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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant[ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-
6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to section 240.14a-11(c) or section
240.14a-12
THE RIVERFRONT FUNDS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined);
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: _________________________________________
2) Form, Schedule or Registration Statement No.: ___________________
3) Filing Party: ___________________________________________________
4) Date Filed: _____________________________________________________
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PRELIMINARY COPY
THE RIVERFRONT FUNDS, INC.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of The Riverfront Income
Equity Fund, a series of The Riverfront Funds, Inc.:
Notice is hereby given that a Special Meeting Of Shareholders (the
"Meeting") of The Riverfront Income Equity Fund (the "Fund"), a series of The
Riverfront Funds, Inc. (the "Company"), will be held on Friday, December 20,
1996, at 10:00 A.M., Eastern Daylight Savings Time, at 3435 Stelzer Road,
Columbus, Ohio 43219 for the purpose of considering and acting on the following
matters:
1. To approve an amendment to the Investment Advisory Agreement
between The Provident Bank and the Company to permit The
Provident Bank to manage directly that portion of the Fund's
portfolio allocated to it by the Company's Board of Directors;
2. To approve an amendment to the Sub-Investment Advisory Agreement
between The Provident Bank and DePrince, Race & Zollo, Inc. to
clarify that DePrince, Race & Zollo, Inc. will manage directly
that portion of the Fund's portfolio allocated to it by the
Company's Board of Directors; and
3. To consider and act upon any matters incidental to the foregoing
and to transact such other business as may properly come before
the Meeting and any adjournment or adjournments thereof.
The close of business of November 1, 1996, has been fixed as the record
date for the determination of shareholders of the Fund entitled to notice of and
to vote at the Meeting.
All shareholders of the Fund are cordially invited to attend the
Meeting in person. If you are unable to do so, please complete the enclosed
proxy and return it in the enclosed envelope.
By Order of the Directors,
November 22, 1996 James E. White, Secretary
YOUR VOTE IS IMPORTANT
IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF A SECOND SOLICITATION, WE URGE YOU
TO COMPLETE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY. FOR YOUR CONVENIENCE,
THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE.
<PAGE> 3
PRELIMINARY COPY
THE RIVERFRONT FUNDS, INC.
3435 STELZER ROAD
COLUMBUS, OHIO 43219
PROXY STATEMENT
FOR A SPECIAL MEETING OF SHAREHOLDERS
OF THE RIVERFRONT INCOME EQUITY FUND
GENERAL
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Directors of The Riverfront Funds, Inc., a Maryland
corporation (the "Company"), to be used in connection with a Special Meeting of
Shareholders (the "Meeting") of The Riverfront Income Equity Fund (the "Fund"),
a series of the Company, to be held on Friday, December 20, 1996.
The Directors have fixed the close of business of November 1, 1996, as
the record date (the "Record Date") for the determination of shareholders of the
Fund entitled to notice of and to vote at the Meeting. Investor A and Investor B
shareholders of record of the Fund are entitled to one vote for each share and a
proportionate fractional vote for any fraction of a share as to each issue on
which such shareholders are entitled to vote. As of the Record Date, the total
number of Investor A shares of capital stock, $.001 par value, of the Fund
entitled to vote at the Meeting is 5,340,551.758, and the total number of
Investor B shares of capital stock, $.001 par value, of the Fund entitled to
vote at the Meeting is 513,630.000 (the Investor A Shares and the Investor B
Shares hereinafter are collectively referred to as the "Shares").
Only shareholders of record of the Fund at the close of business on the
Record Date will be entitled to notice of and to vote at the Meeting. Shares
represented by management proxies, unless previously revoked, will be voted at
the Meeting in accordance with the instructions of the shareholders. If no
instructions are given, the proxies will be voted in favor of the proposals. To
revoke a management proxy, the shareholder giving such proxy must either submit
to the Company a subsequently dated proxy, deliver to the Company a written
notice of revocation or otherwise give notice of revocation in open Meeting, in
all cases prior to the exercise of the authority granted in the management
proxy.
The mailing address of the principal executive offices of the Company
is: 3435 Stelzer Road, Columbus, Ohio 43219. The approximate date on which this
Proxy Statement and form of proxy are first sent to shareholders is on or about
November 22, 1996.
In the event that sufficient votes are not received by the date of the
Meeting, a person named as proxy may propose one or more adjournments of the
Meeting for a reasonable period or periods to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of the holders
of a majority of the Fund's Shares present at the Meeting in person or by proxy.
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of the proposals and will vote
against any such adjournment those proxies required to be voted against the
proposals.
Management knows of no business which will be presented for
consideration other than that set forth in Proposals 1 and 2 of the Notice of
Special Meeting of shareholders. If any other matters are properly presented,
it is the intention of the persons named as proxy to vote the proxies in
accordance with their judgment on such matters.
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THE COMPANY WILL FURNISH, WITHOUT CHARGE, A COPY OF THE COMPANY'S MOST
RECENT ANNUAL REPORT TO SHAREHOLDERS AND SEMI-ANNUAL REPORT TO SHAREHOLDERS
SUCCEEDING SUCH ANNUAL REPORT, UPON REQUEST, WHICH REQUEST MAY BE MADE EITHER BY
WRITING TO THE COMPANY AT THE ADDRESS ABOVE OR BY CALLING TOLL-FREE (800)
424-2295. THE ANNUAL REPORT AND THE SEMI-ANNUAL REPORT WILL BE MAILED TO YOU BY
FIRST-CLASS MAIL WITHIN THREE BUSINESS DAYS OF RECEIPT OF YOUR REQUEST.
INVESTMENT ADVISORY AND SUB-INVESTMENT ADVISORY AGREEMENTS
CURRENT AGREEMENTS
The Provident Bank, an Ohio banking corporation ("Provident"), One East
Fourth Street, Cincinnati, Ohio 45202, serves as the investment adviser to the
Fund pursuant to an Investment Advisory Agreement dated as of August 1, 1994, as
amended as of August 15, 1995 (the "Investment Advisory Agreement"). Pursuant to
the terms of the Investment Advisory Agreement, Provident is responsible for
managing, or providing for the management of, the investment and reinvestment of
the Fund's assets in conformity with the Fund's investment objectives,
fundamental policies and restrictions as set forth in the Fund's most recent
Prospectus and Statement of Additional Information. The Investment Advisory
Agreement as presently in effect with respect to the Fund was initially approved
by the Company's Board of Directors on June 26, 1995, and was again reviewed and
approved by the Board of Directors on November 17, 1995, and was most recently
approved, including the proposed amendment described below, by the Board on
October 21, 1996 and November 15, 1996. The Investment Advisory Agreement was
last submitted to the shareholders of the Fund for their approval on July 31,
1995, for the purposes described below.
The Investment Advisory Agreement as presently in effect was amended as
of August 15, 1995 as a result the departure of Mr. Gregory M. DePrince, the
portfolio manager of the Fund, from SunBank Capital N.A., the previous
sub-adviser to the Fund ("SunBank"). In order to retain the services of Mr.
DePrince and his firm, DePrince, Race and Zollo, Inc. ("DRZ"), to continue the
day-to-day management of the Fund and its investment portfolio, the investment
advisory fee payable to Provident was increased as described below.
Shareholders on July 31, 1995 also approved the Sub-Investment Advisory
Agreement between Provident and DRZ (the "Sub-Advisory Agreement") which took
effect as of August 15, 1995, and increased the annual sub-advisory fee paid by
Provident to the Fund's sub-investment adviser from 0.35% to 0.50% of the
Fund's average daily net assets up to $55 million and 0.55% of the Fund's
average daily net assets of $55 million and above. In addition, the Investment
Advisory Agreement was amended to increase the total investment advisory fee
paid by the Fund to Provident with respect to its investment advisory services
to the Fund from 0.75% to 0.95%. DRZ agreed to waive five basis points of its
fee received from Provident and
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to take 0.45% on average daily net assets up to $55 million and 0.50% on average
daily net assets of $55 million and above until January 1, 1997; during the
period of such waiver Provident agreed to waive five basis points of its fee
from the Fund; therefore, until January 1, 1997, the total investment advisory
fee paid by the Fund to Provident is 0.90% under the Investment Advisory
Agreement and the sub-investment advisory fee paid by Provident to DRZ is 0.45%
on average daily net assets up to $55 million and 0.50% on average daily net
assets of $55 million and above under the Sub-Advisory Agreement. The investment
advisory and sub- investment advisory fees are computed daily and paid monthly
based on their respective annual rates.
The Sub-Advisory Agreement as presently in effect was initially
approved by the Company's Board of Directors on June 26, 1995, was again
reviewed and approved by the Board of Directors on November 17, 1995, and was
most recently approved, including the proposed amendment described below, by the
Board on October 21, 1996 and November 15, 1996.
Neither the Investment Advisory Agreement nor the Sub-Advisory
Agreement has since been submitted to shareholders of the Fund for their
approval.
For the fiscal year ended December 31, 1995, the Company, on behalf of
the Fund, incurred $407,229 in investment advisory fees, of which $204,503
(total fees of $216,019 less voluntary fee reduction of $11,516) was retained by
Provident. The remainder of such fee was paid by Provident to SunBank and DRZ,
as sub-investment advisers. For the period from August 15, 1995 through December
31, 1995, Provident paid to DRZ $77,303 (total fees of $88,819 less voluntary
fee reduction of $11,516) pursuant to the Sub-Advisory Agreement.
In addition to serving as investment adviser, Provident has entered
into an Amended and Restated Custodian, Fund Accounting and Recordkeeping
Agreement with the Company dated August 1, 1994, as amended as of July 6, 1995
(the "Custodian Agreement"), to provide custody and certain fund accounting
services to each of the Company's portfolios, including the Fund. Under the
Custodian Agreement, Provident receives an annual fee from the Fund, computed
daily and paid monthly, at an annual rate of 0.15% of the average daily net
assets of the Fund. Provident as custodian is responsible for safeguarding all
securities and cash of the Fund. For the year ended December 31, 1995, the Fund
paid Provident $72,596 for such custody and fund accounting services.
Provident also provides or arranges for the provision of transfer
agency services for the Fund. Under the Master Transfer and Recordkeeping
Agreement with the Company dated February 24, 1992, as amended as of July 6,
1995, Provident receives from the Fund for transfer agency services a fee equal
to the sum of (i) a fee calculated at the annual rate of 0.04% of the average
daily net asset value of the Fund's Investor A shares and (ii) $20,000 as an
annual fee plus $25 per shareholder account and certain other fees and
out-of-pocket expenses attributable to its Investor B shares. Pursuant to a
Sub-Transfer Agency Agreement dated as of
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January 1, 1995, between Provident and BISYS Fund Services Ohio, Inc. ("BISYS"),
an affiliate of BISYS Fund Services Limited Partnership, the Fund's distributor
and administrator, BISYS provides sub-transfer agency services for the Investor
B shares of the Fund. 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. For the year ended December 31, 1995, the
Fund incurred $42,860 for Provident's services as transfer agent, of which
Provident paid $10,966 to BISYS pursuant to the Sub-Transfer Agency Agreement.
It is anticipated that these services, except the sub-transfer agency
services of BISYS, will continue to be provided whether or not the amendments to
the Investment Advisory Agreement and the Sub-Advisory Agreement are approved by
shareholders of the Fund. It is anticipated that as of January 1, 1997, the
Sub-Transfer Agency Agreement will be terminated, that Provident will provide
all transfer agency services for the Investor B shares of the Fund as well as
for the Investor A Shares and that the fees charged in connection with such
services will be modified and increased.
The Sub-Advisory Agreement by its terms continues in effect until
December 31, 1997, and thereafter for successive one-year periods ending
December 31st of each year. The Investment Advisory Agreement remains in effect
for successive one-year terms ending December 31st. HOWEVER, in order for each
such Agreement to continue in effect, (1) such continuance must be specifically
approved at least annually by the Company's Board of Directors or by a vote of a
majority of the outstanding voting securities of the Fund, and (2) such renewal
has been approved by the vote of a majority of Directors of the Company who are
not "interested persons," as that term is defined by the 1940 Act, of any party
to the Sub-Advisory Agreement or the Investment Advisory Agreement, as the case
may be, cast in person at a meeting called for the purpose of voting on such
approval. Any liability of Provident or DRZ under their respective Agreements is
limited to situations involving its willful misfeasance, bad faith, gross
negligence or reckless disregard of its obligations and duties under such
Agreement. Neither the Investment Advisory Agreement nor the Sub-Advisory
Agreement is assignable and each may be terminated without penalty on 60 days'
written notice at the option of either party or by a vote of the shareholders of
the Fund.
INFORMATION REGARDING PROVIDENT AND DRZ
Provident is a wholly owned subsidiary of Provident Bancorp, Inc.
("PBI"), a publicly held bank holding company located in Cincinnati, Ohio with
approximately $6.2 billion in consolidated assets as of December 31, 1995. PBI's
address is One East Fourth Street, Cincinnati, Ohio 45202. The following are the
persons known to the Company who own beneficially more than 5% of the
outstanding voting shares of PBI: Carl E. Lindner - 5.0%; Robert D. Lindner -
6.2; S. Craig Lindner - 5.4%; Keith E. Lindner - 5.3%; Carl H. Lindner, III
- - 5.2%; American Finanical Group, Inc., which may be deemed to be controlled by
the foregoing persons - 16.4%; and Lou Ann Flint - 8.4%. The business address
for such persons, other than Robert D. Lindner and Lou Ann Flint, is One East
Fourth Street, Cincinnati, Ohio 45202. The address for Robert D. Lindner is 3955
Montgomery Road, Cincinnati, Ohio 45212, and for Ms. Flint, 49 East Fourth
Street, Cincinnati, Ohio 45202. Such persons may be considered controlling
persons of PBI and therefore of Provident. Through offices in Ohio and Kentucky,
PBI and its subsidiaries provide a broad range of financial services to
individuals and businesses.
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In September, 1995, the Company, pursuant to an Agreement and Plan of
Reorganization and Liquidation, acquired all of the assets and liabilities of
the six separate funds (the "Acquired Funds") of MIM Mutual Funds, Inc. ("MIM")
(the "Reorganization"). The Reorganization was contingent upon the acquisition
of Mathematical Investing Management, Inc. ("Management"), by a subsidiary of
PBI (the "MIS Acquisition"). Management was the parent corporation of
Mathematical Investing Systems, Inc., the former investment adviser of the
Acquired Funds. In connection with the MIS Acquisition, Harvey M. Salkin, a
major shareholder and officer of Management and former director of MIM, received
shares of voting stock of PBI. Dr. Salkin has since become a director of the
Company and is considered to be an "interested person" of the Company, as that
term is defined in the 1940 Act, because of his ownership of shares in PBI. Dr.
Salkin owns less than 1% of the outstanding voting securities of PBI.
The name, address and principal occupation of the principal executive
officer and each director of Provident are as follows:
<TABLE>
<CAPTION>
Position with Principal Occupation
Name Provident and Business Address(1)
- ---- --------- -----------------------
<S> <C> <C>
Allen L. Davis Director, President President and Chief Executive
and Chief Executive Officer of Provident.
Officer
Jack M. Cook Director President and Chief Executive
Officer, Christ Hospital, 2139
Auburn, Cincinnati, Ohio 45219.
Thomas D. Grote, Jr. Director President of Thomas J. Dyer
Company, 200 Mechanical
Enterprise Building, 5240 Lester
Road, Cincinnati, Ohio 45213-
2586.
Philip R. Myer Director and Senior Vice Senior Executive Vice President
President of Provident.
</TABLE>
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<TABLE>
<S> <C> <C>
Joseph A. Pedoto Director President, JLM Financial, Inc.
(financial consulting firm), 49
East Fourth Street, Suite 521,
Cincinnati, Ohio 45202.
Sidney A. Peerless, M.D. Director Physician, ENT Associates of
Cincinnati, 3131 Harvey
Avenue, Suite 201, Cincinnati,
Ohio 45229.
Joseph A. Steger, Ph.D. Directo President, University of
Cincinnati, Administrative
Building, Room 206, Cincinnati,
Ohio 45221-0063.
<FN>
- -------------------------
(1) Unless otherwise noted, the business address for each Director is One East
Fourth Street, Cincinnati, Ohio 45202
</TABLE>
In April, 1995, Mr. DePrince left SunBank with two other officers and
directors of SunBank, John D. Race and Victor A. Zollo, Jr., to start DRZ, a
Florida corporation, as their own investment advisory firm, which has registered
as an investment adviser. The principal executive officer and directors of DRZ
are as follows: Gregory M. DePrince, Executive Vice President and Director; John
D. Race, Executive Vice President and Director; and Victor A. Zollo, Jr.,
President and Director. The address for DRZ and the principal business address
for each of Messrs. DePrince, Race and Zollo is 201 South Orange Avenue, Suite
850, Orlando, Florida 32801. Messrs. DePrince, Race and Zollo each own one-third
of the outstanding stock of DRZ.
DRZ also currently serves as a sub-investment adviser to The Harbor Value
Fund, a series of an open-end management investment company with investment
objectives similar to those of the Fund. DRZ is responsible for managing 75% of
the value of The Harbor Value Fund. For such services, DRZ receives an annual
fee of 0.65% of the first $10 million of The Harbor Value Fund's average net
assets DRZ manages, 0.40% of the next $40 million of such average net assets,
0.30% of the next $50 million of such average net assets and 0.25% of such
average net assets in excess of $100 million, with a minimum annual fee of
$40,000.
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PORTFOLIO TRANSACTIONS
Under the Investment Advisory Agreement and the Sub-Advisory Agreement,
each of Provident and DRZ (collectively the "Advisers"), under policies
established by the Board of Directors, select broker-dealers to execute
transactions for the Fund. 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 the
Fund, 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, an Adviser 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 Adviser, to the Fund or to any other account over
which the Adviser exercises investment discretion. Each Adviser is authorized to
pay a broker-dealer who provides such brokerage and research services a
commission for executing the Fund'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 the Fund or to an Adviser is considered to be in addition
to and not in lieu of services required to be performed by the Adviser under its
respective Agreement with respect to the Fund. The cost, value and specific
application of such information are indeterminable and hence are not practicably
allocable among the Fund and other clients of the Advisers who may indirectly
benefit from the availability of such information. Similarly, the Fund may
indirectly benefit from information made available as a result of transactions
effected for such other clients. Under the Investment Advisory and the
Sub-Advisory Agreements, each Adviser is 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 the Fund.
Provident and DRZ direct from time to time some brokerage transactions
to Provident Securities Investor, Inc., an affiliate of Provident, in
accordance with the provisions of section 17(e) of the 1940 Act. For the fiscal
year ended December 31, 1995, the total amount of brokerage transactions
directed and commissions paid to Provident Securities Investors, Inc. under
such arrangements were $29,487,974 and $67,723, respectively. Such commissions
were 25% of the total commissions paid by the Fund.
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REASONS FOR THE PROPOSED CHANGES
Since the Fund's inception to April 1995, and from August 15, 1995 to
the present, Gregory M. DePrince has been primarily responsible for the
day-to-day management of the Fund's portfolio. At the time the Company and
Provident negotiated the Sub-Advisory Agreement, DRZ indicated a willingness to
manage net assets of the Fund up to $75 million (exclusive of capital
appreciation), but not beyond. The Company's Board of Directors at that time
determined that in the event the assets of the Fund approached $75 million
(exclusive of capital appreciation), it would be required to determine what
action, including the hiring of an additional sub-investment adviser, would be
necessary and appropriate under the circumstances. As of September 30, 1996, the
Fund's net assets were $76,225,745.
Provident and the Company's Board, upon review of the portfolio
management of the Fund in light of the current level of the Fund's assets have
determined that it is in the best interests of Fund and its shareholders to
continue to retain the services of Mr. DePrince and DRZ to provide the
day-to-day management of some portion of the portfolio of the Fund, taking into
account DRZ's stated limitation on the amount of the Fund's assets it will
manage, and to permit Provident to be responsible for the day-to-day management
of the Fund's portfolio not otherwise managed by DRZ.
The Board of Directors in making its determination to approve the
amendments to the Investment Advisory Agreement and Sub-Advisory Agreement
considered, as more fully described below, the past performance of the Fund, the
level and quality of services provided by Provident and by DRZ, comparative
expense and performance information, the current investment advisory fees paid
by bank-advised funds similar in investment objective to the Fund, and the need
to provide the Fund with stable investment advisory services. In making such
determinations, the Board of Directors determined that such amendments to the
Investment Advisory Agreement and the Sub-Advisory Agreement are in the best
interests of the Fund and its shareholders.
PROPOSALS 1 AND 2 - AMENDMENTS TO THE INVESTMENT ADVISORY AGREEMENT
AND SUB-ADVISORY AGREEMENT
A copy of the Investment Advisory Agreement as proposed to be amended
is attached hereto as Exhibit A, and a copy of the Sub-Advisory Agreement as
proposed to be amended is attached hereto as Exhibit B. The proposed additions
are underlined twice and the deletions have lines through the language to be
deleted. The proposed amendments to the Investment Advisory Agreement with
respect to the Fund and the Sub-Advisory Agreement were approved unanimously by
the Company's Board of Directors, including a majority of the Directors who are
not parties to such Agreements or interested persons of any such party, at the
meeting held on October 21, 1996 and November 15, 1996, and are being submitted
to the shareholders of the Fund for approval at the Meeting.
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<PAGE> 11
The only proposed change to the terms of the Investment Advisory
Agreement is to clarify that Provident will be directly responsible for managing
that portion of the Fund's assets allocated to it from time to time by the
Company's Board of Directors. The only proposed changes to the terms of the
Sub-Advisory Agreement are to clarify that (1) DRZ will be responsible for
managing that portion of the Fund's portfolio allocated to it from time to time
by the Company's Board of Directors rather than being responsible for managing
all of the Fund's portfolio and (2) its compensation will be calculated based
upon the portion of the Fund's portfolio actually managed by it. Therefore, the
Board of Directors of the Company will have complete authority to allocate the
Fund's portfolio for management purposes between Provident and DRZ. Provident's
and DRZ's other obligations and liabilities under the Investment Advisory
Agreement or Sub-Advisory Agreement, as the case may be, would be unchanged.
Because of DRZ's stated desire to manage a limited amount of the Fund's
portfolio and of the difficulty in managing a small asset base, the Board of
Directors of the Company has determined initially that DRZ will manage
approximately $70 million of the Fund's portfolio (including any subsequent
income or capital appreciation thereon) and Provident the balance, currently
approximately $6.6 million. Currently it is contemplated that new monies coming
into the Fund will be managed by Provident and redemptions will be allocated to
DRZ's portion of the portfolio. However, based on Provident's experience and
performance, market factors and DRZ's future performance, the Board of Directors
could allocate less to DRZ and more to Provident. The Sub-Advisory Agreement
also does not limit the ultimate amount of the Fund's portfolio which DRZ may
manage. While it is currently anticipated that DRZ will manage no more than $75
million of the Fund's portfolio, DRZ may choose in the future to manage more or
less assets depending upon its own business objectives. The Board will consider
DRZ's objectives in allocating the Fund's portfolio between Provident and DRZ.
As described above, Provident is entitled to receive a fee for its
services under the Investment Advisory Agreement calculated at the annual rate
of 0.95% of the Fund's average daily net assets. The proposed amendments to the
Investment Advisory Agreement would not change the fees authorized to be
collected by Provident; HOWEVER, Provident has agreed that at least for the
fiscal year ending December 31, 1997, it would voluntarily reduce the amount of
its investment advisory fee on that portion of the assets of the Fund it would
directly manage to 0.75%.
The Board of Directors, in approving the amendments to the Investment
Advisory Agreement and the Sub-Advisory Agreement, considered written material
and information presented at their October 21st and November 15th board
meetings. Specifically, the Directors considered the following factors, among
others: (1) the nature, scope and quality of the services provided and to be
provided by Provident and DRZ, (2) the costs incurred and revenues generated by
Provident and DRZ in rendering such services, (3) Provident's net pre-tax
profits from its mutual fund activities, (4) the compensation paid to investment
advisers of mutual funds with similar investment objectives and policies and
asset sizes, (5) the quality of personnel at Provident and DRZ, and (6)
comparative expense and performance information.
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<PAGE> 12
In reaching its conclusion to approve the proposed amendments of the
Investment Advisory Agreement and the Sub-Advisory Agreement, the Board
recognized that the quality of services available to the Fund from Provident and
the continued retention of DRZ are in the best interests of the Fund's
shareholders.
Approval of the amendments to the Investment Advisory Agreement and the
Sub-Advisory Agreement with respect to the Fund requires the affirmative vote
of a majority of all votes attributable to the outstanding Shares of the Fund,
defined as the lesser of (a) 67% or more of the outstanding votes of the Fund
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 the Fund. If the
amendments to BOTH the Investment Advisory Agreement and Sub-Advisory Agreement
are not approved, the Directors will be required to consider other alternatives,
including retaining in place the current Investment Advisory Agreement and/or
retaining another sub- investment adviser.
THE DIRECTORS RECOMMEND THAT YOU VOTE "FOR" PROPOSALS 1 AND 2.
FURTHER INFORMATION REGARDING THE COMPANY
DISTRIBUTOR AND ADMINISTRATOR
BISYS Fund Services Limited Partnership ("BISYS L.P.") serves as the
principal underwriter of Shares of the Fund pursuant to a Distribution Agreement
with the Company. In its capacity as principal underwriter, BISYS L.P. is
available to receive purchase orders and redemption requests relating to Shares
of the Fund. BISYS L.P. also serves as administrator of the Fund pursuant to an
Administration Agreement with the Company. BISYS L.P.'s address is 3435 Stelzer
Road, Columbus, Ohio 43219.
The sole general partner of BISYS L.P. is BISYS Fund Services, Inc.,
whose address is 3435 Stelzer Road, Columbus, Ohio 43219, and its sole limited
partner is WC Subsidiary Corporation, whose address is 150 Clove Road, Little
Falls, New Jersey 07424. BISYS Fund Services, Inc. and WC Subsidiary
Corporation are both wholly owned by The BISYS Group, Inc., 150 Clove Road,
Little Falls, New Jersey 07424, a publicly held corporation.
BISYS L.P. receives no compensation under its Distribution Agreement
with the Company, but may retain some or all of any sales charge imposed upon
the sale of Shares and may receive compensation under the Investor A and
Investor B Distribution and Shareholder Service Plans adopted by each Fund
(collectively, the "Plans"). Pursuant to the Plans, the Fund may bear some of
the costs of selling its Shares under a Plan adopted pursuant to rule 12b-1
under the 1940 Act. Under the Plans, the Fund is authorized to pay BISYS L.P.
for payments it makes to banks, including the Adviser, other institutions and
broker-dealers, and for expenses BISYS and any of its affiliates or
subsidiaries incur for providing distribution or shareholder service
assistance. Payments to such institutions may be made pursuant to agreements
entered into with BISYS L.P. As authorized by the Plans, BISYS L.P. has entered
into a Dealer Agreement with Provident Securities & Investment Company, an
affiliate of Provident ("PSI"), to provide certain distribution and shareholder
services in connection with the distribution of the Shares of the Fund. In
consideration of such services BISYS L.P. has agreed to pay PSI a monthly fee,
computed at the annual rate of (i) .25% of the average aggregate net asset
value of Investor A shares and (ii) .75% of the average aggregate net asset
value of Investor B shares, held during the period in accounts for which PSI
provided services under such Dealer Agreement. BISYS L.P. is compensated by the
Fund in an amount equal to its payments to PSI under the Dealer Agreement. For
the fiscal year ended December 31, 1995, PSI received from BISYS L.P., with
respect to Investor A shares of the Fund, $_________, and, with respect to
the Fund's Investor B shares, $_________, pursuant to the terms of the Dealer
Agreement.
PRINCIPAL HOLDERS OF VOTING SECURITIES
The following table sets forth certain information as of November 1,
1996, for The Riverfront U.S. Government Securities Money Market Fund (the
"Money Market Fund"), The Riverfront U.S. Government Income Fund (the "U.S.
Government Income Fund"), the Fund, The Riverfront Ohio Tax-Free Bond Fund (the
"Tax-Free Bond Fund"), The Riverfront Stock Appreciation Fund (the "Stock
Appreciation Fund") and The Riverfront Flexible Growth Fund (the "Flexible
Growth Fund"), each a separate portfolio of the Company, with respect to each
person or group known by the Company to be the beneficial owner of more than 5%
of any class of the Company's outstanding voting securities:
11
<PAGE> 13
<TABLE>
<Cation>
AMOUNT AND
----------
NAME AND ADDRESS OF NATURE OF THE PERCENT
------------------- ------------- -------
TITLE OF CLASS BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- -------------- ---------------- -------------------- --------
<S> <C> <C> <C>
Investor A Shares of The Provident Bank 123,139,921 68.14%
the Money Market One East Fourth St.
Fund Cincinnati, OH 45202
BHC Securities, Inc. 43,856,634.670(2) 24.27%
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
Investor A Shares of The Provident Bank 2,515,059.548 69.85%
the U.S. Government One East Fourth St.
Income Fund Cincinnati, OH 45202
The Provident Bank Trust 508,983.029 14.14%
Department Employee
Benefit Plan
3 East Fourth St.
Cincinnati, OH 45207
The Provident Bank Trust 268,456,484(1) 7.46%
Department
3 East Fourth Street
Cincinnati, OH 45202
Investor B Shares of The Fifth Third Bank 23,513 19.78%
the U.S. Government FBO Cincinnati
Income Fund Institute of Fine Arts
P.O. Box 63074
Cincinnati, OH 45263
Investor A Shares of The Chase Manhattan Bank 2,202,847.654 41.25%
the Fund as Trustee for The General
Cable Corporation
4 Tesseneer Drive
Highland Heights, KY
41076
</TABLE>
12
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
The Provident Bank Trust 412,459.981 7.72%
Department Employee
Benefit Plan
3 East Fourth St.
Cincinnati, OH 45207
BHC Securities, Inc. 1,343,062.840(2) 25.15%
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
Investor A Shares of Provident Bancorp 1,000,000 97.33%
the Tax-Free Bond One East Fourth St.
Fund Cincinnati, OH 45202
Investor B Shares of BHC Securities, Inc. 55,274(1) 73.88%
the Tax-Free Bond One Commerce Square
Fund 2005 Market Street
Suite 1200
Philadelphia, PA 19103
Investor B Shares of BHC Securities, Inc. 17,794(2) 26.88%
the Stock One Commerce Square
Appreciation Fund 2005 Market Street
Suite 1200
Philadelphia, PA 19103
Investor A Shares of Provident Bank TTEE 92,997.076 8.36%
the Flexible Growth FBO Provident Bancorp
Fund 401K Equity
3 East Fourth Street
Cincinnati, OH 45202
The Provident Bank Trust 162,273.774 14.72%
Department Employee
Benefit Plan
</TABLE>
13
<PAGE> 15
<TABLE>
<S> <C> <C> <C>
3 East Fourth St.
Cincinnati, OH 45207
The Provident Bank Trust 65,033.634 5.90%
FBO Trustmark 401(k)
P.O. Box 691198
Cincinnati, OH 45269-1198
James Investment Research, 80,565.869 7.31%
Inc. Pension and Profit
Sharing Plan
P.O. Box 8
Alpha, Ohio 45301
BHC Securities, Inc. 487,621.369 (2) 44.22%
One Commerce Square
2005 Market Street
Suite 1200
Philadelphia, PA 19103
<FN>
(1) The designated beneficial owner possesses on behalf of its underlying
accounts voting or investment power with respect to these shares.
(2) BHC Securities, Inc. holds these securities as record owner for
various underlying beneficial owners.
</TABLE>
As of November 1, 1996, the Directors and officers of the Company as a
group owned beneficially fewer than 1% of the outstanding Shares of the Company
or of any of its portfolios.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at any future Meeting
of Shareholders must be received by the Company at its principal office a
reasonable time before the Company's solicitation of proxies for such meeting in
order for such proposal to be considered for inclusion in the Company's Proxy
Statement and form or forms of Proxy relating to such meeting.
ADDITIONAL INFORMATION
With respect to the actions to be taken by the shareholders of the
Company on the matters described in this Proxy Statement, (i) the presence in
person or by proxy of shareholders entitled to cast one-third of the shares of
capital stock of the Company entitled to be cast at the Meeting shall constitute
a quorum for purposes of voting upon such matters at the Meeting, provided that
no action required by law or the Company's Articles of Incorporation to be taken
by the holders of a designated proportion of Shares may be authorized or taken
by a lesser proportion; and (ii) abstentions and broker non-votes, as described
below, shall be treated as votes present for purposes of determining whether a
quorum exists, and for purposes of determining whether an issue has been
approved, abstentions and broker non-votes are treated
14
<PAGE> 16
as against votes. As used above, broker non-votes are Shares for which a broker
holding such Shares for a beneficial owner has not received instructions from
the beneficial owner and may not exercise discretionary voting power with
respect thereto, although such broker may have been able to vote such Shares on
other matters at the Meeting for which it has discretionary authority or
instructions from the beneficial owner. The Fund will bear all costs in
connection with the solicitation of proxies from shareholders of the Fund.
By Order of the Directors
November 22, 1996 James E. White, Secretary
15
<PAGE> 17
EXHIBIT A
INVESTMENT ADVISORY AGREEMENT
This Agreement is made as of the 1st day of August, 1994, AND AMENDED
AS OF JANUARY 1, 1997, 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;
A-1
<PAGE> 18
(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] EXCEPT AS SPECIFICALLY PROVIDED IN THE
FOLLOWING PARAGRAPH, 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.
WITH RESPECT TO THE RIVERFRONT INCOME EQUITY FUND, THE INVESTMENT
ADVISER SHALL DIRECTLY PROVIDE AND MAKE THE DETERMINATIONS SET FORTH IN THE
IMMEDIATELY PRECEDING PARAGRAPH WITH RESPECT TO THAT PORTION OF SUCH FUND'S
PORTFOLIO AS THE COMPANY'S BOARD OF DIRECTORS DETERMINES TO ALLOCATE TO THE
INVESTMENT ADVISER FROM TIME TO TIME. THE BOARD OF DIRECTORS MAY, FROM TIME TO
TIME, MAKE ADDITIONS TO AND WITHDRAWALS FROM THE ASSETS OF THE RIVERFRONT INCOME
EQUITY FUND ALLOCATED TO THE INVESTMENT ADVISER.
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;
A-2
<PAGE> 19
(c) assist and consult with the Sub-Advisers in connection with the
Portfolios' continuous investment programs; and
(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
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
A-3
<PAGE> 20
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.
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
A-4
<PAGE> 21
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 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
A-5
<PAGE> 22
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 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
A-6
<PAGE> 23
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 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 ______________________
Title ___________________
THE PROVIDENT BANK
By ______________________
Title ___________________
A-7
<PAGE> 24
Dated: January 1, 1997
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 [Flexible Annual rate of 0.90% of August 1, 1994
Growth] BALANCED the average daily net
Fund 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
THE RIVERFRONT LARGE ANNUAL RATE OF 0.80% OF JANUARY 1, 1997
COMPANY SELECT FUND THE AVERAGE DAILY NET
ASSETS OF SUCH PORTFOLIO
</TABLE>
THE PROVIDENT BANK THE RIVERFRONT FUNDS, INC.
By By
--------------------- -----------------------
Title Title
------------------ --------------------
- ------------------
All fees are computed daily and paid monthly.
A-8
<PAGE> 25
EXHIBIT B
SUB-INVESTMENT ADVISORY AGREEMENT
---------------------------------
This Sub-Investment Advisory Agreement is made as of the 15th day of
August, 1995, AND AMENDED AS OF JANUARY 1, 1997, 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 THAT PORTION OF the
Portfolio ALLOCATED TO IT FROM TIME TO TIME BY THE COMPANY'S BOARD OF DIRECTORS
(THE "DRZ 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 BOARD OF DIRECTORS MAY, FROM TIME TO TIME, MAKE
ADDITIONS TO AND WITHDRAWALS FROM THE ASSETS OF THE DRZ PORTFOLIO ALLOCATED TO
THE SUB-ADVISER. 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
B-1
<PAGE> 26
Prospectus and Statement of Additional Information and as the same may, from
time to time, be 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 DRZ 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 DRZ Portfolio. The Sub-Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by the DRZ Portfolio, the appropriate portion of the
DRZ 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 DRZ 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 DRZ
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 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
B-2
<PAGE> 27
services (within the meaning of Section 28(e) of the Securities
Exchange Act of 1934) to or for the benefit of the DRZ 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 DRZ 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] BISYS FUND SERVICES
LIMITED PARTNERSHIP, 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 DRZ 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
B-3
<PAGE> 28
(h) render, upon request of the Adviser or the Company's Board of
Directors, written reports concerning the investment activities
of the DRZ 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 DRZ 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 DRZ 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 DRZ 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] BISYS FUND SERVICES LIMITED PARTNERSHIP (under the Company's
Administration Agreement with [The Winsbury Company] BISYS FUND SERVICES LIMITED
PARTNERSHIP) 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
B-4
<PAGE> 29
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 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
B-5
<PAGE> 30
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
1940 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 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
------------------------------
Title Senior Vice President
---------------------------
DePRINCE, RACE & ZOLLO, INC.
By
------------------------------
Title President
---------------------------
B-6
<PAGE> 31
Dated: [August 15, 1995] JANUARY 1, 1997
SCHEDULE A
To the Sub-Investment Advisory Agreement
between The Provident Bank and
DePrince, Race & Zollo, Inc.
<TABLE>
<CAPTION>
Name of Fund COMPENSATION DATE
- ------------ ------------ ----
<S> <C> <C>
The Riverfront Income Annual Rate of .50% of the [August 15, 1995]
Equity Fund average daily net assets of JANUARY 1, 1997
[such] THE DRZ Portfolio up
to $55 million and .55% of
the average daily net assets
of [such] THE DRZ Portfolio
of $55 million and above.
</TABLE>
THE PROVIDENT BANK
By
------------------------------
Title Senior Vice President
---------------------------
DePRINCE, RACE & ZOLLO, INC.
By
------------------------------
Title President
---------------------------
- --------------------
All fees are computed daily and paid monthly.
B-7
<PAGE> 32
PRELIMINARY COPY
PROXY
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT INCOME EQUITY FUND
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE COMPANY
The undersigned hereby appoints Walter B. Grimm, James E. White and
Charles L. Booth and each of them, with full power of substitution, proxies to
vote and act with respect to all Shares of The Riverfront Income Equity Fund
(the "Fund"), a series of The Riverfront Funds, Inc. (the "Company"), which the
undersigned is entitled to vote, at the Special Meeting of Shareholders of the
Company to be held on Friday, December 20, 1996, at 3435 Stelzer Road, Columbus,
Ohio 43219, at 10:00 A.M., EDST, and at any and all adjournments thereof, on the
following proposals and any other matters that may properly come before the
Meeting.
PROPOSAL 1 FOR [ ] AGAINST [ ] ABSTAIN [ ] - Approval of
the amendment to the Investment Advisory Agreement
with The Provident Bank to permit The Provident
Bank to manage directly that portion of the Fund's
portfolio allocated to it by the Company's Board of
Directors.
PROPOSAL 2 FOR [ ] AGAINST [ ] ABSTAIN [ ] - Approval of
the amendment to the Sub-Investment Advisory
Agreement with DePrince, Race & Zollo, Inc. to
clarify that DePrince, Race & Zollo, Inc. will
manage directly that portion of the Fund's
portfolio allocated to it by the Company's Board of
Directors.
The Shares represented by this Proxy will be voted upon the proposals
listed above in accordance with the instruction given by the Shareholder, but if
no instruction is given, this Proxy will be voted FOR the proposals and in
accordance with the best judgment of the proxies on any other matter which
properly comes before the Meeting.
<PAGE> 33
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders dated November 22, 1996, and the Proxy Statement
attached thereto.
Dated _________________________
-------------------------------
(Signature of Shareholder)
-------------------------------
(Signature of Shareholder)
NOTE: Please sign legibly and exactly as name appears on this card.
If Shares are registered in the name of joint owners, each must sign
the proxy. When signing as executor, administrator, attorney, trustee or
guardian or as custodian for a minor, please give full title as such. If a
corporation, please sign in full corporate name and indicate the signer's
office. If a partner, please sign in partnership name.
*** Please mark, sign, date and return the proxy card promptly
using the enclosed envelope. ***
