal income tax purposes was
$96,917,310. The Fund had a capital loss carryover of $3,292,997 which expires
in varying amounts in 2006 and 2007.
5. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Investment Adviser - The Adviser provides investment advisory services to the
Fund pursuant to an investment advisory agreement. 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 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. During the six months ended April 30, 2000, the Fund's Adviser earned
investment advisory fees at an annual rate of 1.12% of average daily net assets
after the Monthly Performance Adjustment.
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.
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GRANUM VALUE FUND
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NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The Fund incurred the following expenses for Distribution and Shareholder
Services for the six months ended April 30, 2000:
<TABLE>
<CAPTION>
DISTRIBUTION SHAREHOLDER
SERVICES SERVICES
------------ -----------
<S> <C> <C>
Mercer $279,194 $139,597
Granum Securities 24,947 12,473
</TABLE>
Other - Firstar Mutual Fund Services, LLC, a subsidiary of Firstar Bank, N.A., a
publicly held bank holding company, serves as transfer agent, administrator and
accounting services agent for the Fund.
Firstar Bank, NA serves as custodian for the Fund.
6. PUT OPTION CONTRACTS WRITTEN
The premium amount and the transactions related to put option contracts written
during the six months ended April 30, 2000, were as follows:
<TABLE>
<CAPTION>
NUMBER OF CONTRACTS
PREMIUM AMOUNT (100 SHARES PER CONTRACT)
-------------- -------------------------
<S> <C> <C>
Options outstanding at October 31, 1999 $ 196,093 50
Options written 327,788 354
Options expired (28,896) (43)
Options closed (494,985) (361)
--------- ----
Options outstanding at April 30, 2000 $ 0 0
========= ====
</TABLE>
Expired and closed put option contracts written resulted in a capital gain of
$240,961.
7. SECURITIES LOANED
The Fund has entered into a securities lending arrangement with the custodian.
Under the terms of the agreement, the custodian is authorized to loan securities
on behalf of the Fund to approved brokers against the receipt of cash collateral
at least equal to the value of the securities loaned. The cash collateral is
invested by the custodian in a money market pooled account approved by the
Adviser. Although risk is mitigated by the collateral, the Fund could experience
a delay in recovering its securities and possible loss of income or value if the
borrower fails to return them. The agreement provides that after predetermined
rebates to the brokers, the income generated from lending transactions is
allocated 60% to the Fund and 40% to the custodian. As of April 30, 2000, the
Fund had on loan securities valued at $8,404,900 and collateral of $8,404,900.
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GRANUM VALUE FUND
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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.
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