<PAGE> 1
MINERVA FUND, INC.
EQUITY PORTFOLIO
ANNUAL REPORT
SEPTEMBER 30, 1996
<PAGE> 2
November 8, 1996
DEAR SHAREHOLDERS:
We are pleased to present the annual report for the Minerva Fund, Inc.
for the year ended September 30, 1996. The Equity Portfolio had net assets of
$63,541,746 on September 30, 1996.
There was a 500% increase in assets due primarily from additional
shareholder contributions since the annual report dated September 30, 1995.
The net asset value per share was $13.57 for the Equity Portfolio.
Audited financial statements including Equity Portfolio of Investments
follow. Your support is appreciated.
John J. Pileggi
President & Treasurer
<PAGE> 3
INVESTMENT MANAGER'S DISCUSSION OF FUND PERFORMANCE
During the fiscal year ended September 30, 1996, the Minerva Equity
Portfolio realized a total return of 16.37%. The return was below the S&P
500 Index which returned 18.96%. This difference was largely due to our
short-term fixed income positions, our underweighting and stock selection in
the technology sector, and our stock selection in the tobacco sector. Our
assessment of the market and corporate profits called for maintaining
meaningful cash reserves and a defensive strategy which emphasized such
non-cyclical sectors as utilities and energy. The Equity Portfolio benefitted
from an overweighting in the health care sector and our stock selection in the
financial services sector.
TEN LARGEST EQUITY HOLDINGS
1. Philip Morris Cos., Inc. 6. ITT Hartford Group
2. Du Pont (E.I.) De Nemours 7. Microsoft Corp.
3. Bristol-Myers Squibb Co. 8. Union Pacific Corp.
4. British Petroleum PLC 9. Pepsico Inc.
5. AT&T Corp. 10. Mobil Corp.
<PAGE> 4
MINERVA FUND, INC.
EQUITY PORTFOLIO
Period Ended September 30, 1996
% Return Since Inception
Fund Performance Comparison*
The following graph illustrates the total return based on a $10,000 investment
in the Equity Portfolio made at the inception date of October 1, 1993 and held
through September 30, 1996, as well as performance of the S&P 500 Index (the
"Index") over the same period. Past performance is not predictive of future
performance.
The Index is a widely accepted unmanaged index of stock market performance
which reflects the reinvestment of income dividends and, where applicable,
capital gains distributions.
The Index does not reflect operating expenses. If expenses had been
applied to the Index, the performance of the Index would have been lower.
The investment return and principal value of an investment in Equity Portfolio
will fluctuate, so that an investor's shares, where redeemed, may be worth more
or less than the original cost.
*Assumes reinvestment of all dividends and distributions and includes the
effect of the Portfolio's operating expenses. Total returns are aggregate from
inception, have not been annualized, and reflect voluntary fee waivers.
AVERAGE ANNUAL TOTAL RETURNS**
Periods Ended September 30, 1996
<TABLE>
<S> <C>
From Inception (October 1, 1993) 13.79%
Fiscal Year 1996 16.37%
</TABLE>
**Assumes reinvestment of dividends and distributions, and reflects voluntary
fee waivers and voluntary reimbursement of expenses.
<PAGE> 5
MINERVA PERFORMANCE CHARTS
PLOT POINTS
<TABLE>
<CAPTION>
Equity S&P 500 index
Date Portfolio
<S> <C> <C>
10/1/93 10,000 10,000
12/31/93 10,141 10,232
3/31/94 9,795 9,844
6/30/94 9,839 9,885
9/30/94 10,179 10,369
12/31/94 10,149 10,367
3/31/95 11,034 11,376
6/30/95 11,906 12,463
9/30/95 12,660 13,453
12/31/95 13,219 14,263
3/31/96 14,064 15,029
6/30/96 14,592 15,702
9/30/96 14,748 16,187
</TABLE>
<PAGE> 6
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.
<PAGE> 7
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.
<PAGE> 8
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.
<PAGE> 9
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.
<PAGE> 10
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.
<PAGE> 11
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
<PAGE> 12
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
<PAGE> 13
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.
<PAGE> 14
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.
<PAGE> 15
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
<PAGE> 16
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.
<PAGE> 17
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.
<PAGE> 18
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.
<PAGE> 19
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
<PAGE> 20
Minerva Fund, Inc.
Equity Portfolio
TAX STATUS OF DIVIDEND PAID (Unaudited)
The following table represents the tax status of dividends and distributions
paid by the Equity Portfolio during the fiscal year ended September 30, 1996.
This information is presented in order to comply with Internal Revenue Service
regulatory requirements and no current action on your part is needed. You will
be receiving a Form 1099 at the close of calendar 1996 for tax filing purposes.
<TABLE>
<CAPTION>
Percentage of
Long-Term Income
Ordinary Capital Gain Derived from
Dividends Paid Dividend Government
Per Share Per Share Securities
----------------- ------------- --------------
<S> <C> <C> <C>
Equity
Portfolio $0.26 $0.34 2.03%
</TABLE>
Additionally, 100% of the dividends paid by Minerva Equity Portfolio qualify
for the dividends received deduction available to corporations.
<PAGE> 21
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
<S> <C>
James D. Schmid* Chairman of the Board,
Principal, Morgan Stanley
Group;
Partner, Miller Anderson
& Sherrerd
Carl T. Hagberg** Chairman, Carl T.
Hagberg & Associates
Raymond F. Miller** Partner, Cronus Partners,
Inc.
Charles A. Parker** Director, T.C.W.
Convertible Fund, Inc.;
Director, URC Holdings Corp.;
Formerly, Executive Vice
President, Director and
Chief Investment Officer
Continental Corporation
</TABLE>
*Director is deemed to be an "interested person" of the Fund
as that term is defined in the Investment Company Act of 1940, as
amended.
**Member of Audit and Nominating Committees
<TABLE>
<CAPTION>
OFFICERS
<S> <C>
James D. Schmid Chairman of the Board
John J. Pileggi President & Treasurer
Joan V. Fiore Secretary
Donald E. Brostrom Assistant Treasurer
Sheryl Hirschfeld Assistant Secretary
</TABLE>
<PAGE> 22
MINERVA FUND, INC.
237 Park Avenue
New York, New York 10017
Information & Client Services:
(800) 393-9988
INVESTMENT MANAGER
LTCB-MAS Investment Management, Inc.
One Tower Bridge, Suite 1000
West Conshohocken, PA 19428
ADMINISTRATOR, TRANSFER AGENT,
DIVIDEND DISBURSING AGENT AND DISTRIBUTOR
Furman Selz LLC
230 Park Avenue
New York, New York 10169
CUSTODIAN
LTCB Trust Company
165 Broadway
New York, New York 10006
LEGAL COUNSEL
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
This report is for the information of the
shareholders of Minerva Fund, Inc.
Its use in connection with any offering
of the Funds' shares is authorized
only in case of a concurrent or prior
delivery of the Funds' current prospectus.
Investments in mutual funds involve risk,
including possible loss of principal.
