<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Annual Report
September 30, 1997
<PAGE>
Minerva Fund, Inc.
November 3, 1997
Dear Shareholders:
We are pleased to present the Annual report for the Minerva Fund, Inc. for the
period ending September 30, 1997. The Minerva Fund, Inc. is a no load open-end
investment company currently consisting of one Portfolio, the Equity Portfolio.
The Portfolio operates as a diversified investment company.
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.
Assets in the Portfolio have increased over 148% to $158,061,774 since September
30, 1996. The net asset value was $17.88 per share as of the end of the
reporting period.
We thank you for your continued confidence in the Minerva Fund, Inc.
Sincerely,
W. Anthony Turner
President
11/97
<PAGE>
Investment Manager's Discussion of Fund Performance
During the fiscal year ended September 30, 1997, the Minerva Equity Portfolio
realized a total return of 37.81%. The return was below the S&P 500 Index which
returned 40.43%. This difference was largely due to our short-term fixed income
positions, our stock selection in the technology, health care, and retail
sector. Our assessment of the market and corporate profits called for
maintaining meaningful cash reserves and a strategy which emphasized companies
with restructuring opportunities, particularly in the heavy
industry/transportation and consumer durables sector. The Equity Portfolio
benefited from our under weighting in the utilities and our stock selection in
the heavy industry/transportation sector.
TEN LARGEST EQUITY HOLDINGS*
<TABLE>
<S> <C>
1. Philip Morris, Inc. (3.4% of Portfolio Holdings) 6. Microsoft (2.0%)
2. Cummins Engine Inc. (2.5%) 7. British Petroleum (1.9%)
3. Ford Motor Co. Del. (2.5%) 8. General Motors Corp. (1.8%)
4. United Technologies Corp. (2.3%) 9. Loews Corporation (1.8%)
5. Waste Management Inc. (2.1%) 10. HFS Inc. (1.7%)
</TABLE>
* The composition of the Fund's holdings is subject to change.
<PAGE>
Minerva Funds, Inc.
Equity Portfolio
Period Ended September 30, 1997
% 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, 1997 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 the stock market performance
which reflects the reinvestment of income dividends and, where applicable,
capital gains distributions.
The Index does not reflect operating expenses. If the 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 the Equity
Portfolio will fluctuate, so that an investor's shares, when 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 the aggregate from
inception, have not been annualized, and reflect voluntary fee waivers and
voluntary reimbursements of expenses.
Average Annual Total Returns**
Periods Ended September 30, 1997
From Inception (October 1, 1993)
19.40%
Fiscal Year 1997
37.81%
**Assumes reinvestment of dividends and distributions, and reflects voluntary
fee waivers and voluntary reimbursements of expenses.
<TABLE>
<CAPTION>
Date Minerva S&P
<S> <C> <C>
10/01/93 10,000.00 10,000.00
12/31/93 10,140.80 10,231.00
03/31/94 9,794.75 9,841.00
06/30/94 9,839.49 9,881.00
09/30/94 10,199.36 10,368.00
12/31/94 10,148.62 10,365.00
03/31/95 11,033.58 11,374.00
06/30/95 11,894.90 12,454.00
09/30/95 12,659.32 13,444.00
12/31/95 13,218.42 14,245.00
03/31/96 14,062.57 15,019.00
06/30/96 14,589.72 15,697.00
09/30/96 14,745.55 16,177.00
12/31/96 16,063.47 17,532.00
03/31/97 16,415.69 17,990.00
06/30/97 18,815.21 21,137.00
09/30/97 20,321.56 22,727.00
</TABLE>
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ----------- ----------
<S> <C> <C>
Common Stocks (96.8%):
Aerospace (5.8%):
20,400 AlliedSignal, Inc. $ 867,000
15,280 Boeing Co. 831,805
24,300 Loral Space & Communications* 501,187
24,600 Lockheed Martin Corp. 2,622,975
10,700 Raytheon Co. 632,638
45,300 United Technologies Corp. 3,669,300
----------
9,124,905
----------
Air Transportation (1.1%):
7,000 AMR Corp.* 774,812
3,500 Delta Air Lines, Inc. 329,656
7,600 UAL Corp. 643,150
----------
1,747,618
----------
Apparel (0.9%):
3,100 Jones Apparel Group, Inc.* 167,400
8,500 Springs Industries Inc. - Class A 446,250
3,500 Tommy Hilfiger Corp.* 174,781
7,000 VF Corp. 648,375
----------
1,436,806
----------
Automobiles (4.3%):
86,000 Ford Motor Co. 3,891,500
43,300 General Motors Corp. 2,898,394
----------
6,789,894
----------
Automotive Related (2.4%):
11,700 Dana Corp. 577,688
19,100 Goodyear Tire & Rubber Co. 1,313,125
48,700 LucasVarity PLC - ADR 1,847,556
----------
3,738,369
----------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ------------- -----------------
<S> <C> <C>
Banks (5.2%):
23,500 BankBoston Corp. $ 2,078,281
5,600 Chase Manhattan Corp. 660,800
10,500 Citicorp 1,406,344
13,500 Crestar Financial Corp. 632,812
34,100 First Union Corp. 1,707,131
7,600 Providian Financial Corp. 301,625
6,900 Republic N Y Corp. 784,012
2,400 Wells Fargo & Co. 660,000
-----------------
8,231,005
-----------------
Basic Chemicals (2.8%):
6,400 Dow Chemical Co. 580,400
36,600 du Pont (E.I.) de Nemours and Co. 2,253,188
4,200 Rohm & Haas Co. 402,937
15,300 W.R. Grace & Co. 1,126,462
-----------------
4,362,987
-----------------
Beverages (0.1%):
2,800 Robert Mondavi Corp.* 153,300
-----------------
Building & Housing (1.2%):
5,700 Danaher Corp. 330,600
13,400 Owens Corning 489,100
25,700 York International Corp. 1,150,075
-----------------
1,969,775
-----------------
Business Services (2.2%):
2,000 Cintas Corp. 147,500
94,500 Waste Management Inc. 3,301,594
-----------------
3,449,094
-----------------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ------------- ----------
<S> <C> <C>
Computers & Office Equipment (4.8%):
25,900 Cisco Systems, Inc.* $1,892,319
2,800 Electronics for Imaging, Inc. 142,800
9,200 HBO & Co. 347,300
8,700 International Business Machines Corp. 921,656
42,400 Seagate Technology, Inc.* 1,531,700
35,275 3Com Corp.* 1,807,844
10,900 Xerox Corp. 917,644
---------
7,561,263
---------
Credit & Finance (2.6%):
9,200 American Express Co. 753,250
12,600 CMAC Investment Corp. 675,675
3,300 Sirrom Capital Corp. 171,188
16,700 SLM Holding Corp. 2,580,150
---------
4,180,263
---------
Department Stores (1.8%):
15,300 Dillard's, Inc. - Class A 670,331
32,700 Federated Department Stores Inc. * 1,410,188
13,200 Sears, Roebuck & Co. 751,575
---------
2,832,094
---------
Drugs (2.6%):
14,100 BioChem Pharma Inc.* 444,150
21,300 Bristol-Myers Squibb Co. 1,762,575
9,900 Merck & Co., Inc. 989,381
17,600 SmithKline Beecham PLC - ADR 860,200
---------
4,056,306
---------
Electronics (0.9%):
13,100 Intel Corp. 1,209,294
5,400 Kemet Corp.* 164,025
---------
1,373,319
---------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- --------- -------------
<S> <C> <C>
Entertainment & Leisure (1.8%):
4,900 Cinar Films Inc. - Class B* $ 186,813
33,200 GTECH Holdings Corp.* 1,135,025
6,700 Imax Corp.* 175,037
45,600 Liberty Media Group - Class A* 1,365,150
-------------
2,862,025
-------------
Funeral Services (0.8%):
38,500 Service Corp. International 1,239,219
-------------
Health Technology (0.3%):
11,000 Beckman Instruments Inc. 468,188
-------------
Healthcare Services (3.8%):
29,900 Aetna Inc. 2,434,981
26,154 Columbia/HCA Healthcare Corp. 751,927
17,580 Foundation Health Systems, Inc. - Class A* 562,560
40,330 Health Management Associates, Inc. - Class A* 1,275,436
19,900 Lincare Holdings, Inc.* 1,003,706
-------------
6,028,610
-------------
Hospital Supplies (0.6%):
19,100 Baxter International Inc. 997,975
-------------
Hotel / Motel (1.7%):
35,500 HFS Inc.* 2,642,531
-------------
Insurance (7.2%):
13,556 Allstate Corp. 1,089,564
20,200 American General Corp. 1,047,875
9,500 CIGNA Corp. 1,769,375
7,100 Chubb Corp. 504,544
33,100 Exel Limited 1,971,519
24,700 Hartford Financial Services Group Inc. 2,125,744
25,100 Loews Corp. 2,834,731
-------------
11,343,352
-------------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ----------- ----------
<S> <C> <C>
Investment Companies (1.3%):
16,290 Bear Stearns Cos. Inc. $ 716,760
8,700 Lehman Brothers Holdings, Inc. 466,538
11,100 Salomon, Inc. 834,581
----------
2,017,879
----------
Manufacturing - Machinery (6.3%):
17,300 Aeroquip-Vickers, Inc. 847,700
39,600 Case Corp. 2,638,350
7,800 Caterpillar Inc. 420,713
50,000 Cummins Engine Co. Inc. 3,903,125
11,000 Deere & Co. 591,250
8,200 Eaton Corp. 757,475
11,200 Harnischfeger Industries Inc. 478,800
7,300 Tecumseh Products Co. - Class A 406,519
----------
10,043,932
----------
Media (0.5%):
33,000 News Corp. Ltd. - ADR 591,938
5,000 Valassis Communications, Inc.* 159,375
----------
751,313
----------
Miscellaneous Industries (2.5%):
24,300 FMC Corp. * 2,156,625
17,500 Textron, Inc. 1,137,500
11,400 TRW Inc. 625,575
----------
3,919,700
----------
Natural Gas (1.5%):
22,900 Coastal Corp. 1,402,625
13,900 Columbia Gas System, Inc. 973,000
----------
2,375,625
----------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ----------- ----------
<S> <C> <C>
Oil & Gas - Domestic & Crude (3.3%):
9,900 Amoco Corp. $ 954,113
13,000 Atlantic Richfield Co. 1,110,687
41,700 Phillips Petroleum Co. 2,152,762
13,800 Ultramar Diamond Shamrock Corp. 445,912
20,372 Union Pacific Resources Group Inc. 533,492
----------
5,196,966
----------
Oil & Gas - International (3.4%):
32,100 British Petroleum Co. PLC - ADR 2,915,081
2,800 Diamond Offshore Drilling, Inc. 154,525
25,400 Repsol S.A. - ADR 1,101,725
20,600 Texaco Inc. 1,265,613
----------
5,436,944
----------
Paper (2.5%):
7,900 Boise Cascade Corp. 332,294
20,700 Bowater Inc. 1,055,700
38,100 Champion International Corp. 2,321,719
5,300 Weyerhaeuser Co. 314,687
----------
4,024,400
----------
Personal Products (0.2%):
6,100 Lauder Estee Cos. - Class A 282,125
----------
Publishing & Broadcasting (2.3%):
25,200 Clear Channel Communications Inc.* 1,634,850
14,250 Comcast Corp. - Special Class A 366,937
5,100 Heftel Broadcasting Corp. - Class A* 386,325
45,168 Tele-Communications - Class A* 925,944
15,432 Tele-Communications - Ventures Group Class A* 318,285
----------
3,632,341
----------
Railroads (1.0%):
5,900 CSX Corp. 345,150
21,000 Union Pacific Corp. 1,315,125
----------
1,660,275
----------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- ------------- -----------
<C> <S> <C>
Software & Services (5.0%):
23,200 BMC Software Inc.* $ 1,502,200
4,800 Complete Business Solutions, Inc.* 136,800
6,600 Fiserv, Inc.* 289,575
10,300 MAPICS, Inc.* 133,900
7,400 McAfee Associates, Inc.* 392,200
24,300 Microsoft Corp.* 3,215,194
34,075 Oracle Corp.* 1,241,608
2,500 PeopleSoft, Inc.* 149,375
18,300 SABRE Group Holdings Inc.* 655,369
4,600 Visio Corp. 192,050
-----------
7,908,271
-----------
Specialty Stores (2.8%):
13,500 Borders Group Inc.* 371,250
14,100 CompUSA Inc.* 493,500
22,300 CVS Corp. 1,268,312
9,800 Gucci Group NV-NY Reg Sh. 459,375
19,150 Home Depot Inc. 998,194
41,200 Office Depot, Inc.* 831,725
-----------
4,422,356
-----------
Telecommunications - Equipment (0.4%):
2,800 CIENA Corp.* 138,688
4,100 Digital Microwave Corp.* 183,475
5,900 Tellabs, Inc.* 303,850
-----------
626,013
-----------
Telephone Services (3.8%):
14,096 Globalstar Telecommunications Ltd.* 740,040
22,800 GTE Corp. 1,034,550
18,600 SBC Communications, Inc. 1,141,575
23,600 Sprint Corp. 1,180,000
53,020 WorldCom, Inc.* 1,875,582
-----------
5,971,747
-----------
</TABLE>
Continued
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Portfolio of Investments - September 30, 1997 - (Continued)
<TABLE>
<CAPTION>
Value
Shares (Note 2a)
- -------------- ------------
<S> <C> <C>
Tobacco (4.5%):
128,000 Philip Morris Cos. Inc. $ 5,320,000
51,480 RJR Nabisco Holdings Corp. 1,769,625
------------
7,089,625
------------
Transportation (0.3%):
4,900 Burlington Northern Santa Fe Corp. 473,462
------------
Utilities (0.3%):
19,900 Entergy Corp. 518,644
------------
Total Common Stocks (Cost $134,367,506) 152,940,516
------------
Money Market Funds (3.2%):
$1,640,650 Federated Automated Government Cash Reserves 1,640,650
3,553,722 Fidelity Cash Treasury II 3,553,722
------------
Total Money Market Funds (Cost $5,194,372) 5,194,372
------------
Total Investments (100.00%): (Cost $139,561,878)(a) $158,134,888
Liabilities in excess of Other Assets (0.0%): (73,114)
------------
Net Assets (100.0%): $158,061,774
============
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of $149,881.
Cost for federal income tax purposes differs from market value by net
unrealized appreciation of securities as follows:
Unrealized appreciation $ 21,041,553
Unrealized depreciation (2,618,424)
------------
Net unrealized appreciation/(depreciation) $ 18,423,129
============
</TABLE>
* Non-income producing security
ADR - American Depository Receipt
PLC - Public Limited Co.
Percentages indicated are based on net assets of $158,061,774.
See accompanying notes to financial statements.
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Statement of Assets and Liabilities
September 30, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments, at value (Cost $139,561,878) $ 158,134,888
Dividends and Interest receivable 256,403
Prepaid and Other 32,185
Unamortized organization costs 21,175
------------
Total Assets 158,444,651
------------
LIABILITIES:
Cash overdraft 36,324
Accrued expenses and other payables:
Payable for investment securities purchased 179,313
Investment advisory fees 45,642
Legal 39,106
Audit 35,845
Registration and filing 27,306
Administrative Service fees 9,212
Other 7,204
Printing costs 2,925
------------
Total Liabilities 382,877
------------
Net Assets $ 158,061,774
============
NET ASSETS:
Par value of shares of capital stock outstanding
(par value $.001 per share,
200,000,000 shares authorized) $ 8,840
Additional paid in capital 127,719,295
Accumulated undistributed net investment income 84,813
Accumulated undistributed net realized gains (losses)
on investment transactions 11,675,816
Net unrealized appreciation (depreciation) on investments 18,573,010
------------
Net Assets $ 158,061,774
============
Outstanding units of beneficial interest (shares) 8,839,670
============
Net Asset Value Per Share (Maximum Offering Price and Redemption
Price Per Share) $ 17.88
============
</TABLE>
See notes to financial statements.
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Statement of Operations
September 30, 1997
<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C>
Dividend income $ 1,680,082
Interest income 62,280
------------
Total Income 1,742,362
------------
EXPENSES:
Investment advisory fees 448,349
Administration fees 134,505
Fund Accounting Fees 28,059
Custodian 31,135
Audit and legal fees 77,669
Organization costs 21,298
Trustees' fees 5,581
Transfer agent fees 12,721
Registration and filing fees 29,151
Printing costs 7,024
Insurance 14,910
Miscellaneous 24,071
------------
Total expenses before voluntary reductions 834,473
Expenses voluntarily reduced (206,068)
------------
Total Expenses 628,405
------------
Net investment income 1,113,957
------------
REALIZED/UNREALIZED GAINS
ON INVESTMENTS:
Net realized gains (losses) on investment transactions 12,077,544
Net change in unrealized appreciation
(depreciation) on investments 14,980,398
------------
Net realized/unrealized gains (losses) on investments 27,057,942
------------
Change in net assets resulting from operations $ 28,171,899
------------
</TABLE>
See notes to financial statements.
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Statements of Changes in Net Assets
September 30, 1997
<TABLE>
<CAPTION>
Year Year
Ended Ended
September 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income $ 1,113,957 $ 450,179
Net realized gains on investment transactions 12,077,544 1,322,643
Net change in unrealized appreciation (depreciation) on investments 14,980,398 1,771,673
------------ -----------
Change in net assets resulting from operations 28,171,899 3,544,495
------------ -----------
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,115,106) (351,954)
Net realized gains (1,718,039) (520,825)
------------ -----------
Change in net assets from shareholder dividends and distributions (2,833,145) (872,779)
------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 101,598,261 47,466,188
Dividends reinvested 2,423,299 846,684
Cost of shares redeemed (34,840,286) (167,938)
------------ -----------
Change in net assets from capital transactions 69,181,274 48,144,934
------------ -----------
Change in net assets 94,520,028 50,816,650
------------ -----------
NET ASSETS:
Beginning of period 63,541,746 12,725,096
============ ===========
End of period (includes accumulated undistributed net investment $158,061,774 $63,541,746
income of $84,813 and $117,802, respectively). ============ ===========
</TABLE>
<PAGE>
MINERVA FUND, INC.
Notes to Financial Statements
September 30, 1997
Note 1. Description and Organization. Minerva Fund, Inc. (the "Fund") is
registered under the Investment Company Act of 1940, as amended, as an open-
ended 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, 1997 there were
authorized 200,000,000 shares of capital stock having a par value of $.001 per
share. The Equity 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 of the Portfolio at $10.00
per share to Furman Selz LLC, formerly, Furman Selz Incorporated ("Furman
Selz"), the Fund's former 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 Portfolio. 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
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 method 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. Dividend income is recorded on the ex-dividend date.
<PAGE>
MINERVA FUND, INC.
Notes to Financial Statements (Continued)
September 30, 1997
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.
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 and wash sales) 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.
d. Federal Income Taxes - The Portfolio 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 Portfolio 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 Portfolio also
intends to meet the distribution requirements to avoid the payment of an excise
tax.
e. Organization Expense - Cost incurred in connection with the
organization and initial registration of the Portfolio were paid by Furman Selz
(former administrator) and reimbursed by the Fund. These cost 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 organizational expenses in the same
proportion as the number of shares being redeemed bears to the number of initial
shares outstanding at the time of redemption.
f. Expenses - Expenses directly attributable to the Portfolio are charged
to the Portfolio.
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"). MA&S is a owned wholly subsidiary of Morgan
Stanley Group, Inc.
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 Portfolio in
conformity with the Portfolio's stated investment objective and
<PAGE>
MINERVA FUND, INC.
Notes to Financial Statements (Continued)
September 30, 1997
policies, consulting with the Investment Manager regarding specific decisions
concerning the purchase, sale, or holdings of particular securities on behalf of
the Portfolio and placing purchase and sale orders for the Portfolio's
securities. MA&S receives no fee from the Investment Manager or the Portfolio
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.
The Investment Management Agreement provides for the Portfolio to pay the
Investment Manager 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. The Investment Manager will provide portfolio management and certain
administrative, clerical and bookkeeping services for the Portfolio. During the
fiscal year ended September 30, 1997 the Investment Manager voluntarily waived
advisory fees in the amount of $134,302. In addition, The Investment Manager 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, 1997.
Note 4. Administrator and Distributor - BISYS Fund Services, Inc.
("BISYS") is responsible for providing the Fund with fund accounting, dividend
and capital gains disbursing services pursuant to an accounting agreement (the
"Fund Accounting Agreement"). BISYS Fund Services Limited Partnership ("BISYS
LP") is responsible for providing the Portfolio with administrative services
pursuant to an administration agreement ( the "Fund Administration Agreement").
BISYS and BISYS LP assumed these functions during the fiscal year ending
September 30, 1997, following the acquisition by The BISYS Group, Inc. of the
Mutual Funds Division of Furman Selz Incorporated, which had previously provided
these services to the Fund. The services under the agreement are subject to the
supervision of the Fund's Board of Directors and officers and include 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 custodian and assistance in the preparation of the
Portfolio's registration statements under federal and state laws. Pursuant to
the Fund Administration Agreement, the Fund pays BISYS Fund Services 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 , BISYS voluntarily waived
administrative services fees of $71,766. In addition, BISYS is entitled to an
annual fee of $30,000 for performing fund accounting services.
<PAGE>
MINERVA FUND, INC.
Notes to Financial Statements (Continued)
September 30, 1997
The Fund has entered into a distribution agreement (the "Distribution
Agreement") with BISYS Fund Services. Under the Distribution Agreement, BISYS
Fund Services 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 BISYS Fund
Services whereby BISYS Fund Services provides personnel necessary to perform
shareholder servicing functions. For its services, BISYS Fund Services receives
a fee of $15 per account with a minimum of $6,000 per year 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 fiscal year ended September 30,
1997, LTCB Trust Company received fees of $ 31,135 from the Fund.
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
portfolio for the fiscal year ended September 30, 1997 was as follows:
Common Stocks & Bonds
Purchases Sales
$161,248,735 $ 93,687,361
<PAGE>
MINERVA FUND, INC.
Notes to Financial Statements (Continued)
September 30, 1997
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
fiscal year ended September 30, 1997 transactions of capital stock were as
follows:
<TABLE>
<S> <C>
Shares sold 6,270,075
Shares issued in reinvestment of dividends 162,478
Shares redeemed (2,274,049)
----------
Net increase in shares 4,158,504
==========
</TABLE>
Note 8 - Subsequent Events. The Board of Directors has authorized the
termination of the Portfolio effective December 31, 1997 or such earlier time as
there shall be no shareholders remaining in the Portfolio, subject to any
approvals that may be required in connection therewith, as well as the
subsequent liquidation of the Company.
Note 9 - Federal Income Tax Information (Unaudited) : During the year
ended September 30, 1997, the Portfolio declared long term capital gain
distributions of $ 1,634,785.
For the taxable year ended September 30, 1997, 18.75 % of income dividends paid
by the Portfolio qualified for the dividends received deduction available to
corporations.
<PAGE>
MINERVA FUND, INC.
Equity Portfolio
Financial Highlights
For a share outstanding throughout each period (1)
<TABLE>
<CAPTION>
Year Year Year Year
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1996 1995 1994(a)
-------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 13.57 $ 12.23 $ 10.01 $ 10.00
-------------- -------------- ---------------- --------------
INVESTMENT ACTIVITIES:
Net investment income 0.20 0.21 0.22 0.16
Net realized and unrealized appreciation
(depreciation) on investments 4.79 1.73 2.20 0.02
-------------- -------------- ---------------- --------------
Total from Investment Activities 4.99 1.94 2.42 0.18
-------------- -------------- ---------------- --------------
DISTRIBUTIONS FROM:
Net investment income (0.21) (0.14) (0.20) (0.15)
Net Realized Capital Gains (0.47) (0.46) ----- -----
Return of Capital ----- ----- ----- (0.02)
-------------- -------------- ---------------- --------------
Total Distributions (0.68) (0.60) (0.20) (0.17)
-------------- -------------- ---------------- --------------
Net Asset Value, End of Period $ 17.88 $ 13.57 $ 12.23 $ 10.01
============== ============== ================ ==============
Total Return 37.81% 16.37% 24.37% 1.99%
RATIOS / SUPPLEMENTAL DATA:
Net Assets at end of period (in thousands) $ 158,062 $ 63,542 $ 12,725 $ 10,227
Ratio of net investment income
average net assets 1.24% 1.59% 1.90% 1.56%
Ratio of net investment income
before effect of waivers and reimbursements* 1.01% 1.13% 0.59% 0.71%
Ratio of expenses to
average net assets 0.70% 0.98% 1.03% 1.00%
Ratio of expenses to
before effect of waivers and reimbursements* 0.93% 1.44% 2.34% 1.85%
Portfolio turnover 108% 55% 56% 35%
Average Commission Rate (b) $0.0600 $0.0590 ----- -----
</TABLE>
________
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(1) Per share based on the average number of shares outstanding during each
period.
(a) Period from commencement of operations, October 1, 1993.
(b) Represents the total dollar amount of commissions paid on Fund transactions
for the year ended September 30, 1997, divided by total number of Fund
shares purchased and sold for which commissions were charged. 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.
See notes to financial statements.
<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 the Equity Portfolio (constituting
the Minerva Fund, Inc., hereafter referred to as the "Portfolio" ) at September
30, 1997, the results of 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, 1997 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
As described in Note 8, the Board of Directors of the Minerva Fund, Inc. has
authorized the termination of the Portfolio effective December 31, 1997 or such
earlier time as there shall be no shareholders remaining in the Portfolio.
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
November 19, 1997
<PAGE>
MINERVA FUND, INC.
3435 Stelzer Road
Columbus, Ohio 43219
Information & Client Services:
(800) 313-9998
INVESTMENT MANAGER:
LTCB-MAS Investment Management , Inc.
One Tower Bridge, Suite 1000
West Conshohocken, Pennsylvania 19428
ADMINISTRATOR & DISTRIBUTOR:
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
TRANSFER AGENT, DIVIDEND DISBURSING AGENT
AND ACCOUNTING AGENT:
BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
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 Fund's
shares is authorized only in case of a concurrent or prior delivery
of the Fund's current prospectus.
Investments in mutual funds involve risk,
including possible loss of principal.
