Registration No. 33-65568
811-7828
As filed with the Securities and Exchange Commission on November 27, 1996
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No.
Post-Effective Amendment No. 6 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 8 /X/
(Check appropriate box or boxes)
MINERVA FUND, INC.
(Exact name of Registrant as specified in charter)
237 Park Avenue
New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 393-9998
George Martinez, Esq.
Minerva Fund, Inc.
3435 Stelzer Road
Columbus, OH 43219
(Name and Address of Agent for Service)
with a copy to:
Robert M. Kaner, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3954
(212) 455-3275
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
It is proposed that this filing will become effective: (check appropriate box)
immediately upon filing pursuant to paragraph (b) on
(date) pursuant to paragraph (b) 60 days after filing
pursuant to paragraph (a)(1)
/X/ on January 24, 1997 pursuant to paragraph (a)(1) 75 days
after filing pursuant to paragraph (a)(2) on (date)
pursuant to paragraph (a)(2) of rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has previously filed a declaration of registration of an indefinite number of
shares of Capital Stock, $.001 par value per share, of all series of the
Registrant, now existing or hereafter created. Registrant's 24f-2 Notice for the
fiscal year ended September 30, 1996 was filed on November 26, 1996.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
N-1A Item No. Location
Part A Prospectus Caption
Item 1 Cover Page Cover Page
Item 2 Synopsis Fund Expenses;
Prospectus Summary
Item 3 Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Investment Objectives;
Investment Policies;
Other Investment
Policies; Special Risk
Considerations;
Investment
Limitations; General
Information
Item 5. Management of the Fund Fund Expenses;
Investment Management;
Administrative
Services; General
Information
Item 5A. Management's Discussion of Fund Performance Not Applicable
Item 6. Capital Stock and Other Securities Dividends, Capital
Gains Distributions
and Taxes; General
Information
Item 7. Purchase of Securities Being Offered Purchase of Shares;
Valuation of Shares;
Distributor
Item 8 Redemption or Repurchase Redemption of Shares
Item 9 Pending Legal Proceedings Not Applicable
Part B Statement of
Additional Information
Caption
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Policies Investment Objectives
and Policies; Foreign
Investments; Futures
Contracts; Options;
Options on Foreign
Currencies; Risks of
Options on Futures
Contracts, Forward
Contracts and Options
on Foreign Currencies;
Investment
Limitations; General
Information
<PAGE>
<TABLE>
<CAPTION>
Statement of Additional
Part B Information Caption
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<S> <C>
Item 14. Management of the Fund Officers and Directors
of the Fund (see also
the Prospectus,
Directors and
Officers); Investment
Management
Item 15. Control Persons and Principal Holders
of Securities Officers and Directors
of the Fund; General
Information
Item 16. Investment Advisory and Other Services Distributor for the
Fund; Administration,
Custody and Transfer
Agency Services
Item 17. Brokerage Allocation and Other Practices Portfolio Transactions
Item 18. Capital Stock and Other Securities General Information
Item 19. Purchase, Redemption and Pricing of Securities Purchase of Shares;
Being Offered Redemption of Shares;
Determination of Net
Asset Value;
Shareholder Services
Item 20. Tax Status Tax Aspects of
Options, Futures,
Forward Contracts and
Swap Agreements;
Additional Information
Concerning Taxes;
Shareholder Services;
General Information
Item 21. Underwriters Distributor for the Fund
Item 22. Calculation of Performance Data Performance Calculations
Item 23. Financial Statements Report of Independent
Accountants; Financial
Statements
</TABLE>
N-1A Item No. Location
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Part C
Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration Statement.
<PAGE>
MINERVA FUND, INC.
3435 Stelzer Road
Columbus, OH 43219
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Information and Client Services: 1-800-393-9998
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Prospectus--January 24, 1997
Minerva Fund, Inc. (the "Fund") is a no load open-end management investment
company currently consisting of one portfolio, the Equity Portfolio (the "Equity
Portfolio" or the "Portfolio"). The Portfolio operates as a diversified
investment company.
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EQUITY PORTFOLIO
The Equity Portfolio seeks to achieve above-average total return over a market
cycle of three to five years, consistent with reasonable risk, by investing in a
diversified portfolio of common stocks of companies which are deemed to have
earnings and dividend growth potential above the average of the economy in
general.
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About This Prospectus
This Prospectus, which should be retained for future reference, concisely sets
forth information that you should know before you invest. A "Statement of
Additional Information" (the "Statement") containing additional information
about the Fund has been filed with the Securities and Exchange Commission (the
"SEC"). Such Statement is dated January 24, 1997 and has been incorporated by
reference into this Prospectus. A copy of the Statement may be obtained, without
charge, by writing to the Fund or by calling the Fund at the telephone number
shown above or through the SEC Internet address at http://www.sec.gov. Investors
are advised that shares of the Portfolio are not deposits or obligations of, or
endorsed or guaranteed by, The Long-Term Credit Bank of Japan, Limited ("LTCB"),
LTCB Trust Company or any other affiliates of LTCB, nor are they federally
insured by the Federal Deposit Insurance Corporation ("FDIC"), the Federal
Reserve Board or any other agency.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
-----
Fund Expenses ...................................... 3
Prospectus Summary ................................. 4
Financial Highlights ............................... 6
Yield and Total Return ............................. 7
Investment Objective ............................... 7
Investment Policies ................................ 7
Other Investment Policies .......................... 8
Special Risk Considerations ........................ 11
Investment Suitability ............................. 12
Purchase of Shares ................................. 12
Redemption of Shares ............................... 14
Page
-----
Shareholder Services ............................... 15
Valuation of Shares ................................ 15
Dividends, Capital Gains
Distributions and Taxes .......................... 15
Investment Management .............................. 16
Administrative Services ............................ 17
Distributor ........................................ 17
Investment Limitations ............................. 17
General Information ................................ 18
Directors and Officers ............................. 20
Investment Manager:
LTCB-MAS Investment Management, Inc.
One Tower Bridge, Suite 1000
West Conshohocken, Pennsylvania 19428
Administrator and Distributor:
BISYS Fund Services Limited
Partnership
3435 Stelzer Road
Columbus, OH 43219
Transfer Agent, Dividend Disbursing Agent
and Accounting Agent:
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
2
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FUND EXPENSES
<TABLE>
<CAPTION>
The following table illustrates the various expenses and fees that an
investor may incur either directly or indirectly as a shareholder in the
Portfolio.
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage
of offering price) ................................................. None
Sales Load Imposed on Reinvested Dividends ............................. None
Redemption Fee ......................................................... None
Exchange Fee ........................................................... None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fee (after voluntary waivers)* .............................. .42%
Other Expenses (estimated, after expense reimbursement)** .............. .58%
-------
Total Fund Operating Expenses (estimated, after expense reimbursements)*** 1.00%
=======
</TABLE>
* Reflects voluntary advisory fee waiver of 0.15% of average daily net assets
by LTCB-MAS Investment Management, Inc. ("LTCB-MAS") and voluntary
administrative services fee waiver of 0.08% of average net assets by Furman
Selz LLC.
** The amounts set forth for "Other Expenses" are based on amounts incurred
during the most recent fiscal year, restated to give effect to the
voluntary expense reimbursements as described below. Absent voluntary
expense reimbursements in effect during the most recent fiscal year, the
ratio of "Other Expenses" to average net assets would have been 1.02% for
the Portfolio. "Other Expenses" include expenses such as fees for
shareholder services, custodial and transfer agency fees, legal and
accounting fees, printing costs and registration fees.
*** The amounts set forth for "Total Fund Operating Expenses" are based on
amounts incurred during the most recent fiscal year, restated to reflect
the agreement by LTCB-MAS to reimburse the Portfolio for "Total Fund
Operating Expenses" in excess of 1.00% of average net assets for a period
of at least one year from the date of this Prospectus. Absent voluntary
expense reimbursements in effect during the most recent fiscal year, the
ratio of "Total Fund Operating Expenses" to average net assets would have
been 1.44%.
Example
The following example illustrates the expenses that an investor would pay on a
$1,000 investment over various time periods based upon payment by the Portfolio
of operating expenses at the levels set forth in the expense table above and
assuming (1) a 5% annual rate of return (2) redemption at the end of each time
period.
1 year 3 years 5 years 10 years
----- ------ ------ -------
$10 $32 $55 $122
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or lesser than those
shown above.
3
<PAGE>
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PROSPECTUS SUMMARY
The Equity Portfolio seeks to achieve above-average total return over a
market cycle of three to five years, consistent with reasonable risk, by
investing in common stocks of companies which are deemed to have earnings and
dividend growth potential above the average of the economy in general.
INVESTMENT MANAGEMENT
LTCB-MAS acts as the Fund's investment manager and has overall
responsibility for supervising the investment program of the Portfolio.
LTCB-MAS, a joint subsidiary of LTCB and Miller Anderson & Sherrerd ("MA&S"),
provides investment counselling services to employee benefit plans and other
institutional investors and as of September 30, 1996, had assets under
management in excess of $750 million. LTCB, with over $300 billion in assets as
of September 30, 1996, is one of the 25 largest banks in the world. MA&S
provides investment counselling services primarily to institutional investors
and as of September 30, 1996, had assets under management in excess of $37
billion. The selection on a day-to-day basis of appropriate investments for the
Portfolio is made by MA&S acting in collaboration with and under the supervision
of LTCB-MAS. As used in this Prospectus, the term "Adviser" refers to LTCB-MAS
and MA&S acting in collaboration in the provision of investment advisory
services to the Portfolio.
HOW TO INVEST
Shares of the Portfolio are offered directly to investors without a sales
commission at the net asset value of the Portfolio next determined after receipt
of the order. Share purchases may be made by sending investments directly to the
Fund, subject to acceptance by the Fund. The minimum initial investment is $1
million. The minimum for subsequent investments is $100,000. Shares of the
Portfolio are also sold to corporations or other institutions such as trusts,
foundations or broker-dealers purchasing for the accounts of others
("Shareholder Organizations"). The Fund's officers are authorized to waive the
minimum initial and subsequent investment requirements. See "Purchase of
Shares."
HOW TO REDEEM
Shares of the Portfolio may be redeemed at any time at the net asset value
of the Portfolio next determined after receipt of the redemption request. The
redemption price may be more or less than the purchase price. See "Redemption of
Shares."
INVESTMENT SUITABILITY
The Portfolio is designed principally for the investments of tax-exempt
fiduciary investors and other institutional clients. Since it is contemplated
that the preponderance of investors in the Portfolio will not be subject to
federal income taxes, securities transactions for the Portfolio will not be
influenced by the different tax treatment of long-term capital gains, short-term
capital gains and dividend income under the Internal Revenue Code of 1986, as
amended (the "Code").
ADMINISTRATIVE SERVICES
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services, provides
the Fund with administrative services and also acts as the Fund's distributor.
BISYS Fund Services, Inc. provides the Fund with accounting, dividend disbursing
and transfer agency services.
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4
<PAGE>
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PROSPECTUS SUMMARY--Continued
RISK FACTORS
Prospective investors in the Fund should consider the following factors:
(1) the Portfolio may invest in repurchase agreements, which entail a risk of
loss should the seller default in its obligation to repurchase the security
which is the subject of the transaction; (2) the Portfolio may lend its
investment securities which entails a risk of loss should the borrower fail
financially; (3) the Portfolio may invest a portion of its assets in futures
contracts, options relating to foreign currencies and options on futures
contracts, commonly referred to as derivatives, which entail certain costs and
risks including imperfect correlation between the value of the security being
hedged and the value of the particular derivative instrument, and the risk that
the Portfolio could not close out a futures or option position when it would be
most advantageous to do so; and (4) the Portfolio may invest in the securities
of foreign issuers, which are subject to certain special considerations not
typically associated with investing in the securities of U.S. issuers (such
investments to be limited to 5% of net assets). See "Special Risk
Considerations" for additional information regarding certain risks associated
with investment in the Portfolio.
5
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for each period below has been audited by
Price Waterhouse LLP, the Fund's independent accountants whose report on the
financial statements, including this financial highlights table, is included in
the Fund's Annual Report and is contained in the Statement of Additional
Information, which is available upon request. This information should be read
in conjunction with the financial statements.
<TABLE>
<CAPTION>
Year Year Year
Ended Ended Ended
September 30, September 30, September 30,
1996 1995 1994*
------------ ------------ ------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $12.23 $10.01 $10.00
------ ------ ------
Income from Investment Operations:
Net investment income(1) 0.21 0.22 0.16
Net realized and unrealized appreciation
on investments 1.73 2.20 0.02
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Total Increase from Investment Operations 1.94 2.42 0.18
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Less Dividends and Distributions:
Dividends from net investment income (0.14) (0.20) (0.15)
Realized Capital Gains (0.46) -- --
Return of Capital -- -- (0.02)
------ ------ ------
Total Dividends and Distributions (0.60) (0.20) (0.17)
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Net Asset Value, End of Period $13.57 $12.23 $10.01
====== ====== ======
Total Return** 16.37% 24.37% 1.99%
Ratios/Supplemental Data:
Net Assets, End of Period (in thousands) $63,542 12,725 10,227
Ratio of Net Investment Income to Average Net Assets+ 1.59% 1.90% 1.56%
Ratio of Net Expenses to Average Net Assets++ 0.98% 1.03% 1.00%
Portfolio Turnover Rate 55% 56% 35%
Average Commission Rate2 $0.059 -- --
</TABLE>
1 Per share data based on the average number of shares outstanding during
each period.
2 For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share in security
trades on which commissions are charged. This amount may vary from period
to period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rate structures may
differ.
* Commencement of Operations--October 1, 1993.
** Total returns are for the period shown and have not been annualized, and
reflect voluntary fee waivers.
+ Ratios of Net Investment Income before effect of waivers and reimbursements
were 1.13%, 0.59%, and 0.71%.
++ Ratios of Expenses before effect of waivers and reimbursements were 1.44%,
2.34%, and 1.85%.
6
<PAGE>
YIELD AND TOTAL RETURN
From time to time, the Portfolio may advertise its yield and total return.
Both yield and total return figures are based on historical information, will
fluctuate and are not intended to indicate future performance. The "average
annual" total return shows the average annual percentage change in value of an
investment in the Portfolio from the beginning date of the measuring period to
the end of the measuring period. Such figures reflect changes in the price of
the Portfolio's shares and assume that any income dividends and/or capital gains
distributions made by the Portfolio during the period were reinvested in
additional shares of the Portfolio. Figures will be given for recent one-, five-
and ten-year periods (if applicable), and may be given for other periods as well
(such as from commencement of the Portfolio's operations). When considering
average annual total return figures for periods longer than one year, it is
important to note that the Portfolio's total return for any one year in the
period might have been greater or less than the average annual total return for
the entire period.
In addition to "average annual" total return, the Portfolio may also quote
an "aggregate" total return for various periods representing the cumulative
change in value of an investment in the Portfolio for a specific period (again
reflecting changes in the Portfolio's share price and assuming reinvestment of
dividends and distributions). Aggregate total returns may be shown by means of
schedules, charts or graphs and may include subtotals of the various components
of total return (i.e., change in value of initial investment, income dividends
and capital gains distributions).
The "yield" of the Portfolio is computed by dividing the net investment
income per share (determined in accordance with regulatory requirements) earned
during the 30-day period stated in the advertisement by the closing price per
share on the last day of the period (using the average number of shares entitled
to receive dividends). For the purpose of determining net investment income, the
calculation includes in expenses of the Portfolio all recurring fees that are
charged to all shareholder accounts and any non-recurring charges for the period
stated. The yield formula provides for semi-annual compounding, which assumes
that net investment income is earned and reinvested at a constant rate and
annualized at the end of a six-month period.
The performance of the Portfolio may be compared to data prepared by
independent services which monitor the performance of investment companies, data
reported in financial and industry publications, and various indices, all as
further described in the Statement of Additional Information.
The Fund's annual report to shareholders, which is available without charge
upon request, contains a discussion of the performance of the Portfolio for the
fiscal year ended September 30, 1996.
INVESTMENT OBJECTIVE
The Portfolio seeks to achieve its investment objective relative to the
universe of securities in which it is authorized to invest and, accordingly, the
total return achieved by the Portfolio may not be as great as that achieved by
another Portfolio that can invest in a broader range of securities. Total return
consists of two separate components: income return, which includes dividend
and/or interest income which is distributed to shareholders; and capital return,
which includes net realized capital gains which are distributed to shareholders,
net realized capital losses which are not distributed to shareholders and the
unrealized appreciation or depreciation of unsold securities which is reflected
in changes in the Portfolio's net asset value per share. Although the Portfolio
intends to remain substantially fully invested, a small percentage of the
Portfolio's assets is generally held in the form of cash equivalents in order to
meet redemption requests and otherwise manage the daily affairs of the Fund. The
investment objective of the Portfolio is to achieve above-average total return
over a market cycle of three to five years, consistent with reasonable risk, by
investing in a diversified portfolio of common stocks of companies which are
deemed by the Adviser to have earnings and dividend growth potential that is
greater than the economy in general.
The investment objective of the Portfolio is a fundamental policy and may
not be changed without shareholder approval. The achievement of this objective
cannot be assured.
INVESTMENT POLICIES
In pursuing its objective, the Portfolio follows an investment policy which
is based on the evaluation by the Adviser of both short-term and long-term
economic trends and their impact on corporate profits. The Adviser also
evaluates long-term and short-term earnings growth prospects for individual
companies within broad sectors of the stock market. While the Portfolio invests
at least 65% of its assets under normal circumstances in common stocks of
companies with favorable long-term earnings growth
7
<PAGE>
prospects, certain stocks which are deemed to have short-term earnings growth
potential may be included in the Portfolio. Individual securities are selected
based on fundamental business and financial factors (earnings growth, financial
position, price volatility and dividend payment records) and the measurement of
those factors relative to the current market price of the security. It is
expected that eventually the stock market will recognize this earnings growth
success with higher valuations for these securities. Over the longer term,
companies with earnings growth should be able to and may raise their dividends.
When, in the opinion of the Adviser, these stocks become fully valued (either
because of price appreciation or reduced earnings growth potential), they will,
under most circumstances, be sold and replaced by stocks which are deemed by the
Adviser to have greater potential for growth. Equity investments will be made
primarily in dividend paying stocks of any size companies depending on their
relative attractiveness. The equity securities in which the Portfolio invests
will be traded primarily on the New York Stock Exchange, the American Stock
Exchange, NASDAQ or in over-the-counter markets. Although the Adviser expects
that the companies in which the Portfolio invests will be primarily those with
large capitalization's (i.e., in excess of $300 million), the Portfolio is not
limited with respect to its ability to invest in companies with smaller
capitalizations. The Adviser expects that the companies in which the Portfolio
invests will be seasoned issuers, although the Portfolio may invest up to 5% of
its total assets in securities of issuers which have (with predecessors) a
record of less than three years' continuous operations. The Adviser expects the
Portfolio's net asset value to exhibit average fluctuation relative to the stock
market in general, as measured by the Standard & Poor's 500 Index, and, thus,
the Portfolio may or may not be suitable for all investors. The Portfolio is
designed for long-term investors who can accept the risks entailed in these
investment policies and is not meant to provide a vehicle for playing short-term
swings in the market.
The Portfolio may invest in foreign securities, but such securities,
including American Depository Receipts ("ADRs"), will not comprise more than 5%
of the Portfolio's net assets. ADRs are dollar-denominated securities which are
listed and traded in the United States, but which represent claims to shares of
foreign stocks. ADRs may be either sponsored or unsponsored. Unsponsored ADR
facilities typically provide less information to ADR holders.
The Portfolio will remain substantially invested in equity securities. The
Portfolio may, however, when the Adviser deems that market conditions are such
that a significant decline in stock prices is expected and a temporary defensive
approach is desirable, reduce the Portfolio's equity holdings and invest in cash
equivalents or in fixed-income securities as described under "Other Investment
Policies--Temporary Investments" without limit. To the extent the Portfolio
invests temporarily in cash equivalents or other fixed-income securities as a
defensive measure, it will not be pursuing its investment objective during such
periods. For a more detailed description of certain risks associated with
investment in foreign securities, see "Special Risk Considerations--Foreign
Securities."
The Portfolio may also lend portfolio securities, enter into repurchase
agreements, trade in futures contracts, options on futures contracts and options
relating to foreign currencies, enter into forward foreign currency exchange
contracts and purchase illiquid securities. See "Other Investment Policies"
below. For a discussion of certain risks associated with certain of the
Portfolio's investments and activities, see "Special Risk Considerations" below.
The Portfolio will not concentrate its investments in any one industry
(exclusive of securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities). Therefore, it will not invest more than 25% of
its total assets in any one industry.
OTHER INVESTMENT POLICIES
Lending of Securities
The Portfolio may lend its portfolio securities to qualified brokers,
dealers, banks and other financial institutions for the purpose of realizing
additional income. Loans of securities will be collateralized by cash, letters
of credit, or securities issued or guaranteed by the U.S. Government or its
agencies. The collateral will equal at least 100% of the current market value of
the loaned securities. In addition, the Portfolio will not loan out its
portfolio securities to the extent that greater than one-third of its assets, at
fair market value, would be committed to loans at that time. Voting rights may
pass with the lending of portfolio securities; however, the Board of Directors
will be obligated to call loans to vote proxies or otherwise obtain rights to
vote if a material event affecting the investment is to occur. Such loans may
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by MA&S to be of good standing and only when, in the judgment
of MA&S, the income to be earned from the loans justifies the attendant risks.
8
<PAGE>
Temporary Investments
The Portfolio may invest in the following instruments for liquidity
purposes or when economic or market conditions are such that the Adviser deems a
temporary defensive position to be appropriate:
(1) Time deposits, certificates of deposit (including marketable variable
rate certificates of deposit) and bankers' acceptances issued by a commercial
bank or savings and loan association. Time deposits are non-negotiable deposits
maintained in a banking institution for a specified period of time at a stated
interest rate. Time deposits maturing in more than seven days will not be
purchased by the Portfolio. Certificates of deposit are negotiable short-term
obligations issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. Variable rate certificates of
deposit are certificates of deposit on which the interest rate is periodically
adjusted prior to their stated maturity based upon a specified market rate. A
bankers' acceptance is a time draft drawn on a commercial bank by a borrower
usually in connection with an international commercial transaction (to finance
the import, export, transfer or storage of goods).
The Portfolio may invest in obligations of U.S. banks, foreign branches of
U.S. banks (Eurodollars), and U.S. branches of foreign banks (Yankee dollars).
Euro and Yankee dollar investments will involve the same risks of investing in
international securities that are discussed under "Special Risk
Considerations--Foreign Securities." Although the Adviser carefully considers
these factors in evaluating investments, the Portfolio does not limit the amount
of its assets which can be invested in any one type of instrument or in any
foreign country in which a branch of a U.S. bank or the parent of a U.S. branch
is located.
The Portfolio will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign branches of U.S. banks, the security is deemed by
MA&S to be of an investment quality comparable with other debt securities which
may be purchased by the Portfolio;
(2) Commercial paper rated A-1 or A-2 by Standard & Poor's or Prime 1 or
Prime 2 by Moody's or, if not rated, issued by a corporation having an
outstanding unsecured debt issue rated A or better by Moody's or by Standard &
Poor's;
(3) Short-term corporate obligations rated A or better by Moody's or by
Standard & Poor's;
(4) U.S. Government obligations including bills, notes, bonds and other
debt securities issued by the U.S. Treasury. These are direct obligations of the
U.S. Government and differ mainly in interest rates, maturities and dates of
issue;
(5) U.S. Government Agency securities issued or guaranteed by U.S.
Government sponsored instrumentalities and federal agencies. These include
securities issued by the Federal Home Loan Banks, Federal Land Bank, Farmers
Home Administration, Farm Credit Banks, Federal Intermediate Credit Bank,
Federal National Mortgage Association, Federal Financing Bank, the Tennessee
Valley Authority, and others;
(6) Repurchase agreements collateralized by securities listed above; and
(7) Shares of other investment companies which are money market funds,
limited to 10% of the value of the Portfolio's total assets, subject to the
additional limitations of the Investment Company Act of 1940, as amended (the
"1940 Act"), and the investment limitations described in the Statement of
Additional Information.
Repurchase Agreements
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit and certain bankers' acceptances.
Repurchase agreements are transactions by which the Portfolio purchases a
security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase). The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. In these
transactions, the securities purchased by the Portfolio have a total value in
excess of the value of the repurchase agreement and are held by the Portfolio's
custodian bank until repurchased. Such agreements permit the Portfolio to keep
all its assets at work while retaining "overnight" flexibility in pursuit of
investments of a longer term nature. The Fund will continually monitor the value
of the underlying securities to ensure that their value, including accrued
interest, always equals or exceeds the repurchase price.
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Reverse Repurchase Agreements
The Portfolio may enter into reverse repurchase agreements to avoid selling
securities during unfavorable market conditions to meet redemptions. Pursuant to
a reverse repurchase agreement, the Portfolio will sell portfolio securities and
simultaneously commit to repurchase them from the buyer at an agreed upon price
on an agreed upon date. Whenever the Portfolio enters into a reverse repurchase
agreement, it will establish a segregated account in which it will maintain
liquid assets in an amount at least equal to the repurchase price marked to
market daily (including accrued interest), and will subsequently monitor the
account to ensure that such equivalent value is maintained. The Portfolio will
pay interest on amounts obtained pursuant to reverse repurchase agreements.
Reverse repurchase agreements are considered to be borrowings by the Portfolio
under the 1940 Act and are subject to the limitations with respect to entering
reverse repurchase agreements included in investment limitation (e) under
"Investment Limitations" below. The Portfolio has no current intention to enter
into reverse repurchase agreements.
Futures Contracts, Options on Futures Contracts and Options
In order to assist in achieving its investment objective and policies, the
Portfolio may purchase and sell financial futures contracts, exchange-listed and
over-the-counter put and call options on securities, financial indices, foreign
currencies and financial futures contracts. Such instruments are commonly
referred to as "derivatives." The Portfolio will only engage in such
transactions to the extent that they relate to equity securities or indices of
equity securities (or, if the Portfolio has invested in securities denominated
in foreign currencies, foreign currency exchange rates).
Futures contracts provide for the sale by one party and purchase by
another party of a specified amount of the underlying instrument or currency at
a specified future time and price (or, in the case of certain cash-settled
instruments, a net cash amount). Because futures contracts require only a small
initial margin deposit, the Portfolio would then be able to keep a cash reserve
available to meet potential redemptions while at the same time being effectively
fully invested. Additional cash or assets ("Variation Margin") may be required
to be deposited thereafter on a daily basis as the mark-to-market value of the
futures contract fluctuates. An option is a legal contract that gives the holder
the right to buy or sell a specified amount of the underlying instrument or
currency at a fixed or determinable price upon the exercise of the option. A
call option conveys the right to buy and a put option conveys the right to sell
a specified quantity of the underlying instrument or currency. Options on
futures contracts are similar to options on securities except that an option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract and obligates the seller to
deliver that position. Also, because transaction costs associated with futures
and/or options may be lower than the costs of investing in stocks and bonds
directly, the use of futures and/or options may reduce the Portfolio's overall
transaction costs.
Over-the-counter options may lack a liquid secondary market. The Portfolio
will not invest more than an aggregate of 15% of its total assets, determined at
the time of investment, in securities for which there are no readily available
markets. The Portfolio will minimize the risk that it will be unable to close
out a futures and/or options contract by entering only into futures and/or
options transactions traded on national exchanges and for which there appears to
be a liquid secondary market.
The Portfolio will engage in futures and/or options transactions only for
hedging purposes and not for speculative purposes and only if consistent with
its investment objective and investment policies. The Portfolio will not enter
into futures contracts, options on futures contracts or options on securities,
financial indices or foreign currencies to the extent that its aggregate net
outstanding obligations under these instruments would exceed 35% of its total
assets. There are no separate limits on the amount of assets the Portfolio may
invest in put and call options on securities, financial indices or foreign
currencies. The Portfolio will maintain assets sufficient to meet its
obligations under such transactions in a segregated account with the custodian
bank.
Forward Foreign Currency Exchange Contracts
The Portfolio may enter into forward foreign currency exchange contracts
in order to protect against uncertainty in the level of future foreign exchange
rates in the purchase and sale of investment securities. The Portfolio may not
enter into such contracts for speculative purposes. A forward foreign currency
exchange contract is an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. These
contracts may be bought or sold to protect the Portfolio to a limited extent
against adverse changes in exchange rates between foreign currencies and the
U.S. dollar. Such contracts, which protect the value of the Portfolio's
investment securities against a decline in the value of a currency, do not
eliminate fluctuations caused by changes in the local currency prices of the
securities, but rather, they simply establish an exchange rate at a future date.
Also, although such
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contracts tend to minimize the risk of loss due to a decline in the value of the
hedged currency, at the same time they tend to limit any potential gain that
might be realized should the value of such currency increase.
There is a risk in creating a synthetic investment position to the extent
that the value of a security denominated in the U.S. dollar or other foreign
currency is not exactly matched with the Portfolio's obligation under the
forward contract. On the date of maturity, the Portfolio may be exposed to some
risk of loss from fluctuations in that currency. Although the Portfolio will
attempt to hold such mismatching to a minimum, there can be no assurance that
the Portfolio will be able to do so.
The Portfolio may maintain a net exposure to foreign currency forward
contracts in excess of the value of the securities or other assets held by the
Portfolio and denominated in that currency, provided that the Portfolio
maintains with its custodian liquid securities or cash in a segregated account
with a daily value at least equal to the amount of such excess.
Illiquid Investments
The Portfolio may invest up to 15% of its net assets in securities that are
illiquid by virtue of the absence of a readily available market, or because of
legal or contractual restrictions on resale. This policy does not limit the
acquisition of restricted securities (i) eligible for resale to qualified
institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as
amended, or (ii) commercial paper issued pursuant to Section 4(2) under the
Securities Act of 1933 that are determined to be liquid in accordance with
guidelines established by the Fund's Board of Directors. There may be delays in
selling these securities and sales may be made at less favorable prices.
Except as specified above and as described under "Investment Limitations,"
the foregoing investment policies are not fundamental and the Board of Directors
may change such policies without an affirmative vote of a "majority of the
Portfolio's outstanding voting securities," as defined in the 1940 Act.
Portfolio Turnover
The Portfolio is managed without regard generally to restrictions on
portfolio turnover, except those imposed by provisions of the federal tax laws
regarding short-term trading. Generally, the Portfolio will not trade for
short-term profits, but when circumstances warrant, investments may be sold
without regard to the length of time held. It is expected that the Portfolio's
annual portfolio turnover rate will not exceed 100%. A 100% rate of turnover
would occur, for example, if all of the Portfolio's securities are replaced
within a one year period. For the fiscal period ended September 30, 1996, the
portfolio turnover rate for the Portfolio was 55%.
High rates of portfolio turnover necessarily result in correspondingly
heavier brokerage and portfolio trading costs which are paid by the Portfolio.
Trading in fixed-income securities does not generally involve the payment of
brokerage commissions, but does involve indirect transaction costs. In addition
to portfolio trading costs, higher rates of portfolio turnover may result in the
realization of capital gains. As a general rule, net short-term capital gains
are distributed to shareholders and, in the case of shareholders subject to
federal income taxation, will be taxable at ordinary income tax rates for
federal income tax purposes regardless of a shareholder's holding period in
portfolio shares. See "Dividends, Capital Gains Distributions and Taxes" for
more information on taxation.
SPECIAL RISK CONSIDERATIONS
Foreign Securities
The Portfolio may invest in foreign securities, but such securities
(including ADR's) will not comprise more than 5% of its net assets. Although the
Portfolio expects its investments in foreign securities to be primarily
securities of issuers located in developed countries, on occasion the Portfolio
may invest in securities of issuers located in lesser-developed or other
countries, subject to satisfying any applicable credit quality standards of the
Portfolio described herein. Investors should recognize that investing in the
securities of foreign issuers involves certain special considerations which are
not typically associated with investing in the securities of U.S. issuers. Since
the securities of foreign issuers are frequently denominated in foreign
currencies, and since the Portfolio may temporarily hold uninvested reserves in
bank deposits in foreign currencies, the Portfolio may be affected favorably or
unfavorably by changes in currency rates and in exchange control regulations,
and may incur costs in connection with conversions between various currencies.
As non-U.S. issuers are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to U.S. issuers, there may be less publicly available information
about certain foreign
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issuers than about U.S. issuers. Securities of some non-U.S. issuers may be less
liquid and more volatile than securities of comparable U.S. issuers. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed companies than in the U.S. With respect to developing countries and
certain other foreign countries, there is the possibility of expropriation or
confiscatory taxation, currency blockages, withholding of dividends or interest
payments at the source, political or social instability, or diplomatic
developments which could affect U.S. investments in those countries.
Additionally, there may be difficulty in obtaining and enforcing judgments
against foreign issuers.
Although the Portfolio will endeavor to achieve the most favorable
execution costs in its portfolio transactions in foreign securities, fixed
commissions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. In addition, it is expected that the expenses for
custodial arrangements of the Portfolio's foreign securities will be somewhat
greater than the expenses for the custodial arrangements for handling U.S.
securities of equal value. Certain foreign governments levy withholding taxes
against dividend and interest income. Although in some countries a portion of
these taxes is recoverable, the non-recovered portion of foreign withholding
taxes will reduce the income the Portfolio receives from the companies
comprising the Portfolio's investments.
Futures Contracts, Options on Futures Contracts and Options
The primary risks associated with the use of futures and/or options, which
are part of a class of instruments commonly referred to as "derivatives," are
(i) imperfect correlation between the change in market value of the securities
held by the Portfolio and the prices of futures and/or options purchased or sold
by the Portfolio; and (ii) possible lack of a liquid secondary market for a
futures contract and the resulting inability to close a futures position which
could have an adverse impact on the Portfolio's ability to hedge. In the opinion
of the Board of Directors, the risk that the Portfolio will be unable to close
out a futures and/or options contract will be minimized by entering only into
futures and/or options transactions traded on national exchanges and for which
there appears to be a liquid secondary market. Additional risks associated with
options transactions are (i) the risk that an option will expire worthless; (ii)
the risk that the issuer of an over-the-counter option will be unable to fulfill
its obligation to the Portfolio due to bankruptcy or related circumstances;
(iii) the risk that options may exhibit a greater short-term price volatility
than the underlying security; and (iv) the risk that the Portfolio may be forced
to forego participation in the appreciation of the value of underlying
securities or currency due to the writing of a covered call option.
INVESTMENT SUITABILITY
The Portfolio is designed principally for the investments of tax-exempt
fiduciary investors and other institutional clients. Since it is contemplated
that the preponderance of investors in the Portfolio will not be subject to
federal income taxes, securities transactions for the Portfolio will not be
influenced by the different tax treatment of long-term capital gains, short-term
capital gains and dividend income under the Code. While the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), does not prohibit a fiduciary
of an employee benefit plan from investing in any specific type of asset, it
imposes certain duties on fiduciaries of such plans which are subject to its
provisions. These requirements are more fully discussed in the Statement of
Additional Information.
PURCHASE OF SHARES
Shares of the Portfolio may be purchased at the net asset value per share
next determined after receipt of the purchase order. See "Valuation of Shares."
Initial Investments by Wire
Subject to acceptance by the Fund, shares of the Portfolio may be purchased
by wiring Federal Funds ($1 million minimum). Please call the Fund at
1-800-393-9998 for wiring instructions. A completed Account Registration Form
must be sent by overnight courier to the Fund at the address noted below in
advance of the wire. For the Portfolio, notification must be given to the Fund
at 1-800-393-9998 prior to 4:00 p.m., Eastern Standard time, of the wire date.
(Prior notification must also be received from investors with existing
accounts.):
Minerva Fund, Inc.
c/o BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219-8021
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Federal Funds purchases will be accepted only on a day on which the
Portfolio and the Fund's Custodian Bank, LTCB Trust Company, 165 Broadway, New
York, New York 10006 are open for business.
Initial Investments by Mail
Subject to acceptance by the Fund, an account may also be opened by
completing and signing an Account Registration Form (provided at the end of the
Prospectus), and mailing it to the Fund at the address noted below, together
with a check ($1 million minimum) payable to the Minerva Fund, Inc.:
Minerva Fund, Inc.
P.O. Box 182489
Columbus, OH 43218-2489
The Portfolio to be purchased should be designated on the Account
Registration Form. Subject to acceptance by the Fund, payment for the purchase
of shares received by mail will be credited to your account at the net asset
value per share of the Portfolio next determined after receipt. Such payment
need not be converted into Federal Funds (monies credited to the Fund's
Custodian Bank by a Federal Reserve Bank) before acceptance by the Fund. Please
note that purchases made by check are not permitted to be redeemed until payment
of the purchase has been collected, which may take up to fifteen business days
after purchase.
Additional Investments
Additional purchases of shares at net asset value may be made at any time
(minimum investment $100,000) by mailing a check to the Fund at the address
noted under "Initial Investments by Mail" (payable to Minerva Fund, Inc.) or by
wiring monies to the Custodian Bank as outlined above under "Initial Investments
by Wire." Notification must be given to the Fund at 1-800-393-9998 prior to 4:00
p.m., Eastern Standard time, of the wire date.
Other Purchase Information
The Fund reserves the right, in its sole discretion, to suspend the
offering of shares of the Portfolio or to reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interests of
the Fund. No third party or foreign checks are accepted.
Under certain circumstances, shares of the Portfolio may be purchased in
exchange for securities which are eligible for acquisition by the Portfolio. A
gain or loss for federal income tax purposes may be realized by taxable
investors making in-kind purchases upon the exchange depending upon the cost of
the securities exchanged. Investors interested in such exchanges should contact
LTCB-MAS. In-kind purchases are described more fully in the Statement of
Additional Information.
Purchases of the Portfolio's shares will be made in full and fractional
shares of the Portfolio calculated to three decimal places. In the interest of
economy and convenience, certificates for shares will not be issued.
LTCB-MAS or one of its affiliates may have a pre-existing fiduciary
relationship with certain employee benefit plan investors. Prior to purchasing
shares of the Portfolio, an independent fiduciary of such an investor must
authorize such purchase by completing and signing an Employee Benefit Plan
Fiduciary Authorization Form (provided with the Prospectus) and mailing it to
the Fund at the address noted above.
Shares of the Portfolio may also be sold to corporations or other
institutions such as trusts, foundations or broker-dealers purchasing for the
accounts of others ("Shareholder Organizations"). Investors purchasing and
redeeming shares of the Portfolio through a Shareholder Organization may be
charged a transaction-based fee or other fee for the services of such
organization. Each Shareholder Organization is responsible for transmitting to
its customers a schedule of any such fees and information regarding any
additional or different conditions regarding purchases and redemptions.
Customers of Shareholder Organizations should read this Prospectus in light of
the terms governing accounts with their organization. The Fund does not pay to
or receive compensation from Shareholder Organizations for the sale of Fund
shares. The Fund's officers are authorized to waive the minimum initial and
subsequent investment requirements.
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<PAGE>
REDEMPTION OF SHARES
Shares of the Portfolio may be redeemed by mail, or, if authorized, by
telephone. No charge is made for redemptions. The value of shares redeemed may
be more or less than the purchase price, depending on the market value of the
investment securities held by the Portfolio.
By Mail
The Portfolio will redeem its shares at the net asset value next determined
after the request is received in "good order." The net asset value per share of
the Portfolio is determined as of 4:00 p.m., Eastern Standard time, on each day
that the New York Stock Exchange, Inc. (the "NYSE") and the Portfolio are open
for business. Requests should be addressed to Minerva Fund, Inc., P.O. Box
182489, Columbus, Ohio 43218-2489.
Requests in "good order" must include the following documentation:
(a) The share certificates, if issued;
(b) A letter of instruction, if required, or a stock assignment
specifying the number of shares or dollar amount to be redeemed, signed by
all registered owners of the shares in the exact names in which they are
registered;
(c) Any required signature guarantees (see "Signature Guarantees"
below); and
(d) Other supporting legal documents, if required, in the case of
estates, trusts, guardianships, custodianships, corporations, pension and
profit sharing plans and other organizations.
Signature Guarantees. To protect shareholder accounts, the Fund and its
transfer agent from fraud, signature guarantees are required to enable the Fund
to verify the identity of the person who has authorized a redemption from an
account. Signature guarantees are required for (1) redemptions where the
proceeds are to be sent to someone other than the registered shareowner(s) and
the registered address, and (2) share transfer requests. Shareholders may
contact the Fund at 1-800-393-9998 for further details.
By Telephone
Provided the Telephone Redemption Option has been authorized, a redemption
of shares may be requested by calling the Fund at 1-800-393-9998 and requesting
that the redemption proceeds be mailed to the primary registration address or
wired per the authorized instructions. If the Telephone Redemption Option is
authorized, the Fund and its transfer agent may act on telephone instructions
from any person representing himself or herself to be a shareholder and believed
by the Fund or its transfer agent to be genuine. The transfer agent's records of
such instructions are binding and shareholders, not the Fund or its transfer
agent, bear the risk of loss in the event of unauthorized instructions
reasonably believed by the Fund or its transfer agent to be genuine. The Fund
will employ reasonable procedures to confirm that instructions communicated are
genuine and, if it does not, it may be liable for any losses due to unauthorized
or fraudulent instructions. The procedures employed by the Fund in connection
with transactions initiated by telephone include tape recording of telephone
instructions and requiring some form of personal identification prior to acting
upon instructions received by telephone. Telephone Redemption will be suspended
for a period of 10 days following a telephone address change.
Further Redemption Information
Redemption proceeds for shares of the Fund recently purchased by check may
not be distributed until payment for the purchase has been collected, which may
take up to fifteen business days. Such funds are invested and earn dividends
during this holding period. Shareholders can avoid this delay by utilizing the
wire purchase option.
Payment of the redemption proceeds will ordinarily be made within seven
days after receipt of an order for a redemption. The Fund may suspend the right
of redemption or postpone the date at times when the NYSE or the bond market is
closed or under any emergency circumstances as determined by the SEC.
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<PAGE>
If the Board of Directors determines that it would be detrimental to the
best interests of the remaining shareholders of the Fund to make payment wholly
or partly in cash, the Fund may pay the redemption proceeds in whole or in part
by a distribution in-kind of readily marketable securities held by the Portfolio
in lieu of cash in conformity with applicable rules of the SEC. Investors may
incur brokerage charges on the sale of portfolio securities so received in
payment of redemptions.
SHAREHOLDER SERVICES
Transfer of Registration
The registration of Fund shares may be transferred by writing to Minerva
Fund, Inc., P.O. Box 182489, Columbus, OH 43218-2489. As in the case of
redemptions, the written request must be received in "good order" as defined
above.
VALUATION OF SHARES
The Portfolio's net asset value per share is determined by dividing the
total market value of the Portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the Portfolio. Net asset value
per share is determined as of 4:00 p.m., Eastern Standard time, on each day that
the NYSE and the Portfolio are open for business. Securities listed on a U.S.
securities exchange or NASDAQ for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities listed on a foreign exchange are valued at the
latest quoted sales price available on the exchange where they are primarily
traded before the time when assets are valued. For purposes of net asset value
per share, all assets and liabilities initially expressed in foreign currencies
are converted into U.S. dollars at the bid price of such currencies against U.S.
dollars last quoted by any major bank. Unlisted securities and listed U.S.
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean of the most recent quoted bid and asked
price. The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods approved by the Board of Directors.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAXES
Dividends and Capital Gains Distributions
Dividends are generally paid to shareholders on a quarterly basis. If any
net capital gains are realized from the sale of underlying securities, the
Portfolio normally distributes such gains with the last dividend for the
calendar year. All dividends and capital gains distributions are automatically
paid in additional shares of the Portfolio unless the shareholder elects
otherwise. Such election must be made in writing to the Fund.
In the Portfolio, undistributed net investment income is included in the
Portfolio's net assets for the purpose of calculating net asset value per share.
Therefore, on the "ex-dividend" date, the net asset value per share excludes the
dividend (i.e., is reduced by the per share amount of the dividend). Dividends
paid shortly after the purchase of shares by an investor, although in effect a
return of capital, are taxable as ordinary income.
If you elect to receive distributions in cash and checks (1) are returned
and marked as "undeliverable" or (2) remain uncashed for six months, your cash
election will be changed automatically and your future dividend and capital
gains distributions will be reinvested in the Portfolio at the per share net
asset value determined as of the date of payment of the distribution. In
addition, any undeliverable checks or checks that remain uncashed for six months
will be canceled and will be reinvested in the Portfolio at the per share net
asset value determined as of the date of cancellation.
Federal Taxes
The Portfolio intends to qualify for taxation as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). By so qualifying, the Portfolio will not be subject to federal
income taxes with respect to net investment income (i.e., its investment company
taxable income as that term is defined in the Code, without regard to the
deduction for dividends paid and net capital gains (i.e. the excess of its net
realized long-term capital gains over net realized short-term capital losses),
if any, that are distributed to its shareholders, provided that the Portfolio
distributes in each taxable year at least 90% of its net investment income. The
Portfolio will be treated as a separate entity for federal income tax purposes,
and thus the provisions of the Code applicable to regulated investment companies
generally will be applied to the Portfolio separately, rather than to the Fund
as a whole.
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<PAGE>
Dividends, either in cash or reinvested in shares, paid by the Portfolio
from net investment income will be taxable to shareholders as ordinary income.
For owners of shares that are corporations, such distributions may be eligible
for the dividends-received deduction, but the portion of the dividends so
qualified depends on the aggregate taxable qualifying dividend income received
by the Portfolio from United States sources. The Portfolio will send each
shareholder a statement each year indicating the amount of the dividend income
which qualifies for such treatment.
Whether paid in cash or additional shares of the Portfolio, and regardless
of the length of time the shares in the Portfolio have been owned by the
shareholder, distributions of net capital gains designated by the Portfolio as
"capital gain dividends" will be taxable as long-term capital gains and will not
be eligible for the dividends received deduction for corporations. Shareholders
are notified annually by the Portfolio as to federal tax status of dividends and
distributions paid by the Portfolio. Such dividends and distributions may also
be subject to state and local taxes.
Exchanges and redemptions of shares in the Portfolio are generally taxable
events for federal income tax purposes. Individual shareholders may also be
subject to state and municipal taxes on such exchanges and redemptions.
The Portfolio intends to declare and pay dividends and capital gains
distributions so as to avoid imposition of a nonde-ductible 4% federal excise
tax. Although dividends generally will be treated as distributed when paid,
dividends declared in October, November or December, payable to shareholders of
record on a specified date in one of those months and paid during the following
January will be treated as having been distributed by the Portfolio (and
received by the shareholders) on December 31 of the year declared.
INVESTMENT MANAGEMENT
LTCB-MAS acts as the Fund's investment manager and has overall
responsibility for supervising the investment program of each Portfolio.
LTCB-MAS, a joint subsidiary of LTCB and MA&S, is registered under the
Investment Advisers Act of 1940 and provides investment counselling services to
employee benefit plans and other institutional investors. As of September 30,
1996, LTCB-MAS had assets under management in excess of $750 million. LTCB, with
over $300 billion in assets as of September 30, 1996, is one of the 25 largest
banks in the world. MA&S provides investment counselling services primarily to
institutional investors and as of September 30, 1996, had assets under
management in excess of $37 billion. The selection on a day-to-day basis of
appropriate investments for the Portfolio is made by MA&S acting in
collaboration with and under the supervision of LTCB-MAS.
Pursuant to an investment management agreement (the "Investment Management
Agreement") with the Fund, LTCB-MAS has responsibility for the investment and
reinvestment of the assets of the Portfolio and will supervise the investment
program of the Portfolio in accordance with the stated investment objective and
policies of the Portfolio. The activities of LTCB-MAS as investment manager
shall remain under the control and supervision of the Fund's Board of Directors.
LTCB-MAS shall advise and consult with MA&S regarding the Portfolio's overall
investment strategy and consult with MA&S on at least a weekly basis regarding
specific decisions concerning the purchase, sale or holding of particular
securities. As compensation for the services rendered by LTCB-MAS under the
Investment Management Agreement, the Portfolio will pay LTCB-MAS an investment
management fee calculated and accrued daily and paid monthly, at an annual rate
of .50% of the Portfolio's average daily net assets for the month.
Pursuant to an investment services agreement (the "Investment Services
Agreement") between LTCB-MAS and MA&S, MA&S, acting in collaboration with and
under the supervision of LTCB-MAS, is responsible on a day-to-day basis for
selecting investments for the Portfolio in conformity with the stated investment
objective and policies of the Portfolio. MA&S will place purchase and sale
orders for the Portfolio's portfolio securities. MA&S receives no fee pursuant
to the Investment Services Agreement for the services it provides.
Sixty percent of the outstanding capital stock of LTCB-MAS is owned by LTCB
Capital Markets, Inc. ("LCM") which, in turn, is wholly owned by LTCB. Forty
percent of the outstanding capital stock of LTCB-MAS is owned by MA&S. LCM owns
a non-voting limited partnership interest in MA&S equal to approximately
eighteen percent of the total equity of MA&S. MA&S is wholly owned, indirectly,
by Morgan Stanley Group Inc. The principal offices of LTCB-MAS are located at
One Tower Bridge, Suite 1000, West Conshohocken, Pennsylvania 19428. The
principal offices of MA&S are located at One Tower Bridge, Suite 1150, West
Conshohocken, Pennsylvania 19428.
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<PAGE>
In cases where a shareholder of the Portfolio has an investment counselling
relationship with LTCB-MAS, LTCB-MAS may reduce the investment counselling fees
paid by the client directly to LTCB-MAS. This procedure will be utilized with
clients having contractual relationships based on total assets managed by
LTCB-MAS to avoid situations where excess investment management fees might be
paid to LTCB-MAS. In no event will a client pay higher total investment
management fees as a result of the client's investment in the Fund.
Mr. Hideo Ueki, Equity Portfolio Manager of LTCB-MAS, has primary
responsibility for supervision of the Portfolio's investment program. Mr. Ueki
has been Equity Portfolio Manager of LTCB-MAS since 1993, was a Fund Manager of
LTCB Investment Management Company, Ltd. from 1990 to 1993, and prior thereto
was a Loan Officer of LTCB. Ms. Arden C. Armstrong and Messrs. Nicholas J.
Kovich, Robert J. Marcin, Gary G. Schlarbaum and A. Morris Williams, Jr., each a
Portfolio Manager of MA&S, are primarily responsible for the day-to-day
management of the Portfolio in consultation with and under the supervision of
Mr. Ueki. Each of the aforementioned Portfolio Managers of MA&S have been
affiliated with MA&S for at least the past five years.
ADMINISTRATIVE SERVICES
BISYS Group, Inc. ("BISYS"), headquartered in Little Falls, New Jersey,
supports more than 5,000 financial institutions and corporate clients through
two strategic business units. BISYS Information Services Group provides image
and data processing outsourcing, and pricing analysis to more than 600 banks
nationwide. BISYS Investment Services Group designs, administers and distributes
over 30 families of proprietary mutual funds consisting of more than 365
portfolios, and provides 401(k) marketing support, administration, and
recordkeeping services in partnership with banking institutions and investment
management companies. BISYS and its affiliates BISYS Fund Services Limited
Partnership and BISYS Fund Services, Inc. have their principal place of business
at 3435 Stelzer Road, Columbus, Ohio 43219. BISYS Fund Services Limited
Partnership provides the Fund with administrative services pursuant to an
administration agreement (the "Fund Administration Agreement"). BISYS Fund
Services, Inc. provides the Fund with accounting services pursuant to an
accounting agreement (the "Fund Accounting Agreement"). The services under the
agreements are subject to the supervision of the Fund's Board of Directors and
officers, and include day-to-day administration of matters related to the
corporate existence of the Fund, maintenance of its records, preparation of
reports, supervision of the Fund's arrangements with its custodians, and
assistance in the preparation of the Fund's Registration Statements under
federal and state laws. Pursuant to the Fund Administration Agreement, the Fund
will pay BISYS Fund Services Limited Partnership a monthly fee for its services
which on an annualized basis will not exceed .15% of the average daily net
assets of the Fund, pursuant to the Fund Accounting Agreement, the Fund will pay
BISYS Fund Services, Inc. an annual fee of $30,000 for fund accounting services.
From time to time, subject to review by the Board of Directors, each of
BISYS Fund Services Limited Partnership and BISYS Fund Services, Inc. may make
certain adjustments to the fees it is entitled to receive from the Fund pursuant
to the Fund Administration Agreement and the Fund Accounting Agreement,
respectively.
DISTRIBUTOR
Shares of the Fund are distributed through BISYS Fund Services Limited
Partnership pursuant to a distribution agreement (the "Distribution Agreement").
Under the Distribution Agreement, BISYS Fund Services Limited Partnership does
not receive any fee or other compensation for distributing shares of the Fund.
The principal offices of BISYS Fund Services Limited Partnership are located at
3435 Stelzer Road, Columbus, OH 43219.
INVESTMENT LIMITATIONS
The Portfolio has adopted certain limitations designed to reduce its
exposure to specific situations. If a percentage limitation on investment or
utilization of assets as set forth herein is adhered to at the time an
investment is made, a later change in percentage resulting from changes in the
value or total cost of the Portfolio's assets will not be considered a violation
of the restriction. As a matter of fundamental policy, the Portfolio will not:
(a) with respect to 75% of its assets, purchase securities of any
issuer if, as a result, more than 5% of the Portfolio's total assets, taken
at market value at the time of such investment, would be invested in
securities of such issuer except that this restriction does not apply to
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities;
17
<PAGE>
(b) with respect to 75% of its assets, purchase a security if, as a
result, it would hold more than 10% (taken at the time of such investment)
of the outstanding voting securities of any issuer;
(c) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the Portfolio's
total assets would be invested in securities of companies within such
industry; provided, however, that there shall be no limitation on the
purchase of obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, or instruments issued by U.S. banks when the
Portfolio adopts a temporary defensive position;
(d) make loans except (i) by purchasing debt securities in accordance
with its investment objective and policies, or entering into repurchase
agreements, subject to the applicable limitations of its investment
policies and (ii) by lending its portfolio securities; and
(e) borrow money, except (i) as a temporary measure for extraordinary
or emergency purposes or (ii) in connection with reverse repurchase
agreements provided that (i) and (ii) in combination do not exceed 33-1/3%
of the Portfolio's total assets (including the amount borrowed) less
liabilities (exclusive of borrowings), provided, however, that trading in
futures contracts, options on futures contracts and options and entering
into swap transactions shall not be deemed to involve a "borrowing" for
purposes of this limitation, and provided further that additional portfolio
securities may not be purchased by the Portfolio while borrowings and
reverse repurchase agreements exceed 5% of the Portfolio's total assets;
The foregoing investment limitations and certain of the limitations
described in the Statement of Additional Information are fundamental
policies and may be changed only with the approval of the holders of a
"majority of the shares" of the Portfolio, as defined in the 1940 Act.
GENERAL INFORMATION
Organization and Capital Stock
The Fund was incorporated in Maryland on June 28, 1993. The authorized
capital stock of the Fund consists of 200,000,000 shares having a par value of
$.001 per share. The Fund's Articles of Incorporation authorize the issuance of
a separate class of shares corresponding to shares in the Equity Portfolio, and
the Fund's Board of Directors may, in the future, authorize the issuance of
additional classes of capital stock representing shares in the same or
additional investment portfolios.
All shares of the Fund have equal voting rights and will be voted in the
aggregate and not by class, except where voting by class is required by law or
where the matter involved affects only one class. Under the corporate law of
Maryland, the Fund's state of incorporation, and the Fund's By-Laws (except as
required under the 1940 Act), the Fund is not required and does not currently
intend to hold annual meetings of shareholders for the election of directors.
Shareholders, however, do have the right to call for a meeting to consider the
removal of one or more of the Fund's Directors if such a request is made, in
writing, by the holders of at least 10% of the Fund's outstanding voting
securities. In such cases, the Fund will assist in calling the meeting
(including effecting any necessary shareholder communications) as required under
the 1940 Act. A more complete statement of the voting rights of shareholders is
contained in the Statement of Additional Information.
All shares of the Fund, when issued, will be fully paid and nonassessable.
The business and affairs of the Portfolio is managed under the general
direction and supervision of the Fund's Board of Directors. The day-to-day
operations of the Portfolio is handled by the Fund's officers.
Custodian
LTCB Trust Company, 165 Broadway, New York, New York 10006, acts as
Custodian for the Portfolio.
Transfer Agent and Dividend Disbursing Agent
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, OH 43219, acts as
Transfer Agent and Dividend Disbursing Agent for the Fund.
18
<PAGE>
Counsel
Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York, serves as counsel to the Fund.
Financial Statements/Independent Accountants
Shareholders will receive semi-annual and annual financial statements.
Annual financial statements are audited by Price Waterhouse LLP, independent
accountants, whose selection is ratified by shareholders. Price Waterhouse LLP
is located at 1177 Avenue of the Americas, New York, New York 10036.
Closed Holidays
Currently, the days on which the NYSE and/or the Fund are closed for
business are: New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Expenses of the Fund
The Fund bears all of its own costs and expenses, including: services of
its independent accountants, its administrator and dividend disbursing and
transfer agent, legal counsel, taxes, insurance premiums, costs incidental to
meetings of its shareholders and Board of Directors, the cost of filing its
registration statements under federal and state securities laws, reports to
shareholders and custodian fees. These Fund expenses will, in turn, be allocated
to the Portfolio and other portfolios that may be established in the future
based on each portfolio's relative net assets. The Portfolio bears its own
advisory fees and brokerage commissions and transfer taxes in connection with
the acquisition and disposition of its investment securities. LTCB-MAS has
agreed to reimburse the Portfolio for total annual operating expenses in excess
of 1.00%, of average net assets for a period of at least one year from the date
of this Prospectus.
Regulatory Matters
Banking laws and regulations, including the Glass-Steagall Act as currently
interpreted by the Board of Governors of the Federal Reserve System, prohibit a
bank holding company registered under the Bank Holding Company Act of 1956, as
amended, or any affiliate thereof from sponsoring, organizing, controlling, or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks generally
from issuing, underwriting, selling or distributing securities, but do not
prohibit such bank holding company or affiliate from acting as investment
adviser or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of a customer. LTCB and the Fund
believe that LTCB-MAS and LTCB Trust Company, or any other duly authorized
affiliate of LTCB, may perform the investment advisory and custody services,
respectively, for the Fund, as described in this Prospectus, and that LTCB Trust
Company or any other affiliate of LTCB, subject to such banking laws and
regulations, may act as a Shareholder Organization as contemplated by this
Prospectus, without violation of such banking laws or regulations. However,
future changes in legal requirements relating to the permissible activities of
banks and their affiliates, as well as future interpretations of present
requirements, could prevent LTCB-MAS, LTCB Trust Company or any other affiliate
of LTCB from continuing to perform investment advisory or custody services for
the Fund, as the case may be, or require LTCB Trust Company or any other
affiliate of LTCB to discontinue acting as a Shareholder Organization.
If LTCB-MAS, LTCB Trust Company or any other affiliate of LTCB were
prohibited from performing investment advisory or custody services for the Fund,
as the case may be, it is expected that the Fund's Board of Directors would
recommend to the Fund's shareholders that they approve new agreements with
another entity or entities qualified to perform such services and selected by
the Board of Directors. If LTCB Trust Company or any other affiliate of LTCB
were required to discontinue acting as a Shareholder Organization, its customers
would be permitted to remain the beneficial owners of Portfolio shares and
alternative means for continuing the servicing of such customers would be
sought. The Fund does not anticipate that investors would suffer any adverse
financial consequences as a result of these occurrences.
19
<PAGE>
DIRECTORS AND OFFICERS
The following is a list of the Directors and principal executive officers
of the Fund and a brief statement of their present positions and principal
occupations during the past five years.
<TABLE>
<CAPTION>
<S> <C> <C>
Name, Address and Age Position with the Fund Principal Occupation During Past Five Years
- ----------------- ---------------- -------------------------------
* James D. Schmid Director and Principal, Morgan Stanley Group; Partner, Miller
Miller Anderson & Sherrerd Chairman of the Board Anderson & Sherrerd (since 1989);
One Tower Bridge President, MAS Funds; Director, MAS
West Conshohocken, PA 19428 Funds Distributor, Inc.; formerly Vice President,
Age: 46 years Chase Manhattan Bank.
Carl T. Hagberg Director Chairman, Carl T. Hagberg & Associates
6 South Lakeview Drive (since 1992); formerly Senior Vice President,
Jackson, NJ 08527 Chemical Bank.
Age: 54 years
Raymond F. Miller Director Partner, Cronus Partners, Inc. (since 1990);
Cronus Partners, Inc. formerly Managing Director, Bankers Trust Co.
540 Madison Avenue Director, Thirty Thirty Park Group, Inc.
New York, NY 10022
Age: 55 years
Charles A. Parker Director Director, T.C.W. Convertible Fund, Inc.;
54 Huckleberry Hill Road Director, URC Holding Corp., formerly
New Canaan, CT 06840 Executive Vice President, Director
Age: 62 years and Chief Investment Officer, Continental
Corporation
John J. Pileggi President and Director,
230 Park Avenue Treasurer Furman Selz LLC
New York, NY 10169
Age: 37 years
Sheryl Hirschfeld Secretary Manager-Legal Services, BISYS Fund Services, Inc.
125 West 55th Street (since January 1997);
New York, NY 10019 formerly Director, Corporate Secretary Services,
Age: 36 years Furman Selz LLC (November 1994-December
1995); formerly Assistant to the Corporate
Secretary and General Counsel at The Dreyfus
Corporation.
Donald Brostrom Assistant Vice President, BISYS Fund Services, Inc.,
125 West 55th Street Treasurer formerly Managing Director of Furman Selz, LLC
New York, NY 10019 from 1995 to present. Previously, Director of Fund
Age: 38 years Services, Furman Selz LLC from 1986 to 1995.
</TABLE>
* Director is deemed to be an "interested person" of the Fund as that term is
defined in the 1940 Act.
Remuneration of Directors and Officers
The Fund pays each Director an annual fee plus a fee and reimbursement for
travel and other expenses in connection with attending Board meetings. The
Fund's officers are paid by BISYS Fund Services Limited Partnership.
20
<PAGE>
-1-
MINERVA FUND, INC.
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 24, 1997
Minerva Fund, Inc. (the "Fund") is a no load open-end management
investment company currently consisting of the Equity Portfolio (the "Equity
Portfolio" or the "Portfolio"). This Statement of Additional Information
sets forth information about the Fund applicable to the Portfolio.
This Statement is not a Prospectus but should be read in conjunction
with the Fund's Prospectus dated January 24, 1997. To obtain the Prospectus,
please call the Fund at the telephone number indicated below.
INFORMATION AND CLIENT SERVICES 1-800-393-9998
TABLE OF CONTENTS
Page
Investment Objectives and Policies ..........................B-2
Foreign Investments..........................................B-3
Futures Contracts ...........................................B-4
Options .....................................................B-6
Options on Foreign Currencies ...............................B-6
Risks of Options on Futures Contracts, Forward Contracts
and Options on Foreign Currencies...................... B-7
Tax Aspects of Options, Futures,
Forward Contracts and Swap Agreements .....................B-8
Rule 144A Securities ........................................B-9
Additional Information Concerning Taxes .....................B-9
Investment Suitability.......................................B-12
Purchase of Shares...........................................B-12
Redemption of Shares.........................................B-13
Determination of Net Asset Value.............................B-13
Shareholder Services.........................................B-14
Investment Limitations.......................................B-14
Officers and Directors of the Fund...........................B-16
Investment Management........................................B-16
Distributor for the Fund.....................................B-184
Portfolio Transactions.......................................B-18
Administration, Custody and Transfer
Agency Services............................................B-18
General Information .........................................B-20
Performance Calculations ....................................B-22
Comparative Indices .........................................B-22
Report of Independent Accountants and
Financial Statements.......................................F-1
<PAGE>
-2-
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------
The following policies supplement the investment objectives and
policies set forth in the Fund's Prospectus:
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by U.S.
Government securities, certificates of deposit and certain bankers' acceptances.
Repurchase agreements are transactions by which the Portfolio purchases a
security and simultaneously commits to resell that security to the seller (a
bank or securities dealer) at an agreed upon price on an agreed upon date
(usually within seven days of purchase). The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or date of maturity of the purchased security. In these
transactions, the securities purchased by the Portfolio have a total value in
excess of the value of the repurchase agreement and are held by the Portfolio's
custodian bank until repurchased. Such agreements permit the Portfolio to keep
all its assets at work while retaining "overnight" flexibility in pursuit of
investments of a longer term nature. The Fund will continually monitor the value
of the underlying securities to ensure that their value, including accrued
interest, always equals or exceeds the repurchase price.
The use of repurchase agreements involves certain risks. For example,
if the seller of the agreements defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities has declined,
the Portfolio may incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or reorganization under
the Bankruptcy Code or other laws, a bankruptcy court may determine that the
underlying securities are collateral not within the control of the Portfolio and
therefore subject to sale by the trustee in bankruptcy. Finally, it is possible
that the Portfolio may not be able to substantiate its interest in the
underlying securities. While the Fund's management acknowledges these risks, it
is expected that they can be controlled through stringent security selection
criteria and careful monitoring procedures.
SECURITIES LENDING
The Portfolio may lend its investment securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its investment
securities, the Portfolio attempts to increase its income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Portfolio. The Portfolio may lend its investment securities to qualified
brokers, dealers, domestic and foreign banks or other financial institutions, so
long as the terms, the structure and the aggregate amount of such loans are not
inconsistent with the Investment Company Act of 1940, as amended (the "1940
Act"), or the rules and regulations or interpretations of the Securities and
Exchange Commission (the "SEC") thereunder, which currently require that (a) the
borrower pledge and maintain with the Portfolio collateral consisting of cash,
an irrevocable letter of credit issued by a domestic U.S. bank, or securities
issued or guaranteed by the U.S. Government having a value at all times not less
than 100% of the value of the securities loaned, (b) the borrower add to such
collateral whenever the price of the securities loaned rises (i.e., the borrower
"marks to the market" on a daily basis), (c) the loan be made subject to
termination by the Portfolio at any time, and (d) the Portfolio receive
reasonable interest on the loan (which may include the Portfolio investing any
cash collateral in interest bearing short-term investments), any distribution on
the loaned securities and any increase in their market value. All relevant facts
and circumstances, including the creditworthiness of the broker, dealer or
institution, will be considered in making decisions with respect to the lending
of securities, subject to review by the Board of Directors. Such loans may
involve risks of delay in receiving additional collateral or in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by Miller Anderson & Sherrerd ("MA&S") to be of good standing
and only when, in the judgment of MA&S, the income to be earned from the loans
justifies the attendant risks.
<PAGE>
-3-
At the present time, the staff of the SEC does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Board of Directors. In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.
U.S. GOVERNMENT SECURITIES
The term "U.S. Government securities" refers to a variety of
securities which are issued or guaranteed by the U.S. Government and by various
instrumentalities which have been established or sponsored by the U.S.
Government. U.S. Treasury securities are backed by the "full faith and credit"
of the United States. Securities issued or guaranteed by federal agencies and
U.S. Government sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the investor must look
principally to the agency or instrumentality issuing or guaranteeing the
obligation for ultimate repayment, and may not be able to assert a claim against
the United States itself in the event the agency or instrumentality does not
meet its commitment. Agencies which are backed by the full faith and credit of
the United States include the Export-Import Bank, Farmers Home Administration,
Federal Financing Bank, and others. Certain debt issued by Resolution Funding
Corporation has both its principal and interest backed by the full faith and
credit of the U.S. Treasury in that its principal is defeased by U.S. Treasury
zero coupon issues, while the U.S. Treasury is explicitly required to advance
funds sufficient to pay interest on it, if needed. Certain agencies and
instrumentalities, such as the Government National Mortgage Association, are, in
effect, backed by the full faith and credit of the United States through
provisions in their charters that they may make "indefinite and unlimited"
drawings on the Treasury, if needed, to service their debt. Debt from certain
other agencies and instrumentalities, including the Federal Home Loan Bank and
Federal National Mortgage Association, are not guaranteed by the United States,
but those institutions are protected by the discretionary authority for the U.S.
Treasury to purchase certain amounts of their securities to assist the
institution in meeting its debt obligations. Finally, other agencies and
instrumentalities, such as the Farm Credit System and the Federal Home Loan
Mortgage Corporation, are federally chartered institutions under Government
supervision, but their debt securities are backed only by the creditworthiness
of those institutions, not the U.S. Government.
Some of the U.S. Government agencies that issue or guarantee
securities include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Federal Home Loan
Banks, the Federal Land Banks, Central Bank for Cooperatives, Federal
Intermediate Credit Banks and the Federal National Mortgage Association.
- --------------------------------------------------------------------------------
FOREIGN INVESTMENTS
- --------------------------------------------------------------------------------
Investors should recognize that investing in the securities of foreign
issuers involves certain special considerations which are not typically
associated with investing in the securities of U.S issuers. Since the securities
of foreign issuers are frequently denominated in foreign currencies, and since
the Portfolio may temporarily hold uninvested reserves in bank deposits in
foreign currencies, the Portfolio may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policy of the Portfolio permits it to enter into forward foreign currency
exchange contracts in order to hedge the Portfolio's holdings and commitments
against changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date, at a price
set at the time of the contract.
<PAGE>
-4-
As foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards and practices comparable to those
applicable to domestic issuers, there may be less publicly available information
about certain foreign issuers than about domestic issuers. Securities of some
foreign issuers may be less liquid and more volatile than securities of
comparable domestic issuers. There is generally less government supervision and
regulation of stock exchanges, brokers and listed companies than in the United
States. With respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Although the Portfolio will endeavor to achieve the most favorable
execution costs in its portfolio transactions in foreign securities, fixed
commissions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges. In addition, it is expected that the expenses for
custodial arrangements of the Portfolio's foreign securities will be somewhat
greater than the expenses for the custodial arrangements for handling U.S.
securities of equal value.
Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income the Portfolio receives from the companies comprising the Portfolio's
investments. These foreign withholding taxes, however, are not expected to have
a significant impact on the Portfolio.
- --------------------------------------------------------------------------------
FUTURES CONTRACTS
- --------------------------------------------------------------------------------
In order to further its investment objective and policies, the
Portfolio may purchase and sell financial futures contracts and options on
financial futures contracts. The Portfolio will only engage in such transactions
to the extent that they relate to equity securities or indices of equity
securities (or, if the Portfolio has invested in securities denominated in
foreign currencies, foreign currency exchange rates).
Futures contracts provide for the sale by one party and purchase by
another party of a specified amount of the underlying instrument or currency at
a specified future time and price (or, in the case of certain cash-settled
instruments, a net cash amount). Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national futures
exchanges. Futures exchanges and trading are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission (the "CFTC"), a U.S.
Government Agency.
Although most futures contracts by their terms call for actual delivery
or acceptance of the underlying instrument or currency, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out an open futures position is done by taking an opposite
position ("buying" a contract which has previously been "sold" or "selling" a
contract previously "purchased") in an identical contract to terminate the
position. Brokerage commissions are incurred when a futures contract is bought
or sold.
Futures traders are required to make a good faith margin deposit in
cash or acceptable securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
securities) if it is not terminated prior to the specified delivery date.
Minimal initial margin requirements are established by the futures exchange and
may be changed. Brokers may establish deposit requirements which are higher than
the exchange minimums. Futures contracts are customarily purchased and sold on
the basis of margin deposits that may range between 1% and 10% of the value of
the contract being traded. The Portfolio's margin deposits, consisting of cash,
U.S. Government securities and other liquid, high grade debt obligations, will
be placed in a segregated account maintained by the Fund's custodian.
After a futures contract position is opened, the value of the contract
is marked to market daily. If the futures contract price changes, to the extent
that the margin on deposit does not satisfy margin requirements,
<PAGE>
-5-
payment of additional "variation" margin will be required. Conversely, a change
in the contract value may reduce the required margin, resulting in a repayment
of excess margin to the contract holder. Variation margin payments are made to
and from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.
Traders in futures contracts may be broadly classified as either
"hedgers" or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the value of the underlying securities. The Portfolio intends to use futures
contracts only for bona fide hedging purposes.
Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions or, to the extent
that the Fund's futures and options positions are for other purposes, that the
aggregate initial margins and premiums required to establish such non-hedging
positions not exceed 5% of the liquidation value of the Portfolio. The Portfolio
will only sell futures contracts to protect securities owned by them against
price declines or purchase contracts to protect against an increase in the price
of securities it intends to purchase. As evidence of this hedging interest, the
Fund expects that approximately 75% of its futures contracts purchased will be
"completed;" that is, equivalent amounts of related securities will have been
purchased or are being purchased by the Fund upon sale of open futures
contracts.
Trading in futures contracts and options on futures contracts involves
unique risks, including those summarized in the following paragraphs.
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. There can be no assurance,
however, that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, the Portfolio would continue
to be required to make daily cash payments to maintain its required margin. In
such situations, if the Portfolio has insufficient cash, it may have to sell
portfolio securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Portfolio may be required to make
delivery of the instruments underlying the interest rate futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the Portfolio's ability to effectively hedge. The Portfolio
will minimize the risk that it will be unable to close out a futures contract by
only entering into futures contracts which are traded on national futures
exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit before any deduction for the transaction costs,
if the account were then closed out. A 15% decrease would result in a loss equal
to 150% of the original margin deposit if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract. However, because the futures strategies of the
Fund are engaged in primarily for hedging purposes, the Adviser (as defined
below) does not believe that the Portfolio is subject to the risks of loss
frequently associated with futures transactions. The Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Portfolio involves the risk
of imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
<PAGE>
-6-
possible that the Portfolio could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
- --------------------------------------------------------------------------------
OPTIONS
- --------------------------------------------------------------------------------
Investments in options involve some of the same considerations that are
involved in connection with investments in futures contracts (e.g., the
existence of a liquid secondary market). In addition, the purchase of an option
also entails the risk that changes in the value of the underlying security or
contract will not be fully reflected in the value of the option purchased.
Depending on the pricing of the option compared to either the futures contract
upon which it is based, or upon the price of the securities being hedged, an
option may or may not be less risky than ownership of the futures contract or
actual securities. In general, the market prices of options can be expected to
be more volatile than the market prices on the underlying futures contract or
securities.
Although certain risks are involved in options, the Adviser believes
that the futures and options strategies to be utilized by the Fund will not
subject the Portfolio to the same risks associated with speculative use of
futures and options transactions.
- --------------------------------------------------------------------------------
OPTIONS ON FOREIGN CURRENCIES
- --------------------------------------------------------------------------------
The Portfolio may purchase and write options on foreign currencies for
hedging purposes in a manner similar to that in which futures contracts on
foreign currencies, or forward contracts will be utilized. For example, a
decline in the dollar value of a foreign currency in which portfolio securities
are denominated will reduce the dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminution in the value of portfolio securities, the Portfolio may purchase put
options on the foreign currency. If the value of the currency does decline, the
Portfolio will have the right to sell such currency for a fixed amount in
dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Portfolio may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Portfolio derived from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Portfolio could sustain losses on transactions
in foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Portfolio may write options on foreign currencies for the same
types of hedging purposes. For example, where the Portfolio anticipates a
decline in the dollar value of foreign currency denominated securities due to
adverse fluctuations in exchange rates, it could, instead of purchasing a put
option, write a call option on the
<PAGE>
-7-
relevant currency. If the anticipated decline occurs, the option will most
likely not be exercised, and the diminution in value of portfolio securities
will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the
Portfolio could write a put option on the relevant currency which, if exchange
rates move in the manner projected, will expire unexercised and allow the
Portfolio to hedge such increased cost up to the amount of the premium. As in
the case of other types of options, however, the writing of a foreign currency
option will constitute only a partial hedge up to the amount of the premium, and
only if exchange rates move in the expected direction. If this does not occur,
the option may be exercised and the Portfolio would be required to purchase or
sell the underlying currency at a loss which may not be offset by the amount of
the premium. Through the writing of options on foreign currencies, the Portfolio
also may be required to forego all or a portion of the benefits which might
otherwise have been obtained from favorable movements in exchange rates.
The Portfolio intends to write covered call options on foreign
currencies. A call option written on a foreign currency by the Portfolio is
"covered" if the Portfolio owns the underlying foreign currency covered by the
call or has an absolute and immediate right to acquire that foreign currency
without additional cash consideration (or for additional cash consideration held
in a segregated account by the Fund's custodian) upon conversion or exchange of
other foreign currency held in its portfolio. A call option is also covered if
the Portfolio (a) maintains in a segregated account cash or other liquid assets
in an amount not less than the value of the underlying foreign currency in U.S.
dollars marked-to-market daily or (b) owns a call on the same foreign currency
and in the same principal amount as the call written where the exercise price of
the call held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call written if the
difference is maintained by the Portfolio in cash or other liquid assets in a
segregated account with the Fund's custodian.
The Portfolio also intends to write call options on foreign currencies
for cross-hedging purposes. A call option on a foreign currency is considered to
be used for cross-hedging purposes if it is designed to provide a hedge against
a decline in the U.S. dollar value of a security which the Portfolio owns or has
the right to acquire and which is denominated in the currency underlying the
option due to an adverse change in the exchange rate. In such circumstances, the
Portfolio will collateralize the option by maintaining in a segregated account
with the Fund's custodian, cash or other liquid assets in an amount not less
than the value of the underlying foreign currency in U.S. dollars marked to
market daily.
- --------------------------------------------------------------------------------
RISKS OF OPTIONS ON FUTURES CONTRACTS,
FORWARD CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
- --------------------------------------------------------------------------------
Options on foreign currencies and forward contracts are not traded on
contract markets regulated by the CFTC or (with the exception of certain foreign
currency options) by the SEC. To the contrary, such instruments are traded
through financial institutions acting as market-makers, although foreign
currency options are also traded on certain national securities exchanges, such
as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. Similarly, options on currencies may be traded
over-the-counter. In an over-the-counter trading environment, many of the
protections afforded to exchange participants will not be available. For
example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchase of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, the option writer and a trader of forward contracts could lose amounts
substantially in excess of their initial investments, due to the margin and
collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges
are within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing
<PAGE>
-8-
Corporation ("OCC"), thereby reducing the risk of counterparty default.
Furthermore, a liquid secondary market in options traded on a national
securities exchange may be more readily available than in the over-the-counter
market, potentially permitting the Portfolio to liquidate open positions at a
profit prior to exercise or expiration, or to limit losses in the event of
adverse market movements.
The purchase and sale of exchange-traded foreign currency options,
however, are subject to the risks of the availability of a liquid secondary
market described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effect of other
political and economic events. In addition, exchange-traded options of foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing members, impose special procedures on
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions on exercise.
In addition, futures contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges.
Such transactions are subject to the risk of governmental actions affecting
trading in or the prices of foreign currencies or securities. The value of such
positions also could be adversely affected by (i) other complex foreign
political and economic factors, (ii) lesser availability than in the United
States of data on which to make trading decisions, (iii) delays in the
Portfolio's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States, (iv) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States, and (v) lesser trading volume.
- --------------------------------------------------------------------------------
TAX ASPECTS OF OPTIONS, FUTURES,
FORWARD CONTRACTS AND SWAP AGREEMENTS
- --------------------------------------------------------------------------------
Some of the options, futures contracts or forward contracts entered
into by the Portfolio may be "Section 1256 contracts." Section 1256 contracts
held by the Portfolio at the end of its taxable year (and, for purposes of the
4% excise tax, on certain other dates as prescribed under the Internal Revenue
Code of 1986, as amended (the "Code"), are "marked to market" with unrealized
gains or losses treated as though they were realized. Any gains or losses,
including "marked to market" gains or losses, on Section 1256 contracts other
than forward contracts are generally treated as 60% long-term and 40% short-term
capital gains on losses. Gains or losses from foreign currency forward contracts
are treated as ordinary income or loss, however, an election may be made to
treat such gains or losses as capital gains or losses. Any gains or losses,
including "marked to market" gains or losses, on Section 1256 contracts other
than forward foreign currency contracts are generally 60% long-term and 40%
short-term capital gains or losses. Foreign currency gains and losses from the
forward foreign exchange contracts may be treated as ordinary income pursuant to
Section 988.
Generally, hedging transactions and certain other transactions in
options, futures, forward contracts and swap agreements undertaken by the
Portfolio, may result in "straddles" for U.S. federal income tax purposes. The
straddle rules may affect the character of gain or loss realized by the
Portfolio. In addition, losses realized by the Portfolio on positions that are
part of a straddle may be deferred under the straddle rules, rather than being
taken into account in calculating the taxable income for the taxable year in
which such losses are realized. Because only a few regulations implementing the
straddle rules have been promulgated, the tax consequences of transactions in
options, futures, forward contracts and swap agreements to the Portfolio are not
entirely clear. The transactions may increase the amount of short-term capital
gain realized by the Portfolio. Short-term capital gain is taxed as ordinary
income when distributed to shareholders.
<PAGE>
-9-
The Portfolio may make one or more of the elections available under the
Code which are applicable to straddles. If the Portfolio makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected straddle positions will be determined under rules that
vary according to the elections made. The rules applicable under certain of the
elections operate to accelerate the recognition of gains or losses from the
affected straddle positions.
Because application of the straddle rules may affect the character of
gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed to shareholders, and which will be taxed to shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to the Portfolio that did not engage in such hedging transactions.
Certain requirements of the Code, such as the 30% limitation on gains
from the disposition of certain options, futures, forward contracts and swap
agreements held less than three months, and the qualifying income and
diversification requirements applicable to the Portfolio's assets may limit the
extent to which the Portfolio will be able to engage in these transactions.
RULE 144A SECURITIES
As indicated in the Prospectus, the Portfolio may purchase certain
restricted securities ("Rule 144A securities"), as contemplated by Rule 144A
under the Securities Act of 1933, as amended (the "1933 Act"). Rule 144A
provides an exemption from the registration requirements of the 1933 Act for the
resale of certain restricted securities to qualified institutional buyers.
Rule 144A securities may be liquid or illiquid, depending upon whether
there is a secondary market of qualified institutional buyers of such Rule 144A
securities. There is no assurance that a liquid market for any particular Rule
144A securities will develop or be maintained. In promulgating Rule 144A the SEC
stated that the ultimate responsibility for liquidity determinations is that of
an investment company's board of directors, although the board may delegate the
day-to-day function of determining liquidity to the portfolio's investment
adviser, provided that the board retains sufficient oversight. The Board of
Directors has adopted policies and procedures for the purpose of determining
whether securities that are eligible for resale under Rule 144A are liquid or
illiquid for purposes of the Portfolio's limitation on investment in illiquid
securities. Pursuant to those policies and procedures, the Board of Directors
has delegated to MA&S the determination as to whether a particular security is
liquid or illiquid, requiring that consideration be given to, among other
things, the frequency of trades and quotes for the security, the number of
dealers willing to purchase or sell the security and the number of other
potential purchasers, dealer undertakings to make a market in the security, the
nature of the security and the time needed to dispose of the security. The Board
of Directors periodically reviews purchases and sales of Rule 144A securities.
To the extent that liquid Rule 144A securities held by the Portfolio
become illiquid due to the lack of sufficient qualified institutional buyers or
market or other conditions, the percentage of the Portfolio's assets invested in
illiquid assets would increase. MA&S, under the supervision of the Board of
Directors, will monitor investments in Rule 144A securities and will consider
appropriate measures to enable the Portfolio to maintain sufficient liquidity
for operating purposes and to meet redemption requests.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION CONCERNING TAXES
- --------------------------------------------------------------------------------
IN GENERAL
The Portfolio intends to qualify as a regulated investment company (a
"RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). Qualification as a RIC requires, among other things, that the
Portfolio: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments
<PAGE>
-10-
with respect to securities loans and gains from the sale or other disposition of
stock, securities or foreign currencies, or other income (including gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stocks or securities; (b) derive less than 30% of its gross
income in each taxable year from the sale or other disposition of any of the
following held for less than three months: (i) stock or securities, (ii)
options, futures, or forward contracts (other than foreign currency options,
futures forward contracts), or (iii) foreign currencies (or foreign currency
options, futures or forward contracts) that are not directly related to its
principal business of investing in stock or securities (or options and futures
with respect to stocks or securities) (the "30% limitation"); and (c) diversify
its holdings so that, at the end of each quarter of each taxable year, (i) at
least 50% of the market value of the Portfolio's assets is represented by cash,
cash items, U.S. Government securities, securities of other regulated investment
companies and other securities with such other securities limited, in respect of
any issuer, to an amount not greater than 5% of the value of the Portfolio's
assets and 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities (other
than U.S. Government securities or the securities of other regulated investment
companies) of any one issuer.
As a regulated investment company, the Portfolio will not be subject to
federal income tax on its net investment income (i.e., its investment company
taxable income, as that term is defined in the Code, determined without regard
to the deduction for dividends paid) and "net capital gains" (the excess of the
Portfolio's net long-term capital gains over net short-term capital losses), if
any, that it distributes in each taxable year to its shareholders, provided that
it distributes 90% of its net investment income for such taxable year. However,
the Portfolio would be subject to corporate income tax (currently at a maximum
rate of 35%) on any undistributed net investment income and net capital gains.
The Portfolio expects to designate amounts retained as undistributed net capital
gains in a notice to its shareholder who (i) will be required to include in
income for United States federal income tax purposes, as long-term capital gain,
their proportionate shares of the undistributed amount, (ii) will be entitled to
credit their proportionate shares of the 35% tax paid by the Portfolio on the
undistributed amount against their federal income tax liabilities and to claim
refunds to the extent such credits exceed their liabilities and (iii) will be
entitled to increase their tax basis, for federal income tax purpose, in their
shares by an amount equal to 65% of the amount of undistributed net capital
gains included in the shareholder's income.
The Portfolio will be subject to a non-deductible 4% excise tax to the
extent that it does not distribute by the end of each calendar year: (a) at
least 98% of its ordinary income for such calendar year; (b) at least 98% of the
excess of its capital gains over its capital losses for the one-year period
ending, as a general rule, on October 31 of each year; and (c) 100% of the
undistributed income and gains from the preceding calendar year (if any)
pursuant to the calculations in (a) and (b). For this purpose, any income or
gain retained by the Portfolio that is subject to corporate tax will be
considered to have been distributed by year-end.
Investors should consider the tax implications of buying shares just
prior to distribution. Although the price of shares purchased at that time may
reflect the amount of the forthcoming distribution, those purchasing just prior
to a distribution will receive a distribution which will nevertheless be taxable
to them.
Gain or loss, if any, on the sale or other disposition of shares of the
Portfolio will generally result in capital gain or loss to shareholders.
Generally, a shareholder's gain or loss will be a long-term gain or loss if the
shares have been held for more than one year. If a shareholder sells or
otherwise disposes of a share of the Portfolio before holding it for more than
six months, any loss on the sale or other disposition of such share shall be
treated as a long-term capital loss to the extent of any capital gain dividends
received by the shareholder with respect to such share. Currently, the maximum
federal income tax rate imposed on individuals with respect to net realized
long-term capital gains is lower than the maximum federal income tax rate
imposed on individuals with respect to net realized short-term capital gains
(which are taxed at the same rates as ordinary income).
The Portfolio investments in options, futures contracts and forward
contracts, options on futures contracts and stock indices and certain other
securities, including transactions involving actual or deemed short sales or
foreign exchange gains or losses are subject to many complex and special tax
rules. For example, over-the-counter
<PAGE>
-11-
options on debt securities and equity options, including options on stock and on
narrow-based stock indexes, will be subject to tax under Section 1234 of the
Code, generally producing a long-term or short-term capital gain or loss upon
exercise, lapse or closing out of the option or sale of the underlying stock or
security. By contrast, the Portfolio's treatment of certain other options,
futures and forward contracts entered into by the Portfolio is generally
governed by Section 1256 of the Code. These "Section 1256" positions generally
include listed options on debt securities, options on broad-based stock indexes,
options on securities indexes, options on futures contracts, regulated futures
contracts and certain foreign currency contracts and options thereon.
Absent a tax election to the contrary, each such Section 1256 position
held by the Portfolio will be marked-to-market (i.e., treated as if it were sold
for fair market value) on the last business day of the Portfolio's fiscal year,
and all gain or loss associated with fiscal year transactions and mark-to-market
positions at fiscal year end (except certain currency gain or loss covered by
Section 988 of the Code) will generally be treated as 60% long-term capital gain
or loss and 40% short-term capital gain or loss. The effect of Section 1256
mark-to-market rules may be to accelerate income or to convert what otherwise
would have been long-term capital gains into short-term capital gains or
short-term capital losses into long-term capital losses within the Portfolio.
The acceleration of income on Section 1256 positions may require the Portfolio
to accrue taxable income without the corresponding receipt of cash. In order to
generate cash to satisfy the distribution requirements of the Code, the
Portfolio may be required to dispose of portfolio securities that they otherwise
would have continued to hold or to use cash flows from other sources such as the
sale of Portfolio shares. In these ways, any or all of these rules may affect
the amount, character and timing of income earned and in turn distributed to
shareholders by the Portfolio.
When the Portfolio holds options or contracts which substantially
diminish their risk of loss with respect to other positions (as might occur in
some hedging transactions), this combination of positions could be treated as a
"straddle" for tax purposes, resulting in possible deferral of losses,
adjustments in the holding periods of Portfolio securities and conversion of
short-term capital losses into long-term capital losses. Certain tax elections
exist for mixed straddles, i.e., straddles comprised of at least one Section
1256 position and at least one non-Section 1256 position which may reduce or
eliminate the operation of these straddle rules.
The 30% limitation may restrict the Portfolio's ability to engage in
options, spreads, straddles, hedging transactions, forward or futures contracts
or options on any of these positions because these transactions are often
consummated in less than three months, may require the sale of portfolio
securities held less than three months and may, as in the case of short sales of
portfolio securities reduce the holding periods of certain securities within the
Portfolio, resulting in additional short-short income for the Portfolio.
The Portfolio will monitor its transactions in such options and
contracts and may make certain other tax elections in order to mitigate the
effect of the above rules and to prevent disqualification of the Portfolio as a
regulated investment company under Subchapter M of the Code.
If the Portfolio purchases shares in certain foreign investment
entities, called "passive foreign investment companies" ("PFICs"), the Portfolio
may be subject to U.S. federal income tax on a portion of any "excess
distribution" or gain from the dispersion of shares even if the income is
distributed as a taxable dividend by the Portfolio to its shareholders.
Additional charges in the nature of interest may be imposed on either the
Portfolio or its shareholders with respect to deferred taxes arising from the
distributions or gains. If the Portfolio were to invest in a PFIC and (if the
Portfolio received the necessary information available from the PFIC, which may
be difficult to obtain) elected to treat the PFIC as a "qualified election fund"
under the Code (a "QEF"), in lieu of the foregoing requirements, the Portfolio
might be required to include in income each year a portion of the ordinary
earnings and net capital gains of the PFIC, even if not distributed to the
Portfolio, and the amounts would be subject to the 90% and excise tax
distribution requirements described above. On April 1, 1992 the Internal Revenue
Service proposed regulations providing a mark-to-market election for regulated
investment companies that would have effects similar to the QEF election. These
regulations would be effective for taxable years ending after promulgation of
the regulations as final regulations.
<PAGE>
-12-
BACKUP WITHHOLDING
The Portfolio may be required to withhold federal income tax at a rate
of 31% ("backup withholding") from dividends and redemption proceeds paid to
non-corporate shareholders. This tax may be withheld from dividends if (i) the
payee fails to furnish the Fund with the payee's correct taxpayer identification
number, (ii) the IRS notifies the Fund that the payee has failed to report
properly certain interest and dividend income to the IRS and to respond to
notices to that effect, or (iii) when required to do so, the payee fails to
certify that he or she is not subject to backup withholding. Any amounts
withheld under the backup withholding rules will be allowed as a refund or
credit against such shareholder's United States federal income tax provided the
required information is furnished to the Internal Revenue Service.
The foregoing discussion is only a brief summary of certain additional
tax considerations affecting the Portfolio and its shareholders. No attempt is
made to present a detailed explanation of all federal, state, local and foreign
tax concerns, and the discussion set forth here and in the Prospectus is not
intended as a substitute for careful tax planning. Investors are urged to
consult their own tax advisers with specific questions relating to federal,
state, local and foreign taxes.
- --------------------------------------------------------------------------------
INVESTMENT SUITABILITY
- --------------------------------------------------------------------------------
Section 404 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), imposes certain duties on fiduciaries of employee benefit
plans which are subject to its provisions. While ERISA does not prohibit a
fiduciary from investing in any specific type of asset, it does require a
fiduciary to discharge his or her duties solely in the interest of plan
participants and their beneficiaries with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of like character and with like aims. In addition, Section 404 of
ERISA requires a fiduciary to diversify the investments of a plan so as to
minimize the risk of large losses, unless under the circumstances it is clearly
prudent not to do so. Plan fiduciaries should give appropriate consideration to
all relevant factors in deciding whether to authorize the purchase of shares of
the Portfolio, including the opportunity for gain and the risk of loss, the
plan's overall investment portfolio and its needs for diversification,
liquidity, current return relative to anticipated cash flow requirements, and
projected return relative to funding objectives.
The foregoing discussion is merely a summary of certain issues that a
fiduciary of an employee benefit plan investor should evaluate when considering
an investment in the Fund. Fiduciaries are urged to consult with their legal
advisers before investing plan assets in shares of the Portfolio.
- --------------------------------------------------------------------------------
PURCHASE OF SHARES
- --------------------------------------------------------------------------------
For information pertaining to the manner in which shares of the
Portfolio are offered to the public, see the Prospectus, "Purchase of Shares."
The Fund reserves the right, in its sole discretion, to (i) suspend the offering
of shares of the Portfolio, and (ii) reject purchase orders when, in the
judgment of management, such suspension or rejection is in the best interest of
the Fund. The officers of the Fund may, from time to time, waive the minimum
initial and subsequent investment requirements.
If LTCB-MAS Investment Management, Inc. ("LTCB-MAS") or one of its
affiliates has a pre-existing fiduciary relationship with an employee benefit
plan investor, an independent named fiduciary of the plan must provide prior
written authorization of the plan's investment in the Fund on an Employee
Benefit Plan Fiduciary Authorization Form (provided with the Prospectus).
If accepted by the Portfolio, shares of the Portfolio may be purchased
in exchange for securities which are eligible for acquisition by the Portfolio
as described in the Fund's Prospectus. Securities to be exchanged which are
<PAGE>
-13-
accepted by the Portfolio will be valued in accordance with the procedures
referenced under "Valuation of Shares" in the Fund's Prospectus at the time of
the next determination of net asset value after such acceptance. Shares issued
by a Portfolio in exchange for securities will be issued at net asset value
determined as of the same time. All dividends, interest, subscription, or other
rights pertaining to such securities shall become the property of the Portfolio
whose shares are being acquired and must be delivered to the Portfolio by the
investor upon receipt from the issuer.
The Portfolio will accept securities for their portfolios in exchange
for shares issued by them, but only if (1) such securities are, at the time of
the exchange, eligible to be included in the Portfolio whose shares are to be
issued and current market quotations are readily available for such securities;
(2) the investor represents and agrees that all securities offered to be
exchanged are not subject to any restrictions upon their sale by the Portfolio
under the 1933 Act or under the laws of the country in which the principal
market for such securities exists, or otherwise; (3) the value of any such
security (except U.S. Government securities) being exchanged together with other
securities of the same issuer owned by the Portfolio will not exceed 5% of the
net assets of the Portfolio immediately after the transaction; and (4) such
securities are consistent with the Portfolio's investment objective and
policies, as applied by the Adviser (as defined under "Investment Management"
below), and otherwise acceptable to the Adviser in its sole discretion.
A gain or loss for federal income tax purposes may be realized by
taxable investors making in-kind purchases upon the exchange depending upon the
cost of the securities exchanged. Investors interested in such exchanges should
contact LTCB-MAS.
- --------------------------------------------------------------------------------
REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the "NYSE") or
the bond market is closed, or trading on the NYSE is restricted as determined by
the SEC, (ii) during any period when an emergency exists as defined by the rules
of the SEC as a result of which it is not reasonably practicable for the
Portfolio to dispose of securities owned by it, or fairly to determine the value
of its assets, and (iii) for such other periods as the SEC may permit.
The Fund has made an election with the SEC to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Portfolio
at the beginning of such period. Such commitment is irrevocable without the
prior approval of the SEC. Redemptions in excess of the above limits may be paid
in whole or in part in investment securities or in cash, as the Board of
Directors may deem advisable; however, payment will be made wholly in cash
unless the Board of Directors believes that economic or market conditions exist
which would make such a practice detrimental to the best interests of the Fund.
If redemptions are paid in investment securities, such securities will be valued
as set forth in the Fund's Prospectus under "Valuation of Shares" and redeeming
shareholders would normally incur brokerage expenses if they converted these
securities to cash.
No charge is made by the Portfolio for redemptions. Redemption proceeds
may be more or less than the shareholder's cost depending on the market value of
the securities held by the Portfolio.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
- --------------------------------------------------------------------------------
The Portfolio's net asset value per share is determined by dividing the
total market value of the Portfolio's investments and other assets, less any
liabilities, by the total outstanding shares of the Portfolio. Net asset value
per share is determined as of 4:00 p.m., Eastern Standard time, on each day that
the NYSE and the Portfolio are open for business. Securities listed on a U.S.
securities exchange or NASDAQ for which market quotations are available are
valued at the last quoted sale price on the day the valuation is made. Price
information on listed securities is taken from the exchange where the security
is primarily traded. Securities listed on a foreign exchange are valued at
<PAGE>
-14-
the latest quoted sales price available on the exchange where they are primarily
traded before the time when assets are valued. For purposes of net asset value
per share, all assets and liabilities initially expressed in foreign currencies
are converted into U.S. dollars at the bid price of such currencies against U.S.
dollars last quoted by any major bank. Unlisted securities and listed U.S.
securities not traded on the valuation date for which market quotations are
readily available are valued at the mean of the most recent quoted bid and asked
price. The value of other assets and securities for which no quotations are
readily available (including restricted securities) is determined in good faith
at fair value using methods approved by the Board of Directors.
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
The following supplements the shareholder services set forth in the
Fund's Prospectus:
TRANSFER OF SHARES
Shareholders may transfer shares of the Portfolio to another person by
written request to the Minerva Fund, Inc., P.O. Box 182489, Columbus, OH
43218-2489. The request should clearly identify the account and number of shares
to be transferred and include the signature of all registered owners and all
share certificates, if any, which are subject to the transfer. The signature on
the letter of request, the share certificate or any stock power must be
guaranteed in the same manner as described under "Redemption of Shares" in the
Prospectus. As in the case of redemptions, the written request must be received
in good order before any transfer can be made.
- --------------------------------------------------------------------------------
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
The Portfolio of the Fund is subject to the following restrictions
which are fundamental policies and may not be changed without the approval of
the lesser of: (1) at least 67% of the voting securities of the Portfolio
present at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented by proxy, or (2) more
than 50% of the outstanding voting securities of the Portfolio. The Portfolio
will not:
(a) invest in physical commodities or contracts on physical
commodities;
(b) purchase or sell real estate, although it may purchase and sell
securities of companies which deal in real estate, other than real
estate limited partnerships, and may purchase and sell marketable
securities which are secured by interests in real estate;
(c) make loans except (i) by purchasing debt securities in accordance
with its investment objective and policies, or entering into repurchase
agreements, subject to the applicable limitations of its investment
policies, (ii) by lending its portfolio securities;
(d) with respect to 75% of its assets, purchase a security if, as a
result, it would hold more than 10% (taken at the time of such
investment) of the outstanding voting securities of any issuer;
(e) with respect to 75% of its assets, purchase securities of any
issuer if, as a result, more than 5% of the Portfolio's total assets,
taken at market value at the time of such investment, would be invested
in securities of such issuer except that this restriction does not
apply to securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities;
(f) borrow money, except (i) as a temporary measure for extraordinary
or emergency purposes or (ii) in connection with reverse repurchase
agreements provided that (i) and (ii) in combination do not exceed
33-1/3% of the Portfolio's total assets (including the amount borrowed)
less liabilities (exclusive of borrowings), provided, however, that
trading in futures contracts, options on futures contracts and options
<PAGE>
-15-
and entering into swap transactions shall not be deemed to involve a
"borrowing" for purposes of this limitation, and provided further that
additional portfolio securities may not be purchased by the Portfolio
while borrowings and reverse repurchase agreements exceed 5% of the
Portfolio's total assets;
(g) underwrite the securities of other issuers (except to the extent
that the Portfolio may be deemed to be an underwriter within the
meaning of the 1933 Act in the disposition of restricted securities);
and
(h) acquire any securities of companies within one industry if, as a
result of such acquisition, more than 25% of the value of the
Portfolio's total assets would be invested in securities of companies
within such industry; provided, however, that there shall be no
limitation on the purchase of obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or instruments
issued by U.S. banks when the Portfolio adopts a temporary defensive
position.
In addition to the foregoing fundamental limitations, as a matter of
non-fundamental operating policy, the Portfolio will not:
(1) enter into futures contracts, options on futures contracts or
options to the extent that its aggregate net outstanding obligation
under such instruments exceeds 35% of the Portfolio's total assets;
(2) invest in puts, calls, straddles or spreads, except as described
above in (1);
(3) purchase on margin, except for use of short-term credit as may be
necessary for the clearance of purchases and sales of securities, but
it may make margin deposits in connection with transactions in options,
futures and options on futures; or sell short unless, (i) by virtue of
its ownership of other securities, it has the right to obtain
securities equivalent in kind and amount to the securities sold and, if
the right is conditional, the sale is made upon the same conditions or,
(ii) it maintains in a segregated account on the books of the
Portfolio's custodian an amount that, when combined with the amount of
collateral deposited with the broker in connection with the short sale,
equals the current market value of the security sold short or such
other amount as the SEC or its staff may permit by rule, regulation,
order or interpretation. Transactions in futures contracts and options
are not deemed to constitute selling securities short;
(4) borrow money other than from banks;
(5) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 33-1/3% of its total assets at fair market value, provided
that the Portfolio may segregate assets without limit in order to
comply with the requirements of Section 18(f) of the 1940 Act and
applicable rules, regulations or interpretation of the SEC and its
staff;
(6) invest more than an aggregate of 15% of the total assets of the
Portfolio, determined at the time of investment, in securities subject
to legal or contractual restrictions on resale or securities for which
there are no readily available markets, including repurchase agreements
having maturities of more than seven days and over-the-counter options,
provided that there is no limitation with respect to or arising out of
investment in (i) securities that have legal or contractual
restrictions on resale but have a readily available market or (ii)
securities that are not registered under the 1933 Act but which can be
sold to qualified institutional investors in accordance with Rule 144A
under the 1933 Act;
(7) invest for the purpose of exercising control over management of any
company; and
(8) invest its assets in securities of any investment company, except
by purchase in the open market involving only customary brokers'
commissions or in connection with mergers, acquisitions of assets or
consolidations and except as may otherwise be permitted by the 1940
Act.
<PAGE>
-16-
- --------------------------------------------------------------------------------
OFFICERS AND DIRECTORS OF THE FUND
- --------------------------------------------------------------------------------
The Fund's officers, under the supervision of the Board of Directors,
manage the day-to-day operations of the Fund. The Board of Directors sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past 5 years are set forth in the Fund's
Prospectus.
The Fund pays each Director an annual fee of $2,000 plus a fee of $500
and reimbursement for travel and other expenses per Board meeting attended. The
Fund's officers are paid by BISYS Fund Services Limited Partnership.
<TABLE>
<CAPTION>
DIRECTOR COMPENSATION
(for fiscal year ended September 30, 1996)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total
Aggregate Pension or Compensation
Name of Compensation Retirement Estimated Annual From Registrant
Person, From Benefits Accrued Benefits Upon and Fund Complex
Position Registrant Expenses As Part of Fund Retirement Paid to
Directors
James D. Schmid $5,000 0 N/A $5,000
Director
Carl T. Hagberg $6,000 0 N/A $6,000
Director
Raymond F. Miller $6,000 0 N/A $6,000
Director
Charles A. Parker $5,000 0 N/A $5,000
Director
</TABLE>
- --------------------------------------------------------------------------------
As of November 4, 1996, the Directors and Officers, as a group did
not own 1% or more of the Fund.
- --------------------------------------------------------------------------------
INVESTMENT MANAGEMENT
- --------------------------------------------------------------------------------
LTCB-MAS acts as the Fund's investment manager and has overall
responsibility for supervising the investment program of the Portfolio.
LTCB-MAS, a joint subsidiary of The Long-Term Credit Bank of Japan, Limited
("LTCB") and MA&S, is registered under the Investment Advisers Act of 1940, as
amended and provides investment counseling services to employee benefit plans
and other institutional investors. As of September 30, 1996, LTCB-MAS had assets
under management in excess of $750 million. LTCB, with over $300 billion in
assets as of September 30, 1996, is one of the 25 largest banks in the world.
MA&S provides investment counseling services primarily to institutional
investors and as of September 30, 1996, had assets under management in excess of
$37 billion. The selection on a day-to-day basis of appropriate investments for
the Portfolio is made by MA&S acting in collaboration with and under the
supervision of LTCB-MAS. As used in this Statement of Additional Information,
the term "Adviser" refers to LTCB-MAS and MA&S acting in collaboration in the
provision of investment advisory services to the Portfolio.
Sixty percent of the outstanding capital stock of LTCB-MAS is owned by
LTCB Capital Markets, Inc. ("LCM") which, in turn, is wholly owned by LTCB.
Forty percent of the outstanding capital stock of LTCB-MAS is owned by MA&S. The
sole general partner of MA&S is Morgan Stanley Asset Management Holdings Inc.
("MSAM"), and indirect wholly owned subsidiary of Morgan Stanley Group Inc.
("MSGI"). MSAM and two other wholly owned subsidiaries of MSGI are the limited
partners of MA&S. The principal offices of LTCB-MAS are
<PAGE>
-17-
located at One Tower Bridge, Suite 1000, West Conshohocken, Pennsylvania 19428.
The principal offices of MA&S are located at One Tower Bridge, Suite 1150, West
Conshohocken, Pennsylvania 19428.
Pursuant to an investment management agreement (the "Investment
Management Agreement") with the Fund, LTCB-MAS has responsibility for the
investment and reinvestment of the assets of the Portfolio and will supervise
the investment program of the Portfolio in accordance with the stated investment
objective and policies of the Portfolio. The activities of LTCB-MAS as
investment manager shall remain under the control and supervision of the Fund's
Board of Directors. LTCB-MAS shall advise and consult with MA&S regarding each
Portfolio's overall investment strategy and consult with MA&S on at least a
weekly basis regarding specific decisions concerning the purchase, sale or
holding of particular securities. As compensation for the services rendered by
LTCB-MAS under the Investment Management Agreement, the Portfolio will pay
LTCB-MAS an investment management fee calculated and accrued daily and paid
monthly, based on .50% of the Portfolio's average daily net assets for the
month.
For the fiscal year ended September 30, 1996 LTCB-MAS waived $81,937 of
its fee and for the fiscal years ended September 30, 1995 and September 30,
1994, LTCB-MAS waived its entire fee of $55,698 and $50,780, respectively, for
the Portfolio. In addition, for the fiscal years ended September 30, 1996,
September 30, 1995 and September 30, 1994 LCM voluntarily reimbursed expenses of
$13,124, $89,818 and $0, respectively, for the Portfolio.
Pursuant to an investment services agreement (the "Investment Services
Agreement") between LTCB-MAS and MA&S, MA&S, acting in collaboration with and
under the supervision of LTCB-MAS, is responsible on a day-to-day basis for
selecting investments for the Portfolio in conformity with the stated investment
objective and policies of the Portfolio. MA&S will place purchase and sale
orders for the Portfolio's portfolio securities. MA&S receives no fee pursuant
to the Investment Services Agreement for the services it provides.
In cases where a shareholder of the Portfolio has an investment
counseling relationship with LTCB-MAS, LTCB-MAS may reduce the investment
counseling fees paid by the client directly to LTCB-MAS. This procedure will be
utilized with clients having contractual relationships based on total assets
managed by LTCB-MAS to avoid situations where excess investment management fees
might be paid to LTCB-MAS. In no event will a client pay higher total investment
management fees as a result of the client's investment in the Fund.
The Investment Management Agreement and the Investment Services
Agreement became effective on January 3, 1996, and were approved in connection
with the acquisition of MA&S by MSGI. The Investment Management Agreement and
the Investment Services Agreement are substantially identical to the investment
management agreement and the investment services agreement, respectively, which
were effective prior to the consummation of such acquisition. Each Agreement
continues in effect until January 3, 1998 and for successive one year periods
thereafter if approved by a vote of the Fund's Board of Directors, including the
affirmative votes of a majority of the Directors who are not parties to the
agreement or "interested persons" (as defined in the 1940 Act) of any such party
in person at a meeting called for the purpose of considering such approval. In
addition, the question of continuance of the Investment Management Agreement or
the Investment Services Agreement may be presented to the shareholders of the
Portfolio; in such event, continuance shall be effected only if approved by the
affirmative vote of a majority of the outstanding voting securities of the
Portfolio. The Investment Management Agreement and the Investment Services
Agreement are automatically terminated if assigned, and may be terminated by the
Portfolio without penalty, at any time, (1) either by vote of the Board of
Directors or by vote of the outstanding voting securities of the Portfolio on
sixty (60) days' written notice, (2) in the case of the Investment Management
Agreement, by LTCB-MAS upon ninety (90) days' notice to the Fund, or (3) in the
case of the Investment Services Agreement, by LTCB-MAS or MA&S upon 90 days'
notice to the Fund and the other party thereto.
<PAGE>
-18-
The Fund bears all of its own costs and expenses, including: services
of its independent accountants, its administrator and dividend disbursing and
transfer agent, legal counsel, taxes, insurance premiums, costs incidental to
meetings of its shareholders and Board of Directors, the cost of filing its
registration statements under federal and state securities laws, reports to
shareholders, and custodian fees. These Fund expenses are, in turn, allocated to
the Portfolio, based on the Portfolio's relative net assets. The Portfolio bears
its own advisory fees and brokerage commissions and transfer taxes in connection
with the acquisition and disposition of its investment securities. LTCB-MAS has
agreed to reimburse the Portfolio for total annual operating expenses in excess
of 1.00% of average net assets for a period of at least one year from the date
of this Statement of Additional Information.
- --------------------------------------------------------------------------------
DISTRIBUTOR FOR THE FUND
- --------------------------------------------------------------------------------
BISYS Fund Services Limited Partnership, with its principal office at
3435 Stelzer Road, Columbus, Ohio 43219, distributes the shares of the Fund.
Under a distribution agreement (the "Distribution Agreement"), BISYS Fund
Services Limited Partnership, as agent of the Fund, agrees to use its best
efforts as sole distributor of the Fund's shares. BISYS Fund Services Limited
Partnership does not receive any fee or other compensation under the
Distribution Agreement which continues in effect so long as such continuance is
approved at least annually by the Fund's Board of Directors, including a
majority of those Directors who are not parties to such Distribution Agreement
nor interested persons of any such party. The Distribution Agreement provides
that the Fund will bear the costs of the registration of its shares with the SEC
and various states and the printing of its prospectuses, statements of
additional information and reports to shareholders.
- --------------------------------------------------------------------------------
PORTFOLIO TRANSACTIONS
- --------------------------------------------------------------------------------
The Investment Services Agreement authorizes MA&S to select the brokers
or dealers that will execute the purchases and sales of investment securities
for the Portfolio and directs MA&S to use its best efforts to obtain the best
execution with respect to all transactions for the Portfolio.
In doing so, the Portfolio may pay higher commission rates than the
lowest available when MA&S believes it is reasonable to do so in light of the
value of the research, statistical and pricing services provided by the broker
effecting the transaction.
Total brokerage commissions paid by the Portfolio amounted to $84,462,
$14,369 and $-0-, respectively, for the fiscal years ended September 30, 1996,
September 30, 1995 and September 30, 1994.
Since shares of the Portfolio are not marketed through intermediary
brokers or dealers, it is not the Fund's practice to allocate brokerage or
principal business on the basis of sales of shares which may be made through
such firms. However, MA&S may place portfolio orders with qualified
broker-dealers who recommend the Portfolio or who act as agents in the purchase
of shares of the Portfolio for their clients.
Some securities considered for investment by the Portfolio may also be
appropriate for other clients served by MA&S. If purchases or sales of
securities consistent with the investment policies of the Portfolio and one or
more of these other clients served by MA&S are considered at or about the same
time, transactions in such securities will be allocated among the Portfolio and
clients in a manner deemed fair and reasonable by MA&S. Although there is no
specified formula for allocating such transactions, the various allocation
methods used by MA&S, and the results of such allocations, are subject to
periodic review by the Fund's Board of Directors.
- --------------------------------------------------------------------------------
ADMINISTRATION, CUSTODY AND TRANSFER AGENCY SERVICES
- --------------------------------------------------------------------------------
BISYS Fund Services Limited Partnership provides the Fund with
administrative and fund accounting services pursuant to Administration and
Accounting Agent Agreements each dated as of October 1, 1996. The services
provided by and the fees payable to BISYS Fund Services Limited Partnership for
such services are
<PAGE>
-19-
described in the Prospectus. The Administration and Accounting Agent Agreements
continue in effect until October 1, 1997 and from year to year thereafter if
such continuance is approved at least annually by the Fund's Board of Directors
and by a majority of the Directors who are not parties to such Agreement or
"interested persons" (as defined in the 1940 Act) of any party, and such
Agreement may be terminated by either party on 60 days' written notice.
The Portfolio's predecessor Administrator was Furman Selz LLC ("Furman
Selz"). For the fiscal year ended September 30, 1996, Furman Selz received
$42,231 in administrative fees of which $26,982 was voluntarily waived. In
addition, Furman Selz was entitled to an annual fee of $30,000 for performing
fund accounting services of which $10,000 was voluntarily waived. For the fiscal
year ended September 30, 1995, Furman Selz received $17,154 in administrative
fees and $30,000 for performing fund accounting services. For the fiscal year
ended September 30, 1995 the Fund paid $45,000 in fund accounting fees which
included out-of-pocket expenses. For the fiscal year ended September 30, 1994,
Furman Selz waived its entire administrative fee of $15,234 for the Portfolio.
In addition, for the fiscal year ended September 30, 1994, Furman Selz waived
$19,777 of its fund accounting fee.
BISYS Fund Services, Inc. serves as the Fund's Transfer Agent and
Dividend Disbursing Agent pursuant to a transfer agency agreement (the "Transfer
Agency Agreement") with the Fund. Under the Transfer Agency Agreement, BISYS
Fund Services, Inc. has agreed, among other things, to: (i) issue and redeem
shares of the Portfolio; (ii) transmit all communications by the Portfolio to
its shareholders of record, including reports to shareholders, dividend and
distribution notices and proxy materials for meetings of shareholders; (iii)
respond to correspondence by security brokers and others relating to its duties;
(iv) maintain shareholder accounts; and (v) make periodic reports to the Board
of Directors concerning the Portfolio's operations. Under the Transfer Agency
Agreement, BISYS Fund Services, Inc. is entitled to a fee of $15 per account per
year. The Transfer Agency Agreement continues in effect until October 1, 1997
and from year to year thereafter if such continuance is approved at least
annually by the Fund's Board of Directors and by a majority of the Directors who
are not parties to such Agreement or "interested persons" (as defined in the
1940 Act) of any party, and such Agreement may be terminated by either party on
60 days' written notice. The Portfolio's predecessor Transfer Agent and Dividend
Disbursing Agent was Furman Selz LLC. For the fiscal years ended September 30,
1996 and September 30, 1995 the Portfolio paid $9,027 and $8,500, respectively,
in Transfer Agency fees which numbers include out-of-pocket expenses. For the
fiscal year ended September 30, 1994, the Portfolio paid $8,481 in Transfer
Agency fees.
LTCB Trust Company (the "Custodian") serves as the Fund's custodian
pursuant to a custodian agreement (the "Custodian Agreement") with the Fund. The
Custodian is located at 165 Broadway, New York, New York 10006. Under the
Custodian Agreement, the Custodian has agreed to (i) maintain a separate account
or accounts in the name of the Portfolio; (ii) hold and disburse portfolio
securities on account of the Portfolio; (iii) collect and receive all income and
other payments and distributions on account of the Portfolio's portfolio
securities; (iv) respond to correspondence by security brokers and others
relating to its duties; and (v) make periodic reports to the Fund's Board of
Directors concerning the Portfolio's operations. The Custodian is authorized
under the Custodian Agreement to select one or more banks or trust companies to
serve as sub-custodian on behalf of the Portfolio, provided that the Custodian
remains responsible for the performance of all of its duties under the Custodian
Agreement. The Custodian under the Custodian Agreement is entitled to receive
monthly fees based upon the types of assets held by the Portfolio, at the annual
rate of up to .05% of the value of assets held in the United States, depending
on the types of assets, and at the annual rate of up to .15% of the value of
assets held outside the United States, depending on country in which such assets
are held; securities transaction fees and income collection fees of up to $25.00
per transaction involving a security held in the United States and up to $85.00
per transaction for a security held outside the United States; specified fees
for optional additional services, if utilized; and out-of-pocket expenses. The
Custodian Agreement continues in effect until September 28, 1997 and from year
to year thereafter if such continuance is approved at least annually by the
Fund's Board of Directors and by a majority of the Directors who are not parties
to such Agreement or "interested persons" (as defined in the 1940 Act) of any
party, and such Agreement may be terminated by either party on 60 days' written
notice. LTCB Trust Company is a wholly owned subsidiary of LTCB. For the fiscal
years ended September 30, 1996, September 30, 1995 and September 30, 1994
<PAGE>
-20-
LTCB Trust Company received $36,300, $16,044 and $14,102, respectively, for the
Portfolio for their services as Custodian.
- --------------------------------------------------------------------------------
GENERAL INFORMATION
- --------------------------------------------------------------------------------
CAPITAL STOCK
For additional information as to the organization and capital stock of
the Fund, see "General Information -Organization and Capital Stock" in the
Prospectus.
As used in the Prospectus and in this Statement of Additional
Information, the term "majority", when referring to the approvals to be obtained
from shareholders in connection with matters affecting the Portfolio, or any
portfolio that may be commenced in the future (e.g., approval of advisory
contracts), means the vote of the lesser of (i) 67% of the shares of the
Portfolio represented at a meeting if the holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy, or (ii)
more than 50% of the outstanding shares of the Portfolio. Shareholders are
entitled to one vote for each full share held and the fractional votes for
fractional shares held.
The By-Laws of the Fund provide that the Fund shall not be required to
hold an annual meeting of shareholders in any year in which the election of the
Directors to the Fund's Board of Directors is not required to be acted upon
under the 1940 Act.
Each share of the Portfolio will be entitled to such dividends and
distributions out of the assets belonging to that portfolio as are declared in
the discretion of the Fund's Board of Directors. In determining a portfolio's
net asset value, assets belonging to a particular portfolio will be credited
with a proportionate share of any general assets of the Fund not belonging to a
particular portfolio and are charged with the direct liabilities in respect of
that portfolio and with a share of the general liabilities of the Fund which
will normally be allocated in proportion to the relative net asset values of the
respective portfolios at the time of allocation.
In the event of the liquidation or dissolution of the Fund, shares of a
portfolio will be entitled to receive the assets attributable to that portfolio
that are available for distribution, and a proportionate distribution, based
upon the relative net assets of the portfolios, of any general assets not
attributable to a portfolio that are available for distribution. Shareholders
are not entitled to any preemptive rights.
Subject to the provisions of the Fund's Articles of Incorporation,
determinations by the Board of Directors as to the direct and allocable
liabilities, and the allocable portion of any general assets of the Fund, with
respect to a particular portfolio will be conclusive.
As of November 4, 1996, the following persons owned of record and
beneficially 5% or more of the Fund:/
SHARES OWNED PERCENTAGE
The Sumitomo Trust 1,817,485.594 38.83%
and Banking Co. Ltd.
16157-003
11-5 Nihonbashi-Honcho
4 Chome, Chuo-Ku, Tokyo
- ----------
// The Sumitomo Trust and Banking Co. Ltd ("Sumitomo") is listed above as
owning beneficially 25% or more of the outstanding shares of the
Portfolio and may be presumed to "control" (as that term is defined in
the 1940 Act) the Portfolio. As a result, Sumitomo would have the
ability to vote a majority of the shares of the Portfolio on any matter
requiring the approval of shareholders. Sumitomo is a custodian for
Japanese pension fund clients.
<PAGE>
-21-
Marine Midland Bank Trustee FBO 598,846.378 12.79%
Dunlop Tire Corp - Salaried Pension
Attn: Clair Lindauer AVP
Employee Benefit Trust Service
1 Marine Midland Center
Buffalo, N.Y. 14203-2842
Marine Midland Bank Trustee FBO 598,846.378 12.79%
Dunlop Tire Corp
Buffalo Hourly Pension Plan (1950)
Attn: Clair Lindauer AVP
Employee Benefit Trust Service
1 Marine Midland Center
Buffalo, N.Y. 14203-2842
Yasuda Trust and Banking Co. Ltd. 422,372.000 9.02%
Tokkin 9756
Fund Administration
2-1 Yaesu 1-Chome,
Chuo-Ku, Tokyo
The Mitsui Trust 412,289.961 8.81%
1-1 Nihonbashi-Muromachi
2-Chome, Chuo-Ku, Tokyo 103
The Toyo Trust 300,393.303 6.42%
7-2 Nihonbashi-Koamicho
Chuo-Ku, Tokyo 103
VALIDITY OF SHARES
The validity of the shares has been passed upon for the Fund by Piper &
Marbury, Baltimore, Maryland.
DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS
The Fund's policy is to distribute substantially all of the Portfolio's
net investment income, if any, together with any net realized capital gains in
the amount and at the times that will avoid both income (including capital
gains) taxes and the imposition of the federal excise tax on undistributed
income and capital gains. See discussion under "Dividends, Capital Gains
Distributions and Taxes" in the Prospectus. The amounts of any income dividends
or capital gains distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Portfolio by an investor may have the effect of reducing the per share
net asset value of the Portfolio by the per share amount of the dividend or
distribution. Furthermore, such dividends or distributions, although in effect a
return of capital, are subject to income taxes as set forth in the Prospectus.
As set forth in the Prospectus, unless the shareholder elects otherwise
in writing, all dividends and capital gains distributions are automatically
received in additional shares of the Portfolio of the Fund at net asset value
(as of the business day following the record date). This will remain in effect
until the Fund is notified by the shareholder in writing at least three days
prior to the record date that either the Income Option (income dividends in cash
and capital gains distributions in additional shares at net asset value) or the
Cash Option (both income
<PAGE>
-22-
dividends and capital gains distributions in cash) has been elected. An account
statement is sent to shareholders whenever an income dividend or capital gains
distribution is paid.
- --------------------------------------------------------------------------------
PERFORMANCE CALCULATIONS
- --------------------------------------------------------------------------------
The Fund may from time to time quote various performance figures to
illustrate the past performance of the Portfolio. Performance quotations by
investment companies are subject to rules adopted by the SEC, which require the
use of standardized performance quotations or, alternatively, that every
non-standardized performance quotation furnished by the Fund be accompanied by
certain standardized performance information computed as required by the SEC. An
explanation of the SEC methods for computing performance follows.
TOTAL RETURN
The Portfolio's average annual total return is determined by finding
the average annual compounded rates of return over 1, 5 and 10 year periods (or,
if shorter, the period since inception of the Portfolio) that would equate an
initial hypothetical $1,000 investment to its ending redeemable value. The
calculation assumes that all dividends and distributions are reinvested when
paid. The quotation assumes the amount was completely redeemed at the end of
each 1, 5 and 10 year period (or, if shorter, the period since inception of the
Portfolio) and the deduction of all applicable Fund expenses on an annual basis.
Average annual total return is calculated according to the following formula:
P (1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
stated period
The Portfolio may also calculate total return on an aggregate basis
which reflects the cumulative percentage change in value over the measuring
period. The formula for calculating aggregate total return can be expressed as
follows:
Aggregate Total Return [ ( ERV )- 1 ]
---
P
For the fiscal year ended September 30, 1996, the total return for the
Portfolio was 16.37%. Total return is an aggregate and has not been annualized,
and reflects voluntary fee waivers. For the period October 1, 1993 (commencement
of operations) through September 30, 1996, the cumulative total return for the
Portfolio was 13.79%
The performance of the Portfolio may be compared to data prepared by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., the Donoghue Organization, Inc. or other independent services
which monitor the performance of investment companies, and may be quoted in
advertising in terms of their rankings in each applicable universe. In addition,
the Fund may use performance data reported in financial and industry
publications, including Barron's, Business Week, Forbes, Fortune, Investor's
Daily, IBC/Donoghue's Money Fund Report, Money Magazine, The Wall Street Journal
and USA Today.
- --------------------------------------------------------------------------------
COMPARATIVE INDICES
- --------------------------------------------------------------------------------
The Portfolio may from time to time use one or more of the following
unmanaged indices for performance comparison purposes:
<PAGE>
-23-
NASDAQ INDUSTRIALS INDEX
The NASDAQ Industrials Index is a measure of all NASDAQ National Market System
issues classified as industrial based on Standard Industrial Classification
codes relative to a company's major source of revenue. The index is exclusive of
warrants and all domestic common stocks traded in the regular NASDAQ market
which are not part of the NASDAQ National Market System. The NASDAQ Industrials
Index is market value weighted.
RUSSELL 1000 INDEX
The Russell 1000 Index consists of the 1000 largest of the 3000 largest stocks.
Market capitalization is typically between $450 million and $80 billion. The
list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 1000 stocks in the Russell 1000 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
RUSSELL 2000 INDEX
The Russell 2000 Index consists of the 2000 smallest of the 3000 largest stocks.
Market capitalization is typically between $35 million and $450 million. The
list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 2000 stocks in the Russell 2000 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
RUSSELL 2500 INDEX
The Russell 2500 Index consists of the 2500 smallest of the 3000 largest stocks.
Market capitalization is typically between $1.2 billion and $35 million. The
list is rebalanced each year on June 30. If a stock is taken over or goes
bankrupt, it is not replaced until rebalancing. Therefore, there can be fewer
than 2500 stocks in the Russell 2500 Index. The index is an equity market
capitalization weighted index available from Frank Russell & Co. on a monthly
basis.
S&P 500
The S&P 500 is a portfolio of 500 stocks designed to mimic the overall equity
market's industry weightings. Most, but not all, large capitalization stocks are
in the index. There are also some small capitalization names in the index. The
list is maintained by Standard & Poor's and is market capitalization weighted.
Unlike the Russell indices, there are always 500 names in the S&P 500. Changes
are made by Standard & Poor's as needed.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Minerva Fund, Inc.
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio 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 Minerva Equity Portfolio
(constituting Minerva Fund, Inc., hereafter referred to as the "Portfolio") at
September 30, 1996, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended
and the financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio'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 generally accepted
auditing standards 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 September 30, 1996 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York
November 7, 1996
F-1
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2a)
- ------------ ------------ -------------
<S> <C> <C> <C>
COMMON STOCKS - 93.7%
AEROSPACE - 0.5%
2,200 Loral Space & Communications Ltd......................... $ 29,635 $ 34,650
5,400 Raytheon Co.............................................. 248,339 300,375
------------ -------------
277,974 335,025
------------ -------------
AIR TRANSPORTATION - 1.3%
10,100 AMR Corp*................................................ 846,556 804,212
------------ -------------
APPAREL - 0.9%
5,400 Fruit of the Loom Inc*................................... 149,249 167,400
2,400 Springs Industries Inc - Class A......................... 101,619 106,800
2,400 Tommy Hilfiger Corp*..................................... 117,490 142,200
2,900 VF Corp.................................................. 163,354 174,363
------------ -------------
531,712 590,763
------------ -------------
AUTOMOBILES - 1.7%
19,300 Chrysler Corporation..................................... 575,189 552,462
10,500 General Motors Corp...................................... 562,380 504,000
------------ -------------
1,137,569 1,056,462
------------ -------------
AUTOMOTIVE RELATED - 0.7%
9,900 Goodyear Tire and Rubber Co.............................. 466,069 456,637
------------ -------------
BANKS - 5.7%
9,400 Chase Manhattan Corp..................................... 674,164 753,175
3,900 Citicorp................................................. 312,222 353,437
2,700 Crestar Financial Corp................................... 146,000 159,300
12,800 First Chicago NBD Corp................................... 540,556 579,200
11,900 First Union Corp......................................... 731,118 794,325
6,500 NationsBank Corp......................................... 545,403 564,688
3,600 Republic NY Corp......................................... 231,204 248,850
4,700 U.S. Bancorp............................................. 153,130 185,650
------------ -------------
3,333,797 3,638,625
------------ -------------
BASIC CHEMICALS - 2.9%
4,500 Airgas Inc*.............................................. 88,359 114,187
17,200 Du Pont (E.I.) De Nemours................................ 1,308,845 1,517,900
2,900 Rohm & Haas Co........................................... 176,812 189,950
------------ -------------
1,574,016 1,822,037
------------ -------------
BEVERAGES - 1.6%
35,400 Pepsico Inc.............................................. 1,122,321 1,000,050
------------ -------------
BUILDING AND HOUSING - 0.3%
3,800 Danaher Corp............................................. 144,316 157,225
------------ -------------
BUSINESS SERVICES - 0.6%
800 Cintas Corp.............................................. 31,300 44,800
11,200 PHH Corp................................................. 284,190 333,200
------------ -------------
315,490 378,000
------------ -------------
COMPUTERS AND OFFICE EQUIPMENT - 3.6%
11,700 Cisco Systems Inc*....................................... 608,094 726,132
10,100 Compaq Computer Corp..................................... 508,344 647,662
3,600 Seagate Technology Inc*.................................. 197,141 201,150
4,200 Stratus Computer, Inc*................................... 113,287 82,950
9,400 U.S. Robotics Inc*....................................... 563,092 607,476
------------ -------------
1,989,958 2,265,370
------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1996 - (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2a)
- ------------ ------------ -------------
<S> <C> <C> <C>
COMPUTER SOFTWARE AND SERVICES - 2.6%
4,000 Fiserv, Inc*............................................. $ 118,537 $ 153,000
2,400 McAfee Associates Inc*................................... 122,887 165,600
7,900 Microsoft Corp.*......................................... 961,800 1,041,813
6,850 Oracle Systems Corp*..................................... 212,723 291,553
------------ -------------
1,415,947 1,651,966
------------ -------------
CONSUMER DURABLES - 0.4%
4,500 Tupperware Corp.......................................... 165,979 220,500
------------ -------------
CREDIT AND FINANCE - 0.4%
5,800 Sirrom Capital Corp...................................... 139,272 175,450
1,497 TransAmerica Corp........................................ 101,034 104,603
------------ -------------
240,306 280,053
------------ -------------
DEPARTMENT STORES - 2.8%
6,000 Dillard Department Stores - Class A...................... 214,961 193,500
19,500 Federated Department Stores*............................. 643,995 653,250
21,200 Sears, Roebuck and Co.................................... 960,200 948,700
------------ -------------
1,819,156 1,795,450
------------ -------------
DRUGS - 8.4%
14,700 Abbott Laboratories...................................... 653,369 723,975
12,100 Allergan Inc............................................. 429,765 461,312
3,000 Alza Corp. - Class A*.................................... 82,555 80,625
11,700 American Home Products Corp.............................. 597,690 745,875
12,800 Bristol-Myers Squibb Co.................................. 1,046,518 1,233,600
2,400 Cardinal Health Inc...................................... 167,419 198,300
9,000 Johnson & Johnson........................................ 423,667 461,250
3,600 Merck & Co., Inc......................................... 246,596 253,350
10,500 Schering Plough Corp..................................... 602,583 645,750
4,000 Smithkline Beecham PLC - ADR............................. 224,787 243,500
4,300 Warner-Lambert Co........................................ 248,597 283,800
------------ -------------
4,723,546 5,331,337
------------ -------------
ELECTRICAL EQUIPMENT - 1.5%
10,500 General Electric Co...................................... 863,780 955,500
------------ -------------
ELECTRICAL POWER - 3.4%
5,100 Central & South West Corp................................ 140,924 132,600
9,400 Cinergy Corp............................................. 291,202 290,225
11,700 DTE Energy Co............................................ 356,465 327,600
8,300 Entergy Corp............................................. 237,923 224,100
9,000 GPU Inc.................................................. 298,965 276,750
13,500 Ohio Edison Co........................................... 300,210 261,563
13,900 Peco Energy Company...................................... 357,197 330,125
13,000 Unicom Corporation....................................... 340,768 326,625
------------ -------------
2,323,654 2,169,588
------------ -------------
ELECTRONICS - 1.2%
8,200 Intel Corp............................................... 493,388 782,587
------------ -------------
ENTERTAINMENT & LEISURE - 1.1%
12,100 Carnival Corp. - Class A................................. 356,139 375,100
11,800 Liberty Media Group - Class A*........................... 331,983 337,775
------------ -------------
688,122 712,875
------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1996 - (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2a)
- ------------ ------------ -------------
<S> <C> <C> <C>
FOOD PRODUCTS - 1.8%
11,000 Conagra Inc.............................................. $ 478,098 $ 541,750
3,700 Unilever NV - ADR........................................ 522,835 583,213
------------ -------------
1,000,933 1,124,963
------------ -------------
FOOD RETAILERS - 0.6%
9,000 American Stores Co....................................... 332,465 360,000
------------ -------------
FURNISHINGS AND APPLIANCES - 0.1%
4,500 Premark International, Inc............................... 63,681 84,938
------------ -------------
HEALTH SERVICES - 1.3%
7,636 Columbia/HCA Healthcare Corp............................. 397,974 434,297
5,400 Foundation Health Corp*.................................. 201,149 182,925
1,630 Health Management Associates Inc*........................ 36,366 40,546
9,600 Humana Inc*.............................................. 219,164 194,400
------------ -------------
854,653 852,168
------------ -------------
HEALTH TECHNOLOGY - 0.2%
3,800 Beckman Instruments Inc.................................. 129,591 147,725
------------ -------------
HOSPITAL SUPPLIES - 1.8%
7,200 Baxter International Inc................................. 281,607 336,600
11,700 Becton Dickinson & Co.................................... 419,014 517,725
7,600 Mallinckrodt Group Inc................................... 286,469 316,350
------------ -------------
987,090 1,170,675
------------ -------------
INSURANCE - 7.2%
6,500 Ace Limited.............................................. 281,565 343,687
10,100 Aetna Life & Casualty Co................................. 708,039 710,787
10,256 Allstate Corp............................................ 434,949 505,108
4,000 American General Corp.................................... 137,777 151,000
7,000 Cigna Corp............................................... 801,204 839,125
12,600 Exel Limited............................................. 416,981 437,850
19,000 ITT Hartford Group Inc................................... 984,934 1,121,000
2,400 Providian Corp........................................... 96,536 103,200
6,300 SAFECO Corp.............................................. 209,655 220,500
2,700 St. Paul Companies Inc................................... 140,219 149,850
------------ -------------
4,211,859 4,582,107
------------ -------------
MACHINERY - 2.2%
3,300 Case Corp................................................ 161,898 160,875
3,800 Caterpillar Inc.......................................... 256,153 286,425
8,700 Cummins Engine........................................... 356,862 342,562
7,600 Deere & Co............................................... 276,722 319,200
3,600 Eaton Corp............................................... 206,179 217,350
1,800 Tecumseh Products Co. - Class A.......................... 97,037 97,650
------------ -------------
1,354,851 1,424,062
------------ -------------
MISCELLANEOUS INDUSTRIALS - 2.8%
5,400 FMC Corp*................................................ 349,164 366,525
6,700 ITT Corp*................................................ 391,767 292,287
4,500 Tenneco Inc.............................................. 223,833 225,563
4,200 Textron Inc.............................................. 316,452 357,000
8,100 Trinova Corp............................................. 260,216 255,150
2,900 TRW Inc.................................................. 253,874 269,700
------------ -------------
1,795,306 1,766,225
------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1996 - (CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES COST (NOTE 2a)
- ------------ ------------ -------------
<S> <C> <C> <C>
NATURAL GAS - 1.5%
10,300 Coastal Corp............................................. $ 392,568 $ 424,875
5,200 Columbia Gas System...................................... 296,062 291,200
5,100 El Paso Natural Gas...................................... 191,381 224,400
------------ -------------
880,011 940,475
------------ -------------
NON-FERROUS METALS - 0.3%
3,800 Reynolds Metals Co....................................... 209,803 194,275
------------ -------------
OIL - DOMESTIC AND CRUDE - 3.2%
3,600 Amoco Corp............................................... 257,454 253,800
5,200 Atlantic Richfield Co.................................... 607,325 663,000
3,300 Mapco Inc................................................ 191,386 196,763
17,800 Phillips Petroleum Co.................................... 729,106 760,950
5,600 Ultramar Corp*........................................... 158,525 169,400
------------ -------------
1,943,796 2,043,913
------------ -------------
OIL - INTERNATIONAL - 5.7%
9,400 British Petroleum PLC - ADR.............................. 991,658 1,175,000
7,600 Chevron Corp............................................. 450,356 475,950
8,400 Mobil Corp............................................... 914,992 972,300
7,400 Texaco Inc............................................... 638,232 680,800
8,600 Total S.A. - ADR......................................... 287,754 336,475
------------ -------------
3,282,992 3,640,525
------------ -------------
OTHER CONSUMER SERVICES - 0.5%
10,300 Service Corporation International........................ 246,330 311,575
------------ -------------
PAPER - 0.9%
7,600 Bowater Inc.............................................. 301,368 288,800
6,000 Champion International Corp.............................. 276,973 275,250
------------ -------------
578,341 564,050
------------ -------------
PERSONAL PRODUCTS - 2.6%
10,300 Avon Products Inc........................................ 429,446 511,137
1,800 Estee Lauder Co. - Class A............................... 69,458 80,775
6,962 Kimberley Clark Corp..................................... 480,790 613,526
4,900 Proctor & Gamble Co...................................... 428,607 477,750
------------ -------------
1,408,301 1,683,188
------------ -------------
PUBLISHING AND BROADCASTING - 2.0%
6,750 Comcast Corp. - Class A.................................. 120,380 103,781
4,000 Gannett Co., Inc......................................... 277,715 281,500
8,100 Harcourt General Inc..................................... 400,710 447,525
3,700 Infinity Broadcasting Co. - Class A*..................... 108,061 116,550
6,900 Panamsat Corp*........................................... 179,933 191,906
2,900 Sinclair Broadcasting Group - Class A*................... 95,881 115,638
------------ -------------
1,182,680 1,256,900
------------ -------------
RAILROADS - 2.4%
4,650 Burlington Northern Santa Fe Corp........................ 347,544 392,344
1,800 CSX Corp................................................. 86,346 90,900
13,900 Union Pacific Corp....................................... 963,321 1,018,175
------------ -------------
1,397,211 1,501,419
------------ -------------
RECREATION - 0.5%
3,800 Eastman Kodak Co......................................... 269,851 298,300
------------ -------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS - SEPTEMBER 30, 1996 - (CONTINUED)
<TABLE>
<CAPTION>
SHARES/
PRINCIPAL VALUE
AMOUNT COST (NOTE 2a)
- -------------- ------------ -------------
<S> <C> <C> <C>
SPECIALTY STORES - 2.1%
4,500 Gymboree*................................................ $ 125,930 $ 136,688
10,600 Home Depot, Inc.......................................... 522,249 602,875
7,600 Officemax Inc*........................................... 122,374 106,400
10,100 Pep Boys - Manny, Moe & Jack............................. 347,171 359,813
3,600 Viking Office Products*.................................. 93,787 108,000
------------ -------------
1,211,511 1,313,776
------------ -------------
TELECOMMUNICATIONS EQUIPMENT - 0.2%
1,800 Tellabs Inc*............................................. 89,639 127,125
------------ -------------
TELEPHONE SERVICES - 7.8%
22,000 AT&T Corp................................................ 1,297,432 1,149,500
7,600 Frontier Corp............................................ 233,681 202,350
11,700 GTE Corp................................................. 480,427 450,450
6,300 Lucent Technologies Inc.................................. 218,816 289,012
9,400 MFS Communications Co., Inc*............................. 390,836 410,075
14,300 NYNEX Corp............................................... 681,471 622,050
6,300 Paging Network Inc*...................................... 132,500 126,000
8,100 Palmer Wireless Inc.*.................................... 164,313 143,269
12,100 SBC Communications Inc................................... 593,535 582,313
24,900 Sprint Corporation....................................... 957,396 967,988
------------ -------------
5,150,407 4,943,007
------------ -------------
TOBACCO - 4.4%
21,900 Philip Morris Cos., Inc.................................. 1,961,019 1,965,525
14,380 RJR Nabisco Holdings Corp................................ 429,214 373,880
15,300 UST, Inc................................................. 490,518 453,263
------------ -------------
2,880,751 2,792,668
------------ -------------
TOTAL COMMON STOCK 55,935,709 59,528,321
------------ -------------
MONEY MARKET FUNDS - 6.5%
$1,194,664 Federated Trust for Government Cash Reserves, 4.96% (a).. 1,194,664 1,194,664
2,931,156 Fidelity Institutional Cash Treasury II, 5.15% (a)....... 2,931,156 2,931,156
------------ -------------
Total Money Market Funds 4,125,820 4,125,820
------------ -------------
Total Investments - 100.2% $ 60,061,529 ** 63,654,141
------------
</TABLE>
<TABLE>
<S> <C> <C>
Liabilities in Excess of Other Assets - (0.2%) (112,395)
-------------
Net Assets - 100% $ 63,541,746
=============
</TABLE>
*Non-income producing security
**The cost for Federal income tax purposes is $60,064,213. See
Note 6b.
ADR - American Depository Receipt
(a) Yield effective on 9/30/96.
See accompanying notes to financial statements.
F-6
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities, at value
(Identified cost $60,061,529)................................................ $ 63,654,141
Receivable for investment securities sold.................................... 165,000
Dividends and interest receivable............................................ 141,108
Unamortized organizational cost.............................................. 42,473
------------
Total Assets............................................................. 64,002,722
------------
LIABILITIES:
Payable for investment securities purchased.................................. 360,087
Advisory fee payable......................................................... 16,775
Custodian fee payable........................................................ 9,186
Fund accounting fee payable.................................................. 8,765
Transfer agent fee payable................................................... 2,554
Administrative services fee payable.......................................... 2,396
Other accrued expenses....................................................... 61,213
------------
Total Liabilities......................................................... 460,976
------------
NET ASSETS $ 63,541,746
============
COMPOSITION OF NET ASSETS
Par value of shares of capital stock outstanding (par value $.001 per share,
200,000,000 shares authorized)............................................... $ 4,681
Additional paid-in-capital................................................... 58,542,120
Accumulated undistributed net investment income.............................. 117,802
Accumulated undistributed net realized gain on investments................... 1,284,531
Unrealized appreciation of investments....................................... 3,592,612
============
NET ASSETS $ 63,541,746
------------
Shares of Capital Stock Outstanding.......................................... 4,681,166
------------
Net Asset Value (Maximum Offering Price and Redemption Price Per Share) ..... $13.57
======
</TABLE>
See accompanying notes to financial statements
F-7
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividends.................................................................. $ 628,435
Interest .................................................................. 98,321
------------
726,756
------------
EXPENSES:
Advisory .................................................................. 138,248
Administrative services ................................................... 42,231
Fund accounting............................................................ 38,636
Custodian ................................................................. 36,300
Audit...................................................................... 31,950
Legal...................................................................... 27,480
Registration............................................................... 23,000
Amortization of organization expenses...................................... 21,356
Insurance.................................................................. 12,642
Directors.................................................................. 9,750
Transfer agent ............................................................ 9,027
Reports to shareholders.................................................... 6,000
Miscellaneous.............................................................. 12,000
------------
Total expenses before waivers / reimbursements............................. 408,620
Expenses waived / reimbursed by Adviser and Administrator.................. (132,043)
------------
NET EXPENSES............................................................... 276,577
------------
NET INVESTMENT INCOME........................................................ 450,179
------------
Net realized gain on investments............................................. 1,322,643
Change in unrealized appreciation on investments............................. 1,771,673
------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS.............................. 3,094,316
------------
Net increase in net assets resulting from operations......................... $ 3,544,495
============
</TABLE>
See accompanying notes to financial statements
F-8
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR YEAR
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
INCREASE IN NET ASSETS: ------------ -------------
<S> <C> <C>
Net investment income...................................................... $ 450,179 $ 211,383
Net realized gain on investments........................................... 1,322,643 490,664
Change in unrealized appreciation of investments........................... 1,771,673 1,795,679
------------ -------------
Net increase in net assets resulting from operations......................... 3,544,495 2,497,726
------------ -------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income...................................................... (351,954) (202,662)
Realized Capital Gains..................................................... (520,825) -----
------------ -------------
Total Dividends and Distributions.......................................... (872,779) (202,662)
------------ -------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sales of shares.............................................. 47,466,188 ---
Net asset value of shares issued in reinvestment of distributions.......... 846,684 202,662
Cost of shares redeemed ................................................... (167,938) --
------------ -------------
Net increase in net assets from capital share transactions................. 48,144,934 202,662
------------ -------------
TOTAL INCREASE IN NET ASSETS...................................................... 50,816,650 2,497,726
NET ASSETS:
Beginning of period........................................................ 12,725,096 10,227,370
------------ -------------
End of period (including undistributed net investment income
of $117,802 and $19,577, respectively) ...................................... $ 63,541,746 $ $12,725,096
============ =============
</TABLE>
See accompanying notes to financial statements.
F-9
<PAGE>
MINERVA FUND, INC.
EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1. DESCRIPTION AND ORGANIZATION. Minerva Fund, Inc. (the
"Fund") is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company, and was incorporated in the State of
Maryland on June 28, 1993. The Fund currently consists of one investment
portfolio, Equity Portfolio (the "Portfolio"). At September 30, 1996 there
were authorized 200,000,000 shares of capital stock having a par value of
$0.001 per share. The Portfolio commenced operations on October 1, 1993. Prior
to commencement of operations, the Portfolio had no operations other than
organizational matters and the sale of 5,000 shares at $10.00 per share to
Furman Selz LLC, formerly, Furman Selz Incorporated ("Furman Selz"), the Fund's
Administrator and Distributor, representing the initial capital of the Fund.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES. Following is a summary of
the significant accounting policies followed by the Fund. Estimates and
assumptions are required to be made regarding assets, liabilities and changes
in net assets resulting from operations when financial statements are prepared.
Changes in the economic environment, financial markets and any other parameters
used in determining these estimates could cause actual results to differ from
these amounts.
a. SECURITY VALUATION - Securities listed on a U.S. securities
exchange or NASDAQ for which market quotations are available are valued at the
last quoted sale price on the day the valuation is made. Price information on
listed securities is taken from the exchange where the security is primarily
traded. Unlisted securities and listed U.S. securities not traded on the
valuation date for which market quotations are readily available are valued at
the mean of the most recent quoted bid and asked price. The value of
securities and other assets for which no quotations are readily available
(including restricted securities) are determined in good faith at fair value
using methods approved by the Board of Directors. Short-term securities with
remaining maturities of 60 days or less are valued at amortized cost.
b. INVESTMENT TRANSACTIONS - Investment transactions are recorded on
the trade date. Identified cost of investments sold is used to calculate
realized gains and losses for both financial statement and Federal income tax
purposes. Interest income, including the amortization of discount or premium,
is recorded as earned or accrued.
c. DIVIDENDS AND CAPITAL GAINS DISTRIBUTIONS - Dividends from net
investment income are declared and paid to shareholders on a quarterly basis.
If any net capital gains are realized from the sale of securities, the
Portfolio normally distributes such gains with the last dividend for the
calendar year. Dividends are recorded on the ex-dividend date. The amount of
dividends and distributions from net investment income and net realized capital
gains are determined in accordance with Federal income tax regulations which
may differ with generally accepted accounting principles. These "book/tax"
differences are either temporary (primarily attributable to post October
capital and foreign currency loss deferrals) or permanent in nature. To the
extent these differences are permanent in nature, such amounts are
reclassified within the capital accounts based on their tax-basis treatment.
Temporary differences do not require a reclassification.
F-10
<PAGE>
MINERVA FUND, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
d. FEDERAL INCOME TAXES - The Fund intends to continue to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended. By so qualifying, the Fund will not be subject to Federal
income taxes with respect to net investment income and net realized capital
gains, if any, that are distributed to shareholders. The Fund also intends to
meet the distribution requirements to avoid the payment of an excise tax.
e. ORGANIZATION EXPENSES - Costs incurred in connection with the
organization and initial registration of the Fund were paid by Furman Selz and
reimbursed by the Fund. These costs have been deferred and are being amortized
on the straight-line method against operations over a period of sixty months
beginning with the Fund's commencement of operations. In the event any of the
initial shares of the Fund are redeemed during the amortization period, the
redemption proceeds will be reduced by a pro-rata portion of any unamortized
organization expenses in the same proportion as the number of shares being
redeemed bears to the number of initial shares outstanding at the time of the
redemption.
NOTE 3. ADVISER. The Fund has entered into an investment management
agreement (the "Investment Management Agreement") with LTCB-MAS Investment
Management, Inc. ("LTCB-MAS") (the "Investment Manager"). LTCB-MAS is a joint
subsidiary of The Long-Term Credit Bank of Japan, Limited ("LTCB") and Miller,
Anderson & Sherrerd, LLP ("MA&S").
Pursuant to an Investment Services Agreement (the "Investment Services
Agreement") between the Investment Manager and MA&S, MA&S acting in
collaboration with and under the supervision of the Investment Manager, is
responsible on a day-to-day basis for selecting investments for the Fund in
conformity with the Fund's stated investment objective and policies, consulting
with the Investment Manager regarding specific decisions concerning the
purchase, sale, or holding of particular securities on behalf of the Fund and
placing purchase and sale orders for the Fund's securities. MA&S receives no
fee from the Investment Manager or the Fund pursuant to the Investment Services
Agreement for the services it provides.
Sixty percent of the outstanding capital stock of the Investment
Manager is owned by LTCB Capital Markets, Inc. ("LCM") which, in turn, is
wholly owned by LTCB. Forty percent of the outstanding capital stock of the
Investment Manager is owned by MA&S.
As of January 3, 1996, MA&S was acquired by Morgan Stanley Group Inc.
Forty percent of the outstanding capital stock of LTCB-MA&S was also acquired
by affiliates of Morgan Stanley Group. Each of LTCB-MA&S and MA&S has retained
its name. A new Investment Management Agreement ("Current Investment
Management Agreement") with LTCB-MA&S and a new Investment Services Agreement
between LTCB-MA&S and MA&S were approved on September 29, 1995 due to this
acquisition. The terms are identical to the previous contracts.
The Current Investment Management Agreement provides for the Portfolio
to pay the Investment Manager an investment management fee calculated and
accrued daily and paid monthly at the annual rates of 0.50% of average daily
net assets. The Investment Manager will
F-11
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
provide portfolio management and certain administrative, clerical and
bookkeeping services for the Fund.
During the year ended September 30, 1996, the Investment Manager
waived advisory fees of $81,937 from the Portfolio. In addition, LCM has
voluntarily reimbursed expenses of $13,124 to the Portfolio.
LTCB-MAS has agreed that, in any fiscal year, it will reduce its
management fee to the Portfolio to the extent that the Portfolio's expenses
exceed the most restrictive expense limitation imposed by state securities laws
or regulations in states where the Portfolio's shares are sold. There was no
reimbursement of expenses to meet these limitations for the year ended
September 30, 1996.
NOTE 4. ADMINISTRATOR AND DISTRIBUTOR - Furman Selz provides the Fund
with administrative and fund accounting services pursuant to an administration
agreement (the "Fund Administration Agreement"). The services under the Fund
Administration Agreement are subject to the supervision of the Fund's Board of
Directors and officers and includes the day-to-day administration of matters
related to the corporate existence of the Fund, maintenance of its records,
preparation of reports, supervision of the Fund's arrangements with its
custodians and assistance in the preparation of the Fund's registration
statements under federal and state laws. Pursuant to the Fund Administration
Agreement, the Portfolio pays Furman Selz a monthly fee which on an annualized
basis will not exceed 0.15% of the average daily net assets of the Portfolio.
For the year ended September 30, 1996, Furman Selz voluntarily waived
administrative services fees of $26,982.
In addition, Furman Selz is entitled to an annual fee of $30,000 from
the Portfolio for performing fund accounting services. Furman Selz voluntarily
waived $10,000 of this fund accounting fee for the year ended September 30,
1996.
The Fund has entered into a distribution agreement (the "Distribution
Agreement") with Furman Selz. Under the Distribution Agreement, Furman Selz
does not receive any fee or other compensation for distributing shares of the
Fund.
NOTE 5. OTHER TRANSACTIONS WITH AFFILIATES. The Fund has entered
into a Transfer Agency Agreement (the "Transfer Agency Agreement") with Furman
Selz whereby Furman Selz provides personnel necessary to perform shareholder
servicing functions. For its services, Furman Selz receives a fee of $15 per
account plus reimbursement of out-of-pocket expenses.
LTCB Trust Company, a subsidiary of LTCB and an affiliate of the
Investment Manager, serves as custodian for the Fund. For furnishing custodian
services, LTCB Trust Company is paid a monthly fee with respect to the
Portfolio at an annual rate based on a percentage of average daily net assets
plus certain transaction and out of pocket expenses. For the year ended
September 30, 1996, LTCB Trust Company received fees of $36,300 from the
Portfolio.
F-12
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - SECURITIES TRANSACTIONS.
(a) PURCHASE AND SALE TRANSACTIONS - The aggregate amount of purchases
and sales of investment securities, other than short-term securities, for the
year ended September 30, 1996 were as follows:
<TABLE>
<CAPTION>
Common Stocks & Bonds
Purchases Sales
--------- -----
<S> <C>
$59,112,493 $13,916,988
</TABLE>
(b) FEDERAL INCOME TAX BASIS - Cost for Federal income tax purposes at
September 30, 1996 was $60,064,213. Accordingly, the Portfolio had gross
unrealized appreciation of $4,699,205, and gross unrealized depreciation of
$1,109,277 for Federal income tax purposes.
NOTE 7 - CAPITAL SHARE TRANSACTIONS. The Board of Directors may, in
the future, authorize the issuance of additional classes of capital stock
representing shares in the same or additional investment portfolios. For the
periods indicated, transactions of capital stock of Equity Portfolio were as
follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
Shares sold..................... 3,586,262 ---
Shares issued in reinvestment of
dividends..................... 67,536 18,234
Shares redeemed................. (12,796) ---
-------- ---
Net increase in shares.......... 3,641,002 18,234
--------- ------
</TABLE>
NOTE 8 - SUBSEQUENT EVENTS. Furman Selz has consummated an agreement
with BISYS Group, Inc. ("BISYS") whereby administrative, transfer agency, and
fund accounting services currently provided by Furman will be provided by BISYS
under new Administrative Services Agreement, Transfer Agency Agreement, and
Fund Accounting Agreements between the Fund and BISYS.
F-13
<PAGE>
MINERVA FUND, INC.
EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD (1)
<TABLE>
<CAPTION>
YEAR YEAR YEAR
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994*
-------------- ---------------- --------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period............................................. $12.23 $10.01 $10.00
====== ====== ======
Income from Investment Operations:
Net investment income........................................................ 0.21 0.22 0.16
Net realized and unrealized appreciation on investments...................... 1.73 2.20 0.02
------ ------ ------
Total Increase from Investment Operations.................................... 1.94 2.42 0.18
------ ------ ------
Less Dividends and Distributions:
Dividends from net investment income......................................... (0.14) (0.20) (0.15)
Realized Capital Gains...................................................... (0.46) -- --
------ ------ -----
Return of Capital............................................................ -- -- (0.02)
Total Dividends and Distributions.............................................. (0.60) (0.20) (0.17)
------ ------ ------
Net Asset Value, End of Period................................................... $13.57 $12.23 $10.01
====== ====== ======
Total Return..................................................................... 16.37% 24.37% 1.99%
Ratios / Supplemental Data:
Net Assets, End of Period (in thousands) $63,542 $12,725 $10,227
Ratios of Net Investment Income to Average Net Assets 1.59% 1.90% 1.56%
Ratios of Net Investment Income before effect of waivers and reimbursements 1.13% 0.59% 0.71%
Ratios of Net Expenses to Average Net Assets 0.98% 1.03% 1.00%
Ratios of Expenses before effect of waivers and reimbursements 1.44% 2.34% 1.85%
Portfolio Turnover Rate 55% 56% 35%
Average Commission Rate (a) $0.059 -- --
</TABLE>
(1) Per share based on the average number of shares outstanding during each
period.
*Commencement of Operations October 1, 1993
(a) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate per share for security trades
on which commissions are charged. This amount may vary from period to period
and fund to fund depending on the mix of trades executed in various markets
where trading practices and commission rate structures may differ.
F-14
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in the Prospectus:
(1) Financial Highlights for the periods ended September 30, 1996,
September 30, 1995 and September 30, 1994.
Included in Statement of Additional Information:
(1) Portfolio of Investments as of September 30, 1996
(2) Statement of Assets and Liabilities as of September 30, 1996
(3) Statement of Operations for the year ended September 30, 1996
(4) Statement of Changes in Net Assets for the years ended
September 30, 1996 and September 30, 1995
(5) Notes to Financial Statements as of September 30, 1996
(6) Financial Highlights for the periods ended September 30, 1996,
September 30, 1995 and September 30, 1994
(b) Exhibits:
Exhibit
Number Description
------- -----------
1 -- Registrant's Articles of Incorporation
2 -- Registrant's By-Laws
3 -- None.
4(a) -- Form of Share Certificate for shares of Class A
stock*
4(b) -- Form of Share Certificate for shares of Class B
stock*
5(a) -- Investment Management Agreement between
Registrant and LTCB-MAS Investment Management,
Inc. ("LTCB-MAS")
5(b) -- Investment Services Agreement between LTCB-MAS
and Miller Anderson & Sherrerd ("MA&S")
6 -- Distribution Agreement between Registrant and
BISYS Fund Services Limited Partnership
7 -- None.
8 -- Custodian Agreement between Registrant and LTCB
Trust Company
<PAGE>
9(a) -- Administration Agreement between Registrant and
BISYS Fund Services Limited Partnership
9(b) -- Transfer Agency Agreement between Registrant and
BISYS Fund Services, Inc.
9(c) Fund Accounting Agreement between Registrant and
BISYS Fund Services Limited Partnership
10 -- Opinion and Consent of Piper & Marbury
11 -- Consent of Independent Accountants .
12 -- None.
13 -- Purchase Agreement
14 -- None.
15 -- None.
16 -- Performance Calculations
17(A) -- Powers of Attorney from Messrs. Schmid, Hagberg,
Miller and Pileggi*
-- Power of Attorney from Charles A. Parker **
17(B) -- Financial Data Schedule .
- ----------
* Exhibit is incorporated by reference to same exhibit to Pre-Effective
Amendment No. 2, filed September 29, 1993 to the Registration Statement.
** Exhibit is incorporated by reference to same exhibit to Post-Effective
Amendment No. 5, filed January 26, 1996 to the Registration Statement .
Item 25. Persons Controlled by or Under Common Control with Registrant.
--------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
Number of Record
Holders at
November 4, 1996
Title of Class
-------------- ----------------
Shares of the Equity Portfolio, 36
par value $.001 per share
Item 27. Indemnification
---------------
Reference is made to Article VII of Registrant's Articles of
Incorporation and Article IV of Registrant's By-Laws.
<PAGE>
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant understands that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
The list required by this Item 28 of officers and directors of
LTCB-MAS, together with information as to any other business, profession,
vocation or employment of a substantial nature engaged in by such officers and
directors during the past two years, is incorporated by reference to Schedules A
and D of FORM ADV filed by LTCB-MAS pursuant to the Advisers Act (SEC File No.
801-35451).
The list required by this Item 28 of officers and directors of MA&S,
together with information as to any other business, profession, vocation or
employment of a substantial nature engaged in by such officers and directors
during the past two years, is incorporated by reference to Schedules A and D of
Form ADV filed by MA&S pursuant to the Advisers Act (SEC File No. 801-10437).
Item 29. Principal Underwriters
----------------------
(a) Not applicable.
(b) The information required by this Item 29 with respect to each
director, officer or partner of Furman Selz LLC, the Fund's current principal
underwriter, is incorporated by reference to Schedule A of Form BD filed by
Furman Selz LLC pursuant to the Securities Exchange Act of 1934 (SEC File No.
801-12425).
The information required by this Item 29 with respect to
BISYS Fund Services Limited Partnership is incorporated by reference to Schedule
A of Form BD filed by BISYS Fund Services Limited Partnership pursuant to the
Securities Exchange Act of 1934 (SEC File No. 8-32480).
(c) Not applicable.
Item 30. Location of Accounts and Records
--------------------------------
All accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and the rules
thereunder will be maintained at the offices of:
(1) Minerva Fund, Inc.
3435 Stelzer Road
Columbus, OH 43219
(2) BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, OH 43219
<PAGE>
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to furnish to each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
(d) Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or more of
Registrant's directors when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares of common stock and, in connection
with such meeting, to assist in communications with other shareholders in this
regard, as provided under Section 16(c) of the 1940 Act.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, and State of New York, on
the 27th day of November, 1996.
MINERVA FUND, INC.
By: /s/ JOHN J. PILEGGI
........................
John J. Pileggi
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the 27th day of November, 1996.
SIGNATURE TITLE
- --------- -----
*
- --------------- Chairman of the Board
James D. Schmid of Directors and Director
........................ President and Treasurer
John J. Pileggi
*
........................ Director
James D. Schmid
*
........................ Director
Carl T. Hagberg
*
............ Director
Raymond F. Miller
*
........................ Director
Charles A. Parker
*By: /s/ JOHN J. PILEGGI
-------------------
John J. Pileggi
Attorney-in-Fact
<PAGE>
MINERVA FUND, INC.
------------------
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
1 Registrant's Articles of Incorporation
2 Registrant's By-Laws
5(a) Investment Management Agreement between Registrant and LTCB-MAS
Investment Management, Inc.
5(b) Investment Services Agreement between LTCB-MAS and Miller Anderson &
Sherrerd
6 Distribution Agreement between Registrant and BISYS Fund Services
Limited Partnership
8 Supplement to Custodian Agreement and Custodian Agreement between
Registrant and LTCB Trust Company
9(a) Administration Agreement between Registrant and BISYS Fund Services
Limited Partnership
9(b) Transfer Agency Agreement between Registrant and BISYS Fund
Services, Inc.
9(c) Fund Accounting Agreement between Registrant and BISYS Fund Services
Limited Partnership
10 Opinion and Consent of Piper & Marbury
11 Consent of Independent Accountants
13 Purchase Agreement
16 Performance Calculations
17(B) Financial Data Schedule
Exhibit 1
ARTICLES OF INCORPORATION
of
MINERVA FUND, INC.
ARTICLE I
INCORPORATOR
The undersigned Barbara L. Katzav, whose post office address is c/o
Simpson Thacher and Bartlett, 425 Lexington Avenue, New York, N.Y. 10017-3909,
being at least 18 years of age, as an incorporator, hereby forms a corporation
under and by virtue of the laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation is Minerva Fund, Inc. (the "Corporation").
ARTICLE III
CORPORATE PURPOSES
The purpose for which the Corporation is formed is to engage in the
business of an investment company.
The Corporation may engage in any other business and shall have all
powers conferred upon corporations by the Maryland General Corporation Law now
or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
Maryland is c/o The Corporation Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. The name of the resident agent of the Corporation in Maryland is
The Corporation Trust Incorporated, a Maryland corporation, and the post office
address of the resident agent is 32 South Street, Baltimore, Maryland 21202.
<PAGE>
2
ARTICLE V
CAPITAL STOCK
Section 1. Authorized Shares. The aggregate number of shares of
capital stock which the Corporation is authorized to issue is two hundred
million (200,000,000). These shares shall have a par value of $.001 per share
and shall have an aggregate par value of two hundred thousand dollars
($200,000). All of such shares are initially classified as "Common Stock."
Subject to the following paragraph, the authorized shares are
classified as follows: Equity Portfolio, 100,000,000 shares; Fixed Income
Portfolio, 100,000,000 shares.
The Board of Directors is authorized to classify or to reclassify,
from time to time, any unissued shares of stock of the Corporation, whether now
or hereafter authorized, by setting, changing or eliminating the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, and qualifications -- terms and conditions of or rights to require
redemption of the stock. The authority to classify and reclassify the Common
Stock, or any class or portfolio thereof, however designated, shall include the
authority to classify, reclassify, or divide a class or portfolio into one or
more sub-classes of such class or portfolio. All such sub-classes of a class or
portfolio shall represent the same interest in the Corporation and have the same
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as the other shares of Common Stock of that class or portfolio;
provided, however, that notwithstanding anything contained in the charter of the
Corporation, the Board of Directors -- without stockholder approval, provide
for the issuance of additional sub-classes of Common Stock of a particular class
or portfolio which shall have such preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, and
terms and conditions of redemption, including without limitation such front-end
sales loads, such 12b-1 service, administrative, or distribution fees, such
contingent deferred sales charges, such conversion rights, and exchange
privileges, as shall be determined by resolution of the Board of Directors and
shall be included in Articles Supplementary filed for record with the State
Department of Assessments and Taxation of Maryland prior to the issuance of such
shares.
The provisions of these Articles of Incorporation, including those in
this Section shall apply to each class of stock unless otherwise provided by the
Board of Directors prior to issuance of any shares of that class:
(a) As more fully set forth hereafter, the assets and liabilities and
the income and expenses of each class of the Corporation's stock shall be
determined separately and,
<PAGE>
3
accordingly, the net asset value, the dividends payable to holders, and the
amounts distributable in the event of dissolution of the Corporation to
holders of shares of the Corporation's stock may vary from class to class.
Except for these differences and certain other differences hereafter set
forth, each class of the Corporation's stock shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of and
rights to require redemption.
(b) All consideration received by the Corporation for the issue or
sale of shares of a class of the Corporation's stock, together with all
funds derived from any investment and reinvestment thereof, shall
irrevocably belong to that class for all purposes, subject only to the
rights of creditors, and shall be so recorded upon the books of account of
the Corporation. Such consideration and any funds derived from any
investment and reinvestment are herein referred to as "assets belonging
to" that class.
(c) The assets belonging to a class of the Corporation's stock shall
be charged with the liabilities of the Corporation with respect to that
class and with that class' share of the liabilities of the Corporation not
attributable to any particular class, in the latter case in the proportion
that the net asset value of that class (determined without regard to such
liabilities) bears to the net asset value of all classes of the
Corporation's stock (determined without regard to such liabilities). The
determination of the Board of Directors shall be conclusive as to the
allocation of liabilities, including accrued expenses and all reserves, and
assets to a particular class or classes.
(d) Shares of each class of stock shall be entitled to such dividends
or distributions, in stock, property, cash or in any combination thereof,
as may be declared from time to time by the Board of Directors with respect
to such class. Dividends or distributions shall be paid on shares of a
class of stock only out of lawfully available assets belonging to that
class.
(e) On each matter submitted to a vote of the stockholders, each
holder of a share shall be entitled to one vote for each share standing in
his name on the books of the Corporation, irrespective of the class
thereof, and all shares of all classes shall vote as a single class
("Single Class Voting"); provided, however, that (a) as to any matter with
respect to which a separate vote of any class is required by the Investment
Company Act of 1940, as amended from time to time (the "1940 Act"), or by
the Maryland General Corporation Law, such requirement as to a separate
vote by that class shall apply in lieu of Single Class
<PAGE>
4
Voting as described above; (b) in the event that the separate vote
requirements referred to in (a) above apply with respect to one or more
classes, then, subject to (c) below, the shares of all other classes shall
vote as a single class and (c) as to any matter which does not affect the
interest of a particular class only the holders of shares of the one or
more affected classes shall be entitled to vote.
(f) In the event of the liquidation or dissolution of the Corporation,
the stockholders of a class of the Corporation's stock shall be entitled to
receive, as a class, out of the assets of the Corporation available for
distribution to stockholders, the assets belonging to that class less the
liabilities allocated to that class. The assets so distributable to the
stockholders of a class shall be distributed among such stockholders in
proportion to the number of shares of that class held by them and recorded
on the books of the Corporation. In the event that there are any assets
available for distribution that are not attributable to any particular
class of stock, such assets shall be allocated to all classes in proportion
to the net asset value of the respective classes and distributed to the
holders of stock of each class in proportion to the net asset value of the
shares of that class held by the respective holders. The liquidation of a
particular class may be accomplished, in whole or in part, by the transfer
of assets of such class to another class or by the exchange of shares of
such class for the shares of another class.
(g) The Corporation shall not be obligated to issue certificates
representing shares of any or all of its classes of capital stock. At the
time of issue or transfer of shares without certificates, the Corporation
shall provide the stockholder with such information as may be required
under the Maryland General Corporation Law.
Section 2. FRACTIONAL SHARES. The Corporation may issue fractional
shares. Any fractional share of capital stock of the Corporation shall carry
proportionately all the rights of a whole share, excepting any right to receive
a certificate evidencing such fractional share, but including, without
limitation, the right to vote and the right to receive dividends.
Section 3. QUORUM REQUIREMENTS AND VOTING RIGHTS. The presence in
person or by proxy of the holders of one third of the shares of stock of the
Corporation entitled to vote (without regard to class) shall constitute a quorum
at any meeting of the stockholders, except with respect to any matter which by
law requires the approval of one or more classes of stock, in which case the
presence in person or by proxy of the holders of one-third of the shares of
stock of each class entitled to vote on the matter shall constitute a quorum.
Notwithstanding any provision of the laws of the State of Maryland requiring any
<PAGE>
5
action to be taken or authorized by the affirmative vote of the holders of more
than a majority of the outstanding shares of capital stock of the Corporation,
that action shall, except to the extent otherwise required by the 1940 Act, be
effective and valid if taken or authorized by the affirmative vote of the
holders of the majority of the total number of votes entitled to be cast
thereon.
Section 4. NO PREEMPTIVE RIGHTS. No holder of shares of capital stock
of the Corporation shall, as such holder, have any right to purchase or
subscribe for any shares of the capital stock of the Corporation which the
Corporation may issue or sell (whether consisting of shares of capital stock
authorized by these Articles of Incorporation, or shares of capital stock of the
Corporation acquired by it after the issue thereof, or other shares) other than
any right which the Board of Directors of the Corporation, in its discretion,
may determine.
Section 5. REDEMPTION AND REPURCHASE OF SHARES OF CAPITAL STOCK.
(a) CIRCUMSTANCES UNDER WHICH SHARES OF CAPITAL STOCK MAY BE REDEEMED
OR REPURCHASED. The Corporation shall under some circumstances redeem, and may
under other circumstances repurchase or redeem, shares of its capital stock as
follows:
(i) Each holder of shares of its capital stock shall be entitled at
the holder's option to require the Corporation to redeem all or any part of
the sharer of its capital stock owned by that holder, upon request to the
Corporation or its designated agent in a form approved by the Board of
Directors by the Corporation, accompanied by surrender of the certificate
or certificates for those shares, if any, or any other evidence of
ownership specified by the Corporation's Board of Directors, at the net
asset value of those shares determined as provided in Section 6 of this
Article V, subject to and in accordance with the provisions of paragraph
(b) of this Section 5, less such redemption charge as shall be established
by the Board of Directors in accordance with the 1940 Act and any
applicable rules of the National Association of Securities Dealers, Inc.
and shall be disclosed in the Corporation's current prospectus applicable
to the shares. Notwithstanding the foregoing, the Board of Directors of the
Corporation may suspend the right of the holders of the capital stock of
the Corporation to require the Corporation to redeem such capital stock
when permitted or required to do so by applicable law.
(ii) The Board of Directors of the Corporation may also, from time to
time in its discretion, authorize the Corporation to require the redemption
of all or any part of the outstanding shares of its capital stock for the
net asset value of those shares determined as provided in Section 6 of this
Article V, subject to and in accordance
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6
with the provisions of paragraph (b) of this Section 5, upon the sending of
written or telegraphic notice of redemption to each holder whose shares are so
redeemed and upon such terms and conditions as the Board of Directors of the
Corporation shall deem advisable.
(iii) The Board of Directors of the Corporation may also, from time to
time in its discretion, authorize the Corporation to repurchase outstanding
shares of its capital stock, either directly or through an agent, subject
to and in accordance with the provisions of paragraph (b) of this Section
5. The price to be paid by the Corporation upon any such repurchase shall
be determined, in the discretion of its Board of Directors, in accordance
with any applicable provision of the laws of the State of Maryland and the
1940 Act or any rule or regulation thereunder, including any rule or
regulation made or adopted pursuant to Section 22 of the 1940 Act by the
Securities and Exchange Commission or any securities association registered
under the Securities Exchange Act of 1934.
(b) PROCEDURE FOR REDEMPTION AND REPURCHASES OF SHARES OF CAPITAL
STOCK. With respect to redemptions and repurchases of shares of capital stock of
the Corporation pursuant to paragraph (a) of this Section 5:
(i) The net asset value applicable to a redemption or repurchase
pursuant to paragraphs (a) (i) and (a) (ii) of this Section 5 shall be
computed as of the specific time or times during the day determined by the
Board of Directors of the Corporation.
(ii) Any certificates for shares of capital stock of the Corporation
to be redeemed or repurchased shall be surrendered in proper form for
transfer, together with any proof of the authenticity of signatures
required by the Board of Directors or transfer agent of the Corporation.
(iii) Payment of the redemption or repurchase price by the Corporation
or its designated agent shall be made within seven days after the time for
the determination of the redemption or repurchase price, but in no event
prior to delivery to the Corporation or its designated agent of the
certificate or certificates, if any, for the shares of capital stock
redeemed or repurchased or any other evidence of ownership specified by the
Corporation's Board of Directors. Payment of the redemption or repurchase
price may be postponed when permitted or required by applicable law.
(iv) The right of a holder of shares of capital stock redeemed or
repurchased by the Corporation as provided in this Article V to receive
dividends thereon and all other rights of that holder with respect to those
shares shall
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7
forthwith cease and terminate at the time as of which the redemption or
repurchase price of those shares has been determined, except the rights of
that holder to receive (A) the redemption or repurchase price of those
shares from the Corporation or its designated agent in cash, securities or
other assets of the Corporation and (B) any dividend or distribution to
which that holder had become entitled as the record holder of those shares
on the record date for that dividend.
Section 6. DETERMINATION OF NET ASSET VALUE. For purposes of this
Article V, the net asset value of shares of capital stock of the Corporation
shall be determined at such time or times on any day pursuant to the direction
of the Board of Directors and in accordance with the following provisions:
(a) The net asset value of each share of capital stock shall be the
quotient obtained by dividing the "net value of the assets" of the
Corporation (as defined below) by the total number of shares of capital
stock deemed to be outstanding at the time (including shares sold, whether
or not paid for and issued, and excluding shares redeemed or repurchased on
the basis of previously determined values, whether or not paid for,
received and held in treasury).
(b) The "net value of the assets" of the Corporation shall be the
"gross value of the assets" of the Corporation (as defined below) after
deducting the amount of all expenses incurred, accrued and unpaid, reserves
that may be set up to cover taxes and other liabilities and other
deductions.
(c) The "gross value of the assets" of the Corporation shall be the
amount of all cash and receivables and the market value of all securities
and other assets held by the Corporation at the time as of which the
determination is made. Securities held shall be valued in accordance with
methods approved by the Board of Directors and applicable statutes and
regulations.
(d) When the Corporation has more than one class of shares of its
capital stock outstanding having separate assets and liabilities, the net
asset value of shares of capital stock of the Corporation as provided for
in this Section 6 shall be determined as if each class of sharer were the
Corporation as referred to in such computation, but with its assets limited
to the assets belonging to that class, its liabilities limited to the
liabilities belonging to that class and the total number of shares of
capital stock deemed to be outstanding limited to the outstanding shares of
that class.
Section 7. DETERMINATIONS MADE BY THE BOARD OF DIRECTORS. Any
determination made in good faith by or pursuant
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8
to the direction of the Board of Directors, as to the amount of the assets,
debts, obligations or liabilities of the Corporation, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating such reserves or charges, as to the use, alteration or
cancellation of any reserves or charges (whether or not any debt, obligation or
liability for which such reserves or charges shall have been created shall have
been paid or discharged or shall be then or thereafter required to be paid or
discharged), as to the value of or the method of valuing any investment or other
asset owned or held by the Corporation, as to the allocation of any asset or
liability of the Corporation to a particular class or classes of the
Corporation's stock, as to the number of shares of any class of stock
outstanding, as to the estimated expense to the Corporation in connection with
purchases of its shares, as to the ability to liquidate investments in orderly
fashion, or as to any other matters relating to the issue, sale, purchase or
other acquisition or disposition of investments or shares of the Corporation,
shall be final and conclusive and shall be binding upon the Corporation and all
holders of its shares, past, present and future, and shares of the Corporation
are issued and sold on the condition and understanding that any and all such
determinations shall be binding as aforesaid.
Section 8. ALL SHARES OF CAPITAL STOCK SUBJECT TO ARTICLES OF
INCORPORATION. All persons who shall acquire shares of capital stock of the
Corporation shall acquire those shares subject to the provisions of these
Articles of Incorporation.
Section 9. EQUALITY. All shares of each particular class shall
represent an equal proportionate interest in the assets belonging to that class
(subject to the liabilities of that class), and each share of any particular
class shall be equal to each other share of that class. The Board of Directors
may from time to time divide or combine the shares of any particular class into
a greater or lesser nether of shares of that class without thereby changing the
proportionate interest in the assets belonging to that class or in any way
affecting the rights of holders of shares of any other class.
Section 10. CONVERSION OR EXCHANGE RIGHTS. Subject to compliance with
the requirements of the 1940 Act, the Board of Directors shall have the
authority to provide that holders of shares of any class shall have the right to
convert or exchange said shares into shares of one or more other clasper of
shares in accordance with such requirements and procedures as may be established
by the Board of Directors.
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9
ARTICLE VI
DIRECTORS
Section 1. INITIAL BOARD OF DIRECTORS. The number of Directors of the
Corporation shall initially be one. The name of the initial director is: John J.
Pileggi .
Section 2. NUMBER OF DIRECTORS. The number of Directors in office may
be changed from time to time in the manner specified in the 8y-Laws of the
Corporation, but this number shall never be less than the minimum number
required under the Maryland General Corporation Law.
Section 3. CERTAIN POWERS OF BOARD OF DIRECTORS. In addition to its
other powers explicitly or implicitly granted under these Articles of
Incorporation, by law or otherwise, the Board of Directors of the Corporation
(a) is expressly authorized to make, alter, amend or repeal the By-Laws of the
Corporation, (b) may from time to time determine whether, to what extent, at
what times and places, and under what conditions and regulations the accounts
and books of the Corporation, or any of them, shall be open to the inspection of
the stockholders, and no stockholders shall have any right to inspect any
account, book or document of the Corporation except as conferred by statute or
as authorized by the Board of Directors of the Corporation, and (c) is
empowered, without stockholder approval, to increase or decrease the number of
shares of capital stock of any class that the Corporation has authority to
issue.
ARTICLE VII
LIABILITY AND INDEMNIFICATION
To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General Corporation Law, no director
or officer of the Corporation shall have any personal liability to the
Corporation or its stockholders for monetary damages. This limitation on
liability applies to events occurring at the time a person serves as a director
or officer of the Corporation whether or not such person is a director or
officer at the time of any proceeding in which liability is asserted.
The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and may do so to such further extent as is consistent with law. The
Board of Directors may by By-Law, resolution or agreement make further provision
for indemnification of directors, officers, employees and agents to
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10
the fullest extent permitted by the Maryland General Corporation Law. This
indemnification applies to events occurring at the time a person serves as a
director or officer of the Corporation whether or not such person is a director
or officer at the time of any proceeding in which liability is asserted.
No provision of these Articles of Incorporation shall be effective to
protect or purport to protect any director or officer of the Corporation against
any liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
References to the Maryland General Corporation Law in this Article VII
are to that law as from time to time amended. No amendment to the Corporation's
Articles of Incorporation shall affect any right of any person under this
Article VII based on any event, omission or proceeding prior to such amendment.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment of these Articles of Incorporation now or hereafter authorized by law,
including any amendment which alters the contract rights, as expressly set forth
in these Articles of Incorporation, of any outstanding capital stock.
ARTICLE IX
PERPETUAL EXISTENCE
The duration of the Corporation shall be perpetual.
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11
IN WITNESS WHEREOF, I have signed these ARTICLES OF INCORPORATION on
June 25, 1993 and acknowledge the same to be my act.
--------------------------------
/s/ Barbara L. Katzav
Incorporator
WITNESS:
- --------------------------
EXHIBIT 2
BY-LAWS
OF
MINERVA FUND. INC.
ARTICLE I
STOCKHOLDERS
SECTION 1. PLACE OF MEETING. Meetings of stockholders shall be held at
such place within or without the State of Maryland as the Board of Directors may
determine.
SECTION 2. ANNUAL MEETINGS. The Corporation shall not be required to
hold an annual meeting of its stockholders in any year in which the election of
directors is not required to be acted upon under the Investment Company Act of
1940. In the event that the Corporation shall hold an annual meeting of
stockholders, such meeting shall be held at a date and time set by the Board of
Directors, PROVIDED, HOWEVER, that if the purpose of the meeting is to elect
directors or to approve an investment advisory agreement or distribution
agreement, then the date and time of such meeting shall be set in accordance
with the Investment Company Act of 1940. Any stockholders' meeting held in
accordance with the preceding sentence may constitute the annual meeting of
stockholders for the fiscal year of the Corporation in which the meeting is
held.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders for
any purpose or purposes may be called by the Chairman of the Board of Directors,
if any, or by the President or by the Board of Directors. In addition, such
special meetings shall be called by the Secretary upon receipt of the request in
writing signed by stockholders entitled to cast at least 10% of all votes
entitled to be cast at the meeting stating the purpose of the meeting and the
matters proposed to be acted on and upon payment by such stockholders of the
estimated costs of preparing and mailing a notice of the meeting. Unless
requested by stockholders entitled to cast a majority of all the votes entitled
to be cast at the meeting, a special meeting need not be called to consider any
matter which is substantially the same as a matter voted on at a special meeting
of the stockholders held during the preceding 12 months.
SECTION 4. RECORD DATES. The Board of Directors may fix, in advance, a
date as the record date for the purpose of determining stockholders entitled to
notice of, or to vote at, any meeting of stockholders, or stockholders entitled
to receive payment of any dividend or the allotment of any other right, or in
order to make a determination of stockholders for any other proper purpose. Such
date in any case shall be not more than 90 days, and in case of a meeting of
stockholders, not less than 10
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2
days, prior to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
SECTION 5. NOTICE OF MEETING. Not less than 10 and not more than 90
days before each meeting of stockholders, the Secretary shall give to each
stockholder entitled to vote at the meeting and to each other stockholder
entitled to notice of such meeting, written notice of the time, date, place,
and, in the case of a special meeting or when otherwise required by the laws of
the State of Maryland, the purpose or purposes of the meeting.
SECTION 6. ADJOURNMENT. A meeting of stockholders convened on the date
for which it was called may be adjourned from time to time without further
notice, other than as announced at the meeting, to a date not more than 120 days
after the original record date. At any such adjourned meeting at which a quorum
shall be present, any action may be taken that could have been taken at the
meeting originally called.
SECTION 7. QUORUM AND VOTING. The presence in person or by proxy of
theholders of one-third of the shares of stock of the Corporation entitled to
vote (without regard to class) shall constitute a quorum at any meeting of the
stockholders, except with respect to any matter which by law requires the
approval of one or more classes of stock, in which case the presence in person
or by proxy of the holders of one-third of the shares of stock of each class
entitled to vote on the matter shall constitute a quorum. Except as otherwise
provided by law, a majority of the votes cast at a meeting of stockholders, at
which a quorum is present, shall be sufficient to take or authorize action upon
any matter which may properly come before the meeting.
SECTION 8. CONDUCT OF MEETINGS. Each meeting of stockholders shall be
presided over by the Chairman of the Board or, if he is not present, by the Vice
Chairman of the Board or, if neither of them is present, by a chairman to be
elected at the meeting. The Secretary shall act as secretary of the meeting or,
if he is not present, an Assistant Secretary shall so act. If neither the
Secretary nor an Assistant Secretary is present, the chairman of the meeting
shall appoint a secretary.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. POWERS. The business and affairs of the Corporation shall
be managed by or under the direction of the Board of Directors, which may
exercise all powers of the Corporation and do all lawful acts and things that
are not by law, the Articles of Incorporation of the Corporation or these
By-Laws directed or required to be done by the stockholders.
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3
SECTION 2. NUMBER AND TENURE. The number of Directors fixed by the
Articles of Incorporation of the Corporation as the number which shall
constitute the whole Board may be increased or decreased by a vote of a majority
of the entire Board of Directors from time to time, provided that this number
shall not be more than 21. Each Director shall hold office until his successor
is elected and qualifies or until hi; earlier resignation or removal.
SECTION 3. VACANCIES. Vacancies in the Board of Directors for any
cause, including an increase in the authorized number of Directors, may, subject
to the Investment Company Act of 1940, be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director. A
Director elected by the Board of Directors to fill a vacancy serves until his
successor is elected and qualifies or until his earlier resignation or removal.
SECTION 4. REMOVAL OF DIRECTORS. At any meeting of stockholders, the
stockholders may remove any Director from office, either with or without cause,
by the affirmative vote of a majority of the votes entitled to be cast for the
election of directors and may elect a successor to fill any resulting vacancy
for the unexpired term of the removed Director.
SECTION 5. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held at any place within or without the State of
Maryland as the Board of Directors may determine.
SECTION 6. CONDUCT OF MEETING. The Board of Directors shall name from
its membership a Chairman of the Board and may name a Vice Chairman of the
Board. The Chairman of the Board or in his absence the Vice Chairman of the
Board, shall preside at meetings of the Board of Directors. In the absence of
both the Chairman of the Board and the Vice Chairman of the Board, the Directors
present shall select a Director to preside. The Chairman of the Board and the
Vice Chairman of the Board shall hold their titles at the pleasure of the Board
of Directors and will cease to hold their titles at any time with or without
cause upon action by the Board of Directors.
SECTION 7. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at the conclusion of each annual meeting of stockholders
and at any other time fixed by the Board of Directors. No notice of regular
meetings shall be required.
SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the President
or a majority of the Directors. Written notice of the time and place of any
special meeting shall be delivered or telegraphed to each Director not less than
one day before the meeting or mailed to each Director not less than three days
before the meeting.
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4
SECTION 9. TELEPHONE MEETINGS. Members of the Board of Directors or
any committee hereof may participate in a meeting by means of conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time.
SECTION 10. QUORUM. One-third of the total number of Directors shall
constitute a quorum for the transaction of business, provided that a quorum
shall be no less than two Directors, except where the Board consists of only one
Director, a quorum shall be one Director. If at any meeting of the Board of
Directors there shall be less than a quorum present, a majority of those present
may adjourn the meeting until a quorum shall have been obtained. Except as
otherwise provided by law, the Articles of Incorporation of the Corporation,
these By-Laws or any contract or agreement to which the Corporation is a party,
the act of a majority of the Directors present at any meeting at which there is
a quorum shall be the act of the Board of Directors.
SECTION 11. COMMITTEE. The Board of Directors may designate an
executive committee and other committees composed of two or more Directors, and
the members thereof, and each committee shall have the powers, authority and
duties specified in the resolution creating the same and permitted by law. If a
member of a committee is absent or disqualified, the members present at a
meeting, whether or not constituting a quorum, may appoint another member of the
Board of Directors to act at the meeting in place of the absent or disqualified
member.
SECTION 12. COMPENSATION OF DIRECTORS. The Board of Directors may
authorize reasonable compensation to Directors for their services as Directors
and as members of committees of the Board of Directors and may authorize the
reimbursement of reasonable expenses incurred by Directors in connection with
rendering those services.
ARTICLE III
OFFICERS
SECTION l. ELECTION AND REMOVAL. The Board of Directors shall elect a
President, a Secretary and a Treasurer. The Board of Directors may also in its
discretion elect one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers and other officers, agents and employees. Any two or more offices,
except those of President and Vice President, may be held by the same person.
The Board of Directors may fill any vacancy which may occur in any office. All
officers shall hold office at the pleasure of the Board of Directors, and any
officer may be removed from office at any time with or without cause by the
Board of Directors whenever, in the judgment of the Board of Directors, the best
interests of the Corporation will be served thereby.
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5
SECTION 2. POWERS AND DUTIES. The officers of the Corporation shall
have such powers and duties as generally pertain to their respective offices as
well as such powers and duties as may from time to time be conferred by
resolution of the Board of Directors.
ARTICLE IV
INDEMNIFICATION
The Corporation shall indemnify each individual who is a present or
former Director or officer of the Corporation or who, while a Director or
officer of the Corporation, is or was serving at the request of the Corporation,
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, and may
indemnify each individual who is a present or former employee or agent of the
Corporation (collectively, the "Indemnitees"), who, by reason of his position
was, is, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter collectively referred to as a "Proceeding"), to the
fullest extent permitted under the laws of the State of Maryland, the Investment
Company Act of 1940 and any other applicable law now or hereafter in effect,
including the advance of related expenses; provided, however, that such
indemnity shall not protect any Indemnitee from any liability arising out of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("Disabling Conduct").
Notwithstanding the foregoing, no indemnification shall be made by the
Corporation to any Indemnitee unless:
(a) the court or other body before whom the Proceeding to which the
Indemnitee is a party was brought (i) dismisses the Proceeding for
insufficiency of evidence of any Disabling Conduct or (ii) reaches a final
decision on the merits that the Indemnitee was not liable by reason of
Disabling Conduct; or
(b) in the absence of such a decision, there is a reasonable
determination, based upon a review of the facts, that the Indemnitee was
not liable by reason of Disabling Conduct, which determination shall be
made by:
(i) the vote of a majority of a quorum of the Directors who are
neither "interested persons" of the Corporation as defined in the
Investment Company Act of 1940 nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
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6
Anything in this Article IV to the contrary notwithstanding, any
advance of expenses by the Corporation to an Indemnitee shall be made only upon
the undertaking by or on behalf of the Indemnitee to repay the advance unless it
is ultimately determined that such Indemnitee is entitled to indemnification as
above provided, and only if one of the following conditions is met:
(a) the Indemnitee shall provide adequate security for his
undertaking;
(b) the Corporation shall be insured against losses arising by
reason of any lawful advances; or
(c) there is a determination, based on a review of readily
available facts, that there is reason to believe that the Indemnitee
will ultimately be found to be entitled to indemnification, which
determination shall be made by:
(i) a majority of a quorum of the Directors who are neither
"interested persons" of the Corporation as defined in the
Investment Company Act of 1940 nor parties to the Proceeding; or
(ii) an independent legal counsel in a written opinion.
ARTICLE V
GENERAL PROVISIONS
SECTION 1. ANNUAL STATEMENT. The Chairman of the Board, the Vice
Chairman of the Board or the Treasurer shall prepare or cause to be prepared
annually a full and correct statement of the affairs of the Corporation,
including a balance sheet and a financial statement of operations for the
preceding fiscal year.- The statement of affairs shall be submitted at the
annual meeting of the stockholders, if any, and, within 20 days after the
meeting (or, in the absence of an annual meeting within 120 days after the end
of the fiscal year), placed on file at the Corporation's principal office in the
State of Maryland.
SECTION 2. STOCK LEDGER. The Corporation shall maintain at the office
of its transfer agent an original or duplicate stock ledger containing the names
and addresses of all stockholders and the number of shares of each class held by
each stockholder. Such stock ledger may be in written form or any other form
capable of being converted into written form within a reasonable time for visual
inspection.
SECTION 3. AMENDMENT OF BYLAWS. These By-Laws may be altered, amended,
added to or repealed by the Board of Directors.
Exhibit 5(a)
INVESTMENT MANAGEMENT AGREEMENT
MINERVA FUND, INC.
237 Park Avenue
New York, New York 10017
January 3, 1996
LTCB-MAS Investment Management, Inc.
One Tower Bridge, Suite 1000
West Conshohocken, PA 19428
Ladies and Gentlemen:
This will confirm the agreement between the undersigned (the
"Fund") and you ("LTCB-MAS") as follows:
1. The Fund is an open-end investment company that consists of
the separate investment portfolios listed on Schedule A hereto, as amended from
time to time (the "Portfolios"). The Fund proposes to engage in the business of
investing and reinvesting the assets of each Portfolio in accordance with the
investment objective and limitations of each Portfolio specified in the Fund's
Articles of Incorporation (the "Articles"), and the currently effective
prospectus, including the documents incorporated by reference therein (the
"Prospectus"), relating to the Fund and each Portfolio, included in the Fund's
Registration Statement, as amended from time to time (the "Registration
Statement"), filed under the Investment Company Act of 1940, as amended (the
"1940 Act"), and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to LTCB-MAS. Any
amendments to these documents shall be furnished to LTCB-MAS promptly.
2. Each Portfolio hereby employs LTCB-MAS to (a) be responsible
for the investment and reinvestment of the assets of such Portfolio as specified
in paragraph 1. Consistent with the requirements of the 1940 Act, LTCB-MAS may
engage one or more sub-investment advisers or other investment services
providers (each, an "Investment Services Provider"), on terms satisfactory to
the Fund's Board of Directors, to assist it in carrying out its responsibilities
under this Agreement. If LTCB-MAS so engages an Investment Services Provider
with respect to the management of one or more Portfolios, LTCB-MAS will continue
to
<PAGE>
2
perform the following services, unless the Fund's Board of Directors otherwise
instructs: (a) supervise the investment program of each such Portfolio in
accordance with the stated investment objective and policies of such Portfolio,
(b) advise and consult with such Investment Services Provider regarding each
such Portfolio's overall investment strategy, and (c) consult with such
Investment Services Provider on at least a weekly basis regarding specific
decisions concerning the purchase, sale or retention of particular securities on
behalf of each such Portfolio.
3. LTCB-MAS shall provide, at its own expense, the office space,
furnishings and equipment and the personnel required by it to perform the
services to be performed hereunder on the terms and for the compensation
provided herein. The Fund shall be responsible for all of the expenses and
liabilities of each Portfolio, including organizational expenses; taxes;
interest; fees (including fees paid to its directors, but excluding any fees
paid to an Investment Services Provider); fees payable to the Securities and
Exchange Commission; state securities qualification fees; costs of preparing and
printing prospectuses; advisory and administration fees; charges of the
custodian and transfer agent; charges of any shareholder servicing agents;
certain insurance premiums; auditing and legal expenses; costs of shareholders'
reports and shareholder meetings; any extraordinary expenses; brokerage fees,
commissions, and transfer taxes, if any, in connection with the purchase or sale
of portfolio securities; and payments, if any, to the distributor of each
Portfolio for activities intended to result in the sale of shares of the
Portfolio.
4. Each Portfolio shall be managed by LTCB-MAS in accordance with
the investment objective and limitations of such Portfolio set forth in the
Articles, the Prospectus, the 1940 Act, the provisions of the Internal Revenue
Code relating to regulated investment companies, other applicable laws and
regulations, and policy decisions adopted by the Fund's Board of Directors from
time to time and communicated to LTCB-MAS in writing. LTCB-MAS shall advise the
Fund's officers and Board of Directors, at such times as the Fund's Board of
Directors may specify, of investments made for the account of each Portfolio and
shall, when requested by the Fund's officers or Board of Directors, supply the
reasons for making such investments.
5. In consideration of LTCB-MAS's undertaking to render the
services described in this agreement, the Fund agrees that LTCB-MAS shall not be
liable under this agreement for any error of judgment or mistake of law or for
any loss suffered by the Fund in connection with the performance of this
agreement, provided that nothing in this agreement shall be deemed to protect or
purport to protect LTCB-MAS against any liability to the Fund or its
stockholders to which LTCB-MAS would otherwise be subject by reason of willful
misfeasance, bad faith or gross
<PAGE>
3
negligence in the performance of its duties under this agreement or by reason of
its reckless disregard of its obligations and duties hereunder.
6. In consideration of the services to be rendered by LTCB-MAS
under this agreement, each Portfolio shall pay LTCB-MAS an investment management
fee calculated and accrued daily and paid monthly, as set forth on Schedule B
hereto, as amended form time to time. For purposes of calculating such fee, the
value per share of the Portfolio's net assets shall be computed in the manner
specified in the Prospectus and the Articles.
7. LTCB-MAS is authorized to select the brokers or dealers that
will execute the purchases and sales of securities for each of the Fund's
Portfolios and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Subject to
policies established by the Board of Directors of the Fund, LTCB-MAS may also be
authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if LTCB-MAS determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage or research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the overall responsibilities of
LTCB-MAS with respect to the Fund. The execution of such transactions shall not
be deemed to represent an unlawful act of breach of any duty created by this
Agreement or otherwise. LTCB-MAS will promptly communicate to the officers and
Directors of the Fund such information relating to portfolio transactions as
they may reasonably request.
8. If the aggregate expenses incurred by, or allocated to, a
Portfolio in any fiscal year shall exceed the expense limitations applicable to
the Portfolio imposed by state securities laws or regulations thereunder, as
such limitations may be raised or lowered from time to time, LTCB-MAS shall
reimburse the Portfolio for such excess. LTCB-MAS's reimbursement obligation
will be limited to the amount of fees it received under this agreement during
the period in which such expense limitations were exceeded, unless otherwise
required by applicable laws or regulations. With respect to portions of a fiscal
year in which this contract shall be in effect, the foregoing limitations shall
be prorated according to the proportion which that portion of the fiscal year
bears to the full fiscal year. Any payments required to be made by this
paragraph 8 shall be made once a year promptly after the end of the Fund's
fiscal year.
9. This agreement shall continue in effect for an initial period
of two years from the date hereof and thereafter with respect to each Portfolio
for successive annual periods, provided that such continuance is specifically
approved at least annually (a) by the vote of a majority of that Portfolio's
<PAGE>
4
outstanding voting securities (as defined in the 1940 Act) or by the Fund's
Board of Directors and (b) by the vote, cast in person at a meeting called for
such purpose, of a majority of the Fund's directors who are not parties to this
agreement or "interested persons" (as defined in the 1940 Act) of any such
party. This agreement may be terminated by any Portfolio without penalty, at any
time, (1) either by a vote of the Board of Directors or by vote of the
outstanding voting securities of that Portfolio on sixty (60) days' written
notice, or (2) by LTCB-MAS upon ninety (90) days notice to the Fund. This
agreement may remain in effect with respect to a Portfolio even if it has been
terminated in accordance with this paragraph with respect to other Portfolios of
the Fund. This agreement will also terminate automatically in the event of its
assignment (as defined in the 1940 Act).
10. Except to the extent necessary to perform LTCB-MAS,
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of LTCB-MAS, or any affiliate of LTCB-MAS, or any employee of
LTCB-MAS, to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
firm, individual or association.
11. This agreement shall be governed by the laws of the State of
New York.
<PAGE>
5
If the foregoing correctly sets forth the agreement between the
Fund and LTCB-MAS, please so indicate by signing and returning to the Fund the
enclosed copy hereof.
Very truly yours,
MINERVA FUND, INC.
By: /s/ John J. Pileggi
-------------------------------
Title: President
ACCEPTED:
LTCB-MAS INVESTMENT MANAGEMENT, INC.
By: /s/ Herbert Evert
---------------------------------
Title: President
<PAGE>
6
SCHEDULE A
--------------------
Equity Portfolio
<PAGE>
7
SCHEDULE B
--------------------
In consideration of the services to be rendered by LTCB-MAS under
this agreement, each Portfolio shall pay LTCB-MAS an investment management fee
calculated and accrued daily and paid monthly, based on the following annual
percentage rates, to the Portfolio's average daily net assets for the month:
Rate
----
Equity Portfolio .50%
For purposes of calculating such fee, the value per share of the Portfolio's
net assets shall be computed in the manner specified in the Prospectus and the
Articles.
Exhibit 5(b)
INVESTMENT SERVICES AGREEMENT
LTCB-MAS Investment Management, Inc.
One Tower Bridge, Suite 1000
West Conshohocken, PA 19428
January 3, 1996
Miller Anderson & Sherrerd, LLP
One Tower Bridge, Suite 1150
West Conshohocken, PA 19428
Ladies and Gentlement:
This will confirm the agreement between the undersigned
("LTCB-MAS") and Miller Anderson & Sherrerd, LLP (or any successor-in-interest
(by merger or otherwise) thereto or transferee thereof that does not involve an
"assignment" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"), and that is a limited partnership or other entity
wholly owned, directly or indirectly, by Morgan Stanly Asset Management
Holdings, Inc. and/or its affiliates (Miller Anderson & Sherrard, LLP or such
successor-in-interst or transferee being referred to herein as the
"Sub-adviser") as follows:
1. LTCB-MAS has been employed by Minerva Fund, Inc. (the
"Fund")to provide investment services to the Fund pursuant to an investment
management agreement dated January 3, 1996 (the "Investment Management
Agreement"). The Fund is an open-end investment company that consists of the
separate investment portfolios set forth on Schedule A hereto, as amended from
time to time (the "Portfolios"). The Fund invests and reinvests the assets of
each Portfolio in the manner and in accordance with the investment objective and
limitations of each Portfolio specified in the Fund's Articles of Incorporation
(the "Articles"), and the currently effective prospectus, including the
documents incorporated by reference therein (the "Prospectus"), relating to the
Fund and each Portfolio, included in the Fund's Registration Statement, as
amended from time to time (the "Registration Statement"), filed under the 1940
Act and the Securities Act of 1933, as amended. Copies of the documents referred
to in the preceding sentence have been furnished to the Sub-adviser. Any
<PAGE>
2
amendments to these documents shall be furnished to the Sub-adviser promptly.
2. For good and valuable consideration, LTCB-MAS hereby employs
the Sub-adviser, acting in collaboration with and under the supervision of
LTCB-MAS, to (a) be responsible for selecting investments for each Portfolio in
conformity with the stated investment objective and policies of such Portfolio,
(b) advise and consult with LTCB-MAS regarding each Portfolio's overall
investment strategy, and (c) consult with LTCB-MAS on at least a weekly basis
regarding specific decisions concerning the purchase, sale or retention of
particular securities on behlaf of each Portfolio.
3. The Sub-adviser shall provide, at its own expense, the office
space, furnishings and equipment and the personnel required by it to perform the
services to be performed hereunder on the terms provided herein. The Sub-adviser
shall not be responsible for the expenses of the Fund or LTCB-MAS.
4. The Sub-adviser, acting in collaboration with and under the
supervision of LTCB-MAS, shall make investments and shall place purchase and
sale orders for the account of each Portfolio in accordance with the investment
objective and limitations of each Portfolio set forth in the Articles, the
Prospectus, the 1940 Act, the provisions of the Internal Revenue Code relating
to regulated investment companies, other applicable laws and regulations, and
policy decisions adopted by the Fund's Board of Directors from time to time and
communicated to the Sub-adviser in writing. The Sub-adviser shall advise
LTCB-MAS and, through LTCB-MAS, the Fund's officers and Board of Directors, at
such times as the Fund's Board of Directors may specify, of investments made for
the account of each Portfolio and shall, when requested by LTCB-MAS or the
Fund's officers or Board of Directors, supply the reasons for making such
investments.
5. In consideration of the Sub-adviser's undertaking to render
the services described in this agreement, LTCB-MAS agrees that the Sub-adviser's
undertaking to render the services described in this agreement, LTCB-MAS agrees
that the Sub-adviser shall not be liable under this agreement for any error of
judgment or mistake of law or for any loss suffered by LTCB-MAS or the Fund in
connection with the performance of this agreement, provided that nothing in this
agreement shal be deemed to protect or purport to protect the Sub-adviser
against any liability to LTCB-MAS or the Fund to which the Sub-adviser would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties under this agreement or by reason of
its reckless disregard of its obligations and duties hereunder.
6. The Sub-adviser shall receive no fee for the services it
provides pursuant to this agreement.
<PAGE>
3
7. The Sub-adviser is authorized to select the brokers or dealers
that will execute the purchases and sales of securities for each of the Fund's
Portfolios and is directed to use its best efforts to obtain the best available
price and most favorable execution, except as prescribed herein. Subject to
policies established by the Board of Directors of the Fund, the Sub-adviser may
also be authorized to effect individual securities transactions at commission
rates in excess of the minimum commission rates available, if the Sub-adviser
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage or research services provided by such
broker or dealer, viewed in terms of either that particular transaction or the
overall responsibilities of the Sub-adviser under this agreeement. The execution
of such transactions shall not be deemed to represent an unlawful act or breach
of any duty created by this agreement or otherwise. The Sub-adviser will
promptly communicate to LTCB-MAS and the officers and Directors of the Fund such
information relating to portfolio transactions as they may reasonably request.
8. The Sub-adviser will notify LTCB-MAS of any change or pending
change in its direct or indirect ownership or in its organizational structure
within a reasonable period of time after learning of such change or pending
change.
9. This agreement shall continue in effect for an initial period
of two years from the date hereof and thereafter with respect to each Portfolio
for successive annual periods, provided that such continuance is specifically
approved at least annually (a) by the vote of a majority of the Portfolio's
outstanding voting securities (as defined in the 1940 Act) or by the Fund's
Board of Directors and (b) by the vote, cast in person at a meeting called for
such purpose, of a majority of the Fund's directors who are not parties to this
agreement or "interested persons" (as defined in the 1940 Act) of any such
party. This agreement may be terminated by any Portfolio without penalty, at any
time,(1) either by a vote of the Board of Directors or by vote of the
outstanding voting securities of that Portfolio on sixty (60) days' written
notice, (2) by LTCB-MAS upon ninety (90) days' notice to the Sub-adviser and the
Fund, or (iii) by the Sub-Adviser upon ninety (90) days' notice to LTCB-MAS and
the Fund. This agreement may remain in effect with respect to a Portfolio even
if it has been terminated in accordance with this paragraph with respect to the
other Portfolio of the Fund. This agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act).
10. Except to the extent necessary to perform the Sub-adviser's
obligations under this agreement, nothing herein shall be deemed to limit or
restrict the right of the Sub-adviser, or any affiliate of the Sub-adviser, or
any employee of the Sub-adviser, to engage in any other business or to devote
time and attention to the management or other aspects of any other
<PAGE>
4
business, whether of a similar or dissimilar nature, or to render services of
any kind to any other corporation, firm, individual or association.
11. This agreement shall be governed by the laws of the State of
New York.
<PAGE>
5
If the foregoing correctly sets forth the agreement between
LTCB-MAS and the Sub-adviser, please so indicate by signing and returning to
LTCB-MAS the enclosed copy hereof.
Very truly yours,
LTCB-MAS INVESTMENT MANAGEMENT, INC.
By: /s/ Herbert Evert
-------------------------------
Title: President
ACCEPTED:
MILLER ANDERSON & SHERRERD
By: /s/ Thomas
---------------------------------
Title: Partner
<PAGE>
5
SCHEDULE A
------------
Equity Portfolio
EXHIBIT 6
DISTRIBUTION AGREEMENT
AGREEMENT made this 1st day of October, 1996, between MINERVA FUND, INC.
(the "Company"), a Maryland corporation having its principal place of business
at 237 Park Avenue, New York, New York 10017, and BISYS FUND SERVICES LIMITED
PARTNERSHIP d/b/a BISYS FUND SERVICES ("Distributor"), having its principal
place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company is an open-end management investment company,
organized as a Maryland corporation and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
units of beneficial interest ("Shares") of each of the investment portfolios of
the Company (such portfolios being referred to individually as a "Fund" and
collectively as the "Funds").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS DISTRIBUTOR; CONVERSION TO THE SERVICES.
1.1 Distributor (i) will act as agent for the distribution of the
Shares covered by the registration statement and prospectus of the Company
then in effect under the Securities Act of 1933, as amended (the
"Securities Act") and (ii) will perform such additional services as are
provided in this Section 1 (collectively, the "Services"). In connection
therewith, the Company agrees to convert to the Distributor's data
processing systems and software (the "BISYS System"). The Company shall
cooperate with the Distributor to provide the Distributor with all
necessary information and assistance required to successfully convert to
the BISYS System. The Distributor shall provide the Company with a schedule
relating to such conversion and the parties agree that the conversion may
progress in stages. The date upon which all Services shall have been
converted to the BISYS System shall be referred to herein as the
"Conversion Date." The Distributor hereby accepts such engagement and
agrees to perform the Services commencing, with respect to each individual
Service, on the date that the conversion of such Service to the BISYS
System has been completed. The Distributor shall determine in accordance
with its normal acceptance procedures when the applicable Service has been
successfully converted. As used in this Agreement, the term "registration
statement" shall mean Parts A (the prospectus), B (the Statement of
Additional Information) and C of each registration statement that is filed
on Form N-1A, or any successor thereto, with the Commission, together with
any amendments thereto. The term "prospectus" shall mean each form of
prospectus and Statement of Additional Information used by the Funds for
delivery to shareholders and prospective shareholders after the effective
dates of the above-referenced registration statements, together with any
amendments and supplements thereto.
<PAGE>
1.2 Distributor agrees to use appropriate efforts to solicit orders
for the sale of the Shares and will undertake such advertising and
promotion as it believes reasonable in connection with such solicitation.
The Company understands that Distributor is now and may in the future be
the distributor of the shares of several investment companies or series
(together, "Investment Companies") including Companies having investment
objectives similar to those of the Company. The Company further understands
that investors and potential investors in the Company may invest in shares
of such other Investment Companies. The Company agrees that Distributor's
duties to such Investment Companies shall not be deemed in conflict with
its duties to the Company under this paragraph 1.2.
Distributor shall, at its own expense, finance appropriate activities
which it deems reasonable, which are primarily intended to result in the
sale of the Shares, including, but not limited to, advertising,
compensation of underwriters, dealers and sales personnel, the printing and
mailing of prospectuses to other than current Shareholders, and the
printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the
1940 Act, all rules and regulations promulgated by the Commission
thereunder and all rules and regulations adopted by any securities
association registered under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the
Company.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the
Funds.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of
any kind, the Company's officers may decline to accept any orders for, or
make any sales of, the Shares until such time as those officers deem it
advisable to accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 The Company agrees at its own expense to execute any and all
documents and to furnish any and all information and otherwise to take all
actions that may be reasonably necessary in connection with the
qualification of the Shares for sale in such states as Distributor may
designate.
1.9 The Company shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Funds and
the Shares as Distributor may reasonably request; and the Company warrants
that the statements contained in any such information shall fairly show or
2
<PAGE>
represent what they purport to show or represent. The Company shall also
furnish Distributor upon request with: (a) unaudited semi-annual statements
of the Funds' books and accounts prepared by the Company, (b) a monthly
itemized list of the securities in the Funds, (c) monthly balance sheets as
soon as practicable after the end of each month, and (d) from time to time
such additional information regarding the financial condition of the Funds
as Distributor may reasonably request.
1.10 The Company represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Company
with the Commission under the Securities Act have been carefully prepared
in conformity with requirements of said Act and rules and regulations of
the Commission thereunder. The registration statement and prospectus
contain all statements required to be stated therein in conformity with
said Act and the rules and regulations of said Commission and all
statements of fact contained in any such registration statement and
prospectus are true and correct. Furthermore, neither any registration
statement nor any prospectus includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of
the Shares. The Company may, but shall not be obligated to, propose from
time to time such amendment or amendments to any registration statement and
such supplement or supplements to any prospectus as, in the light of future
developments, may, in the opinion of the Company's counsel, be necessary or
advisable. If the Company shall not propose such amendment or amendments
and/or supplement or supplements that are deemed necessary or advisable by
the Company's counsel within fifteen days after receipt by the Company of a
written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement. The Company shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Company's
right to file at any time such amendments to any registration statement
and/or supplements to any prospectus, of whatever character, as the Company
may deem advisable, such right being in all respects absolute and
unconditional.
1.11 The Company authorizes Distributor and dealers to use any
prospectus in the form furnished from time to time in connection with the
sale of the Shares. The Company agrees to indemnify, defend and hold
Distributor, its several partners and employees, and any person who
controls Distributor within the meaning of Section 15 of the Securities Act
free and harmless from and against any and all claims, demands, liabilities
and expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which Distributor, its partners and employees, or any such
controlling person, may incur under the Securities Act or under common law
or otherwise, arising out of or based upon any untrue statement, or alleged
untrue statement, of a material fact contained in any registration
statement or any prospectus or arising out of or based upon any omission,
or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make
the statements in either thereof not misleading; provided, however, that
the Company's agreement to indemnify Distributor, its partners or
employees, and any such controlling person shall not be deemed to cover any
claims, demands, liabilities or expenses arising out of any statements or
3
<PAGE>
representations as are contained in any prospectus and in such financial
and other statements as are furnished in writing to the Company by
Distributor and used in the answers to the registration statement or in the
corresponding statements made in the prospectus, or arising out of or based
upon any omission or alleged omission to state a material fact in
connection with the giving of such information required to be stated in
such answers or necessary to make the answers not misleading; and further
provided that the Company's agreement to indemnify Distributor and the
Company's representations and warranties hereinbefore set forth in
paragraph 1.10 shall not be deemed to cover any liability to the Company or
its Shareholders to which Distributor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of Distributor's reckless disregard of its
obligations and duties under this Agreement. The Company's agreement to
indemnify Distributor, its partners and employees and any such controlling
person, as aforesaid, is expressly conditioned upon the Company being
notified of any action brought against Distributor, its partners or
employees, or any such controlling person, such notification to be given by
letter or by telegram addressed to the Company at its principal office in
Columbus, Ohio and sent to the Company by the person against whom such
action is brought, within 10 days after the summons or other first legal
process shall have been served. The failure to so notify the Company of any
such action shall not relieve the Company from any liability which the
Company may have to the person against whom such action is brought by
reason of any such untrue, or allegedly untrue, statement or omission, or
alleged omission, otherwise than on account of the Company's indemnity
agreement contained in this paragraph 1.11. The Company will be entitled to
assume the defense of any suit brought to enforce any such claim, demand or
liability, but, in such case, such defense shall be conducted by counsel of
good standing chosen by the Company and approved by Distributor, which
approval shall not be unreasonably withheld. In the event the Company
elects to assume the defense of any such suit and retain counsel of good
standing approved by Distributor, the defendant or defendants in such suit
shall bear the fees and expenses of any additional counsel retained by any
of them; but in case the Company does not elect to assume the defense of
any such suit, or in case Distributor reasonably does not approve of
counsel chosen by the Company, the Company will reimburse Distributor, its
partners and employees, or the controlling person or persons named as
defendant or defendants in such suit, for the fees and expenses of any
counsel retained by Distributor or them. The Company's indemnification
agreement contained in this paragraph 1.11 and the Company's
representations and warranties in this Agreement shall remain operative and
in full force and effect regardless of any investigation made by or on
behalf of Distributor, its partners and employees, or any controlling
person, and shall survive the delivery of any Shares.
This Agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Company agrees promptly to notify Distributor of the
commencement of any litigation or proceedings against the Company or any of
its officers or Directors in connection with the issue and sale of any
Shares.
1.12 Distributor agrees to indemnify, defend and hold the Company, its
several officers and Directors and any person who controls the Company
within the meaning of Section 15 of the Securities Act free and harmless
4
<PAGE>
from and against any and all claims, demands, liabilities and expenses
(including the costs of investigating or defending such claims, demands, or
liabilities and any counsel fees incurred in connection therewith) which
the Company, its officers or Directors or any such controlling person, may
incur under the Securities Act or under common law or otherwise, but only
to the extent that such liability or expense incurred by the Company, its
officers or Directors or such controlling person resulting from such claims
or demands, shall arise out of or be based upon any untrue, or alleged
untrue, statement of a material fact contained in information furnished in
writing by Distributor to the Company and used in the answers to any of the
items of the registration statement or in the corresponding statements made
in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such
information furnished in writing by Distributor to the Company required to
be stated in such answers or necessary to make such information not
misleading. Distributor's agreement to indemnify the Company, its officers
and Directors, and any such controlling person, as aforesaid, is expressly
conditioned upon Distributor being notified of any action brought against
the Company, its officers or Directors, or any such controlling person,
such notification to be given by letter or telegram addressed to
Distributor at its principal office in Columbus, Ohio, and sent to
Distributor by the person against whom such action is brought, within 10
days after the summons or other first legal process shall have been served.
Distributor shall have the right of first control of the defense of such
action, with counsel of its own choosing, satisfactory to the Company, if
such action is based solely upon such alleged misstatement or omission on
Distributor's part, and in any other event the Company, its officers or
Directors or such controlling person shall each have the right to
participate in the defense or preparation of the defense of any such
action. The failure to so notify Distributor of any such action shall not
relieve Distributor from any liability which Distributor may have to the
Company, its officers or Directors, or to such controlling person by reason
of any such untrue or alleged untrue statement, or omission or alleged
omission, otherwise than on account of Distributor's indemnity agreement
contained in this paragraph 1.12.
1.13 No Shares shall be offered by either Distributor or the Company
under any of the provisions of this Agreement and no orders for the
purchase or sale of Shares hereunder shall be accepted by the Company if
and so long as the effectiveness of the registration statement then in
effect or any necessary amendments thereto shall be suspended under any of
the provisions of the Securities Act or if and so long as a current
prospectus as required by Section 10(b)(2) of said Act is not on file with
the Commission; provided, however, that nothing contained in this paragraph
1.13 shall in any way restrict or have an application to or bearing upon
the Company's obligation to repurchase Shares from any Shareholder in
accordance with the provisions of the Company's prospectus, Articles of
Incorporation, or Bylaws.
1.14 The Company agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or for
additional information;
5
<PAGE>
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by
service of process on the Company of any proceeding for that
purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration
statement or prospectus then in effect or which requires the
making of a change in such registration statement or
prospectus in order to make the statements therein not
misleading; and
(d) of all action of the Commission with respect to any
amendment to any registration statement or prospectus which
may from time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the
Staff of the Commission shall not be deemed actions of or requests by the
Commission.
1.15 Distributor agrees on behalf of itself and its partners and employees
to treat confidentially and as proprietary information of the Company all
records and other information relative to the Company and its prior, present or
potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Company,
which approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Company.
1.16 This Agreement shall be governed by the laws of the State of Ohio.
2. PUBLIC OFFERING PRICE.
The public offering price of the Company's Shares shall be the net asset
value of such Shares. The net asset value of Shares shall be determined in
accordance with the provisions of the Articles of Incorporation and By-Laws of
the Company and the then-current prospectuses of the Company's Funds.
3. TERM, DURATION AND TERMINATION.
The initial term of this Agreement (the "Initial Term") shall be for a
period commencing on the date this Agreement is executed by both parties and
ending on the date that is one year after such date. Thereafter, if not
terminated, this Agreement shall continue with respect to a particular Fund
automatically for successive one-year terms, provided that such continuance is
specifically approved at least annually by the vote of the Company's Board of
Directors or the vote of a majority of the outstanding voting securities of such
6
<PAGE>
Fund. This Agreement will also terminate automatically in the event of its
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities," "interested persons" and "assignment" shall have the same
meanings as ascribed to such terms in the 1940 Act.)
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first written
above.
MINERVA FUND, INC. BISYS FUND SERVICES
LIMITED PARTNERSHIP
By: BISYS Fund Services, Inc.
General Partner
By: /s/ John J. Pileggi By: /s/ Stephen Mintos
-------------------------- ---------------------------
John J. Pileggi Stephen Mintos
Title: President and Treasurer Title: Executive Vice President
------------------------- -------------------------
EXHIBIT 8
SUPPLEMENT TO CUSTODIAN AGREEMENT
THIS SUPPLEMENT TO THE CUSTODIAN AGREEMENT is made as of February 1, 1994
(this "Supplement") by and between MINERVA FUND, INC., a Maryland corporation
(the "Company"), and LTCB TRUST COMPANY, a New York corporation ("LTCB").
W I T N E S S E T H :
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company and LTCB have entered into a custodian agreement dated
as of September 28, 1993 (the "Custodian Agreement"); and
WHEREAS, the Company has requested and LTCB has agreed to supplement the
Custodian Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms used
herein which are defined in the Custodian Agreement, as supplemented hereby, are
used herein as therein defined.
2. APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Company hereby authorizes
and instructs LTCB to employ as sub-custodians for the Company's securities and
other assets maintained outside the United States the foreign banking
institutions and foreign securities depositories designated on Schedule A hereto
("foreign sub-custodians"). Upon receipt by LTCB of Written Instructions
<PAGE>
2
satisfactory to it, LTCB and the Company may agree to amend Schedule A hereto
from time to time to designate additional foreign banking institutions and
foreign securities depositories to act as sub-custodian. By Written
Instructions, the Company may instruct LTCB to cease the employment of any one
or more of such sub-custodians for maintaining custody of the Company's assets,
in which case the Company will, in consultation with LTCB, provide Written
Instructions as to where any assets held by such sub-custodian shall be
transferred.
3. ASSETS TO BE HELD. LTCB shall limit the securities and other assets
maintained in the custody of foreign sub-custodians to: (a) "foreign
securities", as defined in paragraph (c)(1) of Rule 17f-5 under the Investment
Company Act of 1940, as amended, and (b) cash and cash equivalents in such
amounts as LTCB or the Company may determine to be reasonably necessary to
effect the Company's foreign securities transactions. LTCB shall identify on its
books as belonging to the Company the foreign securities of the Company held by
each foreign sub-custodian.
4. FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be agreed upon
in writing by LTCB and the Company, assets of the Company shall be maintained in
foreign securities depositories only through arrangements implemented by the
foreign banking institutions serving as sub-custodians pursuant to the terms
<PAGE>
3
hereof or directly by LTCB. Where possible, such arrangements shall include
entry into agreements containing the provisions set forth in Section 5 hereof.
5. AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each agreement with a
foreign banking institution shall provide that: (a) the Company's assets will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or agents,
except a claim of payment for their safe custody or administration or for funds
advanced on behalf of the Company by the foreign banking institution; (b)
beneficial ownership of the Company's assets will be freely transferable without
the payment of money or value other than for custody or administration or for
funds advanced on behalf of the Company by the foreign banking institution; (c)
adequate records will be maintained identifying the assets as belonging to the
Company; (d) officers of or auditors employed by, or other representatives of
LTCB, including to the extent permitted under applicable law the independent
public accountants for the Company, will be given access to the books and
records of the foreign banking institution relating to its actions under its
agreement with LTCB; and (e) assets of the Company held by the foreign
sub-custodian will be subject only to the instructions of LTCB or its agents.
6. ACCESS OF INDEPENDENT ACCOUNTANTS OF THE COMPANY. Upon the request of
the Company, LTCB will use its best efforts to arrange for the independent
accountants of the Company to be afforded access to the books and records of any
foreign banking institution employed as a foreign sub-custodian insofar as such
<PAGE>
4
books and records relate to the performance of such foreign banking institution
under its agreement with LTCB.
7. REPORTS BY LTCB. LTCB will supply to the Company from time to time, as
mutually agreed upon, statements in respect of the securities and other assets
of the Company held by foreign sub-custodians, including but not limited to an
identification of entities having possession of the Company's securities and
other assets and advises or notifications of any transfers of securities to or
from each custodial account maintained by a foreign banking institution for LTCB
on behalf of the Company indicating, as to securities acquired for the Company,
the identity of the entity having physical possession of such securities.
8. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. (a) Notwithstanding any
provision of the Custodian Agreement to the contrary, settlement and payment for
securities received for the account of the Company and delivery of securities
maintained for the account of the Company may be effected in accordance with the
customary established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(b) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set forth
<PAGE>
5
in Section 4 of the Custodian Agreement, and the Company agrees to hold any such
nominee harmless from any liability as a holder of record of such securities.
9. LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which
LTCB employs a foreign banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in the performance of its
duties and to indemnify, and hold harmless, LTCB and the Company from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the institutions performance of such obligations by reason of
the negligence (whether through action or inaction), fraud or willful misconduct
of such institution or any of its officers or employees. At the election of the
Company, it shall be entitled to be subrogated to the rights of LTCB with
respect to any claims against a foreign banking institution as a consequence of
any such loss, damage, cost, expense, liability or claim if and to the extent
that the Company has not been made whole for any such loss, damage, cost,
expense, liability or claim.
10. LIABILITY OF LTCB. LTCB shall be liable for the acts or omissions of a
foreign banking institution to the same extent as set forth with respect to
sub-custodians generally in the Custodian Agreement but, regardless of whether
assets are maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by Section 13
<PAGE>
6
hereof, LTCB shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has otherwise
exercised reasonable care.
11. REIMBURSEMENT FOR ADVANCES. If LTCB advances cash or securities for any
purpose including the purchase or sale of foreign exchange or of contracts for
foreign exchange, or in the event that LTCB or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of the Custodian Agreement, except such as may
arise from its or its nominee's own negligent action, negligent failure to act
or willful misconduct, any property at any time held for the account of the
Company shall be security therefor and should the Company fail to repay LTCB
promptly, LTCB shall be entitled to utilize available cash and to dispose of the
Company's assets to the extent necessary to obtain reimbursement.
12. MONITORING RESPONSIBILITIES. LTCB shall furnish annually to the
Company any information it receives from a foreign sub-custodian concerning such
foreign sub-custodian. Each agreement with a foreign sub-custodian shall provide
that the foreign sub-custodian shall furnish annually information similar in
kind and scope to that furnished to the Company in connection with the initial
approval of each foreign custodian. In addition, LTCB will promptly inform the
Company in the event that LTCB learns of (i) a material adverse change in the
financial
<PAGE>
7
condition of a foreign subcustodian, (ii) any material loss of the assets of the
Company, or (iii) in the case of any foreign sub-custodian not the subject of an
exemptive order from the Securities and Exchange Commission with respect to the
minimum shareholder's equity requirements under Rule 17f-5, if LTCB is notified
by such foreign sub-custodian that there appears to be a substantial likelihood
that its shareholder's equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholder's equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
13. BRANCHES OF U.S. BANKS. The provisions of this Supplement shall not
apply where the custody of the Company's assets is maintained in a foreign
branch of a banking institution which is a "bank" as defined by Section 2(a)(5)
of the 1940 Act meeting the qualifications set forth in Section 26(a) of the
1940 Act. The appointment of any such branch as a sub-custodian shall be
governed by paragraph 6(a) of the Custodian Agreement.
14. COUNTERPARTS. This Supplement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. GOVERNING LAW. This Supplement shall be governed by the laws of the
State of New York.
<PAGE>
8
IN WITNESS WHEREOF, the parties hereto have caused this Supplement to be
executed by their officers designated below on the day and year first above
written.
MINERVA FUND, INC.
Attest: /s/ Michael Appleton By: /s/ John J. Pileggi
--------------------- ------------------------
Michael Appleton Name: John J. Pileggi
Title: President
LTCB TRUST COMPANY
Attest: /s/ Barbara Berelaqua By: /s/ Helmut Langefeld
-------------------------- ------------------------
Barbara Berelaqua Name: Helmut Langefeld
Vice President Title: Executive Vice President
<PAGE>
9
SCHEDULE A
Royal Bank of Canada
The Canadian Depository for Securities Ltd.
<PAGE>
MINERVA FUND, INC.
CUSTODIAN AGREEMENT
<PAGE>
TABLE OF CONTENTS
Page
----
1. Appointment ......................................................... 1
2. Delivery of Documents ............................................... 2
3. Definitions ......................................................... 4
4. Delivery and Registration of the Property ........................... 6
5. Receipt and Disbursement of Money ................................... 6
6. Receipt of Securities ............................................... 7
7. Use of Book-Entry System ............................................ 9
8. Instructions Consistent with Articles, etc........................... 1O
9. Transactions Not Requiring Instructions ............................. 11
10. Transactions Requiring Instructions ................................. 13
11. Segregated Accounts ................................................. 14
12. Dividends and Distributions ......................................... 16
13. Purchases of Securities ............................................. 16
14. Sales of Securities ................................................. 17
15. Records ............................................................. 17
16. Reports ............................................................. 18
17. Cooperation with Accountants ........................................ 18
18. Confidentiality ..................................................... 19
19. Right to Receive Advice ............................................. 19
20. Compliance with Governmental Rules and Regulations .................. 20
21. Compensation ........................................................ 21
22. Indemnification ..................................................... 21
23. Responsibility of LTCB .............................................. 23
24. Collections ......................................................... 25
25. Duration and Termination ............................................ 26
i
<PAGE>
Page
----
26. Notices.............................................................. 27
27. Further Actions ..................................................... 28
28. Amendments .......................................................... 28
29. Delegation .......................................................... 28
30. Counterparts ........................................................ 28
31. Miscellaneous ....................................................... 29
32. Governing Law ....................................................... 29
ii
<PAGE>
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of September 28, 1993 by and between MINERVA
FUND, INC., a Maryland corporation (the "Company"), and LTCB TRUST COMPANY, a
New York corporation ("LTCB").
W I T N E S S E T H :
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Company desires to retain LTCB to serve as the Company's
custodian and LTCB is willing to serve as the Company's custodian;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Company hereby appoints LTCB to act as custodian of the
portfolio securities of the Company's two existing investment portfolios: the
Equity Portfolio and the Fixed Income Portfolio (collectively, the "Funds"),
cash and other property belonging to the Company for the period and on the terms
set forth in this Agreement. In the event that the Company establishes one or
more portfolios other than the Funds with respect to which the Company decides
to retain LTCB to serve as custodian hereunder, the Company shall so notify LTCB
in writing. If LTCB is willing to render such services, LTCB shall promptly so
notify the Company in writing whereupon such portfolio shall be deemed to be a
<PAGE>
2
Fund hereunder. LTCB agrees to comply with all relevant provisions of the 1940
Act and applicable rules and regulations thereunder.
2. DELIVERY OF DOCUMENTS. The Company has furnished LTCB with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Company's Board of Directors authorizing the
appointment of LTCB as custodian of the portfolio securities, cash and other
property belonging to the Company and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the Company's
officers and/or other persons authorized to issue Oral Instructions and to sign
Written Instructions, as hereinafter defined, on behalf of the Company;
(c) The Company's Articles of Incorporation filed with the Department of
Assessments and Taxation of the State of Maryland on June 28, 1993 and all
amendments thereto (the "Articles");
(d) The Company's By-Laws and all amendments thereto (the "By-Laws");
(e) The Investment Management Agreement between LTCB-MAS Investment
Management, Inc. ("LTCB-MAS") and the Company with respect to the Equity
Portfolio and the Fixed Income . Portfolio, and (ii) the Investment Services
Agreement between LTCB-MAS and Miller, Anderson & Sherrerd ("MA&S") with respect
to the Equity Portfolio and the Fixed Income Portfolio (LTCB-MAS, MA&S or such
other entity as may in the future provide
<PAGE>
3
investment advisory services to the Company being referred to herein as the
"Adviser");
(f) The Transfer Agency Agreement between Furman Selz, Incorporated (the
"Transfer Agent") and the Company dated as of September 28, 1993 (the "Transfer
Agency Agreement");
(g) The Distribution Agreement between Furman Selz Incorporated ("Furman
Selz") and the Company dated as of September 28, 1993 (the "Distribution
Agreement");
(h) The Fund Administration Agreement between Furman Selz and the Company
dated as of September 28 , 1993 (the "Fund Administration Agreement");
(j) The Company's most recent Registration Statement on Form N-1A under the
Securities Act of 1933 (the "1933 Act"), and under the 1940 Act (File Nos.
33-65568 and 8117828) as filed with the SEC relating to shares of the Company's
Capital Stock, $.001 par value ("Shares"), and all amendments thereto;
(k) The Company's most recent prospectus and statement of additional
information and all amendments and supplements thereto (the "Prospectus"); and
(l) Before the Company engages in any transactions regulated by the
Commodity Futures Trading Commission ("CFTC"), a copy of either (i) a filed
notice of eligibility to claim the exclusion from the definition of "commodity
pool operator" contained in Section 2(a)(1)(A) of the Commodity Exchange Act;
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the
<PAGE>
4
Commodity Exchange Act ("CEA") that is provided in Rule 4.5 under the CEA,
together with all supplements as are required by the CFTC, or (ii) a letter
which has been granted the Company by the CFTC which states that the Company
will not be treated as a "pool" as defined in section 4.10(d) of the CFTC's
General Regulations, or (iii) a letter which has been granted the Company by the
CFTC which states that the CFTC will not take any enforcement action if the
Company does not register as a "commodity pool operator"; and
The Company will furnish LTCB from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. DEFINITIONS.
(a) "AUTHORIZED PERSON". As used in this Agreement, the term
"Authorized Person" means any of the officers of the Company and any other
person, whether or not any such person is an officer or employee of the Company,
duly authorized by the Board of Directors of the Company to give Oral and
Written Instructions on behalf of the Company and listed on the Certificate
annexed hereto as Appendix A or any amendment thereto as may be received by LTCB
from time to time.
(b) "BOOK-ENTRY SYSTEM". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and its
nominee or nominees and any book-entry system maintained by a clearing
<PAGE>
5
agency registered with the SEC under Section 17A of the Securities Exchange Act
of 1934 (the "1934 Act").
(c) "ORAL INSTRUCTIONS". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by LTCB from an
Authorized Person or from a person reasonably believed by LTCB to be an
Authorized Person. The Company agrees to deliver to LTCB, at the time and in the
manner specified in Paragraph 8(b) of this Agreement, Written Instructions
confirming Oral Instructions.
(d) "PROPERTY". The term "Property", as used in this Agreement, means:
(i) any and all securities and other property which the Company
may from time to time deposit, or cause to be deposited, with LTCB or
which LTCB may from time to time hold for the Company:
(ii) all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any of such securities or other
property; and
(iv) all proceeds of the sale of securities issued by the
Company, which are received by LTCB from time to time from or on
behalf of the Company.
(e) "WRITTEN INSTRUCTIONS". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, including buy or sell
tickets
<PAGE>
6
and computer transmissions and received by LTCB and signed by two Authorized
Persons.
4. DELIVERY AND REGISTRATION OF THE PROPERTY. The Company will deliver
or cause to be delivered to LTCB all securities and all moneys owned by it,
including cash received for the issuance of its Shares, at any time during the
period of this Agreement. LTCB will not be responsible for such securities and
such moneys until actually received by it. All securities delivered to LTCB
(other than in bearer form) shall be registered in the name of the Company or in
the name of a nominee of the Company or in the name of any nominee of LTCB (with
or without indication of fiduciary status), or in the name of any sub-custodian
or any nominee of any such sub-custodian appointed pursuant to Paragraph 6
hereof or shall be properly endorsed and in form for transfer satisfactory to
LTCB.
5. RECEIPT AND DISBURSEMENT OF MONEY.
(a) LTCB shall open and maintain a separate custodial account or
accounts in the name of each Fund, subject only to draft or order by LTCB acting
pursuant to the terms of this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it from or for
the account of the Company. LTCB shall make payments of cash to, or for the
account of, the Company from such cash only (i) for the purchase of securities
for the Company's portfolio as provided in Paragraph 13 hereof; (ii) upon
receipt of Written Instructions stating they are for the payment of interest,
dividends, taxes, administration, accounting, distribution,
<PAGE>
7
advisory or management fees or expenses which are to be borne by the Company
under the terms of this Agreement, the Investment Management Agreement, the Fund
Administration Agreement, the Transfer Agency Agreement and the Distribution
Agreement; (iii) upon receipt of Written Instructions, for payments in
connection with the conversion, exchange or surrender of securities owned or
subscribed to by the Company and held by or to be delivered to LTCB; (iv) to a
sub-custodian pursuant to Paragraph 6 hereof; (v) for the redemption of Company
Shares; (vi) for payment of the amount of dividends received in respect of
securities sold short; or (vii) upon receipt of Written Instructions stating
they are for other proper Company purposes. No payment pursuant to (i) above
shall be made unless LTCB has received a copy of the broker's or dealer's
confirmation or the payee's invoice, as appropriate.
(b) LTCB is hereby authorized to endorse and collect all checks,
drafts or other orders for the payment of money received as custodian for the
account of the Company.
6. RECEIPT OF SECURITIES.
(a) Except as provided by Paragraph 7 hereof, LTCB shall hold and
physically segregate in a separate account, identifiable at all times from those
of any other persons, firms, or corporations; all securities and non-cash
property received by it for the account of the Company. All such securities and
non-cash property are to be held or disposed of by LTCB for the Company pursuant
to the terms of this Agreement. In the absence of Written Instructions LTCB
shall have no power or authority to
<PAGE>
8
withdraw, deliver, assign, hypothecate, pledge or otherwise dispose of any such
securities and investments. In no case may any Director, officer, employee or
agent of the Company withdraw any securities other than pursuant to this
Agreement. In connection with its duties under this Paragraph 6, LTCB may, at
its own expense, enter into sub-custodian agreements with other banks or trust
companies for the receipt of certain securities and cash to be held by LTCB for
the account of the Company pursuant to this Agreement; provided that each such
bank or trust company has an aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than one million dollars
($1,000,000) for a LTCB subsidiary or affiliate, or of not less than twenty
million dollars ($20,000,000) if such bank or trust company is not a LTCB
subsidiary or affiliate and that in either case such bank or trust company
agrees with LTCB to comply with all relevant provisions of the 1940 Act and
applicable rules and regulations thereunder. LTCB shall remain responsible for
the performance of all of its duties under this Agreement and shall hold the
Company harmless from the acts and omissions, under the standards of care
provided for herein, of any bank or trust company that it might choose pursuant
to this Paragraph 6.
(b) Where securities are transferred to an account of the Company
established pursuant to Paragraph 7 hereof, LTCB shall also by book-entry or
otherwise identify as belonging to the Company the quantity of securities in a
fungible bulk of securities registered in the name of LTCB (or its
<PAGE>
9
nominee) or shown in LTCB's account on the books of the Book Entry System. At
least monthly and from time to time, LTCB shall furnish the Company with a
detailed statement of the Property held for the Company under this Agreement.
7. USE OF BOOK-ENTRY SYSTEM. The Company shall deliver to LTCB
certified resolutions of the Board of Directors of the Company approving,
authorizing and instructing LTCB on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received by
LTCB (a) to deposit in the Book-Entry System all securities belonging to the
Company eligible for deposit therein and (b) to utilize the Book-Entry System to
the extent possible in connection with settlements of purchases and sales of
securities by the Company, and deliveries and returns of securities loaned,
subject to repurchase agreements or used as collateral in connection with
borrowings. Without limiting the generality of such use, it is agreed that the
following provisions shall apply thereto:
(a) Securities and any cash of the Company deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled by
LTCB in other than a fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. LTCB and its sub-custodian, if any, will
pay out money only upon receipt of securities and will deliver securities only
upon the receipt of money.
(b) All books and records maintained by LTCB which relate to the
Company's participation in the Book-Entry
<PAGE>
10
system will at times during LTCB's regular business hours be open to the
inspection of the Company's duly authorized employees or agents, and the Company
will be furnished with all information in respect of the services rendered to it
as it may require.
(c) LTCB will provide the Company with copies of any report obtained
by LTCB on the system of internal accounting control of the Book-Entry System
promptly after receipt of such a report by LTCB. LTCB will also provide the
Company with such reports on its own system of internal control as the Company
may reasonably request from time to time.
8. INSTRUCTIONS CONSISTENT WITH ARTICLES. ETC.
(a) Unless otherwise provided in this Agreement, LTCB shall act only
upon Oral and Written Instructions. Although LTCB may know of the provisions of
the Articles and By-Laws of the Company, LTCB may assume that any Oral or
Written Instructions received hereunder are not in any way inconsistent with any
provisions of such Articles or By-Laws or any vote, resolution or proceeding of
the Shareholders, or of the Board of Directors, or of any committee thereof.
(b) LTCB shall be entitled to rely upon any Oral Instructions and any
Written Instructions actually received by LTCB pursuant to this Agreement. The
Company agrees to forward to LTCB Written Instructions confirming Oral
Instructions in such manner that the Written Instructions are received by LTCB
by the close of business of the same day that such Oral Instructions are given
to LTCB. The Company agrees that the fact that such confirming Written
Instructions are not received by LTCB shall in
<PAGE>
11
no way affect the validity of the transactions or enforceability of the
transactions authorized by the Company by giving Oral Instructions. The Company
agrees that LTCB shall incur no liability to the Company in acting upon Oral
Instructions given to LTCB hereunder concerning such transactions provided such
instructions reasonably appear to have been received from an Authorized Person.
9. TRANSACTIONS NOT REQUIRING INSTRUCTIONS. In the absence of contrary
Written Instructions, LTCB is authorized to take the following actions:
(a) COLLECTION OF INCOME AND OTHER PAYMENTS. LTCB shall:
(i) collect and receive for the account of the Company, all income and
other payments and distributions, including (without limitation) stock
dividends, rights, bond coupons, option premiums and similar items,
included or to be included in the Property, and promptly advise the Company
of such receipt and shall credit such income, as collected, to the
Company's custodian account;
(ii) endorse and deposit for collection on the same day as received,
in the name of the Company, checks, drafts, or other orders for the payment
of money;
(iii) receive and hold for the account of the Company all securities
received as a distribution on the Company's portfolio securities as a
result of a stock dividend, share split-up or reorganization,
recapitalization, readjustment or other rearrangement or distribution of
rights or similar
<PAGE>
12
securities issued with respect to any portfolio securities belonging to the
Company HELD BY LTCB hereunder;
(iv) present for payment and collect the amount payable upon all
securities which may mature or be called, redeemed, or retired, or
otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in connection
with the collection and receipt of such income and other payments and the
endorsement for collection of checks, drafts, and other negotiable
instruments as described in Paragraph 24 of this Agreement.
(b) MISCELLANEOUS TRANSACTIONS. LTCB is authorized to deliver or
cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the Company
in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary SECURITIES FOR
definitive securities; and
(iii) for transfer of securities into the name of the Company or LTCB
or nominee of either, or for exchange of -securities for a different number
of bonds, certificates, or other evidence, representing the same aggregate
face amount or number of units bearing the same interest rate, maturity
date and call provisions, if any; provided that, in any such case, the new
securities are to be delivered to LTCB.
<PAGE>
13
l0. TRANSACTIONS REQUIRING INSTRUCTIONS. Upon receipt of Oral or
Written Instructions and not otherwise, LTCB, directly or through the use of the
Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Company as owner of any
securities may be exercised;
(b) deliver any securities held for the Company against receipt of
other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for the Company to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale of
assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other instruments or
documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Company
and take such other steps as shall be stated in said Oral or Written
Instructions to be for the purpose of effectuating any duly authorized plan of
liquidation, reorganization, merger, consolidation or recapitalization of the
Company;
<PAGE>
14
(e) release securities belonging to the Company to any bank or
trust company for the purpose of pledge or hypothecation to secure any loan
incurred by the Company; provided, however, that securities shall be released
only upon payment to LTCB of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, subject to
proper prior authorization, further securities may be released for that purpose;
and repay such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes evidencing the
loan;
(f) release and deliver securities owned by the Company in
connection with any repurchase agreement entered into on behalf of the Company,
but only on receipt of payment therefor; and pay out moneys of the Company in
connection with such repurchase agreements, but only upon the delivery of the
securities; and
(g) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.
11. SEGREGATED ACCOUNTS. LTCB shall upon receipt of Written or Oral
Instructions establish and maintain a segregated account or accounts on its
records for and on behalf of the Company, into which account or accounts may be
transferred cash and/or securities, including securities in the Book-Entry
System (i) for the purposes of compliance by the Company with the procedures
required by a securities or option exchange, providing
<PAGE>
15
such procedures comply with the 1940 Act and Release No. 10666 or any subsequent
release or releases of the SEC relating to the maintenance of segregated
accounts by registered investment companies, and (ii) for other proper corporate
purposes, but only, in the case of clause (ii), upon receipt of Written
Instructions.
LTCB may enter into separate custodial agreements with various futures
commission merchants ("FCMs") that the Company uses (each an "FCM Agreement"),
pursuant to which the Company's margin deposits in any transactions involving
futures contracts and options on futures contracts will be held by LTCB in
accounts (each an "FCM Account") subject to the disposition by the FCM involved
in such contracts in accordance with the customer contract between FCM and the
Company ("FCM Contract"), SEC rules governing such segregated accounts, CFTC
rules and the rules of the applicable commodities exchange. Such FCM Agreements
shall only be entered into upon receipt of Written Instructions from the Company
which state that (i) a customer agreement between the FCM and the Company has
been entered into; and (ii) the Company is in compliance with all the rules and
regulations of the CFTC. Transfers of initial margin shall be made into an FCM
Account only upon Written Instructions; transfers of premium and variation
margin may be made into an FCM Account pursuant to Oral Instructions. Transfers
of funds from an FCM Account to the FCM for which LTCB holds such an account may
only occur upon certification by the FCM to LTCB that pursuant to the FCM
<PAGE>
16
Agreement and the FCM Contract, ALL CONDITIONS PRECEDENT TO ITS right to give
LTCB such instruction have been satisfied.
12. DIVIDENDS AND DISTRIBUTIONS. Upon receipt by LTCB of Written
Instruction with respect to dividends and distributions declared by the
Company's Board of Directors and payable to Shareholders who have elected in the
proper manner to RECEIVE their distributions or dividends in cash, and in
conformance with procedures mutually agreed upon by LTCB, the Company and the
Company's Transfer Agent, LTCB shall pay to the Company's Transfer Agent, as
agent for the Shareholders, an amount equal to the amount indicated in said
Written Instructions as payable by the Company to such Shareholders for
distribution in cash by the Transfer Agent to such Shareholders. In lieu of
paying the Company's Transfer Agent cash dividends and distributions, LTCB may
arrange for the direct payment of cash dividends and distributions to
Shareholders by LTCB in accordance with such procedures and controls as are
mutually agreed upon from time to time by and among the Company, LTCB and the
Company's Transfer Agent
13. PURCHASES OF SECURITIES. Promptly after each decision to purchase
securities by the Adviser, the Company shall deliver to LTCB Oral or Written
Instructions specifying with respect to each such purchase: (a) the name of
the issuer and the title of the securities, (b) the number of shares or the
principal amount purchased and accrued interest, if any, (c) the date of
purchase and settlement, (d) the purchase price per unit, (e) the total amount
payable upon such purchase and (f) the name
<PAGE>
17
of the person from whom or the broker through whom the purchase was made. LTCB
shall upon receipt of securities purchased by or for the Company pay out of the
moneys held for the account of the Company the total amount payable to the
person from whom or the broker through whom the purchase was made, provided that
the same conforms to the total amount payable as set forth in such Oral or
Written Instructions.
14. SALES OF SECURITIES. Promptly after each decision to sell
securities by the Adviser or exercise of an option written by the Company, the
Company shall deliver to LTCB Oral or Written Instructions, specifying with
respect to each such sale: (a) the name of the issuer and the title of the
security, (b) the number of shares or principal amount sold, and accrued
interest, if any, (c) the date of sale, (d) the sale price per unit, (e) the
total amount payable to the Company upon such sale, and (f) the name of the
broker through whom or the person to whom the sale was made. LTCB shall deliver
the securities upon receipt of the total amount payable to the Company upon such
sale, provided that the same conforms to the total amount payable as set forth
in such Oral Instructions. Subject to the foregoing, LTCB may accept payment in
such form as shall be satisfactory to it, and may deliver securities and arrange
for payment in accordance with the customs prevailing among dealers in
securities.
15. RECORDS. The books and records pertaining to the Company which are
in the possession of LTCB shall be prepared and maintained as required by the
1940 Act and other applicable securities laws and regulations. The Company, or
the Company's
<PAGE>
18
authorized representatives, shall have access to such books and records at all
times during LTCB's normal business hours. Upon the reasonable request of the
Company, copies of any such books and records shall be provided by LTCB to the
Company or the Company's authorized representative at the Company's expense.
16. REPORTS.
(a) LTCB shall furnish the Company the following reports:
(1) such periodic and special reports as the Company may
reasonably request;
(2) a monthly statement summarizing all transactions and entries
for the account of the Company, listing the portfolio securities and
stating the cash account of the Company;
(3) the reports to be furnished to the Company pursuant to Rule
17f-4; and
(4) such other information as may be agreed upon from time to
time between the Company and LTCB.
(b) LTCB shall transmit promptly to the Company any proxy
statement, proxy materials, notice of a call or conversion or similar
communications received by it as Custodian of the Property.
17. COOPERATION WITH ACCOUNTANTS. LTCB shall cooperate with the
Company's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the
<PAGE>
19
expression of their opinion, as such may be required from time to time by the
Company.
18. CONFIDENTIALITY. LTCB agrees on behalf of itself and its employees
to treat confidentially all records and other information relative to the
Company and its prior, present, or potential Shareholders and relative to the
Adviser and its prior, present or potential customers, except, after prior
notification to and approval in writing by the Company or the Adviser as
appropriate, which approval shall not be unreasonably withheld and may not be
withheld where LTCB may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Company or the Adviser as
appropriate.
19. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF COMPANY. If LTCB shall be in doubt as to any action
to be taken or omitted by it, it may request, and shall receive, from the
Company directions or advice, including Oral or Written Instructions where
appropriate.
(b) ADVICE OF COUNSEL. If LTCB shall be in doubt as to any question
of law involved in any action to be taken or omitted by LTCB, it may request
advice at its own cost from counsel of its own choosing (who may be counsel
for the Adviser, the Company or LTCB, at the option of LTCB).
(c) CONFLICTING ADVICE. In case of conflict between directions,
advice or Oral or Written Instructions received by LTCB pursuant to subparagraph
(a) of this paragraph
<PAGE>
20
and advice received by LTCB pursuant to subparagraph (b) of this paragraph, LTCB
shall be entitled to rely on and follow the advice received pursuant to the
latter provision alone.
(d) PROTECTION OF LTCB. LTCB shall be protected in any action or
inaction which it takes in reliance on any directions, advice or Oral or Written
Instructions received pursuant to subparagraphs (a) or (b) of this paragraph
which LTCB, after receipt of any such directions, advice or Oral or Written
Instructions, in good faith believes to be consistent with such directions,
advice or Oral or Written Instructions, as the case may be. However, nothing in
this paragraph shall be construed as imposing upon LTCB any obligation (i) to
seek such directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions when
received, unless, under the terms of another provision of this Agreement, the
same is a condition to LTCB's properly taking or omitting to take such action.
Nothing in this subsection shall excuse LTCB when an action or omission on the
part of LTCB constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by LTCB of any duties or obligations under this Agreement.
20. COMPLIANCE WITH GOVERNMENTAL RULES AND REOULATIONS. LTCB
undertakes to comply with all applicable laws, rules and regulations of
governmental authorities having jurisdiction including without limitation the
1940 Act and the rules and regulations thereunder.
<PAGE>
21
21. COMPENSATION. For the services provided and the expenses assumed
by LTCB under this Agreement, the Company will pay to LTCB a monthly fee as
agreed upon between LTCB and the Company from time to time.
22. INDEMNIFICATION. The Company, as sole owner of the Property,
agrees to indemnify and hold harmless LTCB and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1940 Act,
the CEA, and any state and foreign securities and blue sky laws, all as or to be
amended from time to time) and expenses, including attorneys' fees and
disbursements (as long as such attorney has been retained with the consent of
the Company, which consent shall not be unreasonably withheld), arising directly
or indirectly (a) from the fact that securities included in the Property are
registered in the name of any such nominee or (b) without limiting the
generality of the foregoing clause (a) from any action or thing which LTCB takes
or does or omits to take or do (i) at the request or on the direction of or in
reliance on the advice of the Company or (ii) upon Oral or Written Instructions,
provided, that neither LTCB nor any of its nominees shall be indemnified against
any liability to the Company or to its Shareholders (or any expenses incident to
such liability) arising out of LTCB's or such nominee's own willful misfeasance,
bad faith, negligence or reckless disregard of its duties or responsibilities
specifically described in this Agreement. In order that the indemnification
provision contained in this
<PAGE>
22
Paragraph 22 shall apply, it is understood that if in any case the Company may
be asked to indemnify or save LTCB harmless, the Company shall be fully and
promptly advised of all pertinent facts concerning the situation in question,
and it is further understood that LTCB wilL use all reasonable care to identify
and notify the Company promptly concerning any situation which presents or
appears likely to present the probability of such a claim for indemnification
against the Company. The Company shall have the option to defend LTCB against
any claim which may be the subject of this indemnification and, in the event
that the Company so elects, it will so notify LT CB and thereupon the Company
shall take over complete defense for the claim, and LTCB shall in such situation
incur no further legal or other expenses for which it shall seek indemnification
under this Paragraph 22. LTCB shall in no case confess any claim or make any
compromise or settlement in any case in which the Company will be asked to
indemnify LTCB, except with the Company's prior written consent.
In the event of any advance of cash for any purpose made by LTCB
resulting from Oral or Written Instructions of the Company, or in the event that
LTCB or its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance of this
Agreement, except such as may arise from its or its nominee's own negligent
action, negligent failure to act or willful misconduct, any Property at any time
held for the account of the Company shall be security therefor.
<PAGE>
23
23. RESPONSIBILITY OF LTCB. LTCB shall be under no duty to take any
action on behalf of the Company except as specifically set forth herein or as
may be specifically agreed to by LTCB in writing. In the performance of its
duties hereunder, LTCB shall be obligated to exercise care and diligence and to
act in good faith and to use its best efforts within reasonable limits to insure
the accuracy and completeness of all services performed under this Agreement.
LTCB shall be responsible for and shall hold the Company harmless from all loss,
cost, damage and expense, including reasonable attorney fees (as long as such
attorney has been retained with the consent of LTCB, which consent shall not be
unreasonably withheld), incurred by it resulting from any claim, demand, action
or suit arising out of LTCB's own negligent failure to perform its duties under
this Agreement. In order that the indemnification provision contained in this
Paragraph 23 shall apply, it is understood that if in any case LTCB may be asked
to indemnify or save the Company harmless, LTCB shall be fully and promptly
advised of all pertinent facts concerning the situation in question, and it is
further understood that the Company will use all reasonable care to identify and
notify LTCB promptly concerning any situation which presents or appears likely
to present the probability of such a claim for indemnification against LTCB.
LTCB shall have the option to defend the Company against any claim which may be
the subject of this indemnification and, in the event that LTCB elects, it will
so notify the Company and thereupon LTCB shall take over complete defense for
the claim, and the Company shall
<PAGE>
24
in such situation incur no further legal or other expense for which it shall
seek indemnification under this paragraph 23. The Company shall in no case
confess any claim or make any compromise or settlement in any case in which LTCB
will be asked to indemnify the Company, except with LTCB's prior written
consent.
To the extent that duties, obligations and responsibilities are not
expressly set forth in this Agreement, however, LTCB shall not be liable for any
act or omission which does not constitute willful misfeasance, bad faith or
gross negligence on the part of LTCB or reckless disregard of such duties,
obligations and responsibilities. Without limiting the generality of the
foregoing or of any other provision of this Agreement, LTCB in connection with
its duties under this Agreement shall not be under any duty or obligation to
inquire into and shall not be liable for or in respect of (a) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, if any, and which LTCB reasonably believes to be genuine; (b) the
validity or invalidity of the issuance of any securities included or to be
included in the Property, the legality or illegality of the purchase of such
securities, or the propriety or impropriety of the amount paid therefore (c) the
legality or illegality of the sale (or exchange) of any Property or the
propriety or impropriety of the amount for which such Property is sold (or
exchanged); or (d) delays or errors or loss of data occurring by reason of
circumstances beyond LTCB's control, including acts of
<PAGE>
25
civil or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply,
nor shall LTCB be under any duty or obligation to ascertain whether any Property
at any time delivered to or held by LTCB may properly be held by or for the
Company. Notwithstanding the foregoing, LTCB shall use its best efforts to
mitigate the effects of the events in clause (d) above, although such efforts
shall not impute any liability thereto. LTCB expressly disclaims all
responsibility for consequential damages, including but not limited to any that
may result from performance or non-performance of any duty or obligation whether
express or implied in this Agreement, and also expressly disclaims any express
or implied warranty of products or services provided in connection with this
Agreement.
24. COLLECTIONS. All collections of monies or other property in
respect, or which are to become part, of the Property (but not the safekeeping
thereof upon receipt by LTCB) shall be at the sole risk of the Company. In any
case in which LTCB does not receive any payment due the Company within a
reasonable time after LTCB has made proper demands for the same, it shall so
notify the Company in writing, including copies of all demand letters, any
written responses thereto, and memoranda of all oral responses thereto and to
telephonic demands, and await instructions from the Company. LTCB shall not be
obliged to take legal action for collection unless and until reasonably
indemnified to its satisfaction. LTCB shall also notify the
<PAGE>
26
Company as soon as reasonably practicable whenever income due on securities is
not collected in due course.
25. DURATION AND TERMINATION. This Agreement shall continue in effect
until two years from the date thereof and thereafter for successive annual
periods, provided that such continuance is specifically approved at least
annually (a) by the Company's Board of Directors and (b) by the vote, cast in
person at a meeting called for the purpose, of a majority of the Company's
Directors who are not parties to this Agreement or "interested persons" (as
defined in the 1940 Act) of any such party. This Agreement may be terminated at
any time, without the payment of any penalty, by a vote of a majority of the
Company's outstanding voting securities (as defined in the 1940 Act) or by a
vote of a majority of the Company's entire Board of Directors on 60 days'
written notice to LTCB or by 60 days' written notice to the Company, except as
provided in paragraph 29. Upon any termination of this Agreement, pending
appointment of a successor to LTCB or vote of the Shareholders of the Company to
dissolve or to function without a custodian of its cash, securities or other
property, LTCB shall not deliver cash, securities or other property of the
Company to the Company, but may deliver them to a bank or trust company of its
own selection, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty million dollars
($20,000,000) as a custodian for the Company to be held under terms similar to
those of this Agreement, provided, however, that LTCB shall not be required to
make any such delivery or payment
<PAGE>
27
until full payment shall have been made by the Company of all liabilities
constituting a charge on or against the properties of the Company then held by
LTCB or on or against LTCB and until full payment shall have been made to LTCB
of all of its fees, compensation, costs and expenses.
26. NOTICES. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to LTCB at
LTCB's address, 165 Broadway, New York, New York 10006, marked for the attention
of Trust Administration and Operation Division (or its successor); (b) if to the
Company, at 237 Park Avenue, New York, New York 10017; or (c) if to neither of
the foregoing, at such other address as shall have been notified to the sender
of any such Notice or other communication. A Notice may be sent by first-class
mail, in which case it shall be deemed to have BEEN GIVEN five days after it is
sent, if sent by facsimile sending device, it shall be deemed to have been given
immediately, or if sent by messenger, it shall be deemed to have been given on
the day it is delivered, or if sent by confirming telegram, cable, telex or
facsimile sending device, it shall be deemed to have been given immediately. All
postage, cable, telegram, telex and facsimile sending device charges arising
from the sending of a Notice hereunder shall be paid by the sender.
<PAGE>
28
27. FURTHER ACTIONS. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
28. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
29. DELEGATION. On thirty (30) days' prior written notice to the
Company, LTCB may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of LTCB, provided (i) the delegate
agrees with LTCB to comply with all relevant provisions of the 1940 Act; (ii)
LTCB and such delegate shall promptly provide such information as the Company
may request, and respond to such questions as the Company may ask, relative to
the delegation, including (without limitation) the capabilities of the delegate;
(iii) the delegation of such duties shall not relieve LTCB of any of its duties
hereunder; and (iv) if the Company notifies LTCB within such thirty (30) day
period of its objection to such delegation and LTCB, notwithstanding such
notification of objection, assigns its rights and delegates, its duties
thereunder, then the Company may terminate this Agreement immediately or upon
such notice as the Company, in its sole discretion determines, without complying
with the sixty (60) days' notice prescribed by Paragraph 25 hereof.
30. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an
<PAGE>
29
original, but all of which together shall constitute one and the same
instrument.
31. MISCELLANEOUS.
This Agreement embodies the entire agreement and understanding
between the PARTIES HERETO, AND supersedes all prior agreements and
understandings relating to the subject matter HEREOF, PROVIDED that the PARTIES
HERETO MAY EMBODY in one or more separate documents their agreement, if any,
with respect to delegated and/or Oral Instructions. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding and shall inure
to the benefit of the parties hereto and their respective successors.
32. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of New York.
<PAGE>
30
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated below on the day and
year first above written.
MINERVA FUND, INC.
Attest: /s/ Michael Appetton By: /s/ John T. Pileggi
--------------------- ------------------------
Michael Appetton John J. Pileggi
Title: President and Treasurer
LTCB TRUST COMPANY
Attest: /s/ Barbara Berelaqua By: /s/ Helmut Langefeld
-------------------------- ------------------------
Barbara Berelaqua Helmut Langefeld
Vice President Title: Executive Vice President
EXHIBIT 9(a)
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of October, 1996, by and between
MINERVA FUND, INC., a Maryland corporation (the "Company"), and BISYS FUND
SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES (the "Administrator"),
an Ohio limited partnership.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), which may consist of several series of shares of common stock ("Shares");
and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Portfolios") and as listed on Schedule A attached hereto and made a part of
this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR; CONVERSION TO THE SERVICES. The
Company hereby engages the Administrator to act as the administrator of the
Portfolios and to furnish the Portfolios with the management and administrative
services as set forth in Article 2 below (collectively, the "Services"), and, in
connection therewith, the Company agrees to convert to the Administrator's data
processing systems and software (the "BISYS System") as necessary in order to
receive the Services. The Company shall cooperate with the Administrator to
provide the Administrator with all necessary information and assistance required
to successfully convert to the BISYS System. The Administrator shall provide the
Company with a schedule relating to such conversion and the parties agree that
the conversion may progress in stages. The date upon which all Services shall
have been converted to the BISYS System shall be referred to herein as the
"Conversion Date." The Administrator hereby accepts such engagement and agrees
to perform the Services commencing, with respect to each individual Service, on
the date that the conversion of such Service to the BISYS System has been
completed. The Administrator shall determine in accordance with its normal
acceptance procedures when the applicable Service has been successfully
converted.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
ARTICLE 2. ADMINISTRATIVE SERVICES. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Company,
<PAGE>
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Directors of the Company with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Company with regulatory reporting, all
necessary office space, equipment, personnel, compensation and facilities
(including facilities for meetings of shareholders ("Shareholders") and
directors of the Company) for handling the affairs of the Portfolios and such
other services as the Administrator shall, from time to time, determine to be
necessary to perform its obligations under this Agreement. In addition, at the
request of the Board of Directors, the Administrator shall make reports to the
Company's Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator shall:
(a) calculate contractual Company expenses and control all disbursements
for the Company, and as appropriate compute the Company's yields,
total return, expense ratios, portfolio turnover rate and, if
required, portfolio average dollar-weighted maturity;
(b) prepare and file with the SEC Post-Effective Amendments to the
Company's Registration Statement, Notices of Annual or Special
Meetings of Shareholders and Proxy materials relating to such
meetings; accumulate information for and, subject to the approval by
the Company's Treasurer, prepare reports to the Company's Shareholders
of record and the SEC including, but not necessarily limited to:
Semi-Annual Reports on Form N-SAR and the preparation and filing of
Notices pursuant to Rule 24f-2;
(c) prepare such reports, applications and documents (including reports
regarding the sale and redemption of Shares as may be required in
order to comply with Federal and state securities law) as may be
necessary or desirable to register the Company's Shares with state
securities authorities, monitor the sale of Company Shares for
compliance with state securities laws, and file with the appropriate
state securities authorities the registration statements and reports
for the Company and the Company's Shares and all amendments thereto,
as may be necessary or convenient to register and keep effective the
Company and the Company's Shares with state securities authorities to
enable the Company to make a continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's investment
adviser, communications to Shareholders, including the annual report
2
<PAGE>
to Shareholders, coordinate the mailing of prospectuses, notices,
proxy statements, proxies and other reports to Shareholders, and
supervise and facilitate the proxy solicitation process for all
shareholder meetings, including the tabulation of shareholder votes;
(e) administer contracts on behalf of the Company with, among others, the
Company's investment adviser, distributor, custodian, transfer agent
and fund accountant;
(f) supervise the Company's transfer agent with respect to the payment of
dividends and other distributions to Shareholders;
(g) calculate performance data of the Portfolios for dissemination to
information services covering the investment company industry;
(h) coordinate and supervise the preparation and filing of the Company's
tax returns;
(i) examine and review the operations and performance of the various
organizations providing services to the Company or any Portfolio of
the Company, including, without limitation, the Company's investment
adviser, distributor, custodian, fund accountant, transfer agent,
outside legal counsel and independent public accountants, and at the
request of the Board of Directors, report to the Board on the
performance of organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and printing of the
Company's semi-annual and annual reports to Shareholders;
(k) assist with the design, development, and operation of the Portfolios,
including new classes, investment objectives, policies and structure;
(l) provide individuals reasonably acceptable to the Company's Board of
Directors to serve as officers of the Company, who will be responsible
for the management of certain of the Company's affairs as determined
by the Company's Board of Directors;
(m) advise the Company and its Board of Directors on matters concerning
the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the Company in
accordance with the requirements of Rules 17g-1 and 17d-1(7) under the
1940 Act as such bonds and policies are approved by the Company's
Board of Directors;
(o) monitor and advise the Company and its Portfolios on their registered
investment company status under the Internal Revenue Code of 1986as
amended;
3
<PAGE>
(p) perform all administrative services and functions of the Company and
each Portfolio to the extent administrative services and functions are
not provided to the Company or such Portfolio pursuant to the
Company's or such Portfolio's investment advisory agreement,
distribution agreement, custodian agreement, transfer agent agreement
and fund accounting agreement;
(q) review and provide advice and counsel on all sales literature (e.g.,
advertisements, brochures and Shareholder communications) with respect
to each of the Portfolios;
(r) assist in monitoring, and assist in developing compliance procedures
for, each Portfolio which will include, among other matters,
procedures to monitor compliance with each Portfolio's investment
objective, policies, restrictions, tax matters and applicable laws and
regulations;
(s) monitor the Company's arrangements with respect to services provided
by financial institutions which are, or wish to become, shareholder
servicing agents for the Company ("Shareholder Servicing Agents").
With respect to Shareholder Servicing Agents, the Administrator shall
specifically monitor and review the services rendered by the
Shareholder Servicing Agents to their customers, who are the
beneficial owners of Shares, pursuant to agreements between the
Company and such Shareholder Servicing Agents ("Shareholder Servicing
Agreements"). Such responsibilities shall include, among other things,
reviewing the qualifications of financial institutions wishing to be
Shareholder Servicing Agents; assisting in the execution and delivery
of Shareholder Servicing Agreements; reporting to the Board of
Directors with respect to (i) the amounts paid or payable by the
Company from time to time under the Shareholder Servicing Agreements
and (2) the nature of the services provided by Shareholder Servicing
Agents; and maintaining appropriate records in connection with its
monitoring duties;
(t) provide legal advice and counsel to the Company with respect to
regulatory matters including: monitoring regulatory and legislative
developments which may affect the Company and assisting in the
strategic response to such developments; counseling and assisting the
Company in routine regulatory examinations or investigations of the
Company; and working closely with outside counsel to the Company in
response to any litigation or non-routine regulatory matters. In
performing its duties as administrator of the Company, the
Administrator (i) will act in accordance with the Company's Articles
of Incorporation, By-Laws and Prospectuses and with the instructions
and directions of the Board of Directors of the Company and will
conform to and comply with the requirements of the 1940 Act and all
other applicable federal or state laws and regulations and (ii) will
consult with legal counsel to the Company, as necessary and
appropriate; and
4
<PAGE>
(u) furnish advice and recommendations with respect to other aspects of
the business and affairs of the Portfolios as the Company and the
Administrator shall determine desirable.
The Administrator shall perform such other services for the Company that
are mutually agreed upon by the parties from time to time. Such services may
include performing internal audit examinations; mailing the annual reports of
the Portfolios; preparing an annual list of Shareholders; and mailing notices of
Shareholders' meetings, proxies and proxy statements, for all of which the
Company will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own expense
the executive, supervisory and clerical personnel necessary to perform its
obligations under this Agreement. The Administrator shall also provide the items
which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all Directors of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Directors of the
Company to perform services on behalf of the Company.
(B) THE COMPANY. The Company assumes and shall pay or cause to be paid all
other expenses of the Company not otherwise allocated herein, including, without
limitation, organization costs, taxes, expenses for legal and auditing services,
the expenses of preparing (including typesetting), printing and mailing reports,
prospectuses, statements of additional information, proxy solicitation material
and notices to existing Shareholders, all expenses incurred in connection with
issuing and redeeming Shares, the costs of custodial services, the cost of
initial and ongoing registration of the Shares under Federal and state
securities laws, fees and out-of-pocket expenses of Directors who are not
affiliated persons of the Administrator or the Investment Adviser to the Company
or any affiliated corporation of the Administrator or the Investment Adviser,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the facilities
furnished and the expenses assumed by the Administrator pursuant to this
Agreement, the Company shall pay to the Administrator compensation at an annual
rate specified in Schedule A attached hereto. Such compensation shall be
calculated and accrued daily, and paid to the Administrator monthly. The Company
shall also reimburse the Administrator for its reasonable out-of-pocket
expenses, including the travel and lodging expenses incurred by officers and
employees of the Administrator in connection with attendance at Board meetings.
5
<PAGE>
If the Conversion Date occurs subsequent to the first day of a month or
terminates before the last day of a month, the Administrator's compensation for
that part of the month in which this Agreement is in effect shall be prorated in
a manner consistent with the calculation of the fees as set forth above. Payment
of the Administrator's compensation for the preceding month shall be made
promptly.
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under this
Agreement for services performed as of the termination date shall survive the
termination of this Agreement.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of the
Administrator shall be confined to those expressly set forth herein, and
no implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Article 5, the term "Administrator" shall include
partners, officers, employees and other agents of the Administrator as well as
the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence and
without negligence, the Company assumes full responsibility and shall indemnify
the Administrator and hold it harmless from and against any and all actions,
suits and claims, whether groundless or otherwise, and from and against any and
all losses, damages, costs, charges, reasonable counsel fees and disbursements,
payments, expenses and liabilities (including reasonable investigation expenses)
arising directly or indirectly out of the Administrator's actions taken or
nonactions with respect to the performance of services hereunder. The indemnity
and defense provisions set forth herein shall indefinitely survive the
termination of this Agreement.
Except for actions, suits or claims brought or threatened against the
Administrator by (i) the Company, or (ii) one or more Shareholders of the
Company, the rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or threatened litigation with
respect to which indemnification hereunder may ultimately be merited. In order
that the indemnification provision contained herein shall apply, however, it is
understood that if in any case the Company may be asked to indemnify or hold the
Administrator harmless, the Company shall be fully and promptly advised of all
pertinent facts concerning the situation in question, and it is further
understood that the Administrator will use all reasonable care to identify and
notify the Company promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification against
the Company, but failure to do so in good faith shall not affect the rights
hereunder.
The Company shall be entitled to participate at its own expense or, if it
so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
6
<PAGE>
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Company at any time for instructions and
may consult counsel for the Company or its own counsel and with accountants and
other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employees or agents of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders are or may be or become interested in the Administrator, as
officers, employees or otherwise and that partners, officers and employees of
the Administrator and its counsel are or may be or become similarly interested
in the Company, and that the Administrator may be or become interested in the
Company as a Shareholder or otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall be
as specified in Schedule A hereto.
ARTICLE 8. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. AMENDMENTS. This Agreement may be amended by the parties hereto
only if such amendment is specifically approved (i) by the vote of a majority of
the Directors of the Company, and (ii) by the vote of a majority of the
Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Directors meeting called
for the purpose of voting on such approval.
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<PAGE>
For special cases, the parties hereto may amend such procedures set forth
herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Articles of Incorporation or then current prospectuses, or any rule,
regulation or requirement of any regulatory body.
ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator , against such liability.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person" and
"affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. NOTICE. Any notice required or permitted to be given by either
party to the other shall be deemed sufficient if sent by registered or certified
mail, postage prepaid, addressed by the party giving notice to the other party
at the following address: if to the Administrator, to it at 3435 Stelzer Road,
Columbus, Ohio 43219; if to the Company, to it at 237 Park Avenue, New York, New
York 10017, with a copy to LTCB-MAS, or at such other address as such party may
from time to time specify in writing to the other party pursuant to this
Section.
ARTICLE 13. GOVERNING LAW. This Agreement shall be construed in accordance
with the laws of the State of Ohio and the applicable provisions of the 1940
Act. To the extent that the applicable laws of the State of Ohio, or any of the
provisions herein, conflict with the applicable provisions of the 1940 Act, the
latter shall control.
ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two or
more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
MINERVA FUND, INC.
/s/ John J. Pileggi
By:----------------------------------
John J. Pileggi
President and Treasurer
Title:-------------------------------
BISYS FUND SERVICES LIMITED PARTNERSHIP
BY: BISYS FUND SERVICES, INC.
GENERAL PARTNER
/s/ Stephen Mintos
By:---------------------------------
Stephen Mintos
Executive Vice President
Title:------------------------------
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<PAGE>
SCHEDULE A
TO THE ADMINISTRATION AGREEMENT
DATED AS OF OCTOBER 1, 1996
BETWEEN THE MINERVA FUND, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all Portfolios of the Company,
either now or hereafter created (collectively, the "Portfolios").
The current portfolios of the Company are set forth below:
Equity Portfolio
------------------------------------------------------------------
Fees: Pursuant to Article 4, in consideration of services rendered and
expenses assumed pursuant to this Agreement, the Company will pay
the Administrator on the first business day of each month, or at
such time(s) as the Administrator shall request and the parties
hereto shall agree, a fee computed daily at the annual rate of:
Fifteen one-hundredths of one percent (.15%) of the Company's
average daily net assets.
The fee for the period from the day of the month this Agreement is
entered into until the end of that month shall be prorated
according to the proportion which such period bears to the full
monthly period. Upon any termination of this Agreement before the
end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to
the full monthly period and shall be payable upon the date of
termination of this Agreement.
For purposes of determining the fees payable to the Administrator,
the value of the net assets of a particular Portfolio shall be
computed in the manner described in the Company's Articles of
Incorporation or in the Prospectus or Statement of Additional
Information respecting that Portfolio as from time to time is in
effect for the computation of the value of such net assets in
connection with the determination of the liquidating value of the
shares of such Portfolio.
The parties hereby confirm that the fees payable hereunder shall
be applied to each Portfolio as a whole, and not to separate
classes of shares within the Portfolios.
Term: The initial term of this Agreement (the "Initial Term") shall be
for a period commencing on the date this Agreement is executed by
both parties and ending on the date that is one year after the
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<PAGE>
Conversion Date. This Agreement shall be renewed automatically for
successive periods of one year after the Initial Term, unless
written notice of nonrenewal is provided by either party not less
than 90 days prior to the end of the then-current term. In the
event of a material breach of this Agreement by either party, the
non-breaching party shall notify the breaching party in writing of
such breach and upon receipt of such notice, the breaching party
shall have 45 days to remedy the breach. In the event the breach
is not remedied within such time period, the nonbreaching party
may immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination for so long
as the Administrator, with the written consent of the Company, in
fact continues to perform any one or more of the services
contemplated by this Agreement or any schedule or exhibit hereto,
the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full
force and effect. Compensation due the Administrator and unpaid by
the Company upon such termination shall be immediately due and
payable upon and notwithstanding such termination. The
Administrator shall be entitled to collect from the Company, in
addition to the compensation described in this Schedule A, the
amount of all of the Administrator's cash disbursements for
services in connection with the Administrator's activities in
effecting such termination, including without limitation, the
delivery to the Company and/or its designees of the Company's
property, records, instruments and documents, or any copies
thereof. Subsequent to such termination, the Administrator will
provide the Company with reasonable access to any Company
documents or records remaining in its possession; provided,
however, that, in exchange therefor, the Company shall reimburse
the Administrator for all costs reasonably incurred by the
Administrator in connection therewith.
If, for any reason other than a breach of this Agreement, the
Administrator is replaced as fund manager and administrator, or if
a third party is added to perform all or a part of the services
provided by the Administrator under this Agreement (excluding any
sub-administrator appointed by the Administrator as provided in
Article 7 hereof), then the Company shall make a one-time cash
payment, as liquidated damages, to the Administrator equal to the
balance due the Administrator for the remainder of the term of
this Agreement, assuming for purposes of calculation of the
payment that the asset level of the Company on the date the
Administrator is replaced, or a third party is added, will remain
constant for the balance of the contract term.
A-2
EXHIBIT 9(b)
TRANSFER AGENCY AGREEMENT
AGREEMENT made this 1st day of October, 1996, between MINERVA FUND, INC.
(the "Company"), a Maryland corporation having its principal place of business
at 237 Park Avenue, New York, New York 10017, and BISYS FUND SERVICES, INC.
("BISYS"), a Delaware corporation having its principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Company desires that BISYS perform certain services for each
series of the Company (individually referred to herein as a "Fund" and
collectively as the "Funds"); and
WHEREAS, BISYS is willing to perform such services on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. RETENTION OF BISYS; CONVERSION TO THE SERVICES.
The Company hereby engages BISYS to act as the transfer agent for the Funds
to perform (i) the transfer agent services set forth in Schedule A hereto (the
"Initial Services"), (ii) such special services (the "Special Services")
incidental to the performance of such services as may be agreed to by the
parties from time to time (for such fees as the parties may agree as aforesaid)
and (iii) such additional services (collectively with the Initial Services and
the Special Services, the "Services"), as may be agreed to by the parties from
time to time and set forth in an amendment to said Schedule A (for such fees as
the parties may agree as aforesaid), and, in connection therewith, the Company
agrees to convert to BISYS' data processing systems and software (the "BISYS
System") as necessary in order to receive the Services. The Company shall
cooperate with BISYS to provide BISYS with all necessary information and
assistance required to successfully convert to the BISYS System. BISYS shall
provide the Company with a schedule relating to such conversion and the parties
agree that the conversion may progress in stages. The date upon which all
Initial Services shall have been converted to the BISYS System shall be referred
to herein as the "Conversion Date." BISYS hereby accepts such engagement and
agrees to perform the Services commencing, with respect to each individual
Service, on the date that the conversion of such Service to the BISYS System has
been completed. BISYS shall determine in accordance with its normal acceptance
procedures when the applicable Service has been successfully converted.
BISYS may, in its discretion, appoint in writing other parties qualified to
perform transfer agency services reasonably acceptable to the Company
(individually, a "Sub-transfer Agent") to carry out some or all of its
responsibilities under this Agreement with respect to a Fund; provided, however,
that the Sub-transfer Agent shall be the agent of BISYS and not the agent of the
<PAGE>
Company or such Fund, and that BISYS shall be fully responsible for the acts of
such Sub-transfer Agent and shall not be relieved of any of its responsibilities
hereunder by the appointment of such Sub-transfer Agent.
2. FEES.
The Company shall pay BISYS for the services to be provided by BISYS under
this Agreement in accordance with, and in the manner set forth in, Schedule B
hereto. Fees for any additional services to be provided by BISYS pursuant to an
amendment to Schedule A hereto shall be subject to mutual agreement at the time
such amendment to Schedule A is proposed.
3. REIMBURSEMENT OF EXPENSES.
In addition to paying BISYS the fees described in Section 2 hereof, the
Company agrees to reimburse BISYS for BISYS' out-of-pocket expenses in providing
services hereunder, including without limitation, the following:
(a) All freight and other delivery and bonding charges incurred by
BISYS in delivering materials to and from the Company and in
delivering all materials to shareholders;
(b) All direct telephone, telephone transmission and telecopy or
other electronic transmission expenses incurred by BISYS in
communication with the Company, the Company's investment adviser
or custodian, dealers, shareholders or others as required for
BISYS to perform the services to be provided hereunder;
(c) Costs of postage, couriers, stock computer paper, statements,
labels, envelopes, checks, reports, letters, tax forms, proxies,
notices or other form of printed material which shall be required
by BISYS for the performance of the services to be provided
hereunder;
(d) The cost of microfilm or microfiche of records or other
materials; and
(e) Any expenses BISYS shall incur at the written direction of an
officer of the Company thereunto duly authorized.
4. EFFECTIVE DATE.
This Agreement shall become effective as of the date first written above
(the "Effective Date").
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<PAGE>
5. TERM.
The initial term of this Agreement (the "Initial Term") shall be for a
period commencing on the date this Agreement is executed by both parties and
ending on the date that is one year after the Conversion Date. Thereafter, it
shall be renewed automatically for successive one-year terms unless written
notice not to renew is given by the non-renewing party to the other party at
least 60 days prior to the expiration of the then-current term; provided,
however, that after such termination, for so long as BISYS, with the written
consent of the Company, in fact continues to perform any one or more of the
services contemplated by this Agreement or any Schedule or exhibit hereto, the
provisions of this Agreement, including without limitation the provisions
dealing with indemnification, shall continue in full force and effect. Fees and
out-of-pocket expenses incurred by BISYS but unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. BISYS shall be entitled to collect from the Company, in addition to
the fees and disbursements provided by Sections 2 and 3 hereof, the amount of
all of BISYS' costs in connection with BISYS' activities in effecting such
termination, including without limitation, the delivery to the Company and/or
its distributor or investment adviser and/or other parties, of the Company's
property, records, instruments and documents, or any copies thereof. To the
extent that BISYS may retain in its possession copies of any Company documents
or records subsequent to such termination which copies had not been requested by
or on behalf of the Company in connection with the termination process described
above, BISYS will provide the Company with reasonable access to such copies;
provided, however, that, in exchange therefor, the Company shall reimburse BISYS
for all costs reasonably incurred in connection therewith.
In the event of a material breach of this Agreement by either party, the
non-breaching party shall notify the breaching party in writing of such breach
and, upon receipt of such notice, the breaching party shall have 45 days to
remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, for any reason other than a breach of this Agreement, BISYS is replaced
as transfer agent, or if a third party is added to perform all or a part of the
services provided by BISYS under this Agreement (excluding any sub-transfer
agent appointed by BISYS as provided in Section 1 hereof), then the Company
shall make a one-time cash payment, as liquidated damages to, BISYS equal to the
balance due BISYS for the remainder of the term of this Agreement, assuming for
purposes of calculation of the payment that the asset level of the Company on
the date BISYS is replaced, or a third party is added, will remain constant for
the balance of the contract term.
6. UNCONTROLLABLE EVENTS.
BISYS assumes no responsibility hereunder, and shall not be liable for any
damage, loss of data, delay or any other loss whatsoever caused by events beyond
its reasonable control.
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<PAGE>
7. LEGAL ADVICE.
BISYS shall notify the Company at any time BISYS believes that it is in
need of the advice of counsel (other than counsel in the regular employ of BISYS
or any affiliated companies) with regard to BISYS' responsibilities and duties
pursuant to this Agreement; and after so notifying the Company, BISYS, at its
discretion, shall be entitled to seek, receive and act upon advice of legal
counsel of its choosing, such advice to be at the expense of the Company or
Funds unless relating to a matter involving BISYS' willful misfeasance, bad
faith, gross negligence or reckless disregard with respect to BISYS'
responsibilities and duties hereunder and BISYS shall in no event be liable to
the Company or any Fund or any shareholder or beneficial owner of the Company
for any action reasonably taken pursuant to such advice.
8. INSTRUCTIONS.
Whenever BISYS is requested or authorized to take action hereunder pursuant
to instructions from a shareholder, or a properly authorized agent of a
shareholder ("shareholder's agent"), concerning an account in a Fund, BISYS
shall be entitled to rely upon any certificate, letter or other instrument or
communication, believed by BISYS to be genuine and to have been properly made,
signed or authorized by an officer or other authorized agent of the Company or
by the shareholder or shareholder's agent, as the case may be, and shall be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained by it hereunder a certificate signed by an officer of the Company or
any other person authorized by the Company's Board of Directors or by the
shareholder or shareholder's agent, as the case may be.
As to the services to be provided hereunder, BISYS may rely conclusively
upon the terms of the Prospectuses and Statement of Additional Information of
the Company relating to the Funds to the extent that such services are described
therein unless BISYS receives written instructions to the contrary in a timely
manner from the Company.
9. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
BISYS shall use its best efforts to ensure the accuracy of all services
performed under this Agreement, but shall not be liable to the Company for any
action taken or omitted by BISYS in the absence of bad faith, willful
misfeasance, negligence or from reckless disregard by it of its obligations and
duties. The Company agrees to indemnify and hold harmless BISYS, its employees,
agents, directors, officers and nominees from and against any and all claims,
demands, actions and suits, whether groundless or otherwise, and from and
against any and all judgments, liabilities, losses, damages, costs, charges,
counsel fees and other expenses of every nature and character arising out of or
in any way relating to BISYS' actions taken or nonactions with respect to the
performance of services under this Agreement or based, if applicable, upon
reasonable reliance on information, records, instructions or requests given or
made to BISYS by the Company, the investment adviser and on any records provided
by any fund accountant or custodian thereof; provided that this indemnification
shall not apply to actions or omissions of BISYS in cases of its own bad faith,
4
<PAGE>
willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties; and further provided that prior to confessing any claim
against it which may be the subject of this indemnification, BISYS shall give
the Company written notice of and reasonable opportunity to defend against said
claim in its own name or in the name of BISYS.
10. RECORD RETENTION AND CONFIDENTIALITY.
BISYS shall keep and maintain on behalf of the Company all books and
records which the Company or BISYS is, or may be, required to keep and maintain
pursuant to any applicable statutes, rules and regulations, including without
limitation Rules 31a-1 and 31a-2 under the Investment Company Act of 1940, as
amended (the "1940 Act"), relating to the maintenance of books and records in
connection with the services to be provided hereunder. BISYS further agrees that
all such books and records shall be the property of the Company and to make such
books and records available for inspection by the Company or by the Securities
and Exchange Commission (the "Commission") at reasonable times and otherwise to
keep confidential all books and records and other information relative to the
Company and its shareholders, except when requested to divulge such information
by duly-constituted authorities or court process, or requested by a shareholder
or shareholder's agent with respect to information concerning an account as to
which such shareholder has either a legal or beneficial interest or when
requested by the Company, the shareholder, or shareholder's agent, or the dealer
of record as to such account.
11. REPORTS.
BISYS will furnish to the Company and to its properly-authorized auditors,
investment advisers, examiners, distributors, dealers, underwriters, salesmen,
insurance companies and others designated by the Company in writing, such
reports at such times as are prescribed in Schedule C attached hereto, or as
subsequently agreed upon by the parties pursuant to an amendment to Schedule C.
12. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services required
to be provided by BISYS under this Agreement are the property of BISYS. All
records and other data except such computer programs and procedures are the
exclusive property of the Company and all such other records and data will be
furnished to the Company in appropriate form as soon as practicable after
termination of this Agreement for any reason.
13. RETURN OF RECORDS.
BISYS may at its option at any time, and shall promptly upon the Company's
demand, turn over to the Company and cease to retain BISYS' files, records and
documents created and maintained by BISYS pursuant to this Agreement which are
no longer needed by BISYS in the performance of its services or for its legal
protection. If not so turned over to the Company, such documents and records
5
<PAGE>
will be retained by BISYS for six years from the year of creation. At the end of
such six-year period, such records and documents will be turned over to the
Company unless the Company authorizes in writing the destruction of such records
and documents.
14. BANK ACCOUNTS.
The Company and the Funds shall establish and maintain such bank accounts
with such bank or banks as are selected by the Company, as are necessary in
order that BISYS may perform the services required to be performed hereunder. To
the extent that the performance of such services shall require BISYS directly to
disburse amounts for payment of dividends, redemption proceeds or other
purposes, the Company and Funds shall provide such bank or banks with all
instructions and authorizations necessary for BISYS to effect such
disbursements.
15. REPRESENTATIONS OF THE COMPANY.
The Company certifies to BISYS that: (a) as of the close of business on the
Effective Date, each Fund which is in existence as of the Effective Date has
authorized unlimited shares, and (b) by virtue of its Articles of Incorporation,
shares of each Fund which are redeemed by the Company may be sold by the Company
from its treasury, and (c) this Agreement has been duly authorized by the
Company and, when executed and delivered by the Company, will constitute a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
16. REPRESENTATIONS OF BISYS.
BISYS represents and warrants that: (a) BISYS has been in, and shall
continue to be in, substantial compliance with all provisions of law, including
Section 17A(c) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), required in connection with the performance of its duties under this
Agreement; and (b) the various procedures and systems which BISYS has
implemented with regard to safekeeping from loss or damage attributable to fire,
theft or any other cause of the blank checks, records, and other data of the
Company and BISYS' records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as are required for the secure
performance of its obligations hereunder.
17. INSURANCE.
BISYS shall notify the Company should its insurance coverage with respect
to professional liability or errors and omissions coverage be canceled or
reduced. Such notification shall include the date of change and the reasons
therefor. BISYS shall notify the Company of any material claims against it with
6
<PAGE>
respect to services performed under this Agreement, whether or not they may be
covered by insurance, and shall notify the Company from time to time as may be
appropriate of the total outstanding claims made by BISYS under its insurance
coverage.
18. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
The Company has furnished to BISYS the following:
(a) Copies of the Articles of Incorporation of the Company and of any
amendments thereto, certified by the proper official of the state
in which such Declaration has been filed.
(b) Copies of the following documents:
1. The Company's By-Laws and any amendments thereto.
2. Certified copies of resolutions of the Board of Directors
covering the following matters:
A. Approval of this Agreement and authorization of a
specified officer of the Company to execute and deliver
this Agreement and authorization for specified officers
of the Company to instruct BISYS hereunder; and
B. Authorization of BISYS to act as Transfer Agent for the
Company on behalf of the Funds.
(c) A list of all officers of the Company, together with specimen
signatures of those officers, who are authorized to instruct
BISYS in all matters.
(d) Two copies of the following (if such documents are employed by
the Company):
1. Prospectuses and Statement of Additional Information;
2. Distribution Agreement; and
3. All other forms commonly used by the Company or its
Distributor with regard to their relationships and
transactions with shareholders of the Funds.
(e) A certificate as to shares of beneficial interest of the Company
authorized, issued, and outstanding as of the Effective Date of
BISYS' appointment as Transfer Agent (or as of the date on which
BISYS' services are commenced, whichever is the later date) and
as to receipt of full consideration by the Company for all shares
7
<PAGE>
outstanding, such statement to be certified by the Treasurer of
the Company.
19. INFORMATION FURNISHED BY BISYS.
BISYS has furnished to the Company the following:
(a) BISYS' Articles of Incorporation.
(b) BISYS' By-Laws and any amendments thereto.
(c) Certified copies of actions of BISYS covering the following
matters:
1. Approval of this Agreement, and authorization of a specified
officer of BISYS to execute and deliver this Agreement;
2. Authorization of BISYS to act as Transfer Agent for the
Company.
(d) A copy of the most recent independent accountants' report
relating to internal accounting control systems as filed with the
Commission pursuant to Rule 17Ad-13 under the Exchange Act.
20. AMENDMENTS TO DOCUMENTS.
The Company shall furnish BISYS written copies of any amendments to, or
changes in, any of the items referred to in Section 18 hereof forthwith upon
such amendments or changes becoming effective. In addition, the Company agrees
that no amendments will be made to the Prospectuses or Statement of Additional
Information of the Company which might have the effect of changing the
procedures employed by BISYS in providing the services agreed to hereunder or
which amendment might affect the duties of BISYS hereunder unless the Company
first obtains BISYS' approval of such amendments or changes.
21. RELIANCE ON AMENDMENTS.
BISYS may rely on any amendments to or changes in any of the documents and
other items to be provided by the Company pursuant to Sections 18 and 20 of this
Agreement and the Company hereby indemnifies and holds harmless BISYS from and
against any and all claims, demands, actions, suits, judgments, liabilities,
losses, damages, costs, charges, counsel fees and other expenses of every nature
and character which may result from actions or omissions on the part of BISYS in
reasonable reliance upon such amendments and/or changes. Although BISYS is
authorized to rely on the above-mentioned amendments to and changes in the
documents and other items to be provided pursuant to Sections 18 and 20 hereof,
BISYS shall be under no duty to comply with or take any action as a result of
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<PAGE>
any of such amendments or changes unless the Company first obtains BISYS'
written consent to and approval of such amendments or changes.
22. COMPLIANCE WITH LAW.
Except for the obligations of BISYS set forth in Section 10 hereof, the
Company assumes full responsibility for the preparation, contents, and
distribution of each prospectus of the Company as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act, and any other laws, rules and regulations of governmental
authorities having jurisdiction. BISYS shall have no obligation to take
cognizance of any laws relating to the sale of the Company's shares. The Company
represents and warrants that no shares of the Company will be offered to the
public until the Company's registration statement under the 1933 Act and the
1940 Act has been declared or becomes effective.
23. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent by
registered or certified mail to the party required to be served with such notice
at the following address: if to the Company, to it at 237 Park Avenue, New York,
New York 10017; if to BISYS, to it at 3435 Stelzer Road, Columbus, Ohio 43219,
or at such other address as such party may from time to time specify in writing
to the other party pursuant to this Section.
24. HEADINGS.
Paragraph headings in this Agreement are included for convenience only and
are not to be used to construe or interpret this Agreement.
25. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be assignable
by either of the parties hereto except by the specific written consent of the
other party. This Section 25 shall not limit or in any way affect BISYS' right
to appoint a Sub-transfer Agent pursuant to Section 1 hereof. This Agreement
shall be binding upon, and shall inure to the benefit of, the parties hereto and
their respective successors and permitted assigns.
26. GOVERNING LAW AND MATTERS RELATING TO THE COMPANY AS A MASSACHUSETTS
BUSINESS COMPANY.
This Agreement shall be governed by and provisions shall be construed in
accordance with the laws of the State of Ohio. It is expressly agreed that the
obligations of the Company hereunder shall not be binding upon any of the
Directors, shareholders, nominees, officers, agents or employees of the Company
personally, but shall bind only the Company property of the Company. The
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<PAGE>
execution and delivery of this Agreement have been authorized by the Directors,
and this Agreement has been signed and delivered by an authorized officer of the
Company, acting as such, and neither such authorization by the Directors nor
such execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them personally,
but shall bind only the Company property of the Company as provided in the
Company's Agreement and Articles of Incorporation.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
MINERVA FUND, INC.
/s/ John J. Pileggi
By:---------------------------------
John J. Pileggi
President and Treasurer
Title:------------------------------
BISYS FUND SERVICES, INC.
/s/ Stephen Mintos
By:---------------------------------
Stephen Mintos
Executive Vice President
Title:------------------------------
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<PAGE>
Dated: October 1, 1996
SCHEDULE A
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MINERVA FUND, INC.
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENCY SERVICES
1. SHAREHOLDER TRANSACTIONS
a. Process shareholder purchase and redemption orders.
b. Set up account information, including address, dividend option,
taxpayer identification numbers and wire instructions.
c. Issue confirmations in compliance with Rule 10 under the Securities
Exchange Act of 1934, as amended.
d. Issue periodic statements for shareholders.
e. Process transfers and exchanges.
f. Process dividend payments, including the purchase of new shares,
through dividend reimbursement.
2. SHAREHOLDER INFORMATION SERVICES
a. Make information available to shareholder servicing unit and other
remote access units regarding trade date, share price, current
holdings, yields, and dividend information.
b. Produce detailed history of transactions through duplicate or special
order statements upon request.
c. Provide mailing labels for distribution of financial reports,
prospectuses, proxy statements or marketing material to current
shareholders.
A-1
<PAGE>
3. COMPLIANCE REPORTING
a. Provide reports to the Securities and Exchange Commission, the
National Association of Securities Dealers and the States in which the
Fund is registered.
b. Prepare and distribute appropriate Internal Revenue Service forms for
corresponding Fund and shareholder income and capital gains.
c. Issue tax withholding reports to the Internal Revenue Service.
4. DEALER/LOAD PROCESSING (IF APPLICABLE)
a. Provide reports for tracking rights of accumulation and purchases made
under a Letter of Intent.
b. Account for separation of shareholder investments from transaction
sale charges for purchase of Fund shares.
c. Calculate fees due under 12b-1 plans for distribution and marketing
expenses.
d. Track sales and commission statistics by dealer and provide for
payment of commissions on direct shareholder purchases in a load Fund.
5. SHAREHOLDER ACCOUNT MAINTENANCE
a. Maintain all shareholder records for each account in the Company.
b. Issue customer statements on scheduled cycle, providing duplicate
second and third party copies if required.
c. Record shareholder account information changes.
d. Maintain account documentation files for each shareholder.
A-2
<PAGE>
SCHEDULE B
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MINERVA FUND, INC.
AND
BISYS FUND SERVICES, INC.
TRANSFER AGENT FEES
BISYS shall receive an account maintenance fee of $15.00 per year for each
account which is in existence at any time during the month for which payment is
made, such fee to be paid in equal monthly installments, plus out-of-pocket
expenses. BISYS shall be entitled to this account maintenance fee on all
accounts maintained in its records during the year, including those accounts
which have a zero balance during any portion of the year.
ADDITIONAL SERVICES:
Additional services such as IRA processing, development of interface
capabilities, servicing of 403(b) and 408(c) accounts, management of cash sweeps
between DDAs and mutual fund accounts and coordination of the printing and
distribution of prospectuses, annual reports and semi-annual reports are subject
to additional fees which will be quoted upon request. Programming costs or
database management fees for special reports or specialized processing will be
quoted upon request.
OUT-OF-POCKET EXPENSES:
BISYS shall be entitled to be reimbursed for all reasonable out-of-pocket
expenses including, but not limited to, the expenses set forth in Section 3 of
the Transfer Agency Agreement to which this Schedule B is attached.
B-1
<PAGE>
SCHEDULE C
TO THE TRANSFER AGENCY AGREEMENT
BETWEEN
MINERVA FUND, INC.
AND
BISYS FUND SERVICES, INC.
REPORTS
1. Daily Shareholder Activity Journal
2. Daily Fund Activity Summary Report
a. Beginning Balance
b. Dealer Transactions
c. Shareholder Transactions
d. Reinvested Dividends
e. Exchanges
f. Adjustments
g. Ending Balance
3. Daily Wire and Check Registers
4. Monthly Dealer Processing Reports
5. Monthly Dividend Reports
6. Sales Data Reports for Blue Sky Registration
7. Annual report by independent public accountants concerning BISYS'
shareholder system and internal accounting control systems to be
filed with the Securities and Exchange Commission pursuant to Rule
17Ad-13 of the Securities Exchange Act of 1934, as amended.
C-1
Exhibit 9(c)
FUND ACCOUNTING AGREEMENT
AGREEMENT made this 1st day of October, 1996, between the MINERVA FUND,
INC. (the "Company"), a Maryland corporation having its principal place of
business at 237 Park Avenue, New York, New York 10017, and BISYS FUND SERVICES,
INC. ("Fund Accountant"), a corporation organized under the laws of the State of
Delaware and having its principal place of business at 3435 Stelzer Road,
Columbus, Ohio 43219.
WHEREAS, the Company desires that Fund Accountant perform certain fund
accounting services for each investment portfolio of the Company, all as now or
hereafter may be established from time to time (individually referred to herein
as the "Fund" and collectively as the "Funds"); and
WHEREAS, Fund Accountant is willing to perform such services on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. SERVICES AS FUND ACCOUNTANT; CONVERSION TO SERVICES.
The Company hereby engages Fund Accountant to perform fund accounting
services as set forth in this Section 1 (collectively, the "Services"), and, in
connection therewith, the Company agrees to convert to Fund Accountant's data
processing systems and software (the "BISYS System") as necessary in order to
receive the Services. The Company shall cooperate with Fund Accountant to
provide Fund Accountant with all necessary information and assistance required
to successfully convert to the BISYS System. Fund Accountant shall provide the
Company with a schedule relating to such conversion and the parties agree that
the conversion may progress in stages. The date upon which all Services shall
have been converted to the BISYS System shall be referred to herein as the
"Conversion Date." Fund Accountant hereby accepts such engagement and agrees to
perform the Services commencing, with respect to each individual Service, on the
date that the conversion of such Service to the BISYS System has been completed.
Fund Accountant shall determine in accordance with its normal acceptance
procedures when the applicable Service has been successfully converted.
(a) MAINTENANCE OF BOOKS AND RECORDS. Fund Accountant will keep
and maintain the following books and records of each Fund
pursuant to Rule 31a-1 under the Investment Company Act of
1940 (the "Rule"):
(i) Journals containing an itemized daily record in detail
of all purchases and sales of securities, all receipts
and disbursements of cash and all other debits and
credits, as required by subsection (b)(1) of the Rule;
<PAGE>
(ii) General and auxiliary ledgers reflecting all asset,
liability, reserve, capital, income and expense
accounts, including interest accrued and interest
received, as required by subsection (b)(2)(I) of the
Rule;
(iii) Separate ledger accounts required by subsection
(b)(2)(ii) and (iii) of the Rule; and
(iv) A monthly trial balance of all ledger accounts (except
shareholder accounts) as required by subsection (b)(8)
of the Rule.
(b) PERFORMANCE OF DAILY ACCOUNTING SERVICES. In addition to the
maintenance of the books and records specified above, Fund
Accountant shall perform the following accounting services
daily for each Fund:
(i) Calculate the net asset value per share utilizing
prices obtained from the sources described in
subsection 1(b)(ii) below;
(ii) Obtain security prices from independent pricing
services, or if such quotes are unavailable, then
obtain such prices from each Fund's investment adviser
or its designee, as approved by the Company's Board of
Directors;
(iii) Verify and reconcile with the Fund's custodian all
daily trade activity;
(iv) Compute, as appropriate, each Fund's net income and
capital gains, dividend payables, dividend factors,
7-day yields, 7-day effective yields, 30-day yields,
and weighted average portfolio maturity;
(v) Review daily the net asset value calculation and
dividend factor (if any) for each Fund prior to release
to shareholders, check and confirm the net asset values
and dividend factors for reasonableness and deviations,
and distribute net asset values and yields to NASDAQ;
(vi) Report to the Company the daily market pricing of
securities in any money market Funds, with the
comparison to the amortized cost basis;
(vii) Determine unrealized appreciation and depreciation on
securities held in variable net asset value Funds;
(viii) Amortize premiums and accrete discounts on securities
purchased at a price other than face value, if
requested by the Company;
2
<PAGE>
(ix) Update fund accounting system to reflect rate changes,
as received from a Fund's investment adviser, on
variable interest rate instruments;
(x) Post Fund transactions to appropriate categories;
(xi) Accrue expenses of each Fund according to instructions
received from the Company's Administrator;
(xii) Determine the outstanding receivables and payables for
all (1) security trades, (2) Fund share transactions
and (3) income and expense accounts;
(xiii) Provide accounting reports in connection with the
Company's regular annual audit and other audits and
examinations by regulatory agencies; and
(xiv) Provide such periodic reports as the parties shall
agree upon, as set forth in a separate schedule.
(c) SPECIAL REPORTS AND SERVICES.
(i) Fund Accountant may provide additional special reports
upon the request of the Company or a Fund's investment
adviser, which may result in an additional charge, the
amount of which shall be agreed upon between the
parties.
(ii) Fund Accountant may provide such other similar services
with respect to a Fund as may be reasonably requested
by the Company, which may result in an additional
charge, the amount of which shall be agreed upon
between the parties.
(d) ADDITIONAL ACCOUNTING SERVICES. Fund Accountant shall also
perform the following additional accounting services for
each Fund:
(i) Provide monthly a download (and hard copy thereof) of
the financial statements described below, upon request
of the Company. The download will include the following
items:
Statement of Assets and Liabilities,
Statement of Operations,
Statement of Changes in Net Assets, and
Condensed Financial Information;
3
<PAGE>
(ii) Provide accounting information for the following:
(A) federal and state income tax returns and federal
excise tax returns;
(B) the Company's semi-annual reports with the
Securities and Exchange Commission ("SEC") on
Form N-SAR;
(C) the Company's annual, semi-annual and quarterly
(if any) shareholder reports;
(D) registration statements on Form N-1A and other
filings relating to the registration of Shares;
(E) the Administrator's monitoring of the Company's
status as a regulated investment company under
Subchapter M of the Internal Revenue Code, as
amended;
(F) annual audit by the Company's auditors; and
(G) examinations performed by the SEC.
2. SUBCONTRACTING.
Fund Accountant may, at its expense, subcontract with any entity or
person concerning the provision of the services contemplated hereunder;
provided, however, that Fund Accountant shall not be relieved of any of its
obligations under this Agreement by the appointment of such subcontractor and
provided further, that Fund Accountant shall be responsible, to the extent
provided in Section 6 hereof, for all acts of such subcontractor as if such acts
were its own.
3. COMPENSATION.
The Company shall pay Fund Accountant for the services to be
provided by Fund Accountant under this Agreement in accordance with, and in the
manner set forth in, Schedule A hereto, as such Schedule may be amended from
time to time.
4. REIMBURSEMENT OF EXPENSES.
In addition to paying Fund Accountant the fees described in Section
3 hereof, the Company agrees to reimburse Fund Accountant for its out-of-pocket
expenses in providing services hereunder, including without limitation the
following:
4
<PAGE>
(a) All freight and other delivery and bonding charges incurred by Fund
Accountant in delivering materials to and from the Company;
(b) All direct telephone, telephone transmission and telecopy or other
electronic transmission expenses incurred by Fund Accountant in
communication with the Company, the Company's investment advisor or
custodian, dealers or others as required for Fund Accountant to
perform the services to be provided hereunder;
(c) The cost of obtaining security market quotes pursuant to Section
l(b)(ii) above;
(d) The cost of microfilm or microfiche of records or other materials;
(e) Any expenses Fund Accountant shall incur at the written direction of
an officer of the Company thereunto duly authorized; and
(f) Any additional expenses reasonably incurred by Fund Accountant in
the performance of its duties and obligations under this Agreement.
5. EFFECTIVE DATE.
This Agreement shall become effective with respect to a Fund as of
the date first written above.
6. TERM.
The initial term of this Agreement (the "Initial Term") shall be for
a period commencing on the date this Agreement is executed by both parties and
ending on the date that is one year after the Conversion Date. This Agreement
shall be renewed automatically for successive one-year terms unless written
notice not to renew is given by the non-renewing party to the other party at
least 60 days prior to the expiration of the then-current term; provided,
however, that after such termination for so long as Fund Accountant Accountant,
with the written consent of the Company, in fact continues to perform any one or
more of the services contemplated by this Agreement or any schedule or exhibit
hereto, the provisions of this Agreement, including without limitation the
provisions dealing with indemnification, shall continue in full force and
effect. Compensation due Fund Accountant and unpaid by the Company upon such
termination shall be immediately due and payable upon and notwithstanding such
termination. Fund Accountant shall be entitled to collect from the Company, in
addition to the compensation described under Section 3 hereof, the amount of all
of Fund Accountant's cash disbursements for services in connection with Fund
Accountant's activities in effecting such termination, including without
limitation, the delivery to the Company and/or its designees of the Company's
property, records, instruments and documents, or any copies thereof. Subsequent
to such termination, Fund Accountant will provide the Company with reasonable
access to any Company documents or records remaining in its possession;
provided,
5
<PAGE>
however, that, in exchange therefor, the Company shall reimburse Fund Accountant
for all costs reasonably incurred in connection therewith.
In the event of a material breach of this Agreement by either party,
the non-breaching party shall notify the breaching party in writing of such
breach and, upon receipt of such notice, the breaching party shall have 45 days
to remedy the breach. In the event the breach is not remedied within such time
period, the nonbreaching party may immediately terminate this Agreement.
If, for any reason other than a breach of this Agreement, Fund
Accountant is replaced as Fund Accountant, or if a third party is added to
perform all or a part of the services provided by Fund Accountant under this
Agreement (excluding any sub-accountant appointed by Fund Accountant as provided
in Section 2 hereof), then the Company shall make a one-time cash payment, as
liquidated damages, to Fund Accountant equal to the balance due Fund Accountant
for the remainder of the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of the Company on the date Fund
Accountant is replaced, or a third party is added, will remain constant for the
balance of the contract term.
7. STANDARD OF CARE; RELIANCE ON RECORDS AND INSTRUCTIONS;
INDEMNIFICATION.
Fund Accountant shall use its best efforts to insure the accuracy of
all services performed under this Agreement, but shall not be liable to the
Company for any action taken or omitted by Fund Accountant in the absence of bad
faith, willful misfeasance, negligence or from reckless disregard by it of its
obligations and duties. A Fund agrees to indemnify and hold harmless Fund
Accountant, its employees, agents, directors, officers and nominees from and
against any and all claims, demands, actions and suits, whether groundless or
otherwise, and from and against any and all judgments, liabilities, losses,
damages, costs, charges, counsel fees and other expenses of every nature and
character arising out of or in any way relating to Fund Accountant's actions
taken or nonactions with respect to the performance of services under this
Agreement with respect to such Fund or based, if applicable, upon reasonable
reliance on information, records, instructions or requests with respect to such
Fund given or made to Fund Accountant by a duly authorized representative of the
Company; provided that this indemnification shall not apply to actions or
omissions of Fund Accountant in cases of its own bad faith, willful misfeasance,
negligence or from reckless disregard by it of its obligations and duties, and
further provided that prior to confessing any claim against it which may be the
subject of this indemnification, Fund Accountant shall give the Company written
notice of and reasonable opportunity to defend against said claim in its own
name or in the name of Fund Accountant.
8. RECORD RETENTION AND CONFIDENTIALITY.
Fund Accountant shall keep and maintain on behalf of the Company all
books and records which the Company and Fund Accountant is, or may be, required
to keep and maintain pursuant to any applicable statutes, rules and regulations,
including without limitation Rules 31a-1 and 31a-2 under the Investment Company
Act of 1940, as amended (the "1940 Act"), relating to the
6
<PAGE>
maintenance of books and records in connection with the services to be provided
hereunder. Fund Accountant further agrees that all such books and records shall
be the property of the Company and to make such books and records available for
inspection by the Company or by the Securities and Exchange Commission at
reasonable times and otherwise to keep confidential all books and records and
other information relative to the Company and its shareholders; except when
requested to divulge such information by duly-constituted authorities or court
process.
9. UNCONTROLLABLE EVENTS.
Fund Accountant assumes no responsibility hereunder, and shall not
be liable, for any damage, loss of data, delay or any other loss whatsoever
caused by events beyond its reasonable control.
10. REPORTS.
Fund Accountant will furnish to the Company and to its properly
authorized auditors, investment advisers, examiners, distributors, dealers,
underwriters, salesmen, insurance companies and others designated by the Company
in writing, such reports and at such times as are prescribed pursuant to the
terms and the conditions of this Agreement to be provided or completed by Fund
Accountant, or as subsequently agreed upon by the parties pursuant to an
amendment hereto.
11. RIGHTS OF OWNERSHIP.
All computer programs and procedures developed to perform services
required to be provided by Fund Accountant under this Agreement are the property
of Fund Accountant. All records and other data except such computer programs and
procedures are the exclusive property of the Company and all such other records
and data will be furnished to the Company in appropriate form as soon as
practicable after termination of this Agreement for any reason.
12. RETURN OF RECORDS.
Fund Accountant may at its option at any time, and shall promptly
upon the Company's demand, turn over to the Company and cease to retain Fund
Accountant's files, records and documents created and maintained by Fund
Accountant pursuant to this Agreement which are no longer needed by Fund in the
performance of its services or for its legal protection. If not so turned over
to the Company, such documents and records will be retained by Fund Accountant
for six years from the year of creation. At the end of such six-year period,
such records and documents will be turned over to the Company unless the Company
authorizes in writing the destruction of such records and documents.
7
<PAGE>
13. REPRESENTATIONS OF THE COMPANY.
The Company certifies to Fund Accountant that: (1) as of the close
of business on each Conversion Date, each Fund that is in existence as of the
Conversion Date has authorized unlimited shares, and (2) this Agreement has been
duly authorized by the Company and, when executed and delivered by the Company,
will constitute a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting the rights and remedies of creditors and secured parties.
14. REPRESENTATIONS OF FUND ACCOUNTANT.
Fund Accountant represents and warrants that: (1) the various
procedures and systems which Fund Accountant has implemented with regard to
safeguarding from loss or damage attributable to fire, theft, or any other cause
the records, and other data of the Company and Fund Accountant's records, data,
equipment facilities and other property used in the performance of its
obligations hereunder are adequate and that it will make such changes therein
from time to time as are required for the secure performance of its obligations
hereunder, and (2) this Agreement has been duly authorized by Fund Accountant
and, when executed and delivered by Fund Accountant, will constitute a legal,
valid and binding obligation of Fund Accountant, enforceable against Fund
Accountant in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting the
rights and remedies of creditors and secured parties.
15. INSURANCE.
Fund Accountant shall notify the Company should any of its insurance
coverage be canceled or reduced. Such notification shall include the date of
change and the reasons therefor. Fund Accountant shall notify the Company of any
material claims against it with respect to services performed under this
Agreement, whether or not they may be covered by insurance, and shall notify the
Company from time to time as may be appropriate of the total outstanding claims
made by Fund Accountant under its insurance coverage.
16. INFORMATION TO BE FURNISHED BY THE COMPANY AND FUNDS.
The Company has furnished to Fund Accountant the following:
(a) Copies of the Articles of Incorporation of the Company and
of any amendments thereto, certified by the proper official
of the state in which such document has been filed.
8
<PAGE>
(b) Copies of the following documents:
(i) The Company's Bylaws and any amendments thereto;
and
(ii) Certified copies of resolutions of the Board of
Directors covering the approval of this Agreement,
authorization of a specified officer of the Company
to execute and deliver this Agreement and
authorization for specified officers of the Company
to instruct Fund Accountant thereunder.
(c) A list of all the officers of the Company, together with
specimen signatures of those officers who are authorized to
instruct Fund Accountant in all matters.
(d) Two copies of the Prospectuses and Statements of Additional
Information for each Fund.
17. INFORMATION FURNISHED BY FUND ACCOUNTANT.
(a) Fund Accountant has furnished to the Company the following:
(i) Fund Accountant's Articles of Incorporation; and
(ii) Fund Accountant's Bylaws and any amendments thereto.
(b) Fund Accountant shall, upon request, furnish certified
copies of corporate actions covering the following matters:
(i) Approval of this Agreement, and authorization of a
specified officer of Fund Accountant to execute and
deliver this Agreement; and
(ii) Authorization of Fund Accountant to act as fund
accountant for the Company and to provide accounting
services for the Company.
18. AMENDMENTS TO DOCUMENTS.
The Company shall furnish Fund Accountant written copies of any
amendments to, or changes in, any of the items referred to in Section 16 hereof
forthwith upon such amendments or changes becoming effective. In addition, the
Company agrees that no amendments will be made to the Prospectuses or Statements
of Additional Information of the Company which might have the effect of changing
the procedures employed by Fund Accountant in providing the services agreed to
hereunder or which amendment might affect the duties of Fund Accountant
hereunder unless the Company first obtains Fund Accountant's approval of such
amendments or changes.
9
<PAGE>
19. COMPLIANCE WITH LAW.
Except for the obligations of Fund Accountant set forth in Section 8
hereof, the Company assumes full responsibility for the preparation, contents
and distribution of each prospectus of the Company as to compliance with all
applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the 1940 Act and any other laws, rules and regulations of
governmental authorities having jurisdiction. Fund Accountant shall have no
obligation to take cognizance of any laws relating to the sale of the Company's
Shares. The Company represents and warrants that no Shares of the Company will
be offered to the public until the Company's registration statement under the
Securities Act and the 1940 Act has been declared or becomes effective.
20. NOTICES.
Any notice provided hereunder shall be sufficiently given when sent
by registered or certified mail to the party required to be served with such
notice, at the following address: 3435 Stelzer Road, Columbus, Ohio 43219, or at
such other address as such party may from time to time specify in writing to the
other party pursuant to this Section.
21. HEADINGS.
Paragraph headings in this Agreement are included for convenience
only and are not to be used to construe or interpret this Agreement.
22. ASSIGNMENT.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to a Fund by either of the parties hereto except by the
specific written consent of the other party. This Agreement shall be binding
upon, and shall inure to the benefit of, the parties hereto and their respective
successors and permitted assigns.
23. GOVERNING LAW.
This Agreement shall be governed by and provisions shall be
construed in accordance with the laws of the State of Ohio.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.
MINERVA FUND, INC.
/s/ John J. Pileggi
By:---------------------------------
John J. Pileggi
President and Treasurer
Title:------------------------------
BISYS FUND SERVICES, INC.
/s/ Stephen Mintos
By:---------------------------------
Stephen Mintos
Executive Vice President
Title:------------------------------
11
<PAGE>
Dated: October 1, 1996
SCHEDULE A
TO THE FUND ACCOUNTING AGREEMENT
BETWEEN THE
MINERVA FUND, INC.
AND
BISYS FUND SERVICES, INC.
FEES
Fund Accountant shall be entitled to receive an annual fee of $30,000 from each
Fund.
MULTIPLE CLASSES OF SHARES:
MINERVA FUND, INC. BISYS FUND SERVICES, INC.
/s/ John J. Pileggi /s/ Stephen Mintos
By:------------------------ By:---------------------------
John J. Pileggi Stephen Mintos
President and Treasurer Executive Vice President
Title:---------------------- Title:------------------------
A-1
Exhibit 10
LETTERHEAD
September 28, 1993
Minerva Fund, Inc.
237 Park Avenue
New York, NY 10017
Ladies and Gentlemen:
As special Maryland counsel to Minerva Fund, Inc., a Maryland
corporation (the "Fund"), in connection with the registration under the
Securities Act of 1933, as amended, of up to an indefinite number of shares of
Common Stock of the Fund, but in no event more than 200,000,000 shares (the
"Shares"), we have examined the Articles of Incorporation of the Fund filed with
the Maryland State Department of Assessments and Taxation (the "SDAT") on June
28, 1993, the By-Laws of the Fund and minutes of the proceedings of the
Fund's Board of Directors authorizing the organization of the Fund and the
issuance of its outstanding capital stock. We have additionally examined the
Certificate of Corporate Officer dated September 28, 1993 (the "Certificate").
In rendering our opinion, we are relying on the Certificate and have made no
independent investigation or inquiries as to the matters set forth therein.
Based on our examination, we advise you that in our opinion the Shares
to be issued by the Fund have been duly and validly authorized and, when issued
upon the terms set forth in the Registration Statement on Form N-1A of the Fund
filed with the Securities and Exchange Commission (the "Commission"), will be
legally issued, fully paid and non-assessable.
<PAGE>
Minerva Fund, Inc.
September 28, 1993
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm in the Registration
Statement. In giving our consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission thereunder.
Very truly yours,
/s/ Piper & Marbury
--------------------------------
Piper & Marbury
Consent of Independent Accountants
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 6 to the registration
statement on Form N-1A (the "Registration Statement") of our report dated
November 7, 1996, relating to the financial statements and financial highlights
of Minerva Equity Portfolio (constituting Minerva Fund, Inc.), which appears in
such Statement of Additional Information, and to the incorporation by reference
of our report into the Prospectus which constitutes part of this Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights" and "Financial Statements / Independent Accountants" in such
Prospectus.
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
November 25, 1996
Exhibit 13
PURCHASE AGREEMENT
Minerva Fund, Inc., a Maryland corporation (the "Company"), and Furman
Selz Incorporated, a Delaware corporation (the "Distributor"), hereby agree as
follows:
1. The Company hereby offers the Distributor and the Distributor
hereby purchases 5,000 shares of Class A (par value $.001 per share) of the
Company, representing 5,000 shares in the Equity Portfolio and 5,000 shares of
Class B (par value $.001 per share) of the Company, representing 5,000 shares in
the Fixed Income Portfolio, at $10.00 per share, (the "Shares"). The Distributor
hereby acknowledges receipt of a purchase confirmation reflecting the purchase
of the Shares, and the Company hereby acknowledges receipt from the Distributor
of funds in the amount of $100,000 in full payment for the Shares.
2. The Distributor represents and warrants to the Company that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The Distributor agrees that if it or any direct or indirect
transferee of the Shares redeems the Shares prior to the fifth anniversary of
the date the Funds begins its investment activities, the Distributor will pay to
the Company an amount equal to the number resulting from multiplying each Fund's
total unamortized organizational expenses by a fraction, the numerator of which
is equal to the number of Shares redeemed by the Distributor or such transferee
and the denominator of which is equal to the number of shares of each Fund
outstanding as of the date of such redemption, as long as the administrative
position of the staff of the Securities and Exchange Commission requires such
reimbursement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 23rd day of September, 1993.
MINERVA FUND, INC.
Attest:
/s/Carrie Zuckerman /s/John J. Pileggi
- ---------------------------- By:---------------------------------------------
Name: Carrie Zuckerman Name: John J. Pileggi
Title: Treasurer
FURMAN SELZ INCORPORATED
Attest:
/s/Carrie Zuckerman /s/Donald E. Brostrom
- ---------------------------- By:---------------------------------------------
Name: Carrie Zuckerman Name: Donald E. Brostrom
Title: Director - Fund Services
Exhibit 16
MINERVA FUND, INC.
AVERAGE ANNUAL TOTAL RETURNS*
Periods Ended September 30, 1996
From Inception (October 1, 1993) 13.79%
Fiscal Year 1996 16.37%
*Assumes reinvestment of all dividends and distributions and reflects voluntary
fee waivers and voluntary reimbursements of expenses.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000908711
<NAME> Minerva Fund
<SERIES>
<NUMBER> 01
<NAME> EQUITY PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 60,061
<INVESTMENTS-AT-VALUE> 63,654
<RECEIVABLES> 306
<ASSETS-OTHER> 42
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,003
<PAYABLE-FOR-SECURITIES> 360
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<OTHER-ITEMS-LIABILITIES> 101
<TOTAL-LIABILITIES> 461
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 58,542
<SHARES-COMMON-STOCK> 118
<SHARES-COMMON-PRIOR> 1
<ACCUMULATED-NII-CURRENT> 118
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,285
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,593
<NET-ASSETS> 63,542
<DIVIDEND-INCOME> 628
<INTEREST-INCOME> 98
<OTHER-INCOME> 0
<EXPENSES-NET> 277
<NET-INVESTMENT-INCOME> 450
<REALIZED-GAINS-CURRENT> 1,323
<APPREC-INCREASE-CURRENT> 1,772
<NET-CHANGE-FROM-OPS> 3,544
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (352)
<DISTRIBUTIONS-OF-GAINS> (521)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 47,466
<NUMBER-OF-SHARES-REDEEMED> (168)
<SHARES-REINVESTED> 847
<NET-CHANGE-IN-ASSETS> 50,817
<ACCUMULATED-NII-PRIOR> 19,577
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 138
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 409
<AVERAGE-NET-ASSETS> 28,284
<PER-SHARE-NAV-BEGIN> 12.23
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 1.73
<PER-SHARE-DIVIDEND> (0.14)
<PER-SHARE-DISTRIBUTIONS> (0.46)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.57
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000908711
<NAME> Minerva Fund
<SERIES>
<NUMBER> 02
<NAME> FIXED INCOME PORTFOLIO
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 6
<ASSETS-OTHER> 17
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 23
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23
<TOTAL-LIABILITIES> 23
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 341
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
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<NET-INVESTMENT-INCOME> 179
<REALIZED-GAINS-CURRENT> (55)
<APPREC-INCREASE-CURRENT> (59)
<NET-CHANGE-FROM-OPS> 65
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (143)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 822
<NUMBER-OF-SHARES-REDEEMED> 4,161
<SHARES-REINVESTED> 143
<NET-CHANGE-IN-ASSETS> 3,274
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 13
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 148
<AVERAGE-NET-ASSETS> 3,713
<PER-SHARE-NAV-BEGIN> 9.60
<PER-SHARE-NII> 0.51
<PER-SHARE-GAIN-APPREC> (9.74)
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 0
<EXPENSE-RATIO> .92
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
