<PAGE> 1
As filed with the Securities and Exchange Commission
April 26, 1996
1933 Act Registration No. 33-34154
1940 Act File No. 811-6082
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE /x/
SECURITIES ACT OF 1933
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 16 /x/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 17 /x/
THE RIVERFRONT FUNDS, INC.
(formerly known as The Trust Advisory
Group of Funds, Inc.)
(Exact name of Registrant as specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number,
including Area Code: (614) 899-4600
Bryan C. Haft
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
Immediately upon effectiveness
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/x/ on April 30, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933 pursuant to Rule 24f-2 under the
Investment Company Act of 1940. A Rule 24f-2 Notice for the Registrant's fiscal
year ended December 31, 1995, was filed on February 28, 1996.
<PAGE> 3
CROSS-REFERENCE SHEET
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT STOCK APPRECIATION FUND
Five Funds of
The Riverfront Funds, Inc.
Cross-Reference Sheet pursuant to Rule 481 under the Securities Act of 1933.
<TABLE>
<CAPTION>
Item Number in
Part A of Form N-1A Prospectus Caption
- ------------------- ------------------
<S> <C>
1 Cover Page
2 Fee Table
3 Financial Highlights; Performance Data
4 Cover Page; The Company and its
Portfolios; The Fund's Investment
Objectives and Policies
5 Company Management and Expenses;
Additional Information
5A Not Applicable
6 The Company and its Portfolios; Dividends
and Taxes; Company Shares; Pricing Shares
7 How to Buy Shares; Shareholder Services
8 How to Redeem Shares; How to Buy Shares
9 Not Applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Prospectus Summary.................... 4
Fee Table............................. 7
Financial Highlights.................. 10
The Company and Its Portfolios........ 19
The Funds' Investment Objectives and
Policies............................ 19
Investment Restrictions............... 34
Pricing Shares........................ 37
How To Buy Shares..................... 38
Sales Charges......................... 40
Reduced Sales Charges -- Investor A
Shares.............................. 41
Contingent Deferred Sales Charge --
Investor B Shares................... 43
Conversion Feature.................... 45
Other Purchase Information............ 46
Exchanges............................. 46
How To Redeem Shares.................. 47
Shareholder Services.................. 50
Dividends and Taxes................... 50
Company Management and Expenses....... 53
Performance Data and Advertising...... 58
Company Shares........................ 59
Additional Information................ 60
</TABLE>
3
<PAGE> 5
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT STOCK APPRECIATION FUND
PROSPECTUS APRIL 30, 1996
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company which currently issues six series of shares (individually, a
"Portfolio" and collectively, the "Portfolios"), each having a different
investment objective and investing in a different portfolio of securities. The
Portfolios offered by the Company are: The Riverfront U.S. Government Securities
Money Market Fund, The Riverfront U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund, The Riverfront
Flexible Growth Fund, and The Riverfront Stock Appreciation Fund.
The Portfolios are offered to both customers of The Provident Bank
("Provident"), including personal trust, employee benefit, agency and custodial
clients, and to the general public. Provident is a wholly owned subsidiary of
Provident Bancorp, Inc. ("PBI"). Provident, directly or through one or more
sub-investment advisers, serves as investment adviser to each of the Portfolios.
SHARES OF THE PORTFOLIOS ARE NOT DEPOSITS OF, OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, PROVIDENT, PBI OR ANY OF THEIR AFFILIATES, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. AN INVESTMENT IN A PORTFOLIO INVOLVES INVESTMENT RISKS,
INCLUDING RISK OF LOSS OF PRINCIPAL. THE VALUE OF THE RIVERFRONT U.S. GOVERNMENT
INCOME, THE RIVERFRONT INCOME EQUITY FUND, THE RIVERFRONT OHIO TAX-FREE BOND
FUND AND THE RIVERFRONT STOCK APPRECIATION FUND SHARES MAY FLUCTUATE, AND WHEN
REDEEMED THEIR VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY PAID BY
THE PURCHASER.
AN INVESTMENT IN THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE RIVERFRONT
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INTENDS TO MAINTAIN A NET ASSET
VALUE PER SHARE OF $1.00, THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
For Information Contact:
THE RIVERFRONT FUNDS, INC.
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
CALL TOLL FREE 1-800-424-2295
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.
This prospectus relates only to The Riverfront U.S. Government Securities
Money Market Fund, The Riverfront U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund and The Riverfront
Stock Appreciation Fund and sets forth concisely information that a prospective
investor should know about each Fund before investing. Investors should read and
retain this prospectus for future reference.
<PAGE> 6
Additional information about the Company and its Portfolios is contained in a
Statement of Additional Information and Appendix thereto dated as of the date
hereof, which has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated by reference into this prospectus. For a free
copy, or for other information about the Company and its Portfolios, write to
the address or call the telephone number listed above.
The Company is designed to enable investors to pursue financial goals through
a choice of portfolios.
The Company offers the following Portfolios by this prospectus:
-- THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (the "Money
Market Fund") seeks current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity. The dollar weighted average
maturity of the Money Market Fund will not exceed 90 days.
-- THE RIVERFRONT U.S. GOVERNMENT INCOME FUND (the "Income Fund") seeks a high
level of current income, consistent with preservation of capital, by investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, and in high quality fixed rate and adjustable
rate mortgage-backed securities and other asset-backed securities. The Income
Fund intends to invest in securities with dollar-weighted average durations of
between three and seven years. The dollar-weighted average life of the Income
Fund's securities is expected to be in the range of four to ten years.
-- THE RIVERFRONT INCOME EQUITY FUND (the "Income Equity Fund") seeks a high
level of investment income, with capital appreciation as a secondary objective,
through investment primarily in income-producing equity securities of U.S.
issuers. To provide investment advisory services to the Income Equity Fund,
Provident has entered into a sub-investment advisory agreement with DePrince,
Race & Zollo, Inc., Orlando, Florida.
-- THE RIVERFRONT OHIO TAX-FREE BOND FUND (the "Ohio Tax-Free Fund") seeks (1)
income, which is exempt from federal income tax and Ohio state income taxes, and
(2) preservation of capital.
-- THE RIVERFRONT STOCK APPRECIATION FUND (the "Stock Appreciation Fund")
seeks capital growth.
The Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund and the Stock Appreciation Fund are hereinafter collectively
referred to as the "Funds" and individually as a "Fund."
The Company also offers by separate prospectus The Riverfront Flexible Growth
Fund (the "Flexible Growth Fund"). For more information about the Flexible
Growth Fund, please write to the address or call the telephone number listed
above. Each Portfolio of the Company, other than the Money Market Fund, offers
two classes of shares. This prospectus describes the one class of shares of the
Money Market Fund --Investor A shares, and the two classes of shares of the
Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund and the Stock
Appreciation Fund -- Investor A shares and Investor B shares.
2
<PAGE> 7
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered................ Investor A shares of capital stock, $0.001 par value, of the
Money Market Fund, and Investor A and Investor B shares of
capital stock, $0.001 par value, of the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Stock
Appreciation Fund, five separate series (collectively, the
"Funds") of The Riverfront Funds, Inc., a Maryland corpora-
tion (the "Company").
Offering Price................ The public offering price of the INVESTOR A SHARES of the
Money Market Fund is equal to the net asset value per share.
The public offering price of INVESTOR A SHARES of each of the
other Funds is equal to the net asset value per share plus a
sales charge equal to 4.50% of the public offering price
(4.71% of the net amount invested), reduced on investments of
$100,000 or more (See "Sales Charges -- Investor A Shares").
Under certain circumstances, the sales charge may be elimi-
nated (See "Reduced Sales Charges -- Investor A Shares").
The public offering price of INVESTOR B SHARES of each of the
Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund
and the Stock Appreciation Fund is equal to the net asset
value per share, but investors may be subject to a contingent
deferred sales charge ranging from 4% to 1% when Investor B
shares are redeemed within the first six years after purchase.
Minimum Purchase.............. $1,000 minimum initial investment with $100 minimum subse-
quent investments. Such minimum initial and subsequent
investments are waived for employees of The Provident Bank and
BISYS Fund Services Limited Partnership. Investor B shares may
only be purchased in an amount of less than $250,000.
Type of Company............... Each of the Money Market Fund, the Income Fund, the Income
Equity Fund and the Stock Appreciation Fund is a diversified
series of the Company, an open-end, management investment
company. The Ohio Tax-Free Fund is a non-diversified series of
the Company.
Investment Objective.......... For the MONEY MARKET FUND, current income from U.S. Government
short-term securities while preserving capital and maintaining
liquidity.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
For the INCOME FUND, a high level of current income,
consistent with preservation of capital, by investing
primarily in securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, and in high
quality fixed rate and adjustable rate mortgage-backed
securities and other asset-backed securities.
For the INCOME EQUITY FUND, a high level of investment income,
with capital appreciation as a secondary objective, through
investment primarily in income-producing equity securities of
U.S. issuers.
For the OHIO TAX-FREE FUND, (1) income, which is exempt from
federal income tax and Ohio state income taxes, and (2)
preservation of capital.
For the STOCK APPRECIATION FUND, capital growth.
Investment Policies........... Under normal market conditions, the MONEY MARKET FUND invests
at least 65% of its total assets in obligations issued or
guaranteed as to principal and interest by the U.S. Govern-
ment, its agencies or instrumentalities, and in repurchase
agreements secured by such obligations.
Under normal market conditions, the INCOME FUND invests
primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in high
quality fixed rate and adjustable rate mortgage-backed securi-
ties and other asset-backed securities which are issued or
guaranteed by the U.S. Government, its agencies or instrumen-
talities or are rated no lower than one of the three highest
rating categories by a nationally recognized statistical
rating organization (an "NRSRO"), or if not so rated, are
deemed to be of comparable quality.
Under normal market conditions, the INCOME EQUITY FUND invests
at least 65% of its total assets in common stocks and
securities convertible into common stock, such as bonds and
preferred stocks, rated in one of the four highest rating
categories by an NRSRO, or if not so rated, deemed to be of
comparable quality.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
Under normal market conditions, the OHIO TAX-FREE FUND invests
at least 80% of its net assets in a portfolio of obligations
consisting of bonds, notes, commercial paper, debentures and
certificates of indebtedness, issued by or on behalf of the
State of Ohio, or any county, political subdivision or
municipality thereof (including any agency, board, authority
or commission of any of the foregoing), and in debt
obligations issued by the Government of Puerto Rico and such
other governmental entities whose debt obligations, either by
law or treaty, generate interest income which is exempt from
federal income tax, is not a preference item for individuals
for purposes of the federal alternative minimum tax and is
exempt from Ohio state income taxes.
Under normal market conditions, the STOCK APPRECIATION FUND
invests at least 65% of its total assets in a portfolio of
common stocks that, in the opinion of Provident based upon its
analysis of various fundamental and technical standards, have
appreciation potential.
Risk Factors and Investment
Techniques.................. An investment in any of the Funds is subject to certain risks,
as set forth in detail under "Risk Factors and Investment
Techniques." As with other mutual funds, there can be no
assurance that any of the Funds will achieve its investment
objective or objectives. The Funds, to the extent set forth
under "Risk Factors and Investment Techniques," may engage in
the following practices: the use of repurchase and reverse
repurchase agreements, entering into options and futures
transactions, the lending of portfolio securities, the
purchase of securities on a when-issued or delayed-delivery
basis and investing in warrants and foreign securities. The
Ohio Tax-Free Fund is also subject to the risks associated
with being a non-diversified portfolio.
Investment Adviser............ The Provident Bank ("Provident").
Sub-Investment Adviser........ DePrince, Race & Zollo, Inc. ("DRZ"), with respect to the
Income Equity Fund.
Dividends..................... For the Money Market Fund, dividends from net income are
declared daily and generally paid monthly. For each of the
other Funds, dividends from net income are declared and
generally paid monthly. Net realized capital gains are
distributed at least annually.
Distributor................... BISYS Fund Services Limited Partnership (the "Distributor").
</TABLE>
6
<PAGE> 10
FEE TABLE
The purpose of the fee table is to assist investors in understanding the costs
and expenses that an investor in a Fund will bear directly or indirectly. Such
costs and expenses do not include any fees charged by Provident or any of its
affiliates to its customers' accounts which may have invested in shares of the
Funds. For more complete descriptions of the various costs and expenses, see the
following sections of this prospectus: "Company Management and Expenses," "How
to Buy Shares," "Sales Charges," "Reduced Sales Charges -- Investor A Shares"
and "Distribution Plans."
INVESTOR A SHARES
<TABLE>
<CAPTION>
MONEY INCOME OHIO STOCK
MARKET INCOME EQUITY TAX-FREE APPRECIATION
FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------
<S> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (as a percentage of
offering price).................. 0% 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
ANNUAL FUND EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Investment Advisory Fees After
Voluntary Fee Reduction.......... .15% .40% .90%(2) .40%(3) .80%
12b-1 Fees After Voluntary Fee
Reduction........................ 0(4) .19(4) .22(4) .25 .25
Other Expenses(5).................. .43 .50 .57 .71 .61
--- ---- ---- ---- ----
Total Fund Operating Expenses After
Voluntary Fee Reductions......... .58% 1.09% 1.69% 1.36% 1.66%
=== ==== ==== ==== ====
</TABLE>
- ---------------
(1) The sales charge applied to purchases of Fund shares declines as the amount
invested increases. In addition, all or a portion of the sales charge may be
waived by the Distributor on certain sales of Investor A shares. See "Sales
Charges -- Investor A Shares" and "Reduced Sales Charges -- Investor A
Shares."
(2) The above table with respect to the Income Equity Fund reflects a
continuation of the agreement by Provident and DRZ to waive 5 basis points
(.05%) of the investment advisory and sub-investment advisory fees until
January 1, 1997. Absent such fee waivers, the Investment Advisory Fees and
Total Fund Operating Expenses for the Investor A Shares of the Income Equity
Fund would have been .95% and 1.74%, respectively, during the period of
August 15, 1995 (when DRZ became the sub-adviser) to December 31, 1995.
(3) Provident has agreed with the Company to reduce voluntarily the amount of
its investment advisory fee with respect to the Ohio Tax-Free Fund for the
current fiscal year. Absent such voluntary fee reduction, Investment
Advisory Fees and Total Fund Operating Expenses for the Investor A Shares of
the Ohio Tax-Free Fund would be .50% and 1.46%, respectively.
7
<PAGE> 11
(4) The Distributor has agreed with the Company to reduce voluntarily the amount
of its 12b-1 fees under the Investor A Plan, as described below, with
respect to the Money Market, Income Equity and Income Funds, for the current
fiscal year. Absent such voluntary fee reduction, 12b-1 Fees for such Funds
would be .25%.
(5) "Other Expenses" with respect to the Income Equity Fund, the Ohio Tax-Free
Fund and the Stock Appreciation Fund have been restated to reflect current
fees.
INVESTOR B SHARES
<TABLE>
<CAPTION>
INCOME OHIO STOCK
INCOME EQUITY TAX-FREE APPRECIATION
FUND FUND FUND FUND
------ ------ -------- ------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable)(1)................ 4.00% 4.00% 4.00% 4.00%
ANNUAL FUND EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Investment Advisory Fees After Voluntary Fee
Reduction.................................. .40% .90%(2) .40%(3) .80%
12b-1 Fees................................... 1.00 1.00 1.00 1.00
Other Expenses............................... .50 .57 .71 .61(4)
---- ---- ---- ----
Total Fund Operating Expenses After Voluntary
Fee Reduction.............................. 1.90% 2.47% 2.11% 2.41%
==== ==== ==== ====
</TABLE>
- ---------------
(1) A contingent deferred sales load ranging from 4% to 1% is charged with
respect to Investor B shares redeemed within the first six years after
purchase. See "Contingent Deferred Sales Charge -- Investor B Shares" below.
(2) The above table with respect to the Income Equity Fund reflects a
continuation of the agreement by Provident and DRZ to waive 5 basis points
(0.05%) of the investment advisory and sub-investment advisory fees until
January 1, 1997. Absent such fee waivers, the Investment Advisory Fees and
Total Fund Operating Expenses for the Investor B Shares of the Income Equity
Fund would have been .95% and 2.52%, respectively, during the period of
August 15, 1995 (when DRZ became the sub-adviser) to December 31, 1995.
(3) Provident has agreed with the Company to reduce voluntarily the amount of
its investment advisory fee with respect to the Ohio Tax-Free Fund for the
current fiscal year. Absent such voluntary fee reduction, Investment
Advisory Fees and Total Fund Operating Expenses for the Investor B Shares of
the Ohio Tax-Free Fund would be .50% and 2.21%, respectively.
(4) "Other Expenses" is based upon estimated amounts for the current fiscal
year.
8
<PAGE> 12
EXAMPLE(4) -- INVESTOR A SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
MONEY INCOME OHIO STOCK
MARKET INCOME EQUITY TAX-FREE APPRECIATION
FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------
<S> <C> <C> <C> <C> <C>
One Year........................... $ 6 $ 56 $ 61 $ 58 $ 61
Three Years........................ $ 19 $ 78 $ 96 $ 86 $ 95
Five Years......................... $ 32 $102 $133 $116 $131
Ten Years.......................... $ 73 $172 $236 $201 $233
</TABLE>
EXAMPLE(4) -- INVESTOR B SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
INCOME OHIO STOCK
INCOME EQUITY TAX-FREE APPRECIATION
FUND FUND FUND FUND
------ ------ -------- ------------
<S> <C> <C> <C> <C>
One Year........................... $ 59 $ 65 $ 61 $ 64
Three Years........................ $100 $117 $106 $115
Five Years......................... $123 $152 $133 N/A
Ten Years.......................... $222 $281 $244 N/A
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
INCOME OHIO STOCK
INCOME EQUITY TAX-FREE APPRECIATION
FUND FUND FUND FUND
------ ------ -------- ------------
<S> <C> <C> <C> <C>
One Year........................... $ 19 $ 25 $ 21 $ 24
Three Years........................ $ 60 $ 77 $ 66 $ 75
Five Years......................... $103 $132 $113 N/A
Ten Years.......................... $222 $281 $244 N/A
- ---------------
(4) The Commission requires use of a 5% annual return figure for purposes of the
examples. Actual return for a Fund may be greater or less than 5%.
</TABLE>
AMOUNTS SHOWN IN THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. As a result of the payment of sales loads and Rule 12b-1
fees, long-term shareholders may pay more than the maximum front-end sales
charge permitted by the Rules of the National Association of Securities Dealers,
Inc. (the "NASD"). The NASD has adopted rules which generally limit the
aggregate of any sales charges paid and payments under a Fund's Investor A and
Investor B Distribution Plans to 6.25% of total new gross sales, plus interest.
A Fund would stop accruing payments under a Distribution Plan if, to the extent,
and for as long as, such limit would otherwise be exceeded.
9
<PAGE> 13
The information set forth in the foregoing Fee Tables and examples relates
to the Investor A and Investor B Shares (except with respect to the Money Market
Fund which only has Investor A shares) of the Funds. The two classes of shares
are subject to the same expenses except that the level of Rule 12b-1 fees paid
by the holders of Investor A shares and Investor B shares differs.
FINANCIAL HIGHLIGHTS
The Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund and the Stock Appreciation Fund are five separate Portfolios of
the Company. The following financial highlights for the fiscal year ended
December 31, 1995, for each of the Funds, other than the Stock Appreciation
Fund, and for the three month period ended December 31, 1995 for the Stock
Appreciation Fund, have been audited by Ernst & Young LLP, independent auditors,
whose report, together with the financial statements of the Funds, appear in the
Statement of Additional Information. The following financial highlights: for the
fiscal years ended December 31, 1994 and 1993, and the three month period ended
December 31, 1992, for the Money Market Fund; the fiscal years ended December
31, 1994, 1993, 1992, and 1991, for the Income Fund and the Income Equity Fund;
and the five month period ended December 31, 1994, for the Ohio Tax-Free Fund,
have been audited by other auditors.
As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of each of the Stock Appreciation Fund and the Stock Growth Fund of MIM
Mutual Funds, Inc., in exchange for the assumption of such Funds' stated
liabilities and a number of full and fractional Investor A shares of the Stock
Appreciation Fund having an aggregate net asset value equal to such Funds' net
assets (the "Reorganization"). For accounting purposes, the MIM Stock
Appreciation Fund is deemed to be the survivor of the Reorganization. The
following Financial Highlights with respect to each of the fiscal years ending
September 30, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988 and the fiscal
period from commencement of operations (July, 1987) to September 30, 1987, for
the Stock Appreciation Fund have been audited by other auditors and, except for
September 30, 1995 (the effective date of the Reorganization), reflect the
operations of the MIM Stock Appreciation Fund prior to the Reorganization.
Such Statement of Additional Information may be obtained by shareholders
and prospective investors upon request.
On June 8, 1994, the Board of Directors of the Company and on July 29,
1994, the shareholders of the Company approved the reclassification of the
Funds' then outstanding shares into Class A shares. Such reclassification was
effective as of August 1, 1994.
10
<PAGE> 14
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, OCTOBER 1, 1992
---------------------------------- TO DECEMBER 31,
1995 1994 1993 1992(A)
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities
Net Investment Income(b).................... 0.05 0.04 0.03 0 .01
-------- -------- -------- --------
Total from Investment Activities............ 0.05 0.04 0.03 0 .01
-------- -------- -------- --------
Distributions
Net Investment Income....................... (0.05) (0.04) (0.03) (0.01)
-------- -------- -------- --------
Total Distributions......................... (0.05) (0.04) (0.03) (0.01)
-------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== =======
TOTAL RETURN................................ 5.52% 3.78% 2.90% 0 .80%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)............. $157,495 $149,374 $133,207 $ 37,083
Ratio of expenses to average net assets..... 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income to average
net assets................................ 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net assets*.... 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income to average
net assets*............................... 5.09% 3.41% 2.75% 2.42%(c)
<FN>
- ---------------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Money Market Fund. If
such voluntary fee reductions and expense reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
</TABLE>
11
<PAGE> 15
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
AUGUST 9, 1990
YEARS ENDED DECEMBER 31, TO
------------------------------------------------------ DECEMBER 31,
1995 1994 1993 1992(B) 1991 1990(A)
------- ------- ------- ------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD....... $ 8.92 $ 9.91 $ 9.76 $ 10.00 $10.00 $10.00
Investment Activities
Net investment income....... 0.54 0.54 0.51 0.10 0.73 0.12
Net realized and unrealized
gains (losses) from
investments............... 0.79 (0.99) 0.20 (0.23) -0- -0-
------- ------- ------- ------- ------ ------
Total from Investment
Activities................ 1.33 (0.45) 0.71 (0.13) 0.73 0.12
------- ------- ------- ------- ------ ------
Distributions Net
investment income......... (0.54) (0.54) (0.50) (0.10) (0.73) (0.12)
In excess of net investment
income.................... -0- -0- (0.06) (0.01) -0- -0-
------- ------- ------- ------- ------ ------
Total Distributions......... (0.54) (0.54) (0.56) (0.11) (0.73) (0.12)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD.................... $ 9.71 $ 8.92 $ 9.91 $ 9.76 $10.00 $10.00
======= ======= ======= ======= ====== ======
TOTAL RETURN (EXCLUDING
SALES CHARGE)............. 15.22% (4.64)% 7.38% (1.31)% N/A N/A
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period
(000)..................... $36,538 $32,721 $30,078 $24,588 $ 33 $ 0
Ratio of expenses to average
net assets................ 1.09% 0.86% 0.65% 0.66% 0.00% 1.67%(c)
Ratio of net investment
income to average net
assets.................... 5.74% 5.78% 5.05% 4.00% 7.34% 1.17%(c)
Ratio of expenses to average
net assets*............... 1.18% 1.14% 1.08% 1.06% N/A N/A
Ratio of net investment
income to average net
assets*................... 5.65% 5.49% 4.62% 3.60% N/A N/A
Portfolio turnover.......... 75%(d) 83% 220% 117% 0% 0%
- ---------------
*During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Income Fund. If such
voluntary fee reductions and expense reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
12
<PAGE> 16
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
INVESTOR B SHARES
<TABLE>
<CAPTION>
JANUARY 17,
1995 TO
DECEMBER 31,
1995(A)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $10.00
Investment Activities
Net investment income.......................................... 0.43
Net realized and unrealized gains (losses) from investments.... 0.94
------
Total from Investment Activities............................... 1.37
------
Distributions
Net investment income.......................................... (0.42)
In excess of net investment income............................. -0-
------
Total Distributions............................................ (0.42)
------
NET ASSET VALUE, END OF PERIOD................................. $10.95
======
TOTAL RETURN (EXCLUDING SALES CHARGE).......................... 13.96%(d)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).............................. $1,263
Ratio of expenses to average net assets........................ 1.90%(b)
Ratio of net investment income to average net assets........... 4.80%(b)
Ratio of expenses to average net assets*....................... 1.90%(b)
Ratio of net investment income to average net assets*.......... 4.80%(b)
Portfolio turnover............................................. 75%(c)
<FN>
- ---------------
* During the period, certain fees were voluntarily reduced. In addition, the
Adviser reimbursed expenses to the Income Fund. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have
been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
</TABLE>
13
<PAGE> 17
THE RIVERFRONT INCOME EQUITY FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
---------------------------------------------------------- DECEMBER 31,
1995 1994 1993 1992(B) 1991 1990(A)
------- ------- ------- ------- ------ --------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD...................... $ 10.15 $ 10.63 $ 10.78 $ 10.00 $10.00 $10.00
Investment Activities
Net investment income......... 0.27 0.32 0.28 0.08 0.73 0.12
Net realized and unrealized
gains (losses) from
investments................. 2.89 -0- 1.01 0.80 -0- -0-
------- ------- ------- ------- ------ ------
Total from Investment
Operations.................. 3.16 0.32 1.29 0.88 0.73 0.12
------- ------- ------- ------- ------ ------
Distributions Net investment
income...................... (0.27) (0.31) (0.27) (0.08) (0.73) (0.12)
In excess of net investment
income...................... -0- -0- (0.03) (0.01) -0- -0-
Net realized gains............ (1.34) (0.49) (1.14) -0- -0- -0-
In excess of net realized
gains....................... -0- -0- -0- (0.01) -0- -0-
------- ------- ------- ------- ------ ------
Total Distributions........... (1.61) (0.80) (1.44) (0.10) (0.73) (0.12)
------- ------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD...................... $ 11.70 $ 10.15 $ 10.63 $ 10.78 $10.00 $10.00
======= ======= ======= ======= ====== ======
TOTAL RETURN (EXCLUDING SALES
CHARGE)..................... 31.45% 3.08% 12.11% 8.74% N/A N/A
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period
(000)....................... $60,845 $34,965 $24,387 $12,262 $ 43 $ 40
Ratio of expenses to average
net assets.................. 1.49% 1.30% 1.47% 1.48% 0.00% 1.67%(c)
Ratio of net investment income
to average net assets....... 2.27% 2.93% 2.55% 3.16% 7.34% 1.17%(c)
Ratio of expenses to average
net assets*................. 1.74% 1.58% 1.64% 2.02% N/A N/A
Ratio of net investment income
to average net assets*...... 2.02% 2.65% 2.38% 2.62% N/A N/A
Portfolio turnover............ 180%(d) 119% 145% 12% 0% 0%
- ---------------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Income Equity Fund.
If such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operation.
(b) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE> 14
<PAGE> 18
THE RIVERFRONT INCOME EQUITY FUND
INVESTOR B SHARES
<TABLE>
<CAPTION>
JANUARY 17,
1995 TO
DECEMBER 31,
1995(A)
--------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $10.00
Investment Activities
Net investment income.......................................... 0.13
Net realized and unrealized gains (losses) from investments.... 2.78
------
Total from Investment Activities............................... 2.91
------
Distributions
Net investment income.......................................... (0.13)
In excess of net investment income............................. (0.93)
------
Total Distributions............................................ (1.06)
------
NET ASSET VALUE, END OF PERIOD................................. $11.85
======
TOTAL RETURN (EXCLUDING SALES CHARGE).......................... 29.28%(d)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).............................. $2,833
Ratio of expenses to average net assets........................ 2.46%(b)
Ratio of net investment income to average net assets........... 1.12%(b)
Ratio of expenses to average net assets*....................... 2.51%(b)
Ratio of net investment income to average net assets*.......... 1.07%(b)
Portfolio turnover............................................. 180%(c)
- ---------------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Income Equity Fund.
If such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operation.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
</TABLE> 15
<PAGE> 19
THE RIVERFRONT OHIO TAX-FREE BOND FUND
<TABLE>
<CAPTION>
INVESTOR B
INVESTOR A SHARES SHARES
--------------------------------- --------------
AUGUST 1, JANUARY 17,
YEAR ENDED 1994 TO 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994(A) 1995(A)
-------------- -------------- --------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 9.83 $ 10.00 $ 10.00
Investment Activities
Net investment income............................ 0.39 0.12 0.27
Net realized and unrealized gains (losses) from
investments.................................... 0.67 (0.17) 0.73
------- ------- -------
Total from Investment Activities................. 1.06 (0.05) 1.00
------- ------- -------
Distributions
Net investment income............................ (0.38) (0.12) (0.27)
------- ------- -------
Total Distributions.............................. (0.38) (0.12) (0.27)
------- ------- -------
NET ASSET VALUE, END OF PERIOD................... $ 10.51 $ 9.83 $ 10.73
======= ======= =======
TOTAL RETURN (EXCLUDING SALES CHARGE)............ 10.96% (0.47)%(e) 10.10%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)................ $ 11,091 $ 10,190 $ 626
Ratio of expenses to average net assets.......... 1.49% 1.08%(d) 2.27%(d)
Ratio of net investment income to average net
assets......................................... 3.77% 2.92%(d) 3.01%(d)
Ratio of expenses to average net assets*......... 1.64% 1.44%(d) 2.41%(d)
Ratio of net investment income to average net
assets*........................................ 3.62% 2.56%(d) 2.87%(d)
Portfolio turnover............................... 34%(b) 29% 34%(b)
- ---------------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Ohio Tax-Free Fund.
If such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
</TABLE> 16
<PAGE> 20
THE RIVERFRONT STOCK APPRECIATION FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
PERIOD OF
OCTOBER 1,
1995 THROUGH YEARS ENDED SEPTEMBER 30,
DECEMBER 31, ------------------------------------------------------
1995(B) 1995 1994 1993 1992 1991
------------ ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD....... $ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64
Investment Activities
Net investment loss......... (0.01) (0.07) (0.12) (0.17) (0.08) (0.11)
Net realized and unrealized
gains (losses) from
securities................ (0.12) 2.14 (1.26) 2.57 1.41 3.17
-------- ------- ------- ------- ------- ------
Total from Investment
Operations................ (0.13) 2.07 (1.38) 2.40 1.33 3.06
-------- ------- ------- ------- ------- ------
Distributions
Net investment income....... -0- -0- -0- -0- -0- -0-
Net realized gains.......... (0.37) (0.32) (0.55) (0.20) (1.05) -0-
Returns of capital........ -0- -0- -0- -0- -0- -0-
-------- ------- ------- ------- ------- ------
Total Distributions......... (0.37) (0.32) (0.55) (0.20) (1.05) -0-
-------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD.................... $ 9.50 $ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
======== ======= ======= ======= ======= ======
TOTAL RETURN (EXCLUDING
SALES CHARGE)............... (1.20)%(c) 25.12% (13.91)% 30.61% 16.69% 66.04%
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period
(000s).................... $ 40,995 $44,500 $47,880 $59,330 $28,750 $9,600
Ratio of expenses to average
net assets................ 1.76% (d) 2.61% 2.44% 2.47% 2.70% 2.89%
Ratio of net income to
average net assets........ (0.49)%(d) (0.73)% (1.35)% (1.85)% (1.00)% (1.72)%
Ratio of expenses to average
net assets*............... 1.77% (d)
Ratio of net investment
income to average net
assets*................... (0.50)%(d)
Portfolio turnover.......... 46% (e) 197% 254% 216% 288% 240%
- ---------------
* During the period, certain fees were voluntarily reduced. In addition,
Provident reimbursed expenses to the Portfolio. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have
been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for period prior to September 30, 1995 represents the
performance of the MIM Stock Appreciation Fund. The per share data for the
period prior to September 30, 1995 have been restated to reflect the impact
of the change of the net asset value of the Stock Appreciation Fund on
September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE> 17
<PAGE> 21
THE RIVERFRONT STOCK APPRECIATION FUND
<TABLE>
<CAPTION>
INVESTOR B
INVESTOR A SHARES SHARES
--------------------------------------- --------------
FROM OCTOBER
YEARS ENDED SEPTEMBER 30, 1, 1995
--------------------------------------- TO DECEMBER
1990 1989 1988 1987(A) 31, 1995(A)(B)
------ ------ ------ ------ --------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................ $ 4.86 $ 4.55 $ 5.81 $ 5.77 $10.00
Investment Activities
Net investment income (loss)........ (0.01) 0.11 0.02 0.01 (0.01)
Net realized and unrealized gains
(losses) from securities.......... (0.21) 0.31 (1.26) 0.04 (0.08)
------ ------ ------ ------ ------
Total from Investment Operations.... (0.22) 0.42 (1.24) 0.05 (0.09)
------ ------ ------ ------ ------
Distributions
Net investment income............... -0- (0.11) (0.01) (0.01) -0-
Net realized gains.................. -0- -0- -0- -0- -0-
Returns of capital.................. (0.01) -0- (0.01) -0- -0-
------ ------ ------ ------ ------
Total Distributions................. (0.01) (0.11) (0.02) (0.01) -0-
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD...... $ 4.64 $ 4.86 $ 4.55 $ 5.81 $ 9.91
====== ====== ====== ====== ======
TOTAL RETURN (EXCLUDING SALES
CHARGE)........................... (4.44)% 9.41% (21.29)% 0.92%(c) (0.90)%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net Assets at End of Period (000)... $4,310 $1,420 $1,990 $3,020 $ 72
Ratio of expenses to average net
assets............................ 2.76% 3.07% 2.82% 0.53%(d) 2.30%(d)
Ratio of net income to average net
assets............................ (0.62)% 2.25% 0.43% 0.18%(d) (1.69)%(d)
Ratio of expenses to average net
assets*........................... 2.39%(d)
Ratio of net investment income to
average net assets*............... (1.78)%(d)
Portfolio turnover.................. 185% 71% 207% 0% 46%(e)
- ---------------
* During the period, certain fees were voluntarily reduced. In addition,
Provident reimbursed expenses to the Portfolio. If such voluntary fee
reductions and expense reimbursements had not occurred, the ratios would have
been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for period prior to September 30, 1995 represents the
performance of the MIM Stock Appreciation Fund. The per share data for the
period prior to September 30, 1995 have been restated to reflect the impact
of the change of the net asset value of the Stock Appreciation Fund on
September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e)Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
</TABLE>
18
<PAGE> 22
THE COMPANY AND ITS PORTFOLIOS
The Riverfront Funds, Inc. is an open-end management investment company,
commonly known as a mutual fund (the "Company"), registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Company currently offers
six series of shares of capital stock (individually, a "Portfolio" and
collectively the "Portfolios"). Each Portfolio of the Company, other than the
Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund is non-diversified.
The Company was incorporated in Maryland on March 27, 1990. The Portfolios
currently offered by the Company are the Money Market Fund, the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund and the
Flexible Growth Fund.
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTMENT OBJECTIVE AND POLICIES
The Money Market Fund seeks current income from U.S. Government short-term
securities while preserving capital and maintaining liquidity. The
dollar-weighted average maturity of the Money Market Fund will not exceed 90
days.
PRINCIPAL INVESTMENTS
The Money Market Fund invests at least 65% of its total assets in obligations
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities, and in repurchase agreements secured by such
obligations. Securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities consist of U.S. Treasury securities which differ
only in their interest rates, maturities and times of issuance. Treasury bills
have initial maturities of one year or less; Treasury notes have initial
maturities of one to ten years; and Treasury bonds generally have initial
maturities of greater than ten years. Some obligations issued or guaranteed by
the U.S. Government, such as those issued by the Government National Mortgage
Association ("GNMA") and Federal Housing Administration ("FHA"), are backed by
the full faith and credit of the U.S. Government as to payment of principal and
interest and are the highest quality government securities. Other securities,
such as those issued by the Federal Farm Credit System, the Federal Land Bank
Association and the Federal National Mortgage Association ("FNMA"), are
supported by each agency's right to borrow money from the U.S. Treasury under
certain circumstances. Others, such as those issued by the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the issuing
agency and not by the U.S. Government.
Under normal market conditions, the Money Market Fund may invest up to 35% of
its total assets in Short-Term Securities as described below under "The
Riverfront U.S. Government Income Fund -- Other Eligible Investments," except
that with respect to corporate obligations, such securities may have remaining
maturities of thirteen months or less and shall be rated in one of the two
highest rating categories by an NRSRO or, if unrated, determined to be of
comparable quality by Provident.
Pursuant to Rule 2a-7 under the 1940 Act, the Money Market Fund's investments
will be limited to U.S. dollar-denominated instruments with remaining maturities
of 397 days or less.
19
<PAGE> 23
The Money Market Fund may purchase and sell securities on a when-issued or
delayed delivery basis, enter into repurchase agreements and lend securities to
broker-dealers and financial institutions. For expanded descriptions of these
investment techniques, see the "Risk Factors and Investment Techniques" below.
The securities in which the Money Market Fund may invest may not earn as high a
level of current income as longer term or lower quality securities, which
generally have less liquidity, greater market risk and more price fluctuation.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES AND POLICIES
The Income Fund seeks a high level of current income, consistent with
preservation of capital, by investing primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and in high
quality fixed rate and adjustable rate mortgage-backed securities and other
asset-backed securities which are issued or guaranteed by the U.S. Government,
its agencies and instrumentalities or rated no lower than one of the three
highest rating categories by an NRSRO (e.g., at least "A" from Moody's Investors
Services ("Moody's") or Standard & Poor's Corporation ("S&P"), including all
sub-classifications indicated by a "plus" or "minus" sign or by a number) or, if
unrated, determined to be of comparable quality by Provident. For a description
of these ratings by NRSROs, see the Appendix to the Statement of Additional
Information. It is expected that under normal circumstances the dollar-weighted
average duration of the Income Fund's securities will be between three and seven
years and that the dollar-weighted average life of the Income Fund's securities
will be in the range of four and ten years. While there is no limit on the
maturity of any single security purchased by the Income Fund, it is expected
that the maturity of any single security will not exceed 30 years.
The Income Fund seeks to achieve a high level of current income, consistent
with preservation of capital, by investing in a diversified portfolio of
securities which Provident believes will, in the aggregate, perform well in all
stages of the business and interest rate cycles. Although the values of
fixed-income securities generally increase during periods of declining interest
rates and decrease during periods of increasing interest rates, the extent of
these fluctuations has historically generally been smaller for shorter term
securities than for securities with longer maturities. Conversely, the yield
available on shorter term securities has also historically been lower on average
than those available from longer term securities.
PRINCIPAL INVESTMENTS
Under ordinary circumstances, the Income Fund intends to invest at least 65%
of its total assets in U.S. Government securities, U.S. Government agency
mortgage-backed securities and U.S. Government agency derivatives described
below under "Collateralized Mortgage Obligations." U.S. Government securities
consist of U.S. Treasury bills, notes and bonds and securities issued by U.S.
Government agencies and instrumentalities, such as GNMA, FHLMC, FNMA, Federal
Home Loan Bank, Federal Farm Credit, Student Loan Marketing Association and the
Tennessee Valley Authority.
OTHER ELIGIBLE INVESTMENTS
The Income Fund may invest up to 35% of its total assets in non-government
agency mortgage-backed securities, asset-backed se-
20
<PAGE> 24
curities, corporate debt securities, including adjustable rate securities, and
foreign government bonds. Each such security will be rated in one of the three
highest rating categories by an NRSRO or, if unrated, determined to be of
comparable quality by Provident.
The Income Fund may also invest up to 35% of its total assets in the following
securities: (1) bankers' acceptances which are guaranteed by U.S. commercial
banks having total assets at the time of purchase in excess of $1.5 billion; (2)
certificates of deposit of domestic and foreign branches of U.S. banks which are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation and have total assets at the time of purchase in excess of $1.5
billion; (3) commercial paper (including master demand notes) rated in the
highest rating category by an NRSRO or, if unrated, determined to be of
comparable quality by Provident; (4) repurchase agreements; and (5) corporate
obligations with remaining maturities of one year or less and rated in one of
the three highest rating categories by an NRSRO or, if unrated, determined to be
of comparable quality by Provident. (Items (1) through (5) are hereafter
referred to as "Short-Term Securities.") For expanded descriptions of such
Short-Term Securities, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" in the Company's Statement of Additional
Information. When, in Provident's opinion, market conditions warrant, Provident
may invest up to 100% of the Income Fund's assets for temporary defensive
purposes in such Short-Term Securities.
The Income Fund may also invest in securities issued by other investment
companies which invest in securities in which the Income Fund is permitted to
invest, as more fully described below under "Risk Factors and Investment
Techniques."
The Income Fund is authorized to engage in options transactions, including the
writing of covered put and call options, the purchase of call and put options on
individual securities and interest rate index futures contracts, engage in
interest rate index futures contracts, enter into repurchase agreements, reverse
repurchase agreements, dollar rolls and when-issued, delayed delivery and
forward commitment transactions and lend securities to broker-dealers and
financial institutions. The Income Fund presently does not intend to enter into
options or futures transactions. For expanded descriptions of these investment
techniques, see below under "Risk Factors and Investment Techniques" section of
this prospectus and the "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" section in the Portfolios' Statement of
Additional Information.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. The term mortgage-backed securities includes
adjustable rate mortgage securities and derivative mortgage products such as
collateralized mortgage obligations, stripped mortgage-backed securities and
other products described below.
There are currently three basic types of mortgage-backed securities: (1) those
issued or guaranteed by the U.S. Government or one of its agencies or
instrumentalities, such as GNMA, FNMA and FHLMC (securities issued by GNMA, but
not those issued by FNMA or FHLMC, are backed by the "full faith and credit" of
the U.S.); (2) those issued by
21
<PAGE> 25
private issuers that represent an interest in or are collateralized by
mortgage-backed securities issued or guaranteed by the U.S. Government or one of
its agencies or instrumentalities; and (3) those issued by private issuers that
represent an interest in or are collateralized by whole mortgage loans or
mortgage-backed securities without a government guarantee but usually having
some form of private credit enhancement.
The Income Fund will invest in mortgage pass-through securities representing
participation interests in pools of residential mortgage loans originated by
governmental or private lenders. Such securities, which are ownership interests
in the underlying mortgage loans, differ from conventional debt securities,
which provide for periodic payment of interest in fixed amounts (usually
semi-annually) and principal payments at maturity or on specified call dates.
Mortgage pass-through securities provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments (including any
pre-payments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and the service of the
underlying mortgage loans.
As with other interest-bearing securities, the prices of mortgage-backed
securities and asset-backed securities (described below) are inversely affected
by changes in interest rates. However, though the value of a mortgage-backed or
asset-backed security may decline when interest rates rise, the converse is not
necessarily true, since in periods of declining interest rates the mortgages or
other obligations underlying the security are more likely to be prepaid. For
this and other reasons, a mortgage-backed or asset-backed security's stated
maturity may be shortened by unscheduled prepayments on the underlying mortgages
or obligations, and, therefore, it is not possible to predict accurately the
security's return to the Fund.
PRIVATE MORTGAGE PASS-THROUGH SECURITIES
Private mortgage pass-through securities are structured similarly to GNMA,
FNMA and FHLMC mortgage pass-through securities and are issued by originators of
and investors in mortgage loans, including savings and loan associations,
mortgage banks, commercial banks, investment banks and special purpose
subsidiaries of the foregoing. These securities usually are backed by a pool of
conventional fixed rate or adjustable rate mortgage loans. Since private
mortgage pass-through securities typically are not guaranteed by an entity
having the credit status of GNMA, FNMA or FHLMC, such securities generally are
structured with one or more types of credit enhancement. Types of credit
enhancement are described below.
COLLATERALIZED MORTGAGE OBLIGATIONS
Collateralized mortgage obligations or "CMOs" are debt obligations
collateralized by mortgage loans or mortgage pass-through securities. Typically,
CMOs are collateralized by GNMA, FNMA or FHLMC certificates, but also may be
collateralized by whole loans or private mortgage pass-through securities (such
collateral collectively hereinafter referred to as "Mortgage Assets"). Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs. CMOs may be issued
by agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose subsidiaries of the foregoing. The Income Fund may purchase portions or
"tranches" of CMOs, which are designed to
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permit purchasers to choose varying lengths of maturity. The shorter maturity
tranches are less volatile and carry less risk of non-payment on the underlying
securities and therefore may provide a lower yield than the longer maturity
tranches. The prices of CMOs are affected by changes in interest rates similar
to the way mortgage-backed securities are affected as is described above.
ASSET-BACKED SECURITIES
The securitization techniques used to develop mortgage-backed securities are
also applied to a broad range of other assets. Through the use of trusts and
special purpose corporations, various types of assets, primarily automobile and
credit card receivables and home equity loans, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure.
New instruments and variations of existing mortgage-backed securities and
asset-backed securities continue to be developed. The Income Fund may invest in
any such instruments to the extent consistent with its investment objectives and
policies and applicable regulatory requirements.
TYPES OF CREDIT ENHANCEMENT
Mortgage-backed securities and asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
those securities may contain elements of credit support, which fall into two
categories: (1) liquidity protection and (2) protection against losses resulting
from ultimate default by an obligor on the underlying assets. Liquidity
protection refers to the provision of advances, generally by the entity
administering the pool of assets, to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
from default ensures ultimate payments of the obligations on at least a portion
of the assets in the pool. This protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. The degree of credit support provided for each
issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in a security. The Income Fund will not pay any fees for credit support,
although the existence of credit support may increase the price of a security.
THE RIVERFRONT INCOME EQUITY FUND
INVESTMENT OBJECTIVES AND POLICIES
The Income Equity Fund seeks a high level of investment income, with capital
appreciation as a secondary objective, by investing primarily in
income-producing equity securities of U.S. issuers.
PRINCIPAL INVESTMENTS
The Income Equity Fund has a fundamental policy of investing at least 65% of
its total assets in common stocks and securities convertible into common stock,
such as bonds and preferred stocks, rated in one of the four highest rating
categories by an NRSRO (or, if not rated, deemed by the Income Equity Fund's
adviser to be of comparable quality to securities so rated) as to which there is
an expectation of dividend or other income gen-
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<PAGE> 27
eration. The Income Equity Fund also may acquire rights and warrants to purchase
such securities. The Income Equity Fund generally will invest in equity
securities of U.S. issuers with a demonstrated record of dividend payments and
high total returns which are listed on the New York Stock Exchange or the
American Stock Exchange or traded in the over-the-counter market. The Income
Equity Fund may invest in income-producing equity securities of varying quality.
For a discussion of debt securities rated within the fourth highest rating group
assigned by the NRSROs, see "RISK FACTORS AND INVESTMENT TECHNIQUES" below.
OTHER ELIGIBLE INVESTMENTS
The Income Equity Fund may invest in non-investment grade convertible debt
securities rated no lower than B by an appropriate NRSRO or in unrated
securities which are deemed by DRZ to be of comparable quality. The Income
Equity Fund currently expects that less than 5% of its total assets will be
invested in non-investment grade securities. Non-investment grade securities are
commonly referred to as high yield or high risk securities. High yield, high
risk securities are generally riskier than higher quality securities and are
subject to more credit risk, including risk of default, and volatility than
higher quality securities. In addition, such securities may have less liquidity
and experience more price fluctuation than higher quality securities.
Convertible debt securities which are rated B by Moody's generally lack
characteristics of a desirable investment, since the assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small. Debt rated B by S&P is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
The Income Equity Fund may also invest in foreign securities directly and
through the purchase of sponsored and unsponsored American Depositary Receipts
("ADRs"). Unsponsored ADRs may be less liquid than sponsored ADRs and there may
be less information available regarding the underlying foreign issuer for
unsponsored ADRs. Investment in foreign securities is subject to special risks,
such as future adverse political and economic developments, possible seizure,
nationalization, or expropriation of foreign investments, less stringent
disclosure requirements, the possible establishment of exchange controls or
taxation at the source, or the adoption of other foreign governmental
restrictions. In addition, securities markets in foreign countries may be
structured differently from and may not be as liquid as the U.S. markets. Where
purchases of foreign securities are made in foreign currencies, the Income
Equity Fund may incur currency conversion costs and may be affected favorably or
unfavorably by changes in the value of foreign currencies against the U.S.
dollar.
The Income Equity Fund may also invest under ordinary circumstances up to 35%
of its total assets in the Short-Term Securities described above under "The
Riverfront U.S. Government Income Fund -- Other Eligible Investments," and when,
in DRZ's opinion, market conditions warrant, up to 100% of the Income Equity
Fund's assets in such Short-Term Securities.
The Income Equity Fund may also invest in variable rate obligations,
fixed-income securities that are issued by or backed by the
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<PAGE> 28
full faith and credit of the U.S. Government and repurchase agreements with
respect to such securities. Such fixed-income securities may include U.S.
Treasury bills, notes and bonds and securities of agencies and instrumentalities
of the U.S. Government which may not be direct obligations of the U.S. Treasury.
The maximum initial or remaining maturities of the fixed-income securities at
the time of purchase will generally be less than ten years.
The Income Equity Fund may also invest in securities issued by other
investment companies which invest in securities in which the Income Equity Fund
is permitted to invest, as described more fully below.
The Income Equity Fund is authorized to engage in options transactions,
including the writing of covered put and call options, the purchase of call and
put options on individual stocks, equity indices and equity index futures
contracts, engage in equity index futures contracts, enter into reverse
repurchase agreements and when-issued, delayed delivery and forward commitment
transactions and lend securities to broker-dealers and financial institutions.
The Income Equity Fund presently does not intend to enter into options or
futures transactions. For expanded descriptions of these investment techniques,
see below under "Risk Factors and Investment Techniques" section of this
prospectus and the "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information
on Portfolio Instruments" section in the Company's Statement of Additional
Information.
THE RIVERFRONT OHIO TAX-FREE BOND FUND
INVESTMENT OBJECTIVES AND POLICIES
The Ohio Tax-Free Fund seeks as its investment objectives (1) income, which is
exempt from federal income tax and Ohio state income taxes, and (2) preservation
of capital.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Ohio Tax-Free Fund will invest at least
80% of its net assets in a portfolio of obligations consisting of bonds, notes,
commercial paper, debentures and certificates of indebtedness, issued by or on
behalf of the State of Ohio, or any county, political subdivision or
municipality thereof (including any agency, board, authority or commission of
any of the foregoing), the interest on which, in the opinion of bond counsel to
the issuer, is exempt from federal income tax, is not a preference item for
individuals for purposes of the federal alternative minimum tax and is exempt
from Ohio state income taxes ("Ohio Exempt Securities") and in debt obligations
issued by the Government of Puerto Rico and such other governmental entities
whose debt obligations, either by law or treaty, generate interest income which
is exempt from federal income tax, is not a preference item for individuals for
purposes of the federal alternative minimum tax and is exempt from Ohio state
income taxes (together with Ohio Exempt Securities called "Exempt Securities").
In addition, under normal market conditions, at least 65% of the Ohio Tax-Free
Fund's total assets will be invested in Ohio Exempt Securities. As a matter of
fundamental policy, under normal market conditions, at least 80% of the net
assets of the Ohio Tax-Free Fund will be invested in securities, the interest on
which is exempt from federal income tax and is not a preference item for
individuals for purposes of the federal alternative minimum tax.
The two principal classifications of Exempt Securities which may be held by
the Ohio Tax-Free Fund are "general obligation" securities and "revenue"
securities. General obli-
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gation securities are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue securities
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Ohio Tax-Free Fund are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
The Ohio Tax-Free Fund may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
The Ohio Tax-Free Fund invests in Exempt Securities which are rated at the
time of purchase within the four highest rating groups assigned by one or more
appropriate NRSROs for bonds, notes, tax-exempt commercial paper, or variable
rate demand obligations, as the case may be. The Ohio Tax-Free Fund may also
purchase Exempt Securities which are unrated at the time of purchase but are
determined to be of comparable quality by Provident. The applicable Exempt
Securities ratings are described in the Appendix to the Statement of Additional
Information. For a discussion of debt securities rated within the fourth highest
rating group assigned by the NRSROs, see "Risk Factors and Investment
Techniques" below.
The Ohio Tax-Free Fund may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of Provident, suitable
Exempt Securities are unavailable. There is no percentage limitation on the
amount of assets which may be held uninvested. Uninvested cash reserves will not
earn income.
OTHER ELIGIBLE INVESTMENTS
Under normal market conditions, at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in Exempt Securities. However, under normal
market conditions, up to 20% of the Ohio Tax-Free Fund's net assets may be
invested in taxable obligations. In addition, during temporary defensive periods
as determined by Provident, the Ohio Tax-Free Fund may hold up to 100% of its
total assets in taxable obligations. Such taxable obligations consist of
Short-Term Securities (as defined under "The Riverfront U.S. Government Income
Fund" above). These obligations are described further in the Statement of
Additional Information. The Ohio Tax-Free Fund may also invest up to 10% of the
value of its total assets in money market mutual funds for purposes of
short-term cash management, as described more fully below. During such defensive
periods and to the extent that the Ohio Tax-Free Fund is so invested in taxable
obligations, the Ohio Tax-Free Fund may not achieve its stated investment
objectives. In addition, the Ohio Tax-Free Fund may use one or more of the
investment techniques described below and is authorized to engage in options
transactions, including the writing of covered put and call options and the
purchase of put and call options. For further information about these investment
techniques, see the "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" section in the Portfolios' Statement of
Additional Information. Use of such techniques
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<PAGE> 30
may cause the Ohio Tax-Free Fund to earn income which would be taxable to its
shareholders.
Interest income from certain types of securities may be exempt from federal
and Ohio state income taxes but may be subject to federal alternative minimum
tax. The Ohio Tax-Free Fund may invest up to 20% of its net assets in such types
of securities but may not treat such securities as Exempt Securities for
purposes of compliance with its requirement to have at least 80% of its net
assets invested in Exempt Securities as described above. For additional
information relating to the types of municipal securities the interest on which
may be a preference item for individuals for purposes of the federal alternative
minimum tax, see "ADDITIONAL INFORMATION -- Additional Tax Information" in the
Company's Statement of Additional Information.
Opinions relating to the validity of Exempt Securities and to the exemption of
interest thereon from federal and Ohio state income taxes are normally rendered
by bond counsel to the respective issuers at the time of issuance. Neither the
Ohio Tax-Free Fund nor Provident will review the proceedings relating to the
issuance of Exempt Securities or the basis for such opinions.
Exempt Securities purchased by the Ohio Tax-Free Fund may include rated and
unrated variable and floating rate tax-exempt notes. A variable rate note is one
whose terms provide for the adjustment of its interest rate on set dates and
which, upon such adjustment, can reasonably be expected to have a market value
that approximates its par value. A floating rate note is one whose terms provide
for the adjustment of its interest rate whenever a specified interest rate
changes and which, at any time, can reasonably be expected to have a market
value that approximates its par value. Such notes are frequently not rated by
credit rating agencies; however, unrated variable and floating rate notes
purchased by the Ohio Tax-Free Fund will be determined by Provident to be of
comparable quality at the time of purchase to rated instruments eligible for
purchase under the Ohio Tax-Free Fund's investment policies. In making such
determinations, Provident will consider the creditworthiness of the issuers of
such notes (such issuers include financial, merchandising, bank holding and
other companies) and will continuously monitor their financial condition. There
may be no active secondary market with respect to a particular variable or
floating rate note. Nevertheless, the periodic readjustments of their interest
rates tend to assure that their value to the Ohio Tax-Free Fund will approximate
their par value. Variable and floating rate notes for which no readily available
market exists will be purchased in an amount which, together with other illiquid
securities, exceeds 15% of the Ohio Tax-Free Fund's net assets only if such
notes are subject to a demand feature that will permit the Ohio Tax-Free Fund to
receive payment of the principal within seven days after demand by the Ohio
Tax-Free Fund.
An increase in interest rates will generally reduce the value of the
investments in the Ohio Tax-Free Fund, and a decline in interest rates will
generally increase the value of those investments. Depending upon the prevailing
market conditions, Provident may purchase debt securities at a discount from
face value, which produces a yield greater than the coupon rate. Conversely, if
debt securities are purchased at a premium over face value, the yield will be
lower than the coupon rate. In making investment decisions, Provident will
consider many factors other than current yield, including the preserva-
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<PAGE> 31
tion of capital, maturity, and yield to maturity.
The Ohio Tax-Free Fund will not purchase or otherwise acquire any security if,
as a result, more than 15% of its net assets would be invested in securities
that are illiquid. Illiquid securities include securities which are not readily
marketable and repurchase agreements with maturities in excess of seven days.
THE RIVERFRONT STOCK APPRECIATION FUND
INVESTMENT OBJECTIVE AND POLICIES
The Stock Appreciation Fund seeks capital growth.
PRINCIPAL INVESTMENTS
The Stock Appreciation Fund, under normal market conditions, will have
substantially all, but in no event less than 65%, of its total assets invested
in such common stocks regardless of the movement of stock prices generally. It
is expected that such common stocks will normally be traded on exchanges or
established over-the-counter markets.
The Stock Appreciation Fund seeks its investment objective by investing in
common stocks which, in the opinion of Provident, upon review of certain
fundamental and technical standards of selection, have appreciation potential.
Fundamental investment criteria include, but are not limited to, earnings
figures, price to earnings ratios, debt to equity ratios, and the general growth
prospects of the issuer. Technical selection considerations may include, but are
not limited to, relative stock price strength and magnitude of trading volume.
In addition, the Stock Appreciation Fund generally acquires common stocks of
issuers with market capitalizations between $100 million and $2 billion.
However, Provident is not obligated to conform to any particular fundamental or
technical standard of selection, to the ranking of such standards or to any
particular level of market capitalization. Standards of selection and their
ranking and the level of market capitalization will vary according to
Provident's judgment.
OTHER ELIGIBLE INVESTMENTS
While the Stock Appreciation Fund intends to invest as fully as possible in
common stocks as described above, for cash management purposes the Stock
Appreciation Fund may also invest, under normal market conditions, up to 35% of
its total assets in Short-Term Securities and in short-term U.S. Government
securities. For expanded descriptions of such Short-Term Securities, see "The
Riverfront U.S. Government Income Fund -- Other Eligible Investments" above.
When, in Provident's opinion, market conditions warrant, Provident may invest up
to 100% of the Stock Appreciation Fund's total assets for temporary defensive
purposes in such Short-Term Securities and in short-term U.S. Government
securities. During any such defensive period, the Stock Appreciation will not be
able to pursue its investment objective.
The Stock Appreciation Fund is authorized to enter into repurchase agreements,
to invest no more than 5% of its net assets in warrants, to acquire securities
of other investment companies to achieve its investment objective, and to
acquire foreign securities through ADRs. For expanded descriptions of these
investment techniques, see below under "Risk Factors and Investment Techniques."
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund or the Stock Appreciation Fund is that risk common to any
security, that the net asset value will fluctuate in response to
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<PAGE> 32
changes in economic conditions, interest rates and the market's perception of
the underlying securities of such Fund, and there can be no assurance that any
Fund will achieve its investment objective or objectives. In addition, the Funds
may engage in any one or more of the following investment techniques, as set
forth below.
Non-Diversification. Because the Ohio Tax-Free Fund invests primarily in
securities issued or guaranteed by the State of Ohio and its agencies, the Ohio
Tax-Free Fund's performance is closely tied to the general economic conditions
within the State as a whole and to the economic conditions within particular
industries and geographic areas represented or located within the State and to
the financial condition of the State of Ohio and its agencies.
Historically, the State of Ohio has been heavily reliant upon durable goods
manufacturing with the key industries in this sector including transportation
equipment, industrial machinery, fabricated metal products, primary metals, and
stone, clay and glass products. However, the goods-producing sector of Ohio's
economy has been steadily declining over the last several decades. Since 1982,
the total amount of Ohio's workforce employed in the goods-producing sector has
dropped from 31% to 25% as of February, 1996. Ohio's manufacturing in the
durable goods area still exceeds the national share, with 14.7% of Ohio's total
payroll employment concentrated in durable goods manufacturing in 1991 versus
the 9.7% national share in the same year.
As goods-producing industries have declined in Ohio, the economy of Ohio has
become largely dependent upon service-producing industries. As of February,
1996, 75% of the total workforce in Ohio was employed in service-producing
industries, such as transportation, retail trade, finance and government.
In the past three years, Ohio's unemployment rate has generally been lower
than the national average. The February 1996 unemployment rate for Ohio was 5.0%
compared to 5.5% for the nation as a whole. Ohio is the 7th most populous state
in the nation, with an estimated statewide population of 11,102,000 as of July
1, 1994. During 1993 Ohio ranked 42nd in the nation in terms of state taxes per
capita and 33rd in the nation in terms of government expenditures per capita.
The five largest cities in Ohio by population are Columbus, Cleveland,
Cincinnati, Toledo, and Akron, in order from largest to smallest. Moody's
Investor Services ("Moody's") has rated long-term bonds for all five cities, and
they are (in the order reflected above) AAA (under review), A (under review),
Aa, Baa1, and A, respectively. Standard and Poor's Corporation ("S&P") has rated
the general obligation bonds of those cities, and they are as of the date hereof
(in the order reflected above) AAA, A, AA+, A and AA-, respectively. Both S&P
and Moody's have rated the long-term general obligation bonds of the State of
Ohio as a whole as follows: Aa rating from Moody's and a AA rating from S&P.
There are also risks of reduced diversification because the Ohio Tax-Free Fund
invests a substantial portion of its assets in obligations of issuers within a
single state. As a result, the Ohio Tax-Free Fund is more likely to invest its
assets in the obligations of fewer issuers because of the relatively smaller
number of issuers of Exempt Securities in the State of Ohio.
The Ohio Tax-Free Fund's classification as a "non-diversified" investment
company means that the proportion of the Ohio Tax-
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<PAGE> 33
Free Fund's assets that may be invested in the securities of a single issuer is
not limited by the 1940 Act. However, the Ohio Tax-Free Fund intends to conduct
its operations so as to qualify as a "regulated investment company" for purposes
of the Internal Revenue Code of 1986, as amended, which requires such Fund
generally to invest as of the end of each fiscal quarter, with respect to 50% of
its total assets, not more than 5% of such assets in the obligations of a single
issuer; as to the remaining 50% of its total assets, such Fund is not so
restricted. In no event, however, may such Fund invest more than 25% of its
total assets in the obligations of any one issuer. Compliance with this
requirement is measured at the close of each quarter of the Ohio Tax-Free Fund's
taxable year. Since a relatively high percentage of the Ohio Tax-Free Fund's
assets may be invested in the obligations of a limited number of issuers, some
of which may be within the same economic sector, such Fund's portfolio
securities may be more susceptible to any single economic, political or
regulatory occurrence than the portfolio securities of a diversified investment
company.
Medium Grade Debt Securities. As described above, the Income Equity Fund and
the Ohio Tax-Free Fund may each invest in debt securities rated within the
fourth highest rating group assigned by one or more appropriate NRSROs, in
addition to debt securities rated in the three higher groups, and in comparable
unrated securities. Debt securities which are within such fourth highest rating
group are considered by Moody's to have some speculative characteristics, and
are more vulnerable to changes in economic conditions, higher interest rates or
adverse issuer specific developments which are more likely to lead to a weaker
capacity to make principal and interest payments than comparable higher rated
debt securities.
Should subsequent events cause the rating of a debt security purchased by the
Income Equity Fund or the Ohio Tax-Free Fund to fall below the fourth highest
rating category, Provident and DRZ, as the case may be, will consider such an
event in determining whether such Fund should continue to hold that security. In
no event, however, would the Fund be required to liquidate any such portfolio
security where such Fund would suffer a loss on the sale of such security.
Repurchase Agreements. Securities held by any of the Funds may be subject to
repurchase agreements. Under the terms of a repurchase agreement, a Fund would
acquire securities, in exchange for cash, from member banks of the Federal
Deposit Insurance Corporation and/or from registered broker-dealers which
Provident or DRZ, as the case may be, deems creditworthy under guidelines
approved by the Company's Board of Directors. The seller agrees to repurchase
such securities at a mutually agreed upon date and price. The repurchase price
generally equals the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying portfolio securities. Securities subject to repurchase agreements
must be of the same type and quality as those in which a Fund may invest
directly. For further information about repurchase agreements, see "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments --
Repurchase Agreements" in the Company's Statement of Additional Information.
Reverse Repurchase Agreements. Each of the Income Fund, the Income Equity Fund
and the Ohio Tax-Free Fund may borrow funds for temporary purposes by entering
into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements,
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a Fund would sell portfolio securities to financial institutions such as banks
and broker-dealers, and agree to repurchase them at a mutually agreed-upon date
and price. At the time the Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. Government
securities or other liquid high-grade debt securities, consistent with the
Fund's investment restrictions, having a value equal to the repurchase price
(including accrued interest), and will continually monitor the account to ensure
that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Fund may decline below the price at which the Fund is obligated to repurchase
the securities. Reverse repurchase agreements are considered to be borrowings by
a Fund under the 1940 Act. For further information about reverse repurchase
agreements, see "INVESTMENT OBJECTIVE AND POLICIES -- Additional Information on
Portfolio Instruments -- Reverse Repurchase Agreements" in the Company's
Statement of Additional Information.
Except as otherwise disclosed to the shareholders of the Funds, the Company
will not acquire portfolio securities issued by, make savings deposits in, or
enter into repurchase or reverse repurchase agreements with Provident, the
Distributor, or their affiliates, and will not give preference to Provident's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Lending Portfolio Securities. In order to generate additional income, each
Fund, other than the Stock Appreciation Fund, may, from time to time, lend its
portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive at least 100% collateral in the form of cash or
U.S. Government securities. This collateral will be valued daily by Provident.
Should the market value of the loaned securities increase, the borrower must
furnish additional collateral to the Fund. During the time portfolio securities
are on loan, the borrower pays the Fund any dividends or interest received on
such securities. Loans are subject to termination by the Fund or the borrower at
any time. While a Fund does not have the right to vote securities on loan, each
Fund intends to terminate the loan and regain the right to vote if that is
considered important with respect to the investment. In the event the borrower
would default in its obligations, the Fund bears the risk of delay in recovery
of the portfolio securities and the loss of rights in the collateral. The Funds
will enter into loan agreements only with broker-dealers, banks, or other
institutions that Provident or DRZ, as the case may be, has determined are
creditworthy under guidelines established by the Company's Board of Directors.
When-Issued or Delayed-Delivery
Purchases. Each of the Funds, other than the Stock Appreciation Fund, may
purchase securities on a when-issued or delayed-delivery basis. These
transactions are arrangements in which a Fund purchases securities with payment
and delivery scheduled for a future time. A Fund will engage in when-issued and
delayed-delivery transactions only for the purpose of acquiring portfolio
securities consistent with and in furtherance of its investment objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued securities are securities purchased for delivery
beyond the normal settlement date at a stated price and yield and thereby
involve a risk that the yield obtained in the transaction will be less than
those
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<PAGE> 35
available in the market when delivery takes place. A Fund will generally not pay
for such securities or start earning interest on them until they are received on
the settlement date. When a Fund agrees to purchase such securities, however,
its custodian will set aside in a separate account cash or liquid securities
equal to the amount of the commitment. Securities purchased on a when-issued
basis are recorded as an asset and are subject to changes in the value based
upon changes in the general level of interest rates. In when-issued and
delayed-delivery transactions, a Fund relies on the seller to complete the
transaction; the seller's failure to do so may cause the Fund to miss a price or
yield considered to be advantageous.
Securities of Other Investment Companies. Each of the Funds may acquire
securities of other investment companies for the purposes described above. A
Fund may invest in securities of other investment companies within the limits
prescribed by the 1940 Act, which include, subject to certain exceptions,
limiting its investment to (1) no more than 5% of its total assets in the
securities of any one investment company, (2) no more than 3% of the securities
of any investment company, and (3) no more than 10% of its total assets in such
securities. Investment companies in which a Fund may invest may impose a sales
or distribution charge in connection with the purchase or redemption of their
shares as well as other types of commissions or charges. Such investment
companies will charge management and other fees which will be borne by the Fund.
Such charges will be payable by the Fund and, therefore, will be borne
indirectly by its shareholders. The income on securities of other investment
companies may be taxable at the state or local level.
Mortgage- or Asset-Backed Securities. Mortgage-backed and asset-backed
securities have certain characteristics which are different from traditional
debt securities. Among the major differences are that interest and principal
payments are made more frequently, usually monthly, and that principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. As a result, if the Income Fund purchases
such a security at a premium, a prepayment rate that is faster than expected
will reduce yield to maturity, while a prepayment rate that is slower than
expected will have the opposite effect of increasing yield to maturity.
Alternatively, if the Income Fund purchases these securities at a discount,
faster than expected prepayments will increase, while slower than expected
prepayments will reduce, yield to maturity. Provident will seek to manage these
risks (and potential benefits) by investing in a variety of such securities and
through hedging techniques.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of declining interest rates.
Accordingly, amounts available for reinvestment by the Income Fund are likely to
be greater during a period of declining interest rates and, as a result, likely
to be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-backed securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors,
such as changes in credit use and payment patterns resulting from social, legal
and economic factors, will predominate. Mortgage-backed securities and
asset-backed securities generally decrease in value as a result of increases in
interest rates and may
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<PAGE> 36
benefit less than other fixed income securities from declining interest rates
because of the risk of prepayment.
There are certain risks associated specifically with CMOs. CMOs issued by
private entities are not U.S. government securities and are not guaranteed by
any government agency, although the securities underlying a CMO may be subject
to a guarantee. Therefore, if the collateral securing the CMO, as well as any
third party credit support or guarantees, is insufficient to make payment, the
holder could sustain a loss. However, as stated above, the Income Fund will
invest only in CMOs which are rated in one of the three highest rating
categories by an NRSRO or, if unrated, are determined to be of comparable
quality. Also, a number of different factors, including the extent of prepayment
of principal of the Mortgage Assets, affect the availability of cash for
principal payments by the CMO issuer on any payment date and, accordingly,
affect the timing of principal payments on each CMO class.
Asset-backed securities involve certain risks that are not posed by
mortgage-backed securities, resulting mainly from the fact that asset-backed
securities do not usually contain the complete benefit of a security interest in
the related collateral. For example, credit card receivables generally are
unsecured, and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities.
ADDITIONAL INFORMATION
The rating requirements stated for the securities of each Fund refer to the
required rating at the time of purchase of a security. Provident or DRZ, as the
case may be, retains the discretion to determine disposition of a security if
its rating is subsequently reduced. For further information about the types of
investments and investment techniques available to each Fund, including the
risks associated with such investments and investment techniques, see the
"Additional Investment Information" section of this prospectus and the Company's
Statement of Additional Information.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objective or objectives of each Fund set forth above are
fundamental and may not be changed without the vote of the holders of a majority
of such Fund's outstanding voting securities (as defined below under "COMPANY
SHARES").
PORTFOLIO TURNOVER
For regulatory purposes, the portfolio turnover rate for the Money Market Fund
is expected to be zero. For the year ended December 31, 1995, the portfolio
turnover rates for the Income Fund, the Income Equity Fund, and the Ohio
Tax-Free Fund were 75%, 180% and 34%, respectively. The portfolio turnover rate
for the Stock Appreciation Fund for the fiscal period ended December 31, 1995
was 46%. The portfolio turnover rate for a Fund may vary greatly from year to
year as well as within a particular year, and may also be affected by cash
requirements for redemptions of shares. A high portfolio turnover will generally
result in higher brokerage commissions and other transaction costs, which would
be borne di-
33
<PAGE> 37
rectly by the Fund, as well as additional realized gain/losses to its
shareholders.
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions and policies relating to the
investment of their respective assets. These restrictions and policies are
fundamental and may not be changed with respect to a Fund without the approval
of the holders of a majority of such Fund's outstanding voting securities.
Unless otherwise stated, all references to a Fund's assets are in terms of
current market value.
The Money Market Fund may not:
1. Purchase any security (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities) of any issuer if as a result
more than 5% of its total assets would be invested in securities of the issuer;
2. Purchase securities on margin, except that it may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities;
3. Borrow money, except that the Money Market Fund may borrow money from banks
for temporary or emergency purposes in aggregate amounts up to one-third of the
value of the Money Market Fund's net assets; provided that while borrowings from
banks exceed 5% of the Money Market Fund's net assets, any such borrowings will
be repaid before additional investments are made;
4. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
5. Issue senior securities; the purchase or sale of securities on a "when
issued" basis is not deemed to be the issuance of a senior security;
6. Make loans, except that the Money Market Fund may purchase or hold debt
securities consistent with its investment
objective, lend portfolio securities valued at not more than 15% of its total
assets to brokers, dealers and financial institutions and enter into repurchase
agreements;
7. Purchase any security of any issuer if as a result more than 25% of its
total assets would be invested in a single industry; there is no restriction
with respect to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; and
8. Invest more than 15% of its total assets in repurchase agreements maturing
in more than seven days.
With respect to Investment Restriction (8), the Money Market Fund will limit
its investments in repurchase agreements maturing in more than seven days to no
more than 10% of its total assets.
Each of the Income Fund and the Income Equity Fund may not:
1. Invest in securities of any one issuer (other than the U.S. government, its
agencies and instrumentalities) if, immediately after and as a result of such
investment, the current market value of the holdings of such Fund in the
securities of such issuer exceeds 5% of the Fund's total assets;
2. Invest in the securities of companies primarily engaged in any one industry
(other than the U.S. government, its agencies and instrumentalities) if,
immediately after and as a result of such investment, the current market value
of the aggregate holdings of the Fund in the securities of companies in such
industry exceeds 25% of the Fund's total assets. However, an industry
concentration
34
<PAGE> 38
in excess of such percentage limitation is permitted if it occurs incidentally
as a result of changes in the market value of portfolio securities;
3. Acquire the outstanding voting securities of any one issuer if, immediately
after and as a result of such investment, the current market value of the
holdings of the Fund in the securities of such issuer exceeds 10% of the market
value of such issuer's outstanding voting securities;
4. Borrow money, which includes entering into reverse repurchase agreements,
except that each Fund may enter into reverse repurchase agreements or borrow
money from banks for temporary or emergency purposes in aggregate amounts up to
one-third of the value of the Fund's net assets; provided that while borrowings
from banks exceed 5% of a Fund's net assets, any such borrowings and reverse
repurchase agreements will be repaid before additional investments are made;
5. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
6. Invest more than 15% of the value of the Fund's net assets in restricted or
illiquid securities or instruments including, but not limited to, securities for
which there are no readily available market quotations, dealer (OTC) options,
assets used to cover dealer options written by the Fund or repurchase agreements
that mature in more than 7 days; and
7. Lend more than 30% in value of the Fund's securities to brokers, dealers or
other financial organizations. All such loans will be collateralized by cash or
U.S. government obligations that are maintained at all times in an amount equal
to at least 102% of the current value of the loaned securities.
With respect to investment restrictions 1 and 3, the percentage limits stated
therein apply to 75% of each Fund's total assets. The Ohio Tax-Free Fund may
not:
1. Purchase any securities which would cause more than 25% of the value of the
Ohio Tax-Free Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that the Ohio Tax-Free Fund
may borrow from banks or enter into reverse repurchase agreements or dollar roll
agreements for temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing, and except as permitted pursuant to
appropriate exemptions from the 1940 Act. The Ohio Tax-Free Fund will not
purchase securities while its borrowings (including reverse repurchase
agreements and dollar roll agreements) exceed 5% of its total assets.
3. Make loans, except that the Ohio Tax-Free Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objectives and policies, make time deposits with financial
35
<PAGE> 39
institutions, and enter into repurchase agreements.
The following additional investment restriction with respect to the Ohio
Tax-Free Fund may be changed without the vote of a majority of the outstanding
shares of such Fund. The Ohio Tax-Free Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if at
the end of each fiscal quarter, (a) more than 5% of the value of such Fund's
total assets (taken at current value) would be invested in such issuer (except
that up to 50% of the value of such Fund's total assets may be invested without
regard to such 5% limitation), or (b) more than 25% of its total assets (taken
at current value) would be invested in securities of a single issuer. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes or other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. For purposes of this limitation, a security
is considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond that
is backed only by the assets and revenues of a non-governmental user, such
non-governmental user.
The Stock Appreciation Fund may not:
1. Purchase securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements involving such securities) if as a result more than 5% of
the total assets of the Stock Appreciation Fund would be invested in the
securities of such issuer or the Stock Appreciation Fund would hold more than
10% of the outstanding voting securities of such issuer. This restriction
applies to 75% of the Stock Appreciation Fund's total assets.
2. Purchase any securities which would cause 25% or more of the Stock
Appreciation Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. Borrow money or issue senior securities, except that the Stock Appreciation
Fund may borrow from banks or enter into reverse repurchase agreements for
temporary purposes in amounts up to one-third of its total assets at the time of
such borrowing, and except as permitted pursuant to appropriate exemptions from
the 1940 Act. The Stock Appreciation Fund will not purchase securities while its
borrowings (including reverse repurchase agreements) exceed 5% of its total
assets.
4. Make loans, except that the Stock Appreciation Fund may purchase or hold
debt instruments and lend portfolio securities in accordance with its investment
objective and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
The following additional investment restriction of the Stock Appreciation Fund
is
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<PAGE> 40
non-fundamental and may be changed by the Company's Board of Directors without
shareholder approval. The Stock Appreciation Fund may not:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
of its net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Company's Statement of Additional
Information.
PRICING SHARES
The net asset value of each Fund is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (generally 4:00 p.m. Eastern Time for the purpose of pricing Fund
shares) (the "Valuation Time") except on days when changes in the value of a
Fund's securities do not affect the current net asset value of its shares or on
days during which no shares are tendered for redemption and no orders to
purchase shares are received. The Exchange is currently closed on weekends, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share for a
particular class of each Fund is determined by valuing each Fund's assets
allocable to such class, subtracting its liabilities allocable to such class and
any liabilities charged directly to that class and dividing the result by the
number of its shares of that class outstanding.
The Directors have determined that the best method currently available for
valuing the Money Market Fund's investments is amortized cost, which means that
the investments are valued at their acquisition costs (as adjusted for
amortization of premium or discount) rather than at current market values.
Calculations are made to compare the value of the Money Market Fund's
investments valued at amortized cost with market values. Market valuations are
obtained by using actual quotations provided by market makers, estimates of
market value, or values obtained from yield data relating to classes of money
market instruments published by reputable sources at the mean between the bid
and asked prices for the instruments. If a deviation of 1/2 of 1% or more were
to occur between the Money Market Fund's net asset value per share calculated by
reference to market values and the Money Market Fund's $1.00 per share net asset
value, or if there were any other deviation which the Board of Directors
believed would result in a material dilution to shareholders or purchasers, the
Board of Directors would promptly consider what action, if any, should be
initiated.
Since the net income of the Money Market Fund is declared as a dividend each
time net income is determined, the net asset value per share remains at $1.00
per share immediately after each dividend declaration. If for any reason there
is a net loss, the loss will be first offset pro rata against dividends accrued
during the month in each shareholder account. To the extent that such a net loss
would exceed such accrued dividends, the Money Market Fund will reduce the
number of its outstanding shares by having each shareholder contribute to
capital his pro rata portion of the total number of shares required to be
cancelled in order to maintain a net asset value of $1.00. EACH SHAREHOLDER WILL
BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS
INVESTMENT IN THE MONEY MARKET FUND.
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<PAGE> 41
With respect to the Income Fund, the Income Equity Fund, the Ohio Tax-Free
Fund and the Stock Appreciation Fund, portfolio securities listed on an exchange
are valued on the basis of the last quoted sale price on the exchange where such
securities are principally traded on the valuation date, prior to the close of
trading on the exchange, or, in the absence of any sales, at the mean of the bid
and asked price on such principal exchange prior to the close of trading on the
exchange. Other securities and instruments for which market quotations are not
readily available are valued at fair value, as determined in good faith by the
Board of Directors. Securities, including mortgage-backed and asset-backed
securities, may be valued on the basis of independent pricing services approved
by the Board of Directors, which use information with respect to transactions in
such securities, quotations from dealers, market transactions in comparable
securities and various relationships between securities in determining value.
HOW TO BUY SHARES
Shares of the Funds are offered on each day on which the Exchange is open for
business.
THE MONEY MARKET FUND
There is no sales charge when an investor purchases shares of the Money Market
Fund. Purchase payments are fully invested. Broker-dealers (other than the
Distributor) through whom shares are purchased may charge fees for their
services. Orders for the purchase of the Money Market Fund's shares become
effective after good funds become available to the Money Market Fund. If a
purchase order in proper form is received prior to 12:00 Noon (Eastern time) and
payment in Federal funds is received by the close of the Federal funds wire on
the day the purchase order is received, dividends will accrue starting that day.
If a purchase order is received after 12:00 Noon (Eastern time) and payment in
Federal funds is received by the close of the Federal funds wire on the day the
purchase order is received, the order will be effected that day as of the close
of business of the Company, but dividends will not begin to accrue until the
following business day. The Money Market Fund's shares are sold at the offering
price which is the net asset value per share next computed after the Company
receives the purchase order. The net asset value for the Portfolio is expected
to be $1.00 per share. Shares are held in "Open Accounts," i.e., they are
credited to the shareholder's account on the Money Market Fund's books. No
certificates are issued.
THE OTHER FUNDS
Orders for the purchase of the shares of any of the other Funds will be
confirmed at the offering price, which is the net asset value per share next
computed after the Company receives the purchase order in proper form, plus any
applicable sales charge. Therefore, orders for shares of a Fund received by the
Company prior to the close of the Exchange will receive the offering price
computed at the close of trading on the Exchange on the same day. Orders
received after that day's close of trading on the Exchange will receive the next
business day's offering price. A confirmation will be sent by the Transfer Agent
for every new purchase. No certificates are issued.
GENERAL
There is a $1,000 minimum initial purchase requirement for both Investor A and
Investor B shares of each of the Funds and a $100 minimum subsequent purchase
requirement (except for reinvestment of dividends and distributions). The
initial and subsequent
38
<PAGE> 42
minimum investment amounts have been waived for employees of Provident and the
Distributor. The minimum initial purchase requirement is lowered to $500 for
IRAs. Shareholders receiving banking or other services from Provident or its
affiliates will be charged the usual and customary fees for such services even
if such services include the purchase of a Fund's shares. However, a shareholder
who maintains an investment balance of $10,000 or more in a Fund and has either
a Provident Advantage or Provident Silver Advantage checking account will be
eligible to have his/her monthly service charge waived on his/her respective
Advantage account (one per customer). If a balance of $30,000 or more is
maintained in a Fund by a shareholder, the monthly service charge on a Premier
Advantage checking account will be waived.
Shares may be purchased through the Distributor. The Distributor is located at
3435 Stelzer Road, Columbus, Ohio 43219. Shares also may be purchased through
other broker-dealers, including broker-dealers affiliated with the Company,
Provident and the Distributor. In the case of an order for the purchase of
shares placed through a broker-dealer, the applicable public offering price will
be the net asset value as so determined, plus any applicable sales charge, but
only if the broker-dealer receives the order prior to the Valuation Time for
that day and transmits it to the Distributor prior to the Valuation Time for
that day. The broker-dealer is responsible for transmitting such orders
promptly. If the broker-dealer fails to do so, the investor's right to that
day's closing price must be settled between the investor and the broker-dealer.
If the broker-dealer receives the order after the Valuation Time for that day,
the price will be based on the net asset value determined as of the Valuation
Time for the next business day.
Shares may also be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by Provident or its correspondent or
affiliated banks (collectively, the "Banks").
Shares of a Fund sold to the Banks acting in a fiduciary, advisory, custodial
(other than for IRAs), agency, or other similar capacity on behalf of Customers
will normally be held of record by the Banks. With respect to shares of the
Funds so sold, it is the responsibility of the particular Bank to transmit
purchase or redemption orders to the Distributor and to deliver federal funds
for purchase on a timely basis. Beneficial ownership of shares will be recorded
by the Banks and reflected in the account statements provided by the Banks to
Customers. A Bank will exercise voting authority for those shares for which it
is granted authority by the Customer.
In addition, an account for the purchase of shares of a Fund may be opened by
mailing to the Company, c/o The Provident Bank, Mutual Fund Services, P.O. Box
14967, Cincinnati, Ohio 45202-0967, a completed account application and a check
made payable to the appropriate Fund for $1,000 or more. An account may also be
opened by contacting The Provident Bank, Mutual Fund Services, at
1-800-424-2295, to obtain the number of an account to which wire or electronic
funds transfer ("EFT") can be made and by sending in a completed account
application. Subsequent investments in a Fund in the minimum amount of $100 may
be made by check, by wiring Federal funds or by an EFT.
If payment is made by Federal Funds wire with respect to the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund or the Stock Appreciation Fund, funds
must be re-
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<PAGE> 43
ceived by 3:00 p.m., Eastern time, on the next business day following the order.
Purchases of any of the Funds may be made by wiring the Fund's custodian in
accordance with the following procedures:
1. Telephone Provident at 1-800-424-2295 and specify the Portfolio in which
the investment is to be made, provide the name, address, telephone number and
tax identification number of the investor, the amount being wired and by which
bank. Provident will then provide the investor with a Portfolio account number.
[/R]
2. The bank wiring the funds to be invested must designate the Portfolio
account number which Provident has assigned to the investor and wire the Federal
Funds to:
The Provident Bank/Cincinnati
ABA: 042000424
Mutual Fund Services
for further credit to:
Fund
of The Riverfront Funds
Account Number
Account Name
The Company and the Distributor reserve the right to reject any order for the
purchase of shares in whole or in part, including purchases made with foreign or
third party drafts or checks, or to limit or suspend without prior notice the
offering of any Fund's shares.
SALES CHARGES
INVESTOR A SHARES
There is a sales charge imposed at the time of purchase of the Income Fund's,
Income Equity Fund's, Ohio Tax-Free Fund's and Stock Appreciation Fund's
Investor A shares which is a percentage of the offering price. The sales charge
is paid to the Distributor which in turn may reallow all or a portion of the
sales charge to other broker-dealers. The applicable sales charges are as
follows:
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
CONCESSION
AS A % TO DEALERS
AS A % OF OF NET AS A % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED* PRICE
- ----------------------- --------- --------- ----------
<S> <C> <C> <C>
Under $100,000......... 4.50% 4.71% 4.00%
$100,000--$249,999..... 3.50% 3.63% 3.00%
$250,000--$499,999..... 2.50% 2.56% 2.00%
$500,000--$999,999..... 1.50% 1.52% 1.00%
$1,000,000 and over.... 0.0% 0.0% 0.0%
</TABLE>
- ------------
* Rounded to the nearest one-hundredth percent.
The Sales Charge Schedule is applicable to (1) purchases of Investor A shares
of the Income, Income Equity, Tax-Free and Stock Appreciation Funds and any
other Portfolio sold with a sales charge (a "Load Portfolio") made at one time,
(2) concurrent purchases of Investor A shares (see "Concurrent Purchases"), or
(3) purchases of Investor A shares made pursuant to Rights of Accumulation or
Letters of Intent by any purchaser ("Purchaser"), which includes the following
persons: an individual; an individual, his or her spouse and children under the
age of 21; a trustee or other fiduciary of a single trust estate or single
fiduciary account established for their benefit; an organization exempt from
federal income tax under Section 501(c)(3) or (13) of the Code; a pension,
profit-sharing or other employee benefit plan whether or not qualified under
Section 401 of the Code; or other organized groups of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and
40
<PAGE> 44
identified as originating from a qualifying Purchaser.
INVESTOR B SHARES
Investor B shares may only be purchased in amounts of less than $250,000.
There is no sales charge imposed upon purchases of Investor B shares, but
investors may be subject to a contingent deferred sales charge ranging from 4%
to 1% when Investor B shares are redeemed within the first six years after
purchase. See "CONTINGENT DEFERRED SALES CHARGE -- Investor B Shares" below. The
Money Market Fund does not offer Investor B shares.
GENERAL
Upon written notice to dealers with whom it has dealer agreements, the
Distributor may reallow up to the full applicable sales charge. Dealers to whom
more than 90% of the entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
The Distributor, at its expense, will also provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Portfolios of the Company,
and/or other dealer-sponsored special events. In some instances, this
compensation will be made available only to certain dealers whose
representatives have sold a significant amount of such Shares. Compensation will
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Compensation will also include the following
types of non-cash compensation offered through sales contests: (1) vacation
trips, including the provision of travel arrangements and lodging at luxury
resorts at an exotic location, (2) tickets for entertainment events (such as
concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of a Fund's Shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the NASD. None of the
aforementioned compensation is paid for by any Fund or its Shareholders.
Provident Securities, Inc., an affiliate of Provident ("PSI"), will pay
additional consideration to dealers not to exceed 4.0% of the offering price per
share on all sales of Investor B shares as an expense of PSI for which PSI will
be reimbursed by the Distributor under the Investor B Plan or upon receipt of a
contingent deferred sales charge. Any additional consideration or incentive
program may be terminated at any time by the Distributor.
REDUCED SALES CHARGES -- INVESTOR A SHARES
The sales charges set forth in the Sales Charge Schedule set forth above may
be reduced as follows:
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of a Fund's Investor A shares sold with a sales load
and Investor A shares of any other Load Portfolio.
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<PAGE> 45
RIGHTS OF ACCUMULATION
In calculating the sales charge applicable to current purchases of a Fund's
Investor A shares, a Purchaser is entitled to accumulate current purchases with
the current value of previously purchased Investor A shares of a Fund or the
other Load Portfolios and which are still held by the Purchaser. As an example,
if a Purchaser held Investor A shares of the Income Fund valued at $100,000 in
aggregate and purchased an additional $5,000 of Investor A shares of the Income
Fund, the sales charge for the $5,000 purchase would be 3.50% as indicated in
the Sales Charge Schedule applicable to a $105,000 purchase. The Distributor
must be notified at the time of purchase that a Purchaser is entitled to a
reduced sales charge which will be granted subject to confirmation of the
Purchaser's holdings. Rights of Accumulation may be modified or discontinued at
any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Investor A
shares of a Fund (except direct purchases of shares of the Money Market Fund)
alone or in combination with purchases of Investor A shares of any of the other
Load Portfolios by completing the Letter of Intent section of the application.
By doing so, the Purchaser agrees to invest within a thirteen-month period a
specified amount which, if invested at one time, would qualify for a reduced
sales charge. Each purchase will be made at a public offering price applicable
to a single transaction in the dollar amount specified on the application, as
described herein, after receipt of the Letter of Intent by the Distributor. The
Letter of Intent does not obligate the Purchaser to purchase, nor the Company to
sell, the amount indicated.
The Letter of Intent may be back-dated up to ninety days so that any
investments made in any of the Load Portfolios during the preceding ninety day
period, valued at the Purchaser's cost, can be applied toward fulfillment of the
Letter of Intent. However, there will be no refund of sales charges already paid
during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount specified in the Letter of Intent. Income and
capital gains distributions taken in additional shares will not apply toward
completion of the Letter of Intent.
Out of the initial purchase (or subsequent purchases, if necessary), 5% of the
dollar amount specified on the application will be held in escrow by Provident
in the form of Investor A shares registered in the Purchaser's name. The
escrowed Investor A shares will not be available for redemption, transfer or
encumbrance by the Purchaser until the Letter of Intent is completed or the
higher sales charge is paid. All income and capital gains distributions on
escrowed Investor A shares will be paid to the Purchaser.
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen month period), the Purchaser will
be notified and the escrowed Investor A shares will be released. If the intended
investment is not completed, the Purchaser will be asked to remit to the
Distributor any difference between the sales charge on the amount specified and
on the amount actually purchased. If the Purchaser does not, within 20 days
after receipt of a written request by the Distributor or the shareholder's
dealer, pay such difference in sales charge, Provident, as transfer agent (the
"Transfer Agent"), will redeem an appropriate number of the escrowed Investor A
shares in order to realize
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<PAGE> 46
such difference. Investor A shares remaining after any such redemption will be
released by the Transfer Agent. Any redemptions made by the Purchaser during the
thirteen-month period will be subtracted from the amount of the purchases for
purposes of determining whether the Letter of Intent has been completed. In the
event of a total redemption of the account prior to completion of the Letter of
Intent, the additional sales charge due will be deducted from the proceeds of
the redemption and the balance will be forwarded to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
the Transfer Agent its attorney to surrender for redemption any or all escrowed
shares with full power of substitution. The Purchaser or his dealer must inform
the Distributor or the Transfer Agent that a Letter of Intent is in effect each
time a purchase is made.
WAIVER OF SALES CHARGES
Investor A shares may also be sold, to the extent permitted by applicable law,
at net asset value without the imposition of an initial sales charge to: (1)
personal trust, employee benefit, agency and custodial (other than IRA) clients
of Provident; (2) employees of Provident, the Distributor, and their spouses;
(3) broker/dealers purchasing shares for their own accounts; (4) all affiliates
of Provident; (5) corporations; (6) employees (and their spouses and children
under the age of 21) of any broker-dealer with which the Distributor enters into
a dealer agreement to sell Investor A shares of the Company; (7) orders placed
on behalf of other investment companies distributed by The BISYS Group, Inc., or
any of its affiliates, including the Distributor; (8) persons investing directly
through the Distributor pursuant to a Systematic Investment Plan; and (9)
persons investing directly through a discount brokerage firm which has entered
into a dealer agreement with the Distributor.
In addition, a shareholder who has redeemed all or any portion of his or her
investment in a Fund (other than in the Money Market Fund) may purchase without
a sales charge Investor A shares of any other Load Portfolio in an amount up to
a maximum dollar amount of such shares redeemed within 30 days after such
redemption. In order to so purchase Investor A shares without a sales charge,
the shareholder, or his or her dealer, must notify the Company at the time an
order is placed that such a purchase qualifies for this exemption from sales
charges and must provide any other information necessary for confirmation of
qualification.
CONTINGENT DEFERRED SALES CHARGE -- INVESTOR B SHARES
Investor B shares which are redeemed within the first six years of purchase
will be subject to a contingent deferred sales charge equal to the applicable
percentage set forth below of an amount equal to the lesser of the net asset
value at the time of purchase of the Investor B shares being redeemed or the net
asset value of such shares at the time of redemption. Accordingly, a contingent
deferred sales charge will not be imposed on amounts representing increases in
net asset value above the net asset value at the time of purchase. In addition,
a charge will not be assessed on Investor B shares purchased through
reinvestment of dividends or capital gains distributions. The Money Market Fund
does not offer Investor B shares.
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<PAGE> 47
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
- ------------------------------- --------------------
<S> <C>
First.......................... 4%
Second......................... 4%
Third.......................... 4%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
Seventh and following.......... 0%
</TABLE>
Solely for purposes of determining whether a year has elapsed from the time of
purchase of any Investor B shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares acquired pursuant to reinvestment of dividends
or distributions and then from the earliest purchase of shares.
For example, assume an investor purchased 100 Investor B shares with a net
asset value of $10 per share (i.e., at an aggregate net asset value of $1,000)
and in the eleventh month after purchase, the net asset value per share is $12
and, during such time, the investor has acquired five additional Investor B
shares through dividend reinvestment. If the investor makes an initial
redemption of 50 Investor B shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor B shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of $2 per share. Therefore, $450 of the $600 redemption proceeds
will be subject to the charge of 4% ($18.00).
The contingent deferred sales charge is waived on redemptions of Investor B
shares (i) following the death or disability (as defined in the Code) of a
shareholder, (ii) to the extent that the redemption represents a minimum
required distribution from an IRA or a Custodial Account under Code Section
403(b)(7) to a shareholder who has reached age 70 1/2, and (iii) to the
extent the redemption represents the minimum distribution from retirement plans
under Code Section 401(a) where such redemption is necessary to make
distributions to plan participants.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES
Before purchasing Investor A shares or Investor B shares of a Fund, investors
should consider whether, during the anticipated life of their investment in a
Fund, the accumulated Rule 12b-1 fee and potential contingent deferred sales
charges on Investor B shares prior to conversion (as described below) would be
less than the initial sales charge and accumulated Rule 12b-1 fee on Investor A
shares purchased at the same time, and to what extent such differential would be
offset by the higher yield of Investor A shares. In this regard, to the extent
that the sales charge for the Investor A shares is waived or reduced by one of
the methods described above or the investment is $100,000 or more, investments
in Investor A shares become more desirable. The Company will refuse all purchase
orders for Investor B shares of over $250,000.
Although Investor A shares are subject to a Rule 12b-1 fee, they are not
subject to the higher Rule 12b-1 fee applicable to Investor B shares. For this
reason, Investor A shares can be expected to pay correspondingly higher
dividends per share. However, because initial sales charges are deducted at the
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<PAGE> 48
time of purchase, purchasers of Investor A shares who do not qualify for waivers
of or reductions in the initial sales charge would have less of their purchase
price initially invested in the Fund than purchasers of Investor B shares.
As described above, purchasers of Investor B shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B shares. Because the Company's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B shares would, however, own shares that are subject to
higher annual expenses and, for a six-year period, such shares would be subject
to a contingent deferred sales charge ranging from 4.00% to 1.00% upon
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate
annual Investor B shares' Rule 12b-1 fees to the cost of the initial sales
charge and Rule 12b-1 fee on the Investor A shares. Over time, the expense of
the annual Rule 12b-1 fee on the Investor B shares may equal or exceed the
initial sales charge and annual Rule 12b-1 fee applicable to Investor A shares.
For example, if net asset value remains constant and assuming no waiving of any
Rule 12b-1 fees, the aggregate Rule 12b-1 fee with respect to Investor B shares
of a Fund would equal or exceed the initial sales charge and aggregate Rule
12b-1 fee of Investor A shares approximately seven years after the purchase. In
order to reduce such fees of investors that hold Investor B shares for seven
years or more, Investor B shares will be automatically converted to Investor A
shares, as described below, at the end of an eight-year period. This example
assumes that the initial purchase of Investor A shares would be subject to the
maximum initial sales charge of 4.50%. This example does not take into account
the time value of money which reduces the impact of the Investor B shares' Rule
12b-1 fee on the investment, the benefit of having the additional initial
purchase price invested during the period before it is effectively paid out as a
Rule 12b-1 fee, fluctuations in net asset value, any waiver of Rule 12b-1 fees
or the effect of different performance assumptions.
If a shareholder who owns both Investor A shares and Investor B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Investor B shares that are not subject to a contingent
deferred sales charge; (b) Investor A shares; and (c) Investor B shares subject
to a contingent deferred sales charge, unless shareholder has made a specific
election otherwise.
CONVERSION FEATURE
Investor B shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fee. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge or
other charge except that the Rule 12b-1 fee applicable to Investor A shares
shall thereafter be applied to such converted shares. Such investors will then
benefit from the lower Rule 12b-1 fee of Investor A shares. Because the per
share net asset value of the Investor A shares may be higher than that of the
Investor B shares at the time of conversion, a Shareholder may receive fewer
Investor A shares than the number of Investor B shares converted, although the
dollar
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<PAGE> 49
value will be the same. Reinvestments of dividends and distributions in Investor
B shares will not be considered a new purchase for purposes of the conversion
feature and will convert to Investor A shares in the same proportion as the
number of the shareholder's Investor B shares converting to Investor A shares
bears to the shareholder's total Investor B shares not acquired through
dividends and distributions.
If a shareholder effects one or more exchanges among Investor B shares of the
Portfolios during the eight-year period, the holding period for shares so
exchanged will be counted toward such period.
OTHER PURCHASE INFORMATION
SYSTEMATIC INVESTMENT PLAN
Shareholders may also arrange for systematic monthly or quarterly investments
in their accounts. Once proper authorization has been given, a shareholder's
bank account will be debited on the date specified to purchase shares in a Fund.
A confirmation will be received from the Transfer Agent for every transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Provident offers tax-advantaged Individual Retirement Accounts ("IRAs") for
which the Money Market Fund, the Income Fund, the Income Equity Fund or the
Stock Appreciation Fund may be an appropriate investment. A minimum initial
investment of $500 is required. For details, including fees and an application
form, please call the telephone number listed above under "Shareholder Services"
or contact Mutual Fund Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967.
Investment in shares of the Ohio Tax-Free Fund or in shares of any other
tax-exempt fund would not be appropriate for an IRA. Shareholders are advised to
consult a tax adviser on IRA contribution and withdrawal requirements and
restrictions and whether an investment in the Ohio Tax-Free Fund would be
appropriate.
EXCHANGES
If a shareholder has obtained the appropriate prospectus, he or she may
exchange Investor A or Investor B shares of a Fund for shares of the same class
of any of the other Portfolios on the basis of their respective net asset values
by calling toll free 1-800-424-2295 or by writing The Provident Bank, c/o Mutual
Fund Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967. Subject to the
qualifications and limitations described below under "How to Redeem Shares --
Telephone," neither the Company nor any of its service providers assumes
responsibility for the authenticity of any telephone request for an exchange.
Shares purchased by check are eligible for exchange after 15 days. No contingent
deferred sales charge is imposed upon exchanges of Investor B shares of one
Portfolio for Investor B shares of another Portfolio.
If Investor B shares of a Fund are exchanged into the Money Market Fund, no
contingent deferred sales charge will be imposed; however, the exchange will
freeze the running of the time periods applicable to contingent deferred sales
charges and the conversion feature. An exchange back into Investor B shares will
restart such time periods. If less than all of a shareholder's Investor B shares
of a Portfolio are exchanged into the Money Market Fund, the shareholder's
Investor B shares will be deemed to be exchanged in the following order: (1)
Investor B shares that are not subject to a contingent deferred sales charge,
and (2) Investor B shares in the reverse order in
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<PAGE> 50
which such shares were acquired (i.e., last in, first out).
Orders to exchange Investor A or Investor B shares of a Fund for shares of the
Money Market Fund will be executed by redeeming the shares of the Fund and
purchasing Investor A shares of the Money Market Fund at the net asset value of
such shares next determined after the proceeds from such redemption become
available, which may be up to seven days after such redemption. In all other
cases, orders for exchanges received by the Company prior to the close of
business on any day the Company is open for business will be executed at the
respective net asset values determined as of the close of business that day.
Orders for exchanges received after the close of business will be executed at
the respective net asset values next determined after the close of the next
business day.
An excessive number of exchanges may be disadvantageous to the Company.
Therefore the Company, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the Portfolios in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
the Portfolio being acquired. An exchange constitutes a sale for federal income
tax purposes.
The exchange privilege is available only in states where shares of the
Portfolio being acquired may legally be sold. The Company reserves the right, at
any time, to modify or terminate any of the foregoing exchange privileges. The
Company, however, will give shareholders 60 days' advance written notice of any
such modification or termination.
HOW TO REDEEM SHARES
Shares of the Funds may be redeemed for cash at their net asset value, less
any applicable contingent deferred sales charge, upon written order by the
shareholder to the Company, c/o The Provident Bank, Mutual Fund Services, P.O.
Box 14967, Cincinnati, Ohio 45202-0967. A shareholder's signature(s) on the
written order must be guaranteed as described below. In order to redeem by
telephone, shareholders must have completed the authorization in their account
applications. Proceeds for shares redeemed on telephonic order will be deposited
by wire or EFT only to the bank account designated in the account application.
The redemption value is the net asset value per share, less any applicable
contingent deferred sales charge, and may be more or less than the shareholder's
cost of the Fund's shares depending upon changes in the value of the Fund's
securities between purchase and redemption. The Company computes the amount due
a shareholder at the next Valuation Time after it has received all proper
documentation. Payment of the amount due on redemption will be made within seven
days thereafter except as discussed below.
At various times, the Company may be requested to redeem shares for which it
has not yet received good payment. In such a case, the Company may delay the
mailing of a redemption check or the wiring or EFT of redemption proceeds until
good payment has been collected for the purchase of such shares. This may take
up to 15 days. Any delay may be avoided by purchasing shares either with a
certified check or by Federal Reserve or bank wire of funds or EFT. Although the
mailing of a redemption check,
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<PAGE> 51
wiring or EFT of redemption proceeds may be delayed, the redemption value will
be determined and the redemption processed in the ordinary course of business
upon receipt of proper documentation. In such a case, after the redemption and
prior to the release of the proceeds, no appreciation or depreciation will occur
in the value of the redeemed shares and no interest will be paid on the
redemption proceeds. If the payment of a redemption has been delayed, the check
will be mailed or the proceeds wired or sent EFT promptly after good payment has
been collected.
Shareholders may also redeem their shares through broker-dealers. The
Distributor, acting as agent for the Company, stands ready to repurchase the
Funds' shares upon orders from dealers at the net asset value next computed
after the Distributor receives the order. When the Distributor has received
proper documentation, it will pay the redemption proceeds to the broker-dealer
placing the order within seven days thereafter. The Distributor charges no fees
for this service, except to the extent that a contingent deferred sales charge
may be imposed upon redemptions of Investor B shares. However, a shareholder's
broker-dealer may charge a service fee.
For the protection of shareholders, regardless of the number of shares or
amount of money involved in a redemption or repurchase, signatures on stock
powers and all written orders or authorizations must be guaranteed by a U.S.
stock exchange member, a U.S. commercial bank or trust company or other person
eligible to guarantee signatures under the Securities Exchange Act of 1934 and
the Transfer Agent's policies. The Company or the Transfer Agent may waive this
requirement but may also require additional documents in certain cases.
Currently the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less where the account address of record has been the
same for a minimum period of 90 days. The Company and the Transfer Agent reserve
the right to withdraw this waiver at any time.
If the Company receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Company cannot
execute the order. In such cases, the Company will request the missing
information and process the order on the day such information is received.
If a shareholder requests redemption by telephone and a bank account has
previously been designated, the shareholder should state whether the proceeds
should be wired, sent EFT or mailed to such bank. In the absence of a request
that the proceeds be wired, sent EFT or mailed to such bank, they will be sent
by check to the shareholder's address as it appears on the account registration.
The redemption order also should include the account name as registered with the
Company and the account number.
TELEPHONE
Under ordinary circumstances, shareholders may redeem up to $50,000 from their
accounts by telephoning Mutual Fund Services at: 1-800-424-2295.
In order to ensure that instructions received by the Transfer Agent are
genuine when a telephone transaction is initiated, a shareholder will be asked
to verify certain information specific to its account. At the conclusion of the
transaction, the shareholder will be given a transaction number confirming the
request, and written confirmation of the transaction will be mailed within 72
hours of the telephone transaction. The shareholder's telephone instructions
will be
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<PAGE> 52
recorded. Redemptions by telephone are allowed only if the address and bank
account of record have been the same for a minimum period of 30 days.
The Company reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees. Except as otherwise noted, neither the Company nor
any of its service providers assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder in writing or by
telephone nor will any of them be liable when following instructions received by
telephone that the Transfer Agent reasonably believes to be genuine. The
Transfer Agent will employ procedures designed to provide reasonable assurance
that instructions received by telephone are genuine. If, for any reason,
reasonable procedures are not followed, the Company or its service providers may
be liable for any losses due to unauthorized or fraudulent instructions. The
Company may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Company
cannot dispose of its investments or fairly determine their value; or (4) the
Commission so orders.
If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent EFT to a
previously designated bank account as directed by the shareholder. If the
Company cannot be reached by telephone, shareholders should follow the
procedures for redeeming by mail or through a broker as set forth above.
AUTOMATIC WITHDRAWAL PLAN -- INVESTOR A SHARES
Under an Automatic Withdrawal Plan, if an account has a value of at least
$10,000 in Investor A shares of a Fund, a shareholder may arrange for regular
monthly or quarterly fixed withdrawal payments. Each payment must be at least
$100 and may be as much as 1.5% per month or 4.5% per quarter of the total net
asset value of the Fund's Investor A shares in the account when the Automatic
Withdrawal Plan is opened. Excessive withdrawals may decrease or deplete the
value of an account.
CHECKWRITING
If requested on your account application, the Money Market Fund will establish
a checking account for you with Provident. Checks may be drawn for $250 or more
payable to anyone. When a check is presented to Provident for payment, it will
cause the Money Market Fund to redeem at the net asset value next determined a
sufficient number of your shares to cover the check. You will receive the daily
dividends declared on the shares redeemed to cover your check through the day
Provident instructs the Money Market Fund to redeem the shares. There is
currently no charge to you for this checking account. Money Market Fund checking
accounts are subject to Provident's rules and regulations governing checking
accounts. If there is an insufficient number of shares in your account when a
check is presented to Provident for payment, the check will be returned. If you
present a check on your account in person to Provident it will be treated as a
redemption by mail received that day.
Since the aggregate amount in your account changes each day because of the
daily dividend, you should not attempt to withdraw
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<PAGE> 53
the full amount in your account by using a check.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Company reserves
the right to redeem an account if its value has fallen below $500 as a result of
your redemptions (but not as a result of market action). The shareholder will be
notified in writing and allowed 45 days to purchase additional shares in order
to increase the balance over $500.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Company to pay for
all redemptions in cash, the Company may authorize payment to be made in
portfolio securities or other property. However, the Company has obligated
itself under the 1940 Act to redeem for cash all shares presented for redemption
by any one shareholder up to $250,000, or 1% of the applicable Fund's net assets
if that is less, in any 90-day period. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving such securities would incur
brokerage costs when the securities are sold.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from Provident by calling
toll free 1-800-424-2295 or by writing the Distributor at 3435 Stelzer Road,
Columbus, Ohio, 43219.
DIVIDENDS AND TAXES
DIVIDENDS
The Money Market Fund intends to declare dividends daily from its net
investment income and to distribute all of its net investment income to its
shareholders monthly. Any net realized long-term gains will be declared and
distributed at least annually. Each of the other Funds intends to declare and
distribute to its shareholders dividends from net investment income monthly and
to declare and distribute all net realized long-term capital gains annually.
Each such Fund intends to distribute its net long-term capital gains as capital
gains dividends; such dividends are treated by shareholders as long-term capital
gains. Such distributions will be designated as long-term capital gains
dividends by a written notice mailed to each shareholder no later than 60 days
after the close of the Fund's fiscal year.
Each Fund's net investment income available for distribution to the holders of
Investor A shares and Investor B shares (if any) will be reduced by the amount
of Rule 12b-1 fees payable under the respective Plan.
Unless the Company receives instructions to the contrary before the record
date, it will assume that a shareholder wishes to receive that distribution and
future capital gains and income distributions in additional shares. Instructions
continue in effect until changed in writing. Account statements and/or checks as
appropriate will be mailed to shareholders within seven days after the Fund pays
the distribution.
If a shareholder elects to receive distributions in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the shareholder's cash election will be changed automatically and future
dividend and capi-
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<PAGE> 54
tal gains distributions will be reinvested in the applicable Fund 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 applicable Fund at the per
share net asset value determined as of the date of cancellation.
FEDERAL TAXES -- GENERAL
Each of the Portfolios of the Company, including the Funds, is treated as a
separate entity for federal income tax purposes and intends to qualify as a
"regulated investment company" under the Code for so long as such qualification
is in the best interest of that Portfolio's shareholders. Qualification as a
regulated investment company under the Code requires, among other things, that
the regulated investment company distribute to its shareholders at least 90% of
its investment company taxable income and 90% of its interest income excludable
from gross income under Section 103(a) of the Code. Each Fund contemplates
declaring as dividends all or substantially all of such Fund's investment
company taxable income and its exempt income (before deduction of dividends
paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a nondeductible excise tax equal to 4% of the deficiency.
It is expected that each Fund will distribute annually to shareholders all or
substantially all of the Fund's net ordinary income and net recognized capital
gains, if any, and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal income
tax purposes, even if paid in additional shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends received deduction, if any, received by the
Fund bear to its gross income.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain in
the year in which it is received, regardless of how long the shareholder has
held the shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
THE OHIO TAX-FREE FUND
The Ohio Tax-Free Fund will distribute substantially all of its net investment
income
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<PAGE> 55
and net capital gains to shareholders. Dividends derived from interest earned on
Exempt Securities constitute "exempt-interest dividends" when designated as such
by the Ohio Tax-Free Fund, will be excludable from gross income for federal
income taxes and will not be a preference item for individuals for purposes of
the federal alternative minimum tax.
Distributions, if any, derived from capital gains will generally be taxable to
shareholders as capital gains for federal income tax purposes to the extent so
designated by the Ohio Tax-Free Fund. Dividends, if any, derived from sources
other than interest excluded from gross income for federal income tax purposes
and capital gains will be taxable to shareholders as ordinary income for federal
income tax purposes whether or not reinvested in additional shares. The Ohio
Tax-Free Fund anticipates that substantially all of its dividends will be
excluded from gross income for federal income tax purposes and will notify each
shareholder annually of the tax status of all distributions.
If a shareholder receives an exempt-interest dividend with respect to any
share and such share is held by the shareholder for six months or less, any loss
on the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a shareholder.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Ohio Tax-Free Fund is not deductible for federal income
taxes assuming the Ohio Tax-Free Fund distributes exempt-interest dividends
during the shareholder's taxable year. It is anticipated that distributions from
the Ohio Tax-Free Fund will not be eligible for the dividends received deduction
for corporations.
Distributions of interest income and gain by the Ohio Tax-Free Fund, to the
extent derived from Ohio Exempt Securities, will be exempt from the Ohio
personal income tax, Ohio school district income taxes and Ohio municipal income
taxes, and will not be includible in the net income base of the Ohio corporate
franchise tax; provided, however, that at all times at least 50% of the value of
the total assets of the Ohio Tax-Free Fund consists of Ohio Exempt Securities or
similar obligations of other states or their subdivisions. Shares of the Ohio
Tax-Free Fund will be included in a corporation's tax base for purposes of
computing the Ohio corporate franchise tax on a net worth basis. The Ohio
Tax-Free Fund will report annually to shareholders the percentage and source of
interest income earned by the Ohio Tax-Free Fund. Each investor should consult
his or her own tax adviser to determine the tax status of distributions from the
Ohio Tax-Free Fund in his or her state and locality.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors in a Fund are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situations.
The Transfer Agent will inform shareholders at least annually of the amount
and nature of such income and capital gains.
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<PAGE> 56
COMPANY MANAGEMENT AND EXPENSES
BOARD OF DIRECTORS
Under Maryland law, the Company's Board of Directors, which is elected by the
Company's shareholders, has absolute and exclusive control over the management
and disposition of all assets of each Portfolio of the Company. The Directors,
in turn, elect the officers of the Company to supervise actively its day-to-day
operations. Subject to the authority of the Board of Directors, Provident,
directly and through DRZ as subadviser with respect to the Income Equity Fund,
supervises the investment programs of each Fund.
INVESTMENT ADVISER
Provident, an Ohio banking corporation located at One East Fourth Street,
Cincinnati, Ohio 45202, has entered into a Investment Advisory Agreement with
the Company whereby Provident supervises and manages the investment and
reinvestment of the assets of the Money Market Fund, the Income Fund, the Ohio
Tax-Free Fund, the Stock Appreciation Fund and, through DRZ, the Income Equity
Fund. Provident has been providing investment advisory services to individual
and corporate trust accounts since 1902.
Provident is a subsidiary of Provident Bancorp, Inc. ("PBI"), a bank holding
company located in Cincinnati, Ohio with approximately $6.2 billion in
consolidated assets as of December 31, 1995. Through offices in Ohio and
Kentucky, PBI and its subsidiaries provide a broad range of financial services
to individuals and businesses. Under the Investment Advisory Agreement with the
Company, for services rendered and expenses assumed as investment adviser,
Provident receives annually a fee (1) from the Money Market Fund equal to .15%
of the Money Market Fund's average net assets; (2) from the Income Fund equal to
.40% of the Income Fund's average net assets; (3) from the Income Equity Fund
equal to .95% of the Income Equity Fund's average net assets; (4) from the Ohio
Tax-Free Fund equal to .50% of the Ohio Tax-Free Fund's average net assets; and
(5) from the Stock Appreciation Fund equal to 0.80% of the Stock Appreciation
Fund's average net assets. Provident may periodically voluntarily reduce all or
a portion of its advisory fee with respect to a Fund to increase the net income
of that Fund available for distribution as dividends. The voluntary fee
reduction will cause the yield of that Fund to be higher than it would otherwise
be in the absence of such a reduction. The advisory fee with respect to the
Stock Appreciation Fund is higher, in the opinion of the Commission, than that
paid by most investment companies, but Provident believes the fee to be fair and
reasonable.
David W. Land is primarily responsible for the day-to-day management of the
Income and Ohio Tax-Free Funds' portfolios. Mr. Land has been a portfolio
manager of Provident Investment Advisors, an affiliate of Provident, since June,
1994. Prior thereto, Mr. Land served as an employee of PNC Bank, Ohio; from 1992
to June, 1994, as a Portfolio Analyst Bank Officer and prior thereto, an Asset
Liability Analyst Bank Officer.
Martin A. Weisberg, a portfolio manager for Provident, has been primarily
responsible for the portfolio management of the Stock Appreciation Fund since
September 30, 1995. From 1989 to September 30, 1995, Mr. Weisberg served as a
Vice President of Mathematical Investing Systems, Inc., the MIM Stock
Appreciation and Stock Growth Funds' investment adviser, and had assisted in
security analysis and management of such
53
<PAGE> 57
Funds prior to assuming total management
responsibilities in February, 1993.
Pursuant to the terms of its Investment Advisory Agreement with the Company,
Provident has entered into a Sub-Investment Advisory Agreement with DRZ, a
registered investment adviser, 201 South Orange Avenue, Suite 850, Orlando,
Florida 32801, with respect to the Income Equity Fund. DRZ is owned equally by
Mr. Gregory DePrince, Mr. John D. Race and Mr. Victor A. Zollo, Jr., each of
whom are former employees of SunBank Capital Management N.A., the former
sub-investment adviser of the Income Equity Fund ("SunBank"). In April, 1995,
Messrs. DePrince, Race and Zollo left SunBank to form DRZ. In addition to the
Income Equity Fund, DRZ provides investment management services to mutual funds
and other institutions and currently manages assets of approximately $470
million. Pursuant to the terms of such Sub-Investment Advisory Agreement, DRZ
was retained by Provident to manage the day-to-day investment and reinvestment
of the assets of the Income Equity Fund, subject to the direction and control of
the Company's Board of Directors, and Provident is responsible for selecting and
monitoring DRZ and reporting the activities of DRZ to the Company's Board of
Directors.
For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with Provident, DRZ receives from Provident a fee, computed
daily and paid monthly, at the annual rate of 0.50% of the Income Equity Fund's
average daily net assets up to $55 million and 0.55% of the average daily net
assets of such Fund of $55 million and above. DRZ has agreed with the Company
and with Provident to waive a portion of its sub-investment advisory fee until
January 1, 1997. In addition, DRZ has indicated a willingness to manage net
assets of the Income Equity Fund up to $75 million, but not beyond. Should the
Income Equity Fund's net assets approach or reach $75 million, the Company's
Board of Directors is required to determine what action, including the hiring of
an additional sub-investment adviser, is necessary and appropriate under the
circumstances.
Gregory M. DePrince is primarily responsible for the management of the Income
Equity Fund's portfolio. Since April 1995, Mr. DePrince has been a director and
Executive Vice President of DRZ. Prior to April 1995, Mr. DePrince served as the
Equity Income Portfolio Manager at SunBank where he also managed the STI Classic
Value Income Fund.
In addition to serving as investment adviser, Provident has entered into an
agreement with the Company to provide transfer agency services to the Company
and each Portfolio. Under the Master Transfer and Recordkeeping Agreement,
Provident receives from each portfolio, including the Funds, a fee computed
daily and paid monthly. Such fee is calculated by adding the sum of (i) .04% of
the Fund's average daily net assets attributable to its Investor A Shares and
(ii) $20,000 annual fee plus $23 per shareholder account and certain other fixed
fees and out-of-pocket expenses attributable to its Investor B Shares. BISYS
Fund Services Ohio, Inc., an affiliate of the Distributor ("BISYS"), provides
sub-transfer agency services for the Investor B shares of the Funds pursuant to
a Sub-Transfer Agency Agreement between Provident and BISYS.
CUSTODIAN AND FUND ACCOUNTANT
The Provident Bank (the "Custodian") also serves as custodian for and provides
certain fund accounting services to each of the Funds. Pursuant to the
Custodian, Fund
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Accounting and Recordkeeping Agreement with the Company, the Custodian receives
compensation from the Funds for such services in an amount equal to a fee,
computed daily and paid monthly, at the following annual rate of .05% of the
Money Market Fund's average daily net assets; .10% of the Income Fund's average
daily net assets; .15% of the Income Equity Fund's and the Stock Appreciation
Fund's average daily net assets; and .14% of the Ohio Tax-Free Fund's average
daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
The Distributor, located at 3435 Stelzer Road, Columbus, Ohio 43219, is the
administrator for each Fund, and also acts as the Funds' principal underwriter
(the "Administrator" or the "Distributor," as the context indicates).
The Administrator generally assists in all aspects of a Fund's administration
and operation. For expenses assumed and services provided as administrator
pursuant to its administration agreement with the Company, the Administrator
receives a fee from each Fund, computed daily and paid periodically, at an
annual rate of 0.20% of such Fund's average daily net assets. The Administrator
may periodically voluntarily reduce all or a portion of its administration fee
with respect to a Fund to increase the net income of that Fund available for
distribution as dividends. The voluntary fee reduction will cause the yield of
the Fund to be higher than it would otherwise be in the absence of such a
reduction.
The Distributor acts as agent for the Funds in the distribution of their
shares and, in that capacity, solicits orders for the sale of shares,
advertises, and pays the cost of that advertising, office space and its
personnel involved in such activities. The Distributor receives no compensation
under its Distribution Agreement with the Company, but may retain some or all of
any sales charge imposed upon the shares and may receive compensation under the
Distribution Plans described below.
DISTRIBUTION PLANS -- INVESTOR A SHARES
The Investor A shares of each Fund may bear some of the costs of selling such
shares under an Investor A Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act (the "Investor A Plan"). The Investor A Plan of each Fund
provides that such Fund may expend daily amounts at an annual rate of up to
0.25% of the average daily net asset value of that Fund's Investor A shares to
finance any activity which is principally intended to result in the sale of such
Fund's Investor A shares including, without limitation, expenditures consisting
of payments to the Distributor (1) to enable the Distributor to pay or to have
paid to others who sell Investor A shares of that Fund a maintenance or other
fee, at such intervals as the Distributor may determine, with respect to
Investor A shares of the Fund previously sold by others and remaining
outstanding during the period with respect to which such fee is or has been
paid; and/or (2) to compensate the Distributor for its efforts with respect to
sales of Investor A shares of the Fund since inception of the Plan.
Fees paid pursuant to the Investor A Plan are accrued daily and paid monthly,
and are charged as expenses of Investor A shares of such Fund as accrued.
DISTRIBUTION PLANS -- INVESTOR B SHARES
Pursuant to Rule 12b-1, the Company has also adopted an Investor B
Distribution Plan (the "Investor B Plan") with respect to
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<PAGE> 59
Investor B shares of the Income Fund, the Income Equity Fund, the Ohio Tax-Free
Fund and the Stock Appreciation Fund. Pursuant to the Investor B Plan, a Fund is
authorized to pay or reimburse the Distributor (a) a distribution fee in an
amount not to exceed on an annual basis 0.75% of the average daily net asset
value of Investor B shares of such Fund (the "Distribution Fee") and (b) a
service fee in an amount not to exceed on an annual basis 0.25% of the average
daily net asset value of the Investor B shares of such Fund (the "Service Fee").
Payments under the Investor B Plan will be calculated daily and paid monthly at
a rate not to exceed the limits described above, which rates are set from time
to time by the Company's Board of Directors. Payments of the Distribution Fee to
the Distributor pursuant to the Investor B Plan will be used (i) to compensate
Participating Organizations (as defined below) for providing distribution
assistance relating to Investor B shares, and (ii) for promotional activities
intended to result in the sale of Investor B shares such as to pay for the
preparation, printing and distribution of prospectuses to other than current
shareholders, and payments of the Service Fee to the Distributor pursuant to the
Investor B Plan will be used to compensate Participating Organizations for
providing shareholder services with respect to their customers who are, from
time to time, beneficial and record holders of Investor B shares. Participating
Organizations include banks (including Provident and its affiliates),
broker-dealers and other financial institutions.
Fees paid pursuant to the Investor B Plan are accrued daily and paid monthly,
and are charged as expenses of Investor B shares of such Fund as accrued.
Pursuant to the Investor B Plan, the Distributor may enter into Rule 12b-1
Agreements with Participating Organizations for providing distribution and
shareholder services to their customers who are the record or beneficial owners
of Investor B shares. Such Participating Organizations will be compensated at
the annual rate of up to 1.00% of the average daily net asset value of the
Investor B shares held of record or beneficially by such customers. The
distribution services provided by Participating Organizations for which the
Distribution Fee may be paid may include promoting the purchase of Investor B
shares of such Funds by their customers; processing purchase, exchange, and
redemption requests from customers and placing orders with the Distributor or
the transfer agent; processing dividend and distribution payments from a Fund on
behalf of customers; providing information periodically to customers, including
information showing their positions in Investor B shares; responding to
inquiries from customers concerning their investment in Investor B shares; and
providing other similar services as may be reasonably requested. The services
provided by Participating Organizations for which the Service Fee may be paid
may include providing shareholders information about their investment in the
Investor B shares of a Fund and providing other continuing personal services to
holders of Investor B shares.
As required by Rule 12b-1, the Investor A Plan and the Investor B Plan (the
"Plans") were each approved by the Directors of the Company, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Independent Directors"). The Plans continue in effect as long as such
continuance is specifically approved at least annually by the Company's
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Directors, including a majority of the Independent Directors.
The Plans may be terminated by a vote of a majority of the Independent
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the class of shares subject thereto. Any change in the Plans that
would increase materially the distribution expenses paid by a Fund requires
shareholder approval; otherwise, the Plans may be amended by the Directors,
including a majority of the Independent Directors, by a vote cast in person at a
meeting called for the purpose of voting upon the amendment. As long as either
Plan is in effect, the selection or nomination of the Independent Directors is
committed to the discretion of the Independent Directors.
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan (the "Services Plan")
pursuant to which each Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include
Provident, its correspondent and affiliated banks, and the Distributor, which
agree to provide certain ministerial, recordkeeping and/or administrative
support services for their customers or account holders (collectively
"customers") who are the beneficial or record owners of shares of that Fund. In
consideration for such services, a Service Organization receives a fee from the
Fund computed daily and paid monthly, at an annual rate of up to 0.25% of the
average daily net asset value of shares of that Fund owned beneficially or of
record by such Service Organization's customers for whom the Service
Organization provides such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Services Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of shares of a Fund,
including activities such as responding to shareholder inquiries regarding
accounts, collecting information regarding changes in accounts and further
assisting the Transfer Agent in maintaining the Fund's records, processing
dividend and distribution payments from the Fund on behalf of customers,
providing periodic statements to customers showing their positions in the shares
of the Fund, providing sub-accounting with respect to shares beneficially owned
by such customers and providing customers with a service that invests the assets
of their accounts in shares of that Fund pursuant to specific or pre-authorized
instructions. As of the date of this Prospectus, no Servicing Agreements have
been entered into on behalf of any of the Funds.
BANKING LAWS
Provident believes that it possesses the legal authority to perform the
investment advisory services for the Funds as set forth in its Investment
Advisory Agreement with the Company, as described in this Prospectus, without
violation of applicable banking laws and regulations, and has so represented in
its Investment Advisory Agreement with the Company. Future changes in Federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which Provident performs
such services for the Funds. See "MANAGEMENT OF THE COMPANY - Glass-Steagall
Act" in the Statement of Additional Informa-
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tion for further discussion of applicable law and regulations.
FUND EXPENSES
Provident, DRZ and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser, sub-investment adviser
and administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
The Directors reserve the right, subject to the receipt of any necessary
relevant regulatory approvals or rulings, to allocate certain expenses (other
than those associated with the applicable Plan) to the shareholders of a
particular class on a basis other than relative net asset value as the Directors
deem appropriate ("Class Expenses"). In such event, Class Expenses would be
limited to: transfer agency fees identified by the Transfer Agent as
attributable to a specific class; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; Blue Sky registration fees incurred by a
class of shares; Commission registration fees incurred by a class of shares;
expenses related to administrative personnel and services as required to support
the shareholders of a specific class; litigation or other legal expenses
relating solely to one class of shares; and Directors' fees incurred as a result
of issues relating solely to one class of shares.
SECURITIES TRANSACTIONS
Under policies established by the Board of Directors, Provident and DRZ, as
the case may be, selects broker-dealers to execute portfolio transactions for
the Funds subject to receipt of best execution. When selecting broker-dealers,
Provident and DRZ may consider as a factor the number of shares of the Funds
sold by a broker-dealer. In addition, broker-dealers executing transactions for
a Fund may from time to time be affiliated with the Company, Provident, DRZ or
their affiliates. The Funds may pay higher commissions to broker-dealers which
provide research services. Provident and DRZ each may use these services in
advising the Funds as well as in advising their other clients.
PERFORMANCE DATA AND ADVERTISING
From time to time the Money Market Fund may advertise "yield" and "effective
yield," and the other Funds may advertise "total return" and/or "current yield."
Such figures are based on historical earnings and are not intended to indicate
future performance. The yield of the Money Market Fund refers to the income
generated by the Money Market Fund over a seven-day period (which period will be
stated in the advertisement). This income is then annualized. That is, the
amount of income generated by the Money Market Fund during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage.
The effective yield is calculated similarly but, when annualized, the income
earned from the Money Market Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment. Average annual total return refers to a Fund's
average annual compounded rates of return over specified periods determined by
comparing the initial amount invested to the ending redeemable value of that
amount. The resulting equation assumes reinvestment of all dividends and
distributions and deduction of any sales charge and all recurring charges, if
any, applicable to all shareholder accounts. Aggregate total return is
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<PAGE> 62
computed similarly to average annual total return; however, the resulting rate
of return is not annualized. Performance of a Fund may also be presented
excluding the effect of a sales charge, if any.
Current yield quotations for the Funds, other than the Money Market Fund,
represent the yield on an investment for a stated 30-day period computed by
dividing net investment income earned per share during the base period by the
maximum offering price per share on the last day of the base period.
The Funds may also include comparative performance information in advertising
or marketing their shares, such as data from Lipper Analytical Services, Inc.,
Standard & Poor's 500 Composite Stock Price Index or other industry
publications. The Funds may include in sales and advertising material general
mutual fund industry information compiled from financial and industry
publications. The Company's annual report to Shareholders for the fiscal year
ended December 31, 1995, contains additional performance information and will be
made available to prospective investors and shareholders without cost.
In addition, from time to time each Fund may present its distribution rates
for a class of shares in supplemental sales literature which is accompanied or
preceded by a prospectus and in shareholder reports. Distribution rates will be
computed by dividing the distribution per share of a class made by a Fund over a
twelve-month period by the maximum offering price per share. The calculation of
income in the distribution rate includes both income and capital gain dividends
and does not reflect unrealized gains or losses, although the Funds may also
present a distribution rate excluding the effect of capital gains. The
distribution rate differs from the yield, because it includes capital gains
which are often non-recurring in nature, whereas yield does not include such
items. Distribution rates may also be presented excluding the effect of a sales
charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor A and Investor B shares. Because of differences in the fees and/or
expenses borne by Investor A and Investor B shares of the Funds, the net yield
and total return on Investor A shares can be expected, at any given time, to
differ from the net yield and total return on Investor B shares for the same
period.
COMPANY SHARES
The Company presently offers six series of shares of capital stock, par value
$.001 per share (the "Portfolios"). The shares of each of the Portfolios, other
than the Money Market Fund, are offered in two separate classes: Investor A
shares and Investor B shares. The Money Market Fund has only the Investor A
class of shares. When issued and paid for, shares of each Portfolio are fully
paid and nonassessable by the Company. Shares may be exchanged or converted as
explained above but will have no other preference, conversion, exchange or
preemptive rights. Shareholders are entitled to one vote for each full share
owned and fractional votes for fractional shares. Shares are transferable,
redeemable and freely assignable as collateral. There are no sinking fund
provisions.
Each share represents an equal proportionate interest in a Portfolio with
other shares of the same Portfolio based upon such share's net asset value, and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that
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Portfolio as are declared at the discretion of the Directors.
Shareholders will vote in the aggregate and not by Portfolio except as
otherwise expressly required by law. For example, Shareholders of a Fund will
vote in the aggregate with other shareholders of the Company with respect to the
election of Directors and ratification of the selection of independent
accountants. However, Shareholders of a Portfolio will vote as a Portfolio, and
not in the aggregate with other shareholders of the Company, for purposes of
approval of that Portfolio's investment advisory agreement. In addition, holders
of one class of Investor Shares of a Portfolio will vote as a class and not with
holders of the other class of Investor Shares with respect to the approval of
its respective Distribution Plan.
The Company may dispense with an annual meeting of shareholders in any fiscal
year in which it is not required in order to elect directors under the 1940 Act
or state law. However, shareholders are entitled to call a special meeting of
shareholders for purposes of voting on the removal of a director or directors
when 10% of the outstanding shares request such a meeting. Shareholders may be
eligible for shareholder communication assistance in connection with a special
meeting.
As used in this Prospectus and the Statement of Additional Information, a
"vote of the holders of a majority of the outstanding voting securities" of a
Portfolio means the affirmative vote, at a meeting of shareholders duly called,
of the lesser of (a) 67% or more of the outstanding shares of such Portfolio
present at such meeting, if holders of more than 50% of the shares are present
or represented by proxy, or (b) more than 50% of the shares of such Portfolio.
[/R]
As of the date hereof, Provident possessed, on behalf of its underlying
accounts, voting or investment power with respect to more than 25% of the
outstanding shares of each of the Money Market, Income and Ohio Tax-Free Funds
and therefore may be presumed to control each of these Funds within the meaning
of the 1940 Act.
ADDITIONAL INFORMATION
Except as otherwise stated in this prospectus or required by law, the Company
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
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- ---------------------------------------------------------
<TABLE>
<S> <C>
THE THE RIVERFRONT
RIVERFRONT U.S. GOVERNMENT
FUNDS, INC. SECURITIES MONEY
MARKET FUND
PROSPECTUS THE RIVERFRONT
APRIL 30, 1996 U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT
INCOME EQUITY
FUND
THE RIVERFRONT
OHIO TAX-FREE
BOND FUND
THE RIVERFRONT
STOCK APPRECIATION
FUND
</TABLE>
THE RIVERFRONT FUNDS, INC.
Investment Adviser
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Distributor
[/R]
BISYS Fund Services Limited Partnership
3435 Stelzer Rd.
Columbus, Ohio 43219
For additional information call
The Provident Bank
Mutual Fund Services
1-800-424-2295
<PAGE> 65
CROSS-REFERENCE SHEET
THE RIVERFRONT FLEXIBLE GROWTH FUND
One Fund of
The Riverfront Funds, Inc.
Cross-Reference Sheet pursuant to Rule 481 under the Securities Act of 1933.
<TABLE>
<CAPTION>
Item Number in
Part A of Form N-1A Prospectus Caption
- ------------------- ------------------
<S> <C>
1 Cover Page
2 Fee Table
3 Financial Highlights; Performance Data
4 Cover Page; The Company and its
Portfolios; The Fund's Investment
Objectives and Policies
5 Company Management and Expenses;
Additional Information
5A Not Applicable
6 The Company and its Portfolios; Dividends
and Taxes; Company Shares; Pricing Shares
7 How to Buy Shares; Shareholder Services
8 How to Redeem Shares; How to Buy Shares
9 Not Applicable
</TABLE>
<PAGE> 66
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT FLEXIBLE GROWTH FUND
PROSPECTUS DATED APRIL 30, 1996
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company which issues one or more series of shares (individually, a
"Portfolio" and collectively, the "Portfolios"), each having a different
investment objective and investing in a different portfolio of securities. The
Portfolios currently offered by the Company are: The Riverfront U.S. Government
Income Fund, The Riverfront Income Equity Fund, The Riverfront U.S. Government
Securities Money Market Fund, The Riverfront Ohio Tax-Free Bond Fund, The
Riverfront Stock Appreciation Fund and The Riverfront Flexible Growth Fund.
The Company offers The Riverfront Flexible Growth Fund (the "Flexible Growth
Fund") by this prospectus. The Flexible Growth Fund seeks, as its primary
investment objective, long-term growth of capital with some current income as a
secondary objective. There can be no assurance that the Flexible Growth Fund's
objectives will be achieved. The Provident Bank ("Provident"), directly or
through one or more sub-investment advisers, serves as investment adviser to
each of the Portfolios. To provide investment advisory services to the Flexible
Growth Fund, Provident has entered into a sub-investment advisory agreement with
James Investment Research, Inc., Beavercreek, Ohio ("JIR").
The Portfolios are offered both to customers of Provident, including personal
trust, employee benefit, agency and custodial clients, as well as individual
investors, and to the general public. Provident is a wholly owned subsidiary of
Provident Bancorp, Inc. ("PBI").
The Company is designed to enable investors to pursue financial goals through
a choice of portfolios.
SHARES OF THE FLEXIBLE GROWTH FUND ARE NOT DEPOSITS OF, OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, PROVIDENT, PBI OR ANY OF THEIR AFFILIATES, AND ARE
NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN THE FLEXIBLE GROWTH FUND
INVOLVES INVESTMENT RISKS, INCLUDING RISK OF LOSS OF PRINCIPAL. THE VALUE OF
FLEXIBLE GROWTH FUND SHARES MAY FLUCTUATE, AND WHEN REDEEMED THEIR VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY PAID BY THE PURCHASER.
This prospectus relates only to the Flexible Growth Fund and sets forth
concisely information that a prospective investor should know about the Flexible
Growth Fund before investing. Investors should read and retain this prospectus
for future reference.
Additional information about the Company and its Portfolios is contained in a
Statement of Additional Information and Appendix thereto dated as of the date
hereof, which has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated by reference into this prospectus. For a free
copy, or for other information about the Company and its Portfolios, write to
the address or call the telephone number listed below.
For Information Contact:
THE RIVERFRONT FUNDS, INC.
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
CALL TOLL FREE 1-800-424-2295
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.
(Continued on next page).
<PAGE> 67
The Company also offers by a separate prospectus The Riverfront U.S.
Government Income Fund (the "Income Fund"), The Riverfront Income Equity Fund
(the "Income Equity Fund"), The Riverfront U.S. Government Securities Money
Market Fund (the "Money Market Fund"), The Riverfront Ohio Tax-Free Bond Fund
(the "Ohio Tax-Free Fund") and The Riverfront Stock Appreciation Fund (the
"Stock Appreciation Fund"). For more information about these Portfolios, please
write to the address or call the telephone number listed above. Each Portfolio
of the Company, other than the Money Market Fund, offers two classes of shares.
This prospectus describes the two classes of shares of the Flexible Growth
Fund--Investor A shares and Investor B shares.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Prospectus Summary.................... 3
Fee Table............................. 5
Financial Highlights.................. 7
The Company And Its Portfolios........ 8
The Riverfront Flexible Growth Fund... 8
Investment Restrictions............... 12
Pricing Shares........................ 13
How To Buy Shares..................... 14
Sales Charges......................... 16
Reduced Sales Charges -- Investor A
Shares.............................. 17
Contingent Deferred Sales Charge
--Investor B Shares................. 19
Conversion Feature.................... 21
Other Purchase Information............ 21
Exchanges............................. 21
How To Redeem Shares.................. 22
Shareholder Services.................. 25
Dividends and Taxes................... 25
Company Management and Expenses....... 27
Performance Data and Advertising...... 32
Company Shares........................ 33
Additional Information................ 33
Additional Investment Information..... 34
</TABLE>
2
<PAGE> 68
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered................ Investor A and Investor B shares of capital stock, $.001 par
value, of the Flexible Growth Fund, a separate series of The
Riverfront Funds, Inc., a Maryland corporation (the "Com-
pany").
Offering Price................ The public offering price of INVESTOR A SHARES of the Flexible
Growth Fund is equal to the net asset value per share plus a
sales charge equal to 4.50% of the public offering price
(4.71% of the net amount invested), reduced on investments of
$100,000 or more (See "Sales Charges--Investor A Shares").
Under certain circumstances, the sales charge may be elimi-
nated (See "Reduced Sales Charges--Investor A Shares").
The public offering price of INVESTOR B SHARES of the Flexible
Growth Fund is equal to the net asset value per share, but
investors may be subject to a contingent deferred sales charge
ranging from 4% to 1% when Investor B shares are redeemed
within the first six years after purchase.
Minimum Purchase.............. $1,000 minimum initial investment with $100 minimum subse-
quent investments. Such minimum initial and subsequent
investments are waived for employees of The Provident Bank,
James Investment Research, Inc. and BISYS Fund Services
Limited Partnership. Investor B shares may only be purchased
in an amount of less than $250,000.
Type of Company............... The Flexible Growth Fund is a diversified series of the
Company, an open-end, management investment company.
Investment Objectives......... As its primary investment objective, long-term growth of
capital with some current income as a secondary objective.
Investment Policy............. Under normal market conditions, the Flexible Growth Fund
invests in common stocks, preferred stocks, fixed income
securities and securities convertible into common stocks.
</TABLE>
3
<PAGE> 69
<TABLE>
<S> <C>
Risk Factors and Investment
Techniques.................. An investment in the Flexible Growth Fund is subject to
certain risks, as set forth in detail under "Risk Factors and
Investment Techniques." As with other mutual funds, there can
be no assurance that the Flexible Growth Fund will achieve its
investment objectives. The Flexible Growth Fund, to the extent
set forth under "Risk Factors and Investment Techniques," may
engage in the following practices: the use of repurchase and
reverse repurchase agreements, purchasing foreign securities
and warrants, entering into hedging transactions, the lending
of portfolio securities and the purchase of securities on a
when-issued or delayed-delivery basis.
Investment Adviser............ The Provident Bank ("Provident").
Sub-Investment Adviser........ James Investment Research, Inc. ("JIR")
Dividends..................... Dividends from net income are declared and generally paid
monthly. Net realized capital gains are distributed at least
annually.
Distributor................... BISYS Fund Services Limited Partnership (the "Distributor").
</TABLE>
4
<PAGE> 70
FEE TABLE
The purpose of the fee table is to assist investors in understanding the costs
and expenses that an investor in the Flexible Growth Fund will bear directly or
indirectly. Such expenses do not include any fees charged by Provident, JIR or
any of their affiliates to its customers' accounts which may have invested in
shares of the Flexible Growth Fund. For more complete descriptions of the
various costs and expenses, see the following sections of this prospectus:
"Company Management and Expenses," "How to Buy Shares," "Sales Charges,"
"Reduced Sales Charges -- Investor A Shares" and "Distribution Plans."
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
---------- ----------
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (as a percentage of offering price)(1)................... 4.50% 0%
Deferred Sales Load (as a percentage of original purchase price or
redemption proceeds, as applicable)(2).............................. 0% 4.00%
ANNUAL FUND EXPENSES
(as a percentage of average net assets)
Investment Advisory Fees After Voluntary Fee Reduction(3)............. .80% .80%
12b-1 Fees After Voluntary Fee Reduction.............................. .19(3) 1.00
Other Expenses........................................................ .71 .71
---- ----
Total Fund Operating Expenses After Voluntary Fee Reductions(3)....... 1.70% 2.51%
==== ====
</TABLE>
- ------------
(1) The sales charge applied to purchases of shares declines as the amount
invested increases. In addition, all or a portion of the sales charge may be
waived by the Distributor on certain sales of shares. See "Sales
Charges--Investor A Shares" and "Reduced Sales Charges--Investor A Shares."
(2) A contingent deferred sales load ranging from 4% to 1% is charged with
respect to Investor B shares redeemed within the first six years after
purchase. See "Contingent Deferred Sales Charges -- Investor B Shares"
below.
(3) Provident and JIR have each agreed to reduce voluntarily the amount of the
investment advisory fee for the current fiscal year. Absent such voluntary
fee reduction, Investment Advisory Fees would be .90%. The Distributor has
agreed with the Company to reduce voluntarily the amount of its 12b-1 fees
under the Investor A Plan, as described below, for the current fiscal year.
Absent such voluntary fee reduction, 12b-1 Fees for the Investor A Shares
would be .25%.
5
<PAGE> 71
EXAMPLE(4)
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
INVESTOR A INVESTOR B
SHARES SHARES
---------- ----------
<S> <C> <C>
One Year........................................................... $ 62 $ 65
Three Years........................................................ $ 96 $118
Five Years......................................................... $133 $154
Ten Years.......................................................... $237 $285
</TABLE>
With respect to the Investor B shares, you would pay the following expenses on
the same investment assuming no redemption:
<TABLE>
<CAPTION>
INVESTOR B
SHARES
----------
<S> <C>
One Year........................................................... $ 25
Three Years........................................................ $ 78
Five Years......................................................... $134
Ten Years.......................................................... $285
</TABLE>
- ------------
(4) The Securities and Exchange Commission requires use of a 5% annual return
figure for purposes of the examples. Actual returns for the Flexible Growth
Fund may be greater or less than 5%.
AMOUNTS SHOWN IN THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. In addition, the expenses and examples above reflect
current fees. As a result of the payment of sales loads and Rule 12b-1 fees,
long-term shareholders may pay more than the maximum front-end sales charge
permitted by the Rules of the National Association of Securities Dealers, Inc.
(the "NASD"). The NASD has adopted rules which generally limit the aggregate of
any sales charges paid and payments under the Flexible Growth Fund's Investor A
and Investor B Distribution Plans to 6.25% of total new gross sales, plus
interest. The Flexible Growth Fund would stop accruing payments under a
Distribution Plan if, to the extent, and for as long as, such limit would
otherwise be exceeded.
The information set forth in the foregoing Fee Table and examples relates
to the Investor A and Investor B shares of the Flexible Growth Fund. The two
classes of shares are subject to the same expenses except that the level of Rule
12b-1 fees paid by the holders of Investor A shares and Investor B shares
differs.
6
<PAGE> 72
FINANCIAL HIGHLIGHTS
The Flexible Growth Fund is one separate Portfolio of the Company. The
following financial highlights for the fiscal year ended December 31, 1995, have
been audited by Ernst & Young LLP, independent auditors, whose report, together
with the financial statements of the Flexible Growth Fund, appears in the
Statement of Additional Information. Such Statement of Additional Information
may be obtained by shareholders and prospective investors upon request. The
following financial highlights for the four months ended December 31, 1994, have
been audited by other auditors.
THE RIVERFRONT FLEXIBLE GROWTH FUND
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR B SHARES
---------------------------- -----------------
SEPTEMBER 1, JANUARY 17,
YEAR ENDED 1994 TO 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1994(A) 1995(A)
------------ ------------ -----------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 9.79 $10.00 $ 10.00
------ ------ -------
Investment Activities
Net investment income........................... 0.35 0.10 0.25
Net realized and unrealized gains (losses) from
investments.................................. 1.66 (0.18) 1.79
------ ------ -------
Total from Investment Activities.................. 2.01 (0.08) 2.04
------ ------ -------
Distributions
Net Investment Income........................... (0.34) (0.13) (0.24)
Net realized gains.............................. (0.10) -- (0.10)
------ ------ -------
Total Distributions............................... (0.44) (0.13) (0.34)
------ ------ -------
NET ASSET VALUE, END OF PERIOD.................... $11.36 $ 9.79 $ 11.70
====== ====== =======
TOTAL RETURN (EXCLUDING SALES CHARGE)............. 20.83% (0.82%)(e) 20.53%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)............... $9,427 $2,709 $ 5,030
Ratio of expenses to average net assets......... 1.28% 1.48%(d) 2.04%(d)
Ratio of net investment income to average net
assets....................................... 3.48% 4.01%(d) 2.69%(d)
Ratio of expenses to average net assets*........ 1.67% 4.61%(d) 2.84%(d)
Ratio of net investment income to average net
assets*...................................... 3.09% 0.88%(d) 1.89%(d)
Portfolio Turnover................................ 13.00%(b) 1.00% 13.00%(b)
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Flexible Growth Fund.
If such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
7
<PAGE> 73
THE COMPANY AND ITS PORTFOLIOS
The Riverfront Funds, Inc. is an open-end management investment company,
commonly known as a mutual fund (the "Company"), registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Company currently offers
six series of shares of capital stock (individually, a "Portfolio" and
collectively, the "Portfolios"), including the Flexible Growth Fund, each of
which, other than the Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund
is non-diversified. The Company was incorporated in Maryland on March 27, 1990.
The Portfolios currently offered by the Company are the Income Fund, the Income
Equity Fund, the Money Market Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund and the Flexible Growth Fund.
THE RIVERFRONT FLEXIBLE GROWTH FUND
INVESTMENT OBJECTIVES AND POLICIES
The Flexible Growth Fund seeks, as its primary investment objective, long-term
growth of capital with some current income as a secondary objective. The
Flexible Growth Fund intends to invest based on combined considerations of risk,
income and capital enhancement. The investment objectives of the Flexible Growth
Fund are fundamental policies and as such may not be changed without a vote of
the holders of a majority of the outstanding voting securities of the Flexible
Growth Fund (as defined below under "COMPANY SHARES"). There can be no assurance
that the investment objectives of the Flexible Growth Fund will be achieved.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Flexible Growth Fund will invest in common
stocks, preferred stocks, fixed income securities and securities convertible
into common stocks (i.e., warrants, rights, convertible preferred stock, fixed
rate preferred stock and convertible fixed-income securities). Under normal
market conditions, the Flexible Growth Fund expects that at least 15% of its
total assets will be invested in fixed income senior securities. The proportion
of the Flexible Growth Fund's portfolio that is invested in equity securities
versus fixed income securities may vary greatly depending upon JIR's judgment of
market conditions.
The common and preferred stocks and securities convertible into common stocks
selected for the Flexible Growth Fund will be those that JIR believes will
contribute to the Flexible Growth Fund's objective of providing long-term growth
of capital. The Flexible Growth Fund will invest in common and preferred stocks
and securities convertible into common stocks of domestic issuers and foreign
issuers (subject to the limitations described below), with market
capitalizations of not less than $50 million and which are traded either in
established over-the-counter markets or on national exchanges.
The Flexible Growth Fund's fixed income securities consist of high grade
corporate debt securities rated at the time of purchase in one of the four
highest rating categories assigned by an appropriate nationally recognized
statistical rating organization (an "NRSRO") (e.g., at least "BBB" from Standard
& Poor's Corporation or Moody's Investors Services, Inc. ("Moody's"), including
all sub-classifications indicated by a "plus" or "minus" sign or by a number),
or if unrated, deemed by JIR to be of comparable quality to those so rated, and
securities issued or
8
<PAGE> 74
guaranteed by the U.S. Government or its agencies or instrumentalities. Such
U.S. Government securities consist of U.S. Treasury bills, notes and bonds and
securities issued by U.S. Government agencies and instrumentalities, such as the
Government National Mortgage Association, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Federal Home Loan Bank,
Federal Farm Credit, Student Loan Marketing Association and the Tennessee Valley
Authority. For a discussion of debt securities rated within the fourth highest
rating group assigned by the NRSROs, see "Risk Factors and Investment
Techniques" below.
OTHER ELIGIBLE INVESTMENTS
The Flexible Growth Fund may also invest up to 25% of its total assets in the
following securities for short term cash management purposes. However, when, in
JIR's opinion, market conditions warrant, JIR may invest up to 100% of the
Flexible Growth Fund's assets for temporary defensive purposes in such
securities: (1) bankers' acceptances; (2) certificates of deposit; and (3)
commercial paper (including master demand notes) rated in the highest rating
category by an NRSRO or, if unrated, determined to be of comparable quality by
JIR. The Flexible Growth Fund may also enter into repurchase agreements. For
more information regarding such securities, see "INVESTMENT OBJECTIVES AND
POLICIES -- Additional Information on Portfolio Instruments" in the Company's
Statement of Additional Information.
The Flexible Growth Fund may invest in securities issued by other investment
companies which JIR believes will contribute to the Flexible Growth Fund's
investment objectives and in money market mutual funds for cash management
purposes. The Flexible Growth Fund may invest in securities of other investment
companies within the limits prescribed by the 1940 Act, which include, subject
to certain exceptions, limiting its investment to (1) no more than 5% of its
total assets in the securities of any one investment company, (2) no more than
3% of the securities of any investment company, and (3) no more than 10% of the
value of its total assets in such securities. Investment companies in which the
Flexible Growth Fund may invest may impose a sales or distribution charge in
connection with the purchase or redemption of their shares as well as other
types of commissions or charges. Such investment companies will charge
management and other fees which will be borne by the Flexible Growth Fund. Such
charges will be payable by the Flexible Growth Fund and, therefore, will be
borne indirectly by its shareholders.
The Flexible Growth Fund may also invest up to 20% of its total assets in
foreign securities directly and through the purchase of sponsored and
unsponsored American Depositary Receipts ("ADRs"). Unsponsored ADRs may be less
liquid than sponsored ADRs and there may be less information available regarding
the underlying foreign issuer for unsponsored ADRs. Investment in foreign
securities is subject to special risks, such as future adverse political and
economic developments, possible seizure, nationalization, or expropriation of
foreign investments, less stringent disclosure requirements, the possible
establishment of exchange controls or taxation at the source, or the adoption of
other foreign governmental restrictions. In addition, securities markets in
foreign countries may be structured differently from and may not be as liquid as
the U.S. markets. Where purchases of foreign securities are made in foreign
currencies, the Flexible Growth Fund may incur currency conversion costs and may
be af-
9
<PAGE> 75
fected favorably or unfavorably by changes in the value of foreign currencies
against the U.S. dollar.
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Flexible Growth Fund is that risk common
to any security, that the net asset value will fluctuate in response to changes
in economic conditions, interest rates and the market's perception of the
underlying securities of the Flexible Growth Fund. In addition, the Flexible
Growth Fund may engage in any one or more of the following investment
techniques.
Medium Grade Debt Securities. As described above, the Flexible Growth Fund may
invest in debt securities rated within any of the four highest rating groups
assigned by one or more appropriate NRSROs and comparable unrated securities.
With respect to debt securities rated only within the fourth highest group, such
securities are considered by Moody's to have some speculative characteristics,
and are more vulnerable to changes in economic conditions, higher interest rates
or adverse issuer-specific developments which are more likely to lead to a
weaker capacity to make principal and interest payments than comparable higher
rated debt securities.
Should subsequent events cause the rating of a debt security purchased by the
Flexible Growth Fund to fall below the fourth highest rating category, Provident
and JIR will consider such an event in determining whether the Flexible Growth
Fund should continue to hold that security. In no event, however, would the
Flexible Growth Fund be required to liquidate any such portfolio security where
the Flexible Growth Fund would suffer a loss on the sale of such security.
Repurchase Agreements. Securities held by the Flexible Growth Fund may be
subject to repurchase agreements. Under the terms of a repurchase agreement, the
Flexible Growth Fund would acquire securities, in exchange for cash, from member
banks of the Federal Deposit Insurance Corporation and/or from registered
broker-dealers which JIR deems creditworthy under guidelines approved by the
Company's Board of Directors. The seller agrees to repurchase such securities at
a mutually agreed upon date and price. The repurchase price generally equals the
price paid by the Flexible Growth Fund plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. Securities subject to repurchase agreements
must be of the same type and quality as those in which the Flexible Growth Fund
may invest directly. For further information about repurchase agreements, see
"INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Repurchase Agreements" in the Company's Statement of Additional
Information.
Reverse Repurchase Agreements. The Flexible Growth Fund may borrow funds for
temporary purposes by entering into reverse repurchase agreements in accordance
with the investment restrictions described below. Pursuant to such agreements,
the Flexible Growth Fund would sell portfolio securities to financial
institutions such as banks and broker-dealers, and agree to repurchase them at a
mutually agreed-upon date and price. At the time the Flexible Growth Fund enters
into a reverse repurchase agreement, it will place in a segregated custodial
account assets such as U.S. Government securities or other liquid high-grade
debt securities consistent with the Flexible Growth Fund's investment
restrictions having a value equal to
10
<PAGE> 76
the repurchase price (including accrued interest), and will continually monitor
the account to ensure that such equivalent value is maintained at all times.
Reverse repurchase agreements involve the risk that the market value of the
securities sold by the Flexible Growth Fund may decline below the price at which
the Flexible Growth Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by the Flexible Growth
Fund under the 1940 Act. Borrowing and reverse repurchase agreements (including
dollar rolls) magnify the potential for gain or loss on the portfolio securities
of the Flexible Growth Fund and, therefore, increase the possibility of
fluctuation in the Flexible Growth Fund's net asset value. This is the
speculative factor known as leverage. To reduce the risks of borrowing and
reverse repurchase agreements, the Flexible Growth Fund has adopted the
procedures described above. For further information about reverse repurchase
agreements, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on
Portfolio Instruments -- Reverse Repurchase Agreements" in the Company's
Statement of Additional Information.
Except as otherwise disclosed to the shareholders of the Flexible Growth Fund,
the Company will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase or reverse repurchase agreements with
Provident, JIR, the Distributor, or their affiliates, and will not give
preference to Provident's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements, and reverse repurchase
agreements.
Lending Portfolio Securities. In order to generate additional income, the
Flexible Growth Fund may, from time to time, lend its portfolio securities to
broker-dealers, banks, or institutional borrowers of securities. The Flexible
Growth Fund must receive at least 100% collateral in the form of cash or U.S.
Government securities. This collateral will be valued daily by JIR. Should the
market value of the loaned securities increase, the borrower must furnish
additional collateral to the Flexible Growth Fund. During the time portfolio
securities are on loan, the borrower pays the Flexible Growth Fund any dividends
or interest received on such securities. Loans are subject to termination by the
Flexible Growth Fund or the borrower at any time. While the Flexible Growth Fund
does not have the right to vote securities on loan, the Flexible Growth Fund
intends to terminate the loan and regain the right to vote if that is considered
important with respect to the investment. In the event the borrower would
default in its obligations, the Flexible Growth Fund bears the risk of delay in
recovery of the portfolio securities and the loss of rights in the collateral.
The Flexible Growth Fund will enter into loan agreements only with
broker-dealers, banks, or other institutions that JIR has determined are
creditworthy under guidelines established by the Company's Board of Directors.
When-Issued and Delayed-Delivery Transactions. The Flexible Growth Fund may
purchase securities on a when-issued or delayed-delivery basis. These
transactions are arrangements in which the Flexible Growth Fund purchases
securities with payment and delivery scheduled for a future time. The Flexible
Growth Fund will engage in when-issued and delayed-delivery transactions only
for the purpose of acquiring portfolio securities consistent with and in
furtherance of its investment objectives and policies, not for investment
leverage, although such transactions represent a form of leveraging. When-issued
securities are securities purchased for delivery beyond the
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normal settlement date at a stated price and yield and thereby involve a risk
that the yield obtained in the transaction will be less than those available in
the market when delivery takes place. The Flexible Growth Fund will generally
not pay for such securities or start earning interest on them until they are
received on the settlement date. When the Flexible Growth Fund agrees to
purchase such securities, however, its custodian will set aside in a separate
account cash or high quality liquid debt securities equal to the amount of the
commitment. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in the value based upon changes in the general level
of interest rates. In when-issued and delayed-delivery transactions, the
Flexible Growth Fund relies on the seller to complete the transaction; the
seller's failure to do so may cause the Flexible Growth Fund to miss a price or
yield considered to be advantageous.
Illiquid Securities. The Flexible Growth Fund will not purchase or otherwise
acquire any security if, as a result, more than 15% of its net assets would be
invested in securities that are illiquid. Illiquid securities include securities
which are not readily marketable and repurchase agreements with maturities in
excess of seven days.
Options Transactions. The Flexible Growth Fund is authorized to engage in
options transactions, including the writing of covered put and call options, the
purchase of call and put options on individual securities and interest rate
index futures contracts, purchase and sell futures contracts, and enter into
various interest rate transactions such as swaps, caps, floors or collars, and
enter into various currency transactions such as currency forward contracts,
currency futures contracts and currency swaps or options on currencies or
currency futures (collectively, "hedging transactions"). Hedging transactions
may be used to attempt to protect against possible changes in the market value
of securities held by or to be purchased by the Flexible Growth Fund, including
changes resulting from securities market, interest rate or currency exchange
rate fluctuations. Hedging transactions may also be used to protect the Flexible
Growth Fund's unrealized gains in the value of its portfolio securities, to
manage the effective maturity or duration of the Flexible Growth Fund's
portfolio, or to establish a position in the derivatives markets as a temporary
substitute for purchasing or selling particular securities. Not more than 25% of
the Flexible Growth Fund's total assets will be committed to hedging
transactions for hedging purposes, and not more than 5% of the Flexible Growth
Fund's total assets will be committed to such transactions for non-hedging
purposes. Any or all of these hedging transactions may be used at any time and
the use of one technique over another is a function of numerous variables,
including market conditions. The ability of JIR to utilize these hedging
transactions successfully will depend on JIR's ability to predict pertinent
market movements, which success cannot be assured. Hedging transactions
involving financial futures and options thereon will only be entered into for
bona fide hedging and not for speculative purposes. Further information about
each of these investment techniques, see the "Additional Investment Information"
section of this prospectus.
INVESTMENT RESTRICTIONS
The Flexible Growth Fund has adopted the following restrictions relating to
the investment of its assets. These investment restrictions are fundamental and
may not be changed without the approval of the holders of a majority of the
Flexible Growth Fund's
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outstanding voting securities (as defined below under "Company Shares"). The
Flexible Growth Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Flexible
Growth Fund's total assets would be invested in such issuer, or the Flexible
Growth Fund would hold more than 10% of any class of securities of the issuer,
except that up to 25% of the value of the Flexible Growth Fund's total assets
may be invested without regard to such limitations. There is no limit to the
percentage of assets that may be invested in U.S. Treasury bills, notes, or
other obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of the
Flexible Growth Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For examples,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. Borrow money or issue senior securities, except that the Flexible Growth
Fund may borrow from banks or enter into reverse repurchase agreements or dollar
roll agreements for temporary purposes in amounts up to one-third of the value
of its total assets at the time of such borrowing, and except as permitted
pursuant to appropriate exemptions from the 1940 Act.
4. Make loans, except that the Flexible Growth Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objectives and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
In addition to the above investment restrictions, the Flexible Growth Fund is
subject to certain other investment restrictions set forth under "INVESTMENT
OBJECTIVES AND POLICIES -- Investment Restrictions" in the Company's Statement
of Additional Information.
PRICING SHARES
The net asset value per share of the Flexible Growth Fund is computed each day
on which the New York Stock Exchange (the "Exchange") is open as of the close of
trading on the Exchange (currently 4:00 p.m. Eastern time for the purpose of
pricing the Flexible Growth Fund's shares) (the "Valuation Time") except on days
when changes in the value of the Flexible Growth Fund's securities do not affect
the current net asset value of its shares or on days during which no shares are
tendered for redemption and no orders to purchase shares are received. The
Exchange is currently closed on weekends, New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. The net asset value per share for a particular class of the
Flexible Growth Fund is determined by valuing the Flexible Growth Fund's
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<PAGE> 79
assets allocable to such class, subtracting its liabilities allocable to such
class and any liabilities charged directly to the class and dividing the result
by the number of its shares of that class outstanding.
Portfolio securities listed on an exchange are valued on the basis of the last
quoted sale price on the exchange where such securities are principally traded
on the valuation date, prior to the close of trading on the exchange, or, in the
absence of any sales, at the mean of the bid and asked price on such principal
exchange prior to the close of trading on the exchange. Other securities and
instruments for which market quotations are not readily available are valued at
fair value, as determined in good faith by the Company's Board of Directors.
Debt securities may be valued on the basis of independent pricing services
approved by the Board of Directors, which use information with respect to
transactions in such securities, quotations from dealers, market transactions in
comparable securities and various relationships between securities in
determining value.
HOW TO BUY SHARES
Shares of the Flexible Growth Fund are offered on each day on which the
Exchange is open for business. Orders for the purchase of the Flexible Growth
Fund's shares will be confirmed at the offering price, which is the net asset
value per share next computed after the Company receives the purchase order in
proper form, plus any applicable sales charge. No certificates are issued.
Therefore, orders for shares of the Flexible Growth Fund received by the
Company prior to the close of the Exchange will receive the offering price
computed at the close of trading on the Exchange on the same day. Orders
received after that day's close of trading on the Exchange will receive the next
business day's offering price. There is a $1,000 minimum initial purchase
requirement for both Investor A and Investor B shares of the Flexible Growth
Fund and a $100 minimum subsequent purchase requirement (except for reinvestment
of dividends and distributions). The initial and subsequent minimum investment
amounts have been waived for employees of Provident, JIR and the Distributor.
The minimum purchase requirement is lowered to $500 for IRAs. Shareholders
receiving banking or other services from Provident or its affiliates will be
charged the usual and customary fees for such services even if such services
include the purchase of the Flexible Growth Fund's shares. However, a
shareholder who maintains an investment balance of $10,000 or more in the
Flexible Growth Fund and has either a Provident Advantage or Provident Silver
Advantage checking account will be eligible to have his/her monthly service
charge waived on his/her respective advantage account (one per customer). If a
balance of $30,000 or more is maintained in the Flexible Growth Fund by a
shareholder, the monthly service charge on a Premier Advantage checking account
will be waived.
Shares may be purchased through the Distributor. The Distributor is located at
3435 Stelzer Road, Columbus, Ohio 43219. Shares also may be purchased through
other broker-dealers, including broker-dealers affiliated with the Company and
Provident. In the case of an order for the purchase of shares placed through a
broker-dealer, the applicable public offering price will be the net asset value
as so determined, plus any applicable sales charge, but only if the broker-
dealer receives the order prior to the Valuation Time for that day and transmits
it to the Distributor prior to the Valuation Time for that day. The
broker-dealer is responsible
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<PAGE> 80
for transmitting such orders promptly. If the broker-dealer fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next business day.
Shares may also be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by Provident or its correspondent or
affiliated banks (collectively, the "Banks").
Shares of the Flexible Growth Fund sold to the Banks acting in a fiduciary,
advisory, custodial (other than for IRAs), agency, or other similar capacity on
behalf of Customers will normally be held of record by the Banks. With respect
to shares of the Flexible Growth Fund so sold, it is the responsibility of the
particular Bank to transmit purchase or redemption orders to the Distributor and
to deliver federal funds for purchase on a timely basis. Beneficial ownership of
shares will be recorded by the Banks and reflected in the account statements
provided by the Banks to Customers. A Bank will exercise voting authority for
those shares for which it is granted authority by the Customer.
In addition, an account for the purchase of shares of the Flexible Growth Fund
may be opened by mailing to the Company, c/o The Provident Bank, Mutual Fund
Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967, a completed account
application and a check made payable to the Flexible Growth Fund for $1,000 or
more. An account may also be opened by contacting The Provident Bank, Mutual
Fund Services, at 1-800-424-2295, to obtain the number of an account to which
wire or electronic funds transfer ("EFT") of funds can be made and by sending in
a completed account application. Subsequent investments in a Portfolio in the
minimum amount of $100 may be made by check, by wiring Federal funds or by an
EFT.
If payment is made by Federal Funds wire, funds must be received by 3:00 p.m.,
Eastern time, on the next business day following the order. Purchases may be
made by wiring the Flexible Growth Fund's custodian in accordance with the
following procedures:
1. Telephone Provident at 1-800-424-2295 and specify the Portfolio in which
the investment is to be made, provide the name, address, telephone number and
tax identification number of the investor, the amount being wired and by which
bank. Provident will then provide the investor with a Portfolio account number.
2. The bank wiring the funds to be invested must designate the Portfolio
account number which Provident has assigned to the investor and wire the Federal
Funds to:
The Provident Bank/Cincinnati
ABA: 042000424
Mutual Fund Services
for further credit to:
The Riverfront Flexible Growth Fund
of The Riverfront Funds
Account Number ___________________________
Account Name _____________________________
The Company and the Distributor reserve the right to reject any order for the
purchase of shares in whole or in part, including purchases made with foreign or
third party drafts or checks, or to limit or suspend without prior notice the
offering of the Flexible Growth Fund's shares.
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<PAGE> 81
SALES CHARGES
INVESTOR A SHARES
There is a sales charge imposed at the time of purchase of the Flexible Growth
Fund's Investor A shares which is a percentage of the offering price. The sales
charge is paid to the Distributor which in turn may reallow all or a portion of
the sales charge to other broker-dealers. The applicable sales charges are as
follows:
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
CONCESSION
AS A % TO DEALERS
AS A % OF OF NET AS A % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED* PRICE
- ----------------------- --------- --------- ----------
<S> <C> <C> <C>
Under $100,000......... 4.50% 4.71% 4.00%
$100,000--$249,999..... 3.50% 3.63% 3.00%
$250,000--$499,999..... 2.50% 2.56% 2.00%
$500,000--$999,999..... 1.50% 1.52% 1.00%
$1,000,000 and over.... 0.00% 0.00% 0.00%
</TABLE>
- ------------
* Rounded to the nearest one-hundredth percent.
The Sales Charge Schedule is applicable to (1) purchases of Investor A shares
of the Flexible Growth Fund and any other Portfolio sold with a sales charge (a
"Load Portfolio") made at one time, (2) concurrent purchases of Investor A
shares (see "Concurrent Purchases"), or (3) purchases of Investor A shares made
pursuant to Rights of Accumulation or Letters of Intent by any purchaser
("Purchaser"), which includes the following persons: an individual; an
individual, his or her spouse and children under the age of 21; a trustee or
other fiduciary of a single trust estate or single fiduciary account established
for their benefit; an organization exempt from federal income tax under Section
501(c)(3) or (13) of the Internal Revenue Code; a pension, profit-sharing or
other employee benefit plan whether or not qualified under Section 401 of the
Internal Revenue Code; or other organized groups of persons, whether
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying Purchaser.
INVESTOR B SHARES
Investor B shares may only be purchased in amounts of less than $250,000.
There is no sales charge imposed upon purchases of Investor B shares, but
investors may be subject to a contingent deferred sales charge ranging from 4%
to 1% when Investor B shares are redeemed within the first six years after
purchase. See "Contingent Deferred Sales Charge -- Investor B Shares" below.
GENERAL
Upon written notice to dealers with whom it has dealer agreements, the
Distributor may reallow up to the full applicable sales charge. Dealers to whom
more than 90% of the entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
Provident Securities, Inc., an affiliate of Provident ("PSI"), will also pay
additional consideration to dealers not to exceed 4.0% of the offering price per
share on all sales of Investor B shares as an expense of PSI for which PSI will
be reimbursed by the Distributor under the Investor B Plan (as described below)
or upon receipt of a contingent deferred sales charge. Any additional
consideration or incentive program may be terminated at any time by the
Distributor.
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The Distributor, at its expense, will also provide additional compensation to
dealers in connection with sales of shares of the Flexible Growth Fund. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Portfolios of the Company,
and/or other dealer-sponsored special events. In some instances, this
compensation will be made available only to certain dealers whose
representatives have sold a significant amount of such shares. Compensation will
include payment for travel expenses, including lodging, incurred in connection
with trips taken by invited registered representatives and members of their
families to locations within or outside of the United States for meetings or
seminars of a business nature. Compensation will also include the following
types of non-cash compensation offered through sales contests: (1) vacation
trips, including the provision of travel arrangements and lodging at luxury
resorts at an exotic location, (2) tickets for entertainment events (such as
concerts, cruises and sporting events) and (3) merchandise (such as clothing,
trophies, clocks and pens). Dealers may not use sales of a Portfolio's shares to
qualify for this compensation to the extent such may be prohibited by the laws
of any state or any self-regulatory agency, such as the NASD. None of the
aforementioned compensation is paid for by the Flexible Growth Fund or its
shareholders.
REDUCED SALES CHARGES --
INVESTOR A SHARES
The sales charges set forth in the Sales Charge Schedule set forth above may
be reduced as follows:
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of the Flexible Growth Fund's Investor A shares and
Investor A shares of any other Load Portfolio.
RIGHTS OF ACCUMULATION
In calculating the sales charge applicable to current purchases of the
Flexible Growth Fund's Investor A shares, a Purchaser is entitled to accumulate
current purchases with the current value of previously purchased Investor A
shares of the Flexible Growth Fund or the other Load Portfolios and which are
still held by the Purchaser. As an example, if a Purchaser held Investor A
shares of the Flexible Growth Fund valued at $100,000 in aggregate and purchased
an additional $5,000 of Investor A shares of the Flexible Growth Fund, the sales
charge for the $5,000 purchase would be 3.50% as indicated in the Sales Charge
Schedule applicable to a $105,000 purchase. The Distributor must be notified at
the time of purchase that a Purchaser is entitled to a reduced sales charge
which will be granted subject to confirmation of the Purchaser's holdings.
Rights of Accumulation may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Investor A
shares of the Flexible Growth Fund alone or in combination with purchases of
Investor A shares of any of the other Load Portfolios by completing the Letter
of Intent section of the application. By doing so, the Purchaser agrees to
invest within a thirteen-month period a specified amount which, if invested at
one time, would qualify for a reduced sales charge. Each purchase will be made
at a public offering price applicable to a single
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<PAGE> 83
transaction in the dollar amount specified on the application, as described
herein, after receipt of the Letter of Intent by the Distributor. The Letter of
Intent does not obligate the Purchaser to purchase, nor the Company to sell, the
amount indicated.
The Letter of Intent may be back-dated up to ninety days so that any
investments made in any of the Load Portfolios during the preceding ninety day
period, valued at the Purchaser's cost, can be applied toward fulfillment of the
Letter of Intent. However, there will be no refund of sales charges already paid
during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount specified in the Letter of Intent. Income and
capital gains distributions taken in additional shares will not apply toward
completion of the Letter of Intent.
Out of the initial purchase (or subsequent purchases, if necessary), 5% of the
dollar amount specified on the application will be held in escrow by Provident
in the form of Investor A shares registered in the Purchaser's name. The
escrowed Investor A shares will not be available for redemption, transfer or
encumbrance by the Purchaser until the Letter of Intent is completed or the
higher sales charge is paid. All income and capital gains distributions on
escrowed Investor A shares will be paid to the Purchaser.
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen month period), the Purchaser will
be notified and the escrowed Investor A shares will be released. If the intended
investment is not completed, the Purchaser will be asked to remit to the
Distributor any difference between the sales charge on the amount specified and
on the amount actually purchased. If the Purchaser does not, within 20 days
after receipt of a written request by the Distributor or the shareholder's
dealer, pay such difference in sales charge, Provident as transfer agent (the
"Transfer Agent"), will redeem an appropriate number of the escrowed Investor A
shares in order to realize such difference. Investor A shares remaining after
any such redemption will be released by the Transfer Agent. Any redemptions made
by the Purchaser during the thirteen-month period will be subtracted from the
amount of the purchases for purposes of determining whether the Letter of Intent
has been completed. In the event of a total redemption of the account prior to
completion of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
the Transfer Agent its attorney to surrender for redemption any or all escrowed
shares with full power of substitution. The Purchaser or his dealer must inform
the Distributor or the Transfer Agent that a Letter of Intent is in effect each
time a purchase is made.
WAIVER OF SALES CHARGES
Investor A shares may also be sold, to the extent permitted by applicable law,
at net asset value without the imposition of an initial sales charge to: (1)
personal trust, employee benefit, agency and custodial (other than IRA) clients
of Provident; (2) advisory clients of JIR; (3) employees of Provident, the
Distributor, JIR, and their spouses; (4) broker/dealers purchasing shares for
their own accounts; (5) all affiliates of Provident; (6) corporations; (7)
employees (and their spouses and children under the age of 21) of any
broker-dealer with which the Distributor enters into a dealer agreement to sell
Inves-
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<PAGE> 84
tor A shares of the Company; (8) orders placed on behalf of other investment
companies distributed by The BISYS Group, Inc., or any of its affiliates,
including the Distributor; and (9) persons investing directly through a discount
brokerage firm which has entered into a dealer agreement with the Distributor.
In addition, a shareholder who has redeemed all or any portion of his or her
investment in the Flexible Growth Fund may purchase without a sales charge
Investor A shares of any Load Portfolio in an amount up to a maximum dollar
amount of such shares redeemed within 30 days after such redemption. In order to
so purchase Investor A shares without a sales charge, the shareholder, or his or
her dealer, must notify the Company at the time an order is placed that such a
purchase qualifies for this exemption from sales charges and must provide any
other information necessary for confirmation of qualification.
CONTINGENT DEFERRED SALES CHARGE --
INVESTOR B SHARES
Investor B shares which are redeemed within the first six years of purchase
will be subject to a contingent deferred sales charge equal to the applicable
percentage set forth below of an amount equal to the lesser of the net asset
value at the time of purchase of the Investor B shares being redeemed or the net
asset value of such shares at the time of redemption. Accordingly, a contingent
deferred sales charge will not be imposed on amounts representing increases in
net asset value above the net asset value at the time of purchase. In addition,
a charge will not be assessed on Investor B shares purchased through
reinvestment of dividends or capital gains distributions.
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
- ------------------------------- --------------------
<S> <C>
First.......................... 4%
Second......................... 4%
Third.......................... 4%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
Seventh and following.......... 0%
</TABLE>
Solely for purposes of determining whether a year has elapsed from the time of
purchase of any Investor B shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares acquired pursuant to reinvestment of dividends
or distributions and then from the earliest purchase of shares.
For example, assume an investor purchased 100 Investor B shares with a net
asset value of $10 per share (i.e., at an aggregate net asset value of $1,000)
and in the eleventh month after purchase, the net asset value per share is $12
and, during such time, the investor has acquired five additional Investor B
shares through dividend reinvestment. If the investor makes an initial
redemption of 50 Investor B shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor B shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of $2 per share. Therefore, $450 of the $600 redemption proceeds
will be subject to the charge of 4% ($18.00).
The contingent deferred sales charge is waived on redemptions of Investor B
shares
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<PAGE> 85
(i) following the death or disability (as defined in the Internal Revenue Code
of 1986, as amended (the "Code")) of a shareholder, (ii) to the extent that the
redemption represents a minimum required distribution from an IRA or a Custodial
Account under Code Section 403(b)(7) to a shareholder who has reached age
70 1/2, and (iii) to the extent the redemption represents the minimum
distribution from retirement plans under Code Section 401(a) where such
redemption is necessary to make distributions to plan participants.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES
Before purchasing Investor A shares or Investor B shares of the Flexible
Growth Fund, investors should consider whether, during the anticipated life of
their investment in the Flexible Growth Fund, the accumulated Rule 12b-1 fee and
potential contingent deferred sales charges on Investor B shares prior to
conversion (as described below) would be less than the initial sales charge and
accumulated Rule 12b-1 fee on Investor A shares purchased at the same time, and
to what extent such differential would be offset by the higher yield of Investor
A shares. In this regard, to the extent that the sales charge for the Investor A
shares is waived or reduced by one of the methods described above or the
investment is $100,000 or more, investments in Investor A shares become more
desirable. The Company will refuse all purchase orders for Investor B shares of
over $250,000.
Although Investor A shares are subject to a Rule 12b-1 fee, they are not
subject to the higher Rule 12b-1 fee applicable to Investor B shares. For this
reason, Investor A shares can be expected to pay correspondingly higher
dividends per share. However, because initial sales charges are deducted at the
time of purchase, purchasers of Investor A shares who do not qualify for waivers
of or reductions in the initial sales charge would have less of their purchase
price initially invested in the Flexible Growth Fund than purchasers of Investor
B shares.
As described above, purchasers of Investor B shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B shares. Because the Company's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B shares would, however, own shares that are subject to
higher annual expenses and, for a six-year period, such shares would be subject
to a contingent deferred sales charge ranging from 4.00% to 1.00% upon
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate
annual Investor B shares' Rule 12b-1 fees to the cost of the initial sales
charge and Rule 12b-1 fee on the Investor A shares. Over time, the expense of
the annual Rule 12b-1 fee on the Investor B shares may equal or exceed the
initial sales charge and annual Rule 12b-1 fee applicable to Investor A shares.
For example, if net asset value remains constant and assuming no waivers of any
Rule 12b-1 fees, the aggregate Rule 12b-1 fee with respect to Investor B shares
of the Flexible Growth Fund would equal or exceed the initial sales charge and
aggregate Rule 12b-1 fees of Investor A shares approximately seven years after
the purchase. In order to reduce such fees of investors that hold Investor B
shares for seven years or more, Investor B shares will be automatically
converted to Investor A shares, as described below, at the end of an eight-year
period. This example assumes that the initial purchase of Investor
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<PAGE> 86
A shares would be subject to the maximum initial sales charge of 4.50%. This
example does not take into account the time value of money which reduces the
impact of the Investor B shares' Rule 12b-1 fee on the investment, the benefit
of having the additional initial purchase price invested during the period
before it is effectively paid out as a Rule 12b-1 fee, fluctuations in net asset
value, the effect of different performance assumptions or any waivers of Rule
12b-1 fees.
If a shareholder who owns both Investor A shares and Investor B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Investor B shares that are not subject to a contingent
deferred sales charge; (b) Investor A shares, and (c) Investor B shares subject
to a contingent deferred sales charge, unless the shareholder has made a
specific election otherwise.
CONVERSION FEATURE
Investor B shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fee. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge or
other charge except that the Rule 12b-1 fee applicable to Investor A shares
shall thereafter be applied to such converted shares. Such investors will then
benefit from the lower Rule 12b-1 fee of Investor A shares. Because the per
share net asset value of the Investor A shares may be higher than that of the
Investor B shares at the time of conversion, a shareholder may receive fewer
Investor A shares than the number of Investor B shares converted, although the
dollar value will be the same. Reinvestments of dividends and distributions in
Investor B shares will not be considered a new purchase for purposes of the
conversion feature and will convert to Investor A shares in the same proportion
as the number of the shareholder's Investor B shares converting to Investor A
shares bears to the shareholder's total Investor B shares not acquired through
dividends and distributions.
If a shareholder effects one or more exchanges among Investor B shares of the
Portfolios during the eight-year period, the holding period for shares so
exchanged will be counted toward such period.
OTHER PURCHASE INFORMATION
SYSTEMATIC INVESTMENT PLAN
Shareholders may also arrange for systematic monthly or quarterly investments
in their accounts. Once proper authorization has been given, a shareholder's
bank account will be debited on the date specified to purchase shares in the
Flexible Growth Fund. A confirmation will be received from the Transfer Agent
for every transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Provident offers tax-advantaged Individual Retirement Accounts for which the
Flexible Growth Fund may be an appropriate investment. A minimum initial
investment of $500 is required. For details, including fees and an application
form, please call the telephone number listed below under "Shareholder Services"
or contact Mutual Fund Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967.
EXCHANGES
If a shareholder has obtained the appropriate prospectus, he or she may
exchange Investor A or Investor B shares of the Flexible Growth Fund for shares
of the same class of any of the other Portfolios on the basis of
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<PAGE> 87
their respective net asset values by calling toll free 1-800-424-2295 or by
writing The Provident Bank, c/o Mutual Fund Services, P.O. Box 14967,
Cincinnati, Ohio 45202-0967. Subject to the qualifications and limitations
described below under "How to Redeem Shares -- Telephone," neither the Company
nor any of its service providers assumes responsibility for the authenticity of
any telephone request for an exchange. Shares purchased by check are eligible
for exchange after 15 days. No contingent deferred sales charge is imposed upon
exchanges of Investor B shares of one Portfolio for Investor B shares of another
Portfolio.
If Investor B shares of the Flexible Growth Fund are exchanged into the Money
Market Fund, no contingent deferred sales charge will be imposed; however, the
exchange will freeze the running of the time periods applicable to contingent
deferred sales charges and the conversion feature. An exchange back into
Investor B shares will restart such time periods. If less than all of a
shareholder's Investor B shares of the Flexible Growth Fund are exchanged into
the Money Market Fund, the shareholder's Investor B shares will be deemed to be
exchanged in the following order: (1) Investor B shares that are not subject to
a contingent deferred sales charge, and (2) Investor B shares in reverse order
in which such shares were acquired (i.e., last in, first out).
Orders to exchange Investor A or Investor B shares of the Flexible Growth Fund
for shares of the Money Market Fund will be executed by redeeming the shares of
the Flexible Growth Fund and purchasing Investor A shares of the Money Market
Fund at the net asset value of such shares next determined after the proceeds
from such redemption become available, which may be up to seven days after such
redemption. In all other cases, orders for exchanges received by the Company
prior to the close of business on any day the Company is open for business will
be executed at the respective net asset values determined as of the close of
business that day. Orders for exchanges received after the close of business
will be executed at the respective net asset values next determined after the
close of the next business day.
An excessive number of exchanges may be disadvantageous to the Company.
Therefore the Company, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the Portfolios in a year or three in a calendar
quarter.
An exchange order must comply with the requirements for a redemption or
repurchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial purchase requirements of
the Portfolio being acquired. An exchange constitutes a sale for federal income
tax purposes.
The exchange privilege is available only in states where shares of the
Portfolio being acquired may legally be sold. The Company reserves the right, at
any time, to modify or terminate any of the foregoing exchange privileges. The
Company, however, will give shareholders 60 days' advance written notice of any
such modification or termination.
HOW TO REDEEM SHARES
Shares of the Flexible Growth Fund may be redeemed for cash at their net asset
value, including any applicable contingent deferred sales charge, upon written
order by the shareholder to the Company, c/o The Provident Bank, Mutual Fund
Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967. A shareholder's
signature(s) on the written or-
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der must be guaranteed as described below. In order to redeem by telephone,
shareholders must have completed the authorization in their account
applications. Proceeds for shares redeemed on telephonic order will be deposited
by wire or EFT only to the bank account designated in the account application.
The redemption value is the net asset value per share, plus any applicable
contingent deferred sales load, and may be more or less than the shareholder's
cost of the Flexible Growth Fund's shares depending upon changes in the value of
the Flexible Growth Fund's securities between purchase and redemption. The
Company computes the amount due a shareholder at the next Valuation Time after
it has received all proper documentation. Payment of the amount due on
redemption will be made within seven days thereafter except as discussed below.
At various times, the Company may be requested to redeem shares for which it
has not yet received good payment. In such a case, the Company may delay the
mailing of a redemption check or the wiring or EFT of redemption proceeds until
good payment has been collected for the purchase of such shares. This may take
up to 15 days. Any delay may be avoided by purchasing shares either with a
certified check or by Federal Reserve or bank wire of funds or EFT. Although the
mailing of a redemption check, wiring or EFT of redemption proceeds may be
delayed, the redemption value will be determined and the redemption processed in
the ordinary course of business upon receipt of proper documentation. In such a
case, after the redemption and prior to the release of the proceeds, no
appreciation or depreciation will occur in the value of the redeemed shares and
no interest will be paid on the redemption proceeds. If the payment of a
redemption has been delayed, the check will be mailed or the proceeds wired or
sent EFT promptly after good payment has been collected.
Shareholders may also redeem their shares through broker-dealers. The
Distributor, acting as agent for the Company, stands ready to repurchase the
Flexible Growth Fund's shares upon orders from dealers at the net asset value
next computed after the Distributor receives the order. When the Distributor has
received proper documentation, it will pay the redemption proceeds to the
broker-dealer placing the order within seven days thereafter. The Distributor
charges no fees for this service, except to the extent that a contingent
deferred sales charge may be imposed upon redemptions of Investor B shares.
However, a shareholder's broker-dealer may charge a service fee.
For the protection of shareholders, regardless of the number of shares or
amount of money involved in a redemption or repurchase, signatures on stock
powers and all written orders or authorizations must be guaranteed by a U.S.
stock exchange member, a U.S. commercial bank or trust company or other person
eligible to guarantee signatures under the Securities Exchange Act of 1934 and
the Transfer Agent's policies. The Company or the Transfer Agent may waive this
requirement but may also require additional documents in certain cases.
Currently the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less where the account address of record has been the
same for a minimum period of 90 days. The Company and the Transfer Agent reserve
the right to withdraw this waiver at any time.
If the Company receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Company cannot
execute
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the order. In such cases, the Company will request the missing information and
process the order on the day such information is received.
If a shareholder requests redemption by telephone and a bank account has
previously been designated, the shareholder should state whether the proceeds
should be wired, sent EFT or mailed to such bank. In the absence of a request
that the proceeds be wired, sent EFT or mailed to such bank, they will be sent
by check to the shareholder's address as it appears on the account registration.
The redemption order also should include the account name as registered with the
Company and the account number.
TELEPHONE
Under ordinary circumstances, shareholders may redeem up to $50,000 from their
accounts by telephoning Mutual Fund Services at: 1-800-424-2295.
In order to ensure that instructions received by the Transfer Agent are
genuine when a telephone transaction is initiated, a shareholder will be asked
to verify certain information specific to its account. At the conclusion of the
transaction, the shareholder will be given a transaction number confirming the
request, and written confirmation of the transaction will be mailed within 72
hours of the telephone transaction. The shareholder's telephone instructions
will be recorded. Redemptions by telephone are allowed only if the address and
bank account of record have been the same for a minimum period of 30 days.
The Company reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees. Except as otherwise noted, neither the Company nor
any of its service providers assume responsibility for the authenticity of any
instructions received by any of them from a shareholder in writing or by
telephone nor will any of them be liable when following instructions received by
the telephone that the Transfer Agent reasonably believes to be genuine. The
Transfer Agent will employ procedures designed to provide reasonable assurance
that instructions received by telephone are genuine. If, for any reason,
reasonable procedures are not followed, the Company or its service providers may
be liable for any losses due to unauthorized or fraudulent instructions. The
Company may temporarily suspend the right to redeem its shares when (1) the
Exchange is closed, other than customary weekend and holiday closings; (2)
trading on the Exchange is restricted; (3) an emergency exists and the Company
cannot dispose of its investments or fairly determine their value; or (4) the
Commission so orders.
If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent EFT to a
previously designated bank account as directed by the shareholder. If the
Company cannot be reached by telephone, shareholders should follow the
procedures for redeeming by mail or through a broker as set forth above.
AUTOMATIC WITHDRAWAL PLAN --
INVESTOR A SHARES
Under an Automatic Withdrawal Plan, if an account has a value of at least
$10,000 in Investor A shares of the Flexible Growth Fund, a shareholder may
arrange for regular monthly or quarterly fixed withdrawal payments. Each payment
must be at least $100 and may be as much as 1.5% per month or 4.5% per quarter
of the total net asset value of the Flexible Growth Fund's Investor A shares in
the account when the Automatic
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Withdrawal Plan is opened. Excessive withdrawals may decrease or deplete the
value of an account.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Company reserves
the right to redeem an account if its value has fallen below $500 as a result of
your redemptions (but not as a result of market action). The shareholder will be
notified in writing and allowed 45 days to purchase additional shares in order
to increase the balance over $500.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Company to pay for
all redemptions in cash, the Company may authorize payment to be made in
portfolio securities or other property. However, the Company has obligated
itself under the 1940 Act to redeem for cash all shares presented for redemption
by any one shareholder up to $250,000, or 1% of the Flexible Growth Fund's net
assets if that is less, in any 90-day period. Securities delivered in payment of
redemptions would be valued at the same value assigned to them in computing the
net asset value per share. Shareholders receiving such securities would incur
brokerage costs when the securities are sold.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from Provident by calling
toll free 1-800-424-2295 or by writing the Distributor at 3435 Stelzer Road,
Columbus, Ohio, 43219.
DIVIDENDS AND TAXES
DIVIDENDS
The Flexible Growth Fund intends to declare and distribute to its shareholders
dividends from net investment income monthly and to declare and distribute all
net realized long-term capital gains at least annually. The Flexible Growth Fund
intends to distribute its net long-term capital gains as capital gains
dividends; such dividends are treated by shareholders as long-term capital
gains. Such distributions will be designated as long-term capital gains
dividends by a written notice mailed to each shareholder no later than 60 days
after the close of the Flexible Growth Fund's fiscal year.
The Flexible Growth Fund's net investment income available for distribution to
the holders of Investor A shares and Investor B shares will be reduced by the
amount of Rule 12b-1 fees payable under the respective Plan.
Unless the Company receives instructions to the contrary before the record
date, it will assume that a shareholder wishes to receive that distribution and
future capital gains and income distributions in additional shares. Instructions
continue in effect until changed in writing. Account statements and/or checks as
appropriate will be mailed to shareholders within seven days after the Flexible
Growth Fund pays the Distributor.
If a shareholder elects to receive distributions in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the shareholder's cash election will be changed automatically and future
dividend and capital gains distributions will be reinvested in the Flexible
Growth Fund at the per share net asset value determined as of the date of
payment of the distribution. In addition, any
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undeliverable checks or checks that remain uncashed for six months will be
canceled and will be reinvested in the Flexible Growth Fund at the per share net
asset value determined as of the date of cancellation.
TAXES
Each of the Portfolios of the Company, including the Flexible Growth Fund, is
treated as a separate entity for federal income tax purposes and intends to
qualify as a "regulated investment company" under the Code for so long as such
qualification is in the best interest of that Portfolio's shareholders.
Qualification as a regulated investment company under the Code requires, among
other things, that the regulated investment company distribute to its
shareholders at least 90% of its investment company taxable income. The Flexible
Growth Fund contemplates declaring as dividends all or substantially all of the
Flexible Growth Fund's investment company taxable income (before deduction of
dividends paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, the
Flexible Growth Fund would be subject to a nondeductible excise tax equal to 4%
of the deficiency.
It is expected that the Flexible Growth Fund will distribute annually to
shareholders all or substantially all of the Flexible Growth Fund's net ordinary
income and net recognized capital gains and that such distributed net ordinary
income and distributed net realized capital gains will be taxable income to
shareholders for federal income tax purposes, even if paid in additional shares
of the Flexible Growth Fund and not in cash. The dividends-received deduction
for corporations will apply to the aggregate of such ordinary income
distributions in the same proportion as the aggregate dividends eligible for the
dividends received deduction, if any, received by the Flexible Growth Fund bear
to its gross income.
Distribution by the Flexible Growth Fund of the excess of net long-term
capital gain over net short-term capital loss is taxable to shareholders as
long-term capital gain in the year in which it is received, regardless of how
long the shareholder has held the shares. Such distributions are not eligible
for the dividends-received deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Flexible Growth Fund and its
shareholders. Potential investors in the Flexible Growth Fund are urged to
consult their tax advisers concerning the application of federal, state and
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local taxes as such laws and regulations affect their own tax situation.
The Transfer Agent will inform shareholders at least annually of the amount
and nature of such income and capital gains.
COMPANY MANAGEMENT AND
EXPENSES
BOARD OF DIRECTORS
Under Maryland law, the Company's Board of Directors, which is elected by the
Company's shareholders, has absolute and exclusive control over the management
and disposition of all assets of each Portfolio of the Company. The Directors,
in turn, elect the officers of the Company to supervise actively its day-to-day
operations. Subject to the authority of the Board of Directors, Provident,
through JIR as subadviser, supervises the investment programs of the Flexible
Growth Fund.
INVESTMENT ADVISER
Provident, an Ohio banking corporation located at One East Fourth Street,
Cincinnati, Ohio 45202, has entered into an Investment Advisory Agreement with
the Company whereby Provident supervises and manages through JIR the investment
and reinvestment of the assets of the Flexible Growth Fund. Provident has been
providing investment advisory services to individual and corporate trust
accounts since 1902.
Provident is a subsidiary of Provident Bancorp, Inc. ("PBI"), a bank holding
company located in Cincinnati, Ohio with approximately $6.2 billion in
consolidated assets as of December 31, 1995. Through offices in Ohio and
Kentucky, PBI and its subsidiaries provide a broad range of financial services
to individuals and businesses. Under the Investment Advisory Agreement, for
services rendered and expenses assumed, Provident receives annually a fee from
the Flexible Growth Fund equal to 0.90% of the Flexible Growth Fund's average
net assets. Provident may periodically voluntarily reduce all or a portion of
its investment advisory fee with respect to the Flexible Growth Fund to increase
the net income of the Flexible Growth Fund available for distribution as
dividends. The voluntary fee reduction will cause the yield of the Flexible
Growth Fund to be higher than it would otherwise be in the absence of such a
reduction.
Pursuant to the terms of its Investment Advisory Agreement with the Company,
Provident has entered into a Sub-Investment Advisory Agreement with JIR, 1349
Fairground Road, Beavercreek, Ohio 45385. JIR is owned by Frank E. James, Jr.,
Ph.D., who established it in 1972. JIR provides advice to institutional as well
as individual clients, including NYSE listed companies, colleges, banks,
hospitals, foundations, trusts, endowment funds and individuals. Pursuant to the
terms of such Sub-Investment Advisory Agreement, JIR has been retained by
Provident to manage the day-to-day investment and reinvestment of the assets of
the Flexible Growth Fund, subject to the direction and control of the Company's
Board of Directors, and Provident is responsible for selecting and monitoring
JIR and reporting the activities of JIR to the Company's Board of Directors.
Since the commencement of the Flexible Growth Fund's operations, Frank E.
James, Jr., Ph.D. and Barry R. James have been responsible for the day-to-day
management of the Flexible Growth Fund's portfolio. Dr. James has been president
and a director of JIR since 1976. Mr. Barry James has served as an investment
analyst and Assistant Vice President of JIR since 1987.
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For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with Provident, JIR receives from Provident a fee, computed
daily and paid monthly, at the annual rate of 0.50% of the Flexible Growth
Fund's average daily net assets.
In addition to serving as Investment Adviser, Provident has entered into an
agreement with the Company to provide transfer agency services to the Company
and each Portfolio. Under the Master Transfer and Recordkeeping Agreement,
Provident receives from the Flexible Growth Fund, a fee computed daily and paid
monthly. Such fee is calculated by adding the sum of (i) .04% of the Fund's
average daily net assets attributable to its Investor A Shares and (ii) $20,000
annual fee plus $23 per shareholder account and certain other fixed fees and
out-of-pocket expenses attributable to its Investor B Shares. BISYS Fund
Services Ohio, Inc., an affiliate of the Distributor ("BISYS") provides
sub-transfer agency services for the Investor B shares of the Flexible Growth
Fund pursuant to a Sub-Transfer Agency Agreement between Provident and BISYS.
CUSTODIAN AND FUND ACCOUNTANT
The Provident Bank (the "Custodian") also serves as custodian for and provides
certain fund accounting services to the Flexible Growth Fund. Pursuant to the
Custodian, Fund Accounting and Recordkeeping Agreement with the Company, the
Custodian receives compensation from the Flexible Growth Fund for such services
in an amount equal to a fee, computed daily and paid monthly, at the annual rate
of 0.15% of the Flexible Growth Fund's average daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
The Distributor, located at 3435 Stelzer Road, Columbus, Ohio 43219, is the
administrator for the Flexible Growth Fund, and also acts as the Flexible Growth
Fund's principal underwriter (the "Administrator" or the "Distributor," as the
context indicates).
The Administrator generally assists in
all aspects of the Flexible Growth Fund's
administration and operation. For expenses
assumed and services provided as
administrator pursuant to its administration agreement with the Company, the
Administrator receives a fee from the Flexible Growth Fund, computed daily and
paid periodically, at an annual rate of 0.20% of the Flexible Growth Fund's
average daily net assets. The Administrator may periodically voluntarily reduce
all or a portion of its administration fee with respect to the Flexible Growth
Fund to increase the net income of the Flexible Growth Fund available for
distribution as dividends. The voluntary fee reduction will cause the yield of
the Flexible Growth Fund to be higher than it would otherwise be in the absence
of such a reduction.
The Distributor acts as agent for the Flexible Growth Fund in the distribution
of its shares and, in that capacity, solicits orders for the sale of shares,
advertises, and pays the cost of that advertising, office space and its
personnel involved in such activities. The Distributor receives no compensation
under its Distribution Agreement with the Company, but may retain some or all of
any sales charge imposed upon the shares and may receive compensation under the
Distribution Plans described below.
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DISTRIBUTION PLANS --
INVESTOR A SHARES
The Investor A shares of the Flexible Growth Fund may bear some of the costs
of selling such shares under a Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act (the "Investor A Plan"). The Investor A Plan of the Flexible
Growth Fund provides that the Flexible Growth Fund may expend daily amounts at
an annual rate of up to 0.25% of the average daily net asset value of the
Flexible Growth Fund's Investor A shares to finance any activity which is
principally intended to result in the sale of the Flexible Growth Fund's
Investor A shares including, without limitation, expenditures consisting of
payments to the Distributor (1) to enable the Distributor to pay or to have paid
to others who sell Investor A shares of the Flexible Growth Fund a maintenance
or other fee, at such intervals as the Distributor may determine, with respect
to Investor A shares of the Flexible Growth Fund previously sold by others and
remaining outstanding during the period in respect of which such fee is or has
been paid; and/or (2) to compensate the Distributor for its efforts with respect
to sales of Investor A shares of the Flexible Growth Fund since inception of the
Plan.
Fees paid pursuant to the Investor A Plan are accrued daily and paid monthly,
and are charged as expenses of Investor A shares of the Flexible Growth Fund as
accrued.
INVESTOR B SHARES
Pursuant to Rule 12b-1, the Company has also adopted an Investor B
Distribution Plan (the "Investor B Plan") with respect to Investor B shares of
the Flexible Growth Fund. Pursuant to the Investor B Plan, the Flexible Growth
Fund is authorized to pay or reimburse the Distributor (a) a distribution fee in
an amount not to exceed on an annual basis 0.75% of the average daily net asset
value of Investor B shares of the Flexible Growth Fund (the "Distribution Fee")
and (b) a service fee in an amount not to exceed on an annual basis 0.25% of the
average daily net asset value of the Investor B shares of the Flexible Growth
Fund (the "Service Fee"). Payments under the Investor B Plan will be calculated
daily and paid monthly at a rate not to exceed the limits described above, which
rates are set from time to time by the Company's Board of Directors. Payments of
the Distribution Fee to the Distributor pursuant to the Investor B Plan will be
used (i) to compensate Participating Organizations (as defined below) for
providing distribution assistance relating to Investor B shares, and (ii) for
promotional activities intended to result in the sale of Investor B shares such
as to pay for the preparation, printing and distribution of prospectuses to
other than current shareholders, and payments of the Service Fee to the
Distributor pursuant to the Investor B Plan will be used to compensate
Participating Organizations for providing shareholder services with respect to
their customers who are, from time to time, beneficial and record holders of
Investor B shares. Participating Organizations include banks (including
Provident and its affiliates), broker-dealers and other financial institutions.
Fees paid pursuant to the Investor B Plan are accrued daily and paid monthly,
and are charged as expenses of Investor B shares of the Flexible Growth Fund as
accrued.
Pursuant to the Investor B Plan, the Distributor may enter into Rule 12b-1
Agreements with Participating Organizations for providing distribution and
shareholder services to their customers who are the record or beneficial owners
of Investor B shares. Such Participating Organizations will be compensated at
the annual rate of up to
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1.00% of the average daily net asset value of the Investor B shares held of
record or beneficially by such customers. The distribution services provided by
Participating Organizations for which the Distribution Fee may be paid may
include promoting the purchase of Investor B shares of the Flexible Growth Fund
by their customers; processing purchase, exchange, and redemption requests from
customers and placing orders with the Distributor or the Transfer Agent;
processing dividend and distribution payments from the Flexible Growth Fund on
behalf of customers; providing information periodically to customers, including
information showing their positions in Investor B shares; responding to
inquiries from customers concerning their investment in Investor B shares; and
providing other similar services as may be reasonably requested. The services
provided by Participating Organizations for which the Service Fee may be paid
may include providing shareholders information about their investment in the
Investor B shares of the Flexible Growth Fund and providing other continuing
personal services to holders of Investor B shares.
As required by Rule 12b-1, the Investor A Plan and the Investor B Plan (the
"Plans") were each approved by the Directors of the Company, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Independent Directors"). The Plans continue in effect as long as such
continuance is specifically approved at least annually by the Company's
Directors, including a majority of the Independent Directors.
The Plans may be terminated by a vote of a majority of the Independent
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the class of shares subject thereto. Any change in the Plans that
would increase materially the distribution expenses paid by the Flexible Growth
Fund requires shareholder approval; otherwise, the Plans may be amended by the
Directors, including a majority of the Independent Directors, by a vote cast in
person at a meeting called for the purpose of voting upon the amendment. As long
as either Plan is in effect, the selection or nomination of the Independent
Directors is committed to the discretion of the Independent Directors.
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan (the "Services Plan")
pursuant to which the Flexible Growth Fund is authorized to pay compensation to
banks and other financial institutions (each a "Service Organization"), which
may include Provident, its correspondent and affiliated banks, and the
Distributor, which agree to provide certain ministerial, recordkeeping and/or
administrative support services for their customers or account holders
(collectively "customers") who are the beneficial or record owners of shares of
the Flexible Growth Fund. In consideration for such services, a Service
Organization receives a fee from the Flexible Growth Fund computed daily and
paid monthly, at an annual rate of up to 0.25% of the average daily net asset
value of shares of the Flexible Growth Fund owned beneficially or of record by
such Service Organization's customers for whom the Service Organization provides
such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Service Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of shares of
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the Flexible Growth Fund, including activities such as responding to shareholder
inquiries regarding accounts, collecting information regarding changes in
accounts and further assisting the Transfer Agent in maintaining the Flexible
Growth Fund's records, processing dividend and distribution payments from the
Flexible Growth Fund on behalf of customers, providing periodic statements to
customers showing their positions in the shares of the Flexible Growth Fund,
providing sub-accounting with respect to shares beneficially owned by such
customers and providing customers with a service that invests the assets of
their accounts in shares of the Flexible Growth Fund pursuant to specific or
pre-authorized instructions. As of the date of this Prospectus, no Servicing
Agreements have been entered into on behalf of the Flexible Growth Fund.
BANKING LAWS
Provident believes that it possesses the legal authority to perform the
investment advisory service for the Flexible Growth Fund as set forth in its
Investment Advisory Agreement with the Company, as described in this Prospectus,
without violation of applicable banking laws and regulations, and has so
represented in its Investment Advisory Agreement with the Company. Future
changes in Federal or state statutes and regulations relating to permissible
activities of banks or bank holding companies and their subsidiaries and
affiliates as well as further judicial or administrative decisions or
interpretations of present and future statutes and regulations could change the
manner in which Provident performs such services for the Flexible Growth Fund.
See "MANAGEMENT OF THE COMPANY -- Glass-Steagall Act" in the Statement of
Additional Information for further discussion of applicable law and regulations.
FUND EXPENSES
Provident, JIR and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser, sub-investment adviser
and administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Flexible Growth Fund.
The Directors reserve the right, subject to the receipt of any necessary
relevant regulatory approvals or rulings, to allocate certain expenses (other
than those associated with the applicable Plan) to the shareholders of a
particular class, including Investor shares, on a basis other than relative net
asset value, as they deem appropriate ("Class Expenses"). In such event, Class
Expenses would be limited to: transfer agency fees identified by the Transfer
Agent as attributable to a specific class; printing and postage expenses related
to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; Blue Sky registration fees
incurred by a class of shares; Commission registration fees incurred by a class
of shares; expenses related to administrative personnel and service as required
to support the shareholders of a specific class; litigation or other legal
expenses relating solely to one class of shares; and Directors' fees incurred as
a result of issues relating solely to one class of shares.
SECURITIES TRANSACTIONS
Under policies established by the Board of Directors, JIR selects
broker-dealers to execute portfolio transactions for the Flexible Growth Fund
subject to receipt of best execution. When selecting broker-dealers, JIR may
consider as a factor the number of shares of the Flexible Growth Fund sold by a
broker-
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dealer. In addition, broker-dealers executing transactions for the Flexible
Growth Fund may from time to time be affiliated with the Company, Provident, JIR
or their affiliates. The Flexible Growth Fund may pay higher commissions to
broker-dealers which provide research services. JIR may use these services in
advising the Flexible Growth Fund as well as in advising its other clients.
PERFORMANCE DATA AND ADVERTISING
From time to time the Flexible Growth Fund may advertise "total return" and
"current yield." Both figures are based on historical earnings and are not
intended to indicate future performance. Average annual total return refers to
the Flexible Growth Fund's average annual compounded rates of return over
specified periods determined by comparing the initial amount invested to the
ending redeemable value of that amount. The resulting equation assumes
reinvestment of all dividends and distributions and deduction of any sales
charge and all recurring charges, if any, applicable to all shareholder
accounts. Aggregate total return is computed similarly to average annual total
return; however, the resulting rate of return is not annualized. Performance of
the Flexible Growth Fund may also be presented excluding the effect of a sales
charge.
Current yield quotations represent the yield on an investment for a stated
30-day period computed by dividing net investment income earned per share during
the base period by the maximum offering price per share on the last day of the
base period.
The Flexible Growth Fund may also include comparative performance information
in advertising or marketing its shares, such as data from Lipper Analytical
Services, Inc., Standard & Poor's 500 Composite Stock Price Index or other
industry publications. The Flexible Growth Fund may include in sales and
advertising material general mutual fund industry information compiled from
financial and industry publications. The Company's annual report to shareholders
for the fiscal year ended December 31, 1995, contains additional performance
information and will be made available to prospective investors and shareholders
without cost.
In addition, from time to time the Flexible Growth Fund may present its
distribution rates for a class of shares in supplemental sales literature which
is accompanied or preceded by a prospectus and in shareholder reports.
Distribution rates will be computed by dividing the distribution per share of a
class made by the Flexible Growth Fund over a twelve-month period by the maximum
offering price per share. The calculation of income in the distribution rate
includes both income and capital gain dividends and does not reflect unrealized
gains or losses, although the Flexible Growth Fund may also present a
distribution rate excluding the effect of capital gains. The distribution rate
differs from the yield, because it includes capital gains which are often
non-recurring in nature, whereas yield does not include such items. Distribution
rates may also be presented excluding the effect of a sales charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor A and Investor B shares. Because of differences in the fees and/or
expenses borne by Investor A and Investor B shares of the Flexible Growth Fund,
the net yield and total return on Investor A shares can be expected, at any
given time, to differ from the net yield and total return on Investor B shares
for the same period.
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COMPANY SHARES
The Company presently offers six series of shares of capital stock, par value
$.001 per share (the "Portfolios"). The shares of each of the Portfolios, other
than the Money Market Fund, are offered in two separate classes: Investor A
shares and Investor B shares. The Money Market Fund has only the Investor A
class of shares. When issued and paid for, shares of each Portfolio are fully
paid and nonassessable by the Company. Shares may be exchanged or converted as
explained above but will have no other preference, conversion, exchange or
preemptive rights. Shareholders are entitled to one vote for each full share
owned and fractional votes for fractional shares. Shares are transferable,
redeemable and freely assignable as collateral. There are no sinking fund
provisions.
Each share represents an equal proportionate interest in a Portfolio with
other shares of the same Portfolio based upon such share's net asset value, and
is entitled to such dividends and distributions out of the income earned on the
assets belonging to that Portfolio as are declared at the discretion of the
Directors.
Shareholders will vote in the aggregate and not by Portfolio except as
otherwise expressly required by law. For example, shareholders of the Flexible
Growth Fund will vote in the aggregate with other shareholders of the Company
with respect to the election of Directors and ratification of the selection of
independent accountants. However, shareholders of a Portfolio will vote as a
Portfolio, and not in the aggregate with other shareholders of the Company, for
purposes of approval of that Portfolio's investment advisory agreement. In
addition, holders of one class of Investor shares of a Portfolio will vote as a
class and not with holders of the other class of Investor shares with respect to
the approval of its respective Plan.
The Company may dispense with an annual meeting of shareholders in any fiscal
year in which it is not required in order to elect directors under the 1940 Act
or state law. However, shareholders are entitled to call a special meeting of
shareholders for purposes of voting on the removal of a director or directors
when 10% of the outstanding shares request such a meeting. Shareholders may be
eligible for shareholder communication assistance in connection with a special
meeting.
As used in this Prospectus and the Statement of Additional Information, a
"vote of the holders of a majority of the outstanding voting securities" of a
Portfolio means the affirmative vote, at a meeting of shareholders duly called,
of the lesser of (a) 67% or more of the outstanding shares of such Portfolio
present at such meeting, if holders of more than 50% of the shares are present
or represented by proxy, or (b) more than 50% of the shares of such Portfolio.
As of the date hereof, the Company knows of no person who directly or
indirectly possesses voting or investment power with respect to more than 25% of
the outstanding shares of the Flexible Growth Fund.
ADDITIONAL INFORMATION
Except as otherwise stated in this prospectus or required by law, the Company
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
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ADDITIONAL INVESTMENT INFORMATION
DESCRIPTIONS OF CERTAIN TYPES OF INVESTMENTS
AND INVESTMENT TECHNIQUES
WRITING PUT AND COVERED CALL OPTIONS
The Flexible Growth Fund may write covered call and put options on securities,
or futures contracts regarding securities, in which the Flexible Growth Fund may
invest, in an effort to realize additional income. Such options will be listed
on national securities or futures exchanges or be available in the
over-the-counter market through pricing reports of broker-dealers. The Flexible
Growth Fund may write covered call options as a means of seeking to enhance its
income through the receipt of premiums in instances in which the adviser
determines that the underlying securities or futures contracts are not likely to
increase in value above the exercise price. The Flexible Growth Fund also may
seek to earn additional income through the receipt of premiums by writing put
options. Covered call options give the purchaser the right, for a stated period,
to buy the underlying securities from the Flexible Growth Fund at a stated
price, while put options give the purchaser the right, for a stated period, to
sell the underlying securities to the Flexible Growth Fund at a stated price. By
writing a call option, the Flexible Growth Fund limits its opportunity to profit
from any increase in the market value of the underlying security above the
exercise price of the option; by writing a put option, the Flexible Growth Fund
assumes the risk that it may be required to purchase the underlying security at
a price in excess of its then current market value.
OPTIONS AND FUTURES STRATEGIES
In addition, the Flexible Growth Fund may purchase put and call options
written by third parties covering those types of financial instruments in which
the Flexible Growth Fund may invest to attempt to provide protection against
adverse price effects from anticipated changes in prevailing prices for such
instruments. The purchase of a put option is intended to protect the value of
the Flexible Growth Fund's holdings in a falling market while the purchase of a
call option is intended to protect the value of the Flexible Growth Fund's
positions in a rising market.
In purchasing a call option, the Flexible Growth Fund would be in a position
to realize a gain if, during the option period, the price of the underlying
security, index or futures contract increased by an amount in excess of the
premium paid for the call option. It would realize a loss if the price of the
underlying security, index or futures contract declined or remained the same or
did not increase during the period by more than the amount of the premium. By
purchasing a put option, the Flexible Growth Fund would be in a position to
realize a gain if, during the option period, the price of the security, index or
futures contract declined by an amount in excess of the premium paid. It would
realize a loss if the price of the security, index or futures contract increased
or remained the same or did not decrease during that period by more than the
amount of the premium. If a put or call option purchased by the Flexible Growth
Fund were permitted to expire without being sold or exercised, its premium would
represent a realized loss to the Flexible Growth Fund.
When the Flexible Growth Fund writes an option, an amount equal to the net
premium (the premium less the commission) received by the Flexible Growth Fund
is included in
34
<PAGE> 100
the liability section of the Flexible Growth Fund's statement of assets and
liabilities as a deferred credit. The amount of the deferred credit will be
subsequently marked-to-market to reflect the current value of the option
written. The current value of the traded option is the last sale price or, in
the absence of a sale, the mean between bid and asked price. If an option
expires on the stipulated expiration date or if the Flexible Growth Fund enters
into a closing purchase transaction, it will realize a gain (or a loss if the
cost of a closing purchase transaction exceeds the net premium received when the
option is sold) and the deferred credit related to such option will be
eliminated. If an option is exercised, the Flexible Growth Fund may deliver the
underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received and the Flexible
Growth Fund will realize a gain or loss.
FUTURES CONTRACTS
The Flexible Growth Fund may purchase or sell contracts for the future
delivery of the specific financial instruments in which the Flexible Growth Fund
may invest, and indices based upon the types of securities in which the Flexible
Growth Fund may invest (collectively, "Futures Contracts"). The Flexible Growth
Fund may use this investment technique to hedge against anticipated future
changes in market interest rates, which otherwise might adversely affect either
the value of the Flexible Growth Fund's securities or the prices of securities
which the Flexible Growth Fund intends to purchase at a later date.
Alternatively, the Flexible Growth Fund may purchase or sell futures contracts
to hedge against changes in market interest rates which may result in the
premature call at par value of certain securities which the Flexible Growth Fund
has purchased at a premium.
The Flexible Growth Fund may purchase or sell futures contracts based upon an
equity index, commonly referred to as "equity index futures contracts." This
type of futures contract is an agreement by the Flexible Growth Fund to buy or
sell by a specified date and at a specified price the market value of equity
securities included in a particular equity index. No payment is made for the
index or securities when the Flexible Growth Fund buys an equity index futures
contract and neither the index nor any securities are delivered when the
Flexible Growth Fund sells an equity index futures contract. Instead, the
Flexible Growth Fund makes a deposit of "initial margin" equal to a percentage
of the value of the futures contract. Payment or delivery is made upon the
closing out of the futures position or the expiration of the equity index
futures contract. Equity index futures contracts will be used only as a hedge
against anticipated changes in the level of stock prices.
The Flexible Growth Fund may purchase or sell futures contracts based upon
fixed income securities, commonly referred to as "interest rate futures
contracts." An interest rate futures contract is an agreement by the Flexible
Growth Fund to buy or sell, by a specified date and at a specified price, the
market value of fixed income securities included in a particular fixed income
index. As with the equity index futures contracts, no payment is made for
securities when the Flexible Growth Fund buys an interest rate futures contract
and no securities are delivered when the Flexible Growth Fund sells an interest
rate futures contract; instead, the Flexible Growth Fund makes an initial margin
deposit and payment or delivery is made upon the closing out of the futures
position or the expiration of the interest rate futures
35
<PAGE> 101
contract. Interest rate futures contracts will be used only as a hedge against
anticipated changes in the level of interest rates.
In general, the value of futures contracts sold by the Flexible Growth Fund to
offset declines in its portfolio securities will not exceed the total market
value of the portfolio securities to be hedged, and futures contracts purchased
by the Flexible Growth Fund will be covered by a segregated account consisting
of cash or liquid securities in an amount equal to the total market value of
such futures contracts, less the initial margin deposited therefor.
When selling futures contracts short, when buying futures contracts and when
writing put options, the Flexible Growth Fund will be required to segregate in a
separate account cash and/or U.S. Government securities in an amount sufficient
to meets its obligations. When writing call options, the Flexible Growth Fund
will be required to own the financial instrument or futures contract underlying
the option or segregate cash and/or U.S. Government securities in an amount
sufficient to meet its obligations under written calls.
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<TABLE>
<S> <C>
THE THE RIVERFRONT
RIVERFRONT FLEXIBLE GROWTH
FUNDS, INC. FUND
PROSPECTUS
APRIL 30, 1996
</TABLE>
THE RIVERFRONT FUNDS, INC.
Investment Adviser
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Sub-Investment Adviser
James Investment Research, Inc.
1349 Fairground Road
Beavercreek, Ohio 45385
Distributor
BISYS Fund Services Limited Partnership
3435 Stelzer Road
Columbus, Ohio 43219
For additional information call
The Provident Bank
Mutual Fund Services
1-800-424-2295
[LOGO]
RIVERFRONT FUNDS
<PAGE> 105
STATEMENT OF ADDITIONAL INFORMATION
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT FLEXIBLE GROWTH FUND
THE RIVERFRONT STOCK APPRECIATION FUND
April 30, 1996
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with the prospectuses (the
"Prospectuses"), of The Riverfront U.S. Government Securities Money Market (the
"Money Market Fund"), The Riverfront U.S. Government Income Fund (the "Income
Fund"), The Riverfront Income Equity Fund (the "Income Equity Fund"), The
Riverfront Ohio Tax-Free Bond Fund (the "Ohio Tax-Free Fund"), The Riverfront
Stock Appreciation Fund (the "Stock Appreciation Fund") and The Riverfront
Flexible Growth Fund (the "Flexible Growth Fund") (the Money Market Fund, the
Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund and the Flexible Growth Fund are hereinafter collectively
referred to as the "Portfolios" and individually as a "Portfolio") dated the
date hereof. The Portfolios are currently six series or portfolios of The
Riverfront Funds, Inc. (the "Company"). On January 9, 1995, the Ohio Tax-Free
Fund changed its name from The Riverfront Municipal Bond Fund to The Riverfront
Ohio Tax-Free Bond Fund. This Statement of Additional Information is
incorporated in its entirety into the Prospectuses. A copy of the Prospectuses
may be obtained from BISYS Fund Services Limited Partnership, 3435 Stelzer Road,
Columbus, Ohio 43219.
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TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
THE COMPANY AND ITS PORTFOLIOS......................................... B-1
INVESTMENT OBJECTIVES AND POLICIES..................................... B-2
DIVIDENDS AND TAXES.................................................... B-23
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION......................... B-30
VALUATION OF SECURITIES................................................ B-30
DIRECTORS AND OFFICERS................................................. B-33
MANAGEMENT OF THE PORTFOLIOS........................................... B-35
SECURITIES TRANSACTIONS................................................ B-41
ADMINISTRATOR.......................................................... B-44
DISTRIBUTOR............................................................ B-46
DISTRIBUTION PLANS..................................................... B-47
CAPITAL STOCK.......................................................... B-49
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS......................... B-50
ADDITIONAL INFORMATION................................................. B-54
FINANCIAL STATEMENTS................................................... B-57
APPENDIX .............................................................. A-1
</TABLE>
<PAGE> 106
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THE COMPANY AND ITS PORTFOLIOS
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The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company, commonly known as a mutual fund, which currently issues six
series of shares of capital stock which are described in this Statement of
Additional Information (the "Portfolios"). Each Portfolio of the Company, other
than the Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund is a
non-diversified Portfolio.
The Company was incorporated in Maryland on March 27, 1990. The
Provident Bank ("Provident") serves as investment adviser, either directly or
through a subadviser, to each Portfolio, and BISYS Fund Services Limited
Partnership (the "Distributor") serves as Administrator and Distributor.
Provident also serves as custodian and transfer agent for each of the
Portfolios, and provides certain fund accounting and recordkeeping services for
the Company. BISYS Fund Services Ohio, Inc., an affiliate of the Distributor,
provides sub-transfer agency services for the Investor B Shares of each
Portfolio. DePrince, Race & Zollo, Inc. ("DRZ") serves as the subadviser to the
Income Equity Fund. James Investment Research, Inc. ("JIR") serves as the
subadviser to the Flexible Growth Fund.
As of September 30, 1995, pursuant to an Agreement and Plan of
Reorganization and Liquidation with MIM Mutual Funds, Inc. ("MIM"), the Company
acquired all of the assets and liabilities of MIM as follows: the Money Market
Fund acquired all of the assets and liabilities of the MIM Money Market Fund;
(b) the Income Equity Fund acquired all of the assets and liabilities of the MIM
Bond Income Fund, the MIM Stock Income Fund and the AFA Equity Income Fund; and
(c) the Stock Appreciation Fund acquired all of the assets and liabilities of
the MIM Stock Growth Fund and the MIM Stock Appreciation Fund (collectively, the
"Reorganization"). In exchange for such assets and liabilities, the respective
Portfolio of the Company issued a number of its Investor A shares equal in value
to the net assets of the corresponding MIM Fund acquired in the Reorganization.
For accounting and performance purposes, the MIM Stock Appreciation Fund is
considered to be the successor of the Stock Appreciation Fund; therefore, the
performance and financial information included in this Statement of Additional
Information prior to September 30, 1995, relates to the operations of the MIM
Stock Appreciation Fund prior to the Reorganization.
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<PAGE> 107
The essential information about the Company and its Portfolios is
contained in the Prospectuses. This Statement of Additional Information provides
additional information about the Company and each of the Portfolios that may be
of interest to investors.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectuses of the
Portfolios. Capitalized terms not defined herein are defined in such
Prospectuses. No investment in shares of a Portfolio should be made without
first reading such Portfolio's Prospectus.
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INVESTMENT OBJECTIVES AND POLICIES
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THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Riverfront U.S. Government Securities Money Market Fund (the "Money
Market Fund") is a series of shares of the Company which seeks current income
from U.S. Government short-term securities while preserving capital and
maintaining liquidity.
The Money Market Fund is designed for investors who wish to keep
temporary cash balances in a fund invested in short-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
The Riverfront U.S. Government Income Fund (the "Income Fund") seeks a
high level of current income, consistent with preservation of capital, by
investing primarily in securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, and in high quality fixed rate and
adjustable rate mortgage-backed securities and other asset-backed securities.
The Income Fund intends to invest in securities with dollar-weighted average
durations of between three and seven years. The dollar-weighted average life of
the Income Fund's securities is expected to be in the range of five to ten
years.
The Income Fund is designed for investors seeking to provide for
near-term income needs by investing in a fund which seeks to provide higher
returns than those offered by certificates of deposits or U.S. Government money
market funds.
THE RIVERFRONT INCOME EQUITY FUND
The Riverfront Income Equity Fund (the "Income Equity Fund") seeks a
high level of investment income, with capital appreciation
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<PAGE> 108
as a secondary objective, through investment primarily in income-producing
equity securities of U.S. issuers. To provide investment advisory services to
the Income Equity Fund, Provident has entered into a sub-investment advisory
agreement with SunBank.
The Income Equity Fund is designed for investors seeking to invest for
retirement, educational and other long-term needs.
THE RIVERFRONT OHIO TAX-FREE BOND FUND
The Riverfront Ohio Tax-Free Bond Fund (the "Ohio Tax-Free Fund") seeks
as its investment objectives (1) income which is exempt from federal income tax
and Ohio state income taxes and (2) preservation of capital.
The Ohio Tax-Free Fund is designed for investors seeking to invest in a
fund which generates income exempt from federal and Ohio state income taxes and
is not a preference item for individuals for purposes of the federal alternative
minimum tax.
THE RIVERFRONT STOCK APPRECIATION FUND
The Riverfront Stock Appreciation Fund (the "Stock Appreciation Fund")
seeks as its investment objective capital growth.
The Stock Appreciation Fund is designed for investors who wish to seek
growth of capital.
THE RIVERFRONT FLEXIBLE GROWTH FUND
The Riverfront Flexible Growth Fund (the "Flexible Growth Fund") seeks
as its primary investment objective long-term growth of capital with some
current income as a secondary objective. To provide investment advisory services
to the Flexible Growth Fund, Provident has entered into a sub-investment
advisory agreement with JIR.
The Flexible Growth Fund is designed for investors seeking to invest in
a fund which generates long-term growth of capital with some current income.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objectives and
policies of each Portfolio as set forth in the Prospectus for such Portfolio.
Bank Obligations. Each Portfolio may invest in bank obligations such as
bankers' acceptances, certificates of deposit, and demand and time deposits.
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<PAGE> 109
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by such Portfolios will be those guaranteed by
U.S. commercial banks having, at the time of investment, capital, surplus, and
undivided profits in excess of $1,500,000,000 (as of the date of their most
recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
will be those of domestic and foreign branches of U.S. banks which are members
of the Federal Reserve System or the Federal Deposit Insurance Corporation, if
at the time of investment the depository institution has capital, surplus, and
undivided profits in excess of $1,500,000,000 (as of the date of its most
recently published financial statements).
The Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund and the
Stock Appreciation Fund may also each invest in Eurodollar Certificates of
Deposit, which are U.S. dollar denominated certificates of deposit issued by
offices of foreign and domestic banks located outside the United States
("ECDs"); and Yankee Certificates of Deposit, which are certificates of deposit
issued by a U.S. branch of a foreign bank denominated in U.S.
dollars and held in the United States.
ECDs may be general obligations of the parent bank in addition to the
issuing branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such obligations may be held outside the U.S. and a Portfolio may
be subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic or foreign banks.
Commercial Paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Except as noted below with respect to variable
amount master demand notes, issues of commercial paper normally have maturities
of less than nine months and fixed rates of return.
The Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the
Stock Appreciation Fund and the Flexible Growth Fund may
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<PAGE> 110
invest in commercial paper which is rated by applicable nationally recognized
statistical rating organizations ("NRSROs") in the highest rating category, or
if unrated, is deemed by that Portfolio's investment adviser to be of comparable
quality to commercial paper so rated.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund,
the Stock Appreciation Fund and the Flexible Growth Fund may invest, are
unsecured demand notes that permit the indebtedness thereunder to vary and
provide for periodic adjustments in the interest rate according to the terms of
the instrument. Because master demand notes are direct lending arrangements
between a Portfolio and the issuer, they are not normally traded. Although there
is no secondary market in the notes, a Portfolio may demand payment of principal
and accrued interest at any time within 30 days. While such notes are not
typically rated by credit rating agencies, issuers of variable amount master
demand notes (which are normally manufacturing, retail, financial and other
business concerns), must satisfy the same criteria as set forth above for
commercial paper for such Portfolio. The Portfolio's investment adviser or
sub-adviser, as the case may be, will consider the earning power, cash flow, and
other liquidity ratios of the issuers of such notes and will continuously
monitor their financial status and ability to meet payment on demand. In
determining average weighted portfolio maturity, a variable amount master demand
note will be deemed to have a maturity equal to the longer of the period of time
remaining until the next interest rate adjustment or the period of time
remaining until the principal amount can be recovered from the issuer through
demand.
Foreign Investment. Investments in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including ADRs,
may subject a Portfolio to investment risks that differ in some respects from
those related to investment in obligations of U.S. domestic issuers or in U.S.
securities markets. Such risks include future adverse political and economic
developments, possible seizure, nationalization, or expropriation of foreign
investments, less stringent disclosure requirements, the possible establishment
of exchange controls or taxation at the source, or the adoption of other foreign
governmental restrictions. The Income Equity Fund, the Stock Appreciation Fund
and the Flexible Growth Fund will acquire such securities only when such
Portfolio's investment adviser or sub-adviser, as the case may be, believes the
risks associated with such investments are minimal.
U.S. Government Obligations. Each Portfolio may invest in obligations
issued or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are supported by the full faith and
credit of the U.S.
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<PAGE> 111
Treasury; others are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; and still others are supported
only by the credit of the instrumentality. No assurance can be given that the
U.S. Government would provide financial support to U.S. Government-sponsored
agencies or instrumentalities if it is not obligated to do so by law.
Exempt Securities. As stated in the Prospectus of the Ohio Tax-Free
Fund, under normal market conditions at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in bonds, notes, debentures, commercial paper and
other obligations of the State of Ohio or any county, municipality, political
subdivision, instrumentality, agency or authority thereof (collectively,
"agencies"), the interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal income tax, is not a preference item for purposes
of the federal alternative minimum tax and is exempt from Ohio state income tax
("Ohio Exempt Securities") and in debt obligations issued by the Government of
Puerto Rico and such other governmental entities whose debt obligations, either
by law or by treaty, generate interest income which is exempt from federal
income tax, is not a preference item for individuals for the federal alternative
minimum tax, and is exempt from Ohio state income taxes (together with Ohio
Exempt Securities called "Exempt Securities"). Under normal market conditions,
at least 65% of the total assets of the Ohio Tax-Free Fund will be invested in
Ohio Exempt Securities.
Exempt Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Exempt Securities if the interest paid thereon is
exempt from federal income tax and is not treated as a preference item for
purposes of the federal alternative minimum tax. However, if such interest is
subject to the federal alternative minimum tax, such securities will not be
considered as Exempt Securities for purposes of complying with the Ohio Tax-Free
Fund's 80% required investment in Exempt Securities as described above.
Among other types of Exempt Securities, the Ohio Tax-Free Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt
Commercial Paper, Construction Loan Notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. In
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<PAGE> 112
addition, the Ohio Tax-Free Fund may invest in other types of tax-exempt
instruments, such as municipal bonds, private activity bonds, and pollution
control bonds.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the Prospectus of the Ohio Tax-Free Fund, the two
principal classifications of Exempt Securities consist of "general obligation"
and "revenue" issues. The Ohio Tax-Free Fund may also acquire "moral obligation"
issues, which are normally issued by special purpose authorities. There are, of
course, variations in the quality of Exempt Securities, both within a particular
classification and between classifications, and the yields on Exempt Securities
depend upon a variety of factors, including the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
Ratings represent the opinion of an NRSRO as to the quality of Exempt
Securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and Exempt Securities with the same maturity,
interest rate and rating may have different yields, while Exempt Securities of
the same maturity and interest rate with different ratings may have the same
yield. Subsequent to purchase, an issue of Exempt Securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase. Provident will consider such an event in determining whether the Ohio
Tax-Free Fund should continue to hold the obligation.
An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.
Variable and Floating Rate Notes. Each Portfolio may acquire variable
and floating rate notes, subject to such Portfolio's investment objective,
policies and restrictions. A variable rate note is one whose terms provide for
the adjustment of its interest
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rate on set dates and which, upon such adjustment, can reasonably be expected to
have a market value that approximates its par value. A floating rate note is one
whose terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its par value. Such notes are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
notes purchased by such Portfolios will be determined by Provident or the
applicable sub-adviser, as the case may be, to be of comparable quality at the
time of purchase to rated instruments eligible for purchase under that
particular Portfolio's investment policies. In making such determinations,
Provident or the applicable sub-adviser, as the case may be, will consider the
earning power, cash flow and other liquidity ratios of the issuers of such notes
(such issuers include financial, merchandising, bank holding and other
companies) and will continuously monitor their financial condition. Although
there may be no active secondary market with respect to a particular variable or
floating rate note purchased by a Portfolio, the Portfolio may resell the note
at any time to a third party. The absence of an active secondary market,
however, could make it difficult for a Portfolio to dispose of a variable or
floating rate note in the event the issuer of the note defaulted on its payment
obligations and the Portfolio could, as a result or for other reasons, suffer a
loss to the extent of the default.
When-Issued Securities. As discussed in the Prospectuses, each of the
Portfolios, other than the Stock Appreciation Fund, may purchase securities on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When such a Portfolio agrees to purchase securities on
a "when- issued" basis, the Portfolio's custodian will set aside cash or high
quality liquid debt securities equal to the amount of the commitment in a
separate account. Normally, the Portfolio's custodian will set aside portfolio
securities to satisfy the purchase commitment, and in such a case, the Portfolio
may be required subsequently to place additional assets in the separate account
in order to assure that the value of the account remains equal to the amount of
the Portfolio's commitment. It may be expected that the Portfolio's net assets
will fluctuate to a greater degree when it sets aside portfolio securities to
cover such purchase commitments than when it sets aside cash. In addition,
because a Portfolio will set aside cash or high quality liquid debt securities
to satisfy its purchase commitments in the manner described above, such
Portfolio's liquidity and the ability of Provident or the applicable
sub-adviser, as the case may be, to manage it might be affected in the event its
commitments to purchase "when-issued" securities ever exceeded 25% of its
total assets. Under normal market conditions, however, a Portfolio's
commitment to purchase "when-issued" or "delayed- delivery" securities will not
exceed 25% of its assets.
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When a Portfolio engages in "when-issued" transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may result in
such Portfolio's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. Such Portfolios will engage in "when-issued"
delivery transactions only for the purpose of acquiring portfolio securities
consistent with the Portfolios' investment objectives and policies and not for
investment leverage. If the Ohio Tax-Free Fund sells a "when-issued" or
"delayed-delivery" security before delivery, any gain would not be tax-exempt.
Repurchase Agreements. Securities held by each of the Portfolios may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Portfolio would acquire securities from member banks of the Federal Deposit
Insurance Corporation and registered broker-dealers which the investment adviser
deems creditworthy under guidelines approved by the Company's Board of
Directors, subject to the seller's agreement to repurchase such securities at a
mutually agreed-upon date and price. The repurchase price would generally equal
the price paid by the Portfolio plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller under a repurchase agreement will be required
to maintain continually the value of collateral held pursuant to the agreement
at not less than the repurchase price (including accrued interest). This
requirement will be continually monitored by Provident or the applicable sub-
adviser, as the case may be. If the seller were to default on its repurchase
obligation or become insolvent, the Portfolio holding such obligation would
suffer a loss to the extent that the proceeds from a sale of the underlying
portfolio securities were less than the repurchase price under the agreement, or
to the extent that the disposition of such securities by the Portfolio were
delayed pending court action. Additionally, there is no controlling legal
precedent confirming that a Portfolio would be entitled, as against a claim by
such seller or its receiver or trustee in bankruptcy, to retain the underlying
securities, although the Board of Directors of the Company believes that, under
the regular procedures normally in effect for custody of a Portfolio's
securities subject to repurchase agreements and under federal laws, a court of
competent jurisdiction would rule in favor of the Company if presented with the
question. Securities subject to repurchase agreements will be held by that
Portfolio's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Portfolio under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectuses, each
of the Portfolios, other than the Money Market Fund, may borrow funds for
temporary purposes by entering into reverse repurchase agreements in accordance
with that Portfolio's investment restrictions. Pursuant to such agreements, a
Portfolio
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would sell portfolio securities to financial institutions such as banks and
broker-dealers, and agree to repurchase the securities at a mutually agreed-upon
date and price. Each Portfolio intends to enter into reverse repurchase
agreements only to avoid otherwise selling securities during unfavorable market
conditions to meet redemptions. At the time a Portfolio enters into a reverse
repurchase agreement, it will place in a segregated custodial account assets
such as U.S. Government securities or other liquid, high grade debt securities
consistent with the Portfolio's investment restrictions having a value equal to
the repurchase price (including accrued interest), and will subsequently
continually monitor the account to ensure that such equivalent value is
maintained at all times. Reverse repurchase agreements involve the risk that the
market value of the securities sold by a Portfolio may decline below the price
at which a Portfolio is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Portfolio under the
1940 Act.
Except as otherwise disclosed to the shareholders of the particular
Portfolio, the Company will not acquire portfolio securities issued by, make
savings deposits in, or enter into repurchase agreements with Provident, any
sub-adviser, the Distributor, or their affiliates, and will not give preference
to Provident's correspondents with respect to such transactions, securities,
savings deposits and repurchase agreements. In addition, while the Stock
Appreciation Fund's investment restrictions permit it to engage in reverse
repurchase agreements without prior shareholder approval, the Stock Appreciation
Fund does not currently intend to enter into such agreements.
Hedging Transactions. Hedging transactions, including the use of
options and futures, in which a Portfolio may be authorized to engage as
described in its Prospectus or below, have risks associated with them including
possible default by the other party to the transaction, illiquidity and, to the
extent the investment adviser's view as to certain market movements is
incorrect, the risk that the use of such hedging transactions could result in
losses greater than if they had not been used.
Use of put and call options may result in losses to a Portfolio, force
the sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation a Portfolio can
realize on its investments or cause the Portfolio to hold a security it might
otherwise sell. The use of currency transactions can result in a Portfolio
incurring losses as a result of a number of factors including the imposition of
exchange controls, suspension of settlements, or the inability to deliver or
receive a specified currency. The use of options and futures transactions
entails certain other risks. In particular, the variable degree of
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correlation between price movements of futures contracts and price movements in
the related portfolio position of the Portfolio create the possibility that
losses on the hedging instrument may be greater than gains in the value of such
Portfolio's position. In addition, futures and options markets may not be liquid
at all circumstances and certain over-the-counter options may have no markets.
As a result, in certain markets, a Portfolio might not be able to close out a
transaction without incurring substantial losses, if at all. Although the use of
futures and options transactions for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time they
tend to limit any potential gain which might result from an increase in value of
such position. Finally, the daily variation margin requirements for futures
contracts would create a greater ongoing potential financial risk than would
purchases of options, where the exposure is limited to the cost of the initial
premium. Losses resulting from the use of hedging transactions would reduce net
asset value, and possible income, and such losses can be greater than if the
hedging transactions had not been utilized.
Writing Covered Call and Put Options. Each of the Income, Income
Equity, Ohio Tax-Free and the Flexible Growth Funds may write covered call and
covered put options on securities, or futures contracts regarding securities, in
which the particular Fund may invest, in an effort to realize additional income.
A put option gives the purchaser the right to sell the underlying security at
the stated exercise price at any time prior to the expiration date of the
option, regardless of the market price of the security. A call option gives the
purchaser of the option the right to buy, and a writer has the obligation to
sell, the underlying security at the stated exercise price at any time prior to
the expiration of the option, regardless of the market price of the security.
The premium paid to the writer is consideration for undertaking the obligations
under the option contract. Put and call options purchased by a Fund will be
valued at the last sale price, or in the absence of such a price, at the mean
between bid and asked price. Such options will be listed on national securities
or futures exchanges or be available in the over-the-counter market through
pricing reports of broker-dealers. A Fund may write covered call options as a
means of seeking to enhance its income through the receipt of premiums in
instances in which the adviser determines that the underlying securities or
futures contracts are not likely to increase in value above the exercise price.
A Fund also may seek to earn additional income through the receipt of premiums
by writing put options. Covered call options give the purchaser the right, for a
stated period, to buy the underlying securities from a Fund at a stated price,
while put options give the purchaser the right, for a stated period, to sell the
underlying securities to a Fund at a stated price. By writing a call option, a
Fund limits its opportunity to profit from any increase in the market value of
the underlying security above
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the exercise price of the option; by writing a put option, a Fund assumes the
risk that it may be required to purchase the underlying security at a price in
excess of its then current market value.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the mean between bid
and asked price. If an option expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a gain (or
a loss if the cost of a closing purchase transaction exceeds the net premium
received when the option is sold) and the deferred credit related to such option
will be eliminated. If an option is exercised, the Fund may deliver the
underlying security in the open market. In either event, the proceeds of the
sale will be increased by the net premium originally received and the Fund will
realize a gain or loss.
The Ohio Tax-Free Fund may acquire "puts" with respect to Exempt
Securities held in its portfolio. A put is a right to sell a specified security
(or securities) within a specified period of time at a specified exercise price.
The Ohio Tax-Free Fund may sell, transfer, or assign a put only in conjunction
with the sale, transfer, or assignment of the underlying security or securities.
The amount payable to the Ohio Tax-Free Fund upon its exercise of a
"put" is normally (i) the Ohio Tax-Free Fund's acquisition cost of the Exempt
Securities (excluding any accrued interest which the Ohio Tax-Free Fund paid on
the acquisition), less any amortized market premium or plus any amortized market
or original issue discount during the period the Ohio Tax-Free Fund owned the
securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period.
Puts may be acquired by the Ohio Tax-Free Fund to facilitate the
liquidity of its portfolio assets. Puts may also be used to facilitate the
reinvestment of the Ohio Tax-Free Fund's assets at a rate of return more
favorable than that of the underlying security. Puts may, under certain
circumstances, also be used to shorten the maturity of underlying variable rate
or floating rate securities for purposes of calculating the remaining maturity
of those securities.
The Ohio Tax-Free Fund expects that it will generally acquire puts only
where the puts are available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Ohio Tax-Free Fund may
pay for puts either separately in cash or by paying a higher price for portfolio
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securities which are acquired subject to the puts (thus reducing the yield to
maturity otherwise available for the same securities).
The Ohio Tax-Free Fund intends to enter into puts only with dealers,
banks, and broker-dealers which, in Provident's opinion, present minimal credit
risks.
Options and Futures Strategies. In addition, each of the Income, Income
Equity, Ohio Tax-Free and Flexible Growth Funds may purchase put and call
options written by third parties covering those types of financial instruments
in which such Fund may invest to attempt to provide protection against adverse
price effects from anticipated changes in prevailing prices for such
instruments. The purchase of a put option is intended to protect the value of a
Fund's holdings in a falling market while the purchase of a call option is
intended to protect the value of a Fund's positions in a rising market.
In purchasing a call option, a Fund would be in a position to realize a
gain if, during the option period, the price of the underlying security, index
or futures contract increased by an amount in excess of the premium paid for the
call option. It would realize a loss if the price of the underlying security,
index or futures contract declined or remained the same or did not increase
during the period by more than the amount of the premium. By purchasing a put
option, a Fund would be in a position to realize a gain if, during the option
period, the price of the security, index or futures contract declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the security, index or futures contract increased or remained the same or did
not decrease during that period by more than the amount of the premium. If a put
or call option purchased by a Fund were permitted to expire without being sold
or exercised, its premium would represent a realized loss to a Fund.
General Characteristics of Options. Put options and call options
typically have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or sold.
Thus, the following general discussion relates to each of the particular types
of options discusses in greater detail below. In addition, many hedging
transactions involving options require segregation of a Portfolio's assets in
special accounts, as described further below.
With certain exception, OTC-issued and exchange-listed options
generally settle by physical delivery of the underlying security or currency,
although in the future cash settlement may become available. Index options are
cash settled for the net amount, if any, by which the option is "in-the-money"
(i.e., where the value of the underlying instrument exceeds, in the case of a
call option, or is less than, in the case of a put option, the exercise price of
the option) at the time the option is exercised. Frequently,
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rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option. A Portfolio's ability to close out its position as a purchase of
seller of a put or call option is dependent in part, upon the liquidity of the
option market. In addition, the hours of trading for listed options may not
coincide with the hours during which the underlying financial instruments are
traded. To the extent that the option markets close before the markets for the
underlying financial instruments, significant price and rate movements can take
place in the underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreements with the Counterparty. In contrast to exchange-listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium guarantees and security, are set by negotiation of the parties. The
Flexible Growth Fund will only sell OTC options (other than OTC currency
options) that are subject to a buy-back provision permitting the Flexible Growth
Fund to require the Counterparty to sell the option back to such Fund at a
formula price within seven days. The Portfolios expect generally to enter into
OTC options that have cash settlement provisions, although they are not required
to do so.
Unless the parties provide for it, there is no central clearing or
guaranty function in an OTC option. As a result, if the Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with a Portfolio or fails to make a cash
settlement payment due in accordance with the terms of that option, such
Portfolio will lose any premium it paid for the option as well as any
anticipated benefit of the transaction. Accordingly, the investment adviser must
assess the creditworthiness of each such Counterparty or any guarantor or credit
enhancement of the Counterparty's credit to determine the likelihood that the
terms of the OTC option will be satisfied. A Portfolio will engage in OTC option
transactions only with United States Government securities dealers recognized by
the Federal Reserve Bank of New York as "primary dealers' or broker dealers,
domestic or foreign banks or other financial institutions which have received
(or the guarantors of the obligations of which have received) a short-term
credit rating to "A-1" from Standard & Poor's Corporation ("S&P") or "P-1" from
Moody's Investor Services ("Moody's") or an equivalent rating from another NRSRO
or, if unrated, determined by the investment adviser to be of comparable
quality. The staff of the Commission currently takes the position that OTC
options purchased by a Portfolio and portfolio securities "covering" the amount
of such
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Portfolio's obligation pursuant to an OTC option sold by it (the cost of the
sell-back plus the in-the-money amount, if any) are illiquid, and are subject to
such Portfolio's limitation on investing in illiquid securities.
All options written by a Portfolio must be "covered" (i.e., the
Portfolio must own the securities or futures contract subject to a call option
or must meet the asset segregation requirements) as long as the call is
outstanding. Even though a Portfolio will receive the option premium to help
protect it against loss, a call option written by a Portfolio exposes the
Portfolio during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Portfolio to hold a security or instrument which
it might otherwise have sold. With respect to put options written by a
Portfolio, such Portfolio will place high quality liquid debt securities in a
segregated account to cover its obligations under such put option and will
monitor the value of the assets in such account and its obligations under the
put option daily.
Futures Contracts. Each of the Income, Income Equity, Ohio Tax-Free and
Flexible Growth Funds may purchase or sell contracts for the future delivery of
the specific financial instruments in which the particular Fund may invest, and
indices based upon the types of securities in which the particular Fund may
invest (collectively, "Futures Contracts"). A Fund may use this investment
technique to hedge against anticipated future changes in market interest rates,
which otherwise might adversely affect either the value of the Fund's securities
or the prices of securities which the Fund intends to purchase at a later date.
Alternatively, the Funds may purchase or sell futures contracts to hedge against
changes in market interest rates which may result in the premature call at par
value of certain securities which the Fund has purchased at a premium.
The Income Equity Fund may purchase or sell futures contracts based
upon an equity index, commonly referred to as "equity index futures contracts."
This type of futures contract is an agreement by the Fund to buy or sell by a
specified date and at a specified price the market value of equity securities
included in a particular equity index. No payment is made for the index or
securities when the Fund buys an equity index futures contract and neither the
index nor any securities are delivered when the Fund sells an equity index
futures contract. Instead, the Fund makes a deposit of "initial margin" equal to
a percentage of the value of the futures contract. Payment or delivery is made
upon the closing out of the futures position or the expiration of the equity
index futures contract. Equity index futures contracts will be used only as a
hedge against anticipated changes in the level of stock prices.
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The Income Fund may purchase or sell futures contracts based upon fixed
income securities, commonly referred to as "interest rate futures contracts." An
interest rate futures contract is an agreement by the Fund to buy or sell, by a
specified date and at a specified price, the market value of fixed income
securities included in a particular fixed income index. As with the futures
contracts, no payment is made for securities when the Fund buys an interest rate
futures contract and no securities are delivered when the Fund sells an interest
rate futures contract; instead, the Fund makes an initial margin deposit and
payment or delivery is made upon the closing out of the futures position or the
expiration of the interest rate futures contract. Interest rate futures
contracts will be used only as a hedge against anticipated changes in the level
of interest rates.
In general, the value of futures contracts sold by a Fund to offset
declines in its portfolio securities will not exceed the total market value of
the portfolio securities to be hedged, and futures contracts purchased by the
Fund will be covered by a segregated account consisting of cash or liquid
securities in an amount equal to the total market value of such futures
contracts, less the initial margin deposited therefor.
When selling futures contracts short, when buying futures contracts and
when writing put options, a Fund will be required to segregate in a separate
account cash and/or U.S. government securities in an amount sufficient to meets
its obligations. When writing call options, a Fund will be required to own the
financial instrument or futures contract underlying the option or segregate cash
and/or U.S. government securities in an amount sufficient to meet its
obligations under written calls.
This investment technique is designed primarily to hedge against
anticipated future changes in market conditions or foreign exchange rates which
otherwise might adversely affect the value of securities which such a Portfolio
holds or intends to purchase. For example, when interest rates are expected to
rise or market values of portfolio securities are expected to fall, a Portfolio
can seek through the sale of futures contracts to offset a decline in the value
of its portfolio securities. When interest rates are expected to fall or market
values are expected to rise, a Portfolio, through the purchase of such
contracts, can attempt to secure better rates or prices for the Portfolio than
might later be available in the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Portfolio the right (but not the obligation), for a
specified price, to sell or to purchase the underlying futures contract, upon
exercise of the option, at any time during the option period.
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Futures transactions involve brokerage costs and require a Portfolio to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Portfolio may lose the expected benefit of futures transactions if
interest rates, securities prices or foreign exchange rates move in an
unanticipated manner. Such unanticipated changes may also result in poorer
overall performance than if the Portfolio had not entered into any futures
transactions. In addition, the value of a Portfolio's futures positions may not
prove to be perfectly or even highly correlated with the value of its portfolio
securities and foreign currencies, limiting the Portfolio's ability to hedge
effectively against interest rate, foreign exchange rate and/or market risk and
giving rise to additional risks. There is no assurance of liquidity in the
secondary market for purposes of closing out futures positions.
Forward Foreign Currency Exchange Contracts. A forward foreign currency
exchange contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days (the "Term") from the
date of the contract agreed upon by the parties, at a price set at the time of
the contract. These contracts are traded directly between currency traders
(usually large commercial banks) and their customers.
The Flexible Growth Fund does not intend to enter into such forward
contracts if such Portfolio would have more than 5% of the value of its total
assets committed to such contracts on a regular or continuous basis. The
Flexible Growth Fund also will not enter into such forward contracts or maintain
a net exposure in such contracts where such Portfolio would be obligated to
deliver an amount of foreign currency in excess of the value of such Portfolio's
portfolio securities or other assets denominated in that currency. JIR believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that to do so is in the best interests of the
Flexible Growth Fund. The Flexible Growth Fund's custodian segregates cash or
liquid high-grade securities in an amount not less than the value of such
Portfolio's total assets committed to forward foreign currency exchange
contracts entered into for the purchase of a foreign security. If the value of
the securities segregated declines, additional cash or securities are added so
that the segregated amount is not less than the amount of such Portfolio's
commitments with respect to such contracts. The Flexible Growth Fund generally
does not enter into a forward contract with a Term longer than one year.
Foreign Currency Options. A foreign currency option provides the option
buyer with the right to buy or sell a stated amount of foreign currency at the
exercise price at a specified date or during the option period. A call option
gives its owner the right, but not the obligation, to buy the currency, while a
put option
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gives its owner the right, but not the obligation, to sell the currency. The
option seller (writer) is obligated to fulfill the terms of the option sold if
it is exercised. However, either seller or buyer may close its position during
the option period in the secondary market for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Flexible Growth Fund
against an adverse movement in the value of a foreign currency, it does not
limit the gain which might result from a favorable movement in the value of such
currency. For example, if the Flexible Growth Fund were holding securities
denominated in an appreciating foreign currency and had purchased a foreign
currency put to hedge against a decline in the value of the currency, it would
not have to exercise its put. Similarly, if the Flexible Growth Fund has entered
into a contract to purchase a security denominated in a foreign currency and had
purchased a foreign currency call to hedge against a rise in the value of the
currency but instead the currency had depreciated in value between the date of
purchase and the settlement date, such Portfolio would not have to exercise its
call but could acquire in the spot market the amount of foreign currency needed
for settlement.
Foreign Currency Futures Transactions. As part of its financial futures
transactions, the Flexible Growth Fund may use foreign currency futures
contracts and options on such futures contracts. Through the purchase or sale of
such contracts, the Flexible Growth Fund may be able to achieve many of the same
objectives as through forward foreign currency exchange contracts more
effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and may be traded on boards of
trade and commodities exchanges or directly with a dealer which makes a market
in such contracts and options. It is anticipated that such contracts may provide
greater liquidity and lower cost than forward foreign currency exchange
contracts.
Regulatory Restrictions. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option or entering into a forward foreign
currency exchange purchase, a Portfolio will maintain in a segregated account
cash or liquid high-grade securities equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Portfolio will not enter into a futures contract or purchase
an option thereon if immediately thereafter the initial margin deposits for
futures
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contracts held by such Portfolio plus premiums paid by it for open options on
futures would exceed 5% of the liquidation value of such Portfolio's total
assets after taking into account unrealized profits and unrealized losses on any
contracts entered into. Such Portfolio will not engage in transactions in
futures contracts or options thereon for speculation, but only to attempt to
hedge against changes in market conditions affecting the values of securities
which such Portfolio holds or intends to purchase. When futures contracts or
options thereon are purchased to protect against a price increase on securities
intended to be purchased later, it is anticipated that at least 25% of such
intended purchases will be completed.
Combined Transactions. The Flexible Growth Fund may enter into multiple
transactions, including multiple options transactions, multiple futures
transactions, multiple currency transactions (including forward currency
contracts) and any combination of futures, options and currency transaction,
instead of a single hedging transaction, as part of a single or combined
strategy when, in the opinion of JIR, it is in the best interests of the
Flexible Growth Fund to do so. A combined transaction will usually contain
elements of risk that are present in each of its component transactions.
Although combined transactions are normally entered into based on JIR's judgment
that the combined strategies will reduce risk or otherwise more effectively
achieve the desired portfolio management goal, it is possible that the
combination will instead increase such risks or hider achievement of the
portfolio management objective.
Swaps, Caps, Floors and Collars. Among the hedging transactions into
which the Flexible Growth Fund may enter are interest rate, currency and index
swaps and the purchase or sale of related caps, floors and collars. The Flexible
Growth Fund expects to enter into these transactions primarily to preserve a
return or spread on a particular investment or portion of its portfolio, to
protect against currency fluctuations, as a duration management technique or to
protect against any increase in the price of securities the Flexible Growth Fund
anticipates purchasing at a later date. The Flexible Growth Fund intends to use
those transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream the Flexible Growth Fund may be
obligated to pay. Interest rate swaps involve the exchange by the Flexible
Growth Fund with another party of their respective commitments to pay or receive
interest, e.g., an exchange of floating rate payments for fixed rate payments
with respect to a notional amount of principal. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them and an index swap is an agreement to
swap cash flows on a notional amount based on changes in the values of the
reference indices. The purchase of a cap entitles the purchase to receive
payments on
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a notional principal amount from the party selling such cap to the extent that a
specified index exceeds a predetermined interest rate or amount. The purchase of
a floor entitles the purchaser to receive payments on a notional principal
amount from the party selling such floor to the extent that a specified index
falls below a predetermined interest rate or amount. A collar is a combination
of a cap and a floor that preserves a certain return within a predetermined
range of interest rates or values.
The Flexible Growth Fund will usually enter into swaps on a net basis,
i.e., the two payment streams are netted out in a cash settlement on the payment
date or dates specified in the instrument, with the Flexible Growth Fund
receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these swaps, caps, floors, and collars are entered into
for good faith hedging purposes, JIR and the Flexible Growth Fund believe such
obligations do not constitute senior securities under the 1940 Act and,
accordingly, will not treat them as being subject to its borrowing restrictions.
The Flexible Growth Fund will not enter into any swap, cap, floor or collar
transaction unless, at the time of entering into such transaction, the unsecured
long-term debt of the Counterparty, combined with any credit enhancements, is
rated at least "A" by S&P or Moody's or has an equivalent rating from an NRSRO
or is determined to be of equivalent credit quality by JIR. If there is a
default by the Counterparty, the Flexible Growth Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market for which
standardized documentation has become relatively liquid. Caps, floors and
collars are more recent innovations for which standardized documentation has not
yet been fully developed and, accordingly, they are less liquid than swaps.
FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objective of each of the Portfolios is fundamental and
may not be changed without approval of the holders of a majority of such
Portfolio's outstanding voting shares (which means the lesser of (1) 67% of the
shares represented at a meeting at which more than 50% of the outstanding shares
are represented or (2) more than 50% of the outstanding shares).
In addition to the investment restrictions set forth in the
Prospectuses, the Money Market Fund may not:
1. Invest more than 5% of its total assets in securities of any company
having a record, together with its predecessors, of less than three years of
continuous operation;
2. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns
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<PAGE> 126
an equal amount of such securities or of securities which, without payment of
any further consideration, are convertible into or exchangeable for securities
of the same issue as, and equal in amount to, the securities sold short; and
3. Underwrite securities of other issuers, except that the Money Market
Fund may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objective.
Each of the Income Fund and the Income Equity Fund may not:
1. Invest in securities of an issuer (other than an agency or
instrumentality of the U.S. Government) which, together with any predecessor of
the issuer, has been in operation for less than three years if, immediately
after and as a result of such investment, more than 5% of the value of the
Fund's total assets would then be invested in the securities of such issuer; and
2. Invest more than 10% of the value of the Fund's net assets in fixed
time deposits which are non-negotiable and/or which impose a penalty for early
withdrawal and which have maturities of more than 7 days.
Finally, each of the Ohio Tax-Free Fund, the Stock Appreciation Fund
and the Flexible Growth Fund may not:
1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities and except as may
be necessary to make margin payments in connection with derivative securities
transactions;
2. Underwrite the securities issued by other persons, except to the
extent that a Portfolio may be deemed to be an underwriter under certain
securities laws in the disposition of "restricted securities";
3. Purchase or sell commodities or commodity contracts, except to the
extent disclosed in the current Prospectus of the Portfolio; and
4. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction).
In addition to the investment restrictions contained in the
Prospectuses, each Portfolio has adopted the following additional restrictions,
which may be changed by the Board of Directors without the vote of a Portfolio's
shareholders:
1. A Portfolio may not purchase or retain securities of an issuer if,
to the knowledge of the Company, officers, Trustees or
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Directors of the Company, Provident, any sub-adviser or the Distributor, each
owning beneficially more than 1/2 of 1% of the securities of such issuer, own in
the aggregate more than 5% of the securities of such issuer, or such persons or
management personnel of the Company, Provident, any sub-adviser or the
Distributor have a substantial beneficial interest in the securities of such
issuer. Provident, any sub-adviser, the Distributor or any affiliates thereof or
any of their Trustees, Directors, officers or employees may not purchase or sell
as principal any securities of the Portfolios. Nor may securities of any of the
Portfolios be loaned to Provident, any sub-adviser, the Distributor or any
affiliates or any of their Trustees, Directors, officers or employees.
In addition, each of the Ohio Tax-Free Fund, the Stock Appreciation
Fund and the Flexible Growth Fund may not:
1. Engage in any short sales, except to the extent disclosed in the
current Prospectus of the Portfolio;
2. Invest more than 10% of total assets in the securities of issuers,
which together with any predecessors, have a record of less than three years of
continuous operation;
3. Purchase participation or direct interests in oil, gas or other
mineral exploration or development programs (although investments by such Funds
in marketable securities of companies engaged in such activities are not
prohibited by this restriction);
4. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act or pursuant to any exemptions therefrom;
and
5. Mortgage or hypothecate the Fund's assets in excess of one third of
the Fund's total assets.
In order to permit the sale of a Portfolio's shares in certain states,
the Company may make commitments more restrictive than the investment
restrictions described in the applicable Prospectus. Should the Company
determine that any such commitment is no longer in the best interests of a
Portfolio, it will revoke the commitment by terminating sales of a Portfolio's
shares in the state involved.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in asset value
is not a violation of the limit.
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PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Portfolios is calculated by
dividing the lesser of a Portfolio's purchases or sales of portfolio securities
for the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Because of Money Market Fund intends to invest entirely in securities
with maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover with respect to the Money Market Fund is expected to be zero
percent for regulatory purposes.
The portfolio turnover rate for each of the Portfolios (other than the
Money Market Fund and the Stock Appreciation Fund) for the two most recent
fiscal years are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
Fund 1995 1994
---- ---- ----
<S> <C> <C>
Income Fund 75% 83%
Income Equity Fund 180% 119%
Ohio Tax-Free Fund(1) 34% 29%
Flexible Growth Fund(2) 13% 1%
</TABLE>
- --------------------
1 Commenced operations August 1, 1994
2 Commenced operations September 1, 1994
The portfolio turnover rates for the Stock Appreciation Fund for the
fiscal period ended December 31, 1995, and the two fiscal years ended September
30, 1995 and 1994 were 46%, 197% and 254%,
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respectively. The portfolio turnover rate for each Portfolio may vary greatly
from year to year as well as within a particular year, and may also be affected
by cash requirements for redemptions of shares. High portfolio turnover rates
will generally result in higher transaction costs, including brokerage
commissions to a Portfolio, and may result in additional tax consequences to
such Portfolio's shareholders. Portfolio turnover will not be a limiting factor
in making investment decisions.
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DIVIDENDS AND TAXES
- -------------------------------------------------------------------------------
Each Portfolio intends to distribute to its shareholders dividends from
net investment income monthly and all net realized long-term capital gains
annually in shares of the Portfolio or, at the option of the shareholder, in
cash. Shareholders who have not opted prior to the record date for any
distribution to receive cash will have the number of such shares determined on
the basis of the Portfolio's net asset value per share computed at the end of
the next business day following the record date. Net asset value is used in
computing the number of shares in both gains and income distribution
reinvestments. Account statements and/or checks as appropriate will be mailed to
shareholders within seven days after a Portfolio pays the distribution. Unless a
Portfolio receives instructions to the contrary from a shareholder before the
record date, it will assume that the shareholder wishes to receive that
distribution and all future gains and income distributions in shares.
Instructions continue in effect until changed in writing.
It is not expected that the Income Fund's, the Money Market Fund's or
the Ohio Tax-Free Fund's income dividends will be eligible for the corporate
dividends received deduction. It is expected that a portion of the Income Equity
Fund's, the Stock Appreciation Fund's and the Flexible Growth Fund's income
distributions will be eligible for the 70% corporate dividends received
deduction.
ADDITIONAL TAX INFORMATION
Each of the Portfolios of the Company is treated as a separate entity
for federal income tax purposes and intends to qualify as a "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code") for so long as such qualification is in the best interest of that
Portfolio's shareholders. In order to qualify as a regulated investment company,
each Portfolio must, among other things: derive at least 90% of its gross income
from dividends, interest, payments with respect to securities loans, and gains
from the sale or other disposition of stock or securities or foreign currencies,
or other income derived with respect to its
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business of investing in such stock, securities, or currencies; derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures, forward contracts or foreign currencies held less than three
months; and diversify its investments within certain prescribed limits. In
addition, to utilize the tax provisions specially applicable to regulated
investment companies, each Portfolio must distribute to its shareholders at
least 90% of its investment company taxable income for the year and 90% of its
interest income which is excludable from income under Section 103(a) of the
Code. In general, a Portfolio's investment company taxable income will be its
taxable income subject to certain adjustments and excluding the excess of any
net long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. Dividends
declared in October, November and December in any year and distributed in
January of the following year will be treated as having been paid in the prior
year. If distributions during a calendar year were less than the required
amount, a Portfolio would be subject to a non-deductible excise tax equal to 4%
of the deficiency.
Although each such Portfolio expects to qualify as a "regulated
investment company" and to be relieved of all or substantially all federal
income taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located, or in which it is otherwise deemed to be
conducting business, a Portfolio may be subject to the tax laws of such states
or localities. In addition, if for any taxable year a Portfolio does not qualify
for the special tax treatment afforded regulated investment companies, all of
its taxable income will be subject to federal tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable to shareholders to the extent of
earnings and profits, and would be eligible for the dividends received deduction
for corporations.
The Money Market Fund, the Income Fund, the Income Equity Fund, the
Stock Appreciation Fund and the Flexible Growth Fund. It is expected that each
Portfolio will distribute annually to shareholders all or substantially all of
the Portfolio's net ordinary income and net realized capital gains and that such
distributed net ordinary income and distributed net realized capital gains will
be taxable income to shareholders for federal
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income tax purposes, even if paid in additional shares of the Portfolio and not
in cash.
Distribution by a Portfolio of the excess of net long-term capital gain
over net short-term capital loss is taxable to shareholders as long-term capital
gain in the year in which it is received, regardless of how long the shareholder
has held the shares. Such distributions are not eligible for the
dividends-received deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
to future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Portfolio will
designate the portion of any distributions which qualify for the 70% dividends
received deduction. The amount so designated may not exceed the amount received
by the Portfolio for its taxable year that qualifies for the dividends received
deduction. Because all of the Money Market Fund's and Income Fund's net
investment income is expected to be derived from earned interest, it is
anticipated that no distributions from those Portfolios will qualify for the 70%
dividends received deduction.
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<PAGE> 132
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities, if any. Since less than 50% of
the value of any Fund's total assets at the end of its fiscal year is expected
to be invested in stock or securities of foreign corporations, a Fund will not
be entitled under the Code to pass through to its shareholders their pro rata
share of the foreign taxes paid by the Fund, if any. These taxes will be taken
as a deduction by such Fund.
The Ohio Tax-Free Fund. The Code permits a regulated investment company
which invests in Exempt Securities to pay to its shareholders "exempt-interest
dividends," which are excluded from gross income for federal income tax
purposes, if at the close of each quarter at least 50% of the value of its total
assets consist of Exempt Securities.
An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by the Ohio Tax-Free Fund that is derived from
interest received by the Ohio Tax-Free Fund that is excluded from gross income
for federal income tax purposes, net of certain deductions, provided the
dividend is designated as an exempt-interest dividend in a written notice mailed
to shareholders not later than sixty days after the close of the Ohio Tax- Free
Fund's taxable year. The percentage of the total dividends paid by the Ohio
Tax-Free Fund during any taxable year that qualifies as exempt-interest
dividends will be the same for all shareholders receiving dividends during such
year. Exempt-interest dividends shall be treated by the Ohio Tax-Free Fund's
shareholders as items of interest excludable from their gross income for Federal
income tax purposes under Section 103(a) of the Code. However, a shareholder is
advised to consult his tax adviser with respect to whether exempt-interest
dividends retain the exclusion under Section 103(a) of the Code if such
shareholder is a "substantial user" or a "related person" to such user under
Section 147(a) of the Code with respect to any of the Exempt Securities held by
the Ohio Tax-Free Fund. If a shareholder receives an exempt-interest dividend
with respect to any share and such share is held by the shareholder for six
months or less, any loss on the sale or exchange of such share shall be
disallowed to the extent of the amount of such exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible for federal income tax
purposes if the Ohio Tax-Free Fund distributes exempt-interest dividends during
the shareholder's taxable year. A shareholder of the Ohio Tax-Free Fund that is
a financial institution may not deduct interest expense attributable to
indebtedness incurred or continued to purchase or carry shares of the Ohio
Tax-Free Fund if the Ohio Tax-Free Fund distributes exempt-interest dividends
during the shareholder's taxable year. Certain federal income tax deductions of
property and casualty insurance companies holding shares of the Ohio Tax-Free
Fund and receiving exempt-interest dividends may also be adversely affected.
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<PAGE> 133
In certain limited instances, the portion of Social Security benefits received
by a shareholder which may be subject to federal income tax may be affected by
the amount of tax-exempt interest income, including exempt-interest dividends
received by shareholders of the Ohio Tax-Free Fund.
In the unlikely event the Ohio Tax-Free Fund realizes long-term capital
gains, the Ohio Tax-Free Fund intends to distribute any realized net long-term
capital gains annually. If the Ohio Tax-Free Fund distributes such gains, the
Ohio Tax-Free Fund will have no tax liability with respect to such gains, and
the distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held shares. Any such distributions
will be designated as a capital gain dividend in a written notice mailed by the
Ohio Tax-Free Fund to the shareholders not later than sixty days after the close
of the Ohio Tax-Free Fund's taxable year. It should be noted, however, that
capital gains are taxed like ordinary income except that net capital gains of
individuals are subject to a maximum federal income tax rate of 28%. Net capital
gains are the excess of net long-term capital gains over net short-term capital
losses. Any net short-term capital gains are taxed at ordinary income tax rates.
If a shareholder receives a capital gain dividend with respect to any share and
then sells the share before he has held it for more than six months, any loss on
the sale of the share is treated as long-term capital loss to the extent of the
capital gain dividend received.
Although it is expected that under normal market conditions at least
80% of the net assets of the Ohio Tax-Free Fund will be invested in bonds,
notes, debentures, commercial paper and other obligations, the interest on which
is not a preference item for individuals for the federal alternative minimum
tax, exempt- interest dividends attributable to interest on certain municipal
obligations in which the Ohio Tax-Free Fund may invest, including those issued
on or after August 8, 1986 to finance certain private activities, will be
treated as tax preference items in computing an individual's alternative minimum
tax. For individuals, the alternative minimum tax rate is 26% on alternative
minimum taxable income up to $175,000 and 28% on the excess of $175,000.
Also, all exempt-interest dividends of the Ohio Tax-Free Fund may
subject corporations to alternative minimum tax as a result of the inclusion of
such dividends in alternative minimum taxable income of 75% of the excess of the
adjusted current earnings over pre-adjustment alternative minimum taxable
income. Adjusted current earnings would include exempt-interest dividends of the
Ohio Tax-Free Fund. For corporations the alternative minimum tax rate is 20%.
For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a
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<PAGE> 134
rate of 0.12 of one percent on the excess over $2,000,000 of such corporation's
"modified alternative minimum taxable income", which would include a portion of
the exempt-interest dividends distributed by the Ohio Tax-Free Fund to such
corporation. In addition, exempt-interest dividends distributed to certain
foreign corporations doing business in the United States could be subject to a
branch profits tax imposed by Section 884 of the Code.
As indicated in its Prospectus, the Ohio Tax-Free Fund may acquire
rights regarding specified portfolio securities under puts. See "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments -
Puts" in this Statement of Additional Information. The policy of the Ohio
Tax-Free Fund is to limit its acquisition of puts to those under which it will
be treated for federal income tax purposes as the owner of the Exempt Securities
acquired subject to the put and the interest on the Exempt Securities will be
tax-exempt to it. Although the Internal Revenue Service has issued a published
ruling that provides some guidance regarding the tax consequences of the
purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Ohio Tax-Free Fund could acquire under the 1940 Act.
Therefore, although the Ohio Tax-Free Fund will only acquire a put after
concluding that it will have the tax consequences described above, the Internal
Revenue Service could reach a different conclusion.
Distributions of exempt-interest dividends by the Ohio Tax- Free Fund
may be subject to local taxes even though a substantial portion of such
distributions may be derived from interest on obligations which, if received
directly, would be exempt from such taxes. The Ohio Tax-Free Fund will report to
its shareholders annually after the close of its taxable year the percentage and
source of interest income earned on municipal obligations held by the Ohio
Tax-Free Fund during the preceding year. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
GENERAL
Each Portfolio may be required by federal law to withhold and remit to
the U.S. Treasury 31% of taxable dividends, if any, and capital gain
distributions to any shareholder, and the proceeds of redemption or the values
of any exchanges of shares of the Portfolio, if such shareholder (1) fails to
furnish the Portfolio with a correct taxpayer identification number, (2)
under-reports dividend or interest income, or (3) fails to certify to the
Portfolio that he or she is not subject to such withholding. An individual's
taxpayer identification number is his or her Social Security number.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only
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<PAGE> 135
a summary of some of the important federal tax considerations generally
affecting purchasers of shares of a Portfolio. No attempt has been made to
present a detailed explanation of the federal income tax treatment of a
Portfolio or its shareholders and this discussion is not intended as a
substitute for careful tax planning. Accordingly, potential purchasers of shares
of a Portfolio are urged to consult their tax advisers with specific reference
to their own tax situation. In addition, the tax discussion in the Prospectuses
and this Statement of Additional Information is based on tax laws and
regulations which are in effect on the date of the Prospectuses and this
Statement of Additional Information; such laws and regulations may be changed by
legislative or administrative action. As of the date hereof, several proposals
have been introduced by the 104th Congress, which if enacted, could affect much
of the information contained in this section. However, it is not possible at
this time to assess which, if any, of such proposals will be acted upon and the
effect thereof, if any, on this information.
Information as to the federal income tax status of all distributions
will be mailed annually to each shareholder.
FISCAL YEAR
Each Fund's fiscal year ends December 31.
- --------------------------------------------------------------------------------
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
- --------------------------------------------------------------------------------
Shares of each of the Company's Portfolios are sold on a continuous
basis by the Distributor, and the Distributor has agreed to use appropriate
efforts to solicit all purchase orders. In addition to purchasing shares
directly from the Distributor, shares may be purchased through procedures
established by the Distributor in connection with the requirements of accounts
at Provident or Provident's affiliated entities (collectively, "Entities").
Customers purchasing shares of the Portfolios may include officers, directors,
or employees of Provident or the Entities.
The Company may suspend the right of redemption or postpone the date of
payment for shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension, or
(d) an emergency exists as a result of which (i) disposal by the Company of
securities owned by it is not reasonably
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practical, or (ii) it is not reasonably practical for the Company to determine
the fair value of its net assets.
- --------------------------------------------------------------------------------
VALUATION OF SECURITIES
- --------------------------------------------------------------------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Directors have determined that the amortized cost method for
valuing the Money Market Fund's securities is the best method currently
available. The Directors review this method of valuation to ensure that such
Portfolio's securities are valued at their fair value, as determined by the
Directors in good faith. The Directors are obligated, as a particular
responsibility within the overall duty of care owed to shareholders, to
establish procedures reasonably designed, taking into account current market
conditions and the Money Market Fund's investment objective, to stabilize the
net asset value per share as computed for the purposes of distribution and
redemption at $1.00 per share.
The Directors' procedures include periodically monitoring, as
appropriate and at such intervals as are reasonable in light of current market
conditions, the relationship between the amortized cost value per share and a
net asset value per share based upon available indications of market value. The
Directors will consider what steps should be taken, if any, in the event of a
difference of more than one-half of one percent between the two. The Directors
will take such steps as they consider appropriate including (1) the sale of the
Money Market Fund's instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; (2) withholding dividends
or payment of distributions from capital or capital gains; (3) redemptions of
shares in kind; or (4) establishing a net asset value per share by using
available market quotations or equivalents in order to minimize any material
dilution or other unfair results which might arise from differences between the
two.
The Money Market Fund limits its investments to instruments which the
Directors have determined present minimal credit risk and which are "Eligible
Securities" as defined by Rule 2a-7 of the 1940 Act. The Money Market Fund is
also required to maintain a dollar weighted average portfolio maturity (not more
than 90 days) appropriate to its objective of maintaining a stable net asset
value of $1.00 per share, and this precludes the purchase of any security with a
remaining maturity of more than 397 days. Should the disposition of a security
result in a dollar weighted average portfolio maturity of more than 90 days, the
Money Market Fund will invest its available cash in such a manner as to reduce
such maturity to 90 days or less as soon as practicable. For the pur-
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pose of determining the dollar weighted average, any instrument with a stated
maturity of six months or less which has a coupon (or yield) which is subject to
renegotiation at designated periods of time (e.g., every 30 days), or any
instrument having a coupon (or yield) which fluctuates with the change in a
predetermined standard (e.g., the so-called "Prime Rate"), shall be deemed to
have a maturity equivalent to the time remaining to the next date of
renegotiation or the next date on which the predetermined standard may change.
It is the normal practice of the Money Market Fund to hold securities
to maturity and realize par therefor, unless a sale or other disposition is
mandated by redemption requirements or other extraordinary circumstances. Under
the amortized cost method of valuation traditionally employed by institutions
for valuation of money market instruments, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the Money Market Fund. In periods of declining interest rates,
the indicated daily yield on shares of the Money Market Fund, computed by
dividing its annualized daily income by the net asset value computed as above,
may tend to be lower than similar computations made by utilizing a method of
valuation based upon market prices and estimates. In periods of rising interest
rates, the daily yield of shares at the value computed as described
above may tend to be higher than a similar computation made by utilizing a
method of calculation based upon market prices and estimates.
Since the net income of the Money Market Fund is declared as a dividend
each time net income is determined, the net asset value per share remains at
$1.00 per share immediately after each dividend declaration. The Money Market
Fund expects to have net income at the time of each dividend determination made
at the close of the Exchange. If for any reason there is a net loss which would
result in the Money Market Fund's not being able to price its shares at $1.00
per share, the Money Market Fund will first offset such amount pro rata against
dividends accrued during the month in each shareholder account. To the extent
that such a net loss would exceed such accrued dividends, the Money Market Fund
will reduce the number of its outstanding shares by having each shareholder
contribute to the Money Market Fund's capital his pro rata portion of the total
number of shares required to be cancelled in order to maintain a net asset value
of $1.00. EACH SHAREHOLDER WILL BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION
IN THESE CIRCUMSTANCES BY HIS INVESTMENT IN THE MONEY MARKET FUND.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND, THE RIVERFRONT INCOME
EQUITY FUND, THE RIVERFRONT OHIO TAX-FREE BOND FUND, THE RIVERFRONT
STOCK APPRECIATION FUND AND THE RIVERFRONT FLEXIBLE GROWTH FUND
Current values for such Portfolios' securities are determined as
follows:
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(1) Securities that are traded on a national securities exchange or the
over-the-counter National Market System (NMS) are valued on the basis of the
last sales price on the exchange where primarily traded or NMS prior to the time
of the valuation, provided that a sale has occurred and that this price reflects
current market value according to procedures established by the Board of
Directors;
(2) Securities traded in the over-the-counter market, other than on
NMS, for which market quotations are readily available, or in the event no sale
has occurred under (1) above, are valued at the mean of the bid and asked prices
at the time of valuation;
(3) Short-term instruments which are purchased with maturities of sixty
days or less are valued at amortized cost (original purchase cost as adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; short-term instruments maturing in more
than sixty days when purchased which are held on the sixtieth day prior to
maturity are valued at amortized cost (market value on the sixtieth day adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; and which in either case reflects fair
value as determined by the Board of Directors;
(4) Short-term money market instruments having maturities of more than
sixty days for which market quotations are readily available are valued at
current market value; where market quotations are not available, such
instruments are valued at fair value as determined by the Board of Directors;
and
(5) The following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Directors: (a) securities,
including restricted securities, for which complete quotations are not readily
available, (b) listed securities or those on NMS if, in the Company's opinion,
the last sales price does not reflect a current market value or if no sale
occurred, and (c) other assets.
- --------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
- --------------------------------------------------------------------------------
The Directors and officers of the Company are:
J. VIRGIL EARLY, Age 58, Director; Principal in J. Virgil
Early & Associates and former Executive Vice President of
Huntington Bankshares, Inc. Mr. Early's business address is J.
Virgil Early & Associates, 11 Bliss Lane, Jekyll Island, Georgia
31527.
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<PAGE> 139
WILLIAM M. HIGGINS, Age 51, Director; President and Director
of Sena Weller Rohs Williams Inc.; former President and Director of
Reynolds DeWitt Advisers, Inc. and former Vice President of
Reynolds DeWitt Securities Co. Mr. Higgins' business address is
Sena Weller Rohs Williams, Inc., 300 Main Street, 4th Fl.,
Cincinnati, OH 45202.
STEPHEN G. MINTOS, Age 41, Director and President of the
Company; Executive Vice President, BISYS Fund Services Limited
Partnership (formerly The Winsbury Company).*
HARVEY M. SALKIN, PH.D., Age 50, Director; Retired; former President
and major shareholder of Mathematical Investing Systems, Inc.* Dr. Salkin's
business address is Case Western Reserve University, Department of Operations
Research, 10900 Euclid Avenue, Cleveland, Ohio 44106-7235.
GEORGE O. MARTINEZ, Age 37, Vice President; employee of BISYS Fund
Services Limited Partnership (formerly The Winsbury Company) since April, 1995;
prior to April, 1995, he was Vice President and Associate General Counsel of
Alliance Capital Management L.P.
(investment firm).
WALTER B. GRIMM, Age 50, Vice President; employee of BISYS Fund
Services Limited Partnership (formerly The Winsbury Company) since June, 1992;
prior to June, 1992, he was the President of Leigh Investments Consulting
(investment firm).
JAMES E. WHITE, Age 41, Secretary; employee of BISYS Fund Services
Limited Partnership since December, 1995; prior to December, 1995, he was a
Sales Director/Variable Products at Financial Horizons Distributors Agency, Inc.
(third party products
marketer to banks).
ALAINA V. METZ, Age 28, Assistant Secretary; employee of BISYS Fund
Services Limited Partnership since June, 1995; prior to June, 1995, she was a
supervisor at Alliance Capital Management, L.P.
(investment firm).
*These Directors are interested persons of the Company as
defined under the 1940 Act.
Except as set forth above, the address of all Directors and officers of
the Company is 3435 Stelzer Road, Columbus, Ohio 43219.
During the fiscal year ended December 31, 1995, no Director or officer
affiliated with Provident, SunBank, DRZ, JIR, the Distributor or BISYS Fund
Services Ohio, Inc. received any direct remuneration from the Company.
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<PAGE> 140
The following table sets forth information regarding all compensation
paid by the Company to its directors for their services as directors during the
fiscal year ended December 31, 1995. The Company has no pension or retirement
plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position Compensation From The Company
With The Company From The Company and the Fund Complex*
- ---------------- ---------------- ---------------------
<S> <C> <C>
J. Virgil Early $5,500 $5,500
Director
William M. Higgins $5,500 $5,500
Director
Harvey M. Salkin $1,750 $1,750
Director
Stephen G. Mintos $ 0 $ 0
Director
</TABLE>
- ----------
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Portfolios, which have a common investment adviser or
affiliated investment advisers or which hold themselves out to the public as
being related.
- --------------------------------------------------------------------------------
MANAGEMENT OF THE PORTFOLIOS
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Subject to the general supervision of the Company's Board of Directors
and in accordance with the Portfolios' investment objectives, policies and
restrictions, investment advisory services are provided to the Portfolios of the
Company by The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202
("Provident") pursuant to the Investment Advisory Agreement dated as of August
1, 1994, as amended as of August 15, 1995 (the "Investment Advisory Agreement").
Prior to August 1, 1994, such services were provided to the Money Market Fund,
the Income Fund and the Income Equity Fund pursuant to a Management Agreement
dated August 6, 1992, between the
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<PAGE> 141
Company and Provident (the "Prior Management Agreement"), an Investment Advisory
Agreement between the Company and Provident with respect to the Income Fund
dated April 30, 1993 (the "Provident Advisory Agreement"), and an Investment
Advisory Agreement between the Company and SunBank Capital Management, N.A.
("SunBank") with respect to the Income Equity Fund dated August 1, 1992 (the
"SunBank Agreement").
Provident's services as investment adviser are provided through its
Trust and Financial Services Group. Provident's Trust and Financial Services
Group currently manages assets of approximately $300 million. The Company is
the first registered investment company for which Provident has provided
investment advisory services.
Provident is an Ohio banking corporation which, with its affiliates, on
December 31, 1995, provided commercial lending, lease financing, consumer
credit, credit card, discount brokering, data processing, personal loan
financing and trust and asset management services through over 70 branch
offices located in Ohio and Kentucky. Provident is a subsidiary of Provident
Bancorp, Inc., a bank holding company headquartered in Cincinnati, Ohio, with
approximately $6.2 billion in total consolidated assets as of December 31, 1995.
Through its Ohio and Kentucky banking subsidiaries, Provident Bancorp, Inc.
provides a wide range of banking services to individuals and businesses.
Provident's Trust and Financial Services Group employs an experienced
staff of professional investment analysts, portfolio managers and traders and
uses several proprietary computer-based systems in conjunction with fundamental
analysis to identify investment opportunities.
Under the Investment Advisory Agreement, Provident has agreed to
provide, either directly or through one or more subadvisers, investment advisory
services for each of the Company's Portfolios as described in their respective
Prospectuses. For the services provided and expenses assumed pursuant to the
Investment Advisory Agreement, each of the Company's Portfolios pays Provident a
fee, computed daily and paid monthly, at an annual rate calculated as a
percentage of the average daily net assets of that Portfolio. The annual rates
for the Portfolios are as follows: fifteen one-hundredths of one percent (.15%)
for the Money Market Fund; forty one-hundredths of one percent (.40%) for the
Income Fund; ninety-five one-hundredths of one percent (.95%) for the Income
Equity Fund; fifty one-hundredths of one percent (.50%) for the Ohio Tax-Free
Fund; eighty one-hundredths of one percent (.80%) for the Stock Appreciation
Fund; and ninety one-hundredths of one percent (.90%) for the Flexible Growth
Fund. Provident may periodically voluntarily reduce all or a portion of its
advisory fee with respect to a Portfolio to increase the net income of that
Portfolio available for distribution as dividends.
Under the Prior Management Agreement, for the fiscal year ended
December 31, 1993, and the period from January 1, 1994 to July 31, 1994, the
Income Fund incurred $82,342 and $58,055, respectively, in
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<PAGE> 142
management fees; the Income Equity Fund incurred $83,536 and $69,030,
respectively, in management fees; and the Money Market Fund incurred $156,711
and $130,493, respectively, in management fees. Under the Investment Advisory
Agreement, for the period August 1, 1994 to December 31, 1994, and the fiscal
year ended December 31, 1995, the Portfolios incurred the following investment
advisory fees:
<TABLE>
<CAPTION>
Year Ended August 31, 1994 to
Fund December 31, 1995 December 31, 1994
---- ----------------- -----------------
<S> <C> <C>
Money Market $221,912 $ 96,715
Income $144,461 68,703
Income Equity $407,229 59,054
Tax-Free $ 56,114 20,864
Stock Appreciation $ 83,982(1) N/A(1)
Flexible Growth $ 76,231 2,255
</TABLE>
- ----------
(1) Commenced operations September 30, 1995.
For the fiscal period January 1, 1993 through April 30, 1993, Keystone
Custodian Funds, Inc. ("Keystone") served as adviser to the Income Fund. For
that period, the Company paid Keystone $8,288 in advisory fees. The Agreement
between Keystone and the Company, on behalf of the Income Fund was terminated by
mutual agreement on April 30, 1993.
For the fiscal period May 1, 1993 through December 31, 1993, the
Company, on behalf of the Income Fund, paid Provident $19,159 in advisory fees.
The Directors of Provident are Allen L. Davis, Jack M. Cook,
Thomas D. Grote, Jr., S. Paul Mathews, Philip R. Myers, Joseph A.
Pedoto, Sidney A. Peerless and Joseph A. Steger.
The principal executive officers of Provident are Allen L.
Davis, President and Chief Executive Officer; Philip R. Myers,
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<PAGE> 143
Senior Executive Vice President; Robert L. Hoverson, Executive Vice President;
John R. Farrenkopf, Senior Vice President and Chief Financial Officer; Mark E.
Magee, Senior Vice President, General Counsel and Secretary; John S. Catlin,
Richard J. Deyhle, Geoffrey R. Glick, Jerry L. Grace, Roy L. Hiles, Drew T.
Kagan, Noel Knox, Roland E. Koch, John R. Mirlisena, John E. Rubenbauer and
Bradley J. Smith, Senior Vice Presidents.
For the fiscal year ended December 31, 1993, the Income Fund paid
$293,437 in expenses, of which amount Provident reimbursed such Portfolio
$115,029, and the Income Equity Fund paid $337,251 in expenses, of which amount
Provident reimbursed such Portfolio $35,381. For the fiscal year ended December
31, 1994, Provident waived investment advisory fees or reimbursed the Portfolios
for certain expenses in the following amounts: the Flexible Growth Fund -
$16,264; and the Ohio Tax-Free Fund - $4,394, respectively. For the fiscal year
ended December 31, 1995, Provident waived investment advisory fees or reimbursed
the Portfolios for certain expenses in the following amounts: the Income Fund -
$548; the Income Equity Fund - $73,635; the Tax Free Fund - $11,778; the
Flexible Growth Fund - $69,745; and the Stock Appreciation Fund - $900.
Unless sooner terminated, the Investment Advisory Agreement and each of
the Sub-Investment Advisory Agreements (as described below) continued in effect
as to a particular Portfolio until December 31, 1995 (except for the
Sub-Investment Advisory Agreement with DRZ which will continue in effect until
December 31, 1996), and thereafter for successive one-year periods ending
December 31 of each year if such continuance is approved at least annually by
the Company's Board of Directors or by vote of a majority of the outstanding
shares of such Portfolio (as defined under "Fundamental Nature of Investment
Objectives" in the Prospectuses), and a majority of the Directors who are not
parties to the Investment Advisory Agreement or the Sub-Investment Advisory
Agreements or interested persons (as defined in the 1940 Act) of any party to
the Investment Advisory Agreement or the Sub-Investment Advisory Agreements by
votes cast in person at a meeting called for such purpose. The Investment
Advisory Agreement and each of the Sub- Investment Advisory Agreements are
terminable as to a particular Portfolio at any time on 60 days' written notice
without penalty by the Portfolio, by vote of a majority of the outstanding
shares of that Portfolio, or by Provident or, in the case of a subadviser, on
60 days' prior written notice from such subadviser. Such Agreements also
terminate automatically in the event of any assignment, as defined in the 1940
Act.
B - 38
<PAGE> 144
The Investment Advisory Agreement and each of the Sub- Investment
Advisory Agreements provide that the respective investment advisers or
sub-investment advisers shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Company in connection with the
performance of their duties, except a loss resulting from a breach of fiduciary
duty with respect to the receipt of compensation for services or a loss
resulting from willful misfeasance, bad faith, or gross negligence on the part
of the respective investment advisers or sub-investment advisers in the
performance of their duties, or from reckless disregard of their duties and
obligations thereunder.
SUBADVISERS
Pursuant to the terms of the Investment Advisory Agreement, Provident
has entered into a Sub-Investment Advisory Agreement dated as of August 15,
1995, with DePrince, Race & Zollo, Inc., 201 South Orange Avenue, Suite 850,
Orlando, Florida 32801 ("DRZ"). Pursuant to the terms of such Sub-Investment
Advisory Agreement, DRZ has been retained by Provident to manage the investment
and reinvestment of the assets of the Income Equity Fund, subject to the
direction and control of the Company's Board of Directors.
Under this arrangement, DRZ is responsible for the day-to-day
management of the Income Equity Fund's assets, investment performance, policies
and guidelines, and maintaining certain books and records, and Provident is
responsible for selecting and monitoring the performance of DRZ, and for
reporting the activities of DRZ in managing the Income Equity Fund to the
Company's Board of Directors.
For its services provided and expenses assumed pursuant to its
Sub-Investment Advisory Agreement with Provident, DRZ receives from Provident, a
fee computed daily and paid monthly, at the annual rate of fifty one-hundredths
of one percent (0.50%) of the Income Equity Fund's average daily net assets of
up to $55 million and fifty-five one-hundredths of one percent (0.55%) of the
Income Equity Fund's average daily net assets of $55 million and above. However,
DRZ has agreed with the Company and Provident to waive a portion of such fee
until January 1, 1997. Until January 1, 1997, DRZ will receive such fee at an
annual rate of 0.45% of the Income Equity Fund's average daily net assets of up
to $55 million and 0.50% of the Income Equity Fund's average daily net assets of
$55 million and above. In addition, DRZ has indicated a willingness to manage
net assets of the Income Equity Fund up to $75 million, but not beyond. Should
the Income Equity Fund's net assets approach or reach $75 million, the Company's
Board of Directors will be required to determine what action, including the
hiring of an additional sub-investment adviser, is necessary and appropriate
under the circumstances.
DRZ is owned jointly by Gregory M. DePrince, John D. Race and Victor A.
Zollo, Jr. DRZ was established on March 1, 1995, to
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<PAGE> 145
provide mutual funds and other institutional investors with investment
management services. Messrs. DePrince, Race and Zollo prior to April 1995 were
officers and directors of SunBank Capital Management, N.A., 200 South Orange
Avenue, Orlando, Florida 32801 ("SunBank"), and now serve as the directors and
officers of DRZ.
From August 1, 1994, to August 14, 1995, SunBank served as the
sub-investment adviser to the Income Equity Fund pursuant to a Sub- Investment
Advisory Agreement dated August 1, 1994 (the "SunBank Sub-Advisory Agreement")
and from August 1, 1992 to July 31, 1994, SunBank served as investment adviser
to the Income Equity Fund pursuant to the SunBank Agreement. Pursuant to the
SunBank Sub- Advisory Agreement and the SunBank Agreement, SunBank received a
fee computed daily and paid monthly, at the annual rate of thirty-five
one-hundredths of one percent (0.35%) of the Income Equity Fund's average daily
net assets.
For the fiscal year ended December 31, 1993, and the period of January
1, 1994 to July 31, 1994, the Income Equity Fund paid SunBank $73,097 and
$67,502, respectively, in advisory fees. Pursuant to the terms of the SunBank
Sub-Advisory Agreement, for the period of August 1, 1994, to December 31, 1994,
and for the period of January 1, 1995, to August 14, 1995, Provident paid
$51,630 and $92,579, respectively, to SunBank in sub-investment advisory fees.
For the period August 15, 1995 to December 31, 1995, Provident paid $77,303 to
DRZ in sub-investment advisory fees.
In addition, pursuant to the terms of the Investment Advisory
Agreement, Provident has entered into a Sub-Investment Advisory Agreement dated
as of August 1, 1994, with James Investment Research, Inc., 1349 Fairground
Road, Beavercreek, Ohio 45385 ("JIR"). Pursuant to the terms of such
Sub-Investment Advisory Agreement, JIR has been retained by Provident to manage
the investment and reinvestment of the assets of the Flexible Growth Fund,
subject to the direction and control of the Company's Board of Directors.
Under this arrangement, JIR is responsible for the day-to-day
management of the Flexible Growth Fund's assets, reviewing investment
performance, policies and guidelines and maintaining certain books and records,
and Provident is responsible for selecting and monitoring the performance of JIR
and reporting the activities of JIR in managing the Flexible Growth Fund to the
Company's Board of Directors.
For its services provided and expenses assumed pursuant to the
Sub-Investment Advisory Agreement with Provident, JIR receives from Provident a
fee, computed daily and paid monthly, at the annual rate of fifty one-hundredths
of one percent (.50%) of the Flexible Growth Fund's average daily net assets.
Pursuant to the terms of this Sub-Investment Advisory Agreement, for the fiscal
year ended December 31, 1995 and the period of September 1, 1994, to
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<PAGE> 146
December 31, 1994, Provident paid $25,332 and $2,819, respectively, to JIR in
sub-investment advisory fees.
JIR is owned by Frank James, Ph.D., who established it in 1972. JIR
provides advice to institutional as well as individual clients, including NYSE
listed companies, colleges, banks, hospitals, foundations, trusts, endowment
funds and individuals. The principal executive officers and directors of JIR are
Frank E. James, Ph.D. - President and Director; Barry R. James - Vice President;
Suzie Smith - Treasurer; Francis E. James III - Vice President; Ann Marie Shaw -
Vice President Operations; Jerome G. Peppers - Director; and Robert G. Hawkins -
Director.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
In addition to serving as investment adviser, Provident has entered
into an Amended and Restated Custodian, Fund Accounting and Recordkeeping
Agreement with the Company to provide custody and certain fund accounting
services to Portfolios. Under the Amended and Restated Custodian, Fund
Accounting and Recordkeeping Agreement dated as of August 1, 1994, Provident
receives an annual fee from each Portfolio, computed daily and paid monthly, at
an annual rate calculated as a percentage of the average daily net assets of
that Portfolio. The annual rates for the Portfolios are as follows: .05% for the
Money Market Fund; .10% for the Income Fund; .15% for each of the Income Equity
Fund, the Flexible Growth Fund and the Stock Appreciation Fund; and .14% for the
Ohio Tax-Free Fund. Provident as custodian is responsible for safeguarding all
securities and cash of the Portfolios. For the year ended December 31, 1995, the
Money Market Fund, the Income Fund, the Income Equity Fund, the Flexible Growth
Fund, the Stock Appreciation Fund and the Ohio Tax-Free Fund incurred $73,973,
$36,115, $72,596, $12,666, $15,578 and $15,708, respectively, for such custody
and fund accounting services.
Under the Master Transfer and Recordkeeping Agreement, Provident
receives from each Portfolio for its Investor A shares, a fee, computed daily
and paid monthly at the annual rate of 0.04% of the average daily net asset
value of that Portfolio's Investor A shares. With respect to each Portfolio's
Investor B shares, Provident receives from each Portfolio a $20,000 annual fee
plus $25 per shareholder account and certain other fees for IRAs and payroll
deduction plans and out-of-pocket expenses. Pursuant to a Sub-Transfer Agency
Agreement dated as of January 1, 1995, between Provident and BISYS Fund Services
Ohio, Inc., an affiliate of the Distributor ("BISYS"), BISYS provides
sub-transfer agency services for the Investor B shares of each of the
Portfolios. For such services, BISYS receives from Provident an annual fee of
$20,000 plus $25 per Investor B shareholder account and certain other fixed fees
and out-of-pocket expenses.
- --------------------------------------------------------------------------------
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<PAGE> 147
SECURITIES TRANSACTIONS
- --------------------------------------------------------------------------------
Each adviser, under policies established by the Board of Directors,
selects broker-dealers to execute transactions for the Portfolios. It is the
policy of the Company, in effecting transactions in portfolio securities, to
seek best execution of and best price for orders. The determination of what may
constitute best execution and price in the execution of a transaction by a
broker involves a number of considerations, including, without limitation, the
overall direct net economic result to a Portfolio, involving both price paid or
received and any commissions and other costs paid, the breadth of the market
where executed, the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block is involved, the
availability of the broker to stand ready to execute potentially difficult
transactions in the future and the financial strength and stability of the
broker. Such considerations are judgmental and are weighed by the Board of
Directors in determining the overall reasonableness of brokerage commissions
paid. In determining best execution and selecting brokers to execute
transactions, the advisers may consider brokerage and research services, such as
analyses and reports concerning issuers, industries, securities, economic
factors and trends and other statistical and factual information provided to the
Portfolios or to any other account over which the advisers or their affiliates
exercise investment discretion. Each adviser is authorized to pay a
broker-dealer who provides such brokerage and research services a commission for
executing each such Portfolio's transactions which is in excess of the amount of
commission another broker would have charged for effecting that transaction if,
but only if, the adviser determines in good faith that such commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker viewed in terms of that particular transaction or in
terms of all of the accounts over which it exercises investment discretion. Any
such research and other statistical and factual information provided by brokers
to a Portfolio or to the adviser is considered to be in addition to and not in
lieu of services required to be performed by such adviser under its agreement
with the Company. The cost, value and specific application of such information
are indeterminable and hence are not practicably allocable among the Portfolios
and other clients of the adviser who may indirectly benefit from the
availability of such information. Similarly, the Portfolios may indirectly
benefit from information made available as a result of transactions effected for
such other clients. Under the Investment Advisory Agreements, the advisers are
permitted to pay higher brokerage commissions for brokerage and research
services in accordance with Section 28(e) of the Securities Exchange Act of
1934. In the event the advisers do follow such a practice, they will do so on a
basis which is fair and equitable to the Company, and its Portfolios.
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<PAGE> 148
DRZ may direct some brokerage transactions to large brokerage firms in
return for research regarding equity securities. In addition, DRZ, on behalf of
the Income Equity Fund, intends to direct brokerage transactions to one or more
brokerage firms which participate in fee recapture programs whereby such
brokerage firms refund a portion of the Income Equity Fund's brokerage
commissions to the Income Equity Fund. For the fiscal year ended December 31,
1995, the total amount of brokerage transactions directed by such Fund's
sub-adviser and commissions paid to First Boston Corp. under such an arrangement
were $29,487,974 and $50,199, respectively.
Provident, on behalf of the Stock Appreciation Fund, may from time to
time direct brokerage transactions to Autranet, a subsidiary of Donaldson,
Lufkin & Jenrette, William O'Neill & Company and Kalb Vorrhis & Company in
return for research regarding fundamental and technical research on equity
securities. For the fiscal period ended December 31, 1995, Provident directed
brokerage transactions to such firms in the following principal amounts:
$9,939,693, $659,945 and $552,401, respectively, and paid to such brokers on
behalf of the Stock Appreciation Fund the following brokerage commissions for
those transactions: $22,160, $2,220 and $1,080, respectively.
The Money Market Fund, the Income Fund and the Ohio Tax-Free Fund
expect that purchases and sales of income securities usually will be principal
transactions. Such securities are normally purchased directly from the issuer or
from an underwriter or market maker for the securities. There usually will be no
brokerage commissions paid by such Portfolio for such purchases. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark up
or reflect a dealer's mark down. Where transactions are made in the
over-the-counter market, the Portfolio will deal with primary market makers
unless more favorable prices are otherwise obtainable.
The Income Fund may seek to maximize the rate of return on its
portfolio by engaging in short-term trading consistent with its investment
objective. Trading will occur primarily in anticipation of or in response to
market developments or to take advantage of a market decline (a rise in interest
rates) or to purchase in anticipation of a market rise (a decline in interest
rates) and later sell. In addition, a security may be sold and another purchased
at approximately the same time to take advantage of what the adviser believes to
be a temporary disparity in the normal yield relationship between the two
securities. Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, due to such things as changes in the overall demand for, or supply of,
various types of U.S. government securities and other eligible securities or
changes in the investment objectives of
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<PAGE> 149
investors. This policy of short-term trading may result in a higher portfolio
turnover and increased expenses.
The Income Equity Fund, the Stock Appreciation Fund and the Flexible
Growth Fund expect that purchases and sales of securities usually will be
effected through brokerage transactions for which commissions are payable.
Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark up or mark down. Where transactions are made in the
over-the-counter market, such Portfolio will deal with primary market makers
unless more favorable prices are otherwise obtainable.
The Income Equity Fund may participate, if and when practicable, in
group bidding for the purchase directly from an issuer of certain securities for
such Fund in order to take advantage of the lower purchase price available to
members of such a group.
The Company's Board of Directors has determined that each Portfolio may
follow a policy of considering sales of shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to the requirements of
best execution, including best price, described above.
The policy of the Company with respect to brokerage is and will be
reviewed by the Board of Directors from time to time. Because of the possibility
of further regulatory developments affecting the securities exchanges and
brokerage practices generally, the foregoing practices may be changed, modified
or eliminated.
Investment decisions for the Portfolios are made independently from
similar accounts managed by the advisers. Such similar accounts may also invest
in the same securities as the Portfolios. When a purchase or sale of the same
security is made at substantially the same time on behalf of a Portfolio and
such accounts managed by the advisers, the transaction will be averaged as to
price and available investments allocated as to amount in the manner which each
adviser believes to be equitable to a Portfolio and such accounts. In some
instances, these investment procedures may adversely affect the price paid or
received by a Portfolio or the size of the position obtained by a Portfolio. To
the extent permitted by law, each adviser may aggregate the securities to be
sold or purchased for a Portfolio with those to be sold or purchased for its
similar accounts in order to obtain best execution.
For the fiscal years ended December 31, 1993, 1994 and 1995, no
brokerage commissions were paid by the Money Market Fund, the Income Fund or the
Ohio Tax-Free Fund. For the same periods, the Income Equity Fund paid $36,297,
$93,502 and $269,007, respectively, in brokerage commissions. Of such amount
paid for the year ended
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<PAGE> 150
December 31, 1995, $67,723 were paid to Provident Securities & Investment
Company, an affiliate of Provident. For the fiscal year ended December 31, 1995
and the fiscal period ended December 31, 1994, the Flexible Growth Fund paid
$15,465 and $2,217, respectively, in brokerage commissions, none of which were
paid to an affiliated broker-dealer. For the fiscal years ended September 30,
1993, 1994 and 1995 and for the fiscal period ended December 31, 1995, the Stock
Appreciation Fund paid $484,148, $557,458, $339,168 and $107,648, respectively,
in brokerage commissions, none of which were paid to an affiliated
broker-dealer.
Each of the Money Market Fund, the Income Fund and the Stock
Appreciation Fund from time to time during the fiscal year ended December 31,
1995, held securities of its regular brokers or dealers, as defined in Rule
10b-1 under the 1940 Act, or their parent companies, consisting of those of
Prudential, Dean Witter and Merrill, Lynch, Pierce, Fenner & Smith, with respect
to the Money Market Fund; Lehman Brothers, with respect to the Income Fund; and
Donaldson, Lufkin & Jenrette, with respect to the Stock Appreciation Fund. At
December 31, 1995, the Money Market Fund held $7,000,000 of commercial paper of
Merrill, Lynch, Pierce, Fenner & Smith, and had repurchase agreements in the
following amounts with Prudential and Dean Witter: $35,000,000 and $24,137,000,
respectively. At December 31, 1995, the Income Fund held corporate bonds in the
aggregate amount of $1,000,000 of Lehman Brothers. And, as of that date, the
Stock Appreciation Fund held 5,000 shares of Donaldson, Lufkin & Jenrette at a
value of approximately $156,250. None of the other Portfolios held securities of
its regular brokers or dealers during such year.
- --------------------------------------------------------------------------------
ADMINISTRATOR
- --------------------------------------------------------------------------------
BISYS Fund Services Limited Partnership (formerly The Winsbury Company)
serves as administrator (the "Administrator") to the Company and each Portfolio
pursuant to the Administration Agreement dated February 1, 1994, as amended as
of July 6, 1995 (the "Administration Agreement"). The Administrator assists in
supervising all operations of each Portfolio (other than those performed by
Provident, DRZ and JIR under the Investment Advisory Agreements and
Sub-Investment Advisory Agreements, as applicable, and by Provident under the
Custodian, Fund Accounting and Recordkeeping Agreements and under the Master
Transfer and Recordkeeping Agreement). The Administrator is a broker-dealer
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<PAGE> 151
registered with the Commission, and is a member of the National Association of
Securities Dealers, Inc. The Administrator provides financial services to
institutional clients.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Company, furnish statistical and research
data, clerical and certain bookkeeping services and stationery and office
supplies; prepare the periodic reports to the Commission on Form N-SAR or any
replacement forms therefor; compile data for, prepare for execution by the
Portfolios and file all the Portfolios' federal and state tax returns and
required tax filings other than those required to be made by the Portfolios'
custodian and transfer agent; prepare compliance filings pursuant to state
securities laws; assist to the extent requested by the Company with the
Company's preparation of its Annual and Semi-Annual Reports to Shareholders and
its Registration Statements (on Form N-1A or any replacement therefor); compile
data for, prepare and file timely Notices to the Commission required pursuant to
Rule 24f-2 under the 1940 Act; keep and maintain the financial accounts and
records of the Portfolios, including calculation of daily expense accruals; in
the case of the Money Market Fund, periodic review of the amount of the
deviation, if any, of the current net asset value per share (calculated using
available market quotations or an appropriate substitute that reflects current
market conditions) from the Money Market Fund's amortized cost price per share;
and generally assist in all aspects of the Company's operations other than those
performed by Provident, DRZ and JIR under the Investment Advisory Agreements and
Sub-Investment Advisory Agreements, and by Provident under the Custodian, Fund
Accounting and Recordkeeping Agreement and under the Master Transfer and
Recordkeeping Agreement. Under the Administration Agreement, the Administrator
may delegate all or any part of its responsibilities thereunder.
The Administrator receives a fee from each Portfolio for its services
as Administrator and expenses assumed pursuant to the Administration Agreement,
calculated daily and paid periodically, equal a fee calculated at the annual
rate of 0.20% of that Portfolio's average daily net assets. The Administrator
may voluntarily reduce all or a portion of its fee with respect to any Portfolio
in order to increase the net income of one or more of the Portfolios available
for distribution as dividends.
Unless sooner terminated as provided therein, the Administration
Agreement will continue in effect until December 31, 1997. The Administration
Agreement thereafter shall be renewed automatically for successive two-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. The Administrative Agreement is terminable with respect to a particular
Portfolio only upon mutual agreement of the parties to the Administration
Agreement and for cause (as defined in the Administration Agreement) by the
party alleging cause, on no less
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<PAGE> 152
than 60 days' written notice by the Company's Board of Directors or by the
Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error or judgment or mistake of law or any loss suffered by
the Company in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
For the fiscal year ended December 31, 1995, the Administrator received
$296,225, $72,231, $96,796, $22,439, $20,771 and $16,888, respectively, from the
Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio Tax-Free
Fund, the Stock Appreciation Fund and the Flexible Growth Fund, for
administrative services. For the period February 1, 1994, to December 31, 1994,
the Administrator received $282,711, $53,444 and $59,369, respectively, from the
Money Market Fund, the Income Fund and the Income Equity Fund, for
administration services. For the fiscal period ended December 31, 1994, the
Administrator received $8,346 and $1,113, respectively, from the Ohio Tax-Free
Fund and the Flexible Growth Fund, for administration services. For the fiscal
year ended December 31, 1993, and the one-month period ended January 31, 1994,
Keystone Custodian Funds, Inc., 200 Berkeley Street, Boston, Massachusetts 02116
("Keystone") provided administrative services for the Company. For the fiscal
year ended December 31, 1993, and the one-month period ended January 31, 1994,
the Income Fund paid Keystone an administration fee of $100,000 and $8,178,
respectively; the Income Equity Fund paid Keystone an administration fee of
$100,000 and $8,904, respectively; and the Money Market Fund paid to or accrued
for the account of Keystone an administration fee of $116,552 and $12,019,
respectively.
- --------------------------------------------------------------------------------
DISTRIBUTOR
- --------------------------------------------------------------------------------
The Distributor serves as distributor to the Company and each of the
Portfolios pursuant to the Distribution Agreement dated February 1, 1994, as
amended July 6, 1995 (the "Distribution Agreement"). Unless otherwise
terminated, the Distribution Agreement continues for successive one-year periods
ending December 31 of each year if approved at least annually by the Company's
Board of Directors or by the vote of a majority of the outstanding shares of the
Company, and by the vote of a majority of the Directors of the Company who are
not parties to the Distribution Agreement or interested persons (as defined in
the
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<PAGE> 153
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.
For the fiscal year ended December 31, 1995 and the period of February
1, 1994 to December 31, 1994, commissions paid to the Distributor under the
Distribution Agreement with respect to the sale of shares of the Company, after
discounts to dealers, were $314,870 and $311,412, respectively. For such
periods, $190,064 and $276,225 were reallowed by the Distributor to Provident
Securities & Investment Company, an affiliate of Provident.
For the fiscal year ended December 31, 1993, and for the one-month
period of January 1, 1994 to January 31, 1994, Fiduciary Investment Company,
Inc. ("FICO") served as principal underwriter for the Company pursuant to a
Principal Underwriting Agreement (the "Underwriting Agreement") between the
Company and FICO. For the fiscal year ended December 31, 1993, and for the
one-month period of January 1, 1994 to January 31, 1994, FICO received no
payments from the Money Market Fund, the Income Fund or the Income Equity Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
Each Portfolio has adopted a Distribution and Shareholder Service Plan
and Agreement relating to its Investor A class of shares (the "Investor A
Plans") pursuant to Rule 12b-1 under the 1940 Act. In addition, each of the
Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund and the Flexible Growth Fund has adopted a Distribution and
Shareholder Service Plan and Agreement pursuant to Rule 12b-1 under the 1940 Act
relating to its Investor B Class of Shares (the "Investor B Plans"). The
Investor A Plans and the Investor B Plans are hereinafter referred to as the
"Plans." Rule 12b-1 regulates circumstances under which an investment company
may bear expenses associated with the distribution of its shares. Each Portfolio
adopted both its Investor A Plan and Investor B Plan prior to the public
offering of its shares of that class. Each Investor A Plan provides that a
Portfolio may incur certain expenses which may not exceed a maximum amount up to
0.25% of such Portfolio's average daily net assets for any fiscal year occurring
after the inception of that Investor A Plan. Amounts paid under each Investor A
Plan are to be paid to the Distributor in order to pay costs of
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<PAGE> 154
distribution of a Portfolio's Investor A shares, including payment to the
Distributor for efforts expended in respect of or in furtherance of sales of
Investor A shares of the Portfolio and to enable the Distributor to pay or to
have paid to others who sell or have sold Portfolio Investor A shares a
maintenance or other fee, at such intervals as the Distributor may determine in
respect of Portfolio Investor A shares previously sold by any such others at any
time and remaining outstanding during the period in respect of which such fee is
or has been paid. Such payments would be made through the Distributor to
compensate broker-dealers and others whose clients invest in Investor A shares
of a Portfolio for continuing services to their clients based on the average
daily net asset value of such accounts remaining outstanding on the books of the
Portfolio for specified periods.
The Investor B Plan authorizes a Portfolio to make payments to the
Distributor in an amount not in excess, on an annual basis, of 1.00% of the
average daily net asset value of the Investor B shares of that Portfolio.
Pursuant to the Investor B Plan, a Portfolio is authorized to pay or reimburse
the Distributor (a) a distribution fee in an amount not to exceed on an annual
basis .75% of the average daily net asset value of Investor B shares of that
Portfolio (the "Distribution Fee") and (b) a service fee in an amount not to
exceed on an annual basis .25% of the average daily net asset value of the
Investor B shares of such Portfolio (the "Service Fee"). Payments of the
Distribution Fee to the Distributor pursuant to the Investor B Plan will be used
(i) to compensate Participating Organizations (as defined below) for providing
distribution assistance relating to Investor B shares, and (ii) for promotional
activities intended to result in the sale of Investor B shares such as to pay
for the preparation, printing and distribution of prospectuses to other than
current shareholders, and payments of the Service Fee to the Distributor
pursuant to the Investor B Plan will be used to compensate Participating
Organizations for providing shareholder services with respect to their customers
who are, from time to time, beneficial and record holders of Investor B shares.
Participating Organizations include banks (including Provident and its
affiliates), broker-dealers and other institutions.
The Portfolios make no payments in connection with the sales of their
shares other than the fees paid to the Distributor under the respective Plans.
As a result, the Portfolios do not pay for unreimbursed expenses of the
Distributor, including amounts expended by the Distributor in excess of amounts
received by it from the Portfolios, or interest, carrying or other financing
charges in connection with excess amounts expended.
All persons authorized to direct the disposition of monies paid or
payable by a Portfolio pursuant to a Plan or any related agreement must provide
to the Company's Board of Directors at least quarterly a written report of the
amounts so expended and the purposes for which such expenditures were made.
Representatives,
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<PAGE> 155
brokers, dealers or others receiving payments from the Distributor pursuant to a
Plan must determine that such payments and the services provided in connection
with such payments are appropriate for such persons and are not in violation of
regulatory limitations applicable to such persons.
While each Plan is in effect, the selection and nomination of Directors
of the Company who are not "interested persons" as defined by the 1940 Act
("Independent Directors") is committed to the discretion of the Independent
Directors then in office.
Each Plan was approved by the Board of Directors and by those
Independent Directors who have no direct or indirect financial interest in the
operation of each Plan or any agreements of the Company or any other person
related to a Plan ("Rule 12b-1 Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Each Plan may be continued annually if
approved by a majority vote of the Directors, and by a majority of the Rule
12b-1 Directors, cast in person at a meeting called for that purpose. Each Plan
may not be amended in order to increase materially the amount of distribution
expenses permitted under a Plan without being approved by a majority vote of the
outstanding voting shares of that class of the Portfolio. Each Plan may be
terminated at any time by a majority vote of the Rule 12b-1 Directors or a
majority of the outstanding voting shares of the effected class of the
Portfolio.
For the fiscal year ended December 31, 1995, the following amounts were
payable by the Portfolios to the Distributor and waived by the Distributor,
respectively, under the Plans.
<TABLE>
<CAPTION>
Investor A Plan Investor B Plan
--------------- ---------------
Fund Payable Waived Payable Waived
---- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Money Market Fund $369,910 $369,910 N/A(1)
Income Fund $ 89,106 $ 33,246 $ 4,833 $ 36
Income Equity Fund $117,603 $ 30,381 $14,271 $ 40
Ohio Tax-Free Fund $ 26,953 $ 4,699 $ 4,410 $ 8
Stock Appreciation Fund $ 26,239 $ 281 $ 21 $ 2
Flexible Growth Fund $ 15,101 $ 5,552 $24,218 $ 79
</TABLE>
- ---------------------------
(1) The Money Market Fund does not offer Investor B shares and therefore does
not make payments under the Investor B Plan.
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<PAGE> 156
- --------------------------------------------------------------------------------
CAPITAL STOCK
- --------------------------------------------------------------------------------
The Company has authorized capital of 3,000,000,000 shares, $.001 par
value. The Company's Articles of Incorporation authorizes the Board of Directors
to divide the Company's capital stock into unlimited series and classes. The
Company presently has six series of shares which represent interests in the
Portfolios of the Company. The shares of each Portfolio, other than the Money
Market Fund, are offered in two separate Classes: Investor A shares and Investor
B shares. Shares of the Money Market Fund are only offered in the Investor A
class of shares. Each share of the Company is entitled to one vote. Fractional
shares have proportionate voting rights and participate pro rata in dividends
and distributions. Shares are fully paid and non-assessable when issued and have
no preemptive, conversion or exchange rights except as otherwise described in
the Prospectuses. Shareholders are entitled to redeem their shares as set forth
under "How to Redeem Shares" in the Prospectuses. The shares are transferable
without restriction. The Company does not issue certificates for fractional
shares.
Company shares have non-cumulative rights, which means that the holders
of more than 50% of shares voting for the election of Directors can elect 100%
of the Directors if they choose to do so and, in such event, the holders of the
remaining shares so voting are not able to elect any Directors.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
- --------------------------------------------------------------------------------
TOTAL RETURN
Total return quotations for each of the Income Fund, the Income Equity
Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund and the Flexible
Growth Fund as they may appear from time to time in advertisements are
calculated by finding the average annual compounded rates of return over one,
five and ten year periods, or the time periods for which a Portfolio has had
operations, whichever is relevant, on a hypothetical $1,000 investment that
would equate the initial amount invested to the ending redeemable value. To the
initial investment all dividends and distributions are added, and all recurring
fees charged to all shareholder accounts are deducted. The ending redeemable
value assumes a complete redemption at the end of the relevant periods.
Aggregate total return is a measure of the change in value of an investment in a
Portfolio over the relevant period and is calculated similarly
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<PAGE> 157
to average annual total return except that the result is not annualized.
The average annual total returns of each of the Portfolios are as
follows:
Investor A Shares
<TABLE>
<CAPTION>
With Sales Loads Without Sales Loads
---------------- -------------------
One Year Five Years Inception One Year Five Years Inception
Ended Ended to Ended Ended to
Fund 12/31/95 12/31/95 12/31/95(1) 12/31/95 12/31/95 12/31/95(1)
---- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Money Market 5.52% N/A 4.00% 5.52% N/A 4.00%
Income 10.04% N/A 3.32% 15.22% N/A 4.80%
Income Equity 25.52% N/A 15.17% 31.45% N/A 16.81%
Ohio Tax-Free 6.00% N/A 3.84% 10.96% N/A 7.26%
Stock
Appreciation(2) 22.09% 17.73% 9.40% 27.89% 18.92% 9.99%
Flexible
Growth 15.41% N/A 10.67% 20.83% N/A 14.56%
</TABLE>
- ------------------------
(1) Dates of Inception: Money Market and Income Funds -- 10/1/92; Income
Equity Fund -- 10/8/92; Ohio Tax-Free Fund -- 8/1/94; Stock Appreciation
Fund -- 7/23/87; and the Flexible Growth Fund -- 9/1/94.
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<PAGE> 158
(2) The performance for the Stock Appreciation Fund includes the performance
of the MIM Stock Appreciation Fund, the Stock Appreciation Fund's
predecessor.
Investor B Shares
<TABLE>
<CAPTION>
Fund One Year Ended 12/31/95(3) Inception to 12/31/95(4)
---- -------------------------- ------------------------
<S> <C> <C>
Income 13.96% 7.60%
Income Equity 29.28% 20.54%
Ohio Tax-Free 10.10% 9.58%
Stock Appreciation 28.27% 14.04%
Flexible Growth 20.53% 15.46%
</TABLE>
- ----------
(3) Includes the total return for the Investor A Shares from January 1, 1995 to
January 16, 1995
(4) Dates of Inception -- the Income, Income Equity, Tax-Free and Flexible
Growth Fund -- 1/15/95; and the Stock Appreciation Fund -- 10/1/95.
Without reimbursement of expenses and/or waiver of fees by Provident,
the average annual total returns of the Money Market Fund, the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Flexible Growth Fund for such
periods would have been lower.
30-DAY YIELD
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a 30-day period ended on the
date of the most recent balance sheet of a Portfolio, computed by dividing the
net investment income per share earned during the period by the maximum offering
price per share on the last day of the base period.
The current yields of the Investor A shares of the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Flexible Growth Fund were
4.85%, 1.38%, 3.40% and 2.96%, respectively, for the 30-day period ended
December 31, 1995, assuming the imposition of a sales load, and 5.12%, 1.45%,
3.57% and 3.11%, respectively, without the imposition of a sales load. For such
period, the current yields of the Investor B Shares of the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Flexible Growth Fund were
4.33%, 0.72%, 2.86% and 2.33%, respectively. Without reimbursement of expenses
and/or waiver of fees by Provident, the current yields of the Income Fund, the
Income Equity Fund, the Ohio
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<PAGE> 159
Tax-Free Fund and the Flexible Growth Fund for the same period would have been
lower.
In addition, with respect to the Ohio Tax-Free Fund, tax equivalent
yields will be computed by dividing that portion of the Ohio Tax-Free Fund's
yield (as computed above) which is tax-exempt by one minus a stated income tax
rate and adding that result to that portion, if any, of the yield of the Ohio
Tax-Free Fund which is not tax-exempt. For the 30-day period ended December 31,
1995, the tax-equivalent yield for the Investor A shares of the Ohio Tax- Free
Fund (assuming a 39.6% federal tax rate) were 3.63%, assuming the imposition of
the maximum sales charge, and 3.91%, excluding the effect of a sales charge. For
that same period, the tax- equivalent yield for the Investor B shares of the
Ohio Tax-Free Fund (assuming a 39.6% federal tax rate) was 4.74%.
SEVEN-DAY YIELD
The yield for the Money Market Fund as it may appear from time to time
in advertisements will be calculated by determining the net change, exclusive of
capital changes (all realized and unrealized gains and losses), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, multiplying the base period return by (365/7) and carrying the resulting
yield figure to the nearest hundredth of one percent. The determination of net
change in account value will reflect the value of additional shares purchased
with dividends from the original share and dividends declared on both the
original share and any such additional shares and all fees charged to all
shareholder accounts in proportion to the length of the base period and the
Money Market Fund's average account size.
If realized and unrealized gains and losses were included in the yield
calculation, the yield of the Money Market Fund might vary materially from that
reported in advertisements. For the seven-day period ended December 31, 1995,
the current yield of the Money Market Fund was 4.74%.
In addition to the yield of the Money Market Fund, its effective yield
may appear from time to time in advertisements. The effective yield will be
calculated by compounding the unannualized base period return by adding 1 to the
quotient, raising the sum to a power equal to 365 divided by 7, subtracting 1
from the result and carrying the resulting effective yield figure to the nearest
hundredth of one percent. For the seven-day period ended December 31, 1995, the
effective yield of the Money Market Fund was 4.85%.
The yield and effective yield as quoted in such advertisements will not
be based on information as of a date more than fourteen days prior to the date
of their publication. Each yield will vary
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<PAGE> 160
depending on market conditions and principal. Each yield also depends on the
quality, maturity and type of instruments held and operating expenses. The
advertisements will include, among other things, the length of the base period
and the date of the last day in the base period used in computing the quotation.
DISTRIBUTION RATES
Each of the Income Fund, the Income Equity Fund, the Ohio Tax- Free
Fund and the Flexible Growth Fund may from time to time advertise current
distribution rates which are calculated in accordance with the method disclosed
in the Prospectus. For the year ended December 31, 1995, the distribution rates
for the Investor A shares of the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund and the Flexible Growth Fund assuming the imposition of the
maximum sales charge, were 5.32%, 12.17%, 3.60% and 3.93%, respectively,
including capital gains, and 5.32%, 1.87%, 3.60% and 3.03%, respectively,
excluding capital gains. For the year ended December 31, 1995, the distribution
rates for the Investor B shares of the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund and the Flexible Growth Fund were 4.59%, 8.40%, 2.92% and
2.30%, respectively, including capital gains, and 4.59%, 0.98%, 2.42% and 3.17%,
respectively, excluding capital gains.
GENERAL
The yield and total return of any investment are generally a function
of quality and maturity, type of investment and operating expenses. A
Portfolio's yields and total return will fluctuate from time to time and are not
necessarily representative of future results.
Yield and total return information is useful in reviewing a Portfolio's
performance, but because yield and total return will fluctuate, such information
may not provide a basis for comparison with bank deposits or other investments
that pay a fixed yield for a stated period of time. An investor's principal is
not guaranteed by the Portfolio.
From time to time, the Company may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (a) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (b) discussions of general economic trends; (c)
presentations of statistical data to supplement such discussions; (d)
descriptions of past or anticipated portfolio holdings for one or more of the
Portfolios within the Company; (e) descriptions of investment strategies for one
or more of the Portfolios within the Company; (f) descriptions of investment
strategies for one or more of such Portfolios; (g) descriptions or comparisons
of various investment products, which may or may not include the Portfolios;
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<PAGE> 161
(h) comparisons of investments products (including the Portfolios) with relevant
market or industry indices or other appropriate benchmarks; (i) discussions of
fund rankings or ratings by recognized rating organizations; and (j)
testimonials describing the experience of persons that have invested in one or
more of the Portfolios.
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
To the knowledge of the Company, as of April 8, 1996: The Provident
Bank, One East Fourth Street, Cincinnati, Ohio 45202, owned of record 69.03% of
the outstanding Investor A shares of the Income Fund, 70.86% of the outstanding
Investor A shares of the Money Market Fund and 96.98% of the outstanding
Investor A shares of the Ohio Tax-Free Fund; Provident Bank Trust Department
Employee Benefit Plan, 3 East Fourth Street, Cincinnati, Ohio 45207 owned of
record 14.68% of the outstanding Investor A shares of the Income Fund, 6.75% of
the outstanding Investor A shares of the Income Equity Fund and 9.34% of the
outstanding Investor A shares of the Flexible Growth Fund; The Provident Bank
Trust Department, 3 East Fourth Street, Cincinnati, Ohio 45202, owned of record
7.26% of the outstanding Investor A shares of the Income Fund, and 5.00% of the
outstanding Investor A shares of the Flexible Growth Fund; The Chase Manhattan
Bank as Trustee for The General Cable Corporation, 4 Tesseneer Drive, Highland
Heights, Kentucky 41076, owned of record 41.95% of the outstanding Investor A
shares of the Income Equity Fund; Provident Bank TTEE FBO Provident Bancorp 401K
Equity, 3 East Fourth Street, Cincinnati, Ohio 45202, owned of record 8.61% of
the outstanding Investor A shares of the Flexible Growth Fund; and Frank E.
James Jr. Trust and The Provident Bank Custodian FBO Iris R. James IRA, each
with the address P.O. Box 8, Alpha, Ohio 45301-0008, owned 5.08% and 2.88%,
respectively, of the outstanding Investor A shares of the Flexible Growth Fund.
As of April 8, 1996, The Fifth Third Bank, FBO Cincinnati Institute of
Fine Arts, P. O. Box 63074, Cincinnati, Ohio 45263, owned beneficially 19.92% of
the outstanding Investor B Shares of the Income Fund. As of such date, BHC
Securities, Inc., One Commerce Square, 2005 Market Street, Suite 1200,
Philadelphia, Pennsylvania 19103, to the knowledge of the Company, is the only
other person who owns of record or beneficially 5% or more of the outstanding
Investor B shares of the Income Fund -
B - 56
<PAGE> 162
12.98%; of the Ohio Tax-Free Fund - 76.89%; and the Stock Appreciation Fund -
61.29%. BHC Securities, Inc. holds such shares as recordholder for various
underlying beneficial owners.
As of such date, the Company knows of no one investor who owns 5% or
more of the outstanding Investor B shares of the Income Equity Fund or the
Flexible Growth Fund.
AUDITORS
The financial statements for each of the Portfolios, other than the
Stock Appreciation Fund, at and for the fiscal year ended December 31, 1995, and
for the Stock Appreciation Fund at and for the three months ended December 31,
1995, appearing in this Statement of Additional Information have been audited
by Ernst & Young LLP, 1300 Chiquita Center, 250 East Fifth Street, Cincinnati,
Ohio 45202, independent certified public accountants, as set forth in their
report appearing elsewhere herein and are included in reliance upon such
report given on their authority as experts in auditing and accounting.
LEGAL COUNSEL
Baker & Hostetler, 65 East State Street, Columbus, Ohio 43215, is
counsel to the Company and will pass upon the legality of the shares offered
hereby.
GENERAL
Except as otherwise stated in the Prospectuses, this Statement of
Additional Information, or required by law, the Company reserves the right to
change the terms of the offer stated in its Prospectuses or this Statement of
Additional Information without shareholder approval, including the right to
impose or change fees for services provided.
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<PAGE> 163
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Company's
Prospectuses, this Statement of Additional Information or in supplemental sales
literature issued by the Company or the Distributor, and no person is entitled
to rely on any information or representation not contained therein.
The Company's Prospectuses and this Statement of Additional Information
omit certain information contained in the registration statement filed with the
Securities and Exchange Commission which may be obtained from the Commission's
principal office in Washing- ton, D.C. upon payment of the fee prescribed by the
Rules and Regulations promulgated by the Commission.
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<PAGE> 164
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
B - 59
<PAGE> 165
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Directors
The Riverfront Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments of The Riverfront Funds, Inc.
(comprising, respectively, U.S. Government Securities Money Market Fund, U.S.
Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, Flexible
Growth Fund, and Stock Appreciation Fund) as of December 31, 1995, and the
related statements of operations, and changes in net assets and the financial
highlights for the year then ended of U.S. Government Securities Money Market
Fund, U.S. Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund,
and Flexible Growth Fund, and from October 1, 1995 to December 31, 1995 of Stock
Appreciation Fund. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial statements and financial highlights of the U.S. Government
Securities Money Market Fund, U.S. Government Income Fund, Income Equity Fund,
Ohio Tax-Free Bond Fund, and Flexible Growth Fund for the periods prior to
January 1, 1995, were audited by other auditors whose report dated January 20,
1995, expressed an unqualified opinion on those statements and financial
highlights. The financial statements and financial highlights of the Stock
Appreciation Fund for the years ended prior to October 1, 1995, were audited by
other auditors whose report dated October 11, 1995, expressed an unqualified
opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Riverfront Funds, Inc. at December
31, 1995, the results of their operations, the changes in their net assets and
the financial highlights for the respective periods ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Ernst and Young LLP
Cincinnati, Ohio
January 15, 1996
-11-
<PAGE> 166
THE RIVERFRONT FUNDS, INC.
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
U.S. Government
Securities Money U.S. Government Income
Market Fund Income Fund Equity Fund
------------- ------------- -------------
ASSETS:
<S> <C> <C> <C>
Investments, at value $ 99,079,165 $ 37,305,693 $ 62,969,968
Repurchase agreements 59,137,000
------------- ------------- -------------
Total Investments 158,216,165 37,305,693 62,969,968
Interest receivable 32,077 495,240 218,178
Receivable for capital shares issued 1,883 19,306
Receivable from brokers for investments sold 1,123,881
Receivable from investment adviser 42,403 69,570
Prepaid expenses and other assets 14,492 1,487 6,924
------------- ------------- -------------
Total Assets 158,262,734 37,846,706 64,407,827
------------- ------------- -------------
LIABILITIES:
Dividends payable 668,431 4,750 219,989
Payable for capital shares redeemed 13,933
Payable to brokers for investments purchased 404,849
Accrued expenses and other payables:
Investment advisory fees 24,438 12,899 48,471
Administration fees 29,047 6,450 10,203
Audit and legal fees 22,846 7,142 7,299
Other 22,473 14,290 24,694
------------- ------------- -------------
Total Liabilities 767,235 45,531 729,438
------------- ------------- -------------
NET ASSETS:
Capital 157,497,789 38,263,873 58,269,402
Undistributed net investment income 7,806
Net unrealized appreciation from investments 1,436,834 5,381,996
Accumulated undistributed net realized gains (losses) from investment
transactions (2,290) (1,907,338) 26,991
------------- ------------- -------------
Net Assets $ 157,495,499 $37,801,175 $ 63,678,389
============= ============= =============
Net Assets
Investor A Shares $ 157,495,499 $ 36,538,296 $ 60,845,149
Investor B Shares 1,262,879 2,833,240
------------- ------------- -------------
Total $ 157,495,499 $37,801,175 $ 63,678,389
============= ============= =============
Shares of capital stock
Investor A Shares 157,497,789 3,762,748 5,199,892
Investor B Shares 115,283 239,090
------------- ------------- -------------
Total 157,497,789 3,878,031 5,438,982
============= ============= =============
Net asset value
Investor A Shares--redemption price per share $ 1.00 $ 9.71 11.70
Investor B Shares--offering price per share* 10.95 11.85
============= ============= =============
Maximum Sales Charge (Investor A) 4.50% 4.50%
============= =============
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net asset
value adjusted to nearest cent) per share (Investor A) $ 1.00(a) $ 10.17 12.25
============= ============= =============
Investments, at cost $ 158,216,165 $ 35,868,859 $ 57,587,972
============= ============= =============
<FN>
(a) Offering price and redemption price are the same for the U.S. Government
Securities Money Market Fund.
* Redemption price of Investor B Shares varies based on length of time shares
are held.
</TABLE>
See notes to financial statements
-12-
<PAGE> 167
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
Ohio Tax-Free Flexible Growth Stock Appreciation
Bond Fund Fund Fund
----------- ----------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value $11,650,714 $14,811,639 $39,420,991
Repurchase agreements 1,579,159
----------- ----------- -----------
Total Investments 11,650,714 14,811,639 41,000,150
Interest receivable 76,834 122,851 26,709
Receivable for capital shares issued 22,430 44,007
Receivable from investment adviser 612 58,705
Unamortized organization costs 5,825 2,049 48,231
Prepaid expenses and other assets 620 4,372 3,943
----------- ----------- -----------
Total Assets 11,734,605 15,022,046 41,123,040
----------- ----------- -----------
LIABILITIES:
Dividends payable 1,449 51,444
Payable for capital shares redeemed 17,633
Payable to brokers for investments purchased 474,680
Accrued expenses and other payables:
Investment advisory fees 3,976 7,238 27,648
Administration fees 1,988 2,413 6,912
Audit and legal fees 3,299 2,945 279
Other 6,852 8,799 21,029
----------- ----------- -----------
Total Liabilities 17,564 565,152 55,868
----------- ----------- -----------
NET ASSETS:
Capital 11,153,013 13,247,718 33,949,349
Undistributed net investment income 5,459 9,166
Net unrealized appreciation from investments 558,379 1,200,010 7,117,823
Accumulated undistributed net realized gains from
investment transactions 190
----------- ----------- -----------
Net Assets $11,717,041 $14,456,894 $41,067,172
=========== =========== ===========
Net Assets
Investor A Shares $11,090,807 $ 9,426,863 $40,994,847
Investor B Shares 626,234 5,030,031 72,325
----------- ----------- -----------
Total $11,717,041 $14,456,894 $41,067,172
=========== =========== ===========
Shares of capital stock
Investor A Shares 1,055,522 829,894 4,315,611
Investor B Shares 58,358 430,077 7,299
----------- ----------- -----------
Total 1,113,880 1,259,971 4,322,910
=========== =========== ===========
Net asset value
Investor A Shares--redemption price per share $ 10.51 11.36 9.50
Investor B Shares--offering price per share* 10.73 11.70 9.91
=========== =========== ===========
Maximum Sales Charge (Investor A) 4.50% 4.50% 4.50%
=========== =========== ===========
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share (Investor A) $ 11.01 $ 11.90 9.95
=========== =========== ===========
Investments, at cost $11,092,335 $13,611,629 $33,882,327
=========== =========== ===========
<FN>
* Redemption price of Investor B Shares varies based on length of time shares
are held.
</TABLE>
See notes to financial statements.
-13-
<PAGE> 168
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
U.S. Government
Securities Money U.S. Government Income Equity
Market Fund Income Fund Fund
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 8,763,797 $ 2,465,709 $ 111,565
Dividend income 1,705,653
------------ ------------ ------------
Total Income 8,763,797 2,465,709 1,817,218
------------ ------------ ------------
EXPENSES:
Investment advisory fees 221,912 144,461 407,229
Administration fees 296,225 72,231 96,796
12b-1 fees (Investor A) 369,910 89,106 117,603
12b-1 fees (Investor B) 4,833 14,271
Custodian and accounting fees 73,973 36,115 72,596
Audit and legal fees 133,254 29,458 59,767
Trustees' fees and expenses 16,050 3,364 4,765
Transfer agent fees 59,257 37,402 42,860
Registration and filing fees 13,235 4,600 7,802
Printing costs 26,680 6,282 11,066
Other 16,925 3,827 4,406
Expenses voluntarily reduced (369,910) (33,246) (41,897)
------------ ------------ ------------
Total expenses before reimbursement by investment
adviser 857,511 398,433 797,264
Reimbursement of expenses by investment adviser (548) (62,119)
------------ ------------ ------------
Total Expenses 857,511 397,885 735,145
------------ ------------ ------------
Net Investment Income 7,906,286 2,067,824 1,082,073
------------ ------------ ------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions (1,415) (517,451) 6,655,045
Net change in unrealized appreciation from investments 3,520,908 5,311,784
------------ ------------ ------------
Net realized/unrealized gains (losses) from investments (1,415) 3,003,457 11,966,829
------------ ------------ ------------
Change in net assets resulting from operations $ 7,904,871 $ 5,071,281 $ 13,048,902
============ ============ ============
</TABLE>
See notes to financial statements.
-14-
<PAGE> 169
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Flexible Stock Stock
Ohio Tax-Free Growth Appreciation Appreciation
Bond Fund Fund Fund (a) Fund (b)
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 590,027 $ 311,142 $ 93,734 $ 368,293
Dividend income 91,106 39,950 384,381
----------- ---------- ---------- ----------
Total Income 590,027 402,248 133,684 752,674
----------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees 56,114 76,231 83,982 439,627
Administration fees 22,439 16,888 20,771
12b-1 fees (Investor A) 26,953 15,101 26,239 279,882
12b-1 fees (Investor B) 4,410 24,218 21
Custodian and accounting fees 15,708 12,666 15,578 48,947
Audit and legal fees 18,656 10,249 8,306 36,163
Organization costs 8,823 4,078 6,704
Trustees' fees and expenses 1,096 365 2,005 2,779
Transfer agent fees 25,445 22,857 9,834 75,871
Registration and filing fees 4,266 5,423 6,303 18,296
Printing costs 1,776 13,439 5,080
Other 1,043 441 1,173 143,379
Expenses voluntarily reduced (15,933) (31,119) (1,181)
----------- ---------- ---------- ----------
Total expenses before reimbursement by
investment adviser 170,796 170,837 184,815 1,044,944
Reimbursement of expenses by investment
adviser (544) (44,178)
----------- ---------- ---------- ----------
Total Expenses 170,252 126,659 184,815 1,044,944
----------- ---------- ---------- ----------
Net Investment Income (Loss) 419,775 275,589 (51,131) (292,270)
----------- ---------- ---------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains from investment transactions 8,848 131,879 1,556,383 3,024,858
Net change in unrealized appreciation (depreciation)
from investments 713,315 1,230,202 (2,070,853) 5,538,265
----------- ---------- ---------- ----------
Net realized/unrealized gains (losses) from investments 722,163 1,362,081 (514,470) 8,563,123
----------- ---------- ---------- ----------
Change in net assets resulting from operations $ 1,141,938 $1,637,670 $ (565,601) $8,270,853
=========== ========== ========== ==========
<FN>
- --------
(a) Period from October 1, 1995 (date acquired by Riverfront Stock Appreciation
Fund) through December 31, 1995.
(b) Represents statement of operations for the MIM Stock Appreciation Fund for
the year ended September 30, 1995 (prior fiscal year end). Audited by other
auditors.
</TABLE>
See notes to financial statements.
-15-
<PAGE> 170
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. Government Securities U.S. Government Income Equity
Money Market Fund Income Fund Fund
---------------------------- --------------------------- --------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 (a) 1995 1994 (a) 1995 1994 (a)
------------- ------------ ------------ ----------- ----------- ------------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $7,906,286 $5,452,996 $ 2,067,824 $ 1,797,395 $ 1,082,073 $ 936,433
Net realized gains (losses) from
investment transactions (1,415) (875) (517,451) (1,525,031) 6,655,045 1,673,314
Net change in unrealized appreciation
(depreciation) from investments 3,520,908 (1,773,015) 5,311,784 (1,806,498)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets resulting from
operations 7,904,871 5,452,121 5,071,281 (1,500,651) 13,048,902 803,249
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment income (7,906,286) (5,452,996) (2,032,120) (1,797,395) (1,065,510) (936,243)
In excess of net investment income (3,474) (6,742)
From net realized gains from
investments (6,293,075) (1,694,627)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment income (22,977) (16,563)
In excess of net investment income (105)
From net realized gains from
investments (222,170)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions (7,906,286) (5,452,996) (2,055,097) (1,800,869) (7,604,165) (2,630,870)
------------ ------------ ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 331,872,719 252,936,958 5,670,500 7,849,466 12,155,416 13,962,314
Proceeds from shares issued in
connection with acquisition 4,865,634 9,727,219
Dividends reinvested 1,518,099 569,500 578,837 333,435 8,648,647 900,398
Cost of shares redeemed (330,133,820) (237,338,519) (4,185,229) (2,238,879) (7,262,834) (2,457,054)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets from capital
transactions 8,122,632 16,167,939 2,064,108 5,944,022 23,268,448 12,405,658
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets 8,121,217 16,167,064 5,080,292 2,642,502 28,713,185 10,578,037
NET ASSETS:
Beginning of period 149,374,282 133,207,218 32,720,883 30,078,381 34,965,204 24,387,167
------------ ------------ ----------- ----------- ----------- -----------
End of period $ 157,495,499 $ 149,374,282 $ 37,801,175 $ 32,720,883 $63,678,389 $34,965,204
============ ============ =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued 331,872,719 252,936,958 592,903 838,911 1,069,857 1,295,899
Issued in connection with
acquisition 4,865,634 793,942
Reinvested 1,518,099 569,500 61,636 36,232 764,131 84,342
Redeemed (330,133,820) (237,338,519) (444,444) (243,620) (634,159) (230,101)
------------ ------------ ----------- ----------- ----------- -----------
Change in shares 8,122,632 16,167,939 210,095 631,523 1,993,771 1,150,140
============ ============ =========== =========== =========== ===========
</TABLE>
[FN]
- --------
(a) Audited by other auditors
See notes to financial statements.
-16-
<PAGE> 171
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Ohio Tax-Free Bond Fund Flexible Growth Fund
----------------------------------------- ------------------------------------
Period Period
Year ended from August 1, Year ended from September 1,
December 31, 1994 through December 31, 1994 through
1995 December 31, 1994 (a) 1995 December 31, 1994(a)
------------ -------------------- ------------ --------------------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 419,775 $ 121,843 $ 275,589 $ 22,610
Net realized gains (losses) from investment
transactions 8,848 (8,658) 131,879 (2,876)
Net change in unrealized appreciation
(depreciation) from investments 713,315 (154,936) 1,230,202 (30,192)
------------ ------------ ----------- -----------
Change in net assets resulting from operations 1,141,938 (41,751) 1,637,670 (10,458)
------------ ------------ ----------- -----------
Distributions to Investor A Shareholders:
From net investment income (401,164) (123,784) (202,502) (27,057)
From net realized gains from investments (85,787)
Distributions to Investor B Shareholders:
From net investment income (13,152) (63,921)
From net realized gains from investments (43,216)
------------ ------------ ----------- -----------
Change in net assets from shareholder
distributions (414,316) (123,784) (395,426) (27,057)
------------ ------------ ----------- -----------
Capital Transactions:
Proceeds from shares issued 895,943 10,355,088 11,076,750 2,833,344
Dividends reinvested 18,208 27 334,888 13,957
Cost of shares redeemed (114,312) (906,216) (100,558)
------------ ------------ ----------- -----------
Change in net assets from capital transactions 799,839 10,355,115 10,505,422 2,746,743
------------ ------------ ----------- -----------
Change in net assets 1,527,461 10,189,580 11,747,666 2,709,228
Net Assets:
Beginning of period 10,189,580 2,709,228
------------ ------------ ----------- -----------
End of period $ 11,717,041 $ 10,189,580 $14,456,894 $ 2,709,228
============ ============ =========== ===========
Share Transactions:
Issued 87,181 1,036,159 1,035,102 285,468
Reinvested 1,760 3 30,561 1,408
Redeemed (11,223) (82,394) (10,174)
------------ ------------ ----------- -----------
Change in shares 77,718 1,036,162 983,269 276,702
============ ============ =========== ===========
<FN>
(a) Period from commencement of operations. Audited by other auditors.
</TABLE>
See notes to financial statements.
-17-
<PAGE> 172
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Stock Appreciation Fund
-----------------------------------------------------------------------
Period Period Period
from October 1, from October 1, from October 1,
1995 through 1994 through 1993 through
December 31, 1995 (a) September 30, 1995(b) September 30, 1994 (b)
--------------------- --------------------- ----------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net investment loss $ (51,131) $ (292,270) (725,732)
Net realized gains from investment transactions 1,556,383 3,024,858 715,333
Net change in unrealized appreciation (depreciation)
from investments (2,070,853) 5,538,265 (8,468,657)
------------ ---------------- ------------
Change in net assets resulting from operations (565,601) 8,270,853 (8,479,056)
------------ ---------------- ------------
Distributions to Investor A Shareholders:
From net investment income (1,166,721) (1,869,901)
From net realized gains from investments (1,556,383) (1,566,848)
Tax return of capital (6,824)
------------ ---------------- ------------
Change in net assets from shareholder distributions (1,563,207) (1,166,721) (3,436,749)
------------ ---------------- ------------
Capital Transactions:
Proceeds from shares issued 810,508
Dividends reinvested 1,542,781
Cost of shares redeemed (3,611,887)
------------ ---------------- ------------
Change in net assets from capital transactions (1,258,598) (10,529,141) 463,566
------------ ---------------- ------------
Change in net assets (3,387,406) (3,425,009) (11,452,239)
Net Assets:
Beginning of period 44,454,578 47,879,587 59,331,826
------------ ---------------- ------------
End of period $ 41,067,172 $ 44,454,578 $ 47,879,587
============ ================ ============
Share Transactions:
Issued 83,381
Reinvested 164,279
Redeemed (370,208)
------------ ---------------- ------------
Change in shares (122,548)
============ ================ ============
<FN>
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
(b) Represents statements of changes in net assets for the MIM Stock
Appreciation Fund. Audited by other auditors.
</TABLE>
See notes to financial statements.
-18-
<PAGE> 173
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Schedule of Portfolio Investments
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- --------------- ------------------------------ -------------
<S> <C>
U.S. Government Agencies (35.2%):
Federal Farm Credit Bank:
3,000,000 Discount Note, 1/19/96 $ 2,991,585
3,000,000 Discount Note, 2/21/96 2,976,540
Federal Home Loan Mortgage Corp.:
7,825,000 Discount Note, 1/2/96 7,823,783
2,000,000 Discount Note, 2/26/96 1,982,764
3,000,000 Discount Note, 4/1/96 2,959,050
Federal National Mortgage Assoc.:
100,000 9.35%, 2/12/96 100,306
5,000,000 Discount Note, 1/3/96 4,998,447
6,000,000 Discount Note, 1/5/96 5,996,270
3,000,000 Discount Note, 1/16/96 2,993,025
6,770,000 Discount Note, 2/2/96 6,736,575
3,000,000 Discount Note, 2/22/96 2,975,714
3,000,000 Discount Note, 3/8/96 2,969,515
3,000,000 Discount Note, 3/14/96 2,966,846
4,000,000 Discount Note, 3/28/96 3,948,573
World Bank:
3,000,000 Discount Note, 3/4/96 2,971,020
-------------
Total U.S. Government Agencies 55,390,013
-------------
Commercial Paper (27.7%):
British Commercial Paper (4.4%):
4,000,000 Glaxo PLC, Discount Note,
1/23/96 3,986,067
3,000,000 Hanson PLC, Discount
Note, 3/6/96 2,969,829
-------------
6,955,896
-------------
Energy (1.9%):
3,000,000 Mid American Energy Co.,
Discount Note, 3/26/96 2,960,688
-------------
Financial Services (5.6%):
2,000,000 International Lease Finance
Corp., Discount Note,
2/23/96 1,983,393
4,000,000 Merrill Lynch, Discount
Note, 1/17/96 3,989,867
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ----------------- --------------------------- -------------
<S> <C>
Commercial Paper, continued:
Financial Services, continued:
3,000,000 Merrill Lynch, Discount
Note, 2/29/96 $ 2,972,172
----------
8,945,432
----------
German Commercial Paper (2.5%):
4,000,000 Daimler--Benz North
America Corp., Discount
Note, 1/30/96 3,981,601
----------
Japanese Commercial Paper (4.4%):
3,000,000 Mitsubishi Corp., Discount
Note, 3/15/96 2,965,343
4,000,000 Mitsui & Co., Discount
Note, 4/17/96 3,934,611
----------
6,899,954
----------
Manufacturing (1.9%):
3,000,000 Case Equipment Corp.,
Discount Note, 1/12/96 2,994,729
----------
Pharmaceutical (1.9%):
3,000,000 Allergan Co., Discount
Note, 1/9/96 2,996,173
----------
Telecommunication (5.1%):
4,000,000 AT&T Corp., Discount
Note, 1/23/96 3,986,067
4,000,000 MCI Communications
Corp., Discount Note,
2/20/96 3,968,612
----------
7,954,679
----------
Total Commercial Paper 43,689,152
----------
Total Investments 99,079,165
----------
</TABLE>
Continued
-19-
<PAGE> 174
THE RIVERFRONT FUNDS, INC.
U.S. Government Securities Money Market Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ------------ --------------------- ---------
<S> <C> <C>
Repurchase Agreements (37.5%):
24,137,000 Dean Witter, 5.70%, dated
12/29/95, due 1/2/96
(Collateralized by
various U.S. Government
Agency Securities,
0.00%-7.99%, 2/6/95-
6/1/24, market value-
$24,619,742) $ 24,137,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ------------ --------------------- ---------
<S> <C>
Repurchase Agreements, continued:
35,000,000 Prudential, 5.83%, dated
12/29/95, due 1/2/96
(Collateralized by
various U.S. Treasury
and U.S. Government
Agency Securities,
0.00%-8.50%, 5/15/04-
12/1/25, market value--
$35,700,146) $ 35,000,000
-------------
Total Repurchase Agreements 59,137,000
-------------
Total (Cost--$158,216,165)(a) $158,216,165
=============
<FN>
- ----------
Percentages indicated are based on net assets of $157,495,499.
(a) Cost for federal income tax and financial reporting purposes are the same.
</TABLE>
See notes to financial statements.
-20-
<PAGE> 175
THE RIVERFRONT FUNDS, INC.
U.S. Government Securities Money Market Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
Corporate Bonds (25.0%):
Automotive (1.3%):
500,000 Ford Motor Credit Corp.,
6.25%, 12/8/05 $ 498,125
---------
Financial (18.3%):
1,000,000 Chemical Bank, 8.50%,
2/15/02 1,126,250
1,000,000 Chemical Master Credit Card
Trust I, 6.23%, 6/15/03,
Series 1995-2 1,018,680
1,000,000 Comerica, Inc., 7.25%,
8/1/07 1,060,000
1,000,000 First Chicago Master Trust II,
Series 1994L, 7.15%,
4/15/01 1,055,260
500,000 Grand Metropolitan
Investment, 7.45%,
4/15/35 548,750
500,000 Lehman Brothers Holdings,
7.13%, 9/15/03 513,125
500,000 Lehman Brothers Holdings,
8.50%, 5/1/07 562,500
1,000,000 MBNA Master Credit Card
Trust, 6.05%, 11/15/02 1,012,010
---------
6,896,575
---------
Telecommunication (2.7%):
1,000,000 U.S. West Capital Corp.,
6.31%, 11/1/05 1,020,000
---------
Tobacco (2.7%):
1,000,000 Philip Morris Cos., Inc.,
7.50%, 3/15/97 1,021,250
---------
Total Corporate Bonds 9,435,950
---------
U.S. GOVERNMENT AGENCIES (62.2%):
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97 1,004,240
500,000 8.07%, 2/27/02 534,675
875,000 6.38%, 4/29/03 883,470
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
U.S. Government Agencies, continued:
Federal Home Loan Mortgage Corp.:
1,000,000 6.55%, 1/4/00 $ 1,032,760
500,000 6.33%, 2/16/00 500,430
1,000,000 6.78%, 3/28/01 1,002,220
1,000,000 7.68%, 5/23/01 1,034,610
1,000,000 7.35%, 5/16/05 1,055,430
500,000 7.50%, 3/15/15 508,105
1,000,000 7.00%, 10/15/17 1,019,230
1,000,000 6.00%, 1/15/18 1,003,930
1,000,000 7.20%, 6/15/18 1,016,100
1,250,000 5.85%, 1/25/19 1,231,675
Federal National Mortgage Association:
1,000,000 5.33%, 6/26/98 995,160
500,000 9.05%, 4/10/00 564,235
625,000 6.38%, 6/25/03 630,481
625,000 6.05%, 6/30/03 637,400
888,146 6.75%, 8/25/04 888,769
1,050,000 8.50%, 2/1/05 1,144,332
1,000,000 7.00%, 9/25/05 1,014,200
1,000,000 7.00%, 9/25/19 1,009,700
600,000 9.50%, 11/10/20 639,966
Government National Mortgage Association:
885,6378.00%, 5/15/23
Pool #351752 921,355
Student Loan Marketing Association:
1,000,0006.05%, 9/14/00 1,019,500
1,000,0007.20%, 11/9/00 1,066,250
Tennessee Valley Authority:
1,050,0007.88%, 9/15/01 1,147,125
----------
Total U.S. Government Agencies 23,505,348
----------
U.S. TREASURY BONDS (2.6%):
410,0006.50%, 4/30/99 425,039
500,0007.25%, 5/15/04 555,215
----------
Total U.S. Treasury Bonds 980,254
----------
</TABLE>
Continued
-21-
<PAGE> 176
THE RIVERFRONT FUNDS, INC.
U.S. Government Income Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
U.S. TREASURY NOTES (5.5%):
500,0005.88%, 3/31/99 $ 508,870
250,0005.88%, 2/15/04 255,242
1,000,0006.50%, 5/15/05 1,064,190
250,006.25%, 8/15/23 257,170
-----------
Total U.S. Treasury Notes 2,085,472
-----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community,
9.13%, 3/15/01 414,275
-----------
Total Yankee Dollar Bonds 414,275
-----------
Shares or
Principal Security Market
Amount Description Value
------ ---------------- ------------
Investment Companies (2.3%):
884,394 Dreyfus Treasury Prime
Fund $ 884,394
-----------
Total Investment Companies 884,394
-----------
Total (Cost--$35,868,859)(a) $37,305,693
===========
<FN>
- -------------
Percentages indicated are based on net assets of $37,801,175
(a) Represents cost for the federal income tax purposes and differs value by net
unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $1,459,613
Unrealized depreciation (22,779)
----------
Net unrealized appreciation $1,436,834
==========
</TABLE>
See notes to financial statements.
-22-
<PAGE> 177
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.0%):
Aerospace-Aircraft (0.8%):
800 B.F. Goodrich Co. $ 54,500
3,000 Raytheon Co. 141,750
2,000 Rockwell International Corp. 105,750
2,000 United Technologies Corp. 189,750
------------
491,750
------------
Apparel (2.2%):
51,700 Intimate Brands, Inc. 775,500
11,600 V F Corp. 611,900
------------
1,387,400
------------
Automobile & Parts (2.2%):
15,100 Eaton Corp. 809,737
800 Genuine Parts Co. 32,800
7,100 TRW, Inc. 550,250
------------
1,392,787
------------
Banks (8.9%):
11,500 AmSouth Bancorporation 464,313
12,000 Bank of Boston Corp. 555,000
5,500 BayBanks, Inc. 540,375
23,100 Central Fidelity Banks, Inc. 739,200
12,400 Crestar Financial Corp. 733,150
11,500 First American Corp. 544,812
1,000 First Virginia Banks, Inc. 41,750
24,200 Jefferson Bankshares, Inc. 490,050
30,100 Magna Group, Inc. 714,875
27,600 Summit Bancorp 869,400
------------
5,692,925
------------
Building Materials (2.0%):
37,200 Masco Corp. 1,167,150
2,000 Sherwin Williams Co. 81,500
------------
1,248,650
------------
Chemicals (7.9%):
11,700 Betz Laboratories, Inc. 479,700
42,300 Crompton & Knowles Corp. 560,475
900 Dexter Corp. 21,263
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Chemicals, continued:
3,500 E.I. du Pont deNemours &
Co. $ 244,563
91,400 Ethyl Corp. 1,142,500
2,000 Great Lakes Chemical Corp. 144,000
26,500 Lawter International, Inc. 308,062
17,500 Nalco Chemical Co. 527,187
3,000 PPG Industries, Inc. 137,250
11,000 Rohm & Haas Co. 708,125
25,600 Witco Corp. 748,800
------------
5,021,925
------------
Chemicals & Drugs (0.2%):
1,600 Bristol Myers Squibb Co. 137,400
------------
Consumer Products (1.3%):
23,000 Corning, Inc. 736,000
2,000 Gillette Co. 104,250
------------
840,250
------------
Cosmetics (0.2%):
2,000 International Flavors 96,000
------------
Commercial Services (2.5%):
20,300 Kelly Services, Inc.-Class A 563,325
47,500 Ogden Corp. 1,015,312
------------
1,578,637
------------
Department Stores (4.1%):
27,600 May Department Stores Co. 1,166,100
16,600 Mercantile Stores Co., Inc. 767,750
11,800 J.C. Penney Co. 561,975
3,000 Sears Roebuck & Co. 117,000
------------
2,612,825
------------
Electrical (2.3%):
6,000 AMP, Inc. 230,250
15,100 Thomas & Betts Corp. 1,113,625
1,500 WW Grainger, Inc. 99,375
------------
1,443,250
------------
</TABLE>
Continued
-23-
<PAGE> 178
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Electronics (2.7%):
4,000 General Electric Co. $ 288,000
39,800 General Signal Corp. 1,288,525
3,000 Loral Corp. 106,125
1,500 National Service Industries,
Inc. 48,563
-----------
1,731,213
-----------
Energy & Oil (0.2%):
1,000 British Petroleum, PLC-ADR 102,125
-----------
Financial Services (2.6%):
39,700 ITT Industries, Inc. 952,800
5,500 J.P. Morgan & Co. 441,375
4,000 Norwest Corp. 132,000
2,000 Student Loan Marketing
Assoc. 131,750
-----------
1,657,925
-----------
Food Processing (0.8%):
15,100 Dean Foods Co. 415,250
9,500 Tasty Baking Co. 115,188
-----------
530,438
-----------
Foreign (2.2%):
90,500 Hanson Trust, PLC 1,380,125
-----------
Holding Company (1.7%):
7,800 Unilever N.V. 1,097,850
-----------
Household Products/Wares (1.1%):
8,600 Colgate-Palmolive Co. 604,150
1,000 Procter & Gamble Co. 83,000
-----------
687,150
-----------
Industrial Machinery (2.0%):
29,400 Cooper Industries, Inc. 1,080,450
7,900 Goulds Pumps, Inc. 197,500
-----------
1,277,950
-----------
Insurance (5.3%):
2,781 Allstate Corp. 114,369
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Insurance, continued:
13,800 American Financial Group $ 422,625
26,400 American General Corp. 920,700
1,500 American International Group 138,750
22,500 ITT Hartford Group, Inc.(b) 1,088,437
15,500 Torchmark Corp. 701,375
-----------
3,386,256
-----------
Manufacturing--Miscellaneous (0.4%):
3,500 Minnesota Mining &
Manufacturing Co. 231,875
-----------
Medical Services & Supplies (0.2%):
1,500 Becton Dickinson & Co. 112,500
-----------
Metals (1.4%):
15,500 Reynolds Metals Co. 877,687
-----------
Oil--International (0.5%):
5,000 Chevron Corp. 262,500
1,000 Exxon Corp. 80,125
-----------
342,625
-----------
Oil Equipment, Wells & Services (1.7%):
45,100 Dresser Industries, Inc. 1,099,312
-----------
Oil & Gas Production (10.4%):
10,800 Amoco Corp. 776,250
19,200 Ashland, Inc. 674,400
9,800 Atlantic Richfield Co. 1,085,350
50,400 Occidental Petroleum Corp. 1,077,300
34,000 Repsol, S.A.-ADR 1,117,750
42,800 USX-Marathon Group 834,600
38,500 Unocal Corp. 1,121,312
-----------
6,686,962
-----------
Packaged Food (3.9%):
4,500 Flower's Industries, Inc. 54,563
11,800 General Mills, Inc. 681,450
39,400 Grand Metropolitan, PLC-
ADR 1,132,750
33,000 Lance, Inc. 540,375
</TABLE>
Continued
-24-
<PAGE> 179
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Packaged Food, continued:
2,500 Sara Lee Corp. $ 79,688
------------
2,488,826
------------
Pharmaceuticals (4.2%):
3,000 Abbott Laboratories 125,250
9,000 Merck & Co., Inc. 591,750
3,000 Pfizer, Inc. 189,000
6,000 Schering-Plough 328,500
14,600 Warner-Lambert Co. 1,418,025
------------
2,652,525
------------
Photography (0.6%):
5,500 Eastman Kodak Co. 368,500
------------
Pipelines (2.1%):
27,500 Tenneco, Inc. 1,364,687
------------
Printing & Publishing (1.8%):
17,900 Dun & Bradstreet Corp. 1,159,025
------------
Real Estate Investment Trusts (0.2%):
3,000 Federal Realty Investment
Trust 68,250
3,200 New Plan Realty Trust 70,000
------------
138,250
------------
Restaurants (0.1%):
1,800 Luby's Cafeterias, Inc. 40,050
------------
Retail (0.4%):
5,000 Winn Dixie Stores, Inc. 184,375
5,000 Woolworth Corp. 65,000
------------
249,375
------------
Savings & Loan (0.9%):
30,000 Roosevelt Financial Group,
Inc. 581,250
------------
Tobacco (1.2%):
5,000 American Brands, Inc. 223,125
5,000 Philip Morris Cos., Inc. 452,500
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Tobacco, continued:
1,300 UST, Inc. $ 43,388
------------
719,013
------------
Tools (0.6%):
4,000 Illinois Tool Works 236,000
3,600 Snap-On, Inc. 162,900
------------
398,900
------------
Transportation (1.1%):
5,800 Canadian National Railway
Co.(b) 87,000
2,500 Illinois Central Corp. 95,938
2,500 Norfolk Southern Corp. 198,438
13,500 Ryder System, Inc. 334,125
------------
715,501
------------
Utilities--Electric (4.2%):
27,191 Cinergy Corp. 832,724
1,000 KU Energy Corp. 30,000
22,000 Peco Energy Co. 662,750
18,300 Public Services Enterprise
Group 560,437
14,400 Texas Utilities Co. 592,200
------------
2,678,111
------------
Utilities--Gas (0.1%):
1,500 Consolidated Natural Gas Co. 68,063
1,000 Washington Gas & Light Co. 20,500
------------
88,563
------------
Utilities--Telecommunications (7.8%):
17,600 ALLTEL Corp. 519,200
46,800 Frontier Corp. 1,404,000
15,600 GTE Corp. 686,400
1,200 Pacific Telesis Group 40,350
30,200 Southern New England
Telecommunications Corp. 1,200,450
26,400 Sprint Corp. 1,052,700
</TABLE>
Continued
-25-
<PAGE> 180
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telecommunications, continued:
1,500 US West, Inc. $ 53,625
------------
4,956,725
------------
Total Common Stocks 61,745,093
------------
CONVERTIBLE CORPORATE BONDS (1.9%):
Financial (0.4%):
50,000 Chubb Capital Corp., 6.00%,
5/15/98 57,250
50,000 Cincinnati Financial Corp.,
5.50%, 5/1/02 69,500
50,000 South Carolina National Corp.,
6.50%, 5/15/01 118,375
------------
245,125
------------
Industrial (0.3%):
50,000 Hazleton Labs, 6.50%,
5/15/06 123,250
50,000 Liebert Corp., 8.00%,
11/15/10 145,500
------------
268,750
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS, CONTINUED:
Manufacturing (0.2%):
100,000 Allegheny Ludlum Corp.,
5.88%, 3/15/02 $ 103,625
------------
Oil & Gas--Domestic (0.2%):
100,000 Pennzoil Co., 6.50%, 1/15/03 128,500
------------
Restaurant (0.1%):
85,000 Cooker Restaurant, 6.75%,
10/1/02 68,000
------------
Retail (0.5%):
300,000 Federated Department Stores,
5.00%, 10/1/03 300,375
------------
Toys (0.2%):
100,000 Hasbro, Inc., 6.00%,
11/15/98 110,500
------------
Total Convertible Corporate Bonds 1,224,875
------------
Total (Cost--$57,587,972)(a) $62,969,968
============
</TABLE>
- ----------------
Percentages indicated are based on net assets of $63,678,389.
(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 purposes in excess of federal income tax reporting
of $96,134. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation $ 6,388,955
Unrealized depreciation (1,103,093)
-----------
Net unrealized appreciation $ 5,285,862
===========
(b) Represents non-income producing securities.
See notes to financial statements.
-26-
<PAGE> 181
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
OHIO MUNICIPAL BONDS (93.3%):
100,000 Aurora, City School District, 5.40%, 12/1/06 $ 105,000
100,000 Bowling Green, City School District, 5.70%, 12/1/11 102,375
230,000 Butler County, Hospital Facilities, 6.00%, 11/15/10, Callable 5/15/04 240,925
250,000 Butler County, Sewer System Revenue, Series B, 6.20%, 12/1/09 265,937
250,000 Canton, Waterworks System, 5.75%, 12/1/10 262,187
100,000 Chillicothe, Water System Revenue, 5.10%, 12/1/05 101,625
200,000 Cincinnati, GO, 4.50%, 12/1/97 202,250
250,000 Cincinnati, GO, 5.25%, 12/1/01 262,813
250,000 Clermont County, Waterworks Revenue, 6.63%, 12/1/16 284,062
250,000 Columbus, GO, 5.90%, 1/1/01 267,812
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 263,125
250,000 Columbus, Sewer Revenue, 6.13%, 6/1/03 277,812
250,000 Columbus, Sewer Revenue, 8.00%, 6/1/08 259,275
200,000 Columbus, GO, 5.65%, 6/15/11 207,750
100,000 Delaware County, GO, 5.60%, 12/1/10 102,625
100,000 Dover, Municipal Electric System Revenue, 5.35%, 12/1/06 104,125
250,000 Franklin County, Hospital Revenue, Riverside United Methodist-A, 5.30%, 5/15/02 257,813
250,000 Franklin County, Hospital Revenue, 5.25%, 6/1/08 250,938
250,000 Fremont, GO, 5.45%, 12/15/07 259,688
250,000 Gahanna, GO, 5.85%, 6/1/08 267,812
250,000 Hamilton County, Building Improvement & Refunding Museum Center, 5.75%,
12/1/00 265,625
80,000 Hamilton County, Sewer Systems, Series A, 6.40%, 12/1/04 89,100
170,000 Hamilton County, Sewer System Unrefunded, Series A, 6.40%, 12/1/04 188,488
250,000 Hilliard, School District, 5.35%, 12/1/04 261,875
250,000 Kings Local School District, 5.75%, 12/1/10 260,625
100,000 Lake County, Human Services Building, GO, 5.70%, 12/1/15 103,500
250,000 Lakota, Local School District, 6.00%, 12/1/07, Callable 12/1/02 265,313
250,000 Mahoning County, 5.60%, 12/1/02 265,938
250,000 Mahoning County, GO, 5.70%, 12/1/08 263,125
100,000 Marysville, School District, 5.30%, 12/1/09 101,250
200,000 Mason, City School District, GO, 5.20%, 12/1/08 203,750
250,000 Middletown, Capital Facilities Improvement Refunding, 5.60%, 12/1/05 261,250
100,000 Montgomery County, 5.40%, 9/1/09 101,625
250,000 State Building Authority, 5.70%, 9/1/01 265,938
250,000 State Building Authority, 6.00%, 10/1/07 271,250
</TABLE>
Continued
-27-
<PAGE> 182
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
OHIO MUNICIPAL BONDS, CONTINUED:
245,000 State Building Authority, 6.13%, 10/1/09 $ 265,825
95,000 State Building Authority, 6.25%, 6/1/11 100,106
100,000 State, GO, 5.60%, 8/1/02 107,000
250,000 State Public Facilities Commission, Higher Education Capital Facilities-Series II-B,
5.70%, 11/1/03 268,437
200,000 State Public Facilities Commission, Higher Education Capital Facilities-Series II-A,
5.20%, 5/1/05 206,500
250,000 State Public Facilities Commission, Park & Recreations Facilities, Series II-A, 5.25%,
6/1/06 255,000
250,000 State Special Obligation, 5.45%, 6/1/99 260,625
250,000 State Water Development Authority Revenue, 5.75%, 6/1/03 266,875
250,000 State Water Development Authority Revenue, 5.75%, 12/1/05, Callable 12/1/02 265,937
150,000 State Water Development Authority Revenue, 5.70%, 12/1/11 155,063
250,000 Olentangy Local School District-Series A, 5.70%, 12/1/05 270,312
100,000 Solon, GO, 5.25%, 12/1/07 102,375
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04 267,500
250,000 Warren County, Waterworks Revenue, 5.75%, 12/1/09 259,688
100,000 West Clermont, Local School District, 5.55%, 12/1/06 105,250
250,000 Woodridge, Local School District, 5.75%, 12/1/07, Callable 12/1/04 265,625
------------
Total Ohio Municipal Bonds 10,936,719
------------
INVESTMENT COMPANIES (6.1%):
375,000 Dreyfus Municipal Money Market Fund 375,000
338,995 Goldman Tax-Free Fund 338,995
------------
Total Investment Companies 713,995
------------
Total (Cost--$11,092,335)(a) $11,650,714
============
</TABLE>
- ------------
Percentages indicated are based on net assets of $11,717,041.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 562,460
Unrealized depreciation (4,081)
-----------
Net unrealized appreciation $ 558,379
===========
GO--General Obligation
See notes to financial statements.
-28-
<PAGE> 183
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (45.1%):
Aerospace--Aircraft (1.8%):
2,200 Lockheed Martin Corp. $ 173,800
1,900 Watkin-Johnson Co. 83,125
-----------
256,925
-----------
Banks (1.2%):
2,500 Citicorp 168,125
-----------
Beverages (0.9%):
2,000 Anheuser-Busch Cos., Inc. 133,750
-----------
Chemicals & Drugs (3.6%):
4,000 Bristol Myers Squibb Co. 343,500
2,500 E.I. du Pont deNemours &
Co. 174,687
-----------
518,187
-----------
Computers & Software (2.2%):
2,000 Compaq Computer Corp.(b) 96,000
4,800 Seagate Technology, Inc.(b) 228,000
-----------
324,000
-----------
Electronics (2.9%):
3,500 Arrow Electronics, Inc.(b) 150,937
2,000 Tektronix, Inc. 98,250
3,200 Texas Instruments, Inc. 165,600
-----------
414,787
-----------
Energy--Oil (2.1%):
2,000 British Petroleum PLC-ADR 204,250
1,300 Exxon Corp. 104,163
-----------
308,413
-----------
Food Processing (3.0%):
4,400 Archer Daniels Midland Co. 79,200
4,500 H.J. Heinz Co. 149,062
4,000 IBP, Inc. 202,000
-----------
430,262
-----------
Forest Products (0.5%):
2,000 International Paper Co. 75,750
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Grocery (1.6%):
6,000 Kroger Co.(b) $ 225,000
------------
Household Products/Wares (1.3%):
2,700 Clorox Co. 193,388
------------
Insurance--Fire & Casualty (1.5%):
3,000 Transatlantic Holdings, Inc. 220,125
------------
Leisure Time (0.8%):
5,000 Brunswick Corp. 120,000
------------
Manufacturing (0.8%):
4,000 TRINOVA Corp. 114,500
------------
Metals (1.3%):
8,000 Placer Dome, Inc. 193,000
------------
Mining (2.5%):
5,000 Barrick Gold Corp. 131,875
4,000 Homestake Mining Co. 62,500
14,000 Santa Fe Pacific Gold
Corp.(b) 169,750
------------
364,125
------------
Natural Gas (3.6%):
3,500 Enron Corp. 133,438
6,000 Pacific Enterprises 169,500
8,000 Panhandle Eastern Corp. 223,000
------------
525,938
------------
Oil & Gas Producers (2.3%):
1,200 Mobil Corp. 134,400
9,000 YPF Sociedad Anonima-
Sponsored-ADR 194,625
------------
329,025
------------
Retail (1.9%):
6,000 Walgreen Co. 179,250
3,000 Albertson's, Inc. 98,625
------------
277,875
------------
</TABLE>
Continued
-29-
<PAGE> 184
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C>
COMMON STOCKS, CONTINUED:
Tobacco (2.1%):
3,300 Philip Morris Cos., Inc. $ 298,650
-----------
Utilities--Electric (4.0%):
3,000 Chilgener S.A.-ADR(b) 75,000
7,000 Consolidated Edison of New
York 224,000
3,500 Duke Power Co. 165,812
1,900 Northern States Power Co. 93,338
-----------
558,150
-----------
Utilities--Telecommunications (3.2%):
4,500 Ameritech Corp. 265,500
5,000 Telefonica De Argentina-
ADR(b) 136,250
2,000 Telefonos De Mexico, S.A.-
ADR 63,750
-----------
465,500
-----------
Total Common Stocks 6,515,475
-----------
U.S. GOVERNMENT AGENCIES (3.5%):
Federal Home Loan Bank:
100,000 5.97%, 12/14/98 100,076
400,000 5.78%, 1/8/99 400,000
-----------
Total U.S. Government Agencies 500,076
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS (8.1%):
1,200,000 5/30/96 $ 1,174,752
------------
U.S. TREASURY BONDS (28.3%):
2,250,000 6.25%, 2/15/03 2,348,032
950,000 7.25%, 5/15/04 1,054,909
550,000 8.13%, 8/15/19 691,251
------------
Total U.S. Treasury Bonds 4,094,192
------------
U.S. TREASURY NOTES (15.1%):
300,000 7.50%, 1/31/96 300,567
300,000 6.88%, 4/30/97 306,372
700,000 6.50%, 5/15/97 711,914
200,000 6.25%, 5/31/00 206,774
400,000 7.25%, 5/15/16 456,508
200,000 6.25%, 8/15/23 205,736
------------
Total U.S. Treasury Notes 2,187,871
------------
U.S. TREASURY STRIPS (1.0%):
460,000 2/15/15 145,273
------------
INVESTMENT COMPANIES (1.3%):
194,000 Dreyfus Treasury Prime
Fund 194,000
------------
Total Investment Companies 194,000
------------
Total (Cost--$13,611,629)(a) $14,811,639
============
</TABLE>
- --------------
Percentages indicated are based on net assets of $14,456,894.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 1,256,995
Unrealized depreciation (56,985)
-----------
Net unrealized appreciation $ 1,200,010
===========
(b) Represents non-income producing securities.
See notes to financial statements.
-30-
<PAGE> 185
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.0%):
Aerospace--Aircraft (0.3%):
1,500 Lockheed Martin Corp. $ 118,500
------------
Apparel (7.6%):
30,000 Donnkenny, Inc.(b) 543,750
15,000 Jones Apparel Group(b) 590,625
24,000 The Men's Wearhouse,
Inc.(b) 618,000
12,000 Nike, Inc.-Class B 835,500
10,000 St. John's Knits, Inc. 531,250
------------
3,119,125
------------
Banks (3.2%):
15,000 Bank of Boston Corp. 693,750
14,000 Corestates Financial Corp. 530,250
2,500 Norwest Corp. 82,500
------------
1,306,500
------------
Beverages (0.3%):
2,000 PepsiCo, Inc. 111,750
------------
Brokerage (2.9%):
20,000 Raymond James Financial,
Inc. 422,500
10,000 Charles Schwab Corp. 201,250
5,000 Donaldson Lufkin & Jenrette 156,250
16,875 Waterhouse Investor Services,
Inc. 417,656
------------
1,197,656
------------
Chemicals (0.9%):
10,000 Union Carbide Holding
Corp. 375,000
------------
Commercial Services (3.1%):
12,500 Checkpoint Systems, Inc.(b) 467,187
15,000 CUC International, Inc.(b) 511,875
10,000 Franklin Quest Co.(b) 195,000
2,000 Reuters Holdings-PLC ADR 110,250
------------
1,284,312
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Computer Services (3.1%):
10,000 HBO & Co. $ 766,250
20,000 National Data Corp. 495,000
------------
1,261,250
------------
Computers & Peripherals (3.0%):
15,000 Gateway 2000, Inc.(b) 367,500
10,000 Read-Rite Corp.(b) 232,500
7,000 U.S. Robotics Corp.(b) 614,250
------------
1,214,250
------------
Computers & Software (16.7%):
12,500 Active Voice Corp.(b) 343,750
20,250 Bay Networks, Inc.(b) 832,780
10,000 Cisco Systems, Inc.(b) 746,250
12,000 Cognos, Inc.(b) 535,500
10,000 Dialogic Corp.(b) 385,000
20,000 Global Village
Communication, Inc.(b) 387,500
12,300 In Focus Systems, Inc.(b) 444,338
7,000 Microsoft Corp.(b) 614,250
10,000 Oracle Corp.(b) 423,750
15,000 Quarterdeck Corp.(b) 412,500
10,000 Seagate Technology, Inc.(b) 475,000
10,000 Sybase, Inc.(b) 360,000
13,500 Synopsys, Inc.(b) 513,000
9,000 3 Com Corp.(b) 419,625
------------
6,893,243
------------
Construction (1.7%):
10,000 Centex Corp. 347,500
14,900 Toll Brothers, Inc.(b) 342,700
------------
690,200
------------
Drugs (3.4%):
10,000 Amgen, Inc.(b) 593,750
1,500 Bristol Myers Squibb Co. 128,813
10,000 Glaxo Holdings-ADR 282,500
</TABLE>
Continued
-31-
<PAGE> 186
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Drugs, continued:
6,000 Merck & Co., Inc. $ 394,500
------------
1,399,563
------------
Electronics (4.4%):
15,000 Alliance Semiconductor
Corp.(b) 174,375
15,000 Analog Devices, Inc.(b) 530,625
14,000 Linear Technology Corp. 549,500
14,000 Maxim Integrated Products,
Inc.(b) 539,000
------------
1,793,500
------------
Environmental Control (0.7%):
11,400 Imco Recycling, Inc. 279,300
------------
Financial Services (3.6%):
10,000 Aames Financial Corp. 278,750
12,000 Green Tree Financial Corp. 316,500
27,500 The Money Store, Inc. 429,688
20,000 Olympic Financial Ltd.(b) 325,000
10 Transport Holdings, Inc.-
Class A(b) 408
2,000 Travelers Group, Inc. 125,750
------------
1,476,096
------------
Food Services (3.1%):
19,000 Daka International, Inc.(b) 522,500
20,000 Starbucks Corp.(b) 420,000
15,000 Wendy's International, Inc. 318,750
------------
1,261,250
------------
Healthcare Services (8.1%):
12,500 Columbia HCA Healthcare
Corp. 634,375
20,000 HEALTHSOUTH Corp.(b) 582,500
10,000 Integrated Health Services,
Inc. 250,000
22,000 Maxicare Health Plans,
Inc.(b) 591,250
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Healthcare Services, continued:
7,000 Pacificare Health Systems,
Inc. Class B(b) $ 609,000
10,000 United Healthcare Corp. 655,000
-----------
3,322,125
-----------
Household Products/Wares (0.3%):
1,500 Clorox Co. 107,438
-----------
Insurance (2.8%):
7,354 Allstate Corp. 302,433
10,000 W.R. Berkley Corp. 537,500
2,000 CNA Financial Corp.(b) 227,000
2,500 Providian Corp. 101,875
-----------
1,168,808
-----------
Medical Supplies & Services (9.1%):
20,000 Amsco International, Inc.(b) 297,500
15,000 Boston Scientific Corp.(b) 735,000
15,000 Idexx Laboratories, Inc.(b) 705,000
14,000 Medtronic, Inc. 782,250
25,000 Mentor Corp. 575,000
20,000 Steris Corp.(b) 645,000
-----------
3,739,750
-----------
Oil Equipment, Wells & Services (1.2%):
2,000 Halliburton Co. 101,250
12,500 Tidewater, Inc. 393,750
-----------
495,000
-----------
Retail-Office Supplies (2.7%):
15,000 Corporate Express, Inc.(b) 451,875
15,000 Officemax, Inc.(b) 335,625
12,500 Staples, Inc.(b) 304,688
-----------
1,092,188
-----------
Retail-Specialty (2.5%):
26,000 Sunglass Hut International(b) 617,500
10,000 Fastenal Co. 422,500
-----------
1,040,000
-----------
</TABLE>
Continued
-32-
<PAGE> 187
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Savings & Loan (2.1%):
15,000 Coast Savings Financial,
Inc.(b) $ 519,375
20,000 Glendale Federal Bank(b) 350,000
-----------
869,375
-----------
Telecommunications (3.0%):
10,000 Aspect Telecommunications
Corp.(b) 335,000
12,500 DSC Communications
Corp.(b) 460,937
12,500 Worldcom, Inc.(b) 440,625
-----------
1,236,562
-----------
Textiles (0.9%):
15,000 G&K Services, Inc.-Class A 382,500
-----------
Tobacco (0.3%):
1,500 Philip Morris Cos., Inc. 135,750
-----------
Total Common Stocks 37,370,991
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (5.0%):
2,050,000 Dreyfus Treasury Prime
Fund $ 2,050,000
-----------
Total Investment Companies 2,050,000
-----------
Total Investments 39,420,991
-----------
REPURCHASE AGREEMENTS (3.8%):
1,579,159 Provident, 5.50%, dated
12/29/95, due 1/2/96
(Collateralized
by 4,604,823 Federal
National Mortgage Association,
6.24%, 2/25/23, market
value--$4,596,189)(c) 579,159
-----------
Total Repurchase Agreements 1,579,159
-----------
Total (Cost--$33,882,327)(a) $41,000,150
===========
</TABLE>
- --------------
Percentages indicated are based on net assets of $41,067,172.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 8,076,748
Unrealized depreciation (958,925)
-----------
Net unrealized appreciation $ 7,117,823
===========
(b) Represents non-income producing securities.
(c) Provident Bank and The Riverfront Funds, Inc. are affiliated parties.
See notes to financial statements.
-33-
<PAGE> 188
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
Corporation on March 27, 1990, and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Fund is authorized to issue six series
of shares of capital stock, representing interests in different portfolios
of securities as follows: The Riverfront U.S. Government Securities Money
Market Fund, The Riverfront U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund, The Riverfront
Flexible Growth Fund and The Riverfront Stock Appreciation Fund (each, a
"Portfolio"; and collectively, the "Portfolios"). During the year, the
Fund acquired all six of the investment portfolios of MIM Mutual Funds,
Inc. and combined them with three of the Fund's Portfolios including the
newly created Stock Appreciation Fund.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$0.001. Sales of shares of the Portfolios may be made to customers of The
Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, the Income Equity Fund, the Ohio Tax-Free
Bond Fund, the Flexible Growth Fund and the Stock Appreciation Fund
(collectively, "the variable net asset value funds") each offers two share
classes: Investor A Shares and Investor B Shares. The U.S. Government
Securities Money Market Fund (the "money market fund") offers only
Investor A Shares. Investor A shares of the variable net asset value funds
are subject to initial sales charges imposed at the time of purchase, in
accordance with the Portfolios' prospectuses. Certain redemptions of
Investor B shares of the variable net asset value funds made within six
years of purchase are subject to varying contingent deferred sales charges
in accordance with the Portfolios' prospectuses. Each share class has
identical rights and privileges, except with respect to distribution and
services (12b-1) fees paid by each share class, voting rights on matters
affecting a single share class, and the exchange privileges of each share
class.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles.
SECURITIES VALUATION:
Investments of the money market fund are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the
maturity of the security. In addition, the money market fund may not (a)
purchase any instrument with a remaining maturity greater than 397 days
unless such investment is subject to a demand feature, or (b) maintain a
dollar-weighted-average portfolio maturity which exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, municipal
securities, commercial paper and U.S. Government securities of the
variable net asset value funds are valued at their market values
determined on the basis of the mean of the latest available bid and asked
quotations on the principal exchange
Continued
-34-
<PAGE> 189
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
(closing sales prices if the over-the-counter National Market System) in
which such securities are normally traded. Short-term investments maturing
in 60 days or less are valued at amortized cost which, combined with
accrued interest, approximates market value. Investments in investment
companies are valued at their net asset values as reported by such
investment companies. Other securities for which quotations are not
readily available are valued at their fair value by the investment adviser
under the supervision of the Fund's Board of Directors. The differences
between the cost and market values of investments held by the variable net
asset value funds are reflected as either unrealized appreciation or
depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
REPURCHASE AGREEMENTS:
The Portfolios may acquire repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser, or the Portfolio's sub-investment adviser deems
creditworthy under guidelines approved by the Board of Directors, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the
price paid by each Portfolio plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller, under a repurchase agreement,
is required to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued
interest). Securities subject to repurchase agreements are held by each
Portfolio's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by the Portfolios under the 1940 Act.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Any taxable distributions declared in
December and paid in the following fiscal year will be taxable to
shareholders in the year declared.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Timing differences relating to shareholder
distributions are reflected in the components of net assets and permanent
book and tax basis differences relating to shareholder distributions have
been reclassified to additional paid-in capital. These differences are
primarily due to differing treatments for dollar roll transactions,
deferral of certain losses and expiring capital loss carryforwards.
Continued
-35-
<PAGE> 190
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
FEDERAL INCOME TAXES:
It is the policy of each Portfolio to qualify or continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, Federal income taxes.
ESTIMATES:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses for the period. Actual results could differ
from those estimates.
3. REORGANIZATION
On June 26, 1995, the Fund entered into an Agreement and Plan of
Reorganization and Liquidation (the "Plan") with MIM Mutual Funds, Inc.
("MIM"), a Maryland corporation. Pursuant to the Plan, the money market
fund acquired all or substantially all of the assets of the Money Market
Fund of MIM and the Income Equity Fund acquired all or substantially all
of the assets of each of the Bond Income Fund, AFA Equity Income Fund and
Stock Income Fund of MIM (collectively, the "Acquired Funds"), in exchange
for the assumption of such Acquired Funds' stated liabilities and a number
of full and fractional Investor A shares of the Money Market Fund or the
Income Equity Fund, having an aggregate net asset value equal to such
Acquired Funds' net assets (the "Reorganization"). Additionally, the MIM
Stock Appreciation Fund and MIM Stock Growth Fund were acquired by the
newly created Riverfront Stock Appreciation Fund. At a Special Meeting,
held September 27, 1995, the shareholders of MIM approved the
Reorganization which took effect September 30, 1995. The following is a
summary of shares outstanding, net asset value per share and unrealized
appreciation immediately before and after the Reorganization:
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
------------------------------ --------------------
Riverfront Riverfront
MIM U.S. Government U.S. Government
Money Market Securities Money Securities Money
Fund Market Fund Market Fund
------------ ---------------- ----------------
<S> <C> <C> <C>
Shares 4,865,634 139,885,336 144,750,970
Net Assets $4,865,634 $139,883,045 $144,748,679
Net Asset Value $1.00 $1.00 $1.00
</TABLE>
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
------------------------------------------------------------------ --------------------
MIM Bond MIM Stock MIM AFA Equity Riverfront Income Riverfront Income
Income Fund Income Fund Income Fund Equity Fund Equity Fund
----------- ------------ -------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Shares 175,098 555,565 66,038 4,174,301 4,968,243
Net Assets $1,911,667 $7,001,927 $813,625 $51,090,349 $60,817,568
Net Asset Value: $10.92* $12.60* $12.32*
Investor A Shares $12.25 $12.25
Investor B Shares $12.00 $12.00
Unrealized Appreciation $ 254,298 $1,425,640 $ 70,$83 $ 2,235,485 $ 3,985,706
</TABLE>
--------
* Prior to the reorganization, MIM offered only one class of shares of
each Acquired Fund.
Continued
-36-
<PAGE> 191
THE RIVERFRON FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1995
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. Government Securities U.S. Government
Money Market Fund Income Fund Income Equity Fund
----------------------------- ----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 (a) 1995 1994 (a) 1995 1994 (a)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares issued $ 331,872,719 $ 252,936,958 $ 4,352,572 $ 7,849,466 $ 9,389,60 $13,962,314
Proceeds from shares issued
in connection with
acquisition 4,865,634 9,727,219
Dividends reinvested 1,518,099 569,500 569,125 333,435 8,635,353 900,398
Cost of shares redeemed (330,133,820) (237,338,519) (4,089,227) (2,238,879) (7,219,484) (2,457,054)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets from
Investor A share
transactions $ 8,122,632 $ 16,167,939 $ 832,470 $ 5,944,022 $20,532,690 $12,405,658
============= ============= =========== =========== =========== ===========
INVESTOR B SHARES:
Proceeds from shares issued $ 1,317,928 $ 2,765,814
Dividends reinvested 9,712 13,294
Cost of shares redeemed (96,002) (43,350)
----------- -----------
Change in net assets from
Investor B share
transactions $ 1,231,638 $ 2,735,758
=========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued 331,872,719 252,936,958 469,561 838,911 828,287 1,295,899
Issued in connection with
acquisition 4,865,634 793,942
Reinvested 1,518,099 569,500 60,733 36,232 763,006 84,342
Redeemed (330,133,820) (237,338,519) (435,482) (243,620) (630,554) (230,101)
------------- ------------- ----------- ----------- ----------- -----------
Change in Investor A Shares 8,122,632 16,167,939 94,812 631,523 1,754,681 1,150,140
============= ============= =========== =========== =========== ===========
INVESTOR B SHARES:
Issued 123,342 241,570
Reinvested 903 1,125
Redeemed (8,962) (3,605)
---------- ----------
Change in Investor B Shares 115,283 239,090
=========== ===========
</TABLE>
--------
(a) Audited by other auditors.
Continued
-37-
<PAGE> 192
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Flexible Growth Stock Appreciation
Ohio Tax-Free Bond Fund Fund Fund
----------------------------- ----------------------------- ------------------
Period from Period from
August 1, 1994 August 1, 1994
Year Ended through Year Ended through October 1, 1995
December 31, December 31, December 31, December 31, December 31,
1995 1994(a) 1995 1994(a) 1995(b)
------------ -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares issued $297,450 $10,355,0088 $6,257,968 $2,833,344 $ 738,522
Dividends reinvested 8,453 27 282,271 13,957 1,542,781
Cost of shares redeemed (109,278) (717,635) (100,558) (3,611,887)
-------- ------------ ---------- ---------- -----------
Change in net assets from Investor A
share transactions $196,625 $10,355,115 $5,822,604 $2,746,743 $(1,330,584)
======== ============ ========== ========== ===========
INVESTOR B SHARES:
Proceeds from shares issued $598,493 $4,818,782 $ 71,986
Dividends reinvested 9,755 52,617
Cost of shares redeemed (5,034) (188,581)
-------- ---------- -----------
Change in net assets from Investor B
share transactions $603,214 $4,682,818 $ 71,986
======== ========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued 29,259 1,036,159 593,056 285,468 76,082
Reinvested 833 3 25,863 1,408 164,279
Redeemed (10,732) (65,727) - (10,174) (370,208)
-------- ------------ ---------- ---------- -----------
Change in Investor A Shares 19,360 1,036,162 553,192 276,702 (129,847)
======== ============ ========== ========== ===========
INVESTOR B SHARES:
Issued 57,922 442,046 7,299
Reinvested 927 4,698
Redeemed (491) (16,667)
-------- ---------- -----------
Change in Investor B Shares 58,358 430,077 7,299
======== ========== ===========
</TABLE>
--------
(a) Period from commencement of operations. Audited by other auditors.
(b) Period from date acquired by Riverfront Stock Appreciation Fund.
5. RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment
of the assets of the U.S. Government Securities Money Market Fund, the
U.S. Government Income Fund, the Ohio Tax-Free Bond Fund and the Stock
Appreciation Fund. Under the terms of the Investment Advisory Agreement,
Provident is entitled to receive fees based on a percentage of the average
net assets of each Portfolio.
At meetings held on May 19, 1995 and June 26, 1995, the Board of Directors
of the Fund approved an increase from 0.75% to 0.95% in the investment
advisory fee paid to Provident by the Income Equity Fund. In addition, the
Board approved a new sub-investment advisory agreement between Provident
and DePrince, Race & Zollo, Inc. on behalf of the Income Equity Fund which
also increased the sub-investment advisory fees paid by Provident to the
new sub-investment adviser. At a Special Meeting, held July 31, 1995, the
Continued
-38-
<PAGE> 193
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
shareholders of the Income Equity Fund approved the proposed amendments to
the investment advisory agreement to increase the investment advisory fees
and to enter into the agreement with the new sub-investment adviser. The
amendments took effect August 15, 1995.
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into Sub-Investment Advisory Agreements with
DePrince, Race & Zollo, Inc. ("DePrince"), for the Income Equity Fund and
with James Investment Research ("JIR") for the Flexible Growth Fund.
DePrince and JIR provide investment advice to and supervise the investment
program of the Income Equity Fund and the Flexible Growth Fund,
respectively. Under the terms of the Sub-Investment Advisory Agreements,
JIR receives from Provident fees calculated at 0.50% of the average daily
net assets of the Flexible Growth Fund, and DePrince receives from
Provident fees calculated at 0.50% of average daily net assets up to $55
million and 0.55% of average daily net assets up to $75 million of the
Income Equity Fund.
In addition to serving as Investment Adviser, Provident serves as
custodian and fund accountant to the Portfolios. Under the terms of the
Custodian, Fund Accounting and Recordkeeping Agreement, Provident is
entitled to receive fees based on a percentage of the average daily net
assets of each Portfolio.
During the year ended December 31, 1995, Provident Securities Investor,
Inc. ("PSI"), an affiliate of Provident which is a registered broker
dealer, executed transactions to purchase and sell portfolio investments
on behalf of the Fund. The Fund paid PSI approximately $85,000 that has
been included in investments at cost, as commissions for such
transactions.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services Ohio, Inc.
("BISYS Ohio") are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are
affiliated, serves the Fund as Administrator, principal underwriter and
distributor. Such officers and director are paid no fees directly by the
Portfolios for serving as officers and as director of the Fund. Under the
terms of the Administration Agreement, BISYS' fees are computed at 0.20%
of the average daily net assets of each Portfolio.
Provident also serves as Transfer Agent and Shareholder Servicing Agent to
the Fund, and BISYS Ohio serves as Sub-Transfer Agent for the Investor B
Shares. Under the terms of the Master Transfer and Record-keeping
Agreement, Provident is entitled to receive fees based on the number of
shareholders of each Portfolio and certain out-of-pocket expenses. Under
the terms of the Shareholder Servicing Agreement, Provident may receive a
fee computed daily at an annual rate of up to 0.25% of the average daily
net assets of certain shares of each Portfolio. This fee may be used to
reimburse BISYS or other providers of Record keeping and/or administrative
support services. As of December 31, 1995, there were no shareholder
servicing agreements entered into on behalf of any of the Portfolios.
The Fund has adopted an Investor A Distribution and Shareholder Service
Plan ("Investor A Plan") and an Investor B Distribution and Shareholder
Service Plan ("Investor B Plan"), each in accordance with Rule 12b-1 under
the Investment Company Act of 1940. Pursuant to the Investor A Plan, each
Portfolio is
Continued
-39-
<PAGE> 194
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
authorized to pay or reimburse BISYS, as distributor of Investor A shares,
a periodic amount, calculated at an annual rate not to exceed 0.25% of the
average daily net assets of Investor A Shares of each Portfolio. Pursuant
to the Investor B Plan, each variable net asset value fund is authorized
to pay or reimburse BISYS, as distributor of Investor B shares, (a) a
distribution fee in an amount not to exceed, on an annual basis, 0.75% of
the average daily net assets of Investor B shares of that Portfolio and
(b) a service fee in an amount not to exceed 0.25% of the average daily
net asset value of Investor B Shares of that Portfolio. These fees may be
used by BISYS to pay banks, broker dealers and other institutions,
including Provident, DePrince and JIR, or to reimburse BISYS or its
affiliates, to finance any activity which is principally intended to
result in the sale of shares or to compensate for providing shareholder
services. For the year ended December 31, 1995, BISYS received $214,820
from commissions on sales of capital shares, of which $190,064 was
reallowed to dealers of the Fund's shares including $186,048 to affiliates
of the Fund.
Provident and certain of its affiliates own shares of Portfolios of the
Fund. As of December 31, 1995, the aggregate values of Capital shares owned
by Provident and its affiliates were as follows (amounts in thousands):
<TABLE>
<S> <C>
U.S. Government Income Fund $31,623
Income Equity Fund 5,273
Ohio Tax-Free Bond Fund 10,510
Flexible Growth Fund 2,055
</TABLE>
Fees may be voluntarily reduced or reimbursed to assist the Portfolios in
maintaining competitive expense ratios.
Information regarding these transactions is as follows for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
U.S. Government Income
Securities Money U.S. Government Equity
Market Fund Income Fund Fund
---------------- --------------- -------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions (percentage of
average daily net assets) 0.15% 0.40% 0.95%
Voluntary fee reductions $11,516
12b-1 FEES (INVESTOR A):
Voluntary fee reductions $369,910 $33,246 $30,381
CUSTODIAN AND ACCOUNTING FEES: $ 73,973 $36,115 $72,596
TRANSFER AGENT FEES: $ 59,257 $37,402 $42,860
REIMBURSED FEES: $ 548 $62,119
</TABLE>
Continued
-40-
<PAGE> 195
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Ohio Tax-Free Flexible Stock Appreciation
Bond Fund Growth Fund Fund (a)
------------- ----------- ------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average daily net assets) 0.50% 0.90% 0.80%
Voluntary fee reductions $11,234 $25,567 $ 900
12b-1 FEES (INVESTOR A):
Voluntary fee reductions $ 4,699 $ 5,552 $ 281
CUSTODIAN AND ACCOUNTING FEES: $15,708 $12,666 $15,578
TRANSFER AGENT FEES: $25,445 $22,857 $ 9,834
REIMBURSED FEES: $ 544 $44,178
</TABLE>
--------
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) through December 31, 1995.
6. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
U.S. Government Income Fund $26,035,286 $23,842,104
Income Equity Fund 90,884,221 83,829,266
Ohio Tax-Free Bond Fund 6,043,089 3,396,960
Flexible Growth Fund 10,928,467 891,684
Stock Appreciation Fund 23,560,396(a) 17,024,763(a)
</TABLE>
--------
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) to December 31, 1995.
7. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Portfolios have capital loss
carryforwards as of December 31, 1995, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
Expires Amount
------- ----------
<S> <C> <C>
U.S. Government Securities Money Market Fund...... 2002 $ 875
U.S. Government Securities Money Market Fund...... 2003 $ 1,415
U.S. Government Income Fund....................... 2002 $1,393,386
U.S. Government Income Fund....................... 2003 $ 513,952
Ohio Tax-Free Bond Fund........................... 2002 $ 8,658
</TABLE>
Continued
-41-
<PAGE> 196
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
8. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Fund designated the following eligible distributions for the dividends
1995:
<TABLE>
<CAPTION>
Income Flexible
Equity Fund Growth Fund
----------- -----------
<S> <C> <C>
Dividend Income $1,590,886 $89,366
Dividend Income Per Share--Investor A Shares $ 0.235 $ 0.075
Dividend Income Per Share--Investor B Shares $ 0.113 $ 0.054
</TABLE>
9. EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Fund designated the following exempt-interest income for the Ohio
Tax-Free Bond Fund for the year ended December 31, 1995:
<TABLE>
<CAPTION>
Investor A Share Investor B Shares
---------------- -----------------
<S> <C> <C>
Exempt-interest distributions $395,917 $12,980
Exempt-interest distribution per share $ 0.376 $ 0.267
</TABLE>
The percentage break-down of the exempt-interest by state for the Ohio
Tax-Free Bond Fund for the year ended December 31, 1995 was as follows:
<TABLE>
<S> <C>
Florida 0.9%
Georgia 0.5%
Louisiana 1.5%
Ohio 94.6%
Tennessee 0.6%
Texas 1.9%
-----
100.0%
</TABLE>
10. CAPITAL GAIN DISTRIBUTIONS (UNAUDITED)
The Fund declared and distributed capital gains to shareholders in the
following amounts per share for the taxable year ended December 31, 1995:
<TABLE>
<CAPTION>
Long-term Short-term
<S> <C> <C>
Income Equity Fund 0.1210 1.2140
Flexible Growth Fund 0.0162 0.0885
Stock Appreciation Fund(a) 0.0585 0.3158
</TABLE>
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) through December 31, 1995.
-42-
<PAGE> 197
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. Government Securities Money Market Fund
October 1,
Years ended December 31, 1992 to
-------------------------------------- December 31,
1995 1994 (d) 1993 (d) 1992 (a)(d)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES
Net investment income 0.05 0.04 0.03 0.01
---------- ---------- ---------- ----------
Total from Investment Activities 0.05 0.04 0.03 0.01
---------- ---------- ---------- ----------
DISTRIBUTIONS
Net investment income (0.05) (0.04) (0.03) (0.01)
Total Distributions (0.05) (0.04) (0.03) (0.01)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Return 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 157,495 $ 149,374 $ 133,207 $ 37,083
Ratio of expenses to average net assets 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income to average net assets 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net assets* 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income to average net assets* 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Portfolio. If
such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
See notes to financial statements.
-43-
<PAGE> 198
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
--------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1995 1995(a) 1994(f) 1993(f) 1992(b)(f) 1991(f)
------------ ------------ --------- --------- ---------- -------
INVESTOR A INVESTOR B
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.92 $10.00 $ 9.91 $ 9.76 $ 10.00 $10.00
------- ------ ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income 0.54 0.43 0.54 0.51 0.10 0.73
Net realized and unrealized gains (losses) from
investments 0.79 0.94 (0.99) 0.20 (0.23)
------- ------ ------- ------- ------- ------
Total from Investment Activities 1.33 1.37 (0.45) 0.71 (0.13) 0.73
------- ------ ------- ------- ------- ------
DISTRIBUTIONS
Net investment income (0.54) (0.42) (0.54) (0.50) (0.10) (0.73)
In excess of net investment income (0.06) (0.01)
------- ------ ------- ------- ------- ------
Total Distributions (0.54) (0.42) (0.54) (0.56) (0.11) (0.73)
------- ------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 9.71 $10.95 $ 8.92 $ 9.91 $ 9.76 $10.00
======= ====== ======= ======= ======= ======
Total Return (excludes sales charge) 15.22% 13.96%(e) (4.64)% 7.38% (1.31)% NA
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $36,538 $1,263 $32,721 $30,078 $24,588 $ 33
Ratio of expenses to average net assets 1.09% 1.90%(c) 0.86% 0.65% 0.66% 0.00%
Ratio of net investment income to average net assets 5.74% 4.80%(c) 5.78% 5.05% 4.00% 7.34%
Ratio of expenses to average net assets* 1.18% 1.90%(c) 1.14% 1.08% 1.06%
Ratio of net investment income to average net assets* 5.65% 4.80%(c) 5.49% 4.62% 3.60%
Portfolio Turnover 75%(d) 75%(d) 83% 220% 117% 0%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition,
the manager or investment adviser reimbursed expenses to the Portfolio.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on
October 1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
See notes to financial statements.
-44-
<PAGE> 199
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND
--------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1995 1995(a) 1994(f) 1993(f) 1992(b)(f) 1991(f)
------------ ------------ --------- -------- ---------- -------
INVESTOR A INVESTOR B
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $10.00 $ 10.63 $ 10.78 $ 10.00 $10.00
------- ------ ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income 0.27 0.13 0.32 0.28 0.08 0.73
Net realized and unrealized gains from investments 2.89 2.78 1.01 0.80
------- ------ ------- ------- ------- ------
Total from Investment Activities 3.16 2.91 0.32 1.29 0.88 0.73
------- ------ ------- ------- ------- ------
DISTRIBUTIONS
Net investment income (0.27) (0.13) (0.31) (0.27) (0.08) (0.73)
In excess of net investment income (0.03) (0.01)
Net realized gains (1.34) (0.93) (0.49) (1.14)
In excess of net realized gains (0.01)
Total Distributions (1.61) (1.06) (0.80) (1.44) (0.10) (0.73)
------- ------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 11.70 $11.85 $ 10.15 $ 10.63 $ 10.78 $10.00
======= ====== ======= ======= ======= ======
Total Return (excludes sales charge) 31.45% 29.28%(e) 3.08% 12.11% 8.74% NA
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $60,845 $2,833 $34,965 $24,387 $12,262 $ 43
Ratio of expenses to average net assets 1.49% 2.46%(c) 1.30% 1.47% 1.48% 0.00%
Ratio of net investment income to average net assets 2.27% 1.12%(c) 2.93% 2.55% 3.16% 7.34%
Ratio of expenses to average net assets* 1.74% 2.51%(c) 1.58% 1.64% 2.02%
Ratio of net investment income to average net assets* 2.02% 1.07%(c) 2.65% 2.38% 2.62%
Portfolio Turnover 180%(d) 180%(d) 119% 145% 12% 0%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition,
the manager or investment adviser reimbursed expenses to the Portfolio.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on
October 1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
See notes to financial statements.
-45-
<PAGE> 200
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND
------------------------------------------------ ----------------------------------------------------
JANUARY 17, FROM AUGUST 1, JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED 1995 TO 1994 THROUGH YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995(a) 1994(a)(f) 1995 1995(a) 1994(a)(f)
------------ ------------ -------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.83 $10.00 $ 10.00 $ 9.79 $10.00 $10.00
------- ------ ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.39 0.27 0.12 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments 0.67 0.73 (0.17) 1.66 1.79 (0.18)
------- ------ ------- ------ ------ ------
Total from Investment
Activities 1.06 1.00 (0.05) 2.01 2.04 (0.08)
------- ------ ------- ------ ------ ------
DISTRIBUTIONS
Net investment income (0.38) (0.27) (0.12) (0.34) (0.24) (0.13)
Net realized gains (0.10) (0.10)
------- ------ ------- ------ ------ ------
Total Distributions (0.38) (0.27) (0.12) (0.44) (0.34) (0.13)
------- ------ ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 10.51 $10.73 $ 9.83 $11.36 $11.70 $ 9.79
======= ====== ======= ====== ====== ======
Total Return (excludes
sales charge) 10.96% 10.10%(e) (0.47)%(e) 20.83% 20.53%(c) (0.82)%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000) $11,091 $ 626 $10,190 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets 1.49% 2.27%(d) 1.08%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets 3.77% 3.01%(d) 2.92%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets* 1.64% 2.41%(d) 1.44%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets* 3.62% 2.87%(d) 2.56%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover 34%(b) 34%(b) 29% 13%(b) 13%(b) 1%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Portfolios. If
such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
(f) Audited by other auditors.
See notes to financial statements.
-46-
<PAGE> 201
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
1995 THROUGH 1995 THROUGH
DECEMBER 31, DECEMBER 31, YEARS ENDED SEPTEMBER 30,
--------------- --------------- ----------------------------------------------------
1995(b) 1995(a)(b) 1995(f) 1994(f) 1993(f) 1992(f) 1991(f)
--------------- --------------- --------- --------- --------- --------- --------
INVESTOR A INVESTOR B
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64
------- ------ ------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss (0.01) (0.01) (0.07) (0.12) (0.17) (0.08) (0.11)
Net realized and unrealized gains
(losses) from investments..... (0.12) (0.08) 2.14 (1.26) 2.57 1.41 3.17
------- ------ ------- ------- ------- ------- -------
Total from Investment Activities (0.13) (0.09) 2.07 (1.38) 2.40 1.33 3.06
------- ------ ------- ------- ------- ------- -------
DISTRIBUTIONS
Net realized gains (0.37) (0.32) (0.55) (0.20) (1.05)
------- ------ ------- ------- ------- ------- -------
Total Distributions (0.37) (0.32) (0.55) (0.20) (1.05)
------- ------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.50 $ 9.91 $ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
======= ====== ======= ======= ======= ======= =======
Total Return (excludes sales charge) (1.20)%(c) (0.90)%(c) 25.12% (13.91)% 30.61% 16.69% 66.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $40,995 $ 72 $44,500 $47,880 $59,330 $28,750 $9,600
Ratio of expenses to average net assets 1.76%(d) 2.30%(d) 2.61% 2.44% 2.47% 2.70% 2.89%
Ratio of net investment income to
average net assets (0.49)%(d) (1.69)%(d) (0.73)% (1.35)% (1.85)% (1.00)% (1.72)%
Ratio of expenses to average net
assets* 1.77%(d) 2.39%(d)
Ratio of net investment income to
average net assets* (0.50)%(d) (1.78)%(d)
Portfolio turnover 46%(e) 46%(e) 197% 254% 216% 288% 240%
</TABLE>
* During the period, certain fees were voluntarily reduced. In addition,
the investment adviser reimbursed expenses to the Portfolios. If such
voluntary fee reductions and expense reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for periods prior to September 30, 1995 represent
the performance of the MIM Stock Appreciation Fund. The per share data
for the periods prior to September 30, 1995 have been restated to reflect
the impact of the change of the net asset value of the Stock Appreciation
Fund on September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
See notes to financial statements.
-47-
<PAGE> 202
- --------------------------------------------------------------------------------
APPENDIX
- --------------------------------------------------------------------------------
The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Fund with regard to
portfolio investments for the Portfolios including Moody's Investors Service,
Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc.
("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its
affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of each
such NRSRO. The NRSROs that may be utilized by the Fund and the description of
each NRSRO's ratings is as of the date of this Statement of Additional
Information, and may subsequently change.
Long-Term Debt Ratings (may be assigned, for example, to corporate and
municipal bonds)
Description of the six highest long-term debt ratings by Moody's
(Moody's applies numerical modifiers (1, 2, and 3) in each rating category to
indicate the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
or protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such
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<PAGE> 203
bonds lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba Bonds which are rate Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Description of the six highest long-term debt ratings by S&P (S&P may
apply a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated circumstances.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead
to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB Bonds which are rated BB have less near-term vulnerability to
default than other speculative issues. However, they face
major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to senior debt that is assigned an actual or
implied BBB rating.
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<PAGE> 204
B Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or willingness
to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BB- rating.
Description of six highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
A- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
BBB Debt has below average protection factors but is still
considered sufficient for prudent investment. However, there
is considerable variability in risk during economic cycles.
Description of the six highest long-term debt ratings by Fitch (plus
or minus signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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BBB Bonds rated BBB are considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these
bonds, and therefore, impair timely payment. The likelihood
that the ratings for these bonds will fall below investment
grade is higher than for bonds with higher ratings.
BB Bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected
over time by adverse economic changes. However, business and
financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B Bonds rated B are considered highly speculative. While bonds
in this class are currently meeting debt service requirements,
the probability of continued timely payments of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
IBCA's description of its six highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is adequate, although adverse changes in
business, economic, or financial conditions are more likely to
lead to increased investment risk than for obligations in
other categories.
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BB Obligations for which there is a possibility of investment
risk developing. Capacity for timely repayment of principal
and interest exists, but is susceptible over time to adverse
changes in business, economic, or financial conditions.
B Obligations for which investment risk exists. Timely
repayment of principal and interest is not sufficiently
protected against adverse changes in business, economic or
financial conditions.
Thomson's description of its six highest long-term debt ratings
(Thomson may include a plus (+) or minus (-) designation to indicated where
within the respective category the issue is placed):
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB The lowest investment grade category and indicates an
acceptable capacity to repay principal and interest. Issues
rated BBB are, however, more vulnerable to adverse
developments (both internal and external) than obligations
with higher ratings.
BB While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for
lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated
issues. Adverse developments could well negatively affect the
payment of interest and principal on a timely basis.
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
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Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have a
superior capacity for repayment of senior short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by many of the following
characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of financial
markets and assured sources of alternate
liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and
market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level
of debt protection measurements and may require relatively
high financial leverage. Adequate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues
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<PAGE> 208
determined to have extremely strong safety characteristics
are denoted with a plus sign (+).
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not
as high as for issues designated "A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is
just below risk-free U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity factors are
excellent and supported by good fundamental protection
factors. Risk factors are minor.
Duff 1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection factors.
Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
Duff 3 Satisfactory liquidity and other protection factors qualify
issue as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is
expected.
Fitch's description of its three highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned this
rating are regarded as having the strongest degree of
assurance for timely payment.
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<PAGE> 209
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
or F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment
grade.
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Thomson's description of its three highest short-term ratings:
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid on a
timely basis.
TBW-2 The second highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as for
issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that while
more susceptible to adverse developments (both internal and
external) than obligations with higher ratings, capacity to
service principal and interest in a timely fashion is
considered adequate.
Municipal Obligations Ratings
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or
VMIG-1 designations are of the best quality, enjoying strong protection by
established cash flows, superior
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liquidity support or demonstrated broad-based access to the market for
refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality with ample
margins of protection although not so large as in the preceding rating group.
Obligations bearing MIG-3 or VMIG-3 denote favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest
ratings assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and interest.
"SP-3": Speculative capacity to pay principal and interest.
The following summarizes the four highest ratings used by Moody's for
state and municipal bonds:
"Aaa": Bonds judged to be of the best quality. They carry
the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by
a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
"Aa": Bonds judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
"A": Bonds which possess many favorable investment attributes
and are to be considered as upper medium-grade obligations.
Factors giving security to principal and interest are
considered adequate, but elements may be present which suggest
a susceptibility to impairment sometime in the future.
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<PAGE> 211
"Baa": Bonds which are considered as medium grade
obligations, i.e, they are neither highly protected nor poorly
secured. Interest payments and principal security appear
adequate for the present but certain protective elements may
be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics
as well.
The following summarizes the four highest ratings used by S&P for
state and municipal bonds:
"AAA": Debt which has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
"AA": Debt which has a very strong capacity to pay interest
and repay principal and differs from the highest rated issues
only in small degree.
"A": Debt which has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
"BBB": Debt which has adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category
then in higher rated categories.
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<PAGE> 212
Registration Statement
of
THE RIVERFRONT FUNDS, INC.
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
(i) The Riverfront U.S. Government Securities Money Market Fund
Financial Highlights
(ii) The Riverfront U.S. Government Income Fund
Financial Highlights
(iii) The Riverfront Income Equity Fund
Financial Highlights
(iv) The Riverfront Ohio Tax-Free Bond Fund
Financial Highlights
(v) The Riverfront Flexible Growth Fund
Financial Highlights
(vi) The Riverfront Stock Appreciation Fund
Financial Highlights
Included in Part B:
(i) The Riverfront U.S. Government Securities Money Market Fund
Statement of Assets and Liabilities dated December 31, 1995
Statement of Operations for the year ended December 31, 1995
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Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Schedule of Portfolio Investments dated December 31, 1995
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
Financial Highlights for the years ended December 31, 1995,
1994 and 1993, and the period from commencement of operations
(October 1, 1992) to December 31, 1992
(ii) The Riverfront U.S. Government Income Fund
Statement of Assets and Liabilities dated December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Schedule of Portfolio Investments dated December 31, 1995
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
Financial Highlights for the years ended December 31, 1995,
1994, 1993, 1992 and 1991 (Investor A shares), and the period
from commencement of operations (January 17, 1995) to December
31, 1995 (Investor B shares)
(iii) The Riverfront Income Equity Fund
Statement of Assets and Liabilities dated December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the years ended
December 31, 1995 and 1994
Schedule of Portfolio Investments dated December 31, 1995
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
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<PAGE> 214
Financial Highlights for the years ended December 31, 1995,
1994, 1993, 1992 and 1991 (Investor A shares), and the period
from commencement of operations (January 17, 1995) to December
31, 1995 (Investor B shares)
(iv) The Riverfront Ohio Tax-Free Bond Fund
Statement of Assets and Liabilities dated December 31, 1995
Statements of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the year ended
December 31, 1995, and the period from commencement of
operations (August 1, 1994) to December 31, 1994
Schedule of Portfolio Investments dated December 31, 1995
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
Financial Highlights for the year ended December 31, 1995 and
the period from commencement of operations (August 1, 1994)
to December 31, 1994 (Investor A shares) and the period from
commencement of operations (January 17, 1995) to December 31,
1995 (Investor B shares)
(v) The Riverfront Flexible Growth Fund
Statement of Assets and Liabilities dated December 31, 1995
Statement of Operations for the year ended December 31, 1995
Statements of Changes in Net Assets for the year ended
December 31, 1995, and the period from commencement of
operations (September 1, 1994) to December 31, 1994
Schedule of Portfolio Investments dated December 31, 1995
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
Financial Highlights for the year ended December 31, 1995 and
the period from commencement of operations (September 1,
1994) to December 31, 1994 (Investor A shares) and the period
from commencement of operations (January 17, 1995) to
December 31, 1995 (Investor B shares)
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<PAGE> 215
(vi) The Riverfront Stock Appreciation Fund
Statement of Assets and Liabilities dated December 31, 1995
Statement of Operations for the period from the date of
acquisition (October 1, 1995) to December 31, 1995 and the
year ended December 30, 1995
Statements of Changes in Net Assets for the period from the
date of acquisition (October 1, 1995) to December 31, 1995
and the years ended September 30, 1995 and 1994
Schedule of Portfolio Investments dated December 31, 1995
Financial Highlights for the period from the date of
acquisition (October 1, 1995) to December 31, 1995 and the
years ended September 30, 1995, 1994, 1993, 1992 and 1991
(Investor A shares) and the period from commencement of
operations (October 1, 1995) to December 31, 1995 (Investor B
shares)
Notes to Financial Statements as of December 31, 1995
Report of Independent Auditors dated January 15, 1996
(vii) All required financial statements are included in Part B
hereof. All other financial statements and schedules are
inapplicable.
(b) Exhibits
(1)(a) A copy of Registrant's Articles of Incorporation.
(b) A copy of the form of an Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
changed the name of Registrant and its series designations and
increased the authorized common stock of Registrant.
(c) A copy of a form of Amendment to Registrant's Articles of
Incorporation, filed with the State of Maryland, which changed
the series designation of certain portfolios of Registrant.
(d) A copy of a form of Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
created two new portfolios and two classes of stock for
certain portfolios of Registrant.
(e) A copy of a form of Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
reclassified the shares of a specific series.
C-4
<PAGE> 216
(f) A copy of a form of Articles Supplementary to Registrant's
Articles of Incorporation, as filed with the State of
Maryland, which created a new portfolio.
(2)(a) Registrant's By-Laws.
(b) Form of Amendment to Registrant's Bylaws.
(c) Form of Amendment to Article IV of Registrant's Bylaws as
adopted February 24, 1995.
(3) Not applicable.
(4) Certificates for shares are not issued. Articles VI and VIII
of the Articles of Incorporation, filed as Exhibit 1 hereto,
define the rights of holders of shares.
(5)(a) Investment Advisory Agreement dated as of August 1, 1994, as
amended as of August 15, 1995, between the Registrant and The
Provident Bank.
(b) Sub-Investment Advisory Agreement dated August 1, 1994,
between The Provident Bank and James Investment Research,
Inc.
(c) Sub-Investment Advisory Agreement dated as of August 15, 1995,
between The Provident Bank and DePrince, Race & Zollo, Inc.
(6)(a) Principal Underwriting Agreement, dated February 1, 1994, as
amended as of July 6, 1995, between Registrant and The
Winsbury Company Limited Partnership d/b/a The Winsbury
Company was filed on September 21, 1995, with Post- Effective
Amendment No. 14 as Exhibit (6)(a) and is incorporated by
reference herein.
(b) Form of Dealer Agreement between The Winsbury Company Limited
Partnership and Provident Securities & Investment Company was
filed on September 21, 1995, with Post- Effective Amendment
No. 14 as Exhibit (6)(b) and is incorporated by reference
herein.
(7) Not applicable.
(8) Amended and Restated Custodian, Fund Accounting and
Recordkeeping Agreement dated August 1, 1994, as amended as of
July 6, 1995, between the Registrant and The Provident Bank
was filed on September 21, 1995, with Post-Effective Amendment
No. 14 as Exhibit (8) and is incorporated by reference herein.
(9)(a) Administration Agreement, dated February 1, 1994, as amended
as of July 6, 1995, between the Registrant and
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<PAGE> 217
The Winsbury Company Limited d/b/a The Winsbury Company was
filed on September 21, 1995, with Post-Effective Amendment No.
14 as Exhibit (9)(a) and is incorporated by reference herein.
(b) Master Transfer and Recordkeeping Agreement, dated as of
February 24, 1992, as amended as of July 6, 1995, between the
Registrant and The Provident Bank was filed on September 21,
1995, with Post-Effective Amendment No. 14 as Exhibit (9)(b)
and is incorporated by reference herein.
(c) Shareholder Services Plan adopted January 6, 1994, as amended
as of June 8, 1994, was filed on November 9, 1994, with
Post-Effective Amendment No. 8 as Exhibit (9)(c) and is
incorporated by reference herein.
(d) Form of Servicing Agreement to Shareholder Services Plan, as
amended, was filed on November 9, 1994, with Post- Effective
Amendment No. 8 as Exhibit (9)(d) and is incorporated by
reference herein.
(e) Sub-Transfer Agency Agreement dated as of January 1, 1995, as
amended as of August 15, 1995, between The Provident Bank and
BISYS Fund Services Ohio, Inc. was filed on September 21,
1995, with Post-Effective Amendment No. 14 as Exhibit (9)(e)
and is incorporated by reference herein.
(f) Agreement and Plan of Reorganization and Liquidation dated as
of June 26, 1995, between the Registrant and MIM Mutual Funds,
Inc. was filed on September 21, 1995, with Post-Effective
Amendment No. 14 as Exhibit (9)(f) and is incorporated by
reference herein.
(10) Opinion of counsel as to the legality of the shares of The
Riverfront U.S. Government Securities Money Market Fund, The
Riverfront U.S. Government Income Fund, The Riverfront Income
Equity Fund, The Riverfront Ohio Tax- Free Bond Fund, The
Riverfront Stock Appreciation Fund and The Riverfront Flexible
Growth Fund was filed with Registrant's Rule 24f-2 Notice on
February 28, 1996.
(11) Consent of Ernst & Young LLP, independent auditors.
(12) Not applicable.
(13) A copy of the Subscription Agreement was filed on April 10,
1990, as Exhibit (13) to the Registrant's Registration
Statement and is incorporated by reference herein.
(14) Not applicable.
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<PAGE> 218
(15)(a) Distribution Plans for each of The Riverfront U.S. Government
Securities Money Market Fund, The Riverfront U.S. Government
Income Fund and The Riverfront Income Equity Fund was filed on
March 2, 1992, with Post-Effective Amendment No. 2 as Exhibit
(15) (a) and is incorporated by reference herein.
(b) Investor A Distribution and Shareholder Service Plan and
Agreement, as amended August 1, 1994, was filed on November 9,
1994, with Post-Effective Amendment No. 8 as Exhibit (15)(b)
and is incorporated by reference herein.
(c) Investor B Distribution and Shareholder Service Plan and
Agreement was filed on November 9, 1994, with Post- Effective
Amendment No. 8 as Exhibit (15)(c) and is incorporated by
reference herein.
(d) Form of Dealer Agreement between The Winsbury Company Limited
Partnership and Provident Securities & Investment Company was
filed on September 21, 1995, with Post- Effective Amendment
No. 14 as Exhibit (15)(d) and is incorporated by reference
herein.
(16)(a) Computation of Performance Quotations for The Riverfront U.S.
Government Securities Money Market Fund was filed on June 2,
1994, with Post-Effective Amendment No. 7 as Exhibit (16) (a)
and is incorporated by reference herein.
(b) Computation of Performance Quotations for The Riverfront U.S.
Government Income Fund and The Riverfront Income Equity Fund
was filed on June 2, 1994, with Post-Effective Amendment No. 7
as Exhibit (16)(b) and is incorporated by reference herein.
(c) Computation of Performance Quotations for The Riverfront Ohio
Tax-Free Bond Fund was filed on January 31, 1995, with
Post-Effective Amendment No. 9 as Exhibit (16)(c) and is
incorporated by reference herein.
(d) Computation of Performance Quotations for The Riverfront
Flexible Growth Fund was filed on January 31, 1995, with
Post-Effective Amendment No. 9 as Exhibit (16)(d) and is
incorporated by reference herein.
(e) Computation of Performance Quotations for The Riverfront Stock
Appreciation Fund was filed on September 21, 1995, with
Post-Effective Amendment No. 14 as Exhibit (16)(e) and is
incorporated by reference herein.
(17) Financial Data Schedules.
(18) None.
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<PAGE> 219
(19)(a) Copies of the Powers of Attorney of the Officers and Directors
of the Registrant were filed on March 1, 1994, with
Post-Effective Amendment No. 6 as Exhibit (17) and are
incorporated by reference herein.
(b) Power of Attorney for George P. Landreth was filed on June 2,
1994, with Post-Effective Amendment No. 7 as Exhibit (17)(b)
and is incorporated by reference herein.
(c) Power of Attorney for Walter B. Grimm was filed on April 11,
1995, with Post-Effective Amendment No. 10 as Exhibit (18)(c)
and is incorporated by reference herein.
(d) Power of Attorney for Harvey M. Salkin.
(e) Consent of Baker & Hostetler
Item 25. Persons Controlled by or Under Common Control With Registrant
Not Applicable.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record
Holders as of
March 31, 1996
[/R]
----------------------------
Title of Series Investor A Investor B
- --------------- ---------- ----------
<S> <C> <C>
The Riverfront U.S. Government Securities
Money Market Fund, shares of
capital stock, $.001 par value 598 N/A
The Riverfront U.S. Government
Income Fund, shares of capital
stock, $.001 par value 19 50
The Riverfront Income Equity Fund,
shares of capital stock, $.001 par value 973 289
The Riverfront Ohio Tax-Free Bond Fund,
shares of capital stock, $.001 par value 6 21
The Riverfront Flexible Growth Fund,
shares of capital stock, $.001 par value 30 502
The Riverfront Stock Appreciation Fund,
shares of capital stock, $.001 par value 5,576 28
[/R]
</TABLE>
C-8
<PAGE> 220
Item 27. Indemnification
Provisions relating to the indemnification of the Registrant's
Directors and officers were filed on February 11, 1991, with the Registrant's
Post-Effective Amendment No. 1 and are incorporated by reference herein.
Item 28. Businesses and Other Connections of Investment Adviser
(a) To the knowledge of Registrant, none of the
officers or directors of Provident, except those
set forth below, is or has been at any time during
the past two fiscal years engaged in any other
business, profession, vocation or employment. Set
forth below are the names and principal business
addresses of the directors and officers who are
engaged in any other business, profession,
vocation, or employment of a substantial nature.
<TABLE>
<CAPTION>
Position with
Name The Provident Bank Other Business
- ---- ------------------ --------------
<S> <C> <C>
Jack M. Cook Director President, Christ
Hospital
Thomas D. Grote, Jr. Director President, Mid-
Atlantic Mechanical,
Inc.
S. Paul Mathews Director Attorney, Mathews
and Mathews
Sidney A. Peerless, Director M.D., E.N.T.,
M.D. Associates of
Cincinnati
Joseph A. Steger, Director President,
Ph.D. University of
Cincinnati
</TABLE>
(b) To the knowledge of Registrant, none of the officers or
directors of DePrince, Race & Zollo, Inc. ("DRZ") except those
set forth below, is or has been at any time during the past
two fiscal years engaged in any other business, profession,
vocation or employment. Set forth below are the names and
principal business addresses of the directors and officers of
DRZ who are engaged in any other business, profession,
vocation or employment of a substantial nature.
C-9
<PAGE> 221
<TABLE>
<CAPTION>
Position with
Name DRZ Other Business
- ---- ------------- --------------
<S> <C> <C>
Gregory M. DePrince Director Prior to April 1995,
Director and Senior
Vice President of
SunBank Capital
Management, N.A.,
200 South Orange
Avenue, Orlando,
Florida 32801
John D. Race Director Prior to April 1995,
Director, Executive
Vice President and
Chief Administrative
Officer of SunBank
Capital Management,
N.A., 200 South
Orange Avenue,
Orlando, Florida
32801
Victor A. Zollo Director and Prior to April 1995,
President Director and Senior
Vice President of
SunBank Capital
Management, N.A.,
200 South Orange
Avenue, Orlando,
Florida 32801
</TABLE>
(c) To the knowledge of Registrant, none of the officers or
directors of James Investment Research, Inc. ("JIR"), except
those set forth below, is or has been at any time during the
past two fiscal years engaged in any other business,
profession, vocation or employment. Set forth below are the
names and principal business address of the directors and
officers of JIR who are engaged in any other business,
profession, vocation or employment of a substantial nature.
<TABLE>
<CAPTION>
Position with
Name JIR Other Business
- ---- ------------- --------------
<S> <C> <C>
Jerome G. Peppers Director Professor and
Associate Dean, Air
Force Institute of
Technology, Wright-
Patterson Air Force
Base, Dayton, Ohio.
</TABLE>
C-10
<PAGE> 222
<TABLE>
<S> <C> <C>
Robert G. Hawkins Director Dean and Professor,
Rensselaer
Polytechnic
Institute, Troy, New
York.
</TABLE>
Item 29. Principal Underwriter
(a) BISYS Fund Services Limited Partnership, d/b/a BISYS Fund
Services acts as administrator and distributor for Registrant. BISYS Fund
Services currently serves as distributor of American Performance Funds, the
Pacific Capital Funds, The HighMark Group, The Parkstone Group of Funds, The
Sessions Group, the AmSouth Mutual Funds, The Coventry Group, the BB&T Mutual
Funds Group, The ARCH Funds, Inc., The M.S.D. & T. Funds, Inc., the Summit
Investment Trust, the Qualivest Funds, The Victory Portfolios, the MMA Praxis
Mutual Funds and the MarketWatch Funds, each of which is a management investment
company.
(b) To the best of Registrant's knowledge, the partners of
BISYS Fund Services are as follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
- ------------------ ------------------- -------------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of None
150 Clove Road BISYS Fund Services,
Little Falls, New Jersey Inc.
07424
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, New Jersey
07424
WC Subsidiary Corporation Limited Partner None
150 Clove Road
Little Falls, New Jersey
07424
</TABLE>
(c) None
Item 30. Location of Accounts and Records
(1) BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as
administrator and distributor).
(2) The Provident Bank, One East Fourth Street,
Cincinnati, Ohio 45202 (records relating to its
functions as investment adviser, manager, custodian,
transfer agent and fund accountant).
C-11
<PAGE> 223
(3) DePrince, Race & Zollo, Inc., 201 South Orange
Avenue, Suite 850, Orlando, Florida 32801 (records
relating to its functions as sub-investment adviser
for The Riverfront Income Equity Fund).
(4) James Investment Research, Inc., 1349 Fairground
Road, Beavercreek, Ohio 45385 (records relating to
its functions as sub-investment adviser for The
Riverfront Flexible Growth Fund).
(5) Baker & Hostetler, 65 East State Street, Columbus,
Ohio 43215 (Articles of Incorporation, Bylaws and
Minutes).
(6) BISYS Fund Services Ohio, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219 (records relating to its
functions as sub-transfer agent).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
None.
C-12
<PAGE> 224
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, in the State of Ohio, on the 24th day
of April, 1996. Registrant hereby certifies that this Post-Effective Amendment
to Registration Statement meets all of the requirements for effectiveness
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933.
THE RIVERFRONT FUNDS, INC.
By /s/Stephen G. Mintos
---------------------------
Stephen G. Mintos
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
designated on the 24th day of April, 1996.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
/s/ Stephen G. Mintos President and Director
Stephen G. Mintos
Treasurer (Principal Accounting
/s/*Walter B. Grimm and Financial Officer)
Walter B. Grimm
/s/* J. Virgil Early Director
J. Virgil Early
/s/* William M. Higgins Director
William M. Higgins
/s/* Harvey M. Salkin Director
Harvey M. Salkin
*By/s/ Stephen G. Mintos
------------------------------
Stephen G. Mintos
Attorney-in-Fact
</TABLE>
*Stephen G. Mintos, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named Directors and Officer of the Registrant
pursuant to powers of attorney duly executed by such persons.
C-13
<PAGE> 225
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ------------ ----------- ----
<S> <C> <C>
1. (a) The Registrant's Articles of Incorporation.
(b) Amendment No. 1 to the Registrant's Articles
of Incorporation.
(c) Amendment No. 2 to the Registrant's Articles
of Incorporation.
(d) Form of Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland,
which created two new portfolios and two classes of
stock for certain portfolios of Registrant.
(e) Form of Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland,
which reclassified the shares of a specific series.
(f) Form of Articles Supplementary to Registrant's
Articles of Incorporation, as filed with the State of
Maryland, which created a new portfolio.
2. (a) Bylaws of Registrant.
(b) Amendment No. 1 to Registrant's Bylaws.
(c) Form of Amendment to Article IV of
Registrant's Bylaws as adopted February 24,
1995.
3. Not applicable.
4. Certificates for shares are not issued.
Articles VI and VIII of the Articles of
Incorporation, filed as Exhibit 1 hereto,
define the rights of holders of shares.
5. (a) Investment Advisory Agreement dated as of
August 1, 1994, as amended as of August 15,
1995, between Registrant and The Provident
Bank.
</TABLE>
C-14
<PAGE> 226
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ------------ ----------- ----
<S> <C> <C>
(b) Sub-Investment Advisory Agreement dated
August 1, 1994, between The Provident Bank and
James Investment Research, Inc.
(c) Sub-Investment Advisory Agreement dated as of August
15, 1995, between The Provident Bank and DePrince,
Race & Zollo, Inc.
6. (a) Principal Underwriting Agreement, dated
February 1, 1994, as amended as of July 6,
1995, between Registrant and The Winsbury
Company Limited Partnership d/b/a The Winsbury
Company. Filed as Exhibit (6)(a) to
Registrant's Post-Effective Amendment No. 14
on September 21, 1995.
(b) Form of Dealer Agreement between The Winsbury
Company Limited Partnership and Provident
Securities & Investment Company. Filed as
Exhibit (6)(b) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
7. Not applicable.
8. Amended and Restated Custodian, Fund
Accounting and Recordkeeping Agreement dated
August 1, 1994, as amended as of July 6, 1995,
between Registrant and The Provident Bank.
Filed as Exhibit (8) to Registrant's Post-
Effective Amendment No. 14 on September 21,
1995.
9. (a) Administration Agreement, dated February 1,
1994, as amended as of July 6, 1995, between
the Registrant and The Winsbury Company
Limited d/b/a The Winsbury Company. Filed as
Exhibit (9)(a) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
(b) Master Transfer and Recordkeeping Agreement,
dated as of February 24, 1992, as amended as
of July 6, 1995, between Registrant and The
Provident Bank. Filed as Exhibit (9)(b) to
Registrant's Post-Effective Amendment No. 14
on September 21, 1995.
</TABLE>
C-15
<PAGE> 227
<TABLE>
<CAPTION>
<S> <C>
(c) Shareholder Services Plan adopted January 6,
1994, as amended as of June 8, 1994. Filed as
Exhibit (9)(c) to Registrant's Post-Effective
Amendment No. 8 filed on November 9, 1994.
(d) Form of Servicing Agreement to Shareholder
Services Plan as amended. Filed as Exhibit
(9)(d) to Registrant's Post-Effective
Amendment No. 8 on November 9, 1994.
(e) Sub-Transfer Agency Agreement dated as of
January 1, 1995, as amended as of July 6,
1995, between The Provident Bank and BISYS
Fund Services Ohio, Inc. Filed as Exhibit
(9)(e) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
(f) Agreement and Plan of Reorganization and
Liquidation dated as of June 26, 1995, between
the Registrant and MIM Mutual Funds, Inc.
Filed as Exhibit (9)(f) to Registrant's Post-
Effective Amendment No. 14 on September 21,
1995.
10. An Opinion of Counsel as to the legality of
the shares of The Riverfront U.S. Government
Securities Money Market Fund, The Riverfront
U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Ohio Tax-
Free Bond Fund, The Riverfront Stock
Appreciation Fund and The Riverfront Flexible
Growth Fund was filed with Registrant's Rule
24f-2 Notice on February 28, 1996.
11. Consent of Ernst & Young LLP, independent
auditors.
12. Not applicable.
13. The Subscription Agreement. Filed as an
Exhibit to Registrant's Registration Statement
on April 10, 1990.
14. Not applicable.
15. (a) The Distribution Plans for each of the
Riverfront U.S. Government Securities Money
Market Fund, The Riverfront U.S. Government
Income Fund and The Riverfront Income Equity
Fund. Filed as an Exhibit to Registrant's
Post-Effective Amendment No. 2 on March 2,
1992.
</TABLE>
C-16
<PAGE> 228
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ------------ ----------- ----
<S> <C> <C>
(b) Investor A Distribution and Shareholder
Service Plan and Agreement, as amended
August 1, 1994. Filed as Exhibit (15)(b) to
Registrant's Post-Effective Amendment No. 8
filed on November 9, 1994.
(c) Investor B Distribution and Shareholder
Service Plan and Agreement. Filed as Exhibit
(15)(c) to Registrant's Post-Effective
Amendment No. 8 filed on November 9, 1994.
(d) Form of Dealer Agreement between The Winsbury
Company Limited Partnership and Provident
Securities & Investment Company. Filed as
Exhibit (15)(d) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
16. (a) Schedules for the calculation of performance
quotations for The Riverfront U.S. Government
Securities Money Market Fund. Filed as Exhibit
(16) (a) to Registrant's Post-Effective
Amendment No. 7 on June 2, 1994.
(b) Schedules for the calculation of performance
quotations for The Riverfront U.S. Government
Income Fund and The Riverfront Income Equity
Fund. Filed as Exhibit (16)(b) to
Registrant's Post-Effective Amendment No. 7 on
June 2, 1994.
(c) Schedules for the calculation of performance
quotations for The Riverfront Ohio Tax-Free
Bond Fund. Filed as Exhibit (16)(c) to
Registrant's Post-Effective Amendment No. 9 on
January 31, 1995.
(d) Schedule for the calculation of performance
quotations for The Riverfront Flexible Growth
Fund. Filed as Exhibit (16)(d) to
Registrant's Post-Effective Amendment No. 9 on
January 31, 1995.
(e) Schedule for the calculation of performance
quotations for The Riverfront Stock
Appreciation Fund. Filed as Exhibit (16)(e)
to Registrant's Post-Effective Amendment No.
14 on September 21, 1995.
17. Financial Data Schedules.
18. None.
</TABLE>
C-17
<PAGE> 229
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ------------ ----------- ----
<S> <C> <C>
19. (a) Powers of Attorney of the Officers and
Directors of the Registrant. Filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 6 on March 1, 1994.
(b) Power of Attorney for George P. Landreth.
Filed as Exhibit (17)(b) to Registrant's Post-
Effective Amendment No. 7 on June 2, 1994.
(c) Power of Attorney for Walter B. Grimm. Filed
as Exhibit (18)(c) to Registrant's Post-
Effective Amendment No. 10 on April 11, 1995.
(d) Power of Attorney for Harvey M. Salkin.
(e) Consent of Baker & Hostetler.
</TABLE>
C-18
<PAGE> 230
As filed with the Securities and Exchange Commission April 26, 1996
1933 Act Registration No. 33-34154
1940 Act File No. 811-6082
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Post-Effective Amendment No. 16 /x/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 /x/
Amendment No. 17 /x/
The Riverfront Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(800) 899-4600
C-19
<PAGE> 1
EXHIBIT (1)(a)
<PAGE> 2
ARTICLES OF INCORPORATION
of
THE TRUST ADVISORY GROUP OF FUNDS, INC.
I.
INCORPORATOR
The undersigned, Nicholas J. Spiliotes, whose mailing address
is 2000 Pennsylvania Avenue, N.W., Suite 5500, Washington, D.C., 20006, being
at least 18 years of age, does hereby form a corporation under and by virtue of
the General Laws of the State of Maryland.
II.
NAME
The name of the corporation (the "Corporation") is The Trust
Advisory Group Of Funds, Inc.
III.
PURPOSES AND POWERS
The purpose or purposes for which the Corporation is formed
and the business or objects to be transacted, carried on and promoted by it
are:
(a) To conduct and carry on the business of an open-end
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act").
(b) To hold, invest and reinvest its assets in securities and
other investments including holding part or all of its assets in cash,
including foreign currencies.
(c) To issue and sell shares of its capital stock in such
accounts and on such terms and conditions and for such purposes and for such
amount or kind of consideration (including, without limitation, securities) now
or hereafter permitted by law.
(d) To redeem, purchase or otherwise acquire, hold, dispose
of, resell, transfer, reissue or cancel (all without the vote or consent of the
shareholders of the Corporation) shares of its capital stock, in any manner and
to the extend now or hereafter permitted by law and by these Articles of
Incorporation.
(e) To do any and all such acts or things and to exercise any
and all such further powers or rights as may be necessary, incidental,
relative, conducive, appropriate or
<PAGE> 3
desirable for the accomplishment, carrying out or attainment of the purposes
stated in this Article.
The foregoing enumerated purposes and objects shall be in no
way limited or restricted by reference to, or inference from, the terms of any
other clause of this or any other Article of these Articles of Incorporation,
and shall each be regarded as independent; and they are intended to be and
shall be construed as powers as well as purposes and objects of the Corporation
and shall be in addition to, and not in limitation of, the general powers of
corporations under the laws of the State of Maryland.
IV.
PRINCIPAL OFFICE AND PLACE OF BUSINESS
The present address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Company Incorporated, 32
South Street, Baltimore, Maryland, 21202.
V.
RESIDENT AGENT
The name and address of the Corporation's resident agent is
The Corporation Trust Company Incorporated, 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a Maryland corporation.
VI.
CAPITAL STOCK
(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Two billion (2,000,000,000)
shares of the par value of $.001 per share. There shall initially be three
series of shares, designated as "The Trust Advisory U.S. Treasury Limited
Maturity Fixed Income Series," consisting of 100,000,000 shares, "The Trust
Advisory U.S. Government Intermediate Fixed Income Series," consisting of
100,000,000 shares, and "The Trust Advisory Income Equity Series," consisting
of 100,000,000 shares (such series and any further series of shares from time
to time created by the Board of Directors being referred to individually herein
as a "series"). The Board of Directors of the Corporation is hereby empowered
to increase or decrease, from time to time, the total number of shares of
capital stock or the number of shares of capital stock of any class or series
that the Corporation shall have authority to issue without any action by the
shareholders.
(b) Any fractional share shall carry proportionately all the
rights of a whole share, excepting any right to receive a
-2-
<PAGE> 4
certificate evidencing such fractional share, but including the right to vote
and the right to receive dividends.
(c) All persons who shall acquire stock in the Corporation
shall acquire the same subject to the provisions of these Articles of
Incorporation and the By-Laws of the Corporation.
(d) As used in these Articles of Incorporation, a "series" of
shares represent interests in the same assets, liabilities, income, earnings
and profits of the Corporation; each "class" of shares of a series represents
interests in the same underlying assets, liabilities, income, earnings and
profits, but may differ from other classes of such series with respect to fees
and expenses or such other matters as shall be established by the Board of
Directors. The Board of Directors shall have authority to classify and
reclassify any authorized but unissued shares of capital stock from time to
time by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of the capital
stock. Subject to the provisions of Section (e) of this Article VI and
applicable law, the power of the Board of Directors to classify or reclassify
any of the shares of capital stock shall include, without limitation, authority
to classify or reclassify any such stock into one or more series of capital
stock and to divide and classify shares of any series into one or more classes
of such series, by determining, fixing or altering one or more of the
following:
1. The distinctive designation of such class or
series and the number of shares to constitute such class or
series; provided that, unless otherwise prohibited by the
terms of such class or series, the number of shares of any
class or series may be decreased by the Board of Directors in
connection with any classification or reclassification of
unissued shares and the number of shares of such class or
series may be increased by the Board of Directors in
connection with any such classification or reclassification,
and any shares of any class or series which have been
redeemed, purchased or otherwise acquired by the Corporation
shall remain part of the authorized capital stock and be
subject to classification and reclassification as provided
herein;
2. Whether or not and, if so, the rates, amounts and
times at which, and the conditions under which, dividends
shall be payable on shares of such class or series;
3. Whether or not shares of such class or series
shall have voting rights in addition to any general voting
rights provided by law and these Articles of
-3-
<PAGE> 5
Incorporation of the Corporation and, if so, the terms of such
additional voting rights;
4. The rights of the holders of shares of such class
or series upon the liquidation, dissolution or winding up of
the affairs of, or upon a distribution of the assets of, the
Corporation.
(e) Shares of capital stock of the Corporation shall have the
following preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption:
1. Assets Belonging to a Series. All consideration
received by the Corporation for the issue or sale of stock of
any series of capital stock, together with all assets in which
such consideration is invested and reinvested, income,
earnings, profits and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall irrevocably
belong to the series of shares of capital stock with respect to
which such assets, payments or funds were received by the
Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of
the Corporation. Such consideration, assets, income, earnings,
profits and proceeds thereof, including any proceeds derived
from the sale, exchange or liquidation thereof, and any assets
derived from any reinvestment of such proceeds in whatever
form, are herein referred to as "assets belonging to" such
series. Any assets, income, earnings, profits, and proceeds
thereof, funds or payments which are not readily attributable
to any particular series shall be allocable among any one or
more of the series in such manner and on such basis as the
Board of Directors, in its sole discretion, shall deem fair and
equitable.
2. Liabilities Belonging to a Series. The assets
belonging to any series of capital stock shall be charged with
the liabilities in respect of such series and shall also be
charged with such series' share of the general liabilities of
the Corporation determined as
-4-
<PAGE> 6
hereinafter provided. The determination of the Board of
Directors shall be conclusive as to the amount of such
liabilities, including the amount of accrued expenses and
reserves; as to any allocation of the same to a given series;
and as to whether the same are allocable to one or more
series. The liabilities so allocated to a series are herein
referred to as "liabilities belonging to" such series. Any
liabilities which are not readily attributable to any
particular series shall be allocable among any one or more of
the series in such manner and on such basis as the Board of
Directors, in its sole discretion, shall deem fair and
equitable.
3. Dividends and Distributions. Shares of each
series of capital stock shall be entitled to such dividends and
distributions, in stock or in cash or both, as may be declared
from time to time by the Board of Directors, acting in its sole
discretion, with respect to such series, provided, however,
that dividends and distributions on shares of a series of
capital stock shall be paid only out of the lawfully available
"assets belonging to" such series as such phrase is defined in
section (e)(1) of this Article VI.
4. Liquidating Dividends and Distributions. In the
event of the liquidation or dissolution of the Corporation,
shareholders of each series of capital stock shall be entitled
to receive, as a series, out of the assets of the Corporation
available for distribution to shareholders, but other than
general assets not belonging to any particular series of
capital stock, the assets belonging to such series; and the
assets so distributable to the shareholders of any series of
capital stock shall be distributed among such shareholders in
proportion to the number of shares of such series held by them
and recorded on the books of the Corporation. In the event
that there are any general assets not belonging to any
particular series of capital stock and available for
distribution, such distribution shall be made to the holders of
stock of all series of capital stock in proportion to the asset
value of the respective series of capital stock determined as
hereinafter provided.
-5-
<PAGE> 7
5. Voting. Each shareholder of each series of
capital stock shall be entitled to one vote for each share of
capital stock, irrespective of the class, then standing in his
name on the books of the Corporation, and on any matter
submitted to a vote of shareholders, all shares of capital
stock then issued and outstanding and entitled to vote shall be
voted in the aggregate and not by series except that: (1) when
expressly required by law, shares of capital stock shall be
voted by individual class or series and (ii) only shares of
capital stock of the respective series or class or classes
affected by a matter shall be entitled to vote on such matter.
At all meetings of the shareholders, the holders of one-third
of the shares of capital stock of the Corporation entitled to
vote at the meeting, present in person or by proxy, shall
constitute a quorum for the transaction of any business, except
as otherwise provided by statute or by these Articles of
Incorporation. In the absence of a quorum no business may be
transacted, except that the holders of a majority of the shares
of capital stock present in person or by proxy and entitled to
vote may adjourn the meeting from time to time, without notice
other than announcement at the meeting except as otherwise
required by these Articles of Incorporation or the By-Laws,
until the holders of the requisite amount of shares of capital
stock shall be present. At any such adjourned meeting at which
a quorum may be present any business may be transacted which
might have been transacted at the meeting as originally called.
The absence from any meeting, in person or by proxy, of holders
of the number of shares of capital stock of the Corporation in
excess of the quorum which may be required by the laws of the
State of Maryland, the 1940 Act, or other applicable statute,
these Articles of Incorporation or the By-Laws, for action upon
any given matter shall not prevent action at such meeting upon
any other matter or matters which may properly come before the
meeting, if there shall be present at the meeting, in person or
by proxy, holders of the number of shares of capital stock of
the Corporation required for action in respect of such other
matter or matters.
-6-
<PAGE> 8
6. Redemption. To the extent the Corporation has
funds or other property legally available therefor, each holder
of shares of capital stock of the Corporation shall be entitled
to require the Corporation to redeem all or any part of the
shares standing in the name of such holder on the books of the
Corporation, at the redemption price of such shares as in
effect from time to time as may be determined by the Board of
Directors of the Corporation in accordance with the provisions
hereof, subject to the right of the Board of Directors of the
Corporation to suspend the right of redemption of shares of
capital stock of the Corporation or postpone the date of
payment of such redemption price in accordance with provisions
of applicable law. Without limiting the generality of the
foregoing, the Corporation shall, to the extent permitted by
applicable law, have the right at any time to redeem the shares
owned by any holder of capital stock of the Corporation if the
value of such shares in the account of such holder is less than
the minimum initial investment amount applicable to that
account as set forth in the Corporation's current registration
statement under the 1940 Act, and subject to such further terms
and conditions as the Board of Directors of the Corporation may
from time to time adopt. The redemption price of shares of
capital stock of the Corporation shall, except as otherwise
provided in this Section (e)(6), be the net asset value thereof
as determined by, or pursuant to methods approved by, the Board
of Directors of the Corporation from time to time in accordance
with the provisions of applicable law, less such redemption fee
or other charge, if any, as may be specified in the
Corporation's current registration statement under the 1940 Act
for that class or series. Payment of the redemption price
shall be made in cash by the Corporation at such time and in
such manner as may be determined from time to time by the Board
of Directors of the Corporation unless, in the opinion of the
Board of Directors, which shall be conclusive, conditions exist
which make payment wholly in cash unwise or undesirable; in
such event the Corporation may make payment wholly or partly by
securities or other property included in the assets belonging
or allocable to the
-7-
<PAGE> 9
series of the shares redemption of which is being sought, the
value of which shall be determined as provided herein.
VII.
DIRECTORS
The number of Directors of the Corporation shall be three (3),
which number may be, from time to time, increased or decreased pursuant to the
By-Laws of the Corporation, but shall never be less than the minimum number
permitted by the General Laws of the State of Maryland now or hereafter in
force. The names of the Directors who will serve until the first shareholders
meeting or until their successors are elected and qualified are as follows:
J. Virgil Early
James C. Ryan
Charles L. Terrell
VIII.
PROVISIONS FOR DEFINING, LIMITING AND REGULATING
CERTAIN POWERS OF THE CORPORATION AND OF THE
DIRECTORS AND SHAREHOLDERS
The following provisions are hereby adopted for the purpose of
defining, limiting and regulating the powers of the Corporation and of the
Directors and shareholders:
(a) No holder of any stock or any other securities of the
Corporation, whether now or hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or any other securities of the
Corporation other than such, if any, as the Board of Directors, in its sole
discretion, may determine and at such price or prices and upon such other terms
as the Board of Directors, in its sole discretion, may fix; and any stock or
other securities which the Board of Directors may determine to offer for
subscription may, as the Board of Directors in its sole discretion shall
determine, be offered to the holders of any class, series or type of stock or
other securities at the time outstanding to the exclusion of the holders of any
or all other classes, series or types of stock or other securities at the time
outstanding.
(b) The Board of Directors of the Corporation shall have
power from time to time and in its sole discretion to determine, in accordance
with sound accounting practice, what constitutes annual or other net income,
profits, earnings, surplus or net assets; to fix and vary from time to time the
amount to be reserved as working capital, or determine that retained earnings
or surplus shall remain in the hands of the Corporation; to set apart out of
any funds of the Corporation such reserve or reserves in such amount or
-8-
<PAGE> 10
amounts and for such proper purpose or purposes as it shall determine and to
abolish any such reserve or any part thereof; to distribute and pay
distributions or dividends in stock, cash or other securities or property, out
of surplus or any other funds or amounts legally available therefor, at such
times and to the shareholders of record on such dates as it may from to time to
time determine; and to determine whether and to what extent and at what times
and places and under what conditions and regulations the books, accounts and
documents of the Corporation, or any of them, shall be open to the inspection
of shareholders, except as otherwise provided by statute or by the By-Laws,
and, except as so provided, no shareholder shall have any right to inspect any
book, account or document of the Corporation unless authorized so to do by
resolution of the Board of Directors.
(c) The Board of Directors of the Corporation may establish
in its absolute discretion the basis or method for determining the value of the
assets belonging to any series, and the net asset value of each share of
capital stock of each series and class for purposes of sales, redemptions,
repurchases of shares or otherwise.
(d) Any Director or officer, individually, or any firm of
which any Director or officer may be a member, or any corporation, trust or
association of which any Director or officer may be an officer or Director or
in which any Director or officer may be directly or indirectly interested as
the holder of any amount of its capital stock or otherwise, may be a party to,
or may be financially or otherwise interested in, any contract or transaction
of the Corporation; and any such Director or officer of the Corporation may be
counted in determining the existence of a quorum at the meeting of the Board of
Directors of the Corporation or a committee thereof which shall authorize any
such contract or transaction, and may vote thereat to authorize any such
contract or transaction, and such transaction or contract shall not as a result
be void or voidable provided either
(i) the fact of the common directorship or
interest is disclosed or known to: (a) the Board of Directors
or the committee and the Board or committee authorizes,
approves, or ratifies the contract or transaction by the
affirmative vote of a majority of disinterested Directors,
even if the disinterested Directors constitute less than a
quorum; or (b) the shareholders entitled to vote, and the
contract or transaction is authorized, approved, or ratified
by a majority of the votes cast by the shareholders entitled
to vote other than the votes of shares owned of record or
beneficially by the
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<PAGE> 11
interested Director or corporation, firm, or other entity; or
(ii) the contract or transaction is fair and
reasonable to the Corporation.
In furtherance and not in limitation of the foregoing, the
Board of Directors of the Corporation is expressly authorized to contract for
management services of any nature, with respect to the conduct of the business
of the Corporation with any entity, person or company, incorporated or
unincorporated, on such terms as the Board of Directors may deem desirable.
Any such contract may provide for the rendition of management services of any
nature with respect to the conduct of the business of the Corporation, and for
the management or direction of the business and activities of the Corporation
to such extent as the Board of Directors may determine, whether or not the
contract involves delegation of functions usually or customarily performed by
the Board of Directors or officers of the Corporation or of a corporation
organized under the laws of Maryland. The Board of Directors is further
expressly authorized to contract with any person or company on such terms as
the Board of Directors may deem desirable for the distribution of shares of the
Corporation and to contract for other services, including, without limitation,
services as custodian of the Corporation's assets and as transfer agent for the
Corporation's shares, with any entity(ies), person(s) or company(ies),
incorporated or unincorporated, on such terms as the Directors may deem
desirable. Any entity, person or company which enters into one or more of such
contracts may also perform similar or identical services for other investment
companies and other persons and entities without restriction by reason of the
relationship with the Corporation unless the contract expressly provides
otherwise.
(e) Any contract, transaction, or act of the Corporation or
of the Board of Directors which shall be ratified by a majority of a quorum of
the shareholders having voting powers at any annual meeting, or at any special
meeting called for such purpose, shall so far as permitted by law be as valid
and as binding as though ratified by every shareholder of the Corporation.
(f) Unless the By-Laws otherwise provide, any officer or
employee of the Corporation (other than a Director) may be removed at any time
with or without cause by the Board of Directors or by any committee or superior
officer upon whom such power of removal may be conferred by the By-Laws or by
authority of the Board of Directors.
(g) Notwithstanding any provision of law requiring the
authorization of any action by a greater proportion than a majority of the
total number of shares of any series or class, or of all classes or series of
capital stock, or by the total number of such shares, such action shall be
valid and effective if authorized by
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<PAGE> 12
the affirmative vote of the holders of a majority of the total number of shares
outstanding and entitled to vote thereon.
(h) The Corporation shall indemnify (1) its Directors and
officers, whether serving the Corporation or at its request any other entity,
to the full extent required or permitted by the General Laws of the State of
Maryland now or hereafter in force, including the advance of expenses under the
procedures and to the full extent permitted by law, and (2) its other employees
and agents to such extent as shall be authorized by the Board of Directors or
the Corporation's By-Laws and be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any other rights to which those
seeking indemnification may be entitled. The Board of Directors may take such
action as is necessary to carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend from time to time such By-Laws,
resolutions or contracts implementing such provisions or such further
indemnification arrangements as may be permitted by law. No amendment of these
Articles of Incorporation of the Corporation shall limit or eliminate the right
to indemnification provided hereunder with respect to acts or omissions
occurring prior to such amendment or repeal. Nothing contained herein shall be
construed to authorize the Corporation to indemnify any Director or officer of
the Corporation against any liability to the Corporation or to any holders of
securities of the Corporation to which he is subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. Any indemnification by the Corporation
shall be consistent with the requirements of law, including the 1940 Act.
(i) To the fullest extent permitted by Maryland statutory and
decisional law and the 1940 Act, as amended or interpreted, no Director or
officer of the Corporation shall be personally liable to the Corporation or its
stockholders for money damages; provided, however, that nothing herein shall be
construed to protect any Director or officer of the Corporation against any
liability to which such Director or officer 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. No amendment,
modification or repeal of this Article VIII shall adversely affect any right or
protection of a Director or officer that exists at the time of such amendment,
modification or repeal.
(j) In addition to the powers and authority hereinbefore,
hereinafter or by statute expressly conferred upon them, the Board of Directors
may exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, subject, nevertheless, to the express
provisions of the laws of Maryland, of these Articles of Incorporation and of
the By-Laws of the Corporation.
-11-
<PAGE> 13
(k) The Corporation reserves the right from time to time to
make any amendments of its Articles of Incorporation which may now or hereafter
be authorized by law, including any amendments changing the terms or contract
rights, as expressly set forth in its Articles of Incorporation, of any of its
outstanding stock by classification, reclassification or otherwise but no such
amendment which changes such terms or contract rights of any of its outstanding
stock shall be valid unless such amendment shall have been authorized by not
less than a majority of the aggregate number of the votes entitled to be cast
thereon, by a vote at a meeting or in writing with or without a meeting.
(l) The Corporation shall not be required to hold an annual
meeting of shareholders in any year in which the laws of Maryland do not
require that such a meeting be held.
The enumeration and definition of particular powers of the
Board of Directors included in the foregoing shall in no way be limited or
restricted by reference to or inference from the terms of any other clause of
this or any other Article of these Articles of Incorporation of the
Corporation, or construed as or deemed by inference or otherwise in any manner
to exclude or limit any powers conferred upon the Board of Directors under the
General Laws of the State of Maryland now or hereafter in force.
IX.
DURATION OF THE CORPORATIONS
The duration of the Corporation shall be perpetual.
IN WITNESS WHEREOF, I have signed these Articles of
Incorporation acknowledging the same to be my act, on March 26, 1990.
/s/ Nicholas J. Spiliotes
------------------------------------
Nicholas J. Spiliotes
WITNESS:
- -----------------------------------
-12-
<PAGE> 1
EXHIBIT (1)(b)
<PAGE> 2
THE TRUST ADVISORY GROUP OF FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
THE TRUST ADVISORY GROUP OF FUNDS, INC., a Maryland corporation having
its principal office at 32 South Street, Baltimore, Maryland 21202-3432, c/o
The Corporation Trust Incorporated (hereinafter, the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland as
follows:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
A. ARTICLE II of the Articles of Incorporation is hereby amended
by deleting the name "The Trust Advisory Group of Funds, Inc."
and inserting in lieu thereof the name "The Riverfront Funds,
Inc."
B. ARTICLE VI, Section (a) of the Articles of Incorporation is
hereby amended by deleting the following language:
"(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Two Billion
(2,000,000,000) shares of the par value of $.001 per share.
There shall initially be three series of shares, designated as
"The Trust Advisory U.S. Treasury Limited Maturity Fixed
Income Series," consisting of 100,000,000 shares, "The Trust
Advisory U.S. Government Intermediate Fixed Income Series,"
consisting of 100,000,000 shares and "The Trust Advisory
Income Equity Series," consisting of 100,000,000 shares (such
series and any further series of shares from time to time
created by the Board of Directors being referred to
individually herein as a "series"). The Board of Directors of
the Corporation is hereby empowered to increase or decrease,
from time to time the total number of shares of capital stock
of any class or series that the Corporation shall have
authority to issue without any action by the shareholders."
and inserting in lieu thereof the following language:
"(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share.
There shall initially be four series of shares, designated as
"The Riverfront U.S. Government Two-Year Target Fund,"
consisting of 250,000,000 shares, "The Riverfront U.S.
Government Three-Year Target Fund," consisting of 250,000,000
shares, "The Riverfront Income Equity Fund," consisting of
250,000,000 shares, "The
<PAGE> 3
Riverfront U.S. Government Securities Money Market,"
consisting of 750,000,000 shares (such series and any further
series of shares from time to time created by the Board of
Directors being referred to individually herein as a
"series"). The Board of Directors of the Corporation is
hereby empowered to increase or decrease, from time to time,
the total number of shares of capital stock of any class or
series that the Corporation shall have authority to issue
without any action by the shareholders."
SECOND: The Board of Directors of the Corporation has adopted a
resolution, at a meeting duly held on February 24, 1992, declaring the
foregoing amendments to the Articles of Incorporation of the Corporation
advisable and directing that such amendments be submitted to the stockholders
of the Corporation for their approval.
THIRD: The Stockholders of the Corporation approved the foregoing
amendments at a special meeting held on February 24, 1992.
IN WITNESS WHEREOF, THE TRUST ADVISORY GROUP OF FUNDS, INC. has caused
these Articles of Incorporation to be signed, in its name and on its behalf by
its President and witnessed by its Secretary this 24th day of February, 1992.
The Trust Advisory Group
of Funds, Inc.
By: /s/ Mary L. Hidden
--------------------------------
Mary L. Hidden
President
Attest:
/s/ Rosemary D. Van Antwerp
- -----------------------------------
Rosemary D. Van Antwerp
Assistant Secretary
-2-
<PAGE> 4
THE UNDERSIGNED, President of The Trust Advisory Group of Funds, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of
his knowledge, information, and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ Mary L. Hidden
------------------------------------
Mary L. Hidden
President
-3-
<PAGE> 1
EXHIBIT (1)(c)
<PAGE> 2
THE RIVERFRONT FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
THE RIVERFRONT FUNDS, INC., a Maryland corporation having its
principal office at 32 South Street, Baltimore, Maryland 21202-3432, c/o The
Corporation Trust Incorporated (hereinafter, the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland as
follows:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
ARTICLE VI, Section (a) of the Articles of Incorporation is
hereby amended by deleting the following language:
" (a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share.
There shall initially be four series of shares, designated as
"The Riverfront U.S. Government Two-Year Target Fund,"
consisting of 250,000,000 shares, The Riverfront U.S.
Government Three-Year Target Fund," consisting of 250,000,000
shares, "The Riverfront Income Equity Fund," consisting of
250,000,000 shares, "The Riverfront U.S. Government Securities
Money Market," consisting of 750,000,000 shares (such series
and any further series of shares from time to time created by
the Board of Directors being referred to individually herein
as a "series"). The Board of Directors of the Corporation is
hereby empowered to increase or decrease, from time to time,
the total number of shares of capital stock of any class or
series that the Corporation shall have authority to issue
without any action by the shareholders."
and inserting in lieu thereof the following language:
" (a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share.
There shall initially be four series of shares, designated as
"The Riverfront U.S. Government Limited Maturity Fund,"
consisting of 250,000,000 shares, The Riverfront U.S.
Government Income Fund," consisting of 250,000,000 shares,
"The Riverfront Income Equity Fund," consisting of 250,000,000
shares, "The Riverfront U.S. Government Securities Money
Market," consisting of 750,000,000 shares (such series and any
further series of shares from time to time created by the
Board of Directors being referred to individually herein as a
<PAGE> 3
"series"). The Board of Directors of the Corporation is
hereby empowered to increase or decrease, from time to time,
the total number of shares of capital stock of any class or
series that the Corporation shall have authority to issue
without any action by the shareholders."
SECOND: The Board of Directors of the Corporation has adopted
resolution, at a meeting duly held on February 24, 1992, declaring the
foregoing amendment to the Articles of Incorporation of the Corporation
advisable.
IN WITNESS WHEREOF, THE RIVERFRONT FUNDS, INC. has caused these
Articles of Amendment to be signed, in its name and on its behalf, by its
President and witnessed by its Secretary this ____ day of April, 1992.
THE RIVERFRONT FUNDS, INC.
BY:
---------------------------------
Mary L. Hidden
President
Attest:
- -----------------------------------
Dorothy E. Bourassa
Secretary
THE UNDERSIGNED, President of The Riverfront Funds, Inc., who
executed on behalf of said corporation the foregoing Articles of Amendment, of
which this certificate is made a part, hereby acknowledges, in the name and on
behalf of said corporation, the foregoing Articles of Amendment to be the
corporate act of said corporation and further certifies that, to the best of
his knowledge, information, and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects under
the penalties of perjury.
---------------------------------
Mary L. Hidden
President
-2-
<PAGE> 1
EXHIBIT (1)(d)
<PAGE> 2
THE RIVERFRONT FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
THE RIVERFRONT FUNDS, INC., a Maryland corporation having its
principal office at 32 South Street, Baltimore, Maryland, 21202-3422, c/o The
Corporation Trust Incorporated (hereinafter, the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland as
follows:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
ARTICLE VI, Section (a) of the Articles of Incorporation is hereby
amended by deleting the following language:
(a) The total number of shares of capital stock which the Corporation
shall have the authority to issue is Three Billion (3,000,000,000)
shares of the par value of $.001 per share. There shall initially be
four series of shares, designated as "The Riverfront U.S. Government
Limited Maturity Fund," consisting of 250,000,000 shares, "The
Riverfront U.S. Government Income Fund," consisting of 250,000,000
shares, "The Riverfront Income Equity Fund," consisting of 250,000,000
shares, "The Riverfront U.S. Government Securities Money Market Fund,"
consisting of 750,000,000 shares (such series and any further series
of shares from time to time created by the Board of Directors being
referred to individually herein as a "series"). The Board of
Directors of the Corporation is hereby empowered to increase or
decrease, from time to time, the total number of shares of capital
stock of any class or series that the Corporation shall have authority
to issue without any action by the shareholders.
and inserting in lieu thereof the following language:
(a) The total number of shares of capital stock which the Corporation
shall have the authority to issue is Three Billion (3,000,000,000)
shares of the par value of $.001 per share. There shall initially be
four series of shares, designated as "The Riverfront Municipal Bond
Fund," consisting of Two Hundred Fifty Million (250,000,000) shares,
"The Riverfront U.S. Government Income Fund," consisting of Two
Hundred Fifty Million (250,000,000) shares, "The Riverfront Income
Equity Fund," consisting of Two Hundred Fifty Million (250,000,000)
shares, "The Riverfront U.S. Government Securities Money Market Fund,"
consisting of Seven
<PAGE> 3
Hundred Fifty Million (750,000,000) shares, and an additional series
designated as "The Riverfront Flexible Growth Fund," consisting of Two
Hundred Fifty Million (250,000,000) shares (such series and any
further series of shares from time to time created by the Board of
Directors being referred to individually herein as a "series"). The
Board of Directors of the Corporation is hereby empowered to increase
or decrease, from time to time, the total number of shares of capital
stock of any class or series that the Corporation shall have authority
to issue without any action by the shareholders, but the number of
shares of any class or series shall not be decreased by the Board of
Directors below the number of shares then outstanding.
ARTICLE VI of the Articles of Incorporation is hereby further amended
by adding the following paragraph:
(f) On the effective date of the amendment to this Article, One
Hundred Twenty-Five Million (125,000,000) shares of each of The
Riverfront Municipal Bond Fund series, The Riverfront U.S. Government
Income Fund series, The Riverfront Income Equity Fund series and The
Riverfront Flexible Growth Fund series, and Seven Hundred Fifty
Million (750,000,000) shares of The Riverfront U.S. Government
Securities Money Market Fund series, including any and all of the
shares of such series then outstanding, are hereby designated as a
class of shares called Investor A Shares and One Hundred Twenty-Five
Million (125,000,000) shares of each of The Riverfront Municipal Bond
Fund series, The Riverfront U.S. Government Income Fund series, The
Riverfront Income Equity Fund series and The Riverfront Flexible
Growth Fund series, and no shares of The Riverfront U.S. Government
Securities Money Market Fund series, are hereby further designated as
a class of shares called Investor B Shares. The Investor A Shares and
Investor B Shares represent interests in the same investment portfolio
of each series. Investor A Shares and Investor B Shares shall be
subject to all provisions of Article SIXTH hereof relating to the
capital stock of the Corporation generally and shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions
of redemption, except as follows:
(1) The dividends and distributions of investment income and
capital gains with respect to the Investor A Shares and Investor B
Shares shall be in such amount as
-2-
<PAGE> 4
may be declared from time to time by the Board of Directors, and such
dividends and distributions may vary between the classes to reflect
differing allocations of the expenses of the Corporation between the
classes of stock to such extent and for such purposes as the Board of
Directors may deem appropriate.
(2) The proceeds of the redemption of an Investor B Share
(including a fractional share), except those purchased through
reinvestment of a dividend or a distribution, shall be reduced by the
amount of any applicable contingent deferred sales charge payable on
such redemption to the distributor of the Investor B Shares pursuant
to the terms of the issuance of the shares (to the extent consistent
with the 1940 Act, or regulations or exemptions thereunder) and the
Corporation shall promptly pay to such distributor the amount of any
such contingent deferred sales charge.
(3) (a) Each Investor B Share, other than a share purchased
through the reinvestment of a dividend or a distribution with respect
to the Investor B Share, shall be converted automatically, and
without any action or choice on the part of the holder thereof, into
Investor A Shares, at the relative net asset value of each class, at
the time of the calculation of the net asset value of such class of
shares on the date that is the first business day of the month in
which the eighth anniversary of the issuance of such Investor B Shares
occurs (which, for the purpose of calculating the holding period
required for conversion, shall mean (i) the date on which the issuance
of such Investor B Shares occurred or (ii) for Investor B Shares
obtained through an exchange, the date on which the issuance of the
Investor B Shares of an eligible Riverfront series occurred, if such
shares were exchanged directly, or through a series of exchanges, for
the Corporation's Investor B Shares (the "Conversion Date")). The
Board of Directors shall adopt a resolution setting forth a list of
eligible Riverfront series for purposes of this paragraph.
(b) Each Investor B Share purchased through the reinvestment
of a dividend or a distribution with respect to the Investor B Shares
and the dividends and distributions on such shares shall be segregated
in a separate sub- account on the stock records of the Corporation for
each of the holders of record thereof. On any Conversion Date, a
number of the shares held in the sub-account of the holder of record
of the share or shares being converted, calculated in accordance with
the
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<PAGE> 5
next following sentence, shall be converted automatically, and without
any action or choice on the part of the holder thereof, into Investor
A Shares of the same series. The number of shares in the holder's
sub-account so converted shall bear the same relation to the total
number of shares maintained in the sub-account on the Conversion Date
as the number of shares of the holder converted on the Conversion Date
pursuant to paragraph (f)(3)(a) hereof bears to the total number of
Investor B Shares of the holder on the Conversion Date not purchased
through the automatic reinvestment of dividends or distributions with
respect to the Investor B Shares.
(c) The number of shares of Investor A Shares into which an
Investor B Share is converted pursuant to paragraphs (f)(3)(a) and
(f)(3)(b) hereof shall equal the number (including for this purpose
fractions of a share) obtained by dividing the net asset value per
share of the Investor B Shares for purposes of sales and redemptions
thereof at the time of the calculation of the net asset value on the
Conversion Date by the net asset value per share of the Investor A
Shares for purposes of sales and redemptions thereof at the time of
the calculation of the net asset value on the Conversion Date.
(d) On the Conversion Date, the Investor B Shares converted
into Investor A Shares will cease to accrue dividends and will no
longer be outstanding and the rights of the holders thereof will cease
(except the right to receive declared but unpaid dividends to the
Conversion Date).
(e) The Board of Directors shall have full power and
authority to adopt such other terms and conditions concerning the
conversion of Investor B Shares to Investor A Shares as they deem
appropriate; provided such terms and conditions are not inconsistent
with the terms contained in this paragraph (f) and subject to any
restrictions or requirements under the 1940 Act and the rules,
regulations and interpretations thereof promulgated or issued by the
Securities and Exchange Commission or any conditions or limitations
contained in an order issued by the Securities and Exchange Commission
applicable to the Corporation.
SECOND: The Board of Directors of the Corporation has adopted a
resolution, at a meeting duly held on June 8, 1994, declaring the foregoing
amendment to the Articles of Incorporation of the Corporation advisable and
directing that such amendment be
-4-
<PAGE> 6
submitted to the stockholders of the Corporation for their approval.
THIRD: The Stockholders of the Corporation approved the foregoing
amendment at a meeting held on July 29, 1994.
IN WITNESS WHEREOF, THE RIVERFRONT FUNDS, INC. has caused these
Articles of Amendment to be signed, in its name and on its behalf, by its
President and witnessed by its Secretary this 29th day of July, 1994.
THE RIVERFRONT FUNDS, INC.
By: /s/ Stephen G. Mintos
--------------------------------
Stephen G. Mintos
President
ATTEST:
/s/ William C. Buckham
- -----------------------------------
William C. Buckham
Secretary
The undersigned, President of The Riverfront Funds, Inc., who executed
on behalf of said Corporation the foregoing Articles of Amendment, of which
this certificate is made a part, hereby acknowledges, in the name and on behalf
of said Corporation, the foregoing Articles of Amendment to be the corporate
act of said Corporation and further certifies that, to the best of his
knowledge, information, and belief, the matters and facts set forth therein
with respect to the approval thereof are true in all material respects, under
the penalties of perjury.
/s/ Stephen G. Mintos
--------------------------------
Stephen G. Mintos
President
-5-
<PAGE> 1
EXHIBIT (1)(e)
<PAGE> 2
THE RIVERFRONT FUNDS, INC.
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
THE RIVERFRONT FUNDS, INC., a Maryland corporation having its
principal office at 32 South Street, Baltimore, Maryland, 21202-3422, c/o The
Corporation Trust Incorporated (hereinafter, the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland as
follows:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
ARTICLE VI, Section (a) of the Articles of Incorporation is hereby
amended by deleting the following language:
(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share. There
shall initially be four series of shares, designated as "The
Riverfront Municipal Bond Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government Income
Fund," consisting of Two Hundred Fifty Million (250,000,000) shares,
"The Riverfront Income Equity Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government
Securities Money Market Fund," consisting of Seven Hundred Fifty
Million (750,000,000) shares, and an additional series designated as
"The Riverfront Flexible Growth Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares (such series and any further series of
shares from time to time created by the Board of Directors being
referred to individually herein as a "series"). The Board of
Directors of the Corporation is hereby empowered to increase or
decrease, from time to time, the total number of shares of capital
stock of any class or series that the Corporation shall have authority
to issue without any action by the shareholders, but the number of
shares of any class or series shall not be decreased by the Board of
Directors below the number of shares then outstanding.
and inserting in lieu thereof the following language:
(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share. There
shall initially be four series of shares, designated as "The
Riverfront Ohio Tax-Free Bond Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government Income
Fund," consisting of Two Hundred Fifty Million (250,000,000) shares,
"The Riverfront Income Equity
<PAGE> 3
Fund," consisting of Two Hundred Fifty Million (250,000,000) shares,
"The Riverfront U.S. Government Securities Money Market Fund,"
consisting of Seven Hundred Fifty Million (750,000,000) shares, and an
additional series designated as "The Riverfront Flexible Growth Fund,"
consisting of Two Hundred Fifty Million (250,000,000) shares (such
series and any further series of shares from time to time created by
the Board of Directors being referred to individually herein as a
"series"). The Board of Directors of the Corporation is hereby
empowered to increase or decrease, from time to time, the total number
of shares of capital stock of any class or series that the Corporation
shall have authority to issue without any action by the shareholders,
but the number of shares of any class or series shall not be decreased
by the Board of Directors below the number of shares then outstanding.
ARTICLE VI of the Articles of Incorporation is hereby further amended
by deleting the following language:
(f) On the effective date of the amendment to this Article, One
Hundred Twenty-Five Million (125,000,000) shares of each of The
Riverfront Municipal Bond Fund series, The Riverfront U.S. Government
Income Fund series, The Riverfront Income Equity Fund series and The
Riverfront Flexible Growth Fund series, and Seven Hundred Fifty
Million (750,000,000) shares of The Riverfront U.S. Government
Securities Money Market Fund series, including any and all of the
shares of such series then outstanding, are hereby designated as a
class of shares called Investor A Shares and One Hundred Twenty-Five
Million (125,000,000) shares of each of The Riverfront Municipal Bond
Fund series, The Riverfront U.S. Government Income Fund series, The
Riverfront Income Equity Fund series and The Riverfront Flexible
Growth Fund series, and no shares of The Riverfront U.S. Government
Securities Money Market Fund series, are hereby further designated as
a class of shares called Investor B shares. The Investor A Shares and
Investor B Shares represent interests in the same investment portfolio
of each series. Investor A Shares and Investor B Shares shall be
subject to all provisions of Article SIXTH hereof relating to the
capital stock of the Corporation generally and shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions
of redemption, except as follows:
and inserting in lieu thereof the following language:
(f) On the effective date of the amendment to this Article, One
Hundred Twenty-Five Million (125,000,000) shares of each of The
Riverfront Ohio Tax-Free Bond Fund series, The Riverfront U.S.
Government Income Fund series, The Riverfront
-2-
<PAGE> 4
Income Equity Fund series and The Riverfront Flexible Growth Fund
series, and Seven Hundred Fifty Million (750,000,000) shares of The
Riverfront U.S. Government Securities Money Market Fund series,
including any and all of the shares of such series then outstanding,
are hereby designated as a class of shares called Investor A Shares
and One Hundred Twenty-Five Million (125,000,000) shares of each of
The Riverfront Ohio Tax-Free Bond Fund series, The Riverfront U.S.
Government Income Fund series, The Riverfront Income Equity Fund
series and The Riverfront Flexible Growth Fund series, and no shares
of The Riverfront U.S. Government Securities Money Market Fund series,
are hereby further designated as a class of shares called Investor B
shares. The Investor A Shares and Investor B Shares represent
interests in the same investment portfolio of each series. Investor A
Shares and Investor B Shares shall be subject to all provisions of
Article VI hereof relating to the capital stock of the Corporation
generally and shall have the same preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption, except as
follows:
SECOND: The Board of Directors of the Corporation has adopted a
resolution, by means of an unanimous written Action by Directors dated November
11, 1994, declaring the foregoing amendment to the Articles of Incorporation
advisable and directing that such amendment be submitted to the stockholders of
the Corporation for their approval.
THIRD: The Stockholders of the Corporation entitled to vote on the
foregoing amendment approved the foregoing amendment at a meeting held on
December 30, 1994.
IN WITNESS WHEREOF, THE RIVERFRONT FUNDS, INC. has caused these
Articles of Amendment to be signed, in its name and on its behalf, by its
President and witnessed by its Secretary this 5th day of January, 1995.
THE RIVERFRONT FUNDS, INC.
By: /s/ Stephen G. Mintos
--------------------------------
Stephen G. Mintos
President
ATTEST:
/s/ William C. Buckham
- -----------------------------------
William C. Buckham
Secretary
-3-
<PAGE> 5
The undersigned, President of The Riverfront Funds, Inc., who executed on
behalf of said Corporation the foregoing Articles of Amendment, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information, and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
/s/ Stephen G. Mintos
--------------------------------
Stephen G. Mintos
President
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<PAGE> 1
EXHIBIT (1)(f)
<PAGE> 2
THE RIVERFRONT FUNDS, INC.
ARTICLES SUPPLEMENTARY
TO
ARTICLES OF INCORPORATION
THE RIVERFRONT FUNDS, INC., a Maryland corporation (hereinafter, the
"Corporation") having its principal office in Maryland at 32 South Street,
Baltimore, Maryland, 21202-3422, c/o The Corporation Trust Incorporated, hereby
certifies to the State Department of Assessments and Taxation of Maryland as
follows:
FIRST: The Articles of Incorporation of the Corporation are hereby
amended as follows:
ARTICLE VI, Section (a) of the Articles of Incorporation is hereby
amended by deleting the following language:
(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share. There
shall initially be four series of shares, designated as "The
Riverfront Ohio Tax-Free Bond Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government Income
Fund," consisting of Two Hundred Fifty Million (250,000,000) shares,
"The Riverfront Income Equity Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government
Securities Money Market Fund," consisting of Seven Hundred Fifty
Million (750,000,000) shares, and an additional series designated as
"The Riverfront Flexible Growth Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares (such series and any further series of
shares from time to time created by the Board of Directors being
referred to individually herein as a "series"). The Board of
Directors of the Corporation is hereby empowered to increase or
decrease, from time to time, the total number of shares of capital
stock of any class or series that the Corporation shall have authority
to issue without any action by the shareholders, but the number of
shares of any class or series shall not be decreased by the Board of
Directors below the number of shares then outstanding.
and inserting in lieu thereof the following language:
(a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is Three Billion
(3,000,000,000) shares of the par value of $.001 per share. There
shall initially be four series of shares, designated as "The
Riverfront Ohio Tax-Free Bond Fund," consisting of Two Hundred Fifty
Million (250,000,000) shares, "The Riverfront U.S. Government Income
Fund," consisting of Two Hundred Fifty
<PAGE> 3
Million (250,000,000) shares, "The Riverfront Income Equity Fund,"
consisting of Two Hundred Fifty Million (250,000,000) shares, "The
Riverfront U.S. Government Securities Money Market Fund," consisting
of Seven Hundred Fifty Million (750,000,000) shares, and additional
series designated as "The Riverfront Flexible Growth Fund," consisting
of Two Hundred Fifty Million (250,000,000) shares and "The Riverfront
Stock Appreciation Fund," consisting of Two Hundred Fifty Million
(250,000,000) shares (such series and any further series of shares
from time to time created by the Board of Directors being referred to
individually herein as a "series"). The Board of Directors of the
Corporation is hereby empowered to increase or decrease, from time to
time, the total number of shares of capital stock of any class or
series that the Corporation shall have authority to issue without any
action by the shareholders, but the number of shares of any class or
series shall not be decreased by the Board of Directors below the
number of shares then outstanding.
ARTICLE VI of the Articles of Incorporation is hereby further amended
by deleting the following language:
(f) On the effective date of the amendment to this Article, One
Hundred Twenty-Five Million (125,000,000) shares of each of The
Riverfront Ohio Tax-Free Bond Fund series, The Riverfront U.S.
Government Income Fund series, The Riverfront Income Equity Fund
series, The Riverfront Flexible Growth Fund series, and Seven Hundred
Fifty Million (750,000,000) shares of The Riverfront U.S. Government
Securities Money Market Fund series, including any and all of the
shares of such series then outstanding, are hereby designated as a
class of shares called Investor A Shares and One Hundred Twenty-Five
Million (125,000,000) shares of each of The Riverfront Ohio Tax-Free
Bond Fund series, The Riverfront U.S. Government Income Fund series,
The Riverfront Income Equity Fund series and The Riverfront Flexible
Growth Fund series, and no shares of The Riverfront U.S. Government
Securities Money Market Fund series, are hereby further designated as
a class of shares called Investor B shares. The Investor A Shares and
Investor B Shares represent interests in the same investment portfolio
of each series. Investor A Shares and Investor B Shares shall be
subject to all provisions of Article SIXTH hereof relating to the
capital stock of the Corporation generally and shall have the same
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions
of redemption, except as follows:
and inserting in lieu thereof the following language:
(f) On the effective date of the amendment to this Article, One
Hundred Twenty-Five Million (125,000,000) shares of each
-2-
<PAGE> 4
of The Riverfront Ohio Tax-Free Bond Fund series, The Riverfront U.S.
Government Income Fund series, The Riverfront Income Equity Fund
series, The Riverfront Flexible Growth Fund series and The Riverfront
Stock Appreciation Fund series, and Seven Hundred Fifty Million
(750,000,000) shares of The Riverfront U.S. Government Securities
Money Market Fund series, are hereby designated as a class of shares
called Investor A Shares and One Hundred Twenty-Five Million
(125,000,000) shares of each of The Riverfront Ohio Tax-Free Bond Fund
series, The Riverfront U.S. Government Income Fund series, The
Riverfront Income Equity Fund series, The Riverfront Flexible Growth
Fund series and The Riverfront Stock Appreciation Fund series, and no
shares of The Riverfront U.S. Government Securities Money Market Fund
series, are hereby further designated as a class of shares called
Investor B shares. The Investor A Shares and Investor B Shares
represent interests in the same investment portfolio of each series.
Investor A Shares and Investor B Shares shall be subject to all
provisions of Article SIXTH hereof relating to the capital stock of
the Corporation generally and shall have the same preferences,
conversion and other rights, voting powers, restrictions, limitations
as to dividends, qualifications, and terms and conditions of
redemption, except as follows:
SECOND: The Board of Directors of the Corporation has adopted
unanimously a resolution, at a meeting of Directors held on May 19, 1995,
declaring the foregoing amendment to the Articles of Incorporation advisable.
THIRD: The unissued stock of the Corporation has been classified or
reclassified by the Board of Directors of the Corporation under the authority
contained in Article VI, Section (a) of the Corporation's Articles of
Incorporation and under the authority of Section 2-208 of the Maryland General
Corporation Law.
IN WITNESS WHEREOF, THE RIVERFRONT FUNDS, INC. has caused these
Articles Supplementary to be signed, in its name and on its behalf, by its
President and witnessed by its Secretary this 26th day of June, 1995.
THE RIVERFRONT FUNDS, INC.
By: /s/ Stephen G. Mintos
--------------------------------
Stephen G. Mintos
President
ATTEST:
/s/ Walter B. Grimm
- -----------------------------------
Walter B. Grimm
Secretary
-3-
<PAGE> 5
The undersigned, President of The Riverfront Funds, Inc., who executed on
behalf of said Corporation the foregoing Articles Supplementary, of which this
certificate is made a part, hereby acknowledges, in the name and on behalf of
said Corporation, the foregoing Articles Supplementary to be the corporate act
of said Corporation and further certifies that, to the best of his knowledge,
information, and belief, the matters and facts set forth therein with respect
to the approval thereof are true in all material respects, under the penalties
of perjury.
/s/ Stephen G. Mintos
------------------------------------
Stephen G. Mintos
President
-4-
<PAGE> 1
EXHIBIT (2)(a)
<PAGE> 2
THE TRUST ADVISORY GROUP OF FUNDS, INC.
BY-LAWS
<PAGE> 3
<TABLE>
BY-LAWS
I N D E X
<S> <C>
Page
----
Section and Title
ARTICLE I. SHAREHOLDERS................................... 1
Section 1.1 Annual Meetings.................................. 1
Section 1.2 Special Meetings................................. 1
Section 1.3 Place of Meetings................................ 1
Section 1.4 Notice of Meetings............................... 1
Section 1.5 Quorum........................................... 2
Section 1.6 Votes Required................................... 2
Section 1.7 Proxies.......................................... 2
Section 1.8 List of Shareholders............................. 2
Section 1.9 Voting........................................... 3
Section 1.0 Action by Shareholders Other than
at a Meeting..................................... 3
ARTICLE II. BOARD OF DIRECTORS................................. 3
Section 2.1 Powers............................................ 3
Section 2.2 Number of Directors............................... 4
Section 2.3 Election of Directors............................. 4
Section 2.4 Regular Meetings.................................. 4
Section 2.5 Special Meetings.................................. 4
Section 2.6 Notice of Meetings................................ 4
Section 2.7 Quorum............................................ 5
Section 2.8 Vacancies......................................... 5
Section 2.9 Compensation and Expenses......................... 5
Section 2.10 Action by Directors Other than
at a Meeting...................................... 6
Section 2.11 Audit Committee................................... 6
Section 2.12 Nominating Committee of Directors................. 6
Section 2.13 Other Committees.................................. 7
Section 2.14 Holding of Meetings by Conference
Telephone Call.................................... 7
ARTICLE III. OFFICERS............................................ 7
Section 3.1 Executive Officers................................ 7
Section 3.2 Chairman and Vice Chairman of the Board........... 7
Section 3.3 President......................................... 8
Section 3.4 Vice Presidents................................... 8
Section 3.5 Secretary and Assistant Secretaries............... 8
Section 3.6 Treasurer and Assistant Treasurers................ 8
Section 3.7 Subordinate Officers.............................. 9
Section 3.8 Removal........................................... 9
</TABLE>
-i-
<PAGE> 4
<TABLE>
<S> <C>
ARTICLE IV. STOCK............................................... 9
Section 4.1 Certificates..................................... 9
Section 4.2 Transfers........................................ 10
Section 4.3 Stock Ledgers.................................... 10
Section 4.4 Record Dates..................................... 10
Section 4.5 Replacement Certificates......................... 10
ARTICLE V. GENERAL PROVISIONS.............................. 11
Section 5.1 Dividends........................................ 11
Section 5.2 Checks........................................... 11
Section 5.3 Fiscal Year...................................... 11
Section 5.4 Custodian........................................ 11
Section 5.5 Seal............................................. 12
Section 5.6 Representation of Shares......................... 12
Section 5.7 Prohibited Transactions.......................... 12
Section 5.8 Bonds............................................ 12
Section 5.9 Annual Statement of Affairs...................... 13
ARTICLE VI. AMENDMENT OF BY-LAWS................................ 13
</TABLE>
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<PAGE> 5
BY-LAWS
OF
THE TRUST ADVISORY GROUP OF FUNDS, INC.
(THE "CORPORATION")
ARTICLE I
SHAREHOLDERS
Section 1.1 Annual Meetings. The Corporation is not required to
hold an annual meeting of shareholders in any year in which none of the
following is required to be acted upon by shareholders under the Investment
Company Act of 1940, as amended (the "1940 Act"): election of Directors;
approval of an investment advisory agreement; ratification of the selection of
independent public accountants; and approval of a distribution agreement. If any
of the aforementioned are required to be acted upon under the 1940 Act, then
such meeting (or the first such meeting in any year) shall be designated as the
annual meeting of shareholders for that year. If the 1940 Act requires the
Corporation to hold a meeting of shareholders to act upon any of the
aforementioned, the meeting shall, unless otherwise required by the 1940 Act, be
held no later than 120 days after the occurrence of the event requiring the
meeting. Except as the Articles of Incorporation or statute provides otherwise,
any business may be considered at an annual meeting without the purpose of the
meeting having been specified in the notice. Failure to hold an annual meeting
does not invalidate the Corporation's existence or affect any otherwise valid
corporate acts.
Section 1.2 Special Meetings. At any time in the interval
between annual meetings, special meetings of the shareholders may be called by
the Chairman of the Board or the President or by a majority of the Board or by
shareholders entitled to cast 10% in number of votes by vote at a meeting or in
writing with or without a meeting.
Section 1.3 Place of Meetings. Meetings of the shareholders for
the election of Directors shall be held at such place either within or without
the State of Maryland or elsewhere in the United States as shall be designated
from time to time by the Board of Directors and stated in the notice of the
meeting. Meetings of shareholders for any other purpose may be held at such time
and place, within the State of Maryland or elsewhere in the United States, as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof.
Section 1.4 Notice of Meetings. Not less than ten days nor more
than ninety days before the date of every shareholders' meeting, the Secretary
shall give to each shareholder entitled to vote at such meeting, written or
printed notice stating the time and place of the meeting and, if the meeting is
a special meeting or notice of the purpose is required by statute, the purpose
or
<PAGE> 6
purposes for which the meting is called, either by mail or by presenting it to
the shareholder personally or by leaving it at the shareholder's residence or
usual place of business. If mailed, such notice shall be deemed to be given when
deposited in the United States mail addressed to the shareholder at his post
office address as it appears on the records of the Corporation, with postage
thereon prepaid. Notwithstanding the foregoing provision, a waiver of notice in
writing, signed by the person or persons entitled to such notice and filed with
the records of the meeting, whether before or after the holding thereof, or
actual attendance at the meeting in person or by proxy, shall be deemed
equivalent to the giving of such notice to such persons. Any meeting of
shareholders, annual or special, may adjourn from time to time to reconvene at
the same or some other place, and no notice need be given of any such adjourned
meeting other than by announcement at the meeting.
Section 1.5 Quorum. At any meeting of shareholders the presence
in person or by proxy of shareholders entitled to cast one third of the votes
thereat shall constitute a quorum; but this Section shall not affect any
requirement under statute or under the Articles for the vote necessary for the
adoption of any measure. In the absence of a quorum the shareholders present in
person or by proxy, by majority vote and without notice, may adjourn the meeting
from time to time until a quorum shall attend. At any such adjourned meeting at
which a quorum shall be present, any business may be transacted which might have
been transacted at the meeting as originally called.
Section 1.6 Votes Required. A majority of the votes cast at a
meeting of shareholders, duly called and at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting, unless more than a majority of votes cast is required by
statute or by the Articles. Each outstanding share of stock shall be entitled to
one vote on each matter submitted to a vote at a meeting of shareholders and
fractional shares shall be entitled to corresponding fractions of one vote on
such matters, except that a plurality of all the votes cast at a meeting at
which a quorum is present is sufficient to elect a Director.
Section 1.7 Proxies. A shareholder may vote the shares owned of
record by him either in person or by proxy executed in writing by the
shareholder or by the shareholder's duly authorized attorney-in-fact. No proxy
shall be valid after eleven months from its date, unless otherwise provided in
the proxy. Every proxy shall be in writing, subscribed by the shareholder or the
shareholder's duly authorized attorney, and dated, but need not be sealed,
witnessed or acknowledged.
Section 1.8 List of Shareholders. At each meeting of
shareholders, a full, true and complete list in alphabetical order
-2-
<PAGE> 7
of all shareholders entitled to vote at such meeting, certifying the number and
class or series of shares held by each, shall be made available by the
Secretary.
Section 1.9 Voting. In all elections for Directors every
shareholder shall have the right to vote, in person or by proxy, the shares
owned of record by the shareholder, for as many persons as there are Directors
to be elected and for whose election the shareholder has a right to vote. At all
meetings of shareholders, unless the voting is conducted by inspectors, the
proxies and ballots shall be received, and all questions regarding the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes shall be decided by the chairman of the meeting. If demanded
by shareholders, present in person or by proxy, entitled to case 10% in number
of votes, or if ordered by the chairman, the vote upon any election or question
shall be taken by ballot. Upon like demand or order, the voting shall be
conducted by two inspectors in which event the proxies and ballots shall be
received, and all questions regarding the qualification of voters and the
validity of proxies and the acceptance or rejection of votes shall be decided,
by such inspectors. Unless so demanded or ordered, no vote need be by ballot,
and voting need not be conducted by inspectors. Inspectors may be elected by the
shareholders at their annual meeting, to serve until the close of the next
annual meeting and their election may be held at the same time as the election
of Directors. In case of a failure to elect inspectors, or in case an inspector
shall fail to attend, or refuse or be unable to serve, the shareholders at any
meeting may choose an inspector or inspectors to act at such meeting, and in
default of such election the chairman of the meeting may appoint an inspector or
inspectors.
Section 1.10 Action by Shareholders Other than at a Meeting. Any
action required or permitted to be taken at any meeting of shareholders may be
taken without a meeting, if a consent in writing, setting forth such action, is
signed by all the shareholders entitled to vote on the subject matter thereof
and any other shareholders entitled to notice of a meeting of shareholders (but
not to vote thereat) have waived in writing any rights which they may have to
dissent from such action, and such consent and waiver are filed with the records
of the Corporation.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Powers. The Board may exercise all the powers of the
Corporation, except such as are by statute or the charter or these By-Laws
conferred upon or reserved to the shareholders. The Board shall keep full and
fair accounts of its transactions.
-3-
<PAGE> 8
Section 2.2 Number of Directors. The number of Directors shall
be such number as shall be fixed from time to time by vote of a majority of the
Directors; provided, however, that the number of Directors shall in no event
exceed fifteen nor be reduced to fewer than three. The tenure of office of a
Director shall not be affected by any decrease in the number of Directors made
by the Board.
Section 2.3 Election of Directors. Until the first annual
meeting of shareholders and until successors or additional Directors are duly
elected and qualify, the Board shall consist of the persons named as such in the
charter. At the first annual meeting of shareholders and at each annual meeting
thereafter, the shareholders shall elect Directors to hold office until the next
succeeding annual meeting and until their successors are elected and qualify. At
any meeting of shareholders, duly called and at which a quorum is present, the
shareholders may, by the affirmative vote of the holders of a majority of the
votes entitled to be cast thereon, remove any Director or Directors from office
and may elect a successor or successors to fill any resulting vacancies for the
unexpired terms of removed Directors.
Section 2.4 Regular Meetings. After each meeting of shareholders
at which a Board of Directors shall have been elected, the Board so elected
shall meet for the purpose of organization and the transaction of other
business. No notice of such first meeting shall be necessary if held immediately
after the adjournment, and at the site, of such meeting of shareholders. Other
regular meetings of the Board shall be held without notice on such dates and at
such places within or without the State of Maryland as may be designated from
time to time by the Board.
Section 2.5 Special Meetings. Special meetings of the Board may
be called at any time by the Chairman of the Board, the President or the
Secretary of the Corporation, or by a majority of the Board by vote at a
meeting, or in writing with or without a meeting. Such special meetings shall be
held at such place or places within or without the State of Maryland as may be
designated from time to time by the Board. In the absence of such designation
such meetings shall be held at such places as may be designated in the Notice of
Meeting.
Section 2.6 Notice of Meetings. Except as provided in Section
2.4, notice of the place, day, and hour of all meetings shall be given to each
Director two days (or more) before the meeting, by delivering the same
personally, or by sending the same by telegraph, or by leaving the same at the
Director's residence or usual place of business, or, in the alternative, by
mailing such notice three days (or more) before the meeting, postage prepaid,
and addressed to the Director at the Director's last known business or residence
post office address, according to the records of the Corporation. Unless
required by these By-Laws or by resolution of
-4-
<PAGE> 9
the Board, no notice of any meeting of the Board need state the business to be
transacted thereat. No notice of any meeting of the Board need be given to any
Director who attends or, to any Director who in writing executed and filed with
the records of the meeting either before or after the holding thereof, waives
such notice. Any meeting of the Board, regular or special, may adjourn from time
to time to reconvene at the same or some other place, and no notice need be
given of any such adjourned meeting other than by announcement at the adjourned
meeting.
Section 2.7 Quorum. At all meetings of the Board, one-third of
the Directors (but in no event fewer than two Directors) shall constitute a
quorum for the transaction of business. Except in cases in which it is by
statute, by the charter or by these ByLaws otherwise provided, the vote of a
majority of such quorum at a duly constituted meeting shall be sufficient to
elect and pass any measure. In the absence of a quorum, the Directors present by
majority vote and without notice other than by announcement at the meeting may
adjourn the meeting from time to time until a quorum shall attend. At any such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
noticed.
Section 2.8 Vacancies. Any vacancy occurring in the Board of
Directors for any cause other than by reason of an increase in the number of
Directors may be filled by a majority of the remaining members of the Board of
Directors, although such majority is less than a quorum. Any vacancy occurring
by reason of an increase in the number of Directors may be filled by action of a
majority of the entire Board of Directors; provided, in either case, that
immediately after filling such vacancy at least two-thirds of the Directors then
holding office shall have been elected to such office by the shareholders at an
annual or special meeting thereof. If at any time after the first annual meeting
of shareholders of the Corporation a majority of the Directors in office shall
consist of Directors elected by the Board of Directors, a meeting of the
shareholders shall be called forthwith for the purpose of electing the entire
Board of Directors, and the terms of office of the Directors then in office
shall terminate upon the election and qualification of such Board of Directors.
A Director elected by the Board of Directors or the shareholders to fill a
vacancy shall be elected to hold office until the next annual meeting of
shareholders and until his successor is elected and qualifies.
Section 2.9 Compensation and Expenses. Directors may, pursuant
to resolution of the Board, be paid fees for their services, which fees may
consist of an annual fee or retainer and/or a fixed fee for attendance at
meetings. In addition, Directors may in the same manner be reimbursed for
expenses incurred in connection with their attendance at meetings or otherwise
in performing their duties as Directors. Members of
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committees may be allowed like compensation and reimbursement. Nothing herein
contained shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor.
Section 2.10 Action by Directors Other than at a Meeting. Any
action required or permitted to be taken at any meeting of the Board, or of any
committee thereof, may be taken without a meeting, if a written consent to such
action is signed by all members of the Board or of such committee, as the case
may be, and such written consent is filed with the minutes of proceedings of the
Board or committee.
Section 2.11 Audit Committee. The Board of Directors may by the
affirmative vote of a majority of the entire Board appoint from its members an
Audit Committee composed of two or more Directors who are not "interested
persons" (as defined in the 1940 Act) of the Corporation, as the Board may from
time to time determine. The Audit Committee shall (a) recommend independent
public accountants for selection by the Board, (b) review the scope of audit,
accounting and financial internal controls and the quality and adequacy of the
Corporation's accounting staff with the independent public accountants and such
other persons as may be deemed appropriate, (c) review with the accounting staff
and the independent public accountants the compliance of transactions of the
Corporation with Trust Advisory Group, Inc. or any other manager of the affairs
of the Corporation and with any affiliate of such firm or manager with the
financial terms of applicable agreements, (d) review reports of the independent
public accountants and comment to the Board when warranted, (e) report to the
Board at least once each year and at such other times as the committee deems
desirable, and (f) be directly available at all times to independent public
accountants and responsible officers of the Corporation for consultation on
audit, accounting and related financial matters.
Section 2.12 Nominating Committee of Directors. The Board of
Directors may by the affirmative vote of a majority of the entire Board appoint
from its members a Director Nominating Committee composed of two or more
Directors. The Director Nominating Committee shall recommend to the Board a
slate of persons to be nominated for election as Directors by the stockholders
at each annual meeting of stockholders and a person to be elected to fill any
vacancy occurring for any reason in the Board. Notwithstanding anything in this
Section 2.12 to the contrary, so long as the Corporation has in effect one or
more plans pursuant to Rule 12b-1 under the 1940 Act, the selection and
nomination of those Directors who are not "interested persons" (as defined in
the 1940 Act) shall be committed to the discretion of such disinterested
Directors.
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Section 2.13 Other Committees. The Board of Directors may appoint
from among its members other committees composed of two or more of its Directors
which shall have such powers as may be delegated or authorized by the resolution
appointing them.
Section 2.14 Holding of Meetings by Conference Telephone Call. At
any regular or special meeting of the Board or any committee thereof, members
thereof may participate in such meeting by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at such meeting.
ARTICLE III
OFFICERS
Section 3.1 Executive Officers. The Board of Directors may
choose a Chairman of the Board and a Vice Chairman of the Board from among the
Directors, and shall choose a President, a Secretary and a Treasurer who need
not be Directors. The Board of Directors shall designate as principal executive
officer of the Corporation either the Chairman of the Board, the Vice Chairman
of the Board, or the President. The Board of Directors may choose an Executive
Vice President, one or more Senior Vice Presidents, one or more Vice Presidents,
one or more Assistant Secretaries and one or more Assistant Treasurers, none of
whom need be a Director. Any two or more of the above-mentioned offices, except
those of President and a Vice President, may be held by the same person, but no
officer shall execute, acknowledge or verify any instrument in more than one
capacity if such instrument be required by law, by the charter, by the By-Laws
or by resolution of the Board of Directors to be executed by any two or more
officers. Each such officer shall hold office until his successor shall have
been duly chosen and qualified, or until he shall have resigned or shall have
been removed. Any vacancy in any of the above offices may be filled for the
unexpired portion of the term of the Board of Directors at any regular or
special meeting.
Section 3.2 Chairman and Vice Chairman of the Board. The
Chairman of the Board, if one be elected, shall preside at all meetings of the
Board of Directors and of the shareholders at which he is present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board of Directors. The Vice Chairman of the Board, if one be elected, shall,
when present and in the absence of the Chairman of the Board, preside at all
meetings of the shareholders and Directors, and he shall perform such other
duties as may from time to time be assigned to him by the Board of Directors or
as may be required by law.
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Section 3.3 President. In the absence of the Chairman or Vice
Chairman of the Board, the President shall preside at all meetings of the
shareholders and of the Board at which the President is present; and in general,
shall perform all duties incident to the office of a president of a Maryland
corporation, and such other duties, as from time to time, may be assigned to him
by the Board.
Section 3.4 Vice President. The Vice President or Vice
Presidents, including any Executive or Senior Vice President(s), at the request
of the President or in the President's absence or during the President's
inability or refusal to act, shall perform the duties and exercise the functions
of the President, and when so acting shall have the powers of the President. If
there be more than one Vice President, the Board may determine which one or more
of the Vice Presidents shall perform any of such duties or exercise any of such
functions, or if such determination is not made by the Board, the President may
make such determination. The Vice President or Vice Presidents shall have such
other powers and perform such other duties as may be assigned by the Board, the
Chairman of the Board, or the President.
Section 3.5 Secretary and Assistant Secretaries. The Secretary
shall keep the minutes of the meetings of the shareholders, of the Board and of
any committees, in books provided for the purpose; shall see that all notices
are duly given in accordance with the provisions of these By-Laws or as required
by law; be custodian of the records of the Corporation; see that the corporate
seal is affixed to all documents the execution of which, on behalf of the
Corporation, under its seal, is duly authorized, and when so affixed may attest
the same; and in general perform all duties incident to the office of a
secretary of a Maryland corporation, and such other duties as, from time to
time, may be assigned to him by the Board, the Chairman of the Board, or the
President.
The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board, the President or the
Chairman of the Board, shall, in the absence of the Secretary or in the event of
the Secretary's inability or refusal to act, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.6 Treasurer and Assistant Treasurers. The Treasurer
shall have charge of and be responsible for all funds, securities, receipts and
disbursements of the Corporation, and shall deposit, or cause to be deposited in
the name of the Corporation, all moneys or other valuable effects in such banks,
trust companies or other depositories as shall, from time to time, be selected
by the Board in accordance with Section 5.4 of these By-Laws; render to the
President, the Chairman of the Board and to
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the Board, whenever requested, an account of the financial condition of the
Corporation; and in general, perform all the duties incident to the office of a
treasurer of a corporation, such other duties as may be assigned to him by the
Board, the President or the Chairman of the Board.
The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board, the President or the
Chairman of the Board shall, in the absence of the Treasurer or in the event of
the Treasurer's inability or refusal to act, perform the duties and exercise the
powers of the Treasurer and shall perform other duties and have such other
powers as the Board may from time to time prescribe.
Section 3.7 Subordinate Officers. The Board may from time to
time appoint such subordinate officers as it may deem desirable. Each such
officer shall hold office for such period and perform such duties as the Board,
the President or the Chairman of the Board may prescribe. The Board may, from
time to time, authorize any committee or officer to appoint and remove
subordinate officers and prescribe the duties thereof.
Section 3.8 Removal. Any officer or agent of the Corporation may
be removed by the Board whenever, in its judgment, the best interests of the
Corporation will be served thereby, but such removal shall be without prejudice
to the contractual rights, if any, of the person so removed.
ARTICLE IV
STOCK
Section 4.1 Certificates. Each shareholder shall be entitled to
a certificate or certificates which shall represent and certify the number of
shares of stock owned by him in the Corporation. Such certificate shall be
signed by the President, the Chairman of the Board or a Vice President and
countersigned by the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer, and may be sealed with the seal of the Corporation. The
signatures may be either manual or facsimile signatures and the seal may be
either facsimile or any other form of seal. No certificates shall be issued for
fractional shares. Such certificates shall be in such form, not inconsistent
with law or with the charter, as shall be approved by the Board. In case any
officer of the Corporation who signed any certificate ceases to be an officer of
the Corporation, whether because of death, resignation or otherwise, before such
certificate is issued, the certificate may nevertheless be issued and delivered
by the Corporation as if the officer had not ceased to be such officer as of the
date of its issue. Certificates need not be issued except to shareholders who
request such issuance in writing. A
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certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued.
Section 4.2 Transfers. The Board of Directors shall have power
and authority to make such rules and regulations as it may deem necessary or
expedient concerning the issue, transfer and registration of certificates of
stock; and may appoint transfer agents and registrars thereof. The duties of
transfer agent and registrar, if any, may be combined.
Section 4.3 Stock Ledgers. A stock ledger, containing the names
and addresses of the shareholders of the Corporation and the number of shares of
each class held by them, respectively, shall be kept by the Transfer Agent of
the Corporation. The stock ledger may be in written form or in any other form
which can be converted within a reasonable time into written form for visual
inspection.
Section 4.4 Record Dates. The Board is hereby empowered to fix,
in advance, a date as the record date for the purpose of determining
shareholders entitled to notice of, or to vote at, any meeting of shareholders,
or shareholders entitled to receive payment of any dividend, capital gains
distribution or the allotment of any rights, or in order to make a determination
of shareholders for any other proper purpose. Such date in any case shall be not
more than ninety days, and in case of a meeting of shareholders, not less than
ten days, prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
Section 4.5 Replacement Certificates. The Board of Directors may
direct a new stock certificate or certificates to be issued in place of any
certificate or certificates theretofore issued by the Corporation alleged to
have been lost, stolen or destroyed, upon such conditions as the Board shall
determine. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or his legal representative to advertise the same
in such manner as it shall require and/or to give the Corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
Corporation with respect to the Certificate alleged to have been lost, stolen or
destroyed.
ARTICLE V
GENERAL PROVISIONS
Section 5.1 Dividends. Dividends or distribution upon the
capital stock of the Corporation, subject to provisions of the charter, if any,
may be declared by the Board of Directors at any
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regular or special meeting, pursuant to law. Dividends or distributions may be
paid only in cash or in shares of the capital stock, subject to the provisions
of the Articles of Incorporation.
Before payment of any dividend or distribution there may be set
aside out of any funds of the Corporation available for dividends or
distributions such sum or sums as the Directors from time to time, in their
absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends or distributions or for maintaining
any property of the Corporation, or for such other purpose as the Directors
shall think conducive to the interest of the Corporation, and the Directors may
modify or abolish any such reserve in the manner in which it was created.
Section 5.2 Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other person
or persons as the Board may from time to time designate.
Section 5.3 Fiscal Year. The fiscal year of the Corporation
shall be fixed by resolution of the Board of Directors.
Section 5.4 Custodian. All securities and cash of the
Corporation shall be placed in the custody of a bank or trust company
("Custodian") having (according to its last published report) not less than
$2,000,000 aggregate capital, surplus and undivided profits, provided such a
Custodian can be found ready and willing to act (or maintained in such other
manner as is consistent with Section 17(f) of the Investment Company Act of 1940
and the rules and regulations promulgated thereunder). The Corporation shall
enter into a written contract with the Custodian regarding the powers, duties
and compensation of the Custodian with respect to the cash and securities of the
Corporation held by the Board of Directors of the Corporation. The Corporation
shall upon the resignation or inability to serve of the Custodian use its best
efforts to obtain a successor custodian; require that the cash and securities
owned by the Corporation be delivered directly to the successor custodian; and
in the event that no successor custodian can be found, submit to the
shareholders, before permitting delivery of the cash and securities owned by the
Corporation to other than a successor custodian, the question whether or not the
Corporation shall be liquidated or shall function without a custodian.
Section 5.5 Seal. The Board of Directors may provide a suitable
seal, bearing the name of the Corporation, which shall be in the custody of the
Secretary. The Board of Directors may authorize one or more duplicate seals and
provide for the custody thereof.
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Section 5.6 Representation of Shares. Any officer of the
Corporation is authorized to vote, represent and exercise for the Corporation
any and all rights incident to any shares of any corporation or other business
enterprise owned by the Corporation.
Section 5.7 Prohibited Transactions. No officer or Director of
the Corporation or of its investment adviser shall deal for or on behalf of the
Corporation with himself, as principal or agent, or with any corporation or
partnership in which he has a financial interest. This prohibition shall not
prevent: (a) officers or Directors of the Corporation from having a financial
interest in the Corporation, its principal underwriter or its investment
adviser; (b) the purchase of securities for the portfolio of the Corporation or
the sale of securities owned by the Corporation through a securities dealer, one
or more of whose partners, officers or Directors is an officer or Director of
the Corporation, provided such transactions are handled in the capacity of
broker only and provided commissions charged do not exceed customary brokerage
charges for such service; or (c) the employment of legal counsel, registrar,
transfer agent, dividend disbursing agent, or custodian having a partner,
officer or Director who is an officer or Director of the Corporation, provided
only customary fees are charged for services rendered to or for the benefit of
the Corporation.
Section 5.8 Bonds. The Board of Directors may require any
officer, agent or employee of the Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties, with one or more sureties
and in such amount as may be satisfactory to the Board of Directors. The Board
of Directors shall, in any event, require the Corporation to provide and
maintain a bond issued by a reputable fidelity insurance company, against
larceny and embezzlement, covering each officer and employee of the Corporation
who may singly, or jointly with others, have access to securities or funds of
the Corporation, either directly or through authority to draw upon such funds,
or to direct generally the disposition of such securities, such bond or bonds to
be in such reasonable amount as a majority of the Board of Directors who are not
such officers or employees of the Corporation shall determine with due
consideration to the value of the aggregate assets of the Corporation to which
any such officer or employee may have access, or in any amount or upon such
terms as the Securities and Exchange Commission may prescribe by order, rule or
regulations.
Section 5.9 Annual Statement of Affairs. The President or the
Controller shall prepare annually a full and correct statement of the affairs of
the Corporation, to include a balance sheet and a financial statement of
operations for the preceding fiscal year. The statement of affairs shall be
placed on file at the Corporation's principal office within 120 days after the
end of the fiscal year.
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ARTICLE VI
AMENDMENT OF BY-LAWS
These By-Laws of the Corporation may be altered, amended, added to
or repealed by majority vote of the shareholders or by majority vote of the
entire Board.
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<PAGE> 1
EXHIBIT (2)(b)
<PAGE> 2
AMENDMENT TO THE BY-LAWS
OF
THE TRUST ADVISORY GROUP OF FUNDS, INC.
The By-Laws of the Trust Advisory Group of Funds, Inc. are hereby
amended to change the name from The Trust Advisory Group of Funds, Inc. to The
Riverfront Funds, Inc.
<PAGE> 1
EXHIBIT (2)(C)
<PAGE> 2
RESOLVED FURTHER, That the Corporation's By-Laws be and they are hereby amended
by deleting Section 4.1 of Article IV and adding the following Section 4.1 in
its place:
No certificate representing or certifying the ownership of shares of
stock in the Corporation need be issued except as the Directors may
otherwise determine from time to time. The Directors may make such rules
as they consider appropriate for the issuance of such certificates, the
use of facsimile signature, the transfer of shares of stock and similar
matters. The record books of the Corporation which are kept by the
Corporation or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the shareholders and as to the number of
shares of stock of each series and class held from time to time by each
such shareholder.
RESOLVED FURTHER, That the Corporation's By-Laws be and they hereby are hereby
further amended by deleting the word "certificates" in Article IV, Section 4.2
and replacing it with the word "shares."
<PAGE> 1
EXHIBIT (5)(a)
<PAGE> 2
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of the 1st day of August, 1994 between The
Riverfront Funds, Inc., a Maryland corporation (the "Company"), and The
Provident Bank, an Ohio banking corporation (the "Investment Adviser").
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 has previously retained the Investment Adviser to
manage the Company's investment portfolios and now desires to restate the terms
and conditions upon which it will retain the Investment Adviser to provide, or
arrange for the provision of, investment advisory services to one or more
investment portfolios of the Company (the "Portfolios"), and the Investment
Adviser represents that it is willing and possesses legal authority to so
furnish such services without violation of applicable laws (including the
Glass-Steagall Act); and
WHEREAS, the Investment Adviser is engaged in the business of
rendering
investment advisory services to the Company and to others and desires to provide
the services described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and the Investment Adviser hereby agree as
follows:
1. Appointment. The Company hereby appoints the Investment Adviser
to act as investment adviser to the Portfolios identified on Schedule A hereto
for the period and on the terms set forth in this Agreement. The Investment
Adviser accepts such appointment and agrees to furnish the services herein set
forth for the compensation herein provided. Additional investment portfolios may
from time to time be added to those covered by this Agreement by the parties
executing a new Schedule A which shall become effective upon its execution and
shall supersede any Schedule A having an earlier date.
2. Delivery of Documents. The Company has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following:
(a) the Company's Articles of Incorporation, as amended to
date (the "Articles");
(b) the Company's By-Laws and amendments thereto;
(c) resolutions of the Company's Board of Directors
authorizing the appointment of the Investment Adviser and approving
this Agreement;
<PAGE> 3
(d) Post-Effective Amendment No. 7 to the Company's
Registration Statement on Form N-1A filed under the Securities Act of
1933, as amended ("1933 Act") (File No. 33-34154), and under the 1940
Act, as filed with the Securities and Exchange Commission; and
(e) each Portfolio's most recent Prospectus and Statement of
Additional Information (such Prospectus and Statement of Additional
Information, as presently in effect, and all amendments and
supplements thereto are herein collectively called the "Prospectus").
The Company will furnish the Investment Adviser from time to time with
copies of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Company's Board of
Directors, the Investment Adviser will provide, or arrange for the provision of,
a continuous investment program for each of the Portfolios, including investment
research and management with respect to all securities and investments and cash
equivalents in the Portfolios. The Investment Adviser will determine, or arrange
for others to determine, from time to time what securities and other investments
will be purchased, retained or sold by the Company with respect to the
Portfolios and will implement, or arrange for others to implement, such
determinations through the placement, in the name of the Portfolios, of orders
for the execution of portfolio transactions with or through such brokers or
dealers as it may select. The Investment Adviser will provide, or arrange for
the provision of, the services under this Agreement in accordance with each of
the Portfolios' investment objectives, policies and restrictions as stated in
the Prospectus and resolutions of the Company's Board of Directors.
Subject to the provisions of this Agreement, the Articles and the 1940
Act, the Investment Adviser directly and indirectly may select and enter into
contracts with one or more qualified investment advisers ("Sub-Advisers") to
provide to the Company some or all of the services required by this Agreement.
With respect to any such appointment by the Investment Adviser of any of the
Sub- Advisers, the Investment Adviser will, as appropriate:
(a) advise the Sub-Advisers with respect to economic conditions and
trends;
(b) assist Sub-Advisers with the placement of orders for the
purchase and sale of securities;
(c) assist and consult with the Sub-Advisers in connection with the
Portfolios' continuous investment programs; and
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(d) periodically review, evaluate and report to the Company's Board
of Directors with respect to the performance of the
Sub-Advisers.
In fulfilling its responsibilities hereunder, the Investment Adviser
agrees that it will, or, with respect to services provided to the Company by any
of the Sub-Advisers appointed by the Investment Adviser, that it will require
that each of the Sub- Advisers:
(a) use the same skill and care in providing such services
as it uses in providing services to fiduciary accounts for which it
has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the
Securities and Exchange Commission and in addition will conduct its
activities under this Agreement (or any applicable sub-investment
advisory agreement) in accordance with any applicable regulations of
any governmental authority pertaining to the investment advisory
activities of the Investment Adviser or Sub-Advisers;
(c) not make loans to any person to purchase or carry shares
of capital stock in the Company or make loans to the Company;
(d) place orders pursuant to investment determinations for
the Company either directly with the issuer or with an underwriter,
market maker or broker or dealer. In placing orders with brokers and
dealers, the Investment Adviser will use its reasonable best efforts to
obtain, or require that each of the Sub-Advisers obtain, prompt
execution of orders in an effective manner at the most favorable price.
In assessing the best execution available for any transaction, the
Investment Adviser or any of the Sub-Advisers shall consider all
factors it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and
execution capability of the broker-dealer and the reasonableness of the
commission, if any (for the specific transaction and on a continuing
basis). Consistent with this obligation, the Investment Adviser and any
of the Sub-Advisers may, to the extent permitted by law, purchase and
sell portfolio securities to and from brokers and dealers who provide
brokerage and research services (within the meaning of Section 28(e) of
the Securities Exchange Act of 1934) to or for the benefit of the
Portfolios and/or other accounts over which the Investment Adviser or
any of the Sub- Advisers or any of their respective affiliates
exercises investment discretion. Subject to the review of the Company's
Board of Directors from time to time with respect to the extent and
continuation of the policy, the Investment Adviser and any of the
Sub-Advisers are authorized to pay a broker or
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<PAGE> 5
dealer who provides such brokerage and research services a commission
for effecting a securities transaction for any of the Portfolios which
is in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction if, but only if, the
Investment Adviser or Sub- Advisers determine in good faith that such
commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of
either that particular transaction or the overall responsibilities of
the Investment Adviser or Sub-Advisers with respect to the accounts as
to which it exercises investment discretion. In no instance will
portfolio securities be purchased from or sold to The Winsbury Company,
the Investment Adviser or any Sub-Adviser, or any affiliated person of
the Company, except as may be permitted by the 1940 Act;
(e) maintain all books and records with respect to the
Company's securities transactions and will furnish the Company's Board
of Directors such periodic and special reports as the Board reasonably
may request;
(f) treat confidentially and as proprietary information of
the Company all records and other information relative to the Company
and prior, present, or potential shareholders, and will not use such
records and information for any purpose other than performance of its
responsibilities and duties hereunder, except that, subject to prompt
notification of the Company, the Investment Adviser and any of the
Sub-Advisers may divulge such information to duly constituted
authorities, or when so requested by the Company, provided, however,
that nothing contained herein shall prohibit the Investment Adviser or
any of the Sub-Advisers from advertising or soliciting the public
generally with respect to other products or services regardless of
whether such advertisement or solicitation may include prior, present
or potential shareholders of the Funds; and
(g) maintain its policy and practice of conducting its
fiduciary functions independently. In making investment recommendations
for the Company, the Investment Adviser's or Sub-Adviser's personnel
will not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Company's account are
customers of the Investment Adviser or Sub-Adviser or of their
respective parents, subsidiaries or affiliates. In dealing with such
customers, the Investment Adviser or Sub-Adviser and their respective
parents, subsidiaries, and affiliates will not inquire or take into
consideration whether securities of those customers are held by the
Company.
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<PAGE> 6
4. Services Not Exclusive. The services furnished by the Investment
Adviser and any Sub-Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser and any Sub-Adviser shall be free to furnish similar services
to others so long as its services under this Agreement or any sub-advisory
agreement are not impaired thereby. It is understood that the action taken by
the Investment Adviser under this Agreement may differ from the advice given or
the timing or nature of action taken with respect to other clients of the
Investment Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Investment Adviser at the same time or at
the same price.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all records,
if any, which it maintains for the Company are the property of the Company and
further agrees to surrender promptly, and to require each of the Sub-Advisers to
surrender promptly, to the Company any of such records upon the Company's
request. The Investment Adviser further agrees to preserve, and to require each
of the Sub-Advisers to preserve, for the periods prescribed by Rule 31a-2 under
the 1940 Act, the records required to be maintained by Rule 31a-1 under the 1940
Act.
6. Expenses. During the term of this Agreement, the Investment
Adviser will pay all expenses, including, as applicable, the compensation of any
Sub-Advisers directly appointed by it, incurred by it in connection with its
activities under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Company.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each of the Portfolios will pay the Investment
Adviser and the Investment Adviser will accept as full compensation therefor a
fee set forth on Schedule A hereto. Each of the Portfolios' obligations to pay
the above-described fee to the Investment Adviser will begin as of the date of
the initial public sale of shares in that Portfolio. Except as permitted by
applicable law, the Investment Adviser shall not be compensated on the basis of
a share of capital gains upon or capital appreciation of any of the Portfolios
or any portion thereof.
If in any fiscal year the aggregate expenses of any of the Portfolios
(as defined under the securities regulations of any state having jurisdiction
over the Company) exceed the expense limitations of any such state, the
Investment Adviser will reimburse the Portfolio for a portion of such excess
expenses equal to such excess times the ratio of the fees otherwise payable by
the Portfolio to the Investment Adviser hereunder to the aggregate fees
otherwise payable by the Portfolio to the Investment Adviser hereunder and to
The Winsbury Company under the Administration Agreement between The Winsbury
Company and the Company. The obligation of the Investment Adviser to reimburse
the Portfolios
-5-
<PAGE> 7
hereunder is limited in any fiscal year to the amount of its fee hereunder for
such fiscal year, provided, however, that notwithstanding the foregoing, the
Investment Adviser shall reimburse the Portfolios for such proportion of such
excess expenses regardless of the amount of fees paid to it during such fiscal
year to the extent that the securities regulations of any state having
jurisdiction over the Company so require. Such expense reimbursement, if any,
will be estimated daily and reconciled and paid on a monthly basis.
8. Limitation of Liability. The Investment Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Portfolios in connection with the performance of this Agreement, except a
loss resulting from a breach of fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on the part of the Investment Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement. Any person, even though also an officer,
Director, partner, employee, or agent of the Investment Adviser, who may be or
become an officer, trustee, Director, employee or agent of the Company, shall be
deemed, when rendering services to the Company or acting on any business of the
Company (other than services or business in connection with the Investment
Adviser's duties hereunder or under any other agreements between the Investment
Adviser and the Company), to be rendering such services to or acting solely for
the Company and not as an officer, Director, partner, employee, or agent or one
under the control or direction of the Investment Adviser even though paid by it.
The Company agrees to indemnify and hold the Investment Adviser harmless from
all taxes, charges, expenses, assessments, claims and liabilities (including,
without limitation, liabilities arising under the Securities Act of 1933, the
1934 Act, the 1940 Act and any state and foreign securities and blue sky laws,
as amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which the Investment Adviser takes or does or omits to take or
do hereunder; provided that the Investment Adviser shall not be indemnified
against any liability to the Company or to its shareholders (or any expenses
incident to such liability) arising out of a breach of fiduciary duty with
respect to the receipt of compensation for services, willful misfeasance, bad
faith, or gross negligence on the part of the Investment Adviser in the
performance of its duties, or from reckless disregard by it of its obligations
and duties under this Agreement.
9. Compliance with Order. The Investment Adviser agrees that it
will comply with and be bound by the terms of the Order under Section 6(c) of
the 1940 Act, Release No. 19949, December 13, 1993 (the "Order"), insofar as the
Order imposes obligations upon an investment adviser to a fund offering class
shares under the
-6-
<PAGE> 8
authority of the Order and for so long as compliance with the Order is required
by the 1940 Act.
10. Duration and Termination. This Agreement will become effective
as to a particular Portfolio as of the date first written above (or, if a
particular Portfolio is not in existence on that date, on the date a
registration statement relative to that Portfolio becomes effective with the
Securities and Exchange Commission and Schedule A hereto is amended to add such
Portfolio thereto), provided that it shall have been approved by a vote of a
majority of the outstanding voting securities of such Portfolio, in accordance
with the requirements under the 1940 Act, and, unless sooner terminated as
provided herein, shall continue in effect until December 31, 1995.
Thereafter, if not terminated, this Agreement shall continue in effect
as to a particular Portfolio for successive periods of one year each ending on
December 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Company's
Board of Directors who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by the vote of a majority of all votes
attributable to the outstanding Shares of such Portfolio. Notwithstanding the
foregoing, this Agreement may be terminated as to a particular Portfolio at any
time on sixty days' written notice, without the payment of any penalty, by the
Company (by vote of the Company's Board of Directors or by vote of a majority of
the outstanding voting securities of such Portfolio) or by the Investment
Adviser. This Agreement will immediately terminate in the event of its
assignment. No assignment of this Agreement shall be made by the Investment
Adviser without the consent of the Board of Directors of the Company. (As used
in this Agreement, the terms "majority of the outstanding voting securities,
"interested persons" and "assignment" shall have the same meaning of such terms
in the 1940 Act.)
11. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought.
12. Miscellaneous. 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 upon and shall inure to
-7-
<PAGE> 9
the benefit of the parties hereto and their respective successors and shall be
governed by the law of the State of Ohio.
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
above written.
THE RIVERFRONT FUNDS, INC.
By /s/ William C. Buckham
-------------------------------
Title Vice President
----------------------------
THE PROVIDENT BANK
By /s/ A. David Davis
-------------------------------
Title Vice President
----------------------------
-8-
<PAGE> 10
Dated: August 15, 1995
SCHEDULE A
to the Investment Advisory Agreement
between The Riverfront Funds, Inc. and
The Provident Bank
<TABLE>
<CAPTION>
Name of Portfolio Compensation Date
- ----------------- ------------ ----
<S> <C> <C>
The Riverfront U.S. Annual rate of 0.15% August 1, 1994
Government Securities of the average daily
Money Market Fund net assets of such Portfolio
The Riverfront U.S. Annual rate of 0.40% of August 1, 1994
Government Income the average daily net
Fund assets of such Portfolio
The Riverfront Income Annual rate of 0.95% of August 15, 1995
Equity Fund the average daily net
assets of such Portfolio
The Riverfront Annual rate of 0.90% of August 1, 1994
Flexible Growth Fund the average daily net
assets of such Portfolio
The Riverfront Ohio Tax Annual rate of 0.50% of August 1, 1994
Free Bond Fund the average daily net
assets of such Portfolio
The Riverfront Stock Annual rate of 0.80% of July 6, 1995
Appreciation Fund the average daily net
assets of such Portfolio
</TABLE>
THE RIVERFRONT FUNDS, INC.
By /s/ Walter B. Grimm
--------------------------
Title Vice President & Secy.
-----------------------
THE PROVIDENT BANK
By /s/ Drew T. Kagan
--------------------------
Title Senior Vice President
-----------------------
- ---------------
All fees are computed daily and paid monthly.
-9-
<PAGE> 1
EXHIBIT (5)(b)
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 1st day of
August, 1994, by and between The Provident Bank, an Ohio banking corporation
(the "Adviser"), and James Investment Research, Inc., an Ohio corporation (the
"Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of The Riverfront
Funds, Inc., a Maryland corporation, and an open-end management investment
company (the "Company"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Company is comprised of several separate investment
portfolios, one of which is The Riverfront Flexible Growth Fund (the
"Portfolio"); and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio such as the Portfolio to assist the
Adviser in performing services for the Portfolio; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law, and is engaged in the business of rendering investment advisory
and sub-advisory services to investment companies and desires to provide such
services to the Adviser; and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Portfolio and has reviewed the Investment
Advisory Agreement dated as of August 1, 1994, between the Adviser and the
Company (the "Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for the Portfolio,
subject to such instructions and supervision as the Adviser may from time to
time furnish and further subject to the supervision of the Company's Board of
Directors, for the period and on the terms hereinafter set forth. The
Sub-Adviser hereby accepts such appointment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser will provide the services under
this Agreement in accordance with the Portfolio's investment objectives,
policies and restrictions as stated in the Portfolio's most recent Prospectus
and Statement of Additional Information and as the same may, from time to time,
be supplemented
<PAGE> 3
or amended and in resolutions of the Company's Board of Directors. The Adviser
agrees to furnish the Sub-Adviser from time to time copies of all amendments of
or supplements to such Prospectus and Statement of Additional Information. The
Sub-Adviser shall for all purpose herein be deemed to be an independent
contractor and shall, except as expressly provided or authorized (whether herein
or otherwise), have no authority to act for or represent the Adviser, the
Portfolio or the Company in any way.
2. Sub-Advisory Services. Subject to such instructions and
supervision as the Adviser may from time to time furnish, the continuous
investment program of the Portfolio provided by the Sub- Adviser shall include,
among other things, investment research and management with respect to all
securities, investments and cash equivalents in the Portfolio. The Sub-Adviser
will determine from time to time what securities and other investments will be
purchased, retained or sold by the Portfolio, the appropriate portion of the
Portfolio's assets to be invested in particular countries or geographic regions,
the use of foreign exchange contracts and other foreign currency matters, and
the manner in which voting rights, rights to consent to corporate action and
other rights pertaining to the Portfolio's investments should be exercised. The
Sub-Adviser will implement such determinations through the placement, in the
name of the Portfolio, of orders for the execution of portfolio transactions
with it through such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for which
it has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United
States Securities and Exchange Commission ("SEC") and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any government
authority pertaining to the investment advisory activities of
the Sub-Adviser and shall furnish such written reports or other
documents substantiating such compliance as the Adviser
reasonably may from time to time request;
(c) not make loans to any person to purchase or carry shares of
capital stock in the Company or make loans to the Company;
(d) place orders pursuant to investment determinations for the
Portfolio either directly with the issuer or with an
underwriter, market maker or broker or dealer. In placing orders
with brokers and dealers, the Sub-Adviser
-2-
<PAGE> 4
will use its reasonable best efforts to obtain best qualitative
execution of orders in an effective manner at the most favorable
price. Consistent with this obligation, the Sub-Adviser may, to
the extent permitted by law, purchase and sell portfolio
securities to and from brokers and dealers who provide brokerage
and research services (within the meaning of Section 28(e) of
the Securities Exchange Act of 1934) to or for the benefit of
the Portfolio and/or other accounts over which the Sub-Adviser
exercises investment discretion. Subject to the review of the
Company's Board of Directors from time to time with respect to
the extent and continuation of the policy, the Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for effecting a securities
transaction for the Portfolio which is in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Adviser determines in good
faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion.
One or more of the accounts which the Sub-Adviser manages
may own, from time to time, the same investments as the
Portfolio. Investment decisions for the Portfolio are to be made
independently from those of such other accounts; however, from
time to time, the same investment decision may be made for more
than one company, portfolio or account. When two or more
companies, portfolios or accounts seek to purchase or sell the
same securities, the securities actually purchased or sold will
be allocated among the companies, portfolios, including the
Portfolio, and accounts on a good faith basis by the Sub-
Adviser, in its discretion, in accordance with the accounts',
portfolios' and companies' various investment objectives and
with applicable law. In some cases, this procedure may adversely
affect the price or size of the position obtainable for the
Portfolio. In other cases, however, the ability of the Portfolio
to participate in volume transactions may produce better
execution for the Portfolio. The Sub-Adviser and the Adviser
agree that the Sub-Adviser may follow such procedures so long as
such procedures are consistent with applicable law. In no
instance will portfolio securities be purchased from or sold to
the Company by The Winsbury Company, the Adviser or Sub-Adviser
or any affiliate of the foregoing, either as principal or agent,
except as may be permitted by the 1940 Act;
-3-
<PAGE> 5
(e) maintain all necessary or appropriate books and records with
respect to the Portfolio's securities transactions in accordance
with all applicable laws, rules and regulations, including but
not limited to Section 31(a) of the 1940 Act and will furnish
the Company's Board of Directors such periodic and special
reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Company all records and other information
relative to the Adviser and the Company and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Company and the Adviser, the
Sub-Adviser may divulge such information to duly constituted
authorities, or when so requested by the Adviser and the
Company, provided, however, that nothing contained herein shall
prohibit the Sub-Adviser from advertising or soliciting the
public generally with respect to other products or services,
regardless of whether such advertisement or solicitation may
include prior, present or potential shareholders of the
Portfolio;
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations
for the Company, the Sub-Adviser's personnel will not inquire or
take into consideration whether the issuers of securities
proposed for purchase or sale for the Company's account are
customers of the Adviser, the Sub-Adviser or of their respective
parents, subsidiaries or affiliates. In dealing with such
customers, the Sub-Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Company; and
(h) render, upon request of the Adviser or the Company's Board of
Directors, written reports concerning the investment activities
of the Portfolio.
3. Expenses. During the term of this Agreement, the Sub- Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Portfolio.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the Portfolio are the property of the Portfolio and
further agrees to surrender
-4-
<PAGE> 6
promptly to the Adviser or the Company any such records upon the Adviser's or
the Company's request and that such records shall be available for inspection by
the SEC; provided, that the Sub-Adviser shall be permitted to retain copies of
any such records which the Sub-Adviser surrenders to the Company or the Adviser
pursuant to the terms of this Section4. The Sub-Adviser further agrees to
preserve for the periods and at the places prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay or cause to be paid to
the Sub-Adviser a fee at the annual rate of the value of the Portfolio's average
daily net assets set forth in Schedule A hereto. Such fee shall be accrued daily
and paid monthly as soon as practicable after the end of each month. If the
Sub-Adviser shall serve for less than the whole of any month, the foregoing
compensation shall be prorated. For the purpose of determining fees payable to
the Sub-Adviser, the value of the Portfolio's net assets shall be computed at
the times and in the manner specified in the Company's Registration Statement.
If the Adviser is required to reduce its fee or to reimburse the Company because
the expenses of the Fund exceed applicable state securities regulations or are
in excess of any voluntary expense limitations set forth in the Company's
current Registration Statement, the Sub- Adviser's fee hereunder shall be
reduced by an amount equal to such excess expense multiplied by the ratio that
the Sub-Adviser's fee hereunder bears to the sum of the fees paid to the Adviser
and to The Winsbury Company (under the Company's Administration Agreement with
The Winsbury Company) by the Company with respect to the Portfolio. The
Sub-Adviser shall not be compensated on the basis of a share of capital gains or
upon capital appreciation of the Portfolio or any portion thereof except as may
be authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub- Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Adviser shall not use the name of the
Sub-Adviser in any prospectus, sales literature or other material relating to
the Company in any manner not approved prior thereto by the Sub-Adviser;
provided, however, that the Sub-Adviser shall approve all uses of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the SEC or a
-5-
<PAGE> 7
state securities commission; and, provided further, that in no event shall such
approval be unreasonably withheld. The Sub-Adviser shall not use the name of the
Company or the Adviser in any material relating to the Sub-Adviser in any manner
not approved prior thereto by the Adviser; provided, however, that the Adviser
shall approve all uses of its or the Company's name which merely refer in
accurate terms to the appointment of the Sub-Adviser hereunder or which are
required by the SEC or a state securities commission; and, provided further,
that in no event shall such approval be unreasonably withheld.
8. Liability of the Sub-Adviser. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty with respect to the receipt of compensation for services, the
Sub-Adviser shall not be liable to the Adviser or to the Company for any act or
omission in the course of, or connected with, rendering services hereunder or
for any losses that may be sustained in the purchase, holding or sale of any
security pursuant hereto. Any person, even though also an officer, director,
partner, employee, or agent of the Sub-Adviser, who may be or become an officer,
trustee, director, employee or agent of the Company, shall be deemed, when
rendering services to the Company or acting on any business of the Company
(other than services or business in connection with the Sub-Adviser's duties
hereunder or under any other agreements between the Sub-Adviser and the
Company), to be rendering such services to or acting solely for the Company and
not as an officer, director, partner, employee, or agent or one under the
control or direction of the Sub-Adviser even though paid by it. The Adviser
agrees to indemnify and hold the Sub-Adviser harmless from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Act of 1933, the Securities Exchange
Act of 1934, the 1940 Act and any state and foreign securities and blue sky
laws, as amended from time to time) and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action or thing which the Sub-Adviser takes or does or omits to take or do
hereunder; provided that the Sub-Adviser shall not be indemnified against any
liability to the Company, to its shareholders or to the Adviser (or any expenses
incident to such liability) arising out of a breach of fiduciary duty with
respect to the receipt of compensation for services, willful misfeasance, bad
faith, or gross negligence on the part of the Sub-Adviser in the performance of
its duties, or from reckless disregard by it of its obligations and duties under
this Agreement.
9. Limitation of Company's Liability. The Sub-Adviser acknowledges
that it has received notice of and accepts the limitations upon the Company's
liability set forth in its Articles of Incorporation and under Maryland law. The
Sub-Adviser agrees that any of the Company's obligations shall be limited to the
-6-
<PAGE> 8
assets of the Portfolio and that the Sub-Adviser shall not seek satisfaction of
any such obligation from the shareholders of the Company nor from any Director,
officer, employee or agent of the Company.
10. Duration, Renewal, Termination and Amendment. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Portfolio, in accordance with the requirements under the 1940 Act, and,
unless sooner terminated as provided herein, shall continue in effect until
December 31, 1995.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Portfolio for successive periods of one year each ending on
December 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Company's
Board of Directors who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by the vote of a majority of all votes
attributable to the outstanding Shares of the Portfolio. This Agreement may be
terminated as to the Portfolio at any time, without payment of any penalty, by
the Company's Board of Directors, by the Adviser, or by a vote of the majority
of the outstanding voting securities of the Portfolio upon, 60 days' prior
written notice to the Sub-Adviser, or by the Sub-Adviser upon 60 days' prior
written notice to the Adviser and the Company's Board of Directors, or upon such
shorter notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Adviser Agreement. This
Agreement shall terminate automatically and immediately in the event of its
assignment. No assignment of this Agreement shall be made by the Sub-Adviser
without the consent of the Adviser and the Board of Directors of the Company.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Sub-Adviser,
subject to approval by the Company's Board of Directors and, if required by
applicable SEC rules and regulations, a vote of a majority of the Portfolio's
outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished
by either party to this Agreement to the other shall be treated as confidential
and shall not be disclosed to third parties except as required by law.
12. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
-7-
<PAGE> 9
otherwise, the remainder of this Agreement shall not be affected thereby.
13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties. The respective rights and obligations of the parties hereunder
shall survive any termination of this Agreement to the extent necessary to
preserve any such rights and obligations granted or imposed hereunder.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
THE PROVIDENT BANK
By /s/ Drew T. Kagan, Senior V.P.
--------------------------------
Authorized Officer
JAMES INVESTMENT RESEARCH, INC.
By /s/ Frank E. James, Jr.
--------------------------------
Authorized Officer
-8-
<PAGE> 10
Dated: August 1, 1994
SCHEDULE A
To the Sub-Investment Advisory Agreement
between The Provident Bank and
James Investment Research, Inc.
Name of Fund COMPENSATION DATE
The Riverfront Annual Rate of .50% of the August 1, 1994
Flexible Growth Fund average daily net assets of
such Portfolio.
THE PROVIDENT BANK
By /s/ A. David Davis
------------------------------
Title Vice President
----------------------------
JAMES INVESTMENT RESEARCH, INC.
By /s/ Frank E. James, Jr.
------------------------------
Title President
----------------------------
All fees are computed daily and paid monthly.
-9-
<PAGE> 1
EXHIBIT (5)(c)
<PAGE> 2
SUB-INVESTMENT ADVISORY AGREEMENT
This Sub-Investment Advisory Agreement is made as of the 15th day of
August, 1995, by and between The Provident Bank, an Ohio banking corporation
(the "Adviser"), and DePrince, Race & Zollo, Inc., a Florida corporation (the
"Sub-Adviser").
WHEREAS, the Adviser serves as investment adviser of The Riverfront
Funds, Inc., a Maryland corporation, and an open-end management investment
company (the "Company"), which has filed a registration statement (the
"Registration Statement") under the Investment Company Act of 1940, as amended
(the "1940 Act") and the Securities Act of 1933.
WHEREAS, the Company is comprised of several separate investment
portfolios, one of which is The Riverfront Income Equity Fund (the "Portfolio");
and
WHEREAS, the Adviser desires to avail itself of the services,
information, advice, assistance and facilities of an investment adviser
experienced in the management of a portfolio of income producing securities to
assist the Adviser in performing services for the Portfolio; and
WHEREAS, the Sub-Adviser represents that it has the legal power and
authority to perform the services contemplated hereunder without violation of
applicable law (including the Investment Advisers Act of 1940), and is engaged
in the business of rendering investment advisory services to investment
companies and desires to provide such services to the Company and the Adviser;
and
WHEREAS, the Sub-Adviser is familiar with the investment objectives,
policies and restrictions of the Portfolio and has reviewed the Investment
Advisory Agreement dated as of August 1, 1994, between the Adviser and the
Company (the "Adviser Agreement").
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Appointment of the Sub-Adviser. The Adviser hereby appoints the
Sub-Adviser to provide a continuous investment program for the Portfolio,
subject to such instructions and supervision as the Adviser may from time to
time furnish and further subject to the control and direction of the Company's
Board of Directors, for the period and on the terms hereinafter set forth. The
Sub-Adviser hereby accepts such appointment and agrees during such period to
render the services and to assume the obligations herein set forth for the
compensation herein provided. The Sub-Adviser will provide the services under
this Agreement in accordance with the Portfolio's investment objectives,
policies and restrictions as stated in the Portfolio's most recent Prospectus
and Statement of Additional Information and as the same may, from time to time,
be
<PAGE> 3
supplemented or amended and in resolutions of the Company's Board of Directors.
The Adviser agrees to furnish the Sub-Adviser from time to time copies of all
amendments of or supplements to such Prospectus and Statement of Additional
Information. The Sub- Adviser shall for all purpose herein be deemed to be an
independent contractor and shall, except as expressly provided or authorized
(whether herein or otherwise), have no authority to act for or represent the
Adviser, the Portfolio or the Company in any way.
2. Sub-Advisory Services. Subject to such instructions and
supervision as the Adviser may from time to time furnish, the continuous
investment program of the Portfolio provided by the Sub-Adviser shall include,
among other things, investment research and management with respect to all
securities, investments and cash equivalents in the Portfolio. The Sub-Adviser
will determine from time to time what securities and other investments will be
purchased, retained or sold by the Portfolio, the appropriate portion of the
Portfolio's assets to be invested in particular countries or geographic regions,
the use of foreign exchange contracts and other foreign currency matters, and
the manner in which voting rights, rights to consent to corporate action and
other rights pertaining to the Portfolio's investments should be exercised. The
Sub-Adviser will implement such determinations through the placement, in the
name of the Portfolio, of orders for the execution of portfolio transactions
with it through such brokers or dealers as it may select.
In fulfilling its responsibilities hereunder, the Sub-Adviser agrees
that it will:
(a) use the same skill and care in providing such services as it
uses in providing services to other fiduciary accounts for which
it has investment responsibilities;
(b) conform with all applicable Rules and Regulations of the United
States Securities and Exchange Commission ("SEC") and in
addition will conduct its activities under this Agreement in
accordance with any applicable regulations of any government
authority pertaining to the investment advisory activities of
the Sub-Adviser and shall furnish such written reports or other
documents substantiating such compliance as the Adviser
reasonably may from time to time request;
(c) not make loans to any person to purchase or carry shares of
capital stock in the Company or make loans to the Company;
(d) place orders pursuant to investment determinations for the
Portfolio either directly with the issuer or with an
underwriter, market maker or broker or dealer. In placing orders
with brokers and dealers, the Sub-Adviser
2
<PAGE> 4
will use its reasonable best efforts to obtain prompt execution
of orders in an effective manner at the most favorable price.
Consistent with this obligation, the Sub-Adviser may, to the
extent permitted by law, purchase and sell portfolio securities
to and from brokers and dealers who provide brokerage and
research services (within the meaning of Section 28(e) of the
Securities Exchange Act of 1934) to or for the benefit of the
Portfolio and/or other accounts over which the Sub- Adviser
exercises investment discretion. Subject to the review of the
Company's Board of Directors from time to time with respect to
the extent and continuation of the policy, the Sub-Adviser is
authorized to pay a broker or dealer who provides such brokerage
and research services a commission for effecting a securities
transaction for the Portfolio which is in excess of the amount
of commission another broker or dealer would have charged for
effecting that transaction if the Sub-Adviser determines in good
faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either that particular
transaction or the overall responsibilities of the Sub-Adviser
with respect to the accounts as to which it exercises investment
discretion. In no instance will portfolio securities be
purchased from or sold to the Company, The Winsbury Company, the
Adviser or Sub-Adviser or any affiliate of the foregoing except
as may be permitted by the 1940 Act;
(e) maintain all necessary or appropriate books and records with
respect to the Portfolio's securities transactions in accordance
with all applicable laws, rules and regulations, including but
not limited to Section 31(a) of the 1940 Act and will furnish
the Company's Board of Directors such periodic and special
reports as the Board reasonably may request;
(f) treat confidentially and as proprietary information of the
Adviser and the Company all records and other information
relative to the Adviser and the Company and prior, present, or
potential shareholders, and will not use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except that subject to
prompt notification to the Company and the Adviser, the
Sub-Adviser may divulge such information to duly constituted
authorities, or when so requested by the Adviser and the
Company, provided, however, that nothing contained herein shall
prohibit the Sub-Adviser from advertising or soliciting the
public generally with respect to other products or services,
regardless of whether such advertisement or solicitation
3
<PAGE> 5
may include prior, present or potential shareholders of the
Portfolio;
(g) maintain its policy and practice of conducting its fiduciary
functions independently. In making investment recommendations
for the Company, the Sub-Adviser's personnel will not inquire or
take into consideration whether the issuers of securities
proposed for purchase or sale for the Company's account are
customers of the Adviser, the Sub-Adviser or of their respective
parents, subsidiaries or affiliates. In dealing with such
customers, the Sub-Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Company; and
(h) render, upon request of the Adviser or the Company's Board of
Directors, written reports concerning the investment activities
of the Portfolio.
3. Expenses. During the term of this Agreement, the Sub- Adviser
will pay all expenses incurred by it in connection with its activities under
this Agreement other than the cost of securities (including brokerage
commissions, if any) purchased for the Portfolio.
4. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Sub-Adviser hereby agrees that all records, if
any, which it maintains for the Portfolio are the property of the Portfolio and
further agrees to surrender promptly to the Adviser or the Company any such
records upon the Adviser's or the Company's request and that such records shall
be available for inspection by the SEC. The Sub-Adviser further agrees to
preserve for the periods and at the places prescribed by Rule 31a-2 under the
1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.
5. Compensation of the Sub-Adviser. In consideration of services
rendered pursuant to this Agreement, the Adviser will pay the Sub-Adviser a fee
at the annual rate of the value of the Portfolio's average daily net assets set
forth in Schedule A hereto. Such fee shall be accrued daily and paid monthly as
soon as practicable after the end of each month. If the Sub-Adviser shall serve
for less than the whole of any month, the foregoing compensation shall be
prorated. For the purpose of determining fees payable to the Sub-Adviser, the
value of the Portfolio's net assets shall be computed at the times and in the
manner specified in the Company's Registration Statement. If the Adviser is
required to reduce its fee or to reimburse the Company because the expenses of
the Fund exceed applicable state securities regulations or are in excess of any
voluntary expense limitations set forth in the Company's current Registration
Statement, the Sub-Adviser's fee
4
<PAGE> 6
hereunder shall be reduced by an amount equal to such excess expense multiplied
by the ratio that the Sub-Adviser's fee hereunder bears to the sum of the fees
paid to the Adviser and to The Winsbury Company (under the Company's
Administration Agreement with The Winsbury Company) by the Company with respect
to the Portfolio. Notwithstanding anything contained herein to the contrary, the
Sub-Adviser shall not be compensated on the basis of a share of capital gains or
upon capital appreciation of the Portfolio or any portion thereof except as may
be authorized by applicable law.
6. Services Not Exclusive. The services of the Sub-Adviser
hereunder are not to be deemed exclusive, and the Sub-Adviser shall be free to
render similar services to others and to engage in other activities, so long as
the services rendered hereunder are not impaired. It is understood that the
action taken by the Sub- Adviser under this Agreement may differ from the advice
given or the timing or nature of action taken with respect to other clients of
the Sub-Adviser, and that a transaction in a specific security may not be
accomplished for all clients of the Sub-Adviser at the same time or at the same
price.
7. Use of Names. The Adviser shall not use the name of the
Sub-Adviser in any prospectus, sales literature or other material relating to
the Company in any manner not approved prior thereto by the Sub-Adviser;
provided, however, that the Sub-Adviser shall approve all uses of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the SEC or a state securities commission; and, provided further,
that in no event shall such approval be unreasonably withheld. The Sub- Adviser
shall not use the name of the Company or the Adviser in any material relating to
the Sub-Adviser in any manner not approved prior thereto by the Adviser;
provided, however, that the Adviser shall approve all uses of its or the
Company's name which merely refer in accurate terms to the appointment of the
Sub-Adviser hereunder or which are required by the SEC or a state securities
commission; and, provided further, that in no event shall such approval be
unreasonably withheld.
8. Liability of the Sub-Adviser. Absent willful misfeasance, bad
faith, gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Sub-Adviser, or loss resulting from breach of
fiduciary duty with respect to the receipt of compensation for services, the
Sub-Adviser shall not be liable for any act or omission in the course of, or
connected with, rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
9. Limitation of Company's Liability. The Sub-Adviser acknowledges
that it has received notice of and accepts the limitations upon the Company's
liability set forth in its Articles of Incorporation and under Maryland law. The
Sub-Adviser agrees
5
<PAGE> 7
that any of the Company's obligations shall be limited to the assets of the
Portfolio and that the Sub-Adviser shall not seek satisfaction of any such
obligation from the shareholders of the Company nor from any Director, officer,
employee or agent of the Company.
10. Duration, Renewal, Termination and Amendment. This Agreement
will become effective as of the date first written above, provided that it shall
have been approved by vote of a majority of the outstanding voting securities of
the Portfolio, in accordance with the requirements under the 1940 Act, and,
unless sooner terminated as provided herein, shall continue in effect until
December 31, 1996.
Thereafter, if not terminated, this Agreement shall continue in effect
with respect to the Portfolio for successive periods of one year each ending on
December 31 of each year, provided such continuance is specifically approved at
least annually (a) by the vote of a majority of those members of the Company's
Board of Directors who are not parties to this Agreement or interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, and (b) by the vote of a majority of the
Company's Board of Directors or by the vote of a majority of all votes
attributable to the outstanding Shares of the Portfolio. This Agreement may be
terminated as to the Portfolio at any time, without payment of any penalty, by
the Company's Board of Directors, by the Adviser, or by a vote of the majority
of the outstanding voting securities of the Portfolio upon, 60 days' prior
written notice to the Sub-Adviser, or by the Sub-Adviser upon 60 days' prior
written notice to the Adviser and the Company's Board of Directors, or upon such
shorter notice as may be mutually agreed upon. This Agreement shall terminate
automatically and immediately upon termination of the Adviser Agreement. This
Agreement shall terminate automatically and immediately in the event of its
assignment. No assignment of this Agreement shall be made by the Sub-Adviser
without the consent of the Adviser and the Board of Directors of the Company.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
This Agreement may be amended at any time by the Adviser and the Sub-Adviser,
subject to approval by the Company's Board of Directors and, if required by the
1040 Act and applicable SEC rules and regulations, a vote of a majority of the
Portfolio's outstanding voting securities.
11. Confidential Relationship. Any information and advice furnished
by either party to this Agreement to the other shall be treated as confidential
and shall not be disclosed to third parties except as required by law.
12. Severability. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or
6
<PAGE> 8
otherwise, the remainder of this Agreement shall not be affected thereby.
13. Miscellaneous. This Agreement constitutes the full and complete
agreement of the parties hereto with respect to the subject matter hereof. Each
party agrees to perform such further actions and execute such further documents
as are necessary to effectuate the purposes hereof. This Agreement shall be
construed and enforced in accordance with and governed by the laws of the State
of Ohio. The captions in this Agreement are included for convenience only and in
no way define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement may be executed in several counterparts,
all of which together shall for all purposes constitute one Agreement, binding
on all parties.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
THE PROVIDENT BANK
By /s/ Drew T. Kagan
--------------------------
Title Senior Vice President
------------------------
DePRINCE, RACE & ZOLLO, INC.
By /s/ Victor A. Zollo
---------------------------
Title President
------------------------
7
<PAGE> 9
Dated: August 15, 1995
SCHEDULE A
To the Sub-Investment Advisory Agreement
between The Provident Bank and
DePrince, Race & Zollo, Inc.
Name of Fund COMPENSATION DATE
- ------------ ------------ ----
The Riverfront Income Annual Rate of .50% of the August 15, 1995
Equity Fund average daily net assets of
such Portfolio up to $55
million and .55% of the
average daily net assets
of such Portfolio of $55
million and above.
THE PROVIDENT BANK
By /s/ Drew T. Kagan
------------------------------
Title Senior Vice President
----------------------------
DePRINCE, RACE & ZOLLO, INC.
By /s/ Victor A. Zollo
------------------------------
Title President
---------------------------
- --------------
All fees are computed daily and paid monthly.
8
<PAGE> 1
EXHIBIT (11)
<PAGE> 2
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors" in the Statement of Additional
Information, and to the use of Our report dated January 15, 1996, with respect
to the financial statements of The Riverfront Funds, Inc. included in
Post-Effective Amendment No. 16 to the Registration Statement (Form N-1A No.
33-34154).
ERNST & YOUNG LLP
Cincinnati, Ohio
April 26, 1996
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<PAGE> 1
EXHIBIT (19)(d)
<PAGE> 2
POWER OF ATTORNEY
Harvey M. Salkin, whose signature appears below, does hereby
constitute and appoint Stephen G. Mintos, Walter B. Grimm and William J. Tomko,
each individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable The Riverfront
Funds, Inc. (the "Fund"), to comply with the Investment Company Act of 1940, as
amended, and the Securities Act of 1933, as amended (the "Acts"), and any rules,
regulations or requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the Fund's
Registration Statement on Form N-1A pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as director
and/or officer of the Fund such Registration Statement and any and all such
amendments filed with the Securities and Exchange Commission under any Acts and
any other instruments or documents related thereto, and the undersigned does
hereby ratify and confirm all that said attorneys and agents, or any of them,
shall do or cause to be done by virtue thereof.
Dated: February 27, 1996 /s/ Harvey M. Salkin
--------------------
Harvey M. Salkin
<PAGE> 1
EXHIBIT (19)(E)
<PAGE> 2
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the references to our
firm under the caption "Legal Counsel" included in or made a part of the
Registration Statement on Form N-1A, File No. 33- 34154, filed under the
Securities Act of 1933, as amended, of The Riverfront Funds, Inc.
BAKER & HOSTETLER
Columbus, Ohio
April 24, 1996
C-24
