<PAGE> 1
ANNUAL
REPORT
October 31, 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
NOVEMBER 20, 2000
Dear Shareholder:
For the fiscal year ending October 31, 2000, the total return of Granum
Value Fund was 16.3% versus 6.1% for the S&P 500. For the calendar year 2000
through the end of October, 2000, the total return of Granum Value Fund was 8.5%
versus -1.8% for the S&P 500. Our top 5 positions as of October 31, 2000 were
Bank of New York, Fannie Mae, Intel Corp, Computer Associates, and Everest Re
Group, Ltd.
Despite the strong performance of the Fund in the past year, we still
believe that our portfolio is undervalued. Our top 30 positions, comprising more
than 80% of the net assets of the Fund, trade at approximately 16 times
estimated 2001 earnings while the S&P 500 trades at approximately 23 times
estimated earnings. We believe that this discount of 30% represents a compelling
value for shareholders.
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 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/ LEWIS M. EISENBERG /s/ WALTER F. HARRISON, III
Lewis M. Eisenberg Walter F. Harrison III
Co-Chairman Co-Chairman
</TABLE>
--------------------------------------------------------------------------------
<PAGE> 3
GRANUM VALUE FUND
--------------------------------------------------------------------------------
FUND PERFORMANCE
[GRAPH]
<TABLE>
<CAPTION>
GRANUM VALUE FUND S&P 500
----------------- -------
<S> <C> <C>
5/1/97 10000.00 10000.00
11660.00 11966.00
10/31/97 11695.00 11516.00
12280.00 12391.00
4/30/98 13494.00 14106.00
12110.00 14273.00
10/31/98 10965.00 14049.00
12068.00 16417.00
4/30/99 12475.00 17184.00
12847.00 17156.00
10/31/99 12686.00 17654.00
13416.00 18115.00
4/30/00 14021.00 18923.00
13588.00 18694.00
10/31/00 14752.00 18727.00
</TABLE>
$14,752 (Granum Value Fund)
$18,727 (S&P 500)
<TABLE>
<CAPTION>
AVERAGE ANNUAL RATE OF
RETURN
FOR PERIODS ENDED
OCTOBER 31, 2000
----------------------
1 YEAR SINCE
------ INCEPTION
5/1/97
---------
<S> <C> <C>
Granum Value Fund 16.28% 11.72%
S&P 500 6.09% 19.60%
</TABLE>
INVESTMENT PERIOD
The Standard & Poor's 500 Stock Index (S&P 500) is a capital-weighted index,
representing the aggregate market value of the common equity of 500 stocks
primarily traded on the New York Stock Exchange.
This chart assumes an initial gross investment of $10,000 made on 5/01/97
(commencement of operations). Returns shown included the reinvestment of all
dividends. Past performance is not predictive of future performance. Investment
return and principal value will fluctuate, so that your shares, when redeemed,
may be worth more or less than the original cost.
--------------------------------------------------------------------------------
2
<PAGE> 4
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
COMMON STOCKS 99.4%
------------------------
BANKS AND SAVINGS & LOANS
16.6%
243,700 The Bank of New York
Company, Inc. $ 14,027,981
73,200 Dime Bancorp, Inc. 1,788,825
20,600 Firstar Corporation 405,563
99,000 North Fork
Bancorporation, Inc. 1,998,562
140,585 Ocwen Financial
Corporation * 825,937
45,600 PFF Bancorp, Inc. 843,600
------------
19,890,468
------------
BUILDING & HOUSING 5.5%
101,300 Del Webb Corporation * 2,722,438
102,800 Forest City Enterprises,
Inc. -- Class A 3,803,600
------------
6,526,038
------------
BUSINESS SERVICES 5.4%
26,000 Comdisco, Inc. 320,125
19,500 Convergys Corporation * 849,469
292,300 The Reynolds & Reynolds
Company -- Class A 5,224,862
------------
6,394,456
------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
DEFENSE 2.1%
28,000 Alliant Techsystems Inc.
* $ 2,518,250
------------
ENERGY SERVICES 0.8%
71,600 Petroleum Geo-Services
ASA ADR * 980,025
------------
ENTERTAINMENT &
LEISURE 8.1%
27,000 Brunswick Corporation 524,812
150,000 Casino Data Systems * 909,375
55,200 Hilton Hotels Corporation 524,400
83,200 Hollywood.com, Inc. * 629,200
78,175 Lakes Gaming, Inc. * 616,850
414,000 Park Place Entertainment
Corporation * 5,278,500
52,600 WMS Industries Inc. * 1,170,350
------------
9,653,487
------------
FINANCIAL SERVICES 16.0%
80,000 Ag Services of America,
Inc. * 1,280,000
140,000 DVI, Inc. * 2,345,000
140,000 Fannie Mae 10,780,000
56,000 Radian Group, Inc. 3,969,000
137,100 Resource Bancshares
Mortgage Group, Inc. 788,325
------------
19,162,325
------------
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
3
<PAGE> 5
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
HEALTH CARE 1.7%
51,500 Columbia\HCA Healthcare
Corporation $ 2,056,781
------------
INSTRUMENTS & RELATED
PRODUCTS 3.2%
82,000 Mettler-Toledo
International, Inc. * 3,828,375
------------
INSURANCE 8.3%
110,500 CNA Financial Corporation
* 4,033,250
101,200 Everest Re Group, Ltd. 5,932,850
------------
9,966,100
------------
PHARMACEUTICALS 1.8%
37,000 Teva Pharmaceutical
Industries Ltd. 2,187,625
------------
PRINTING & PUBLISHING
1.3%
97,700 Hollinger International
Inc. 1,508,244
------------
PRIVATE PLACEMENTS 1.5%
28,850 American Technology
Convertible Preferred
(Acquired 12/22/98;
Cost $288,500) (a)(b) * 223,588
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
214,625 Intertainer Inc. Series C
Convertible Preferred
(Acquired 2/12/99,
5/12/00; Cost
$1,249,875) (a)(b) * $ 1,594,664
------------
1,818,252
------------
REITS 7.3%
110,000 Anthracite Capital, Inc. 811,250
120,000 Capital Automotive REIT 1,546,875
93,900 Equity Inns, Inc. 581,006
217,100 RFS Hotel Investors, Inc. 2,795,162
181,300 Redwood Trust, Inc. 2,878,137
------------
8,612,430
------------
RETAILING 0.8%
158,300 The Good Guys, Inc. * 930,013
------------
SEMICONDUCTORS &
SEMICONDUCTOR CAPITAL
EQUIPMENT 6.7%
177,800 Intel Corporation 8,001,000
------------
SOFTWARE 5.5%
206,700 Computer Associates
International, Inc. 6,588,562
------------
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
4
<PAGE> 6
GRANUM VALUE FUND
--------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED)
OCTOBER 31, 2000
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
---------- ------------
<C> <S> <C>
SPECIALTY CHEMICALS 3.4%
79,300 GenTek, Inc. $ 1,323,319
60,000 OM Group, Inc. 2,775,000
------------
4,098,319
------------
TELECOMMUNICATIONS 3.4%
75,000 Citizens Communication
Company 1,087,500
68,750 NTL Incorporated * 3,020,703
------------
4,108,203
------------
Total Common Stocks (Cost
$91,282,258) 118,828,953
------------
PRIVATE PLACEMENT
WARRANTS 0.1%
---------------------
28,850 American Technology
Warrants, expires
11/30/01, (Acquired
12/22/98; Cost $0)
(a)(b) * 19,733
3,166 Hollywood.com
Warrants, expires
5/17/04 (Acquired
5/17/99; Cost $0)
(a)(b) * 2,592
31,250 The Good Guys Warrants,
expires 8/17/01
(Acquired 8/17/99; Cost
$0) (a)(b) * 54,956
26,800 International Isotopes
Warrants, expires
5/28/02 (Acquired
5/28/99; Cost $0)
(a)(b) * 3,591
------------
Total Private Placement
Warrants (Cost $0) 80,872
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
---------- ------------
<C> <S> <C>
VARIABLE RATE DEMAND
NOTES 0.6%
-------------------------
$ 126,595 American Family Financial
Services, Inc., 6.22% $ 126,595
397,952 Sara Lee Corporation,
6.22% 397,952
103,038 Wisconsin Corporate
Central Credit Union,
6.29% 103,038
100,000 Wisconsin Electric Power
Company, 6.21% 100,000
------------
Total Variable Rate
Demand Notes (Cost of
$727,585) 727,585
------------
Total Investments (Cost
of $92,009,843) 100.1% 119,637,410
------------
Other liabilities in
excess of other assets
(0.1%) (139,190)
------------
NET ASSETS 100% $119,498,220
============
</TABLE>
* Non-income producing security.
(a) Restricted Security.
(b) Board Valued Security.
ADR -- American Depository Receipt
See Notes to the Financial Statements
--------------------------------------------------------------------------------
5
<PAGE> 7
GRANUM VALUE FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 2000
<TABLE>
<S> <C>
ASSETS:
Investments, at value (Cost $92,009,843).................. $119,637,410
Cash...................................................... 22,922
Short-term investments of collateral received for
securities loaned....................................... 12,333,500
Dividends and interest receivable......................... 128,927
Organizational expenses, net of accumulated
amortization............................................ 33,791
Other assets.............................................. 19,280
------------
Total assets....................................... 132,175,830
------------
LIABILITIES:
Collateral for securities loaned.......................... 12,333,500
Payable to Investment Adviser............................. 185,665
Distribution fees payable................................. 48,563
Shareholder service fees payable.......................... 24,331
Accrued expenses and other liabilities.................... 85,551
------------
Total liabilities.................................. 12,677,610
------------
NET ASSETS.................................................. $119,498,220
============
NET ASSETS CONSIST OF:
Capital stock............................................. $ 92,023,400
Accumulated net realized loss on investments.............. (152,747)
Net unrealized appreciation on investments................ 27,627,567
------------
Total Net Assets................................... $119,498,220
============
Shares of beneficial interest outstanding (unlimited
number of shares of beneficial interest authorized,
$.001 par value)........................................ 4,085,698
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE..................................................... $29.25
============
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
6
<PAGE> 8
GRANUM VALUE FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
YEAR ENDED OCTOBER 31, 2000
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income (net of foreign taxes withheld of
$2,284)................................................. $ 2,072,613
Interest income........................................... 103,292
Securities lending income................................. 13,418
-----------
Total investment income................................. 2,189,323
-----------
EXPENSES:
Investment advisory fee................................... 1,536,725
Distribution fees......................................... 597,217
Shareholder servicing fees................................ 298,608
Administration fees....................................... 81,342
Professional fees......................................... 72,299
Transfer agent fees and expenses.......................... 58,496
Trustees' fees and expenses............................... 47,649
Fund accounting fees...................................... 31,922
Reports to shareholders................................... 15,300
Custody fees.............................................. 28,480
Federal and state registration............................ 20,028
Amortization of organizational expenses................... 22,652
Insurance expense......................................... 20,496
Other..................................................... 13,322
-----------
Total expenses.......................................... 2,844,536
-----------
NET INVESTMENT LOSS......................................... (655,213)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on:
Investments............................................. 2,402,444
Written option contracts expired or closed.............. 240,961
Change in unrealized appreciation on investments.......... 16,246,011
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS............. 18,889,416
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $18,234,203
===========
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
7
<PAGE> 9
GRANUM VALUE FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss).............................. $ (655,213) $ 795,783
Net realized gain (loss) on investments................... 2,643,405 (3,311,316)
Change in unrealized appreciation or depreciation on
investments............................................. 16,246,011 20,349,865
------------ ------------
Net increase in net assets resulting from operations.... 18,234,203 17,834,332
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................ (654,795) (408,522)
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares sold................................. 6,128,124 7,819,670
Proceeds from shares issued to holders in reinvestment of
dividends............................................... 649,489 405,596
Cost of shares redeemed................................... (26,562,981) (22,602,804)
------------ ------------
Net decrease in net assets from capital share
transactions.......................................... (19,785,368) (14,377,538)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS..................... (2,205,960) 3,048,272
NET ASSETS:
Beginning of period....................................... 121,704,180 118,655,908
------------ ------------
End of period *........................................... $119,498,220 $121,704,180
============ ============
* Including undistributed net investment income of.......... $ -- $ 432,956
</TABLE>
See Notes to the Financial Statements
--------------------------------------------------------------------------------
8
<PAGE> 10
GRANUM VALUE FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, MAY 1, 1997(1)
------------------------------ THROUGH
2000 1999 1998 OCTOBER 31, 1997
-------- -------- -------- ----------------
<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)........................... (0.16)(5) 0.16 0.03 (0.03)
Net realized and unrealized gain (loss) on
investments.......................................... 4.26 3.28 (1.49) 3.42
-------- -------- -------- -------
Total from investment operations....................... 4.10 3.44 (1.46) 3.39
-------- -------- -------- -------
Less distributions:
Dividends from net investment income................... (0.14) (0.08) -- --
-------- -------- -------- -------
Net asset value, end of period......................... $ 29.25 $ 25.29 $ 21.93 $ 23.39
======== ======== ======== =======
Total return........................................... 16.28% 15.69% (6.24)% 16.95%(2)
Supplemental data and ratios:
Net assets, end of period (000's)...................... $119,498 $121,704 $118,656 $76,263
Ratio of net expenses to average net assets
Before expense reimbursement......................... 2.38% 1.59% 1.88% 3.03%(3)
After expense reimbursement.......................... 2.38% 1.59% 1.88% 2.77%(3)
Ratio of net investment income (loss) to average net
assets
Before expense reimbursement......................... (0.55)% 0.64% 0.17% (0.78)%(3)
After expense reimbursement.......................... (0.55)% 0.64% 0.17% (0.52)%(3)
Portfolio turnover rate................................ 24.23% 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.
(5) Net investment income (loss) per share is calculated using ending balances
prior to consideration or adjustment for permanent book and tax differences.
See Notes to the Financial Statements
--------------------------------------------------------------------------------
9
<PAGE> 11
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
OCTOBER 31, 2000
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 October 31, 2000, fair value securities represent 1.59% 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 Fund 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 October 31, 2000, the Fund
held restricted securities with an aggregate market value of $1,899,124
representing 1.59% 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 writes put options on stock indices.
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 mean between the latest bid and ask prices. 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 mean between the latest bid and ask prices. 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) Distributions 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 accounting principles generally accepted in the United
States of America. Of the dividends paid in the year ended October 31, 2000,
$100,279 is considered from capital gains for income tax purposes.
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
accounting principles generally accepted in the United States of America
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>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2000 OCTOBER 31, 1999
---------------- ----------------
<S> <C> <C>
Shares sold 225,279 325,475
Shares reinvested 25,135 17,208
Shares redeemed (976,580) (940,595)
--------- ---------
Net increase (decrease) (726,166) (597,912)
Shares outstanding:
Beginning of period 4,811,864 5,409,776
--------- ---------
End of period 4,085,698 4,811,864
========= =========
</TABLE>
4. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments, for the
year ended October 31, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------ ------------------------
U.S. U.S.
GOVERNMENT OTHER GOVERNMENT OTHER
---------- ----- ---------- -----
<S> <C> <C> <C>
0 $28,589,500 0 $48,211,384
</TABLE>
--------------------------------------------------------------------------------
12
<PAGE> 14
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
At October 31, 2000, gross unrealized appreciation and depreciation of
investments for tax purposes was as follows:
<TABLE>
<S> <C>
Appreciation $34,871,154
(Depreciation) (7,396,333)
-----------
Net unrealized appreciation
on investments $27,474,821
===========
</TABLE>
At October 31, 2000, the cost of investments for federal income tax purposes was
$92,162,589. During the year ended October 31, 2000, the Fund fully utilized its
capital loss carryforwards of $3,292,997.
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 year ended October 31, 2000, the Fund's Adviser earned
investment advisory fees at an annual rate of 1.29% 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.
--------------------------------------------------------------------------------
13
<PAGE> 15
GRANUM VALUE FUND
--------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
The Fund incurred the following expenses for Distribution and Shareholder
Services for the year ended October 31, 2000:
<TABLE>
<CAPTION>
DISTRIBUTION SHAREHOLDER
SERVICES SERVICES
------------ -----------
<S> <C> <C>
Mercer $548,457 $274,228
Granum Securities 48,760 24,380
</TABLE>
Other - Firstar Mutual Fund Services, LLC 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 year ended October 31, 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 October 31, 2000 $ 0 0
========= ====
</TABLE>
Expired and closed put option contracts written resulted in a net 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 October 31, 2000, the
Fund had on loan securities valued at $12,091,667 and collateral of $12,333,500.
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GRANUM VALUE FUND
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of Granum Value Fund and Board of Trustees of
Granum Series Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Granum Series Trust -- Granum Value
Fund (the "Fund") at October 31, 2000, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at October 31, 2000 by
correspondence with the custodian, provide a reasonable basis for our opinion.
Pricewaterhousecoopers LLP
Milwaukee, Wisconsin
December 1, 2000
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15
<PAGE> 17
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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