<PAGE> 1
As filed with the Securities and Exchange Commission
October 18, 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. 17 /x/
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /x/
Amendment No. 18 /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)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/X/ 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
THE RIVERFRONT LARGE COMPANY SELECT FUND
THE RIVERFRONT BALANCED FUND
Seven 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
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
THE RIVERFRONT LARGE COMPANY
SELECT FUND
THE RIVERFRONT BALANCED FUND
PROSPECTUS JANUARY 1, 1997
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company which currently issues seven series of shares (individually,
a "Fund" and collectively, the "Funds"), each having a different investment
objective and investing in a different portfolio of securities. The Funds
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 Stock
Appreciation Fund, The Riverfront Large Company Select Fund and The Riverfront
Balanced Fund.
The Funds 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 a sub-investment adviser with
respect to The Riverfront Income Equity Fund, serves as investment adviser to
each of the Funds.
SHARES OF THE FUNDS 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 FUND 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, THE RIVERFRONT STOCK APPRECIATION FUND, THE RIVERFRONT LARGE COMPANY
SELECT FUND AND THE RIVERFRONT BALANCED 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 to each of the Funds 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> 5
Additional information about the Company and the Funds 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 of the Statement of Additional Information, or for other information about
the Company and the Funds, 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 the following Funds:
-- 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 RIVERFRONT LARGE COMPANY SELECT FUND (the "Large Company Fund") seeks
long-term growth of capital with some current income as a secondary objective.
-- THE RIVERFRONT BALANCED FUND (the "Balanced Fund") seeks long-term growth
of capital with some current income as a secondary objective.
The Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund are hereinafter collectively referred to as the "Funds" and
individually as a "Fund."
Each Fund 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 each of the other
Funds -- Investor A shares and Investor B shares.
2
<PAGE> 6
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Prospectus Summary.................... 4
Fee Table............................. 8
Financial Highlights.................. 11
The Company and Its Funds............. 20
The Funds' Investment Objectives and
Policies............................ 20
Investment Restrictions............... 38
Pricing Shares........................ 41
How To Buy Shares..................... 42
Sales Charges......................... 45
Reduced Sales Charges -- Investor A
Shares.............................. 46
Contingent Deferred Sales Charge --
Investor B Shares................... 48
Conversion Feature.................... 50
Other Purchase Information............ 50
Exchanges............................. 51
How To Redeem Shares.................. 52
Shareholder Services.................. 55
Dividends and Taxes................... 55
Company Management and Expenses....... 57
Performance Data and Advertising...... 63
Company Shares........................ 64
Additional Information................ 65
</TABLE>
3
<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, the Stock
Appreciation Fund, the Large Company Fund and the Balanced
Fund, seven separate series (collectively, the "Funds") of The
Riverfront Funds, Inc., a Maryland corporation (the "Com-
pany").
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,
the Stock Appreciation Fund, the Large Company Fund and the
Balanced 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, the Stock Appreciation Fund, the Large Company
Fund and the Balanced 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 Objectives......... 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.
For the LARGE COMPANY FUND, long-term growth of capital with
some current income as a secondary objective.
For the BALANCED FUND, as its primary objective, long-term
growth of capital with some current income as a secondary
objective.
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 stocks, such as bonds and
preferred stocks, rated in one of the four highest rating
categories by an NRSRO, or if not so rated, are 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.
Under normal market conditions, the LARGE COMPANY FUND invests
substantially all, but in no event less than 65%, of its total
assets in common stocks and securities convertible into common
stocks, such as bonds and preferred stocks, of issuers with
market capitalizations of at least $4 billion.
Under normal market conditions, the BALANCED FUND invests in
common stocks, preferred stocks, fixed income securities and
securities convertible into common stocks.
Risk Factors and Investment
Techniques.................. An investment in any of the Funds is subject to certain risks,
as set forth in detail below under "Risk Factors and Invest-
ment 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, foreign securities and
derivatives. The Ohio Tax-Free Fund is also subject to the
risks associated with being a non-diversified portfolio.
Investment Adviser............ The Provident Bank ("Provident").
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C>
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>
7
<PAGE> 11
FEE TABLE
The purpose of the fee tables 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 LARGE
MARKET INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------ ------- --------
<S> <C> <C> <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) 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% .95%(2) .40%(3) .80% .80% .80%
12b-1 Fees After Voluntary
Fee Reduction.................. .10 .19(4) .22(4) .25 .25 .25 .19
Other Expenses(5)................ .36 .47 .51 .69 .56 .61(6) .57
--
------ ------ -------- ----- ------- --------
Total Fund Operating Expenses
After Voluntary Fee
Reductions..................... .61% 1.06% 1.68% 1.34% 1.61% 1.66% 1.56%
======= ======= ======= ======== ============ ========= ========
</TABLE>
- ---------------
(1) The sales charge applied to purchases of Investor A 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 the
cessation of the agreement by Provident and DRZ to waive 5 basis points
(.05%) of the investment advisory and sub-investment advisory fees as of
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
January 1, 1996, to December 31, 1996.
(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
fiscal year ending December 31, 1997. 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 1.44%, respectively.
(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, Income and Balanced Funds, for
the fiscal year ending December 31, 1997. Absent such voluntary fee
reduction, 12b-1 Fees for such Funds would be .25%.
8
<PAGE> 12
(5) "Other Expenses" with respect to the Income Equity Fund, the Ohio Tax-Free
Fund, the Balanced Fund and the Stock Appreciation Fund have been restated
to reflect current fees.
(6) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
INVESTOR B SHARES
<TABLE>
<CAPTION>
INCOME OHIO STOCK LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <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% 4.00% 4.00%
ANNUAL FUND EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Investment Advisory Fees After
Voluntary Fee Reduction............ .40% .95%(2) .40%(3) .80% .80% .80%
12b-1 Fees........................... 1.00 1.00 1.00 1.00 1.00 1.00
Other Expenses....................... .47 .52 .69 .76(4) .61(4) .57
------ ------ -------- ----- ------- --------
Total Fund Operating Expenses After
Voluntary Fee Reduction............ 1.87% 2.47% 2.09% 2.56% 2.41% 2.37%
====== ====== ======== =========== ======== ========
</TABLE>
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(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 the
cessation of the agreement by Provident and DRZ to waive 5 basis points
(0.05%) of the investment advisory and sub-investment advisory fees as of
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
January 1, 1996 to December 31, 1996.
(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
fiscal year ending December 31, 1997. 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 2.19%, respectively.
(4) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
9
<PAGE> 13
EXAMPLE(5) -- 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 LARGE
MARKET INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year...................... $ 6 $ 55 $ 61 $ 58 $ 63 $ 61 $ 60
Three Years................... $ 20 $ 77 $ 96 $ 85 $ 99 $ 95 $ 92
Five Years.................... $ 34 $101 $132 $115 $139 N/A $126
Ten Years..................... $ 76 $168 $235 $199 $248 N/A $222
</TABLE>
EXAMPLE(5) -- 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 LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 59 $ 65 $ 81 $ 66 $ 64 $ 64
Three Years................... $ 99 $117 $105 $120 $ 115 $114
Five Years.................... $121 $181 $132 N/A N/A $146
Ten Years..................... $219 $280 $242 N/A N/A $270
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
INCOME OHIO STOCK LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 19 $ 25 $ 21 $ 26 $ 24 $ 24
Three Years................... $ 59 $ 79 $ 65 $ 80 $ 75 $ 74
Five Years.................... $101 $137 $112 N/A N/A $126
Ten Years..................... $219 $280 $242 N/A N/A $270
</TABLE>
- ---------------
(5) 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%.
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.
10
<PAGE> 14
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 and
transfer agency 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, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund (formerly known as The Riverfront Flexible Growth Fund) are seven
separate Funds 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 the Large Company 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; the five month period
ended December 31, 1994, for the Ohio Tax-Free Fund; and the four month period
ended December 31, 1994, for the Balanced Fund have been audited by other
auditors.
The Statement of Additional Information may be obtained by shareholders and
prospective investors upon request.
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.
The following financial highlights for the period ended June 30, 1996, are
unaudited. No financial highlights are provided for the Large Company Fund since
it has not yet commenced operations.
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.
11
<PAGE> 15
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
SIX MONTHS OCTOBER 1, 1992
ENDED JUNE TO DECEMBER 31,
30, 1996 1995 1994(d) 1993(d) 1992(a)(d)
----------- -------- -------- -------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities
Net Investment Income(b)........ 0.02 0.05 0.04 0.03 0.01
-------- ------- ------- ------- ------
Total from Investment
Activities.................... 0.02 0.05 0.04 0.03 0.01
-------- ------- ------- ------- ------
Distributions
Net Investment Income........... (0.02) (0.05) (0.04) (0.03) (0.01)
-------- ------- ------- ------- ------
Total Distributions............. (0.02) (0.05) (0.04) (0.03) (0.01)
-------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======
TOTAL RETURN.................... 2.39%(b) 5.52% 3.78% 2.90% 0.80%(b)
ANNUALIZED RATIOS/ SUPPLEMENTAL
DATA
Net Assets, End of Period
(000)......................... $ 172,984 $157,495 $149,374 $133,207 $ 37,083
Ratio of expenses to average net
assets........................ 0.60%(c) 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income
to average net assets......... 4.75%(c) 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net
assets*....................... 0.85%(c) 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income
to average net assets*........ 4.50%(c) 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or 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.
12
<PAGE> 16
[THIS PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 17
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1995(a)
-------------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........................ $ 9.71 $ 10.95 $ 8.92 $ 10.00
Investment Activities
Net investment income........................ 0.26 0.24 0.54 0.43
Net realized and unrealized gains (losses)
from investments........................... (0.37) (0.42) 0.79 0.94
------- ------- ------- -------
Total from Investment Activities............. (0.11) (0.18) 1.33 1.37
------- ------- ------- -------
Distributions
Net investment income........................ (0.26) (0.24) (0.54) (0.42)
In excess of net investment income........... -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions.......................... (0.26) (0.24) (0.54) (0.42)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 9.34 $ 10.53 $ 9.71 $ 10.95
======= ======= ======= =======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)................... (1.19)%(g) (1.61)%(g) 15.22% 13.96%(e)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period (000)............ $34,145 $ 1,190 $ 36,538 $ 1,263
Ratio of expenses to average net assets...... 1.14%(c) 1.93%(c) 1.09% 1.90%(c)
Ratio of net investment income to average net
assets..................................... 5.43%(c) 4.65%(c) 5.74% 4.80%(c)
Ratio of expenses to average net assets*..... 1.22%(c) 1.93%(c) 1.18% 1.90%(c)
Ratio of net investment income to average net
assets*.................................... 5.35%(c) 4.65%(c) 5.65% 4.80%(c)
Portfolio turnover........................... 30%(d) 30%(d) 75%(d) 75%(d)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or 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 Fund 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.
(g) Not annualized.
14
<PAGE> 18
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
------------------------------------------ DECEMBER 31,
1994(f) 1993(f) 1992(b)(f) 1991(f) 1990(a)(f)
------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
$ 9.91 $ 9.76 $ 10.00 $10.00 $10.00
0.54 0.51 0.10 0.73 0.12
(0.99) 0.20 (0.23) -0- -0-
------- ------- ------- ------
(0.45) 0.71 (0.13) 0.73 0.12
------- ------- ------- ------
(0.54) (0.50) (0.10) (0.73) (0.12)
-0- (0.06) (0.01) -0- -0-
------- ------- ------- ------
(0.54) (0.56) (0.11) (0.73) (0.12)
------- ------- ------- ------
$ 8.92 $ 9.91 $ 9.76 $10.00 $10.00
======= ======= ======= ======
(4.64)% 7.38% (1.31)% N/A N/A
$32,721 $30,078 $24,588 $ 33 $ 0
0.86% 0.65% 0.66% 0.00% 1.67%(c)
5.78% 5.05% 4.00% 7.34% 1.17%(c)
1.14% 1.08% 1.06% N/A N/A
5.49% 4.62% 3.60% N/A N/A
83% 220% 117% 0% 0%
</TABLE>
15
<PAGE> 19
THE RIVERFRONT INCOME EQUITY FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1995(a)
--------------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 11.70 $ 11.85 $ 10.15 $10.00
Investment Activities
Net investment income....................... 0.10 0.05 0.27 0.13
Net realized and unrealized gains from
investments............................... 1.00 1.00 2.89 2.78
------- ------- ------- -------
Total from Investment Activities............ 1.10 1.05 3.16 2.91
------- ------- ------- -------
Distributions
Net investment income....................... (0.10) (0.05) (0.27) (0.13)
In excess of net investment income.......... -0- -0- -0- -0-
Net realized gains.......................... -0- -0- (1.34) (0.93)
In excess of net realized gains............. -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions......................... (0.10) (0.05) (1.61) (1.06)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 12.70 $ 12.85 $ 11.70 $11.85
======= ======= ======= =======
TOTAL RETURN (EXCLUDING SALES/REDEMPTION
CHARGE)................................... 9.43%(g) 8.88%(g) 31.45% 29.28%(e)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)........... $67,612 $ 4,900 $ 60,845 $2,833
Ratio of expenses to average net assets..... 1.72%(c) 2.47%(c) 1.49% 2.46%(c)
Ratio of net investment income to average
net assets................................ 1.63%(c) 0.85%(c) 2.27% 1.12%(c)
Ratio of expenses to average net assets*.... 1.82%(c) 2.52%(c) 1.74% 2.51%(c)
Ratio of net investment income to average
net assets*............................... 1.53%(c) 0.80%(c) 2.02% 1.07%(c)
Portfolio turnover.......................... 81%(d) 81%(d) 180%(d) 180%(d)
Average commission rate paid(h)............. $0.0405 $0.0405 -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or 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 Fund 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.
(g) Not annualized.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
16
<PAGE> 20
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
------------------------------------------- DECEMBER 31,
1994(f) 1993(f) 1992(b)(f) 1991(f) 1990(a)(f)
------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
$ 10.63 $ 10.78 $ 10.00 $10.00 $10.00
0.32 0.28 0.08 0.73 0.12
-0- 1.01 0.80 -0- -0-
------- ------- ---------- ------- ------------
0.32 1.29 0.88 0.73 0.12
------- ------- ---------- ------- ------------
(0.31) (0.27) (0.08) (0.73 ) (0.12)
-0- (0.03) (0.01) -0- -0-
(0.49) (1.14) -0- -0- -0-
-0- -0- (0.01) -0- -0-
------- ------- ---------- ------- ------------
(0.80) (1.44) (0.10) (0.73 ) (0.12)
------- ------- ---------- ------- ------------
$ 10.15 $ 10.63 $ 10.78 $10.00 $10.00
======= ======= ========= ======= ===========
3.08% 12.11% 8.74% N/A N/A
$34,965 $24,387 $ 12,262 $ 43 $ 40
1.30% 1.47% 1.48% 0.00 % 1.67%(c)
2.93% 2.55% 3.16% 7.34 % 1.17%(c)
1.58% 1.64% 2.02% N/A N/A
2.65% 2.38% 2.62% N/A N/A
119% 145% 12% 0 % 0%
-- -- -- -- --
</TABLE>
17
<PAGE> 21
THE RIVERFRONT OHIO TAX-FREE BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS YEAR JANUARY 17
ENDED ENDED 1995 TO
JUNE 30, DECEMBER 31, DECEMBER 31, AUGUST 1,
1996 1995 1995(a) 1994 TO
---------------------------- ------------ ------------ DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(a)(f)
---------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 10.51 $ 10.73 $ 9.83 $10.00 $ 10.00
Investment Activities
Net investment income.............. 0.20 0.16 0.39 0.27 0.12
Net realized and unrealized gains
(losses) from investments........ (0.29) (0.28) 0.67 0.73 (0.17)
------- ------ ------- ------ -------
Total from Investment Activities... (0.09) (0.12) 1.06 1.00 (0.05)
------- ------ ------- ------ -------
Distributions
Net investment income.............. (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
Total Distributions................ (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
NET ASSET VALUE, END OF PERIOD..... $ 10.22 $ 10.45 $ 10.51 $10.73 $ 9.83
======= ====== ======= ====== =======
TOTAL RETURN (EXCLUDING SALES/
REDEMPTION CHARGE)............... (0.85)%(e) (1.16)%(e) 10.96% 10.10%(c) (0.47)%(e)
ANNUALIZED RATIOS/ SUPPLEMENTAL
DATA:
Net assets at end of period (000).. $10,538 $ 677 $ 11,091 $ 626 $ 10,190
Ratio of expenses to average net
assets........................... 1.46%(d) 2.17%(d) 1.49% 2.27%(d) 1.08%(d)
Ratio of net investment income to
average net assets............... 3.88%(d) 3.17%(d) 3.77% 3.01%(d) 2.92%(d)
Ratio of expenses to average net
assets*.......................... 1.56%(d) 2.27%(d) 1.64% 2.41%(d) 1.44%(d)
Ratio of net investment income to
average net assets*.............. 3.78%(d) 3.08(d) 3.62% 2.87%(d) 2.56%(d)
Portfolio turnover................. 5%(b) 5%(b) 34%(b) 34%(b) 29%
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or 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 Fund 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.
18
<PAGE> 22
[THIS PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 23
THE RIVERFRONT STOCK APPRECIATION FUND
<TABLE>
<CAPTION>
FROM OCTOBER 1, FROM OCTOBER 1,
SIX MONTHS 1995 THROUGH 1995 THROUGH
ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1995(b) 1995(a)(b)
1996 --------------- ---------------
-------------------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD................................... $ 9.50 $ 9.91 $ 10.00 $ 10.00
Investment Activities
Net investment loss........................ (0.06) (0.06) (0.01) (0.01)
Net realized and unrealized gains (losses)
from investments......................... 0.64 0.60 (0.12) (0.08)
------- ------- ------- -------
Total from Investment Activities........... 0.58 0.54 (0.13) (0.09)
------- ------- ------- -------
Distributions
Net investment income...................... -0- -0- -0- -0-
Net realized gains......................... -0- -0- (0.37) -0-
Returns of capital....................... -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions........................ -0- -0- (0.37) -0-
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............. $ 10.08 $ 10.45 $ 9.50 $ 9.91
======= ======= ======= =======
TOTAL RETURN (EXCLUDING SALES/
REDEMPTION CHARGE)....................... 6.11%(c) 5.45%(c) (1.20)%(c) (0.90)%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000s)......... $37,759 $ 619 $40,995 $ 72
Ratio of expenses to average net assets.... 1.86% (d) 2.55% (d) 1.76% (d) 2.30% (d)
Ratio of net investment income to average
net assets............................... (1.19)%(d) (1.94)%(d) (0.49)%(d) (1.69)%(d)
Ratio of expenses to average net assets*... 1.86% (d) 2.55% (d) 1.77% (d) 2.39% (d)
Ratio of net investment income to average
net assets*.............................. (1.19)%(d) (1.94)%(d) (0.50)%(d) (1.78)%(d)
Portfolio turnover......................... 87% (e) 87% (e) 46% (e) 46% (e)
Average commission rate paid(h)............ $0.0019 $0.0019 -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or 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 Fund as a whole
without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
20
<PAGE> 24
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1995(f) 1994(f) 1993(f) 1992(f) 1991(f) 1990(f) 1989(f) 1988(f) 1987(a)(f)
------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55 $ 5.81 $ 5.77
(0.07) (0.12) (0.17) (0.08) (0.11) (0.01) 0.11 0.02 0.01
2.14 (1.26) 2.57 1.41 3.17 (0.21) 0.31 (1.26) 0.04
------- ------- ------- ------- ------ ------ ------ ------ ------
2.07 (1.38) 2.40 1.33 3.06 (0.22) 0.42 (1.24) 0.05
------- ------- ------- ------- ------ ------ ------ ------ ------
-0- -0- -0- -0- -0- -0- (0.11) (0.01) (0.01)
(0.32) (0.55) (0.20) (1.05) -0- -0- -0- -0- -0-
-0- -0- -0- -0- -0- (0.01) -0- (0.01) -0-
------- ------- ------- ------- ------ ------ ------ ------ ------
(0.32) (0.55) (0.20) (1.05) -0- (0.01) (0.11) (0.02) (0.01)
------- ------- ------- ------- ------ ------ ------ ------ ------
$ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55 $ 5.81
======= ======= ======= ======= ====== ====== ====== ====== ======
25.12% (13.91)% 30.61% 16.69% 66.04% (4.44)% 9.41% (21.29)% 0.92%(c)
$44,500 $47,880 $59,330 $28,750 $9,600 $4,310 $1,420 $1,990 $3,020
2.61% 2.44% 2.47% 2.70% 2.89% 2.76% 3.07% 2.82% 0.53%(d)
(0.73)% (1.35)% (1.85)% (1.00)% (1.72)% (0.62)% 2.25% 0.43% 0.18%(d)
(g) (g) (g) (g) (g) (g) (g) (g) (g)
(g) (g) (g) (g) (g) (g) (g) (g) (g)
197% 254% 216% 288% 240% 185% 71% 207% 0%
-- -- -- -- -- -- -- -- --
</TABLE>
21
<PAGE> 25
THE RIVERFRONT BALANCED FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31, FROM SEPTEMBER 1,
JUNE 30, 1996 1995 1995(a) 1994 THROUGH
------------------------- -------------- -------------- DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(a)(f)
---------- ----------- -------------- -------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 11.36 $ 11.70 $ 9.79 $10.00 $ 10.00
------- ----- ----- ----- -----
INVESTMENT ACTIVITIES
Net investment income......... 0.17 0.12 0.35 0.25 0.10
Net realized and unrealized
gains (losses) from
investments................. (0.26) (0.26) 1.66 1.79 (0.18)
------- ----- ----- ----- -----
Total from Investment
Activities................ (0.09) (0.14) 2.01 2.04 (0.08)
------- ----- ----- ----- -----
DISTRIBUTIONS
Net investment income......... (0.17) (0.12) (0.34) (0.24) (0.13)
Net realized gains............ -- -- (0.10) (0.10) --
------- ----- ----- ----- -----
Total Distributions......... (0.17) (0.12) (0.44) (0.34) (0.13)
------- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD........................ $ 11.10 $ 11.44 $11.36 $11.70 $ 9.79
======= ===== ===== ===== =====
Total Return (excludes sales/
redemption charge)............ (0.83)%(e) (1.09)%(c) 20.83% 20.53%(c) (0.82)%(e)
ANNUALIZED RATIOS/ SUPPLEMENTARY
DATA:
Net Assets at end of period
(000)......................... $13,121 $ 8,710 $9,427 $5,030 $ 2,709
Ratio of expenses to average net
assets........................ 1.55%(d) 2.36%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment income
to average net assets......... 2.99%(d) 2.19%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to average net
assets*....................... 1.86%(d) 2.56%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment income
to average net assets*........ 2.68%(d) 1.99%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover.............. 52%(b) 52%(b) 13%(b) 13%(b) 1%
Average commission rate
paid(h)....................... $0.0043 $0.0043 -- -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary f%e reductions and/or 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 Fund 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.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
22
<PAGE> 26
THE COMPANY AND ITS FUNDS
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
seven series of shares of capital stock (individually a "Fund" and collectively
the "Funds"). Each Fund 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 Funds 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, the Large Company Fund and the
Balanced Fund (formerly known as The Riverfront Flexible Growth Fund).
The investment objectives of each 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 that Fund (as defined below under "COMPANY
SHARES"). There can be no assurance that the investment objectives of any Fund
will be achieved.
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 include 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 will have or be
deemed to have remaining maturities of thirteen months or less and shall be
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rated in one of the two highest rating categories by an NRSRO or, if unrated,
are 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.
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, are 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 instrumen-
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talities, 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 securities, 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, are 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 Funds' 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 and other products described below.
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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 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 for the servicing 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
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<PAGE> 30
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 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 through investment 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
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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 Fund's adviser to be of comparable
quality to securities so rated) as to which there is an expectation of dividend
or other income generation. 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 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 or Provident, as the case may be, 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.
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GOVERNMENT INCOME FUND -- OTHER ELIGIBLE INVESTMENTS," and when, in DRZ's or
Provident's opinion, as the case may be, market conditions warrant, up to 100%
of the Income Equity Fund's assets may be invested 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 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, certificates of indebtedness and other
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
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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 obligation 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 invest-
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ment 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 Funds' Statement of
Additional Information. Use of such techniques 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 securities. A variable rate
security 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 security 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 securities are frequently
not rated by credit rating agencies; however, unrated variable and floating rate
securities 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 and will continuously monitor their financial condition.
There may be no active secondary market with respect to a particular variable or
floating rate security. 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 securities 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
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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
preservation 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 for cash
management
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purposes, and to acquire foreign securities through ADRs. For expanded
descriptions of these investment techniques, see below under "RISK FACTORS AND
INVESTMENT TECHNIQUES."
THE RIVERFRONT LARGE COMPANY SELECT FUND
INVESTMENT OBJECTIVES AND POLICIES
The Large Company Fund seeks long-term growth of capital with some current
income as a secondary objective.
PRINCIPAL INVESTMENTS
The Large Company Fund, under normal market conditions, will have
substantially all, but in no event less than 65%, of its total assets invested
in common stocks and securities convertible into common stocks, such as bonds
and preferred stocks, of companies with market capitalizations of at least $4
billion. The Large Company Fund also may acquire rights and warrants to purchase
such securities. The Large Company Fund generally will invest in equity
securities of such issuers based upon certain fundamental criteria examined by
Provident, including price to earnings, price to book, price to cash flow,
return on equity and other ratios. Earnings and dividend growth are also
important factors analyzed by Provident. Generally such securities will be
traded on the New York Stock Exchange or the American Stock Exchange or traded
in the over-the-counter market. Such bonds or preferred stocks in which the
Large Company Fund may invest may be of varying quality. For a discussion of
securities rated within the fourth highest rating category assigned by the
NRSROS, see "RISK FACTORS AND INVESTMENT TECHNIQUES" below.
OTHER ELIGIBLE INVESTMENTS
The Large Company 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 Provident to be of comparable quality. The Large
Company Fund currently expects that less than 5% of its total assets will be
invested in non-investment grade securities. Further information regarding non-
investment grade securities and the risks associated with such securities is set
forth above under "THE RIVERFRONT INCOME EQUITY FUND -- OTHER ELIGIBLE
INVESTMENTS." The Large Company Fund may also invest in foreign securities
directly and through the purchase of sponsored and unsponsored ADRs. ADRs and
the risks associated generally with foreign securities are discussed in greater
detail above under "THE RIVERFRONT INCOME EQUITY FUND -- OTHER ELIGIBLE
INVESTMENTS." The Large Company Fund does not expect to invest more than % of
its total assets in such foreign securities, either directly or through ADRs.
The Large Company Fund may also invest in securities of equity real estate
investment trusts ("REITs"). REITs pool investors' funds for investment
primarily in commercial real estate properties. Investment in REITs may subject
the Large Company Fund to certain risks. REITs may be affected by changes in the
value of the underlying property owned by the trusts. REITs are dependent upon
specialized management skill, may not be diversified and are subject to the
risks of financing projects. REITs are also subject to heavy cash flow
dependency, defaults by borrowers, self liquidation and the possibility of
failing to qualify for the beneficial tax treatment available to REITs under the
Internal Revenue Code and to maintain its exemption from the 1940 Act. As a
shareholder in a REIT, the Large Company Fund would bear, along with other
shareholders, its pro rata portion of the REIT's operating expenses. These
expenses would be
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in addition to the advisory and other expenses the Large Company Fund bears
directly in connection with its own operations.
The Large Company Fund may also invest under normal market conditions 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" for cash
management purposes and up to 100% of the Large Company Fund's assets may be
invested in such Short-Term Securities for defensive purposes, when, in
Provident's opinion, market conditions warrant.
The Large Company Fund may also invest in securities issued by other
investment companies, as described more fully below, and is authorized to engage
in options and futures 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 Large Company 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 BALANCED FUND
INVESTMENT OBJECTIVES AND POLICIES
The Balanced Fund seeks, as its primary investment objective, long-term growth
of capital with some current income as a secondary objective. The Balanced Fund
intends to invest based on combined considerations of risk, income and capital
enhancement.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Balanced 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 Balanced Fund expects that at least 25% of its total
assets will be invested in fixed income senior securities. The proportion of the
Balanced Fund's portfolio that is invested in equity securities versus fixed
income securities may vary greatly depending upon Provident's judgment of market
conditions.
The common and preferred stocks and securities convertible into common stocks
selected for the Balanced Fund will be those that Provident believes will
contribute to the Balanced Fund's objective of providing long-term growth of
capital. The Balanced 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 Balanced 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 NRSRO, or if unrated, are deemed by
Provident to be of comparable quality to those so rated, and securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities. Such
U.S. Government securities consist of U.S. Trea-
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sury 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. 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 Balanced Fund may also invest up to 25% of its total assets in Short-Term
Securities for cash management purposes. However, when in Provident's opinion,
market conditions warrant, Provident may invest up to 100% of the Balanced
Fund's assets for temporary defensive purposes in such Short-Term Securities.
For more information regarding such securities, see "INVESTMENT OBJECTIVES AND
POLICIES -- Additional Information on Portfolio Instruments" in the Company's
Statement of Additional Information.
Subject to the limitations described below, the Balanced Fund may invest in
securities issued by other investment companies which Provident believes will
contribute to the Balanced Fund's investment objectives and in money market
mutual funds for cash management purposes.
The Balanced Fund may also invest up to 20% of its total assets in foreign
securities directly and through the purchase of sponsored and unsponsored ADRs.
ADRs and the risks associated generally with foreign securities are discussed in
greater detail above under "THE RIVERFRONT INCOME EQUITY FUND -- OTHER ELIGIBLE
INVESTMENTS."
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced 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 such Fund, and there can be
no assurance that any Fund will achieve its investment objective or objectives.
Like any investment program, an investment in any of the Funds entails certain
risks. Equity securities such as those in which the Income Equity, Large
Company, Stock Appreciation and Balanced Funds may invest are more volatile and
carry more risk than some other forms of investment including investments in
high grade fixed income securities. Therefore, such Funds are each subject to
stock market risk, i.e., the possibility that stock prices in general will
decline over short or even extended periods of time.
Since the Income Fund, the Ohio Tax-Free Fund and the Balanced Fund each
invest in bonds, investors in those Funds are exposed to bond market risk, i.e.,
fluctuations in the market value of bonds. Bond prices are influenced primarily
by changes in the level of interest rates. When interest rates rise, the prices
of bonds generally fall; conversely, when interest rates fall, bond prices
generally rise although certain types of bonds are subject to the risks of
prepayment as described above when interest rates fall. While bonds normally
fluctuate less in price than stocks, there have been in the recent past extended
periods of cyclical increases in interest rates that have caused significant
declines in bond prices and have caused the effective maturity of securities
with prepayment features to be extended, thus effectively converting short or
intermediate term securities (which tend to be less volatile)
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into longer term securities (which tend to be
more volatile).
Depending upon the performance of each Funds' investments, the net asset value
per share of a Fund may decrease instead of increase; except that with respect
to the Money Market Fund, Provident will attempt to maintain its net asset value
at $1.00.
Each Fund may invest in one or more of the following securities: certain
variable or floating rate securities, mortgage-backed securities and CMOs. Such
instruments may be considered to be "derivatives." A derivative is generally
defined as an instrument whose value is based upon, or derived from, some
underlying index, reference rate (e.g., interest rates), security, commodity or
other asset.
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, approximately 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 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, respec-
36
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tively. 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-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, the
Ohio Tax-Free Fund, the Large Company Fund and the Balanced 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 any
such 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 banks and/or 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
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<PAGE> 41
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 Funds, other than the Money Market
Fund and the Stock Appreciation 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, 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 or
DRZ, as the case may be. 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
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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 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 other than the
Money Market Fund, 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
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<PAGE> 43
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 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
Company's Statement of Additional Information.
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, the Ohio Tax-Free
Fund and the Balanced Fund were 75%, 180%, 34% and 13%, 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 directly by the Fund, as well
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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
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<PAGE> 45
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
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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 and the Large Company Fund may each 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 such Fund would be invested in the securities of such issuer
or the Fund would hold more than 10% of the outstanding voting securities of
such issuer. This restriction applies to 75% of the Fund's total assets.
2. Purchase any securities which would cause 25% or more of the 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 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
Fund will not purchase securities while its borrowings (including reverse
repurchase agreements) exceed 5% of its total assets.
4. Make loans, except that the 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 Balanced Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed
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<PAGE> 47
by the U.S. Government or its agencies or instrumentalities, if, immediately
after such purchase, more than 5% of the value of the Balanced Fund's total
assets would be invested in such issuer, or the Balanced Fund would hold more
than 10% of any class of securities of the issuer, except that up to 25% of the
value of the Balanced 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
Balanced 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 Balanced 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 Balanced 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.
The following additional investment restriction of the Stock Appreciation
Fund, the Large Company Fund and the Balanced Fund is non-fundamental and may be
changed by the Company's Board of Directors without shareholder approval. Such
Funds 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,
44
<PAGE> 48
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.
With respect to each of the other Funds, 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
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<PAGE> 49
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 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,
46
<PAGE> 50
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 any Fund, other than
the Money Market Fund, funds must be received 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.
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.
IN KIND PURCHASES
Payment for shares of a Fund may, in the discretion of Provident, be made in
the form
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<PAGE> 51
of securities that are permissible investments for the Fund as described in this
Prospectus. For further information about this form of payment, contact
Provident. In connection with an in-kind securities payment, a Fund will
require, among other things, that the securities be valued on the day of
purchase in accordance with the pricing methods used by the Fund and that the
Fund receive satisfactory assurances that it will have good and marketable title
to the securities received by it; that the securities be in proper form for
transfer to the Fund; and that adequate information be provided concerning the
basis and other tax matters relating to the securities.
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, Stock Appreciation Fund's, Large
Company Fund's and Balanced 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, Stock Appreciation, Large Company and
Balanced Funds and any other Fund 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
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.
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<PAGE> 52
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 Funds 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.
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
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<PAGE> 53
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 Load Portfolio 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 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
50
<PAGE> 54
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 Investor A shares of a Load Portfolio 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.
<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.
51
<PAGE> 55
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
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 an-
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<PAGE> 56
nual 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 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
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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, the Stock
Appreciation Fund, the Large Company Fund or the Balanced 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 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.
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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, 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 re-
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demption proceeds to the broker-dealer placing the order within three business
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 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
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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. Purchases of additional shares, including use of the
Systematic Investment Plan, concurrent with withdrawals may be disadvantageous
to certain shareholders because of tax liabilities and sales charges.
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 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.
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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 and the transfer agency
fees paid by the respective class.
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 capital 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 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 Fund's
shareholders. Qualification as a
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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 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
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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.
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
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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, the Large Company
Fund, the Balanced Fund and, with 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; (5)
from the Stock Appreciation Fund equal to 0.80% of the Stock Appreciation Fund's
average net assets; (6) from the Large Company Fund equal to .80% of the Large
Company Fund's average net assets; and (7) from the Balanced Fund equal to 0.90%
of the Balanced 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 fees with
respect to the Income Equity Fund, the Stock Appreciation Fund, the Large
Company Fund and the Balanced Fund are higher, in the opinion of the Commission,
than that paid by most investment companies, but Provident believes the fee to
be fair and reasonable.
Provident uses a team approach and disciplined investment strategy in
providing investment advisory services to all its accounts, including the Funds
as of January 1, 1997. Provident decided to adopt a team approach with respect
to each of the Funds in order to take advantage of the experience of its entire
portfolio management team. Provident's investment staff consists of seven
individuals. All Funds are reviewed on a regular basis by Provident's Investment
Policy Committee to ensure they are invested in accordance with the Funds' and
Provident's investment policies.
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
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to manage the day-to-day investment and reinvestment of that portion of the
assets of the Income Equity Fund allocated to DRZ by the Company's Board of
Directors. The remainder of the Income Equity Fund's assets are managed on a
day-to-day basis by Provident. The amount of the assets of the Income Equity
Fund to be allocated between DRZ and Provident from time to time is subject to
the discretion of the Company's Board of Directors. Currently the first $
million of the Income Equity Fund's assets are managed by DRZ with the remainder
being managed by Provident. Both DRZ's and Provident's day-to-day management of
the Income Equity Fund's portfolio is 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. In addition, DRZ has indicated a
willingness to manage net assets of the Income Equity Fund up to $75 million,
but not beyond. The Directors of the Company shall take such limitation into
account when determining the allocation of the Income Equity Fund's assets
between Provident and DRZ.
Gregory M. DePrince is primarily responsible for the management of that
portion of the Income Equity Fund's portfolio allocated to DRZ to manage. 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 Fund a fee for each class of shares of that Fund,
plus certain out-of-pocket expenses. The Money Market Fund pays Provident a fee
equal to $24 per account over 500 accounts per year with an annual minimum fee
of $24,000. Each of the other Funds pays Provident for each class of shares a
fee equal to $20 per account over 500 accounts per year, with an annual minimum
fee of $20,000.
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 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, the Stock
Appreciation Fund's, the Large Company Fund's and the Balanced 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
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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 Investor B shares of
the Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced 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
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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
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.
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<PAGE> 68
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 Information 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
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<PAGE> 69
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 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 Large Company Fund has been initially funded by the transfer of all of the
assets of two corresponding common trust funds managed by Provident (the
"CIFs"). Because the management of the Large Company Fund is substantially the
same as the CIFs, the quoted performance of such Fund will include the
performance of the CIFs for the
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<PAGE> 70
periods prior to the effectiveness of the Company's registration statement as it
relates to the Large Company Fund. The CIFs were not registered under the 1940
Act, and therefore were not subject to certain investment restrictions that are
imposed by the 1940 Act. If the CIFs had been so registered, their performance
might have been adversely affected.
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 seven series of shares of capital stock, par
value $.001 per share (the "Funds"). The shares of each of the Funds, 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 Fund 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 Fund with other
shares of the same Fund 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 Fund as are declared at the discretion of the Directors.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, Shareholders of a Fund will vote in the
aggregate with
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other shareholders of the Company with respect to the election of Directors and
ratification of the selection of independent accountants. However, Shareholders
of a Fund will vote as a Fund, and not in the aggregate with other shareholders
of the Company, for purposes of approval of that Fund's investment advisory
agreement. In addition, holders of one class of Investor Shares of a Fund 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
Fund 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 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 such Fund.
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> <C>
THE THE RIVERFRONT
RIVERFRONT U.S. GOVERNMENT
FUNDS, INC. SECURITIES MONEY
MARKET FUND
PROSPECTUS THE RIVERFRONT
JANUARY 1, 1997 U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT
INCOME EQUITY
FUND
THE RIVERFRONT
OHIO TAX-FREE
BOND FUND
THE RIVERFRONT
STOCK APPRECIATION
FUND
THE RIVERFRONT
LARGE COMPANY
FUND
THE RIVERFRONT
BALANCED FUND
THE RIVERFRONT FUNDS, INC.
Investment Adviser
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Distributor
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
</TABLE>
<PAGE> 75
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 BALANCED FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
January 1, 1997
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with the prospectus (the
"Prospectus"), 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"), The Riverfront Large
Company Select Fund (the "Large Company Fund") and The Riverfront Balanced Fund
(the "Balanced Fund") (the Money Market Fund, the Income Fund, the Income Equity
Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund and the Balanced Fund
are hereinafter collectively referred to as the "Funds" and individually as a
"Fund") dated the date hereof. The Funds are currently seven 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. On December ___, 1996, the Balanced
Fund changed its name from The Riverfront Flexible Growth Fund to The Riverfront
Balanced Fund. This Statement of Additional Information is incorporated in its
entirety into the Prospectus. A copy of the Prospectus may be obtained from
BISYS Fund Services Limited Partnership, 3435 Stelzer Road, Columbus, Ohio
43219.
TABLE OF CONTENTS
Page
THE COMPANY AND ITS FUNDS..................................................B-1
INVESTMENT OBJECTIVES AND POLICIES.........................................B-2
DIVIDENDS AND TAXES.......................................................B-20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................B-26
VALUATION OF SECURITIES...................................................B-27
DIRECTORS AND OFFICERS....................................................B-30
MANAGEMENT OF THE FUNDS...................................................B-31
SECURITIES TRANSACTIONS...................................................B-37
ADMINISTRATOR.............................................................B-41
DISTRIBUTOR...............................................................B-43
DISTRIBUTION PLANS........................................................B-44
CAPITAL STOCK.............................................................B-46
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS............................B-47
ADDITIONAL INFORMATION....................................................B-51
FINANCIAL STATEMENTS......................................................B-53
APPENDIX ..................................................................A-1
<PAGE> 76
THE COMPANY AND ITS FUNDS
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company, commonly known as a mutual fund, which currently issues
seven series of shares of capital stock which are described in this Statement of
Additional Information (the "Funds"). Each Fund of the Company, other than the
Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund is a non-diversified
Fund.
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 Fund, 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 Funds, and provides
certain fund accounting and recordkeeping services for the Company. DePrince,
Race & Zollo, Inc. ("DRZ") serves as the subadviser to the Income Equity 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
Fund 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.
The essential information about the Company and its Funds is contained
in the Prospectus. This Statement of Additional Information provides additional
information about the Company and each of the Funds that may be of interest to
investors.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are
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defined in the Prospectus. No investment in shares of a Fund should be made
without first reading such Fund's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
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 four 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 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 DRZ.
The Income Equity Fund is designed for investors seeking to invest for
retirement, educational and other long-term needs.
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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 LARGE COMPANY SELECT FUND
The Riverfront Large Company Select Fund (the "Large Company Fund")
seeks as its investment objective long-term growth of capital with current
income as a secondary objective.
The Large Company Fund is designed for investors seeking long-term
growth of capital with some current income.
THE RIVERFRONT BALANCED FUND
The Riverfront Balanced Fund (the "Balanced Fund") seeks as its primary
investment objective long-term growth of capital with some current income as a
secondary objective.
The Balanced 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 Fund as set forth in the Prospectus.
Bank Obligations. Each Fund may invest in bank obligations
such as bankers' acceptances, certificates of deposit, and demand
and time deposits.
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
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effect, that the bank unconditionally agrees to pay the face value of the
instrument on maturity. Bankers' acceptances invested in by such Funds 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, the
Stock Appreciation Fund and the Large Company 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 Fund 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, the Balanced Fund and the Large Company Fund may 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
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by that Fund'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, the Balanced Fund and the Large Company 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 Fund and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Fund 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, variable amount master demand
notes must be determined by Provident or DRZ, as the case may be, to be of
comparable quality to the commercial paper which such Fund may purchase. The
Fund'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 Fund 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,
the Balanced Fund and the Large Company Fund will acquire such securities only
when such Fund'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 Fund 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. 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
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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 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.
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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 Fund may acquire variable and
floating rate notes, subject to such Fund's investment objective, policies and
restrictions. 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,
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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 Funds will
be determined by Provident or DRZ, as the case may be, to be of comparable
quality at the time of purchase to rated instruments eligible for purchase under
that particular Fund's investment policies. In making such determinations,
Provident or DRZ, 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 Fund, the Fund may attempt to resell the note at any time to a
third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of a variable or floating rate note in the event
the issuer of the note defaulted on its payment obligations and the Fund could,
as a result or for other reasons, suffer a loss to the extent of the default.
When-Issued Securities. As discussed in the Prospectus, each of the
Funds, 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 Fund agrees to purchase securities on a
"when-issued" basis, the Fund'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 Fund's custodian will set aside portfolio securities to
satisfy the purchase commitment, and in such a case, the Fund 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 Fund's
commitment. It may be expected that the Fund'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 Fund will set
aside cash or high quality liquid debt securities to satisfy its purchase
commitments in the manner described above, such Fund's liquidity and the ability
of Provident or DRZ, 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 Fund's commitment
to purchase "when-issued" or "delayed-delivery" securities will not exceed 25%
of its assets.
When a Fund 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 Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. Such Funds will engage in "when-issued" delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Funds' investment objectives and policies and not for investment
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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 Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from banks 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 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. 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 DRZ, as the case
may be. If the seller were to default on its repurchase obligation or become
insolvent, the Fund 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 Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that a Fund
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 Fund'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 Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectuses, each
of the Funds, other than the Money Market Fund, may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with that
Fund's investment restrictions. Pursuant to such agreements, a Fund 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 Fund intends to enter into reverse repurchase agreements only to avoid
otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a 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
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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 Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Except as otherwise disclosed to the shareholders of the particular
Fund, the Company will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase agreements with Provident, DRZ, 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 Fund may be authorized to engage as described in
the 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 Fund, 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 Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. [The use of currency transactions can result in a Fund 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 correlation between price
movements of futures contracts and price movements in the related portfolio
position of the Fund create the possibility that losses on the hedging
instrument may be greater than gains in the value of such Fund'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 Fund 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
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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, Large Company and Balanced 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 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
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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
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.
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Options and Futures Strategies. In addition, each of the Income, Income
Equity, Ohio Tax-Free, Large Company and Balanced 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 discussed in greater detail below. In addition, many hedging
transactions involving options require segregation of a Fund's assets in special
accounts, as described further below. The Funds that are authorized to engage in
options transactions will only deal with exchange traded options, as opposed to
over-the-counter traded options. Exchange traded options, unlike
over-the-counter traded options, have standardized terms and performance
mechanics. Exchange-traded options generally are guaranteed by the clearing
agency which is the issuer or counterparty to such options. This guarantee
usually is supported by a daily payment system (i.e., variation margin
requirements) operated by the clearing agency in order to reduce overall credit
risk. As a result, unless the clearing agency defaults, there is relatively
little counterparty credit risk associated with options purchased on an
exchange.
With certain exceptions, 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
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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, 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 Fund'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.
All options written by a Fund must be "covered" (i.e., the Fund 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 Fund will receive the option premium to help protect it against loss, a call
option written by a Fund exposes the Fund 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 Fund to hold a security or
instrument which it might otherwise have sold. With respect to put options
written by a Fund, such Fund 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,
Large Company and Balanced 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 and the Large Company 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
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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.
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 interest rates which
otherwise might adversely affect the value of securities which such a Fund 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 Fund 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 Fund,
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through the purchase of such contracts, can attempt to secure better rates or
prices for the Fund 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 Fund 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.
Futures transactions involve brokerage costs and require a Fund 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 Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly correlated
with the value of its portfolio securities, limiting the Fund's ability to hedge
effectively against interest 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.
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, a Fund 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 Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of such Fund's total assets after
taking into account unrealized profits and unrealized losses on any contracts
entered into. Such Fund 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 Fund 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.
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FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objective of each of the Funds is fundamental and may
not be changed without approval of the holders of a majority of such Fund'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 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, the Large Company Fund and the Balanced 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;
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2. Underwrite the securities issued by other persons, except to the
extent that a Fund 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 Fund; 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 Prospectus,
each Fund has adopted the following additional restrictions, which may be
changed by the Board of Directors without the vote of a Fund's shareholders:
1. A Fund may not purchase or retain securities of an issuer if, to the
knowledge of the Company, officers, Trustees or 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 Funds. Nor may securities of any of the Funds 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, the Large Company Fund and the Balanced Fund may
not:
1. Engage in any short sales, except to the extent disclosed in the
current Prospectus of the Fund;
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
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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 Fund's shares in certain states, the
Company may make commitments more restrictive than the investment restrictions
described in the Prospectus. Should the Company determine that any such
commitment is no longer in the best interests of a Fund, it will revoke the
commitment by terminating sales of a Fund'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.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund'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 Funds (other than the Money
Market Fund, the Stock Appreciation Fund and the Large Company Fund) for the two
fiscal years ended December 31, 1995 and 1994 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%
Balanced Fund(2) 13% 1%
</TABLE>
(1) Commenced operations August 1, 1994
(2) Commenced operations September 1, 1994
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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%, respectively. There are no portfolio
turnover rates for the Large Company Fund since it has not yet commenced
operations.
The portfolio turnover rate for each 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. High portfolio turnover rates will
generally result in higher transaction costs, including brokerage commissions to
a Fund, and may result in additional tax consequences to such Fund's
shareholders. Portfolio turnover will not be a limiting factor in making
investment decisions.
DIVIDENDS AND TAXES
Each Fund 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 Fund 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
Fund'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 Fund pays the distribution. Unless a Fund 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, the Large Company Fund's and the Balanced
Fund's income distributions will be eligible for the 70% corporate dividends
received deduction.
ADDITIONAL TAX INFORMATION
Each of the Funds of the Company is treated as a separate entity for
federal income tax purposes and intends to qualify as a
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<PAGE> 96
"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 Fund's shareholders. In order to qualify as a regulated investment
company, each Fund 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 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 Fund 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
Fund'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 Fund would be subject to a non-deductible excise tax equal to 4% of
the deficiency.
Although each such Fund 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 Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year a Fund 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.
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<PAGE> 97
The Money Market Fund, the Income Fund, the Income Equity Fund, the
Stock Appreciation Fund, the Large Company Fund and the Balanced Fund. It is
expected that each such Fund will distribute annually to shareholders all or
substantially all of the Fund'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 income tax
purposes, even if paid in additional shares of the Fund and not in cash.
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.
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 Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so
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<PAGE> 98
designated may not exceed the amount received by the Fund 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 Funds
will qualify for the 70% dividends received deduction.
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.
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<PAGE> 99
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. 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
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<PAGE> 100
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 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 the 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 Fund 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
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<PAGE> 101
redemption or the values of any exchanges of shares of the Fund, if such
shareholder (1) fails to furnish the Fund with a correct taxpayer identification
number, (2) under-reports dividend or interest income, or (3) fails to certify
to the Fund 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 Prospectus and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of shares of a Fund. No attempt has been made to present a detailed explanation
of the federal income tax treatment of a Fund or its shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectus and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the Prospectus 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 Funds 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 Funds may include officers, directors, or employees of Provident
or the Entities.
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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 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
Fund'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
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<PAGE> 103
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 purpose 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
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<PAGE> 104
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,
THE RIVERFRONT LARGE COMPANY FUND AND THE RIVERFRONT BALANCED FUND
Current values for such Funds' securities are determined as follows:
(1) Securities that are traded on a securities exchange or the
over-the-counter National Market System (NMS) are valued on the basis of the
closing 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.
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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.
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 and Treasurer; 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).
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<PAGE> 106
*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, DRZ, JIR, the Distributor or BISYS Fund Services
Ohio, Inc. received any direct remuneration from the Company.
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 Funds, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
Subject to the general supervision of the Company's Board of Directors
and in accordance with the Funds' investment objectives, policies and
restrictions, investment advisory services are provided to the Funds of the
Company by The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202
("Provident") pursuant
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<PAGE> 107
to the Investment Advisory Agreement dated as of August 1, 1994, as amended as
of January 1, 1997 (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 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 Funds as described in the Prospectus. For the
services provided and expenses assumed pursuant to the Investment Advisory
Agreement, each of the Company's Funds 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 Fund. The annual rates for the Funds 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;
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<PAGE> 108
eighty one-hundredths of one percent (.80%) for the Large Company Fund;
and ninety one-hundredths of one percent (.90%) for the Balanced Fund.
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.
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 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
Funds 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)
Balanced $76,231 2,255
</TABLE>
(1) Commenced operations September 30, 1995.
The Company did not pay any investment advisory fees to Provident with
respect to the Large Company Fund since such Fund has not yet commenced
operations.
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.
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<PAGE> 109
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, 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 Fund $115,029,
and the Income Equity Fund paid $337,251 in expenses, of which amount Provident
reimbursed such Fund $35,381. For the fiscal year ended December 31, 1994,
Provident waived investment advisory fees or reimbursed the Funds for certain
expenses in the following amounts: the Balanced 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 Funds for
certain expenses in the following amounts: the Income Fund - $548; the Income
Equity Fund - $73,635; the Tax Free Fund - $11,778; the Balanced Fund - $69,745;
and the Stock Appreciation Fund - $900.
Unless sooner terminated, the Investment Advisory Agreement and the
Sub-Investment Advisory Agreement (as described below) continue in effect as to
a particular Fund 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 Fund (as
defined under "The Company and its Funds" in the Prospectus), and a majority of
the Directors who are not parties to the Investment Advisory Agreement or the
Sub-Investment Advisory Agreement or interested persons (as defined in the 1940
Act) of any party to the Investment Advisory Agreement or the Sub-Investment
Advisory Agreement by votes cast in person at a meeting called for such purpose.
The Investment Advisory Agreement and the Sub-Investment Advisory Agreement are
terminable as to a particular Fund at any time on 60 days' written notice
without penalty by the Fund, by vote of a majority of the outstanding shares of
that Fund, 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.
The Investment Advisory Agreement and the Sub-Investment Advisory
Agreement provide that the respective investment adviser or sub-investment
adviser shall not be liable for any error of
B - 34
<PAGE> 110
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 adviser 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, as amended as of January 1, 1997, 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 that portion of the
assets of the Income Equity Fund allocated to DRZ by the Company's Board of
Directors 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 that specified portion 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, the day-to-day management of that portion of the Income
Equity Fund's assets allocated to it by the Company's Board of Directors, 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. In
addition, DRZ has indicated a willingness to manage net assets of the Income
Equity Fund up to $75 million, but not beyond. The Board of Directors have
considered and shall continue to consider such limitation in determining what
portion of the Income Equity Fund's assets should be allocated to DRZ to be
managed.
DRZ is owned jointly by Gregory M. DePrince, John D. Race and Victor A.
Zollo, Jr. DRZ was established on March 1, 1995, to 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.
B - 35
<PAGE> 111
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.
From August 1, 1994 to December 31, 1996, James Investment Research,
Inc., 1349 Fairground Road, Beavercreek, Ohio 45385 ("JIR"), served as the
sub-investment adviser to the Balanced Fund pursuant to a Sub-Investment
Advisory Agreement dated August 1, 1994 (the "JIR Sub-Advisory Agreement").
For its services provided and expenses assumed pursuant to the JIR
Sub-Advisory Agreement with Provident, JIR received from Provident a fee,
computed daily and paid monthly, at the annual rate of fifty one-hundredths of
one percent (.50%) of the Balanced Fund's average daily net assets. Pursuant to
the terms of the JIR Sub-Advisory Agreement, for the fiscal year ended December
31, 1995 and the period of September 1, 1994, to 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.
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<PAGE> 112
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 Funds. Under the Amended and Restated Custodian, Fund Accounting and
Recordkeeping Agreement dated as of August 1, 1994, as amended as of January 1,
1997, Provident receives an annual fee from each Fund, computed daily and paid
monthly, at an annual rate calculated as a percentage of the average daily net
assets of that Fund. The annual rates for the Funds are as follows: .05% for the
Money Market Fund; .10% for the Income Fund; .15% for each of the Income Equity
Fund, the Balanced Fund, the Large Company 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 Funds. For the year ended December
31, 1995, the Money Market Fund, the Income Fund, the Income Equity Fund, the
Balanced 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. During such period, no fees were paid to
Provident for such services with respect to the Large Company Fund since such
Fund had not yet commenced operations.
Under the Master Transfer and Recordkeeping Agreement, Provident
receives from each Fund a fee for each class of shares of that Fund, plus
certain out-of-pocket expenses. The Money Market Fund pays Provident a fee equal
to $24 per account over 500 accounts per year with an annual minimum fee of
$24,000. Each of the other Funds pays Provident for each class of shares a fee
equal to $20 per account over 500 accounts per year, with an annual minimum fee
of $20,000.
SECURITIES TRANSACTIONS
Each adviser, under policies established by the Board of Directors,
selects broker-dealers to execute transactions for the Funds. 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 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
B - 37
<PAGE> 113
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 Funds 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 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 a Fund 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 Funds and other clients of the adviser
who may indirectly benefit from the availability of such information. Similarly,
the Funds 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 Funds.
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
B - 38
<PAGE> 114
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 Fund 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 Fund 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 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, the Large Company
Fund and the Balanced 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 Fund 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.
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<PAGE> 115
The Company's Board of Directors has determined that each Fund 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 Funds are made independently from similar
accounts managed by the advisers. Such similar accounts may also invest in the
same securities as the Funds. When a purchase or sale of the same security is
made at substantially the same time on behalf of a Fund 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 Fund and such accounts. In some instances, these
investment procedures may adversely affect the price paid or received by a Fund
or the size of the position obtained by a Fund. To the extent permitted by law,
each adviser may aggregate the securities to be sold or purchased for a Fund
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 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
Balanced 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
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<PAGE> 116
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 Funds 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 Fund
pursuant to the Administration Agreement dated February 1, 1996, as amended as
of January 1, 1997 (the "Administration Agreement"). The Administrator assists
in supervising all operations of each Fund (other than those performed by
Provident and DRZ under the Investment Advisory Agreements and Sub-Investment
Advisory Agreement, 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 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 Funds
and file all the Funds' federal and state tax returns and required tax filings
other than those required to be made by the Funds' 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 Funds, 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)
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<PAGE> 117
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 and DRZ under the Investment Advisory Agreement and Sub-Investment
Advisory Agreement, 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 Fund 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 Fund's average daily net assets. The Administrator may
voluntarily reduce all or a portion of its fee with respect to any Fund in order
to increase the net income of one or more of the Funds 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
Fund 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 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 Balanced 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 Balanced Fund, for administration services. For the fiscal year
ended December 31, 1993, and the one-month period ended January 31, 1994,
Keystone
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<PAGE> 118
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. The Administrator received no fees during such period with respect
to the Large Company Fund since such Fund had not yet commenced operations.
DISTRIBUTOR
The Distributor serves as distributor to the Company and each of the
Funds pursuant to the Distribution Agreement dated February 1, 1994, as amended
January 1, 1997 (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
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.
B - 43
<PAGE> 119
DISTRIBUTION PLANS
Each Fund has adopted a Distribution and Shareholder Service Plan and
Agreement relating to its Investor A class of shares (the "Investor A Plan")
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, the
Large Company Fund and the Balanced 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 Plan"). The
Investor A Plan and the Investor B Plan 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 Fund
adopted both its Investor A Plan and Investor B Plan prior to the public
offering of its shares of that class. The Investor A Plan provides that a Fund
may incur certain expenses which may not exceed a maximum amount up to 0.25% of
such Fund's average daily net assets for any fiscal year occurring after the
inception of the Investor A Plan. Amounts paid under the Investor A Plan are
to be paid to the Distributor in order to pay costs of distribution of a Fund'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 Fund and to
enable the Distributor to pay or to have paid to others who sell or have sold
Fund Investor A shares a maintenance or other fee, at such intervals as the
Distributor may determine in respect of Fund 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 Fund for continuing services to their clients
based on the average daily net asset value of such accounts remaining
outstanding on the books of the Fund for specified periods.
The Investor B Plan authorizes a Fund 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 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 .75% of the
average daily net asset value of Investor B shares of that Fund (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 Fund (the "Service Fee"). Payments of the Distribution Fee to the
Distributor pursuant to the Investor B Plan will be used (i) to compensate
Participating
B - 44
<PAGE> 120
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. 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 Funds 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 Funds do not pay for unreimbursed expenses of the Distributor,
including amounts expended by the Distributor in excess of amounts received by
it from the Funds, 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 Fund 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, 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 Fund. Each Plan may be
terminated as to a specific class of a Fund 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 that Fund.
B - 45
<PAGE> 121
For the fiscal year ended December 31, 1995, the following amounts were
payable by the Funds (other than the Large Company Fund which had not yet
commenced operations) 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) 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
Balanced 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.
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 seven series of shares which represent interests in the
Funds of the Company. The shares of each Fund, 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
Prospectus. Shareholders are entitled to redeem their shares as set forth under
"How to Redeem Shares" in the Prospectus. The shares are transferable without
restriction. The Company does not issue certificates representing 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
B - 46
<PAGE> 122
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, the Large Company
Fund and the Balanced 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 Fund
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 Fund over the relevant period and is calculated similarly to
average annual total return except that the result is not annualized.
The average annual total returns of each of the Funds 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 6/30/96 6/30/96 6/30/96(1) 6/30/96 6/30/96 6/30/96(1)
---- ------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Money Market 5.11% N/A 4.11% 5.11% N/A 4.11%
Income (0.77)% N/A 2.55% 3.94% N/A 3.81%
Income Equity 17.64% N/A 15.78% 23.17% N/A 17.21%
Ohio Tax-Free (0.63)% N/A 2.37% 4.05% N/A 4.85%
Stock
Appreciation(2) 13.37% 12.81% 9.57% 18.70% 13.85% 10.14%
Balanced 2.74% N/A 7.17% 7.62% N/A 9.89%
</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 Balanced Fund -- 9/1/94.
B - 47
<PAGE> 123
(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 6/30/96(3) Inception to 6/30/96(4)
---- ------------------------- -----------------------
<S> <C> <C>
Income (0.92%) 2.65%
Income Equity 18.04% 16.00%
Ohio Tax-Free (0.71%) 2.23%
Stock Appreciation 14.34% 10.10%
Balanced 3.52% 7.64%
</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 Balanced
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 Balanced Fund for such
periods would have been lower.
For the one year, five year and ten year periods ended September 30,
1996, the average annual total returns for the CIFs (the predecessors to the
Large Company Fund) have been restated to reflect the estimated fees for the
Large Company Fund for the current fiscal year and are as follows:
Investor A Shares
-----------------
With Sales Loads Without Sales Loads
---------------- -------------------
One Year Five Year Ten Year One Year Five Year Ten Year
-------- --------- -------- -------- --------- --------
14.55% 12.57% 11.79% 19.96% 13.62% 12.31%
Invester B Shares
-----------------
One Year Five Year Ten Year
-------- --------- --------
15.08% 12.66% 11.47%
30-DAY YIELD
Current yield quotations as they may appear from time to time in
advertisements will consist of a quotation based on a recent 30-day period,
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 Balanced Fund were 5.17%,
1.27%, 3.61% and 2.75%, respectively, for the 30-day period ended June 30, 1996,
assuming the imposition of a sales load, and 5.42%, 1.33%, 3.78% and 2.88%,
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 Balanced Fund were 4.61%, 0.64%, 3.08% and
2.08%, 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 Tax-Free Fund and the Balanced Fund for the same period would have been
lower.
B - 48
<PAGE> 124
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 June 30,
1996, the tax-equivalent yield for the Investor A shares of the Ohio Tax-Free
Fund (assuming a 39.6% federal tax rate) were 5.98%, assuming the imposition of
the maximum sales charge, and 6.26%, 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 5.10%.
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 June 30, 1996, the
current yield of the Money Market Fund was ____%.
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 yield 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 June 30, 1996, 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 depending on market conditions and
principal. Each yield also depends on the quality, maturity and type of
instruments held and
B - 49
<PAGE> 125
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 Balanced Fund may from time to time advertise current distribution
rates which are calculated in accordance with the method disclosed in the
Prospectus. For the 12 month period ended June 30, 1996, the distribution rates
for the Investor A shares of the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund and the Balanced Fund assuming the imposition of the maximum
sales charge, were 5.32%, 11.71%, 3.66% and 3.91%, respectively, including
capital gains, and 5.32%, 1.67%, 3.66% and 3.01%, respectively, excluding
capital gains. For the 12 month period ended June 30, 1996, the distribution
rates for the Investor B shares of the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund and the Balanced Fund were 4.58%, 8.08%, 2.99% and 3.18%,
respectively, including capital gains, and 4.58%, 0.85%, 2.99% and 2.30%,
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 Fund'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 Fund'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 Fund.
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
Funds within the Company; (e) descriptions of investment strategies for one or
more of the Funds within the Company; (f) descriptions of investment strategies
for one or more of such Funds; (g) descriptions or comparisons of various
investment products, which may or may not include the Funds; (h) comparisons of
investments products (including the Funds) with relevant market or industry
indices or other appropriate benchmarks; (i) discussions of fund
B - 50
<PAGE> 126
rankings or ratings by recognized rating organizations; and (j) testimonials
describing the experience of persons that have invested in one or more of the
Funds.
ADDITIONAL INFORMATION
To the knowledge of the Company, as of October 16, 1996: The Provident
Bank, One East Fourth Street, Cincinnati, Ohio 45202, owned of record 69.41% of
the outstanding Investor A shares of the Income Fund, 70.12% of the outstanding
Investor A shares of the Money Market Fund and 96.99% of the outstanding
Investor A shares of the Ohio Tax-Free Fund; The Provident Bank Trust
Department Employee Benefit Plan, 3 East Fourth Street, Cincinnati, Ohio 45207
owned of record 13.96% of the outstanding Investor A shares of the Income Fund,
7.66% of the outstanding Investor A shares of the Income Equity Fund and 14.74%
of the outstanding Investor A shares of the Balanced Fund; The Provident Bank
Trust Department, 3 East Fourth Street, Cincinnati, Ohio 45202, owned of record
7.44% of the outstanding Investor A shares of the Income Fund, and 5.87% of the
outstanding Investor A shares of the Balanced Fund; The Chase Manhattan Bank as
Trustee for The General Cable Corporation, 4 Tesseneer Drive, Highland Heights,
Kentucky 41076, owned of record 41.09% 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 8.36% of the
outstanding Investor A shares of the Balanced Fund; James Investment Research,
Inc. Pension and Profit Sharing Plan, P.O. Box 8, Alpha, Ohio 45301-0008,
owned 7.32% of the outstanding Investor A shares of the Balanced Fund; and
Construction Industry Manufacturers Association, Suite 940, 111 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, owned of record 5.31% of the outstanding
Investor A Shares of the Income Equity Fund.
As of October 16, 1996, The Fifth Third Bank, FBO Cincinnati Institute
of Fine Arts, P. O. Box 63074, Cincinnati, Ohio 45263, owned beneficially 19.78%
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, owned of
record 23.3% of the outstanding Investor A Shares of the Money Market Fund;
44.35% of the outstanding Investor A Shares of the Balanced Fund; 25.09% of the
outstanding Investor A Shares of the Income Equity Fund; 73.88% of the
outstanding Investor B shares of Ohio Tax-Free Fund; and 26.88% of the
outstanding Investor B shares of the Stock Appreciation Fund. 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 A shares of the Income Equity Fund, the Income
Fund or the Balanced Fund.
B - 51
<PAGE> 127
As of the date immediately preceding the public offering of the shares
of the Large Company Fund, BISYS Fund Services Ohio, Inc., an affiliate of the
Distributor, owned all of the outstanding shares of the Large Company Fund. It
is anticipated that immediately after such public offering, BISYS Fund Services
Ohio, Inc.'s holding will be decreased below 5% of the Large Company Fund's
issued and outstanding Shares.
AUDITORS
The financial statements for each of the Funds, other than the Stock
Appreciation Fund and the Large Company 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 Prospectus, this Statement of
Additional Information, or required by law, the Company reserves the right to
change the terms of the offer stated in the Prospectus or this Statement of
Additional Information without shareholder approval, including the right to
impose or change fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Prospectus, 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 Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission (the "Commission") which may be obtained from
the Commission's principal office in Washington, D.C. upon payment of the fee
prescribed by the Rules and Regulations promulgated by the Commission.
B - 52
<PAGE> 128
FINANCIAL STATEMENTS
Effective December __, 1996, The Riverfront Flexible Growth Fund, the
financial statements of which are included herein, changed its name to The
Riverfront Balanced Fund.
The following unaudited financial statements for the period ended June 30,
1996, reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods presented. Of
course, there can be no guarantee that such results will be reflected in the
financial statements as of December 31, 1996.
B - 53
<PAGE> 129
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES MONEY U.S. GOVERNMENT INCOME
MARKET FUND INCOME FUND EQUITY FUND
---------------- --------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$118,594,200; $35,104,732; and
$68,690,785, respectively)...... $118,594,200 $35,112,277 $72,913,779
Repurchase agreements (Cost
$55,150,000; $0; and $0,
respectively).................... 55,150,000 -- --
------------ ----------- -----------
Total Investments............. 173,744,200 35,112,277 72,913,779
Interest and dividends
receivable....................... 24,473 419,215 193,334
Receivable for capital shares
issued........................... -- -- 37,337
Receivable for investments sold.. -- -- 481,918
Receivable from investment
adviser.......................... -- 36,688 44,526
Prepaid expenses and other
assets........................... 9,442 5,517 19,323
------------ ----------- -----------
Total Assets.................. 173,778,115 35,573,697 73,690,217
------------ ----------- -----------
LIABILITIES:
Dividends payable................ 663,920 148,404 75,143
Payable for capital shares
redeemed......................... -- 47,990 27,684
Payable for investments
purchased........................ -- -- 974,951
Accrued expenses and other
payables:
Investment advisory fees........ 25,335 11,507 53,169
Administration fees............. 30,233 5,754 11,247
12b-1 fees (Investor A)......... -- 4,190 10,933
12b-1 fees (Investor B)......... -- 978 3,893
Audit and legal fees............ 37,123 10,039 7,980
Other........................... 37,676 10,173 13,075
------------ ----------- -----------
Total Liabilities............. 794,287 239,035 1,178,075
------------ ----------- -----------
NET ASSETS:
Capital.......................... 172,986,118 37,227,426 61,564,894
Undistributed (distributions in
excess of) net investment income. -- 18,462 (6,186)
Net unrealized appreciation on
investments...................... -- 7,545 4,222,994
Accumulated undistributed net
realized gains (losses) on
investment transactions......... (2,290) (1,918,771) 6,730,440
------------ ----------- -----------
Net Assets.................... $172,983,828 $35,334,662 $72,512,142
============ =========== ===========
Net Assets
Investor A Shares............... $172,983,828 $34,144,538 $67,611,962
Investor B Shares............... NA 1,190,124 4,900,180
------------ ----------- -----------
Total......................... $172,983,828 $35,334,662 $72,512,142
============ =========== ===========
Shares of capital stock
Investor A Shares............... 172,986,121 3,655,928 5,325,955
Investor B Shares............... NA 112,972 381,416
------------ ----------- -----------
Total......................... 172,986,121 3,768,900 5,707,371
============ =========== ===========
Net asset value
Investor A Shares--redemption
price per share................. $ 1.00 $ 9.34 $ 12.70
Investor B Shares--offering
price per share*................ NA $ 10.53 $ 12.85
============ =========== ===========
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) $ 9.78 $ 13.30
============ =========== ===========
</TABLE>
- ------
(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.
NA Not applicable.
See notes to financial statements.
B-54
<PAGE> 130
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE GROWTH STOCK APPRECIATION
BOND FUND FUND FUND
------------- --------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$10,940,541; $20,633,173; and
$32,532,749, respectively)... $11,191,246 $21,627,078 $38,363,504
Interest and dividends
receivable.................... 65,735 139,297 6,874
Receivable for capital shares
issued........................ -- 89,354 1,909
Receivable from investment
adviser....................... -- 39,694 --
Unamortized organization
costs......................... 911 229 28,691
Prepaid expenses and other
assets........................ 4,972 13,566 28,787
----------- ----------- -----------
Total Assets............... 11,262,864 21,909,218 38,429,765
----------- ----------- -----------
LIABILITIES:
Dividends payable............. 32,810 37,118 --
Payable for capital shares
redeemed...................... -- 3,220 156
Accrued expenses and other
payables:
Investment advisory fees..... 3,653 13,825 25,678
Administration fees.......... 1,826 3,456 6,420
12b-1 fees (Investor A)...... 2,290 1,425 7,904
12b-1 fees (Investor B)...... 591 6,910 481
Audit and legal fees......... 4,030 3,708 5,155
Custodian fees............... 1,278 2,592 4,815
Other........................ 1,529 5,723 858
----------- ----------- -----------
Total Liabilities.......... 48,007 77,977 51,467
----------- ----------- -----------
NET ASSETS:
Capital....................... 10,962,591 21,075,251 29,011,041
Undistributed (distributions
in excess of) net investment
income........................ 4,291 6,052 (233,107)
Net unrealized appreciation on
investments................... 250,705 993,905 5,830,755
Accumulated undistributed net
realized gains (losses) on
investment transactions...... (2,730) (243,967) 3,769,609
----------- ----------- -----------
Net Assets................. $11,214,857 $21,831,241 $38,378,298
=========== =========== ===========
Net Assets
Investor A Shares............ $10,538,311 $13,121,118 $37,759,161
Investor B Shares............ 676,546 8,710,123 619,137
----------- ----------- -----------
Total...................... $11,214,857 $21,831,241 $38,378,298
=========== =========== ===========
Shares of capital stock.......
Investor A Shares............ 1,030,877 1,181,864 3,746,931
Investor B Shares............ 64,747 761,462 59,260
----------- ----------- -----------
Total...................... 1,095,624 1,943,326 3,806,191
=========== =========== ===========
Net asset value...............
Investor A Shares--
redemption price per share... $ 10.22 $ 11.10 $ 10.08
Investor B Shares--offering
price per share*............. $ 10.45 $ 11.44 $ 10.45
=========== =========== ===========
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)........... $ 10.70 $ 11.62 $ 10.55
=========== =========== ===========
</TABLE>
- ------
* Redemption price of Investor B shares varies based on length of time shares
are held.
See notes to financial statements.
B-55
<PAGE> 131
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<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................. $4,577,860 $ 1,190,822 $ 70,966
Dividend income................. -- -- 1,075,742
---------- ----------- -----------
Total Income................ 4,577,860 1,190,822 1,146,708
---------- ----------- -----------
EXPENSES:
Investment advisory fees........ 128,251 72,518 325,427
Administration fees............. 170,993 36,259 68,463
12b-1 fees (Investor A)......... 213,848 43,784 80,717
12b-1 fees (Investor B)......... -- 6,092 19,629
Custodian and accounting fees... 42,748 18,129 51,348
Audit and legal fees............ 64,642 14,682 28,822
Trustees' fees and expenses..... 7,114 1,680 2,990
Transfer agent fees............. 34,381 18,236 24,538
Registration and filing fees.... 38,777 7,635 25,082
Printing costs.................. 18,740 4,400 8,548
Other........................... 5,456 1,823 2,169
---------- ----------- -----------
Expenses before fee waivers and
expense reimbursements..... 724,950 225,238 637,733
Less: Fee waivers and expense
reimbursements................. (213,848) (13,694) (33,109)
---------- ----------- -----------
Net Expenses................ 511,102 211,544 604,624
---------- ----------- -----------
Net Investment Income........... 4,066,758 979,278 542,084
---------- ----------- -----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS
Net realized gains (losses) from
investment transactions........ -- (11,433) 6,703,449
Net change in unrealized
depreciation from investments.. -- (1,429,289) (1,159,002)
---------- ----------- -----------
Net realized/unrealized gains
(losses) from investments...... -- (1,440,722) 5,544,447
---------- ----------- -----------
Change in net assets resulting
from operations................ $4,066,758 $ (461,444) $ 6,086,531
========== =========== ===========
</TABLE>
See notes to financial statements.
B-56
<PAGE> 132
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE STOCK
OHIO TAX-FREE GROWTH APPRECIATION
BOND FUND FUND FUND
------------- --------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $ 301,982 $ 302,638 $ 73,771
Dividend income.......................... -- 114,153 56,152
--------- --------- -----------
Total Income......................... 301,982 416,791 129,923
--------- --------- -----------
EXPENSES:
Investment advisory fees................. 28,245 82,480 155,525
Administration fees...................... 11,301 18,287 38,881
12b-1 fees (Investor A).................. 13,308 14,044 48,137
12b-1 fees (Investor B).................. 3,273 35,370 1,860
Custodian and accounting fees............ 7,911 13,716 29,161
Audit and legal fees..................... 4,882 5,878 17,724
Organization costs....................... 4,914 1,820 19,540
Trustees' fees and expenses.............. 558 898 1,919
Transfer agent fees...................... 12,462 12,755 18,115
Registration and filing fees............. 1,998 3,396 17,577
Printing costs........................... 1,281 5,961 12,867
Other.................................... 910 539 1,435
--------- --------- -----------
Expenses before fee waivers and expense
reimbursements.......................... 91,043 195,144 362,741
Less: Fee waivers and expense
reimbursements...................... (5,643) (24,242) --
--------- --------- -----------
Net Expenses......................... 85,400 170,902 362,741
--------- --------- -----------
Net Investment Income (Loss)............. 216,582 245,889 (232,818)
--------- --------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS
Net realized gains (losses) from
investment transactions................. (2,920) (243,967) 3,769,609
Net change in unrealized depreciation
from investments........................ (307,674) (206,105) (1,287,068)
--------- --------- -----------
Net realized/unrealized gains (losses)
from investments........................ (310,594) (450,072) 2,482,541
--------- --------- -----------
Change in net assets resulting from
operations.............................. $ (94,012) $(204,183) $ 2,249,723
========= ========= ===========
</TABLE>
See notes to financial statements.
B-57
<PAGE> 133
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
---------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.. $ 4,066,758 $ 7,906,286 $ 979,278 $ 2,067,824 $ 542,084 $ 1,082,073
Net realized gains
(losses) from
investment
transactions.......... -- (1,415) (11,433) (517,451) 6,703,449 6,655,045
Net change in
unrealized
appreciation
(depreciation) from
investments........... -- -- (1,429,289) 3,520,908 (1,159,002) 5,311,784
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
resulting from
operations............. 4,066,758 7,904,871 (461,444) 5,071,281 6,086,531 13,048,902
------------- ------------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income................ (4,066,758) (7,906,286) (940,840) (2,032,120) (531,555) (1,065,510)
In excess of net
investment income..... -- -- -- -- -- (6,742)
From net realized gains
from investments...... -- -- -- -- -- (6,293,075)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment
income................ -- -- (27,782) (22,977) (16,715) (16,563)
In excess of net
investment income..... -- -- -- -- -- (105)
From net realized gains
from investments...... -- -- -- -- -- (222,170)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from shareholder
distributions.......... (4,066,758) (7,906,286) (968,622) (2,055,097) (548,270) (7,604,165)
------------- ------------- ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 187,416,065 331,872,719 1,359,606 5,670,500 6,943,511 12,155,416
Proceeds from shares
issued in connection
with acquisition...... -- 4,865,634 -- -- -- 9,727,219
Dividends reinvested... 1,076,488 1,518,099 216,290 578,837 707,286 8,648,647
Cost of shares
redeemed.............. (173,004,224) (330,133,820) (2,612,343) (4,185,229) (4,355,305) (7,262,834)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from capital
transactions........... 15,488,329 8,122,632 (1,036,447) 2,064,108 3,295,492 23,268,448
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets.... 15,488,329 8,121,217 (2,466,513) 5,080,292 8,833,753 28,713,185
NET ASSETS:
Beginning of period.... 157,495,499 149,374,282 37,801,175 32,720,883 63,678,389 34,965,204
------------- ------------- ----------- ----------- ----------- -----------
End of period.......... $ 172,983,828 $ 157,495,499 $35,334,662 $37,801,175 $72,512,142 $63,678,389
============= ============= =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 187,416,065 331,872,719 140,407 592,903 562,689 1,069,857
Issued in connection
with acquisition...... -- 4,865,634 -- -- -- 793,942
Reinvested............. 1,076,488 1,518,099 22,547 61,636 58,270 764,131
Redeemed............... (173,004,224) (330,133,820) (272,085) (444,444) (352,570) (634,159)
------------- ------------- ----------- ----------- ----------- -----------
Change in shares........ 15,488,329 8,122,632 (109,131) 210,095 268,389 1,993,771
============= ============= =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
B-58
<PAGE> 134
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND
------------------------- -------------------------
SIX SIX
MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1995 1996 1995
----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income..... $ 216,582 $ 419,775 $ 245,889 $ 275,589
Net realized gains
(losses) from investment
transactions............ (2,920) 8,848 (243,967) 131,879
Net change in unrealized
appreciation
(depreciation) from
investments............. (307,674) 713,315 (206,105) 1,230,202
----------- ----------- ----------- -----------
Change in net assets
resulting from
operations............... (94,012) 1,141,938 (204,183) 1,637,670
----------- ----------- ----------- -----------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment
income................... (207,865) (401,164) (170,197) (202,502)
From net realized gains
from investments......... -- -- -- (85,787)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment
income................... (9,885) (13,152) (78,806) (63,921)
From net realized gains
from investments......... -- -- -- (43,216)
----------- ----------- ----------- -----------
Change in net assets from
shareholder distributions. (217,750) (414,316) (249,003) (395,426)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................... 252,290 895,943 8,894,629 11,076,750
Dividends reinvested...... 11,379 18,208 252,100 334,888
Cost of shares redeemed... (454,091) (114,312) (1,319,196) (906,216)
----------- ----------- ----------- -----------
Change in net assets from
capital transactions..... (190,422) 799,839 7,827,533 10,505,422
----------- ----------- ----------- -----------
Change in net assets....... (502,184) 1,527,461 7,374,347 11,747,666
NET ASSETS:
Beginning of period....... 11,717,041 10,189,580 14,456,894 2,709,228
----------- ----------- ----------- -----------
End of period............. $11,214,857 $11,717,041 $21,831,241 $14,456,894
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued.................... 23,706 87,181 778,082 1,035,102
Reinvested................ 1,080 1,760 22,095 30,561
Redeemed.................. (43,042) (11,223) (116,822) (82,394)
----------- ----------- ----------- -----------
Change in shares........... (18,256) 77,718 683,355 983,269
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
B-59
<PAGE> 135
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------
PERIOD PERIOD
SIX MONTHS FROM OCTOBER 1, FROM OCTOBER 1, 1994
ENDED 1995 THROUGH THROUGH
JUNE 30, 1996 DECEMBER 31, 1995 (a) SEPTEMBER 30, 1995 (b)
------------- --------------------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss.... $ (232,818) $ (51,131) $ (292,270)
Net realized gains from
investment
transactions......... 3,769,609 1,556,383 3,024,858
Net change in
unrealized
appreciation
(depreciation) from
investments.......... (1,287,068) (2,070,853) 5,538,265
----------- ----------- -----------
Change in net assets
resulting from
operations............ 2,249,723 (565,601) 8,270,853
----------- ----------- -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income................ (289) -- (1,166,721)
From net realized gains
from investments...... -- (1,556,383) --
Tax return of capital.. -- (6,824) --
----------- ----------- -----------
Change in net assets
from shareholder
distributions.......... (289) (1,563,207) (1,166,721)
----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 2,261,501 810,508 --
Dividends reinvested... 554 1,542,781 --
Cost of shares
redeemed.............. (7,200,363) (3,611,887) --
----------- ----------- -----------
Change in net assets
from capital
transactions.......... (4,938,308) (1,258,598) (10,529,141)
----------- ----------- -----------
Change in net assets.... (2,688,874) (3,387,406) (3,425,009)
NET ASSETS:
Beginning of period.... 41,067,172 44,454,578 47,879,587
----------- ----------- -----------
End of period.......... $38,378,298 $41,067,172 $44,454,578
=========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 228,156 83,381
Reinvested............. 59 164,279
Redeemed............... (744,934) (370,208)
----------- -----------
Change in shares........ (516,719) (122,548)
=========== ===========
</TABLE>
- ------
(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.
See notes to financial statements.
B-60
<PAGE> 136
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (39.9%):
Federal Farm Credit Bank:
$1,535,000 Discount Note, 7/12/96.............................. $ 1,532,552
5,000,000 Discount Note, 7/31/96.............................. 4,978,208
2,910,000 Discount Note, 10/21/96............................. 2,863,013
Federal Home Loan Mortgage Corp.:
3,000,000 Discount Note, 7/1/96............................... 3,000,000
3,000,000 Discount Note, 7/3/96............................... 2,999,153
3,852,000 Discount Note, 8/1/96............................... 3,834,752
5,000,000 Discount Note, 8/12/96.............................. 4,969,083
3,025,000 Discount Note, 8/14/96.............................. 3,005,737
4,000,000 Discount Note, 8/19/96.............................. 3,971,689
2,000,000 Discount Note, 8/22/96.............................. 1,984,689
4,000,000 Discount Note, 9/12/96.............................. 3,956,849
4,000,000 Discount Note, 9/18/96.............................. 3,953,390
Federal National Mortgage Assoc.:
3,000,000 Discount Note, 7/5/96............................... 2,998,373
5,000,000 Discount Note, 7/10/96.............................. 4,993,563
3,200,000 Discount Note, 7/24/96.............................. 3,189,369
3,000,000 Discount Note, 8/6/96............................... 2,984,250
4,000,000 Discount Note, 8/23/96.............................. 3,971,616
3,000,000 Discount Note, 9/6/96............................... 2,970,911
3,000,000 Discount Note, 9/9/96............................... 2,968,908
4,000,000 Discount Note, 10/10/96............................. 3,940,859
------------
Total U.S. Government Agencies 69,066,964
------------
COMMERCIAL PAPER (28.6%):
Automobiles (1.7%):
3,000,000 Daimler-Benz North America Corp., Discount Note,
7/22/96............................................ 2,991,250
------------
Banking (1.7%):
3,000,000 Banc One Funding, Discount Note, 8/1/96............. 2,986,179
------------
Beverages (2.9%):
5,000,000 PepsiCo, Discount Note, 8/19/96..................... 4,963,658
------------
Computers (1.7%):
3,000,000 Epson American, Series B, Discount Note, 8/5/96..... 2,985,271
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Financial (12.6%):
$3,000,000 Bank of Tokyo Financial, Discount Note, 7/2/96...... $ 2,999,543
4,000,000 Cargill Financial, Discount Note, 7/26/96........... 3,986,056
4,000,000 Merrill Lynch, Discount Note, 8/12/96............... 3,975,360
4,000,000 Merrill Lynch, Discount Note, 8/26/96............... 3,967,022
3,000,000 Sunbelt Dixie, Discount Note, 7/16/96............... 2,993,337
4,000,000 Sunbelt Dixie, Discount Note, 7/30/96............... 3,982,826
------------
21,904,144
------------
Holding Companies (1.7%):
3,000,000 Japan Leasing U.S. Funding Corp., Discount Note,
7/18/96............................................ 2,992,378
------------
Manufacturing (2.6%):
3,000,000 Hanson PLC, Discount Note, 7/11/96.................. 2,995,500
1,500,000 Hanson PLC, Discount Note, 7/29/96.................. 1,493,700
------------
4,489,200
------------
Transportation (1.9%):
3,229,000 Holland Limited Securitization, Inc., Discount Note,
7/29/96............................................ 3,215,564
------------
Telecommunications (1.8%):
3,000,000 AT&T, Discount Note, 7/2/96......................... 2,999,592
------------
Total Commercial Paper 49,527,236
------------
Total Investments, at amortized cost 118,594,200
------------
</TABLE>
Continued
B-61
<PAGE> 137
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------------------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS (31.9%):
$25,150,000 Dean Witter, 5.20%, 7/1/96 (Collateralized by
various U.S. Treasury and U.S. Government Agency
Securities, 0.00%-11.90%, 7/10/96-2/15/15, market
value--$25,654,047)................................. $ 25,150,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
30,000,000 Prudential, 5.43%, 7/1/96 (Collateralized by various
U.S. Government Agency Securities, 6.00%-7.74%,
11/1/22--4/1/26, market value--$30,600,001)......... $ 30,000,000
------------
Total Repurchase Agreements 55,150,000
------------
Total (Amortized cost--$173,744,200)(a) $173,744,200
============
</TABLE>
- --------
Percentages indicated are based on net assets of $172,983,828.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
B-62
<PAGE> 138
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ----------
<C> <S> <C>
CORPORATE BONDS (21.2%):
Automotive (1.3%):
$ 500,000 Ford Motor Credit Corp., 6.25%, 12/8/05............... $ 463,750
----------
Financial (14.2%):
1,000,000 Chase Manhattan Corp., 8.50%, 2/15/02................. 1,068,750
1,000,000 First Chicago Master Trust, Series-L, Class A 1994
7.15%, 4/15/01....................................... 1,017,740
500,000 Grand Metropolitan Investment Co., 7.45%, 4/15/35..... 508,125
500,000 Lehman Brothers Holdings, 8.50%, 5/1/07............... 527,500
1,000,000 MBNA Master Credit Card Trust, 6.05%, 11/15/02........ 981,730
1,000,000 Midland Bank PLC, (HSBC), 6.95%, 3/15/11.............. 941,250
----------
5,045,095
----------
Telecommunications (2.8%):
1,000,000 U.S. West Capital Corp., 6.31%, 11/1/05............... 982,500
----------
Tobacco (2.9%):
1,000,000 Philip Morris Companies, Inc., 7.50%, 3/15/97......... 1,010,000
----------
Total Corporate Bonds 7,501,345
----------
U.S. GOVERNMENT AGENCIES (66.4%):
Federal Farm Credit:
1,000,000 Discount Note, 7/15/96................................ 997,480
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97........................................ 996,490
500,000 8.07%, 2/27/02........................................ 507,920
875,000 6.38%, 4/29/03........................................ 837,428
Federal Home Loan Mortgage Corp.:
1,500,000 Discount Note, 7/22/96................................ 1,494,720
1,000,000 6.55%, 1/4/00......................................... 996,890
1,000,000 6.78%, 3/28/01........................................ 987,860
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp., continued:
$1,000,000 7.35%, 5/16/05.................................... $ 994,120
500,000 7.50%, 3/15/15.................................... 503,665
1,000,000 7.00%, 10/15/17................................... 989,720
1,000,000 6.00%, 1/15/18.................................... 981,790
1,000,000 7.20%, 6/15/18.................................... 996,780
Federal National Mortgage Assoc.:
1,000,000 5.33%, 6/26/98.................................... 980,490
500,000 9.05%, 4/10/00.................................... 539,045
1,000,000 6.40%, 5/2/01..................................... 989,650
1,317,649 6.00%, 2/1/03..................................... 1,272,032
1,000,000 6.71%, 5/21/03.................................... 995,380
625,000 6.38%, 6/25/03.................................... 598,100
625,000 6.05%, 6/30/03.................................... 599,456
578,254 6.75%, 8/25/04, Series 1992-152, Class H.......... 578,775
1,050,000 8.50%, 2/1/05..................................... 1,092,000
1,000,000 7.00%, 9/25/05, Series 1992-1110, Class G......... 998,760
849,946 7.00%, 9/25/19.................................... 845,535
Government National Mortgage Assoc.
737,574 8.00%, 5/15/03, Pool #35172....................... 743,717
Private Export Funding Corp.:
1,000,000 6.24%, 5/15/02.................................... 975,000
Student Loan Marketing Assoc.:
1,000,000 6.05%, 9/14/00.................................... 978,710
-----------
Total U.S. Government Agencies 23,471,513
-----------
U.S. TREASURY NOTES (7.1%):
1,000,000 6.00%, 11/30/97................................... 1,000,590
1,000,000 5.88%, 3/31/99.................................... 990,280
500,000 7.25%, 5/15/04.................................... 518,090
-----------
Total U.S. Treasury Notes 2,508,960
-----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community, 9.13%, 3/15/01.......... 393,744
-----------
Total Yankee Dollar Bonds 393,744
-----------
</TABLE>
Continued
B-63
<PAGE> 139
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
INVESTMENT COMPANIES (3.5%):
1,236,715 Dreyfus Treasury Prime Fund............................ $ 1,236,715
-----------
Total Investment Companies 1,236,715
-----------
Total (Cost--$35,104,732)(a) $35,112,277
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $35,334,662.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............ $357,092
Unrealized depreciation............ (349,547)
--------
Net unrealized appreciation........ $ 7,545
========
</TABLE>
See notes to financial statements.
B-64
<PAGE> 140
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (94.2%):
Apparel (0.3%):
3,100 V.F. Corp.............................................. $ 184,838
-----------
Auto Parts (1.0%):
18,800 Echlin, Inc............................................ 712,050
-----------
Banks (7.7%):
5,100 BayBanks, Inc.......................................... 549,525
44,700 Central Fidelity Banks, Inc............................ 1,016,925
17,800 Crestar Financial Corp................................. 950,075
14,000 First American Corp.................................... 589,750
28,300 Jefferson Bankshares, Inc.............................. 626,138
12,800 Magna Group, Inc....................................... 307,200
11,800 Signet Banking Corp.................................... 274,350
35,250 Summit Bancorp......................................... 1,238,156
-----------
5,552,119
-----------
Broadcast/Radio, TV (0.0%):
1,500 U.S. West Media Group, Inc. (b)........................ 27,375
-----------
Building Materials (1.9%):
46,000 Masco Corp............................................. 1,391,500
-----------
Chemicals (7.4%):
14,000 Akzo Nobel N.V. ADR.................................... 836,500
3,500 E.I. du Pont deNemours & Co............................ 276,938
94,500 Ethyl Corp............................................. 909,563
26,500 Lawter International, Inc.............................. 331,250
3,000 PPG Industries, Inc.................................... 146,250
16,600 RPM, Inc............................................... 259,375
20,900 Rohm & Haas Co......................................... 1,311,475
37,200 Witco Corp............................................. 1,278,750
-----------
5,350,101
-----------
Commercial Services (0.8%):
32,000 Ogden Corp............................................. 580,000
-----------
Consumer Products (2.9%):
10,000 B.A.T. Industries, PLC-ADR............................. 158,125
6,972 Corning, Inc........................................... 267,550
22,300 CPC International...................................... 1,605,600
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Consumer Products, continued:
800 Genuine Parts Co........................................ $ 36,600
----------
2,067,875
----------
Cosmetics (1.6%):
24,500 International Flavors................................... 1,166,813
----------
Department Stores (3.0%):
22,500 May Department Stores Co................................ 984,375
19,800 J.C. Penney Co.......................................... 1,039,500
3,000 Sears Roebuck & Co...................................... 145,875
----------
2,169,750
----------
Electrical (3.5%):
34,100 AMP Inc................................................. 1,368,262
31,000 Thomas & Betts Corp..................................... 1,162,500
----------
2,530,762
----------
Electronics (4.2%):
4,000 General Electric Co..................................... 346,000
28,900 General Signal Corp..................................... 1,094,588
1,500 National Service Industries, Inc........................ 58,688
47,000 Phillips NV (b)......................................... 1,533,375
----------
3,032,651
----------
Energy & Oil (0.1%):
1,000 British Petroleum, PLC-ADR.............................. 106,875
----------
Financial Services (4.5%):
39,200 H & R Block, Inc........................................ 1,278,900
60,400 ITT Industries, Inc..................................... 1,517,550
5,500 J.P. Morgan & Co........................................ 465,437
----------
3,261,887
----------
Food Processing (2.1%):
53,600 Grand Metropolitan, PLC-ADR (b)......................... 1,433,800
9,500 Tasty Baking Co......................................... 109,250
----------
1,543,050
----------
</TABLE>
Continued
B-65
<PAGE> 141
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Forest Products (2.6%):
38,600 International Paper Co................................. $ 1,423,375
13,000 Rayonier, Inc.......................................... 494,000
-----------
1,917,375
-----------
Holding Company (1.9%):
9,600 Unilever N.V........................................... 1,393,200
-----------
Household Products/Wares (0.2%):
1,500 Colgate-Palmolive Co................................... 127,125
-----------
Industrial Machinary (0.7%):
11,600 Cooper Industries, Inc................................. 481,400
-----------
Insurance (4.9%):
29,900 American General Corp.................................. 1,087,613
1,500 American International Group........................... 147,937
21,500 ITT Hartford Group, Inc................................ 1,144,875
13,100 Lincoln National Corp.................................. 605,875
13,700 Torchmark Corp......................................... 599,375
-----------
3,585,675
-----------
Manufacturing (0.3%):
3,500 Minnesota Mining & Manufacturing Co.................... 241,500
-----------
Medical Services & Supplies (0.2%):
1,500 Becton Dickinson & Co.................................. 120,375
-----------
Metals (2.1%):
28,600 Reynolds Metals Co..................................... 1,490,775
-----------
Office Equipment & Supplies (1.0%):
12,900 Xerox Corp............................................. 690,150
-----------
Oil & Gas Production (8.9%):
18,900 Amoco Corp............................................. 1,367,887
10,800 Atlantic Richfield Co.................................. 1,279,800
11,400 Mobil Corp............................................. 1,278,224
15,500 Texaco, Inc............................................ 1,300,062
37,400 Unocal Corp............................................ 1,262,250
-----------
6,488,223
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- -------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Oil--International (0.5%):
5,000 Chevron Corp.................... $ 295,000
1,000 Exxon Corp...................... 86,875
-----------
381,875
-----------
Packaged Food (1.0%):
38,000 Lance, Inc...................... 627,000
2,500 Sara Lee Corp................... 80,937
-----------
707,937
-----------
Paper (3.4%):
13,000 Consolidated Papers, Inc........ 676,000
15,700 Kimberly-Clark Corp............. 1,212,825
20,500 Westvaco Corp................... 612,437
-----------
2,501,262
-----------
Pharmaceuticals (6.3%):
33,300 Abbott Laboratories............. 1,448,550
1,600 Bristol Myers Squibb Co......... 144,000
34,500 Pharmacia & Upjohn, Inc......... 1,530,938
26,000 Warner-Lambert Co............... 1,430,000
-----------
4,553,488
-----------
Photography (0.4%):
3,500 Eastman Kodak Co................ 272,125
-----------
Pipelines (1.9%):
26,400 Tenneco, Inc.................... 1,349,700
-----------
Printing & Publishing (1.6%):
12,800 American Greetings, Class A..... 350,400
19,800 Dow Jones & Co.................. 826,650
-----------
1,177,050
-----------
Real Estate Investment Trusts (0.2%):
3,000 Federal Realty Investment Trust. 68,250
3,200 New Plan Realty Trust........... 67,600
-----------
135,850
-----------
</TABLE>
Continued
B-66
<PAGE> 142
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Retail (0.2%):
5,000 Winn Dixie Stores, Inc................................. $ 176,875
----------
Savings & Loans (0.8%):
31,900 Roosevelt Financial Group, Inc......................... 614,075
----------
Steel (0.6%):
22,700 Allegheny Ludlum Corp.................................. 428,462
----------
Tires & Rubber (0.1%):
1,600 B.F. Goodrich Co....................................... 59,800
----------
Tobacco (1.0%):
5,000 American Brands, Inc................................... 226,875
5,000 Philip Morris Cos., Inc................................ 520,000
----------
746,875
----------
Tools (0.6%):
9,800 Snap-On, Inc........................................... 464,275
----------
Transportation (1.8%):
13,700 Conrail, Inc........................................... 909,337
2,500 Norfolk Southern Corp.................................. 211,875
7,200 Ryder System, Inc...................................... 202,500
----------
1,323,712
----------
Utilities--Electric (3.5%):
33,900 Central & Southwest Corp............................... 983,100
12,300 Chilgener S.A., ADR (b)................................ 295,200
1,000 KU Energy Corp......................................... 29,875
14,700 Pacificorp............................................. 327,075
32,500 Public Services Enterprise Group....................... 889,688
----------
2,524,938
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Gas (0.1%):
1,500 Consolidated Natural Gas Co........................ $ 78,375
-----------
Utilities--Telecommunications (6.4%):
32,200 Frontier Corp...................................... 986,125
17,500 GTE Corp........................................... 783,125
46,000 Peco Energy Co..................................... 1,196,000
22,700 Southern New England Telecommunications Corp....... 953,400
15,500 Sprint Corp........................................ 651,000
1,500 US West, Inc....................................... 47,813
-----------
4,617,463
-----------
Total Common Stocks 68,327,581
===========
CORPORATE BONDS (1.2%):
$50,000 Chubb Capital Corp., 6.00%, 5/15/98................ 59,125
50,000 Cincinnati Financial Corp., 5.50%, 5/1/02.......... 66,313
85,000 Cooker Restaurant, 6.75%,
10/1/02........................................... 76,925
100,000 Hasbro, Inc., 6.00%, 11/15/98...................... 125,625
150,000 INA Republic of Italy, 5.00%, 6/28/01.............. 153,000
50,000 Liebert Corp., 8.00%, 11/15/10..................... 166,500
100,000 Pennzoil Co., 6.50%, 1/15/03....................... 141,250
50,000 South Carolina National Corp., 6.50%, 5/15/01...... 115,500
-----------
Total Corporate Bonds 904,238
-----------
</TABLE>
Continued
B-67
<PAGE> 143
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
INVESTMENT COMPANIES (5.1%):
2,851,960 Dreyfus Treasury Prime Fund............................ $ 2,851,960
830,000 Federated Short Term Government Fund................... 830,000
-----------
Total Investment Companies 3,681,960
-----------
Total (Cost--$68,690,785)(a) $72,913,779
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $72,512,142.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
$76,532. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......... $5,443,701
Unrealized depreciation.......... (1,297,239)
----------
Net unrealized appreciation...... $4,146,462
==========
</TABLE>
(b)Non-income producing security.
ADR--American Depository Receipt
NV--Naamloze Vennootschap (Dutch Corporation)
PLC--Public Limited Company (British)
See notes to financial statements.
B-68
<PAGE> 144
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
OHIO MUNICIPAL BONDS (92.8%):
$100,000 Aurora City School District, GO, 5.40%, 12/1/06........ $ 101,625
200,000 Beavercreek Local School District, GO, 5.30%, 12/1/08.. 199,250
100,000 Bowling Green City School District, GO, 5.70%, 12/1/11. 99,000
230,000 Butler County Hospital Facilities, 6.00%, 11/15/10,
Callable 5/15/04 @101................................. 236,612
200,000 Butler County Sewer System Revenue, 5.40%, 12/1/09..... 197,750
250,000 Butler County Sewer System Revenue, Series B, 6.20%,
12/1/09............................................... 257,500
250,000 Canton Waterworks System, GO, 5.75%, 12/1/10........... 253,437
100,000 Chillicothe Water System Revenue, 5.10%, 12/1/05....... 98,875
250,000 Cincinnati, GO, 5.25%, 12/1/01......................... 256,875
250,000 Clermont County Waterworks Revenue, 6.63%, 12/1/16..... 276,562
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 @102.... 252,812
200,000 Columbus, GO, 5.65%, 6/15/11........................... 200,000
250,000 Columbus Sewer Revenue, 6.13%, 6/1/03.................. 267,812
100,000 Delaware County, GO, 5.60%, 12/1/10.................... 99,000
100,000 Dover Municipal Electric System Revenue, 5.35%,
12/1/06............................................... 100,375
250,000 Franklin County Hospital Revenue, 5.25%, 6/1/08........ 243,125
250,000 Franklin County Hospital Revenue Refunding, Riverside
United Methodist, Series A, 5.30%, 5/15/02............ 253,437
250,000 Fremont, GO, 5.45%, 12/15/07........................... 251,875
250,000 Gahanna, GO, 5.85%, 6/1/08............................. 258,437
80,000 Hamilton County Sewer Systems, Series A, 6.40%,
12/1/04............................................... 87,000
170,000 Hamilton County Sewer System Unrefunded, Series A,
6.40%, 12/1/04........................................ 183,600
250,000 Hamilton County, Building Improvement & Refunding,
Museum Center, GO, 5.75%, 12/1/00..................... 260,312
250,000 Hilliard School District, GO, 5.35%, 12/1/04........... 252,813
250,000 Kings Local School District, GO, 5.75%, 12/1/10........ 253,125
100,000 Lake County Human Services Building, GO, 5.70%,
12/1/15............................................... 98,875
250,000 Lakota Local School District, GO, 6.00%, 12/1/07,
Callable 12/1/02 @101................................. 257,500
250,000 Mahoning County, GO, 5.60%, 12/1/02.................... 259,375
250,000 Mahoning County, GO, 5.70%, 12/1/08.................... 257,188
100,000 Marysville Exempt Village School District, GO, 5.30%,
12/1/09............................................... 97,750
200,000 Mason City School District, GO, 5.20%, 12/1/08......... 195,250
250,000 Middletown Capital Facilities Improvement, 5.60%,
12/1/05............................................... 251,875
100,000 Montgomery County, GO, 5.40%, 9/1/09................... 98,250
250,000 Olentangy Local School District, GO, Series A, 5.70%,
12/1/05............................................... 260,312
</TABLE>
Continued
B-69
<PAGE> 145
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
OHIO MUNICIPAL BONDS, CONTINUED:
$100,000 Solon, GO, 5.25% 12/1/07.............................. $ 98,250
100,000 State, GO, 5.60%, 8/1/02.............................. 104,625
250,000 State Building Authority, 5.70%, 9/1/01............... 261,250
250,000 State Building Authority, 6.00%, 10/1/07.............. 262,812
245,000 State Building Authority, 6.13%, 10/1/09.............. 256,944
95,000 State Building Authority, 6.25%, 6/1/11............... 97,138
250,000 State Elementary & Secondary Capital Facilities,
5.45%, 6/1/99........................................ 256,875
250,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-B, 5.70%, 11/1/03...... 261,563
250,000 State Public Facilities Commission, Parks &
Recreations, Series II-A, 5.25%, 6/1/06.............. 250,000
200,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-A, 5.20%, 5/1/05....... 201,000
250,000 State Water Development Authority Revenue, 5.75%,
6/1/03............................................... 261,563
250,000 State Water Development Authority Revenue, 5.75%,
12/1/05, Callable 12/1/02 @102....................... 261,563
150,000 State Water Development Authority Revenue, 5.70%,
12/1/11.............................................. 150,375
100,000 Summit County, 5.45%, 12/1/10......................... 99,504
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04.... 259,063
250,000 Warren County Waterworks, 5.75%, 12/1/09.............. 250,313
100,000 West Clermont Local School District, GO, 5.55%,
12/1/06.............................................. 101,875
250,000 Woodridge Local School District, GO, 5.75%, 12/1/07,
Callable 12/1/04 @102................................ 257,188
-----------
Total Ohio Municipal Bonds...................................... 10,409,485
-----------
INVESTMENT COMPANIES (7.0%):
325,000 Dreyfus Municipal Money Market Fund................... 325,000
456,761 Goldman Tax Free Fund................................. 456,761
-----------
Total Investment Companies...................................... 781,761
-----------
Total (Cost--$10,940,541)(a).................................... $11,191,246
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $11,214,857.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............. $267,576
Unrealized depreciation............. (16,871)
--------
Net unrealized appreciation......... $250,705
========
</TABLE>
GO--General Obligation
See notes to financial statements.
B-70
<PAGE> 146
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (46.9%):
Aerospace (0.9%):
2,200 Lockheed Martin Corp................................... $ 184,800
-----------
Agricultural Machinery (1.8%):
8,000 Case Corp.............................................. 384,000
-----------
Apparel (0.9%):
4,000 Jones Apparel Group (b)................................ 196,500
-----------
Beverages (0.7%):
2,000 Anheuser-Busch Cos., Inc............................... 150,000
-----------
Building Materials (1.3%):
4,000 Texas Industries, Inc.................................. 274,500
-----------
Chemicals (0.9%):
2,500 E. I. du Pont de Nemours & Co.......................... 197,813
-----------
Computers & Software (1.9%):
4,800 Seagate Technology, Inc. (b)........................... 216,000
4,000 Compaq Computer Corp. (b).............................. 197,000
-----------
413,000
-----------
Department Stores (0.8%):
3,000 Mercantile Stores Co., Inc............................. 175,875
-----------
Drugs (2.4%):
3,000 Amgen, Inc. (b)........................................ 162,000
4,000 Bristol-Myers Squibb Co................................ 360,000
-----------
522,000
-----------
Food Processing (2.3%):
8,000 IBP, Inc............................................... 221,000
8,500 H. J. Heinz Co......................................... 258,187
-----------
479,187
-----------
Forest Products (0.3%):
2,000 International Paper Co................................. 73,750
-----------
Grocery (1.1%):
6,000 Kroger Co. (b)......................................... 237,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Household Products/Wares (1.1%):
2,700 Clorox Co............................................. $ 239,287
-----------
Industrial Machinery (1.1%):
3,400 Caterpillar, Inc...................................... 230,350
-----------
Leisure Time (0.5%):
5,000 Brunswick Corp. 100,000............................... 100,000
-----------
Manufacturing (0.6%):
4,000 TRINOVA Corp.......................................... 133,500
-----------
Metals (1.2%):
11,000 Placer Dome, Inc...................................... 262,625
-----------
Mining (2.6%):
10,000 Barrick Gold Corp..................................... 271,250
4,000 Homestake Mining Co................................... 68,500
14,000 Santa Fe Pacific Gold Corp............................ 197,750
-----------
537,500
-----------
Oil & Gas Producers (6.5%):
2,500 British Petroleum PLC, ADR............................ 267,188
2,300 Exxon Corp............................................ 199,813
1,200 Mobil Corp............................................ 134,550
8,000 Panenergy Corp........................................ 263,000
2,000 Texaco, Inc........................................... 167,750
16,000 YPF Sociedad Anonima-Sponsored ADR.................... 360,000
-----------
1,392,301
-----------
Photography (1.4%):
4,000 Eastman Kodak Co...................................... 311,000
-----------
Real Estate (3.6%):
13,000 Healthcare Properties Investment, Inc................. 438,750
12,000 Health & Retirement Properties Trust.................. 207,000
7,000 Public Storage Inc.................................... 144,375
-----------
790,125
-----------
</TABLE>
Continued
B-71
<PAGE> 147
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Restaurants (0.8%):
5,000 Outback Steakhouse, Inc. (b)........................... $ 172,422
-----------
Retail (1.5%):
3,000 Albertson's, Inc....................................... 124,125
6,000 Walgreen Co............................................ 201,000
-----------
325,125
-----------
Transportation--Rail (0.7%):
3,000 CSX Corp. 144,750...................................... 144,750
-----------
Tobacco (2.0%):
4,300 Philip Morris Cos., Inc................................ 447,200
-----------
Utilities--Electric (2.0%):
7,000 Consolidated Edison of
New York.............................................. 204,750
4,500 Duke Power Co.......................................... 230,625
-----------
435,375
-----------
Utilities--Telecommunications (6.0%):
6,500 Ameritech Corp......................................... 385,937
4,000 Atmel Corp. (b)........................................ 120,500
2,000 CIA Telecomunicacion Chile, ADR........................ 196,250
4,000 Telecom of New Zealand, ADR............................ 267,000
11,000 Telefonica De Argentina,
ADR (b)............................................... 325,875
-----------
1,295,562
-----------
Total Common Stocks 10,105,547
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (5.8%):
FEDERAL HOME LOAN BANK:
$ 100,000 5.97%, 12/14/98....................................... $ 98,723
400,000 5.78%, 1/8/99......................................... 391,540
200,000 6.11%, 1/18/01........................................ 194,344
300,000 6.04%, 2/14/01........................................ 289,647
300,000 7.00%, 3/28/01........................................ 296,844
-----------
Total U.S. Government Agencies 1,271,098
-----------
U.S. TREASURY NOTES (39.3%):
500,000 Discount Note, 9/19/96................................ 494,085
300,000 Discount Note, 12/19/96............................... 292,371
1,300,000 6.50%, 5/15/97........................................ 1,308,151
500,000 6.00%, 12/31/97....................................... 500,280
2,950,000 7.25%, 5/15/04........................................ 3,056,731
2,500,000 6.88%, 5/16/06........................................ 2,525,750
400,000 7.25%, 5/15/16 ....................................... 409,908
-----------
Total U.S. Treasury Notes 8,587,276
-----------
U.S. TREASURY BILLS (4.3%):
950,000 6.25%, 5/31/00........................................ 944,091
-----------
Total U.S. Treasury Bills 944,091
-----------
U.S. TREASURY BONDS (1.5%):
300,000 8.13%, 8/15/19........................................ 336,672
-----------
Total U.S. Treasury Bonds 336,672
-----------
</TABLE>
Continued
B-72
<PAGE> 148
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
INVESTMENT COMPANIES (1.8%):
$248,394 Dreyfus Treasury Prime Fund........................... $ 248,394
8,000 Southern Africa Fund, Inc............................. 134,000
-----------
Total Investment Companies 382,394
-----------
Total (Cost--$20,633,173)(a) $21,627,078
===========
</TABLE>
- ------
The percentages indicated are based on net assets of $21,831,241.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $1,293,514
Unrealized depreciation........... (299,609)
----------
Net unrealized appreciation....... $ 993,905
==========
</TABLE>
(b) Non-income producing security.
ADR--American Depository Receipt
See notes to financial statements.
B-73
<PAGE> 149
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (95.7%):
Apparel (8.7%):
15,000 Jones Apparel Group (b)................................ $ 736,875
7,000 Nike, Inc., Class B.................................... 719,250
14,000 The GAP, Inc........................................... 449,750
24,000 The Men's Wearhouse, Inc. (b).......................... 774,000
12,000 TJX Companies, Inc..................................... 405,000
15,000 Vans, Inc. (b)......................................... 255,000
-----------
3,339,875
-----------
Brokerage (1.1%):
8,000 Alex Brown, Inc........................................ 452,000
-----------
Business Services (0.7%):
9,750 PMT Services, Inc. (b)................................. 279,094
-----------
Building Materials (0.4%):
5,000 NCI Building Systems, Inc. (b)......................... 168,750
-----------
Commercial Services (4.8%):
10,000 Employee Solutions, Inc. (b)........................... 315,000
8,000 Greenwich Air Services, Inc., Class A (b).............. 196,000
8,000 Greenwich Air Services, Inc., Class B (b).............. 156,000
10,500 Paychex, Inc........................................... 505,312
20,000 Prepaid Legal Services, Inc. (b)....................... 370,000
8,600 Wackenhut Corrections
Corp. (b)............................................. 287,025
-----------
1,829,337
-----------
Computer, Software & Services (16.1%):
7,500 Aspen Technologies, Inc. (b)........................... 412,500
20,000 Auspex Systems, Inc. (b)............................... 300,000
11,250 Cadence Design Systems, Inc. (b)....................... 379,688
20,000 Cisco Systems, Inc. (b)................................ 1,132,500
36,000 Cognos, Inc. (b)....................................... 828,000
12,500 Comverse Technology, Inc. (b).......................... 381,250
10,000 Dialogic Corp. (b)..................................... 596,250
12,300 In Focus Systems, Inc. (b)............................. 298,275
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Computer, Software & Services, continued:
7,000 Microsoft Corp. (b).................................... $ 840,875
6,000 Peoplesoft, Inc. (b)................................... 427,500
8,000 Sun Microsystems, Inc. (b)............................. 471,000
15,000 Unisys Corp. (b)....................................... 106,875
-----------
6,174,713
-----------
Cosmetics (0.7%):
10,000 Nature's Sunshine
Products, Inc......................................... 255,000
-----------
Department Stores (2.2%):
15,000 Dollar Tree Stores, Inc. (b)........................... 476,250
10,000 Kohl's Corp. (b)....................................... 366,250
-----------
842,500
-----------
Drugs (2.8%):
11,000 Gilead Sciences, Inc. (b).............................. 277,750
24,000 Jones Medical Industries, Inc.......................... 798,000
-----------
1,075,750
-----------
Electronics (7.6%):
30,000 Alliance Semiconductor
Corp. (b)............................................. 251,250
12,500 Analog Devices, Inc. (b)............................... 318,750
11,000 Applied Materials, Inc. (b)............................ 335,500
25,000 Checkpoint Systems, Inc. (b)........................... 859,375
10,000 Kent Electronics Corp. (b)............................. 312,500
7,500 Lam Research Corp. (b)................................. 195,000
15,000 Micron Technology, Inc................................. 388,125
10,000 Vitesse Semiconductor
Corp. (b)............................................. 240,000
-----------
2,900,500
-----------
Entertainment (2.2%):
7,500 Circus Circus Enterprises,
Inc. (b).............................................. 307,500
10,000 Mirage Resorts, Inc. (b)............................... 540,000
-----------
847,500
-----------
</TABLE>
Continued
B-74
<PAGE> 150
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Environmental Control (1.4%):
15,000 Allied Waste Industries, Inc. (b)....................... $ 133,125
12,000 United Waste Systems, Inc. (b).......................... 387,000
----------
520,125
----------
Financial Services (3.8%):
15,000 Aames Financial Corp.................................... 538,125
10,000 Green Tree Financial Corp. (b).......................... 312,500
27,500 The Money Store, Inc.................................... 608,438
10 Transport Holdings, Inc.,
Class A (b)............................................ 460
----------
1,459,523
----------
Food Service (1.9%):
15,000 Longhorn Steaks, Inc. (b)............................... 375,000
10,000 Outback Steakhouse, Inc. (b)............................ 344,844
----------
719,844
----------
Homebuilders (1.8%):
15,000 Cavalier Homes, Inc..................................... 346,875
16,000 Oakwood Homes Corp...................................... 330,000
----------
676,875
----------
Home Improvememt (1.6%):
40,000 Eagle Hardware And Garden, Inc. (b)..................... 610,000
----------
Hospital Management & Services (1.7%):
20,000 Prime Medical Services, Inc. (b)........................ 347,500
12,000 Universal Health Services, Inc., Class B (b)............ 313,500
----------
661,000
----------
Industrial Machinery (1.0%):
5,000 JLG Industries, Inc..................................... 371,250
----------
Insurance (0.0%):
200 Highlands Insurance Group (b)........................... 3,750
----------
Lodging (1.3%):
7,000 HFS, Inc. (b)........................................... 490,000
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Medical Supplies (1.0%):
15,000 Mentor Corp............................................ $ 382,500
-----------
Metals (0.9%):
15,000 Placer Dome, Inc....................................... 358,125
-----------
Mining (2.8%):
15,000 Barrick Gold Corp...................................... 406,875
7,500 Newmont Gold Co........................................ 377,812
25,000 Pegasus Gold, Inc. (b)................................. 306,250
-----------
1,090,937
-----------
Oil Equipment, Wells & Services (7.7%):
12,000 Ensco International, Inc. (b).......................... 390,000
30,000 Global Marine, Inc. (b)................................ 416,250
11,000 Pogo Producing Co...................................... 419,375
20,000 Reading & Bates Corp. (b).............................. 442,500
25,000 Rowan Companies, Inc. (b).............................. 368,750
5,000 Sonat Offshore Drilling Co............................. 252,500
15,000 Tidewater, Inc......................................... 658,125
-----------
2,947,500
-----------
Printing & Publishing (1.0%):
10,000 Gartner Group, Inc.,
Class A (b)........................................... 366,250
-----------
Recreational Equipment (1.3%):
15,000 Callaway Golf Co....................................... 498,750
-----------
Retail (9.3%):
15,000 Bed Bath & Beyond, Inc. (b)............................ 401,250
10,000 Boise Cascade Office Products Corp. (b)................ 346,250
10,000 Consolidated Stores Corp. (b).......................... 367,500
15,000 Corporate Express, Inc. (b)............................ 600,000
11,000 PetsMart, Inc. (b)..................................... 525,250
13,500 Regis Corp............................................. 421,875
9,000 Ross Stores, Inc. ..................................... 312,750
</TABLE>
Continued
B-75
<PAGE> 151
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Retail, continued:
10,000 Tech Data Corp. (b).................................... $ 217,500
5,000 Tiffany & Co........................................... 365,000
-----------
3,557,375
-----------
Steel (1.0%)
10,000 AK Steel Holding Corp.................................. 391,250
-----------
Telecommunications (5.2%)
8,000 Aspect Telecommunications Corp. (b).................... 396,000
15,000 ECI Telecommunications Limited Designs................. 348,750
5,000 Glenayre Technologies, Inc. (b)........................ 250,000
10,000 LCI International, Inc. (b)............................ 313,750
12,500 Worldcom, Inc. (b)..................................... 692,187
-----------
2,000,687
-----------
Textiles (2.0%):
6,500 Tommy Hilfiger Corp. (b)............................... 348,563
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Textiles, continued:
15,000 G & K Services, Inc., Class A.......................... $ 427,500
-----------
776,063
-----------
Transportation (1.7)%
7,500 Coachmen Industries, Inc............................... 262,500
15,000 Conair Holdings, Inc................................... 405,000
-----------
667,500
-----------
Total Common Stocks 36,714,323
-----------
U.S. GOVERNMENT AGENCIES (2.6%)
Federal National Mortgage Assoc.:
1,000,000 Discount Notes, 7/3/96................................. 999,260
-----------
Total U.S. Government Agencies 999,260
-----------
INVESTMENT COMPANIES (1.7%):
649,921 Dreyfus Treasury Prime Fund............................ 649,921
-----------
Total Investment Companies 649,921
-----------
Total (Cost--$41,721,425)(a) $38,363,504
===========
</TABLE>
- ------
The percentages indicated are based on net assets of $38,378,298.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........ $ 7,467,921
Unrealized depreciation........ (1,637,166)
------------
Net unrealized appreciation.... $ 5,830,755
============
</TABLE>
(b) Non-income producing security.
See notes to financial statements.
B-76
<PAGE> 152
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
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 a diversified, 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").
The investment objective of the U.S. Government Securities Money Market
Fund is to seek current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity. The investment
objective of the U.S. Government Income Fund is to seek a high level of
current income by investing primarily in securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities. The investment
objective of the Income Equity Fund is to seek a high level of investment
income through investment primarily in income-producing equity securities
of U.S. issuers. The investment objective of the Ohio Tax-Free Bond Fund is
to seek income exempt from federal and state income taxes and preservation
of capital through bonds or notes issued by the State of Ohio. The
investment objective of the Flexible Growth Fund is to seek long-term
growth of capital with some current income as a secondary objective. The
investment objective of the Stock Appreciation Fund is to seek capital
growth by investing primarily in common stocks.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.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 the
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 the
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 preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the
Continued
B-77
<PAGE> 153
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
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.
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
bonds, 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 (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.
Continued
B-78
<PAGE> 154
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
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 due
primarily to differing treatments for dollar roll transactions, the
deferral of certain losses and expiring capital loss carryforwards.
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.
OTHER:
Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses of the Fund are
prorated to the portfolios, generally on the basis of relative net assets.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government Income Fund......................... $10,036,208 $13,633,145
Income Equity Fund.................................. $53,911,172 $53,175,699
Ohio Tax-Free Bond Fund............................. $ 499,504 $ 716,491
Flexible Growth Fund................................ $15,044,234 $ 8,647,209
Stock Appreciation Fund............................. $31,930,644 $35,070,302
</TABLE>
Continued
B-79
<PAGE> 155
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND U.S. GOVERNMENT INCOME FUND
---------------------------- -----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995
------------- ------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued.............. $ 187,416,065 $ 331,872,719 $ 1,130,930 $ 4,352,572
Proceeds from shares
issued in connection
with acquisition.... -- 4,865,634 -- --
Dividends reinvested. 1,076,488 1,518,099 195,234 569,125
Shares redeemed...... (173,004,224) (330,133,820) (2,338,203) (4,089,227)
------------- ------------- ------------- -------------
Change in net assets
from Investor A
share transactions.. $ 15,488,329 $ 8,122,632 $ (1,012,039) $ 832,470
============= ============= ============= =============
INVESTOR B SHARES:
Proceeds from shares
issued.............. -- -- $ 228,676 $ 1,317,928
Dividends reinvested. -- -- 21,056 9,712
Shares redeemed...... (274,140) (96,002)
------------- ------------- ------------- -------------
Change in net assets
from Investor B
share transactions.. -- -- $ (24,408) $ 1,231,638
============= ============= ============= =============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued............... 187,416,065 331,872,719 119,163 469,561
Issued in connection
with acquisition.... -- 4,865,634 -- --
Reinvested........... 1,076,488 1,518,099 20,586 60,733
Redeemed............. (173,004,224) (330,133,820) (246,569) (435,482)
------------- ------------- ------------- -------------
Change in Investor A
Shares.............. 15,488,329 8,122,632 (106,820) 94,812
============= ============= ============= =============
INVESTOR B SHARES:
Issued............... -- -- 21,244 123,342
Reinvested........... -- -- 1,961 903
Redeemed............. -- -- (25,516) (8,962)
------------- ------------- ------------- -------------
Change in Investor B
Shares.............. -- -- (2,311) 115,283
============= ============= ============= =============
</TABLE>
Continued
B-80
<PAGE> 156
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME EQUITY FUND OHIO TAX-FREE FUND
---------------------------- ----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995
------------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued .............. $ 5,267,395 $ 9,389,602 $ 39,306 $ 297,450
Proceeds from shares
issued in connection
with acquisition .... -- 9,727,219 -- --
Dividends reinvested . 480,302 8,635,353 2,841 8,453
Shares redeemed ...... (4,221,291) (7,219,484) (301,788) (109,278)
------------ ------------ ------------ ------------
Change in net assets
from Investor A share
transactions ........ $ 1,526,406 $ 20,532,690 $ (259,641) $ 196,625
============ ============ ============ ============
INVESTOR B SHARES:
Proceeds from shares
issued .............. $ 1,676,116 $ 2,765,814 $ 212,984 $ 598,493
Dividends reinvested . 226,984 13,294 8,538 9,755
Shares redeemed ...... (134,014) (43,350) (152,303) (5,034)
------------ ------------ ------------ ------------
Change in net assets
from Investor B share
transactions ........ $ 1,769,086 $ 2,735,758 $ 69,219 $ 603,214
============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued ............... 428,872 828,287 3,723 29,259
Issued in connection
with acquisition .... -- 793,942 -- --
Reinvested ........... 39,085 763,006 274 833
Redeemed ............. (341,894) (630,554) (28,642) (10,732)
------------ ------------ ------------ ------------
Change in Investor A
Shares .............. 126,063 1,754,681 (24,645) 19,360
============ ============ ============ ============
INVESTOR B SHARES:
Issued ............... 133,817 241,570 19,983 57,922
Reinvested ........... 19,185 1,125 806 927
Redeemed ............. (10,676) (3,605) (14,400) (491)
------------ ------------ ------------ ------------
Change in Investor B
Shares .............. 142,326 239,090 6,389 58,358
============ ============ ============ ============
</TABLE>
Continued
B-81
<PAGE> 157
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND STOCK APPRECIATION FUND
-------------------------- --------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995(a)
------------- ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued .............. $ 4,796,993 $ 6,257,968 $ 1,721,983 $ 738,522
Dividends reinvested . 138,211 282,271 554 1,542,781
Shares redeemed ...... (967,355) (717,635) (7,182,625) (3,611,887)
----------- ----------- ----------- -----------
Change in net assets
from Investor A share
transactions ........ $ 3,967,849 $ 5,822,604 $(5,460,088) $(1,330,584)
=========== =========== =========== ===========
INVESTOR B SHARES:
Proceeds from shares
issued .............. $ 4,097,636 $ 4,818,782 $ 539,518 $ 71,986
Dividends reinvested . 113,889 52,617 -- --
Shares redeemed ...... (351,841) (188,581) (17,738) --
----------- ----------- ----------- -----------
Change in net assets
from Investor B share
transactions ........ $ 3,859,684 $ 4,682,818 $ 521,780 $ 71,986
=========== =========== =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued ............... 426,109 593,056 174,475 76,082
Reinvested ........... 12,288 25,863 59 164,279
Redeemed ............. (86,427) (65,727) (743,214) (370,208)
----------- ----------- ----------- -----------
Change in Investor A
Shares .............. 351,970 553,192 (568,680) (129,847)
=========== =========== =========== ===========
INVESTOR B SHARES:
Issued ............... 351,973 442,046 53,681 7,299
Reinvested ........... 9,807 4,698 -- --
Redeemed ............. (30,395) (16,667) (1,720) --
----------- ----------- ----------- -----------
Change in Investor B
Shares .............. 331,385 430,077 51,961 7,299
=========== =========== =========== ===========
</TABLE>
- --------
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
Continued
B-82
<PAGE> 158
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30,1996
(UNAUDITED)
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.
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. ("DRZ"), for the Income Equity Fund and with
James Investment Research ("JIR") for the Flexible Growth Fund. DRZ 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 DRZ receives from Provident fees calculated at
0.50% of average daily net assets up to $55 million of the Income Equity
Fund and 0.55% of average daily net assets above $55 million for this 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.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS 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 June 30, 1996, there were no shareholder servicing
agreements entered into on behalf of any of the Portfolios.
The Fund has adopted an Investor A Distribution Plan ("Investor A Plan")
and an Investor B Distribution and Services 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 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
Continued
B-83
<PAGE> 159
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
average daily net asset value 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 asset value 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, DRZ 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 six months ended June 30, 1996, BISYS received $163,841
from commissions on sales of capital shares, of which $10,697 was reallowed
to the affiliated brokers.
Provident and certain of its affiliates own shares of Portfolios of the
Fund. As of June 30, 1996, the aggregate value of capital shares owned by
Provident and its affiliates were as follows (amounts in thousands):
<TABLE>
<S> <C>
U.S. Government Income Fund..................................... $23,490,656
Ohio Tax-Free Bond Fund......................................... $10,220,000
</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 six months
ended June 30, 1996:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- -------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets)................. 0.15% 0.40% 0.95%
Voluntary fee reductions........... -- -- $17,346
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)....................... 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions (percentage of average
net assets)....................... 0.25% 0.25% 0.25%
Voluntary fee reductions........... $213,848 $13,694 $12,400
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)....................... NA 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:..... $ 42,748 $18,129 $51,348
TRANSFER AGENT FEES:............... $ 34,381 $18,236 $24,538
REIMBURSED FEES:................... -- -- $ 3,363
</TABLE>
Continued
B-84
<PAGE> 160
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
OHIO TAX-FREE FLEXIBLE APPRECIATION
BOND FUND GROWTH FUND FUND
------------- ----------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets).................... 0.50% 0.90% 0.80%
Voluntary fee reductions.............. $ 5,643 $17,547 --
ADMINISTRATION FEES:
Annual fee (percentage of average net
assets).............................. 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions (percentage of average net
assets).............................. 0.25% 0.25% 0.25%
Voluntary fee reductions.............. -- $ 4,985 --
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net
assets).............................. 1.00% 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:........ $ 7,911 $13,716 $29,161
TRANSFER AGENT FEES:.................. $12,462 $12,755 $18,115
REIMBURSED FEES:...................... -- $ 1,710 --
</TABLE>
--------
NA--Not applicable
B-85
<PAGE> 161
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
-------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------
SIX MONTHS OCTOBER 1,
ENDED 1992 TO
JUNE, 30 DECEMBER 31,
1996 1995 1994(d) 1993(d) 1992(a)(d)
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
-----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITIES
Net investment income . 0.02 0.05 0.04 0.03 0.01
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
Net investment income . (0.02) (0.05) (0.04) (0.03) (0.01)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return ........... 2.39%(b) 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) .......... $ 172,984 $ 157,495 $ 149,374 $ 133,207 $ 37,083
Ratio of expenses to
average net assets .... 0.60%(c) 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment
income to average net
assets ................ 4.75%(c) 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to
average net assets* ... 0.85%(c) 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment
income to average net
assets* ............... 4.50%(c) 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or reduced
reimbursed. If such voluntary fee reductions and/or 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.
B-86
<PAGE> 162
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 17,
ENDED YEAR ENDED 1995 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) YEARS ENDED DECEMBER 31,
----------------------------- ------------ ------------ --------------------------------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(f) 1993(f) 1992(b)(f)
----------- ----------- ------------ ------------ ------- ------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ... $ 9.71 $ 10.95 $ 8.92 $ 10.00 $ 9.91 $ 9.76 $ 10.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES
Net investment income . 0.26 0.24 0.54 0.43 0.54 0.51 0.10
Net realized and
unrealized gains
(losses) from
investments .......... (0.37) (0.42) 0.79 0.94 (0.99) 0.20 (0.23)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Activities ......... (0.11) (0.18) 1.33 1.37 (0.45) 0.71 (0.13)
---------- ---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
Net investment income . (0.26) (0.24) (0.54) (0.42) (0.54) (0.50) (0.10)
In excess of net
investment income ... -- -- -- -- -- (0.06) (0.01)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .. (0.26) (0.24) (0.54) (0.42) (0.54) (0.56) (0.11)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD ................ $ 9.34 $ 10.53 $ 9.71 $ 10.95 $ 8.92 $ 9.91 $ 9.76
========== ========== ========== ========== ========== ========== ==========
Total Return (excludes
sales/redemption
charge) ............... (1.19)%(g) (1.61)%(g) 15.22% 13.96%(e) (4.64)% 7.38% (1.31)%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) .......... $ 34,145 $ 1,190 $ 36,538 $ 1,263 $ 32,721 $ 30,078 $ 24,588
Ratio of expenses to
average net assets .... 1.14%(c) 1.93%(c) 1.09% 1.90%(c) 0.86% 0.65% 0.66%
Ratio of net investment
income to average net
assets ................ 5.43%(c) 4.65%(c) 5.74% 4.80%(c) 5.78% 5.05% 4.00%
Ratio of expenses to
average net assets* ... 1.22%(c) 1.93%(c) 1.18% 1.90%(c) 1.14% 1.08% 1.06%
Ratio of net investment
income to average net
assets* ............... 5.35%(c) 4.65%(c) 5.65% 4.80%(c) 5.49% 4.62% 3.60%
Portfolio Turnover ..... 30%(d) 30%(d) 75%(d) 75%(d) 83% 220% 117%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursued. If such voluntary fee reductions and/or 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.
(g) Not annualized
See notes to financial statements.
B-87
<PAGE> 163
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND
------------------------------------------------------------------------
SIX MONTHS JANUARY 17,
ENDED YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------
1996 1995 1995(a) 1994(f) 1993(f) 1992(b)(f)
------------------------- ------------ ------------ ------- ------- ----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.70 $ 11.85 $ 10.15 $10.00 $ 10.63 $ 10.78 $ 10.00
------- ------- ------- ------ ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.10 0.05 0.27 0.13 0.32 0.28 0.08
Net realized and
unrealized gains from
investments........... 1.00 1.00 2.89 2.78 -- 1.01 0.80
------- ------- ------- ------ ------- ------- -------
Total from Investment
Activities............. 1.10 1.05 3.16 2.91 0.32 1.29 0.88
------- ------- ------- ------ ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.10) (0.05) (0.27) (0.13) (0.31) (0.27) (0.08)
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... (0.10) (0.05) (1.61) (1.06) (0.80) (1.44) (0.10)
------- ------- ------- ------ ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 12.70 $ 12.85 $ 11.70 $11.85 $ 10.15 $ 10.63 $ 10.78
======= ======= ======= ====== ======= ======= =======
Total Return (excludes
sales/redemption
charge)................ 9.43%(g) 8.88%(g) 31.45% 29.28%(e) 3.08% 12.11% 8.74%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $67,612 $ 4,900 $60,845 $2,833 $34,965 $24,387 $12,262
Ratio of expenses to
average net assets..... 1.72%(c) 2.47%(c) 1.49% 2.46%(c) 1.30% 1.47% 1.48%
Ratio of net investment
income to average net
assets................. 1.63%(c) 0.85%(c) 2.27% 1.12%(c) 2.93% 2.55% 3.16%
Ratio of expenses to
average net assets*.... 1.82%(c) 2.52%(c) 1.74% 2.51%(c) 1.58% 1.64% 2.02%
Ratio of net investment
income to average net
assets*................ 1.53%(c) 0.80%(c) 2.02% 1.07%(c) 2.65% 2.38% 2.62%
Portfolio Turnover...... 81%(d) 81%(d) 180%(d) 180%(d) 119% 145% 12%
Average commission rate
paid (h)............... $0.0405 $0.0405 -- -- -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or 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.
(g) Not annualized.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-88
<PAGE> 164
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
-------------------------------------------------------------------------
SIX MONTHS YEAR JANUARY 17 FROM AUGUST 1,
ENDED ENDED 1995 TO 1994 THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) 1994(a)(e)
-------------------------- ------------ ------------ --------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
------- ------ ------- ------ -------
INVESTMENT ACTIVITIES
Net investment income.. 0.20 0.16 0.39 0.27 0.12
Net realized and
unrealized gains
(losses) from
investments........... (0.29) (0.28) 0.67 0.73 (0.17)
------- ------ ------- ------ -------
Total from Investment
Activities.......... (0.09) (0.12) 1.06 1.00 (0.05)
------- ------ ------- ------ -------
DISTRIBUTIONS
Net investment income.. (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.22 $10.45 $ 10.51 $10.73 $ 9.83
======= ====== ======= ====== =======
Total Return (excludes
sales/redemption
charge)................ (0.85)%(d) (1.16)%(d) 10.96% 10.10%(d) (0.47)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)........... $10,538 $ 677 $11,091 $ 626 $10,190
Ratio of expenses to
average net assets..... 1.46%(c) 2.17%(c) 1.49% 2.27%(c) 1.08%(c)
Ratio of net investment
income to average net
assets................. 3.88%(c) 3.17%(c) 3.77% 3.01%(c) 2.92%(c)
Ratio of expenses to
average net assets*.... 1.56%)(c) 2.27%(c) 1.64% 2.41%(c) 1.44%(c)
Ratio of net investment
income to average net
assets*................ 3.78%(c) 3.08%(c) 3.62% 2.87%(c) 2.56%(c)
Portfolio Turnover...... 5%(b) 5%(b) 34%(b) 34%(b) 29%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or 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) Annualized.
(d) Not annualized.
(e) Audited by other auditors.
See notes to financial statements.
B-89
<PAGE> 165
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND
---------------------------------------------------------------------------
SIX MONTHS JANUARY 17, FROM SEPTEMBER 1,
ENDED YEAR ENDED 1995 TO 1994 THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) 1994(a)(f)
-------------------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income.. 0.17 0.12 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments........... (0.26) (0.26) 1.66 1.79 (0.18)
------- ------- ------ ------ ------
Total from Investment
Activities.......... (0.09) (0.14) 2.01 2.04 (0.08)
------- ------- ------ ------ ------
DISTRIBUTIONS
Net investment income.. (0.17) (0.12) (0.34) (0.24) (0.13)
Net realized gains..... -- -- (0.10) (0.10) --
------- ------- ------ ------ ------
Total Distributions... (0.17) (0.12) (0.44) (0.34) (0.13)
------- ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 11.10 $ 11.44 $11.36 $11.70 $ 9.79
======= ======= ====== ====== ======
Total Return (excludes
sales redemption
charge)................ (0.83)%(e) (1.09)%(e) 20.83% 20.53%(c) (0.82)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)........... $13,121 $ 8,710 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets..... 1.55%(d) 2.36%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets................. 2.99%(d) 2.19%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets*.... 1.86%(d) 2.56%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets*................ 2.68%(d) 1.99%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover...... 52%(b) 52%(b) 13%(b) 13%(b) 1%
Average commission rate
paid (h)............... $0.0043 $0.0043 -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or 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.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-90
<PAGE> 166
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
--------------------------------------------------------------------------------------------------------
SIX MONTHS FROM OCTOBER 1, FROM OCTOBER 1,
ENDED 1995 THROUGH 1995 THROUGH YEARS ENDED SEPTEMBER 30,
JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------
1996 1995(b) 1995(a)(b) 1995(f) 1994(f) 1993(f) 1992(f)
-------------------------- --------------- --------------- ------- ------- ---------- -------
INVESTOR A INVESTOR B INVESTOR B INVESTOR A
----------- ----------- --------------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.50 $ 9.91 $ 10.00 $10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
------- ------- ------- ------ ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss.... (0.06) (0.06) (0.01) (0.01) (0.07) (0.12) (0.17) (0.08)
Net realized and
unrealized gains
(losses) from
investments........... 0.64 0.60 (0.12) (0.08) 2.14 (1.26) 2.57 1.41
------- ------- ------- ------ ------- ------- ------- -------
Total from Investment
Activities.......... 0.58 0.54 (0.13) (0.09) 2.07 (1.38) 2.40 1.33
------- ------- ------- ------ ------- ------- ------- -------
DISTRIBUTIONS
Net realized gains..... -- -- (0.37) -- (0.32) (0.55) (0.20) (1.05)
------- ------- ------- ------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.08 $ 10.45 $ 9.50 $ 9.91 $ 10.00 $ 8.25 $ 10.18 $ 7.98
======= ======= ======= ====== ======= ======= ======= =======
Total Return (excludes
sales/redemption
charge)................ 6.11%(c) 5.45%(c) (1.20)%(c) (0.90)%(c) 25.12% (13.91)% 30.61% 16.69%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $37,759 $ 619 $40,995 $ 72 $44,500 $47,880 $59,330 $28,750
Ratio of expenses to
average net assets..... 1.86%(d) 2.55%(d) 1.76%(d) 2.30%(d) 2.61% 2.44% 2.47% 2.70%
Ratio of net investment
loss to average net
assets................. (1.19)%(d) (1.94)%(d) (0.49)%(d) (1.69)%(d) (0.73)% (1.35)% (1.85)% (1.00)%
Ratio of expenses to
average net assets*.... 1.86%(d) 2.55%(d) 1.77%(d) 2.39%(d) (g) (g) (g) (g)
Ratio of net investment
loss to average net
assets*................ (1.19)%(d) (1.94)%(d) (0.50)%(d) (1.78)%(d) (g) (g) (g) (g)
Portfolio Turnover...... 87%(e) 87%(e) 46%(e) 46%(e) 197% 254% 216% 288%
Average commission rate
paid (h)............... $0.0019 $0.0019 -- -- -- -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or 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.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-91
<PAGE> 167
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
B-92
<PAGE> 168
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
B-93
<PAGE> 169
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.
B-94
<PAGE> 170
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.
B-95
<PAGE> 171
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.
B-96
<PAGE> 172
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.
B-97
<PAGE> 173
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.
B-98
<PAGE> 174
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.
B-99
<PAGE> 175
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
B-100
<PAGE> 176
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.
B-101
<PAGE> 177
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
B-102
<PAGE> 178
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.
B-103
<PAGE> 179
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
B-104
<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:
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
B-105
<PAGE> 181
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
B-106
<PAGE> 182
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.
B-107
<PAGE> 183
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
B-108
<PAGE> 184
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.
B-109
<PAGE> 185
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
B-110
<PAGE> 186
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.
B-111
<PAGE> 187
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
B-112
<PAGE> 188
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
B-113
<PAGE> 189
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.
B-114
<PAGE> 190
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
B-115
<PAGE> 191
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
B-116
<PAGE> 192
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
B-117
<PAGE> 193
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
B-118
<PAGE> 194
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
B-119
<PAGE> 195
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
B-120
<PAGE> 196
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
B-121
<PAGE> 197
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
B-122
<PAGE> 198
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.
B-123
<PAGE> 199
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.
B-124
<PAGE> 200
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.
B-125
<PAGE> 201
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.
B-126
<PAGE> 202
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.
B-127
<PAGE> 203
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.
B-128
<PAGE> 204
APPENDIX
The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Fund with regard to
portfolio investments for the Funds 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
A-1
<PAGE> 205
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.
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
A-2
<PAGE> 206
senior debt that is assigned an actual or implied BBB
rating.
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
A-3
<PAGE> 207
be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
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
A-4
<PAGE> 208
adverse changes in business, economic, or financial conditions
are more likely to lead to increased investment risk than for
obligations in other categories.
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.
A-5
<PAGE> 209
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
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.
A-6
<PAGE> 210
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 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:
A-7
<PAGE> 211
F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest degree
of assurance for timely payment.
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 rate d 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.
A-8
<PAGE> 212
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 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-9
<PAGE> 213
"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.
"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.
A-10
<PAGE> 214
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 Balanced Fund
Financial Highlights
(vi) The Riverfront Stock Appreciation Fund
Financial Highlights
(vii) The Riverfront Large Company Select Fund
None
Included in Part B:
(i) The Riverfront U.S. Government Securities Money Market
Fund
C-1
<PAGE> 215
Statement of Assets and Liabilities dated June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and the years ended December 31, 1995, 1994 and
1993, and the period from commencement of operations (October
1, 1992) to December 31, 1992
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 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 June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
C-2
<PAGE> 216
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and the years ended December 31, 1995, 1994 and
1993, and the period from commencement of operations (October
1, 1992) to December 31, 1992
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 June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and the years ended December 31, 1995, 1994 and
1993, and the period from commencement of operations (October
1, 1992) to December 31, 1992
C-3
<PAGE> 217
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)
(iv) The Riverfront Ohio Tax-Free Bond Fund
Statement of Assets and Liabilities dated June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and the year ended December 31, 1995, and the
period from commencement of operations (August 1, 1994) to
December 31, 1994
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
C-4
<PAGE> 218
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 Balanced Fund
Statement of Assets and Liabilities dated June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and the year ended December 31, 1995, and the
period from commencement of operations (September 1, 1994) to
December 31, 1994
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
C-5
<PAGE> 219
(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)
(vi) The Riverfront Stock Appreciation Fund
Statement of Assets and Liabilities dated June 30, 1996
(unaudited)
Statement of Operations for the six months ended June 30,
1996 (unaudited)
Statements of Changes in Net Assets for the six months ended
June 30, 1996 (unaudited) and the year ended December 31, 1995
Schedule of Portfolio Investments dated June 30, 1996
(unaudited)
Notes to Financial Statements as of June 30, 1996
(unaudited)
Financial Highlights for the six months ended June 30, 1996
(unaudited) and for the period from the date of acquisition
(October 1, 1995) to December 31, 1995 and the years ended
September 30, 1995, 1994, 1993 and 1992 (Investor A shares)
and the six months ended June 30, 1996 (unaudited) and the
period from commencement of operations (October 1, 1995) to
December 31, 1995 (Investor B shares)
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
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
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<PAGE> 220
Report of Independent Auditors dated January 15, 1996
(vii) The Riverfront Large Company Select Fund
To be filed by amendment
(viii) 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 is
incorporated by reference to Exhibit (1)(a) of
Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(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 is incorporated by reference to
Exhibit (1)(b) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154) filed
on April 26, 1996.
(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 is incorporated by reference to Exhibit (1)(c)
of Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(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 is incorporated by reference
to Exhibit (1)(d) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(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 is
incorporated by reference to Exhibit (1)(e) of
Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(f) A copy of a form of Articles Supplementary to
Registrant's Articles of Incorporation, as filed with the
C-7
<PAGE> 221
State of Maryland, which created a new portfolio is
incorporated by reference to Exhibit (1)(f) of
Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(g) 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 are incorporated by reference to
Exhibit (2)(a) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154) filed
on April 26, 1996.
(b) Form of Amendment to Registrant's Bylaws is incorporated
by reference to Exhibit (2)(b) of Post-Effective
Amendment No. 16 to Registrant's Registration Statement
(No. 33-34154) filed on April 26, 1996.
(c) Form of Amendment to Article IV of Registrant's Bylaws as
adopted February 24, 1995 is incorporated by reference to
Exhibit (2)(b) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154) filed
on April 26, 1996.
(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 proposed to be amended as of January 1, 1997, 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. is incorporated by reference to Exhibit (5)(b) of
Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(c) Sub-Investment Advisory Agreement dated as of August 15, 1995,
as proposed to be amended as of January 1, 1997, between The
Provident Bank and DePrince, Race & Zollo, Inc.
(6)(a) Distribution Agreement, dated February 1, 1994, and
amended as of November 17, 1995, as proposed to be
further amended as of January 1, 1997, between Registrant
and BISYS Fund Services Limited Partnership.
C-8
<PAGE> 222
(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 proposed to
be amended as of January 1, 1997, between the Registrant and
The Provident Bank.
(9)(a) Administration Agreement, dated February 1, 1996, as
proposed to be amended as of January 1, 1997, between the
Registrant and BISYS Fund Services Limited Partnership.
(b) Master Transfer and Recordkeeping Agreement, dated as of
February 24, 1992, as proposed to be amended as of January 1,
1997, between the Registrant and The Provident
Bank.
(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 Large Company Select Fund. 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
C-9
<PAGE> 223
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.
(15)(a) Investor A Distribution and Shareholder Service Plan and
Agreement, as amended as of November 17, 1995.
(b) Investor B Distribution and Shareholder Service Plan and
Agreement, as amended as of November 17, 1995.
(c) 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.
C-10
<PAGE> 224
(f) Computation of Performance Quotations for The Riverfront
Large Company Select Fund.
(17) Financial Data Schedules.
(18) None.
(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 is incorporated by
reference to Exhibit (19)(a) of Post-Effective Amendment
No. 16 to Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(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
-------------
Title of Series October 16, 1996
- --------------- ----------------
Investor A Investor B
---------------------
<S> <C> <C>
The Riverfront U.S. Government Securities
Money Market Fund, shares of
capital stock, $.001 par value 514 N/A
The Riverfront U.S. Government
Income Fund, shares of capital
stock, $.001 par value 23 63
The Riverfront Income Equity Fund,
shares of capital stock, $.001 par value 934 464
The Riverfront Ohio Tax-Free Bond Fund,
shares of capital stock, $.001 par value 7 23
</TABLE>
C-11
<PAGE> 225
<TABLE>
<S> <C> <C>
The Riverfront Flexible Growth Fund,
shares of capital stock, $.001 par value 37 604
The Riverfront Stock Appreciation Fund,
shares of capital stock, $.001 par value 4,809 58
The Riverfront Large Company Select Fund,
shares of capital stock, $.001 par value 0 0
</TABLE>
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.
Position with
Name The Provident Bank Other Business
- ---- ------------------ --------------
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
(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,
C-12
<PAGE> 226
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.
Position with
Name DRZ Other Business
- ---- ------------- --------------
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
(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.
C-13
<PAGE> 227
Position with
Name JIR Other Business
- ---- ------------- --------------
Jerome G. Peppers Director Professor and
Associate Dean, Air
Force Institute of
Technology, Wright-
Patterson Air Force
Base, Dayton, Ohio.
Robert G. Hawkins Director Dean and Professor,
Rensselaer
Polytechnic
Institute, Troy, New
York.
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:
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
- ------------------ ------------------- -------------
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
(c) None
C-14
<PAGE> 228
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).
(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
Registrant undertakes to file a post-effective amendment,
using reasonably current financial statements of The
Riverfront Large Company Select Fund, which need not be
certified, within four to six months of the commencement of
operations of such Fund.
C-15
<PAGE> 229
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 17th day
of October, 1996.
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 17th day of October, 1996.
SIGNATURES TITLE
- ---------- -----
/s/ Stephen G. Mintos President and Director
- ------------------------------
Stephen G. Mintos
Treasurer (Principal Accounting
/s/*Walter B. Grimm and Financial Officer) and Vice
- ------------------------------ President
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
*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-16
<PAGE> 230
Index to Exhibits
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
1. (a) The Registrant's Articles of Incorporation was
filed as Exhibit (1)(a) to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) filed on April 26,
1996.
(b) Amendment No. 1 to the Registrant's Articles
of Incorporation was filed as Exhibit (1)(b)
to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(c) Amendment No. 2 to the Registrant's Articles
of Incorporation was filed as Exhibit (1)(c)
to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(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 was filed as Exhibit (1)(d) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(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 was filed as Exhibit (1)(e) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(f) Form of Articles Supplementary to Registrant's
Articles of Incorporation, as filed with the
State of Maryland, which created a new
portfolio was filed as Exhibit (1)(f) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(g) A copy of a form of Articles Supplementary to
Registrant's Articles of Incorporation, as
C-17
<PAGE> 231
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
filed with the State of Maryland, which
created a new portfolio.
2. (a) Bylaws of Registrant were filed as Exhibit
(2)(a) to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(b) Amendment No. 1 to Registrant's Bylaws was
filed as Exhibit (2)(b) to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) filed on April 26,
1996.
(c) Form of Amendment to Article IV of
Registrant's Bylaws as adopted February 24,
1995, was filed as Exhibit (2)(c) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
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 proposed to be amended as
of January 1, 1997, between Registrant and The
Provident Bank.
(b) Sub-Investment Advisory Agreement dated
August 1, 1994, between The Provident Bank and
James Investment Research, Inc. was filed as
Exhibit (5)(b) to Post-Effective Amendment No.
16 to Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(c) Sub-Investment Advisory Agreement dated as of August
15, 1995, as proposed to be amended as of January 1,
1997, between The Provident Bank and DePrince, Race &
Zollo, Inc.
C-18
<PAGE> 232
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
6. (a) Distribution Agreement, dated February 1,
1994, and amended as of November 17, 1995, as
proposed to be further amended as of January
1, 1997, between Registrant and BISYS Fund
Services Limited Partnership.
(b) Form of Dealer Agreement between BISYS Fund
Services 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 proposed to be amended as of January 1,
1997, between Registrant and The
Provident Bank.
9. (a) Administration Agreement, dated February 1,
1996, as proposed to be amended as of January
1, 1997, between the Registrant and BISYS Fund
Services Limited Partnership.
(b) Master Transfer and Recordkeeping Agreement, dated as
of February 24, 1992, as proposed to be amended as of
January 1, 1997, between Registrant and The Provident
Bank.
(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 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. was filed as Exhibit
(9)(e) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
C-19
<PAGE> 233
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
(f) Agreement and Plan of Reorganization and
Liquidation dated as of June 26, 1995, between
the Registrant and MIM Mutual Funds, Inc. was
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 Large Company
Select Fund. 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) Investor A Distribution and Shareholder
Service Plan and Agreement, as amended as of
November 17, 1995.
(b) Investor B Distribution and Shareholder
Service Plan and Agreement, as amended as of
November 17, 1995.
(c) Form of Dealer Agreement between BISYS Fund
Services 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 were filed as
Exhibit (16) (a) to Registrant's
Post-Effective Amendment No. 7 on June 2,
1994.
C-20
<PAGE> 234
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
(b) Schedules for the calculation of performance
quotations for The Riverfront U.S. Government
Income Fund and The Riverfront Income Equity
Fund were 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 were 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 was 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 was filed as Exhibit (16)(e)
to Registrant's Post-Effective Amendment No.
14 on September 21, 1995.
(f) Schedule for the calculation of performance
quotations for The Riverfront Large Company
Select Fund.
17. Financial Data Schedules.
18. None.
19. (a) Powers of Attorney of the Officers and
Directors of the Registrant were filed as an
Exhibit to Registrant's Post-Effective
Amendment No. 6 on March 1, 1994.
(b) Power of Attorney for George P. Landreth was
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 was
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 was
filed as Exhibit (19)(d) to Registrant's Post-
Effective Amendment No. 16 filed on April 26,
1996.
(e) Consent of Baker & Hostetler.
C-21
<PAGE> 235
As filed with the Securities and Exchange Commission October 18, 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. 17 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 18 [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-22
<PAGE> 1
EXHIBIT (1)(g)
<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
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.
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
<PAGE> 3
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 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,
and "The Riverfront Large Company Select 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 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:
-2-
<PAGE> 4
and inserting in lieu thereof the following language:
(f) 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, The Riverfront
Stock Appreciation Fund series and The Riverfront Large Company Select
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, The Riverfront
Stock Appreciation Fund series and The Riverfront Large Company Select
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, by means of an unanimous written Actions By Directors
dated October 14, 1996, 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.
-3-
<PAGE> 5
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 14th
of October, 1996.
THE RIVERFRONT FUNDS, INC.
By: /s/ STEPHEN G. MINTOS
--------------------------
Stephen G. Mintos
President
ATTEST:
/s/ JAMES A. WHITE
- -----------------------------
James A. White
Secretary
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 (5)(a)
<PAGE> 2
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;
<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. 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:
-2-
<PAGE> 4
(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
(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
-3-
<PAGE> 5
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 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
-4-
<PAGE> 6
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 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
-5-
<PAGE> 7
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 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
-6-
<PAGE> 8
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 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.
-7-
<PAGE> 9
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
-----------------------------
-8-
<PAGE> 10
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 Annual rate of 0.90% of August 1, 1994
Balanced 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
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 RIVERFRONT FUNDS, INC.
By
---------------------------
Title
------------------------
THE PROVIDENT BANK
By
---------------------------
Title
------------------------
- ---------------------
All fees are computed daily and paid monthly.
-9-
<PAGE> 11
-10-
<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, 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
<PAGE> 3
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 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;
2
<PAGE> 4
(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 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,
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,
3
<PAGE> 5
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 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
4
<PAGE> 6
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 BISYS Fund Services Limited Partnership (under the Company's Administration
Agreement with 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 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.
5
<PAGE> 7
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
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
6
<PAGE> 8
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
--------------------------------
7
<PAGE> 9
Dated: 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 January 1, 1997
Equity Fund average daily net assets of
the DRZ Portfolio up to $55
million and .55% of the
average daily net assets
of 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.
8
<PAGE> 1
EXHIBIT (6)(a)
<PAGE> 2
DISTRIBUTION AGREEMENT
This Agreement is made as of the 1st day of August, 1994, and is
amended as of November 17, 1995, between The Riverfront Funds, Inc. (the
"Fund"), a Maryland corporation having its principal place of business at 3435
Stelzer Road, Columbus, Ohio 43219, and BISYS Fund Services Limited Partnership
d/b/a BISYS Fund Services ("Distributor"), an Ohio limited partnership having
its principal place of business at 3435 Stelzer Road, Columbus, Ohio 43219.
WHEREAS, the Fund is an open-end management investment company,
organized as a Maryland corporation and registered with the Securities and
Exchange Commission (the "Commission") under the Investment Company Act of 1940,
as amended (the "1940 Act"); and
WHEREAS, it is intended that Distributor act as the distributor of the
shares of capital stock ("Shares") of each of the investment portfolios of the
Fund identified on Schedule A hereto as such Schedule may be amended from time
to time (such current portfolios and any additional portfolios being referred to
individually as a "Portfolio" and collectively as the "Portfolios").
NOW, THEREFORE, in consideration of the mutual premises and covenants
herein set forth, the parties agree as follows:
1. Services as Distributor.
-----------------------
1.1 Distributor will act as agent for the distribution of the Shares
covered by the registration statement and prospectuses of the Fund then in
effect under the Securities Act of 1933, as amended (the "Securities Act"). As
used in this Agreement, the term "registration statement" shall mean Parts A
(the prospectus), B (the Statement of Additional Information) and C of each
registration statement that is filed on Form N-1A, or any successor thereto,
with the Commission, together with any amendments thereto. The term "prospectus"
shall mean each form of Prospectus and Statement of Additional Information used
by the Portfolios for delivery to shareholders and prospective shareholders
after the effective dates of the above referenced registration statements,
together with any amendments and supplements thereto.
1.2 Distributor agrees to use appropriate efforts to solicit orders for
the sale of the Shares and will undertake such advertising and promotion as it
believes reasonable in connection with such solicitation. The Fund understands
that Distributor is now and may in the future be the distributor of the shares
of several investment companies or series (together, "Companies") including
Companies having investment objectives similar to those of the Portfolios of the
Fund. The Fund further understands that investors and potential investors in the
Fund may invest in shares
<PAGE> 3
of such other Companies. The Fund agrees that Distributor's duties to such
Companies shall not be deemed in conflict with its duties to the Fund under this
paragraph 1.2.
Except as provided in Section 2 hereof, Distributor shall, at its own
expense, finance appropriate activities which it deems reasonable which are
primarily intended to result in the sale of the Shares, including, but not
limited to, advertising, compensation of underwriters, dealers and sales
personnel, the printing and mailing of prospectuses to other than current
Shareholders, and the printing and mailing of sales literature.
1.3 In its capacity as distributor of the Shares, all activities of
Distributor and its partners, agents, and employees shall comply with all
applicable laws, rules and regulations, including, without limitation, the 1940
Act, the Securities Act, all rules and regulations promulgated by the Commission
thereunder and all rules and regulations adopted by any securities association
registered under the Securities Exchange Act of 1934.
1.4 Distributor will provide one or more persons, during normal
business hours, to respond to telephone questions with respect to the Fund.
1.5 Distributor will transmit any orders received by it for purchase
or redemption of the Shares to the transfer agent and custodian for the
Portfolios.
1.6 Whenever in their judgment such action is warranted by unusual
market, economic or political conditions, or by abnormal circumstances of any
kind, the Fund's officers may decline to accept any orders for, or make any
sales of, the Shares until such time as those officers deem it advisable to
accept such orders and to make such sales.
1.7 Distributor will act only on its own behalf as principal if it
chooses to enter into selling agreements with selected dealers or others.
1.8 Distributor shall adopt and maintain compliance standards as to
when each class of Shares may be sold to particular investors in accordance with
the Order of Exemption granted by the Commission in connection with the Fund's
offering of multiple classes of Shares. Distributor further agrees to conform to
such standards and shall require all other persons selling Shares of the Fund to
conform to such standards.
1.9 The Fund agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions that
may be reasonably necessary in connection
2
<PAGE> 4
with the qualification of the Shares for sale in such states as
Distributor may designate.
1.10 The Fund shall furnish from time to time, for use in connection
with the sale of the Shares, such information with respect to the Portfolios and
the Shares as Distributor may reasonable request; and the Fund warrants that the
statements contained in any such information shall fairly show or represent what
they purport to show or represent. The Fund shall also furnish Distributor upon
request with: (a) unaudited semi-annual statements of the Portfolios' books and
accounts prepared by the Fund, (b) a monthly itemized list of the securities in
the Portfolios, (c) monthly balance sheets as soon as practicable after the end
of each month, and (d) from time to time such additional information regarding
the financial condition of the Portfolios as Distributor may reasonably request.
1.11 The Fund represents to Distributor that, with respect to the
Shares, all registration statements and prospectuses filed by the Fund with the
Commission under the Securities Act have been carefully prepared in conformity
with requirements of said Act and the rules and regulations of the Commission
thereunder. The registration statement and prospectus, when such registration
statement becomes effective, will contain all statements required to be stated
therein in conformity with said Act and the rules and regulations of the
Commission and all statements of fact contained in any such registration
statement and prospectus will be true and correct when such registration
statement becomes effective. Furthermore, neither any registration statement nor
any prospectus when such registration statement becomes effective will include
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
to a purchaser of the Shares. The Fund may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus as, in the light
of future developments, may, in the opinion of the Fund's counsel, be necessary
or advisable. If the Fund shall not propose such amendment or amendments and/or
supplement or supplements within fifteen days after receipt by the Fund of a
written request from Distributor to do so, Distributor may, at its option,
terminate this Agreement. The Fund shall not file any amendment to any
registration statement or supplement to any prospectus without giving
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus, of whatever character, as the Fund may deem
advisable, such right being in all respects absolute and unconditional.
3
<PAGE> 5
1.12 The Fund authorizes Distributor and dealers to use any prospectus
in the form furnished from time to time in connection with the sale of the
Shares. The Fund agrees to indemnify, defend and hold Distributor, its several
partners and employees, and any person who controls Distributor within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Distributor, its partners and
employees, or any such controlling person, may incur under the Securities Act or
under common law or otherwise, arising out of or based upon any untrue
statement, or alleged untrue statement, of a material fact contained in any
registration statement or any prospectus or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated in
either any registration statement or any prospectus or necessary to make the
statements in either thereof not misleading. Provided, however, that the Fund's
agreement to indemnify Distributor, its partners or employees, and any such
controlling person shall not be deemed to cover any claims, demands, liabilities
or expenses arising out of any statements or representations as are contained in
any prospectus and in such financial and other statements as are furnished in
writing to the Fund by Distributor and used in the answers to the registration
statement or in the corresponding statements made in the prospectus, or arising
out of or based upon any omission or alleged omission to state a material fact
in connection with the giving of such information required to be stated in such
answers or necessary to make the answers not misleading; and further provided
that the Fund's agreement to indemnify Distributor and the Fund's
representations and warranties hereinbefore set forth in paragraph 1.11 shall
not be deemed to cover any liability to the Fund or its Shareholders to which
Distributor would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
Distributor's reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify Distributor, its partners and
employees and any such controlling person, as aforesaid, is expressly
conditioned upon the Fund's being notified of any action brought against
Distributor, its partners or employees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Fund at its
principal office in Columbus, Ohio and sent to the Fund by the person against
whom such action is brought, within 10 days after the summons or other first
legal process shall have been served. The failure to so notify the Fund of any
such action shall not relieve the Fund from any liability which the Fund may
have to the person against whom such action is brought by reason of any such
untrue, or allegedly untrue, statement or omission, or alleged omission,
otherwise than on account of the Fund's indemnity agreement contained in this
4
<PAGE> 6
paragraph 1.12. The Fund will be entitled to assume the defense of any suit
brought to enforce any such claim, demand or liability, but, in such case, such
defense shall be conducted by counsel of good standing chosen by the Fund and
approved by Distributor, which approval shall not be unreasonably withheld. In
the event the Fund elects to assume the defense of any such suit and retain
counsel of good standing approved by Distributor, the defendant or defendants in
such suit shall bear the fees and expenses of any additional counsel retained by
any of them; but in case the Fund does not elect to assume the defense of any
such suit, or in case Distributor reasonably does not approve of counsel chosen
by the Fund, the Fund will reimburse Distributor, its partners and employees, or
the controlling person or persons named as defendant or defendants in such suit,
for the fees and expenses of any counsel retained by Distributor or them. The
Fund's indemnification agreement contained in this paragraph 1.12 and the Fund's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
Distributor, its partners and employees, or any controlling person, and shall
survive the delivery of any Shares.
This agreement of indemnity will inure exclusively to Distributor's
benefit, to the benefit of its several partners and employees, and their
respective estates, and to the benefit of the controlling persons and their
successors. The Fund agrees promptly to notify Distributor of the commencement
of any litigation or proceedings against the Fund or any of its officers or
Directors in connection with the issue and sale of any Shares.
1.13 Distributor agrees to indemnify, defend and hold the Fund, its
several officers and Directors and any person who controls the Fund within the
meaning of Section 15 of the Securities Act free and harmless from and against
any and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which the Fund, its officers or Directors
or any such controlling person, may incur under the Securities Act or under
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Directors or such controlling person
resulting from such claims or demands, shall arise out of or be based upon any
untrue, or alleged untrue, statement of a material fact contained in information
furnished in writing by Distributor to the Fund and used in the answers to any
of the items of the registration statement or in the corresponding statements
made in the prospectus, or shall arise out of or be based upon any omission, or
alleged omission, to state a material fact in connection with such information
furnished in writing by Distributor to the Fund required to be stated in such
answers or necessary to make such
5
<PAGE> 7
information not misleading. Distributor's agreement to indemnify the Fund, its
officers and Directors, and any such controlling person, as aforesaid, is
expressly conditioned upon Distributor being notified of any action brought
against the Fund, its officers or Directors, or any such controlling person,
such notification to be given by letter or telegram addressed to Distributor at
its principal office in Columbus, Ohio and sent to Distributor by the person
against whom such action is brought, within 10 days after the summons or other
first legal process shall have been served. Distributor shall have the right of
first control of the defense of such action, with counsel of its own choosing,
satisfactory to the Fund, if such action is based solely upon such alleged
misstatement or omission on Distributor's part, and in any other event the Fund,
its officers or Directors or such controlling person shall each have the right
to participate in the defense or preparation of the defense of any such action.
The failure to so notify Distributor of any such action shall not relieve
Distributor from any liability which Distributor may have to the Fund, its
officers or Directors, or to such controlling person by reason of any such
untrue or alleged untrue statement, or omission or alleged omission, otherwise
than on account of Distributor's indemnity agreement contained in this paragraph
1.13.
1.14 No Shares shall be offered by either Distributor or the Fund under
any of the provisions of this Agreement and no orders for the purchase or sale
of Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the
Securities Act or if and so long as a current prospectus as required by Section
10(a) of said Act is not on file with the Commission; provided, however, that
nothing contained in this paragraph 1.14 shall in any way restrict or have an
application to or bearing upon the Fund's obligation to repurchase Shares from
any Shareholder in accordance with the provisions of the Fund's prospectus,
Articles of Incorporation or Bylaws.
1.15 The Fund agrees to advise Distributor as soon as reasonably
practical by a notice in writing delivered to Distributor or its counsel:
(a) of any request by the Commission for amendments to the
registration statement or prospectus then in effect or
for additional information:
(b) in the event of the issuance by the Commission of any stop
order suspending the effectiveness of the registration
statement or prospectus then in effect or the initiation by
service of process on the Fund of any proceeding for that
purpose;
6
<PAGE> 8
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement or
prospectus then in effect or which requires the making of a
change in such registration statement or prospectus in order
to make the statements therein not misleading; and
(d) of all action of the Commission with respect to any amendments
to any registration statement or prospectus which may from
time to time be filed with the Commission.
For purposes of this section, informal requests by or acts of the Staff
of the Commission shall not be deemed actions of or requests by the Commission.
1.16 Distributor agrees on behalf of itself and its partners and
employees to treat confidentiality and as proprietary information of the Fund
all records and other information relative to the Fund and its prior, present or
potential Shareholders, and not to use such records and information for any
purpose other than performance of its responsibilities and duties hereunder,
except, after prior notification to and approval in writing by the Fund, which
approval shall not be unreasonably withheld and may not be withheld where
Distributor may be exposed to civil or criminal contempt proceedings for failure
to comply, when requested to divulge such information by duly constituted
authorities, or when so requested by the Fund.
1.17 This Agreement shall be governed by the laws of the State of Ohio.
2. Fee.
----
Distributor may receive from the Portfolios identified on
Schedule B hereto with respect to such Portfolio's Investor A Shares a
distribution fee at the rate and upon the terms and conditions set forth in the
Investor A Distribution Plan, attached as Schedule C hereto and, as amended from
time to time. Distributor shall receive from the Portfolios identified on
Schedule D hereto with respect to such Portfolios' Investor B Shares a
distribution fee and a service fee at the rate and upon the terms and conditions
set forth in the Investor B Distribution and Shareholder Service Plan attached
as Schedule E hereto, and as amended from time to time. The distribution fees
described above shall be accrued daily and shall be paid on the first business
day of each month, or at such time(s) as the Distributor shall reasonably
request.
7
<PAGE> 9
3. Sale and Payment.
-----------------
Pursuant to the Articles of Incorporation dated March 27, 1990,
each Portfolio may be divided into separate classes of Shares in which case the
Shares of one or more classes may be subject to a sales load and may be subject
to the imposition of a distribution fee pursuant to the Distribution Plans
referred to above. To the extent that all Shares of a Portfolio are sold at an
offering price which includes a sales load or that Shares of one or more
classes of a Portfolio are sold at such an offering price, such Shares shall
hereinafter be referred to collectively as "Load Shares" and individually as a
"Load Share." A Portfolio that contains Load Shares shall hereinafter be
referred to collectively as "Load Portfolios" and individually as a "Load
Portfolio." Under this Agreement, the following provisions shall apply with
respect to the sale of, and payment for, Load Shares of the Load Portfolios
identified on Schedule F hereto.
3.1 The Distributor shall have the right, as principal, to purchase
Load Shares from the Load Portfolios at their net asset value and to sell such
Load Shares to the public against orders therefor at the applicable public
offering price, as defined in Section 4 hereof. The Distributor shall also have
the right, as principal, to sell Load Shares to dealers against orders therefor
at the public offering price less a concession determined by the Distributor,
which concession shall not exceed the amount of the sales charge or underwriting
discount, if any, referred to in Section 4 below.
3.2 Prior to the time of delivery of any Load Shares by a Load
Portfolio to, or on the order of, the Distributor, the Distributor shall pay or
cause to be paid to the Load Portfolio or to its order an amount in federal
funds equal to the applicable net asset value of such Load Shares. The
Distributor may retain so much of any sales charge or underwriting discount as
is not allowed by the Distributor as a concession to dealers.
4. Public Offering Price.
----------------------
The public offering price of a Load Share shall be the net asset value
of such Load Share, plus any applicable sales charge, all as set forth in the
current prospectus of the Load Portfolio. The net asset value of Shares shall be
determined in accordance with the provisions of the Articles of Incorporation
and Bylaws of the Fund and the then current prospectus of the Load Portfolio.
5. Issuance of Shares.
-------------------
The Fund reserves the right to issue, transfer, or sell Load Shares at
net asset value (a) in connection with the merger or
8
<PAGE> 10
consolidation of the Fund or the Load Portfolio(s) with any other investment
company or the acquisition by the Fund or the Load Portfolio(s) of all or
substantially all of the assets or of the outstanding Shares of any other
investment company; (b) in connection with a pro rata distribution directly to
the holders of Shares in the nature of a stock dividend or split; (c) upon the
exercise of subscription rights granted to the holders of Shares on a pro rata
basis; (d) in connection with the issuance of Load Shares pursuant to any
exchange and reinvestment privileges described in any then current prospectus of
the Load Portfolio; and (e) otherwise in accordance with any then current
prospectus of the Load Portfolio.
6. Redemption and Payment.
-----------------------
Under this Agreement, the following provisions shall apply with respect
to the redemption of and payment for Shares of any class redeemed at net asset
value less a contingent deferred sales charge (collectively "CDSC Shares") as
described in the prospectuses of any Portfolios identified on Schedule G hereto
(collectively, the "CDSC Portfolios" and individually, a "CDSC Portfolio"):
(a) Distributor shall have the right to redeem CDSC Shares from
the public on behalf of the CDSC Portfolios at net asset value
less the applicable contingent deferred sales charge.
(b) Distributor may retain so much of any contingent deferred
sales charge as is not allowed by Distributor to dealers
as a concession.
7. Term, Duration and Termination.
-------------------------------
This Agreement shall become effective with respect to each
Portfolio listed on Schedule A hereof as of the date first written above (or, if
a particular Portfolio is not in existence on that date, on the date an
amendment to Schedule A to this Agreement relating to that Portfolio is
executed) and, unless sooner terminated as provided herein, shall continue until
February 1, 1996. Thereafter, if not terminated, this Agreement shall continue
with respect to a particular Portfolio automatically for successive one-year
terms, provided that such continuance is specifically approved at least annually
by (a) by the vote of a majority of those members of the Fund's Board of
Directors who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting for the purpose of voting on such
approval and (b) by the vote of the Fund's Board of Directors or the vote of a
majority of the outstanding voting securities of such a Portfolio. This
Agreement is terminable without penalty, on not less than
9
<PAGE> 11
sixty-days prior written notice by the Fund's Board of Directors, by vote of a
majority of the outstanding voting securities of the Fund or by the Distributor.
This Agreement will also terminate automatically in the event of this
assignment. (As used in this Agreement, the terms "majority of the outstanding
voting securities", "interested persons" and "assignment" shall have the
meanings as ascribed to such terms in the 1940 Act.)
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the date and year first
written above.
THE RIVERFRONT FUNDS, INC. BISYS FUND SERVICES LIMITED
PARTNERSHIP
By
------------------------------- By BISYS Fund Services, Inc.,
General Partner
Title
---------------------------
By
Date November 17, 1995 -----------------------------
-----------------------------
Title
----------------------------
Date November 17, 1995
--------------------------
10
<PAGE> 12
Dated: January 1, 1997
Schedule A
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
<TABLE>
<CAPTION>
Name of Portfolio Date
----------------- ----
<S> <C>
The Riverfront U.S. Government Income Fund August 1, 1994
The Riverfront Income Equity Fund
The Riverfront U.S. Government Securities
Money Market Fund
The Riverfront Ohio Tax Free Bond Fund
The Riverfront Balanced Fund
The Riverfront Stock Appreciation Fund July 6, 1995
The Riverfront Large Company Select Fund January 1, 1997
</TABLE>
THE RIVERFRONT FUNDS, INC.
By
--------------------------------
Name
------------------------------
Title
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
--------------------------------
Name
-----------------------------
Title
-----------------------------
A - 1
<PAGE> 13
Dated: January 1, 1997
Schedule B
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
<TABLE>
<CAPTION>
Name of Investor A Plan Portfolio Date
--------------------------------- ----
<S> <C>
The Riverfront U.S. Government August 1, 1994
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 Balanced Fund
The Riverfront Stock Appreciation Fund July 6, 1995
The Riverfront Large Company Select Fund January 1, 1997
</TABLE>
THE RIVERFRONT FUNDS, INC.
By
----------------------------
Name
---------------------------
Title
--------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
-----------------------------
Name
--------------------------
Title
--------------------------
A - 2
<PAGE> 14
Schedule C
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
INVESTOR A DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
AND AGREEMENT
This Plan (the "Investor A Plan") constitutes a distribution and
shareholder service plan of The Riverfront Funds, Inc., a Maryland corporation
(the "Fund"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Investor A Plan relates to the Investor A
Shares of those investment portfolios identified on Schedule B to the Fund's
Distribution Agreement and as amended from time to time (the "Investor A Plan
Portfolios").
SECTION 1. Each Investor A Plan Portfolio shall pay to BISYS Fund
Services Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Fund's capital stock, par value $.001 per share, of
its Investor A class (the "Investor A Shares"), a fee in an amount not to exceed
on an annual basis .25% of the average daily net asset value of the Investor A
Shares of such Investor A Plan Portfolio (the "Investor A Plan Fee") for: (a)
(i) efforts of the Distributor expended in respect of or in furtherance of sales
of Investor A shares, and (ii) to enable the Distributor to make payments to
banks and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance and/or shareholder service pursuant to an agreement
with the Participating Organization; and (b) reimbursement of expenses (i)
incurred by the Distributor, and (ii) incurred by a Participating Organization
pursuant to an agreement in connection with distribution assistance and/or
shareholder service including, but not limited to, the reimbursement of expenses
relating to printing and distributing prospectuses to persons other than
Shareholders of an Investor A Plan Portfolio, printing and distributing
advertising and sales literature and reports to Shareholders used in connection
with the sale of Investor A Shares, and personnel and communication equipment
used in servicing Shareholder accounts and prospective shareholder inquiries.
For purposes of the Investor A Plan, a Participating Organization may include
any of the Distributor's affiliates or subsidiaries.
C - 1
<PAGE> 15
SECTION 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Portfolio to the Distributor only to compensate or to reimburse the Distributor
for payments or expenses incurred pursuant to Section 1.
SECTION 3. The Investor A Plan shall not take effect with respect to
the Investor A Shares of any subsequently created Investor A Plan Portfolio
until it has been approved by a vote of at least a majority of the outstanding
Investor A Shares of such Investor A Plan Portfolio.
SECTION 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Directors of the Fund, and (b) the Independent Directors of the Fund cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
SECTION 5. The Investor A Plan shall continue in effect for a period of
more than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Investor A Plan Funds pursuant to the Investor A Plan or
any related agreement shall provide to the Directors of the Fund, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 7. The Investor A Plan may be terminated at any time by vote of
a majority of the Independent Directors, or, with respect to an Investor A Plan
Portfolio, by vote of a majority of the outstanding Investor A Shares of the
Investor A Plan Portfolio.
SECTION 8. All agreements with any person relating to implementation of
the Investor A Plan shall be in writing, and any agreement related to the
Investor A Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Directors or, with respect to an Investor A Plan Portfolio, by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan
Portfolio, on not more than 60 days' written notice to any other party
to the agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
C - 2
<PAGE> 16
SECTION 9. The Investor A Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant to Section 1
hereof without approval in the manner provided in Section 3 hereof, and all
material amendments to the Investor A Plan shall be approved in the manner
provided for approval of the Investor A Plan in Section 4.
SECTION 10. As used in the Investor A Plan, (a) the term "Independent
Directors" shall mean those Directors of the Fund who are not interested persons
of the Fund, and have no direct or indirect financial interest in the operation
of the Investor A Plan or any agreements related to it, and (b) the terms
"assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
SECTION 11. This Plan amends in their entirety and supersedes the
Distribution Plans of The Riverfront U.S. Government Securities Money Market
Fund, The Riverfront U.S. Government Income Fund and The Riverfront Income
Equity Fund in effect at the time of adoption and implementation of this Plan.
THE RIVERFRONT FUNDS, INC.
By
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
-----------------------------
Adopted by the Directors of the Fund on June 8, 1994, as amended as
of November 17, 1995
C - 3
<PAGE> 17
Dated: January 1, 1997
Schedule D
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended November 17, 1995
<TABLE>
<CAPTION>
Name of Investor B Plan Portfolio Date
--------------------------------- ----
<S> <C>
The Riverfront U.S. Government August 1, 1994
Income Fund
The Riverfront Income Equity Fund
The Riverfront Ohio Tax Free Bond Fund
The Riverfront Balanced Fund
The Riverfront Stock Appreciation Fund July 6, 1995
The Riverfront Large Company Select Fund January 1, 1997
</TABLE>
THE RIVERFRONT FUNDS, INC.
By
-----------------------------
Name
---------------------------
Title
--------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
-----------------------------
Name
---------------------------
Title
--------------------------
D - 1
<PAGE> 18
Schedule E
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
INVESTOR B DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
AND AGREEMENT
This Plan (the "Investor B Plan") constitutes a distribution and
shareholder service plan of The Riverfront Funds, Inc., a Maryland corporation
(the "Fund"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Investor B Plan relates to the Investor B
Shares of those investment portfolios identified on Schedule D to the Fund's
Distribution Agreement and as amended from time to time (the "Investor B Plan
Portfolios").
SECTION 1. Each Investor B Plan Portfolio is authorized to pay to BISYS
Fund Services Limited Partnership, an Ohio limited partnership and the
distributor (the "Distributor") of the Fund's capital stock, par value $.001 per
share, of its Investor B class (the "Investor B Shares"):
(a) a distribution fee in an amount not to exceed on an annual
basis .75% of the average daily net asset value of the Investor B
Shares of such Investor B Plan Portfolio (the "Distribution Fee") for:
(i) (a) efforts of the Distributor expended in respect of or in
furtherance of sales of Investor B Shares, and (b) to enable the
Distributor to make payments to banks and other institutions and
broker/dealers (a "Participating Organization") for distribution
assistance pursuant to an agreement with the Participating
Organization; and (ii) reimbursement of expenses (a) incurred by the
Distributor, and (b) incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including,
but not limited to, the reimbursement of expenses relating to printing
and distributing prospectuses to persons other than Shareholders of an
Investor B Plan Portfolio, printing and distributing advertising and
sales literature and reports to Shareholders for use in connection with
the sales of Investor B Shares, processing purchase, exchange and
redemption requests from customers and placing orders with the
Distributor or the Fund's transfer agent, and personnel and
communication equipment used in servicing Shareholder accounts and
prospective shareholder inquiries; and
E - 1
<PAGE> 19
(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 Investor B Plan Portfolio (the "Service Fee") for: (i)
(a) efforts of the Distributor expended in servicing shareholders
holding Investor B Shares, and (b) to enable the Distributor to make
payments to a Participating Organization for shareholder services
pursuant to an agreement with the Participating Organization; and (ii)
reimbursement of expenses (a) incurred by the Distributor, and (b)
incurred by a Participating Organization pursuant to an agreement in
connection with shareholder service including, but not limited to
personal, continuing services to investors in the Investor B Shares of
an Investor B Plan Portfolio, providing sub-accounting with respect to
Investor B Shares beneficially owned by customers or the information
necessary for sub-accounting, arranging for bank wires, and providing
office space, equipment, telephone facilities and various personnel
including clerical, supervisory and computer, as is necessary or
beneficial in connection therewith.
For purposes of the Investor B Plan, a Participating Organization may include
any of the Distributor's affiliates or subsidiaries.
SECTION 2. The Distribution Fee and the Service Fee shall be paid by
the Investor B Plan Portfolios to the Distributor only to compensate or to
reimburse the Distributor for payments or expenses incurred pursuant to Section
1.
SECTION 3. The Investor B Plan shall not take effect with respect to
the Investor B Shares of an Investor B Plan Portfolio until it has been approved
by a vote of the initial Shareholder of the Investor B Shares of such Investor B
Plan Portfolio.
SECTION 4. The Investor B Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Directors of the Fund, and (b) the Independent Directors of the Fund cast in
person at a meeting called for the purpose of voting on the Investor B Plan or
such agreement.
E - 2
<PAGE> 20
SECTION 5. The Investor B Plan shall continue in effect for a period of
more than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor B Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Investor B Plan Portfolios pursuant to the Investor B
Plan or any related agreement shall provide to the Directors of the Fund, and
the Directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
SECTION 7. The Investor B Plan may be terminated at any time by vote of
a majority of the Independent Directors, or, with respect to an Investor B Plan
Portfolio, by vote of a majority of the outstanding Investor B Shares of the
Investor B Plan Portfolio.
SECTION 8. All agreements with any person relating to implementation of
the Investor B Plan shall be in writing, and any agreements related to the
Investor B Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Directors or, with respect to an Investor B Plan Portfolio, by vote of
a majority of the outstanding Investor B Shares of the Investor B Plan
Portfolio, on not more than 60 days' written notice to any other party
to the agreement; and
(b) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 9. The Investor B Plan may not be amended to increase
materially the amount of the Distribution Fee and Service Fee permitted pursuant
to Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to the Investor B Plan shall be approved in the
manner provided for approval of the Investor B Plan in Section 4.
SECTION 10. As used in the Investor B Plan, (a) the term "Independent
Directors" shall mean those Directors of the Fund who are not interested persons
of the Fund, and have no direct or indirect financial interest in the operation
of the Investor B Plan
E - 3
<PAGE> 21
or any agreements related to it, and (b) the terms "assignment," "interested
person" and "majority of the outstanding voting securities" shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
THE RIVERFRONT FUNDS, INC.
By
------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By
------------------------------
Adopted by the Directors of the Fund on June 8, 1994 and as amended as of
November 17, 1995.
E - 4
<PAGE> 22
Dated: January 1, 1997
Schedule F
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
<TABLE>
<CAPTION>
Name of Load Portfolio Date
---------------------- ----
<S> <C>
The Riverfront U.S. Government August 1, 1994
Income Fund-Investor A Shares
The Riverfront Income Equity Fund-
Investor A Shares
The Riverfront Ohio Tax Free Bond Fund-
Investor A Shares
The Riverfront Balanced Fund-
Investor A Shares
The Riverfront Stock Appreciation Fund-
Investor A Shares July 6, 1995
The Riverfront Large Company Select Fund-
Investor A Shares January 1, 1997
</TABLE>
THE RIVERFRONT FUNDS, INC.
By
-------------------------
Name
-----------------------
Title
-----------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
--------------------------
Name
------------------------
Title
-----------------------
F - 1
<PAGE> 23
Dated: January 1, 1997
Schedule G
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
<TABLE>
<CAPTION>
Name of CDSC Portfolio Date
---------------------- ----
<S> <C>
The Riverfront U.S. Government August 1, 1994
Income Fund-Investor B Shares
The Riverfront Income Equity Fund-
Investor B Shares
The Riverfront Ohio Tax Free Bond Fund-
Investor B Shares
The Riverfront Balanced Fund-
Investor B Shares
The Riverfront Stock Appreciation Fund-
Investor B Shares July 6, 1995
The Riverfront Large Company Select Fund-
Investor B Shares January 1, 1997
</TABLE>
THE RIVERFRONT FUNDS, INC.
By
--------------------------
Name
------------------------
Title
------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
---------------------------
Name
-------------------------
Title
------------------------
G - 1
<PAGE> 1
EXHIBIT (8)
<PAGE> 2
AMENDED AND RESTATED
CUSTODIAN, FUND ACCOUNTING AND RECORDKEEPING AGREEMENT
BY AND BETWEEN
THE RIVERFRONT FUNDS, INC.
AND
THE PROVIDENT BANK
This Amended and Restated Custodian, Fund Accounting and Recordkeeping
Agreement is entered into as of August 1, 1994, by and between The Riverfront
Funds, Inc., a Maryland corporation (the "Fund"), having its principal place of
business at 1900 East Dublin-Granville Road, Columbus, Ohio 43229, and The
Provident Bank, an Ohio banking corporation ("Provident"), having its principal
place of business at One East Fourth Street, Cincinnati, Ohio 45202.
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets;
WHEREAS, the Fund offers from time to time shares in one or more
series, and desires to retain Provident to provide the services described herein
to those series, as are now or hereafter may be identified in Schedule A hereto,
as may be amended from time to time and made subject to this Agreement in
accordance with paragraph 13. Each such series is herein referred to singly as a
"Portfolio" and collectively, as the "Portfolios"; and
WHEREAS, it is the intention of the parties hereto that the current,
substantially similar Custodian, Fund Accounting and Recordkeeping Agreements
dated as of July 1, 1993, and May 1, 1994, be combined into one agreement, and
that the new Portfolios currently be added to the provisions hereof;
NOW THEREFORE, in consideration of the mutual agreements herein
contained, the Fund and Provident agree as follows:
1. The Fund appoints Provident as the Custodian of the assets of the
Portfolios, subject to the provisions hereof. Provident hereby accepts such
appointment as Custodian. As such Custodian, Provident shall retain all
securities, commodities, cash and other assets now owned or hereafter acquired
by each Portfolio, and the Portfolio shall deliver and pay or cause to be
delivered and paid to Provident, as Custodian, all securities, cash and other
assets now owned or hereafter acquired by the Portfolio during the period of
this Agreement.
<PAGE> 3
2. All securities delivered to Provident (other than in bearer form)
shall be properly endorsed and in proper form for transfer into or in the name
of the appropriate Portfolio, or a nominee of Provident for the exclusive use of
the Portfolio or of such other nominee as may be mutually agreed upon by
Provident and the Fund.
3. The Fund shall deliver to Provident certified or authenticated
copies of its Articles of Incorporation and By-Laws, all amendments thereto, a
certified copy of the resolution of the Fund's Board of Directors appointing
Provident to act in the capacities covered by this Agreement and authorizing the
signing of this Agreement and copies of such resolutions of its Board of
Directors, contracts and other documents as may be reasonably required by
Provident in the performance of its duties hereunder.
4. As Custodian, Provident shall promptly:
A. SAFEKEEPING. Keep safely in a separate account the
securities and other assets of each Portfolio of the Fund, including,
without limitation, all securities in bearer form, other than
securities which are maintained pursuant to paragraph 4B in a
Securities System (as defined in paragraph 4B) and, on behalf of the
Portfolio, receive delivery of certificates, including without
limitation all securities in bearer form, for safekeeping and keep such
certificates physically segregated at all times from those of any other
person. Provident shall maintain records of all receipts, deliveries
and locations of such securities, together with a current inventory
thereof, and shall conduct periodic physical inspections of
certificates representing bonds and other securities held by it under
this Agreement at least annually in such manner as Provident shall
determine from time to time to be advisable in order to verify the
accuracy of such inventory. Provident shall provide the Fund with
copies of any reports of its internal count or other verification of
the securities of the Portfolio held in its custody, including reports
on its own system of internal accounting control. In addition, if and
when independent certified public accountants retained by Provident
shall count or otherwise verify the securities of the Portfolio held in
Provident's custody, Provident shall provide the Fund with a copy of
the report of such accountants. With respect to securities held by any
agent or Subcustodian appointed pursuant to paragraph 7C hereof,
Provident may rely upon certificates from such agent or Subcustodian as
to the holdings of such agent or Subcustodian, it being understood that
such reliance in no way releases Provident of its responsibilities or
liabilities under this Agreement. Provident shall promptly report to
the Fund the results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to remedy
any such shortages or discrepancies.
- 2 -
<PAGE> 4
B. DEPOSIT OF PORTFOLIO ASSETS IN SECURITIES SYSTEMS.
Notwithstanding any other provision of this Agreement, Provident may
deposit and/or maintain securities owned by each Portfolio in
Depository Trust Company, a clearing agency registered with the
Securities and Exchange Commission (the "Commission") under Section 17A
of the Securities Exchange Act of 1934 (the "Exchange Act"), which acts
as a securities depository, in any other clearing agency registered
under Section 17A of the Exchange Act and which has been authorized by
the Fund's Board of Directors, in the book-entry system authorized by
the U.S. Department of the Treasury and certain federal agencies or in
any other book-entry system which the Commission has authorized for use
by investment companies as a securities depository by order or
interpretive or no-action letter and which has been authorized by the
Fund's Board of Directors, collectively referred to herein as
"Securities System(s)," in accordance with applicable Federal Reserve
Board and Commission rules and regulations, if any, and subject to the
following provisions:
1) Provident may keep securities of a Portfolio in a
Securities System provided that such securities are deposited in an
account ("Account") of Provident in the Securities System which shall
not include any assets of Provident other than assets held as a
fiduciary, custodian or otherwise for customers;
2) The records of Provident with respect to securities of
the Portfolios which are maintained in a Securities System
shall identify by book-entry those securities belonging to
such Portfolio;
3) Provident shall pay for securities purchased for the
account of each Portfolio upon (i) receipt of advice from the
Securities System that such securities have been transferred to the
account, and (ii) the making of an entry on the records of Provident to
reflect such payment and transfer for the account of the Portfolio.
Provident shall transfer securities sold for the account of each
Portfolio upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the account, and
(ii) the making of an entry on the records of Provident to reflect such
transfer and payment for the account of that Portfolio. Copies of all
advices from the Securities System of transfers of securities for the
account of each Portfolio shall identify the Portfolio, be maintained
for such Portfolio by Provident and be provided to the Fund at its
request. Provident shall furnish the Fund confirmation of each transfer
to or from the account of the Portfolios in the form of a written
advice or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
- 3 -
<PAGE> 5
Securities System for the account of the Portfolios on the
next business day;
4) Provident shall promptly provide the Fund with any report
obtained by Provident on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System. Provident shall promptly provide
the Fund any report on Provident's accounting system, internal
accounting control and procedures for safeguarding securities deposited
with Provident which is reasonably requested by the Fund;
5) Anything to the contrary in this Agreement notwithstanding,
Provident shall be liable to the Fund for any claim, loss, liability,
damage or expense to the Fund or its Portfolios, including attorneys'
fees, resulting from use of a Securities System by reason of any
negligence, misfeasance or misconduct of Provident, its agents or any
of its or their employees or from failure of Provident or any such
agent to enforce effectively such rights as it may have against a
Securities System. At the election of the Fund, it shall be entitled to
be subrogated to the rights of Provident or its agents with respect to
any claim against the Securities System or any other person which
Provident or its agents may have as a consequence of any such claim,
loss, liability, damage or expense if and to the extent that the Fund
has not been made whole for any such loss or damage.
C. PROVIDENT'S RECORDS. The records of Provident (and its
agents and Subcustodians) with respect to its services for the Fund
shall at all reasonable times and upon reasonable notice (unless
otherwise required by law) during the regular business hours of
Provident (or its agents or Subcustodians) be open for inspection by
duly authorized officers, employees or agents of the Fund and employees
and agents of the Commission.
D. DELIVERY OF SECURITIES. Release and deliver securities
owned by a Portfolio held by Provident or in a Securities System
account of Provident only upon receipt of proper instructions (as
defined in paragraph 6A hereof; hereafter "Proper Instructions"), which
may be continuing instructions when deemed appropriate by the parties,
and only in the cases specified in paragraphs 4E, 4F, 4G, 4H, 4I, 4J,
4K, 4L, 4M and 4N hereof.
E. REGISTERED NAME, NOMINEE. Register securities of each
Portfolio held by Provident in the name of the Portfolio, of a nominee
of Provident for the exclusive use of such Portfolio, or of such other
nominee as may be mutually agreed upon, or of any mutually acceptable
nominee of any agent or Subcustodian appointed pursuant to paragraph 7C
hereof.
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<PAGE> 6
F. PURCHASES. Upon receipt of Proper Instructions, and insofar
as cash is available for the purpose, pay for and receive all
securities purchased for the account of a Portfolio, payment being made
only upon receipt of the securities by Provident (or any bank, banking
firm, responsible commercial agent or trust company doing business in
the United States and appointed pursuant to paragraph 7C hereof as
Provident's agent or Subcustodian for this purpose) registered as
provided in paragraph 4E heretofore in form for transfer satisfactory
to Provident, or, in the case of repurchase agreements entered into
between a Portfolio and a bank or a dealer, delivery of the securities
either in certificate form or through an entry crediting Provident's
account at the Federal Reserve Bank with such securities, or, upon
receipt by Provident of a facsimile copy of a letter of understanding
with respect to a time deposit account of a Portfolio signed by any
bank, whether domestic or foreign, and pursuant to Proper Instructions
from the Fund, for transfer to the time deposit account of the
Portfolio in such bank; such transfer may be effected prior to receipt
of a confirmation from a broker and/or the applicable bank. All
securities accepted by Provident shall be accompanied by payment of, or
a "due bill" for, any dividends, interest or other distributions of the
issuer due the purchaser. In any and every case of a purchase of
securities for the account of a Portfolio where payment is made by
Provident in advance of receipt of the securities purchased, Provident
shall be absolutely liable to the Fund and its Portfolios for such
securities to the same extent as if the securities had been received by
Provident, except that in the case of repurchase agreements entered
into by a Portfolio with a bank which is a member of the Federal
Reserve System, Provident may transfer funds to the account of such
bank prior to the receipt of written evidence that the securities
subject to such repurchase agreement have been transferred by
book-entry into a segregated nonproprietary account of Provident
maintained with the Federal Reserve Bank of Cincinnati, provided that
such securities have in fact been so transferred by book-entry;
provided, further, however, that Provident and the Fund agree to use
their best efforts to ensure receipt by Provident of copies of
documentation for each such transaction as promptly as possible.
G. EXCHANGES. Upon receipt of Proper Instructions, exchange
securities, interim receipts or temporary securities held by it or by
any agent or Subcustodian appointed by it pursuant to paragraph 7C
hereof for the account of each Portfolio, for other securities alone or
for other securities and cash, and expend cash insofar as cash is
available in connection with any merger, consolidation, reorganization,
recapitalization, split-up of shares, changes of par value, conversion
or in connection with the exercise of warrants,
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<PAGE> 7
subscription or purchase rights, or otherwise, and deliver securities
to the designated depository or other receiving agent or Subcustodian
in response to tender offers or similar offers to purchase received in
writing; provided that in any such case the securities and/or cash to
be received as a result of any such exchange, expenditure or delivery
are to be delivered to Provident (or its agents or Subcustodians).
Provident shall give notice as provided under paragraph 15 hereof to
the Fund in connection with any transaction specified in this paragraph
and at the same time shall specify to the Fund whether such notice
relates to securities held by an agent or Subcustodian appointed
pursuant to paragraph 7C hereof, so that the Fund may issue to
Provident Proper Instructions for Provident to act thereon prior to any
expiration date (which shall be presumed to be two business days prior
to such date unless Provident has previously advised the Fund of a
different period). The Fund shall give to Provident full details of the
time and method of submitting securities in response to any tender or
similar offer, exercising any subscription or purchase right or making
any exchange pursuant to this paragraph. When such securities are in
the possession of an agent or Subcustodian appointed by Provident
pursuant to paragraph 7C hereof, the Proper Instructions referred to in
the preceding sentence must be received by Provident in timely enough
fashion (which shall be presumed to be three business days unless
Provident has advised the Fund in writing of a different period) for
Provident to notify the agent or Subcustodian in sufficient time to
permit such agent to act prior to any expiration date.
H. SALES. Upon receipt of Proper Instructions and upon receipt
of full payment therefor, release and deliver securities which have
been sold for the account of a Portfolio. At the time of delivery all
such payments are to be made in cash, by a certified check upon or a
treasurer's or cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System or, if appropriate,
outside of the Federal Reserve Wire System and subsequent credit to
such Portfolio's custodian account, or, in case of delivery through a
stock clearing company, by book-entry credit by the stock clearing
company in accordance with the then current "street" custom.
I. PURCHASES BY ISSUER. Upon receipt of Proper Instructions,
release and deliver securities owned by a Portfolio to the issuer
thereof or its agent when such securities are called, redeemed, retired
or otherwise become payable; provided that in any such case, the cash
or other consideration is to be delivered to Provident.
J. CHANGES OF NAME AND DENOMINATION. Upon receipt of
Proper Instructions, release and deliver securities owned by
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<PAGE> 8
a Portfolio to the issuer thereof or its agent for transfer into the
name of the Portfolio or of a nominee of Provident or of the Portfolio
for the exclusive use of the Portfolio or for exchange for a different
number of bonds, certificates or other evidence representing the same
aggregate face amount or number of units bearing the same interest
rate, maturity date and call provisions if any; provided that in any
such case, the new securities are to be delivered to Provident.
K. STREET DELIVERY. In connection with delivery in New York
City and upon receipt of Proper Instructions, which in the case of
registered securities may be standing instructions, release securities
owned by a Portfolio upon receipt of a written receipt for such
securities to the broker selling the same for examination in accordance
with the existing "street delivery" custom. In such case, Provident
shall have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities, except as may arise from Provident's own negligence or
willful misconduct. In every instance, either payment in full for such
securities shall be made or such securities shall be returned to
Provident that same day. In the event existing "street delivery" custom
is modified, Provident shall obtain authorization from the Board of
Directors of the Fund prior to any use of such modified "street
delivery" custom.
L. RELEASE OF SECURITIES FOR USE AS COLLATERAL. Upon receipt
of Proper Instructions and subject to the Articles of Incorporation and
By-Laws of the Fund, release securities belonging to the Portfolio to
any bank or trust company for the purpose of pledge, mortgage or
hypothecation to secure any loan incurred by a Portfolio; provided,
however, that securities shall be released only upon payment to
Provident of the monies borrowed, except that in cases where additional
collateral is required to secure a borrowing already made, subject to
proper prior authorization from the Fund, further securities may be
released for that purpose. Upon receipt of Proper Instructions,
Provident shall pay such loan upon redelivery to it of the securities
pledged or hypothecated therefor and upon surrender of the note or
notes evidencing the loan.
M. COMPLIANCE WITH APPLICABLE RULES AND REGULATIONS OF THE
OPTIONS CLEARING CORPORATION AND NATIONAL SECURITIES OR COMMODITIES
EXCHANGES OR COMMISSIONS. Upon receipt of Proper Instructions, deliver
securities of a Portfolio in accordance with the provisions of any
agreement among the Fund, Provident and a broker-dealer registered
under the Exchange Act and a member of the National Association of
Securities Dealers, Inc. ("NASD") relating to compliance with the rules
of The Options Clearing Corporation and of any registered national
securities
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<PAGE> 9
exchange, or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by a
Portfolio; or, upon receipt of Proper Instructions, Provident shall
deliver securities in accordance with the provisions of any agreement
among the Fund, Provident and a Futures Commission Merchant registered
under the Commodity Exchange Act relating to compliance with the rules
of the Commodity Futures Trading Commission and/or any contract market,
or any similar organization or organizations, regarding account
deposits in connection with transactions by a Portfolio.
N. RELEASE OR DELIVERY OF SECURITIES FOR OTHER PURPOSES. Upon
receipt of Proper Instructions, release or deliver any securities held
by it for the account of a Portfolio for any other purpose (in addition
to those specified in paragraphs 4D, 4E, 4F, 4G, 4H, 4I, 4J, 4K, 4L and
4M hereof) which the Fund declares is a proper corporate purpose
pursuant to Proper Instructions.
0. PROXIES, NOTICES, ETC. Promptly forward upon receipt to the
Fund all forms of proxies and all notices of meetings and any other
notices or announcements affecting or relating to the securities,
including, without limitation, notices relating to class action claims
and bankruptcy claims, and upon receipt of Proper Instructions execute
and deliver or cause its nominee to execute and deliver such proxies or
other authorizations as may be required. Provident, its nominee or its
agents or Subcustodian shall not vote any of the securities or execute
any proxy to vote thereon or give any consent or take any other action
with respect thereto (except as otherwise herein provided) unless
ordered to do so by Proper Instructions. Provident shall require its
agents and Subcustodians appointed pursuant to paragraph 7C hereof to
forward any such announcements and notices to Provident upon receipt.
P. SEGREGATED ACCOUNT. Upon receipt of Proper Instructions,
establish and maintain a segregated account or accounts for and on
behalf of each Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by Provident pursuant to paragraph 4B hereof, (i) in
accordance with the provisions of any agreement among the Fund,
Provident and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered under
the Commodity Exchange Act), relating to compliance with the rules of
The Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission or any
registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions
- 8 -
<PAGE> 10
by a Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by a
Portfolio or commodity futures contracts or options thereon purchased
or sold by such Portfolio, (iii) for the purposes of compliance by the
Fund with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Commission relating
to the maintenance of segregated accounts by registered investment
companies and (iv), for other proper corporate purposes, but only, in
the case of clause (iv) , upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board of
Directors signed by an officer of the Fund and certified by the
Secretary or an Assistant Secretary, setting forth the purpose or
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
Q. MISCELLANEOUS. In general, attend to all nondiscretionary
details in connection with the sale, exchange, substitution, purchase,
transfer or other dealing with such securities or property of each
Portfolio, except as otherwise directed by the Fund pursuant to Proper
Instructions. Provident shall render to the Fund daily a report of all
monies received or paid on behalf of the Portfolio, an itemized
statement of the securities and cash for which it is accountable to the
Fund under this Agreement and an itemized statement of security
transactions which settled the day before and shall render to the Fund
weekly an itemized statement of security transactions which failed to
settle as scheduled. At the end of each week Provident shall provide a
list of all security transactions that remain unsettled at such time.
5. Additionally, as Custodian, Provident shall promptly:
A. BANK ACCOUNT. Retain safely all cash of each Portfolio,
other than cash maintained by a Portfolio in a bank account established
and used in accordance with Rule 17f-3 under the 1940 Act, in the
banking department of Provident in a separate account or accounts in
the name of such Portfolio, subject only to draft or order by Provident
acting pursuant to the terms of this Agreement. If and when authorized
by Proper Instructions in accordance with a vote of the Board of
Directors of the Fund, Provident may open and maintain an additional
account or accounts in such other bank or trust companies as may be
designated by such instructions, such account or accounts, however, to
be solely in the name of Provident in its capacity as Custodian and
subject only to its draft or order in accordance with the terms of this
Agreement. Provident shall furnish the Fund, not later than thirty (30)
calendar days after the last business day of each month, a statement
reflecting the current status of its internal
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<PAGE> 11
reconciliation of the closing balance as of that day in all accounts
described in this paragraph to the balance shown on the daily cash
report for that day rendered to the Fund.
B. COLLECTIONS. Unless otherwise instructed by receipt of
Proper Instructions, collect, receive and deposit in the bank account
or accounts maintained pursuant to paragraph 5A hereof all income and
other payments with respect to the securities held hereunder, execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with the collection of bond and note
coupons, do all other things necessary or proper in connection with the
collection of such income, and without waiving the generality of the
foregoing:
1) present for payment on the date of payment all coupons
and other income items requiring presentation;
2) present for payment all securities which may mature or
be called, redeemed, retired or otherwise become payable on
the date such securities become payable;
3) endorse and deposit for collection, in the name of the
Portfolio, checks, drafts or other negotiable instruments on
the same day as received.
In any case in which Provident does not receive any such due and unpaid
income within a reasonable time after it has made proper demands for the same
(which shall be presumed to consist of at least three demand letters and at
least one telephonic demand), it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await Proper
Instructions; Provident shall not be obliged to take legal action for collection
unless and until reasonably indemnified to its satisfaction for the reasonable
costs of such legal action for collection. It shall also notify the Fund as soon
as reasonably practicable whenever income due on securities is not collected in
due course.
C. SALE OF SHARES OF THE PORTFOLIO OF THE FUND. Make such
arrangements with the Transfer Agent of the Fund as will enable
Provident to make certain it receives the cash consideration due each
Portfolio for shares of beneficial interest ("shares") of such
Portfolio as may be issued or sold from time to time by the Fund, all
in accordance with the Fund's Articles of Incorporation and By-Laws, as
amended.
D. DIVIDENDS AND DISTRIBUTIONS. Upon receipt of Proper
Instructions, release or otherwise apply cash insofar as cash
is available for the purpose of the payment of dividends or
other distributions to shareholders of each Portfolio.
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<PAGE> 12
E. REDEMPTION OF SHARES OF THE PORTFOLIOS OF THE FUND. From
such funds as may be available for the purpose, but subject to the
limitation of the Fund's Articles of Incorporation and By-Laws, as
amended, and applicable resolutions of the Board of Directors of the
Fund pursuant thereto, make funds available for payment to shareholders
who have delivered to the Transfer Agent a request for redemption of
their shares by the Fund pursuant to such Articles of Incorporation, as
amended. In connection with the redemption of shares of a Portfolio
pursuant to the Fund's Articles of Incorporation and By-Laws, as
amended, Provident is authorized and directed upon receipt of Proper
Instructions from the Transfer Agent for the Fund to make funds
available for transfer through the Federal Reserve Wire System or by
other bank wire to a commercial bank account designated by the
redeeming stockholder.
F. STOCK DIVIDENDS, RIGHTS, ETC. Receive and collect all
stock dividends, rights and other items of like nature; and deal with
the same pursuant to Proper Instructions relative thereto.
G. DISBURSEMENTS. Upon receipt of Proper Instructions, make
or cause to be made, insofar as cash is available for the purpose,
disbursements for the payment on behalf of a Portfolio of its expenses,
including without limitation, interest, taxes and fees or reimbursement
to Provident or to the Portfolio's investment adviser for its payment
of any such expenses.
H. OTHER PROPER CORPORATE PURPOSES. Upon receipt of Proper
Instructions, make or cause to be made, insofar as cash is available
for the purpose, disbursements for any other purpose (in addition to
the purposes specified in paragraphs 4F, 4G, 5D, 5E and 5G of this
Agreement) which the Fund declares is a proper corporate purpose.
I. RECORDS. Create, maintain and retain all records a)
relating to its activities and obligations under this Agreement in such
manner as shall meet the obligations of the Fund under the 1940 Act,
particularly Section 31 thereof and Rules 3la-1 and 3la-2 thereunder or
b) as reasonably requested from time to time by the Fund. All records
maintained by Provident in connection with the performance of its
duties under this Agreement shall remain the property of the Fund and
in the event of termination of this Agreement shall be delivered in
accordance with the terms of paragraph 10 below.
J. MISCELLANEOUS. Assist generally in the preparation of
routine reports to holders of shares of the Fund, to the Commission,
including form N-SAR, to state "Blue Sky"
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<PAGE> 13
authorities, to others in the auditing of accounts and in
other matters of like nature.
K. PORTFOLIO ACCOUNTING AND NET ASSET VALUE COMPUTATION.
Maintain the general ledger and all other books of account of each
Portfolio. In addition, upon receipt of Proper Instructions, which may
be deemed to be continuing instructions, Provident shall daily compute
the net asset value of the shares of each Portfolio and the total net
asset value of each Portfolio. Provident shall, in addition, perform
such other services incidental to its duties hereunder as may be
reasonably requested from time to time by the Fund.
6. Provident and the Fund further agree as follows:
A. PROPER INSTRUCTIONS. Provident shall be deemed to have
received Proper Instructions upon receipt of written instructions
signed by the Fund's Directors or by one or more person or persons as
the Fund's Board of Directors shall have from time to time authorized
to give the particular class of instructions for different purposes.
Different persons may be authorized to give instructions for different
purposes. A copy of a resolution or action of the Directors certified
by the secretary or an assistant secretary of the Fund may be received
and accepted by Provident as conclusive evidence of the instruction of
the Fund's Board of Directors and/or the authority of any person or
persons to act on behalf of the Fund and may be considered as in full
force and effect until receipt of written notice to the contrary. Such
instruction may be general or specific in terms. Oral instructions will
be considered Proper Instructions if Provident reasonably believes them
to have been given by a person authorized by the Board of Directors to
give such oral instructions with respect to the class of instruction
involved. The Fund shall cause all oral instructions to be confirmed in
writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that
the Fund and Provident are satisfied that such procedures afford
adequate safeguards for the assets of the Portfolios. Use by the Fund
of such communication systems shall constitute approval by the Fund of
the safeguards available therewith.
B. INVESTMENTS, LIMITATIONS. In performing its duties
generally, and more particularly in connection with the purchase, sale
and exchange of securities made by or for the Portfolios, Provident may
take cognizance of the provisions of the Articles of Incorporation of
the Fund, as amended; provided, however, that except as otherwise
expressly provided herein, Provident may assume unless and until
notified in writing to the contrary that instructions purporting to be
Proper Instructions received by it are not in conflict with or in any
way contrary to any provision of the Articles of
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<PAGE> 14
Incorporation of the Fund, as amended, or resolutions or proceedings of
the Board of Directors of the Fund.
7. Provident and the Fund further agree as follows:
A. INDEMNIFICATION. Provident, as Custodian, shall be entitled
to receive and act upon advice of counsel (who may be counsel for the
Fund) and shall be without liability for any action reasonably taken or
thing reasonably done pursuant to such advice; provided that such
action is not in violation of applicable federal or state laws or
regulations or contrary to written instructions received from the Fund,
and shall be indemnified by the Fund and without liability for any
action taken or thing done by it in carrying out the terms and
provisions of this Agreement in good faith and without negligence,
misfeasance or misconduct. In order that the indemnification provision
contained in this paragraph shall apply, however, if the Fund is asked
to indemnify or save Provident harmless, the Fund shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and Provident shall use all reasonable care to identify and
notify the Fund fully and promptly concerning any situation which
presents or appears likely to present the probability of such a claim
for indemnification against the Fund. The Fund shall have the option to
defend Provident against any claim which may be the subject of this
indemnification and in the event that the Fund so elects it will so
notify Provident, and thereupon the Fund shall take over complete
defense of the claim, and Provident shall initiate no further legal or
other expenses for which it shall seek indemnification under this
paragraph. Provident shall in no case confess any claim or make any
compromise in any case in which the Fund will be asked to indemnify
Provident except with the Fund's prior written consent.
B. EXPENSES REIMBURSEMENT. Provident shall be entitled to
receive from each Portfolio on demand reimbursement for its cash
disbursements, expenses and charges, excluding salaries and usual
overhead expenses with respect to such Portfolio, as set forth in
Schedule A.
C. APPOINTMENT OF AGENTS AND SUBCUSTODIANS. Provident, as
Custodian, may appoint (and may remove), only in compliance with the
terms and conditions of the Fund's Articles of Incorporation and
ByLaws, as amended, any other bank, trust company or responsible
commercial agent as its agent or Subcustodian to carry out such of the
provisions of this Agreement as Provident may from time to time direct;
provided, however, that the appointment of any such agent or
Subcustodian shall not relieve Provident of any of its responsibilities
under this Agreement.
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<PAGE> 15
D. RELIANCE ON DOCUMENTS. So long as and to the extent that it
is in good faith and in the exercise of reasonable care, Provident, as
Custodian, shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it
or delivered by it pursuant to this Agreement, shall be protected in
acting upon any instructions, notice, request, consent, certificate or
other instrument or paper reasonably believed by it to be genuine and
to constitute Proper Instructions under this Agreement and shall,
except as otherwise specifically provided in this Agreement, be
entitled to receive as conclusive proof of any fact or matter required
to be ascertained by it hereunder a certificate signed by the Fund's
Directors, the secretary or an assistant secretary of the Fund or any
other person expressly authorized by the Board of Directors of the
Fund.
E. ACCESS TO RECORDS. Subject to security requirements of
Provident applicable to its own employees having access to similar
records within Provident and such regulations as to the conduct of such
monitors as may be reasonably imposed by Provident after prior
consultation with an authorized officer of the Fund, books and records
of Provident pertaining to its actions under this Agreement shall be
open to inspection and audit at reasonable times by the Directors of,
attorneys for, auditors employed by the Fund or any other person as the
Fund's Board of Directors shall direct.
F. RECORDKEEPING. Provident shall maintain such records as
shall enable the Fund to comply with the requirements of all federal
and state laws and regulations applicable to the Fund and its
Portfolios with respect to the matters covered by this Agreement.
8. LIEN ON ASSETS. If a Portfolio requires Provident to advance cash or
securities for any purpose or in the event that Provident or its nominee shall
incur or be assessed any taxes, charges, expenses, assessments, claims or
liabilities in connection with the performance of this Agreement, except such as
may arise from its or its nominee's own negligent action, negligent failure to
act or willful misconduct, any property at any time held for the account of a
Portfolio shall be security therefor and should the Portfolio fail to repay
Provident promptly, Provident shall be entitled to utilize available cash and to
dispose of the Portfolio's assets to the extent necessary to obtain
reimbursement; provided, however, that the total value of any property of the
Portfolio which at any time is security for any payment by Provident hereunder
shall not exceed 15% of the Portfolio's total net asset value.
9. The Fund shall pay Provident for its services as Custodian such
compensation as shall be specified on the attached Schedule A.
- 14 -
<PAGE> 16
10. Provident and the Fund further agree as follows:
A. EFFECTIVE PERIOD, TERMINATION, AMENDMENT AND INTERPRETIVE
AND ADDITIONAL PROVISIONS. This Agreement shall become effective as of
the date of its execution, shall continue in full force and effect
until terminated as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage prepaid,
to the other party, such termination to take effect sixty (60) days
after the date of such delivery or mailing; and further provided, that
the Fund may by action of the Fund's Board of Directors substitute
another bank or trust company for Provident by giving notice as
provided above to Provident, provided, however that Provident shall not
act under paragraph 4B hereof in the absence of receipt of an initial
certificate of the secretary or an assistant secretary that the Board
of Directors of the Fund has approved the initial use of a particular
Securities System and the receipt of an annual certificate of the
secretary or an assistant secretary that the Board of Directors has
reviewed the use by the Fund of such Securities System, as required in
each case by Rule 17f-4 under the 1940 Act. The Fund or Provident shall
not amend or terminate this Agreement in contravention of any
applicable federal or state laws or regulations, or any provision of
the Articles of Incorporation of the Fund, as amended; provided,
however, that in the event of such termination Provident shall remain
as Custodian hereunder for a reasonable period thereafter if the Fund
after using its best efforts is unable to find a Successor Custodian.
In connection with the operation of this Agreement, Provident and the
Fund may agree from time to time on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement, any such interpretive or
additional provision to be signed by both parties and annexed hereto, provided
that no such interpretive or additional provisions shall contravene any
applicable federal or state laws or regulations, or any provision of the Fund's
Articles of Incorporation and By-Laws, as amended. No interpretive provisions
made as provided in the preceding sentence shall be deemed to be an amendment of
this Agreement.
B. SUCCESSOR CUSTODIAN. Upon termination hereof or the inability
of Provident to continue to serve hereunder, the Fund shall pay to
Provident such compensation as may be due for services through the date
of such termination and shall likewise reimburse Provident for its
costs, expenses and disbursements incurred prior to such termination in
accordance with paragraph 7B hereof and such reasonable costs, expenses
and disbursements as may be incurred by Provident in connection with
such termination.
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<PAGE> 17
If a Successor Custodian is appointed by the Board of Directors of the
Fund in accordance with the Fund's Articles of Incorporation, as amended,
Provident shall, upon termination, deliver to such Successor Custodian at the
office of Provident, properly endorsed and in proper form for transfer, all
securities then held hereunder, all cash and other assets of the Fund deposited
with or held by it hereunder.
If no such Successor Custodian is appointed, Provident shall, in like
manner at its office, upon receipt of a certified copy of a resolution of the
shareholders pursuant to the Fund's Articles of Incorporation and By-Laws, as
amended, deliver such securities, cash and other properties in accordance with
such resolutions.
In the event that no written order designating a Successor Custodian or
certified copy of a resolution of the stockholders shall have been delivered to
Provident on or before the date when such termination shall become effective,
then Provident shall have the right to deliver to a bank or trust company doing
business in Cincinnati, Ohio of its own selection, having an aggregate capital,
surplus and undivided profits, as shown by its last published report, of not
less than $5,000,000, all securities, cash and other properties held by
Provident and all instruments held by it relative thereto and all other property
held by it under this Agreement. Thereafter, such bank or trust company shall be
the Successor of Provident under this Agreement and subject to the restrictions,
limitations and other requirements of the Fund's Articles of Incorporation and
By-Laws, both as amended.
In the event that securities, funds, and other properties remain in the
possession of Provident after the date of termination hereof owing to failure of
the Fund to procure the certified copy above referred to, or of the Fund's Board
of Directors to appoint a successor Custodian, Provident shall be entitled to
fair compensation for its services during such period and the provisions of this
Agreement relating to the duties and obligations of Provident shall remain in
full force and effect.
C. DUPLICATE RECORDS AND BACKUP FACILITIES. Provident shall
not be liable for loss of data occurring by reason of circumstances
beyond its control, including, but not limited to, acts of civil or
military authority, national emergencies, fire, flood or catastrophe,
acts of God, insurrection, war, riots or failure of transportation,
communication or power supply. However, Provident shall keep in a
separate and safe place additional copies of all records required to be
maintained pursuant to this Agreement or additional tapes, disks or
other sources of information necessary to reproduce all such records.
Furthermore, at all times during this Agreement, Provident shall
maintain a contractual arrangement whereby Provident will have a
back-up computer facility available for its use in providing the
services required
- 16 -
<PAGE> 18
hereunder in the event circumstances beyond Provident's control result
in Provident not being able to process the necessary work at its
principal computer facility. Provident shall, from time to time, upon
request from the Fund provide written evidence and details of its
arrangement for obtaining the use of such a back-up computer facility.
Provident shall use its best efforts to minimize the likelihood of all
damage, loss of data, delays and errors resulting from an
uncontrollable event, and should such damage, loss of data, delays or
errors occur, Provident shall use its best efforts to mitigate the
effects of such occurrence. Representatives of the Fund shall be
entitled to inspect Provident's premises and operating capabilities
within reasonable business hours upon reasonable notice to Provident,
and, upon request of such representative or representatives, Provident
shall from time to time, as appropriate, furnish to the Fund a letter
setting forth the insurance coverage thereon, any changes in such
coverage which may occur and any claim relating to the Fund which
Provident may have made under such insurance.
D. CONFIDENTIALITY. Provident agrees to treat all records
and other information relative to the Fund and the Portfolio
confidentially and Provident, on behalf of itself and its officers,
employees and agents, agrees to keep confidential all such information,
except after prior notification to and approval by the Fund (which
approval shall not be unreasonably withheld and may not be withheld
where Provident may be exposed to civil or criminal contempt
proceedings), when requested to divulge such information by duly
constituted authorities or when so requested by a properly authorized
person.
Provident and the Fund agree that they, their officers, employees and
agents shall maintain all information disclosed to them by the other in
connection with this Agreement in confidence and will not disclose any such
information to any other person, nor use such information for their own benefit
or for the benefit of third parties without the consent in writing of the other;
provided, however, that each party shall have the right to use any such
information for its own necessary internal purposes while this Agreement is in
effect. The provisions of the paragraph shall not apply to information which (i)
is in or becomes part of the public domain, or (ii) is demonstrably known
previously to the party to whom it is disclosed, or (iii) is independently
developed outside this Agreement by the party to whom it is disclosed or (iv) is
rightfully obtained from third parties by the party to whom it is disclosed.
11. The Fund shall not circulate any printed matter which contains any
reference to Provident without the prior written approval of Provident,
excepting solely such printed matter as merely identifies Provident as
Custodian. The Fund will submit
- 17 -
<PAGE> 19
printed matter requiring approval to Provident in draft form, allowing
sufficient time for review by Provident and its counsel prior to any deadline
for printing.
12. In the event of a reorganization of the Portfolio through a merger,
consolidation, sale of assets or other reorganization, Provident, at the request
of the Fund, shall act as Custodian for shares of any investment company or
other company obtained in any such reorganization by the Portfolio for
distribution to those Portfolio shareholders whose shares are represented by
certificates. The Fund shall give notice to each such shareholder of his or her
right to exchange his or her Portfolio shares represented by certificates for
shares held by Provident upon surrender to Provident of his or her certificates
representing such Portfolio shares properly endorsed and in proper form for
transfer. Upon the surrender of such Portfolio certificates Provident will issue
a certificate or certificates to the surrendering shareholder for an approximate
number of shares held by Provident, unless such shareholder establishes an Open
Account Plan or other similar account at that time in which case such shares
will be credited to his or her account. Provident shall not be required to issue
certificates for any fractional shares held by it. Instead, fractional interests
in such shares shall be distributed to the shareholder in cash at their then
current market value or, if the fractional share represents an interest in an
investment company, it shall be redeemed by Provident at the then current
redemption price for such shares and the proceeds of such redemption shall be
distributed to such shareholder in cash. Provident shall not release to any
shareholder any such shares held by it until such shareholder has properly
surrendered for exchange his or her Portfolio shares represented by
certificates.
13. In the event that the Fund establishes one or more series of shares
which it desires to have the Custodian render services as custodian under the
terms hereof or otherwise desires to have the Custodian render services as
custodian hereunder with respect to any other series, it shall so notify the
custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of shares shall become a Portfolio hereunder.
14. This Agreement is executed and delivered in the State of Ohio and
shall be subject to and be construed in accordance with the laws of Ohio.
15. Notices and other writings delivered or mailed postage prepaid to
The Riverfront Funds, Inc., 1900 East Dublin-Granville Road, Columbus, Ohio
43229, or to The Provident Bank at One East Fourth Street, Cincinnati, Ohio
45202, or to such other address as the Fund or Provident may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to the
respective address.
- 18 -
<PAGE> 20
16. This Agreement shall be binding upon and shall inure to the benefit
of the Fund and its Portfolio and Provident and their respective successors or
assigns.
17. This Agreement may be executed simultaneously in two or
more counterparts, each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by a duly authorized
officer as of the day and year first above written.
ATTEST: THE RIVERFRONT FUNDS, INC.
By /s/ William C. Buckham
- ----------------------- -------------------------------
Name: William C. Buckham
Title: Vice President
ATTEST: THE PROVIDENT BANK
By /s/ Jeannetta Ramey
- ------------------------ --------------------------------
Name: Jeannetta Ramey
Title: Vice President, Trust
Operations Officer
- 19 -
<PAGE> 21
Schedule A
Dated: As of January 1, 1997
THE PROVIDENT BANK
Custodian Fee Schedule
THE RIVERFRONT FUNDS, INC.
---------------------------
I. Administration
--------------
CUSTODIAN, PORTFOLIO AND FUND ACCOUNTING SERVICE - Maintain custody of Portfolio
assets. Settle portfolio purchases and sales. Report buy and sell fails.
Determine and collect portfolio income. Make cash disbursements and report cash
transactions. Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general ledger and capital
stock accounts. Prepare daily trial balance. Calculate net asset value daily.
Provide from Fund approved pricing sources or vendors daily pricing for
Portfolio securities. Provide selected general ledger reports. Securities yield
or market value quotations for short term Portfolio securities will be provided
to Provident from a source designated by the Fund.
The administration fee shown below is an annual charge, billed and payable
monthly, based on average net assets and calculated in the same manner as the
Fund's management fee.
<TABLE>
<CAPTION>
ANNUAL FEES PER PORTFOLIO
Portfolio Annual Fee
- --------- ----------
<S> <C>
The Riverfront U.S. Five one-hundredths of one
Government Securities percent (.05%) of such
Money Market Fund Portfolio's average net assets
The Riverfront Income Fifteen one-hundredths of one
Equity Fund percent (.15%) of such
Portfolio's average net assets
The Riverfront U.S. Ten one-hundredths of one
Government Income Fund percent (.10%) of such
Portfolio's average net assets
The Riverfront Ohio Tax- Fourteen one-hundredths of one
Free Bond Fund percent (.14%) of such
Portfolio's average net assets
</TABLE>
- 20 -
<PAGE> 22
<TABLE>
<S> <C>
The Riverfront Balanced Fifteen one-hundredths of one
Fund percent (.15%) of such
Portfolio's average net assets
The Riverfront Stock Fifteen one-hundredths of one
Appreciation Fund percent (.15%) of such
Portfolio's average net assets
The Riverfront Large Fifteen one-hundredths of one
Company Select Fund percent (.15%) of such
Portfolio's average net assets
</TABLE>
II. Out of Pocket Expenses
----------------------
A billing for the recovery of applicable out-of-pocket expenses as incurred by
the Portfolio will be made as of the end of each month.
THE RIVERFRONT FUNDS, INC.
By
------------------------------
------------------------------
(name)
------------------------------
(title)
THE PROVIDENT BANK
By
------------------------------
------------------------------
(name)
------------------------------
(title)
- 21 -
<PAGE> 1
EXHIBIT (9)(a)
<PAGE> 2
ADMINISTRATION AGREEMENT
THIS AGREEMENT is made as of this 1st day of February, 1996, by and
between THE RIVERFRONT FUNDS, INC., a Maryland corporation (the "Company"), and
BISYS FUND SERVICES LIMITED PARTNERSHIP, d/b/a BISYS FUND SERVICES (the
"Administrator"), an Ohio limited partnership.
WHEREAS, the Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), consisting of several series of shares of common stock ("Shares"); and
WHEREAS, the Company desires the Administrator to provide, and the
Administrator is willing to provide, management and administrative services to
such series of the Company as the Company and the Administrator may agree on
("Portfolios"), which are referred to in Schedule A attached hereto and made a
part of this Agreement, on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Company and the Administrator hereby agree as
follows:
ARTICLE 1. RETENTION OF THE ADMINISTRATOR. The Company hereby retains
the Administrator to act as the administrator of the Portfolios and to furnish
the Portfolios with the management and administrative services as set forth in
Article 2 below. The Administrator hereby accepts such employment to perform the
duties set forth below.
The Administrator shall, for all purposes herein, be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Company in any way and shall
not be deemed an agent of the Company.
ARTICLE 2. ADMINISTRATIVE SERVICES. The Administrator shall perform or
supervise the performance by others of other administrative services in
connection with the operations of the Portfolios, and, on behalf of the Company,
will investigate, assist in the selection of and conduct relations with
custodians, depositories, accountants, legal counsel, underwriters, brokers and
dealers, corporate fiduciaries, insurers, banks and persons in any other
capacity deemed to be necessary or desirable for the Portfolios' operations. The
Administrator shall provide the Directors of the Company with such reports
regarding investment performance as they may reasonably request but shall have
no responsibility for supervising the performance by any investment adviser or
sub-adviser of its responsibilities.
The Administrator shall provide the Company with regulatory reporting,
all necessary office space, equipment, personnel,
<PAGE> 3
compensation and facilities (including facilities for Shareholders' and
Directors' meetings) for handling the affairs of the Portfolios and such other
services as the Administrator shall, from time to time, determine to be
necessary to perform its obligations under this Agreement. In addition, at the
request of the Board of Directors, the Administrator shall make reports to the
Company's Directors concerning the performance of its obligations hereunder.
Without limiting the generality of the foregoing, the Administrator
shall:
(a) calculate contractual Company expenses and control all
disbursements for the Company, and as appropriate compute the
Company's yields, total return, expense ratios, portfolio,
turnover rate and, if required, portfolio average
dollar-weighted maturity;
(b) assist Company counsel with the preparation of
prospectuses, statements of additional information,
registration statements and proxy materials;
(c) prepare such reports, applications and documents
(including reports regarding the sale and redemption of
Shares as may be required in order to comply with Federal
and state securities law) as may be necessary or
desirable to register the Company's Shares with state
securities authorities, monitor the sale of Company
Shares for compliance with state securities laws, and
file with the appropriate state securities authorities
the registration statements and reports for the Company
and the Company's Shares and all amendments thereto, as
may be necessary or convenient to register and keep
effective the Company and the Company's Shares with state
securities authorities to enable the Company to make a
continuous offering of its Shares;
(d) develop and prepare, with the assistance of the Company's
investment adviser, communications to Shareholders,
including the annual report to Shareholders, coordinate
the mailing of prospectuses, notices, proxy statements,
proxies and other reports to Company Shareholders, and
supervise and facilitate the proxy solicitation process
for all shareholder meetings, including the tabulation of
shareholder votes;
(e) administer contracts on behalf of the Company with, among
others, the Company's investment adviser, distributor,
custodian, transfer agent and fund accountant;
(f) supervise the Company's transfer agent with respect to
the payment of dividends and other distributions to
Shareholders;
-2-
<PAGE> 4
(g) calculate performance data of the Portfolios for
dissemination to information services covering the
investment company industry;
(h) coordinate and supervise the preparation and filing of
the Company's tax returns;
(i) examine and review the operations and performance of the
various organizations providing services to the Company
or any Portfolio of the Company, including, without
limitation, the Company's investment adviser,
distributor, custodian, fund accountant, transfer agent,
outside legal counsel and independent public accountants,
and at the request of the Board of Directors, report to
the Board on the performance of organizations;
(j) assist with the layout and printing of publicly disseminated
prospectuses and assist with and coordinate layout and
printing of the Company's semi-annual and annual reports to
Shareholders;
(k) assist with the design, development, and operation of the
Portfolios, including new classes, investment objectives,
policies and structure;
(l) provide individuals reasonably acceptable to the Company's
Board of Directors to serve as officers of the Company, who
will be responsible for the management of certain of the
Company's affairs as determined by the Company's Board of
Directors;
(m) advise the Company and its Board of Directors on matters
concerning the Company and its affairs;
(n) obtain and keep in effect fidelity bonds and directors and
officers/errors and omissions insurance policies for the
Company in accordance with the requirements of Rules 17g-1 and
17d-1(7) under the 1940 Act as such bonds and policies are
approved by the Company's Board of Directors;
(o) monitor and advise the Company and its Portfolios on
their registered investment company status under the
Internal Revenue Code of 1986, as amended;
(p) perform all administrative services and functions of the
Company and each Portfolio to the extent administrative
services and functions are not provided to the Company or such
Portfolio pursuant to the Company's or such Portfolio's
investment advisory agreement, distribution agreement,
custodian agreement, transfer agent agreement and fund
accounting agreement;
-3-
<PAGE> 5
(q) furnish advice and recommendations with respect to other
aspects of the business and affairs of the Portfolios as
the Company and the Administrator shall determine
desirable; and
(r) prepare and file with the SEC the semi-annual report for
the Company on Form N-SAR and all required notices
pursuant to Rule 24f-2.
The Administrator shall perform such other services for the Company
that are mutually agreed upon by the parties from time to time. Such services
may include performing internal audit examinations; mailing the annual reports
of the Portfolios; preparing an annual list of Shareholders; and mailing notices
of Shareholders' meetings, proxies and proxy statements, for all of which the
Company will pay the Administrator's out-of-pocket expenses.
ARTICLE 3. ALLOCATION OF CHARGES AND EXPENSES.
(A) THE ADMINISTRATOR. The Administrator shall furnish at its own
expense the executive, supervisory and clerical personnel necessary to perform
its obligations under this Agreement. The Administrator shall also provide the
items which it is obligated to provide under this Agreement, and shall pay all
compensation, if any, of officers of the Company as well as all Directors of the
Company who are affiliated persons of the Administrator or any affiliated
corporation of the Administrator; provided, however, that unless otherwise
specifically provided, the Administrator shall not be obligated to pay the
compensation of any employee of the Company retained by the Directors of the
Company to perform services on behalf of the Company.
(B) THE COMPANY. The Company assumes and shall pay or cause to be paid
all other expenses of the Company not otherwise allocated herein, including,
without limitation, organization costs, taxes, expenses for legal and auditing
services, the expenses of preparing (including typesetting), printing and
mailing reports, prospectuses, statements of additional information, proxy
solicitation material and notices to existing Shareholders, all expenses
incurred in connection with issuing and redeeming Shares, the costs of custodial
services, the cost of initial and ongoing registration of the Shares under
Federal and state securities laws, fees and out-of-pocket expenses of Directors,
insurance, interest, brokerage costs, litigation and other extraordinary or
nonrecurring expenses, and all fees and charges of investment advisers to the
Company.
ARTICLE 4. COMPENSATION OF THE ADMINISTRATOR.
(A) ADMINISTRATION FEE. For the services to be rendered, the
facilities furnished and the expenses assumed by the Administrator
-4-
<PAGE> 6
pursuant to this Agreement, the Company shall pay to the Administrator
compensation at an annual rate specified in Schedule A attached hereto. Such
compensation shall be calculated and accrued daily, and paid to the
Administrator monthly. The Company shall also reimburse the Administrator for
its reasonable out-of-pocket expenses, including the travel and lodging expenses
incurred by officers and employees of the Administrator in connection with
attendance at Board meetings.
If this Agreement becomes effective subsequent to the first day of a
month or terminates before the last day of a month, the Administrator's
compensation for that part of the month in which this Agreement is in effect
shall be prorated in a manner consistent with the calculation of the fees as set
forth above. Payment of the Administrator's compensation for the preceding month
shall be made promptly.
(B) SURVIVAL OF COMPENSATION RIGHTS. All rights of compensation under
this Agreement for services performed as of the termination date shall survive
the termination of this Agreement.
ARTICLE 5. LIMITATION OF LIABILITY OF THE ADMINISTRATOR. The duties of
the Administrator shall be confined to those expressly set forth herein, and no
implied duties are assumed by or may be asserted against the Administrator
hereunder. The Administrator shall not be liable for any error of judgment or
mistake of law or for any loss arising out of any act or omission in carrying
out its duties hereunder, except a loss resulting from willful misfeasance, bad
faith or negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties hereunder, except as may otherwise be
provided under provisions of applicable law which cannot be waived or modified
hereby. (As used in this Article 5, the term "Administrator" shall include
partners, officers, employees and other agents of the Administrator as well as
the Administrator itself.)
So long as the Administrator acts in good faith and with due diligence
and without negligence, the Company assumes full responsibility and, except for
direct, non-derivative actions by the Company, shall indemnify the Administrator
and hold it harmless from and against any and all actions, suits and claims,
whether groundless or otherwise, and from and against any and all losses,
damages, costs, charges, reasonable counsel fees and disbursements, payments,
expenses and liabilities (including reasonable investigation expenses) arising
directly or indirectly out of Administrator's actions taken or nonactions with
respect to the performance of services hereunder. The indemnity and defense
provisions set forth herein shall indefinitely survive the termination of this
Agreement.
The rights hereunder shall include the right to reasonable advances of
defense expenses in the event of any pending or
-5-
<PAGE> 7
threatened litigation with respect to which indemnification hereunder may
ultimately be merited. In order that the indemnification provision contained
herein shall apply, however, it is understood that if in any case the Company
may be asked to indemnify or hold the Administrator harmless, the Company shall
be fully and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Administrator will use all
reasonable care to identify and notify the Company promptly concerning any
situation which presents or appears likely to present the probability of such a
claim for indemnification against the Company, but failure to do so in good
faith shall not affect the rights hereunder.
The Company shall be entitled to participate at its own expense or, if
it so elects, to assume the defense of any suit brought to enforce any claims
subject to this indemnity provision. If the Company elects to assume the defense
of any such claim, the defense shall be conducted by counsel chosen by the
Company and satisfactory to the Administrator, whose approval shall not be
unreasonably withheld. In the event that the Company elects to assume the
defense of any suit and retain counsel, the Administrator shall bear the fees
and expenses of any additional counsel retained by it. If the Company does not
elect to assume the defense of a suit, it will reimburse the Administrator for
the reasonable fees and expenses of any counsel retained by the Administrator.
The Administrator may apply to the Company at any time for instructions
and may consult counsel for the Company or its own counsel and with accountants
and other experts with respect to any matter arising in connection with the
Administrator's duties, and the Administrator shall not be liable or accountable
for any action taken or omitted by it in good faith in accordance with such
instruction or with the opinion of such counsel, accountants or other experts.
Also, the Administrator shall be protected in acting upon any document
which it reasonably believes to be genuine and to have been signed or presented
by the proper person or persons. The Administrator will not be held to have
notice of any change of authority of any officers, employee or agent of the
Company until receipt of written notice thereof from the Company.
ARTICLE 6. ACTIVITIES OF THE ADMINISTRATOR. The services of the
Administrator rendered to the Company are not to be deemed to be exclusive. The
Administrator is free to render such services to others and to have other
businesses and interests. It is understood that directors, officers, employees
and Shareholders of the Company are or may be or become interested in the
Administrator, as officers, employees or otherwise and that partners, officers
and employees of the Administrator and its counsel are or may be or become
similarly interested in the
-6-
<PAGE> 8
Company, and that the Administrator may be or become interested in the Company
as a Shareholder or otherwise.
ARTICLE 7. DURATION OF THIS AGREEMENT. The Term of this Agreement shall
be as specified in Schedule A hereto.
ARTICLE 8. ASSIGNMENT. This Agreement shall not be assignable by either
party without the written consent of the other party; provided, however, that
the Administrator may, at its expense, subcontract with any entity or person
concerning the provision of the services contemplated hereunder. The
Administrator shall not, however, be relieved of any of its obligations under
this Agreement by the appointment of such subcontractor and provided further,
that the Administrator shall be responsible, to the extent provided in Article 5
hereof, for all acts of such subcontractor as if such acts were its own. This
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns.
ARTICLE 9. AMENDMENTS. This Agreement may be amended by the parties
hereto only if such amendment is specifically approved (i) by the vote of a
majority of the Directors of the Company, and (ii) by the vote of a majority of
the Directors of the Company who are not parties to this Agreement or interested
persons of any such party, cast in person at a Board of Directors meeting called
for the purpose of voting on such approval.
For special cases, the parties hereto may amend such procedures set
forth herein as may be appropriate or practical under the circumstances, and the
Administrator may conclusively assume that any special procedure which has been
approved by the Company does not conflict with or violate any requirements of
its Articles of Incorporation or then current prospectuses, or any rule,
regulation or requirement of any regulatory body.
ARTICLE 10. CERTAIN RECORDS. The Administrator shall maintain customary
records in connection with its duties as specified in this Agreement. Any
records required to be maintained and preserved pursuant to Rules 31a-1 and
31a-2 under the 1940 Act which are prepared or maintained by the Administrator
on behalf of the Company shall be prepared and maintained at the expense of the
Administrator, but shall be the property of the Company and will be made
available to or surrendered promptly to the Company on request.
In case of any request or demand for the inspection of such records by
another party, the Administrator shall notify the Company and follow the
Company's instructions as to permitting or refusing such inspection; provided
that the Administrator may exhibit such records to any person in any case where
it is advised by its counsel that it may be held liable for failure to do so,
-7-
<PAGE> 9
unless (in cases involving potential exposure only to civil liability) the
Company has agreed to indemnify the Administrator against such liability.
ARTICLE 11. DEFINITIONS OF CERTAIN TERMS. The terms "interested person"
and "affiliated person," when used in this Agreement, shall have the respective
meanings specified in the 1940 Act and the rules and regulations thereunder,
subject to such exemptions as may be granted by the Securities and Exchange
Commission.
ARTICLE 12. NOTICE. Any notice required or permitted to be given by
either party to the other shall be deemed sufficient if sent by registered or
certified mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party to the party giving
notice: if to the Company, at One East Fourth Street, Cincinnati, Ohio 45202;
and if to the Administrator at 3435 Stelzer Road, Columbus, Ohio 43219.
ARTICLE 13. GOVERNING LAW. This Agreement shall be construed in
accordance with the laws of the State of Ohio and the applicable provisions of
the 1940 Act. To the extent that the applicable laws of the State of Ohio, or
any of the provisions herein, conflict with the applicable provisions of the
1940 Act, the latter shall control.
ARTICLE 14. MULTIPLE ORIGINALS. This Agreement may be executed in two
or more counterparts, each of which when so executed shall be deemed to be an
original, but such counterparts shall together constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
THE RIVERFRONT FUNDS, INC.
By: /s/ Walter B. Grimm
----------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By: /s/ Stephen G. Mintos
----------------------------------
Executive Vice President
-8-
<PAGE> 10
Dated: January 1, 1997
SCHEDULE A, AS AMENDED,
TO THE ADMINISTRATION AGREEMENT
DATED AS OF FEBRUARY 1, 1996
BETWEEN THE RIVERFRONT FUNDS, INC.
AND
BISYS FUND SERVICES LIMITED PARTNERSHIP
Portfolios: This Agreement shall apply to all series of The
Riverfront Funds, Inc., either now or hereafter
created (collectively, the "Portfolios"). The
current Portfolios of The Riverfront Funds, Inc.,
are set forth below: Riverfront Stock Appreciation
Fund, Riverfront Balanced Fund, Riverfront U.S.
Government Securities Money Market Fund, Riverfront
U.S. Government Income Fund, Riverfront Income
Equity Fund, Riverfront Ohio Tax-Free Bond Fund and
Riverfront Large Company Select Fund.
Fees: Pursuant to Article 4, in consideration of services
rendered and expenses assumed pursuant to this
Agreement, the Company will pay the Administrator
on the first business day of each month, or at such
time(s) as the Administrator shall request and the
parties hereto shall agree, a fee computed daily
and paid as specified below at the annual rate
equal to .20% of each Portfolio's average daily net
assets. The fee for the period from the day of the
month this Agreement is entered into until the end
of that month shall be prorated according to the
proportion which such period bears to the full
monthly period. Upon any termination of this
Agreement before the end of any month, the fee for
such part of a month shall be prorated according to
the proportion which such period bears to the full
monthly period and shall be payable upon the date
of termination of this Agreement.
For purposes of determining the fees payable to the
Administrator, the value of the net assets of a
particular Portfolio shall be computed in the manner
described in the Company's Articles of Incorporation
or in the Prospectus or Statement of Additional
Information respecting that Portfolio as from time to
time is in effect for the computation of the value of
such net assets in connection with the determination
of the liquidating value of the shares of such
Portfolio.
The parties hereby confirm that the fees payable
hereunder shall be applied to each Portfolio as a
whole, and not to separate classes of shares within
the portfolios.
A-1
<PAGE> 11
Term: Pursuant to Article 7, the term of this Agreement
shall commence on February 1, 1996 and shall remain
in effect through January 31, 1999 ("Initial
Term"). This Agreement shall be renewed
automatically for successive periods of three years
after the Initial Term, unless terminated by either
party on not less than 90 days prior written notice
to the other party. In the event of a material
breach of this Agreement by either party, the non-
breaching party shall notify the breaching party in
writing of such breach and upon receipt of such
notice, the breaching party shall have 45 days to
remedy the breach or the nonbreaching party may
immediately terminate this Agreement.
Notwithstanding the foregoing, after such termination
for so long as the Administrator, with the written
consent of the Company, in fact continues to perform
any one or more of the services contemplated by this
Agreement or any schedule or exhibit hereto, the
provisions of this Agreement, including without
limitation the provisions dealing with
indemnification, shall continue in full force and
effect. Compensation due the Administrator and unpaid
by the Company upon such termination shall be
immediately due and payable upon and notwithstanding
such termination. The Administrator shall be entitled
to collect from the Company, in addition to the
compensation described in this Schedule A, the amount
of all of the Administrator's cash disbursements for
services in connection with the Administrator's
activities in effecting such termination, including,
without limitation, the delivery to the Company
and/or its designees of the Company's property,
records, instruments and documents, or any copies
thereof. Subsequent to such termination, for a
reasonable fee, the Administrator will provide the
Company with reasonable access to any Company
documents or records remaining in its possession.
If, for any reason, the Administrator is replaced as
fund manager and administrator, or if a third party
is added to perform all or a part of the services
provided by the Administrator under this Agreement
(excluding any subadministrator appointed by the
Administrator as provided in Article 7 hereof), then
the Company shall make a one-time cash payment, as
liquidated damages, to the Administrator equal to the
balance due the Administrator for the remainder of
the term of this Agreement, assuming for purposes of
calculation of the payment that the asset level of
the Company on the date the Administrator is
replaced, or a third
A-2
<PAGE> 12
party is added, will remain constant for the
balance of the contract term.
THE RIVERFRONT FUNDS, INC.
By:
-------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By: BISYS Fund Services, Inc.,
General Partner
By:
-------------------------------
Executive Vice President
A-3
<PAGE> 1
EXHIBIT (9)(b)
<PAGE> 2
MASTER TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 24th day of February 1992, by and between THE
RIVERFRONT FUNDS, INC. (the "Fund"), having its principal place of business at
One East Fourth Street, Cincinnati, Ohio 45202, and THE PROVIDENT BANK
("Provident") having its principal place of business at One East Fourth Street,
Cincinnati, Ohio 45202.
WITNESSETH THAT
WHEREAS, the Fund desires Provident to perform certain services for the
Fund and each of its Portfolios and Provident is willing to perform such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party agrees as follows:
1. SERVICES - Provident shall perform for the Fund and each Portfolio
of the Fund the services set forth on Exhibit A which is attached hereto and
made a part hereof. Provident shall also perform for each Portfolio of the Fund,
without additional charge, any services which it customarily performs in the
ordinary course of business without additional charge for any investment
companies for which Provident acts as transfer agent, divided disbursing agent
or shareholder servicing and recordkeeping agent.
Provident shall perform such other services in addition to those set
forth in Exhibit A hereto as the Fund shall request in writing. Any of the
services to be performed hereunder, and the manner in which such services are to
be performed, shall be changed only pursuant to a written agreement signed by
the parties hereto.
Provident will undertake no activity which, in its judgment, will
adversely affect the performance of its obligations to the Fund under this
Agreement.
2. FEES - The Fund shall pay Provident for the services set forth in
Section 1 of this Agreement in accordance with and in the manner set forth in
Exhibit B which is attached hereto and made a part hereof.
3. EFFECTIVE DATE - This Agreement shall become effective as of the
date set forth above.
4. TERM - This Agreement shall be in effect until terminated in
accordance with Section 16 hereof.
5. USE OF PROVIDENT'S NAME - The Fund will not use Provident's name in
any sales literature or other material in a manner not approved by Provident in
writing before such use, unless a similar such use was previously approved.
Notwithstanding the foregoing, Provident hereby consents to all uses of
Provident's name which merely refer in accurate terms to Provident's
appointments hereunder or which are required by the Securities and
<PAGE> 3
Exchange Commission or a state securities commission, and, provided further,
that in no case will such approval be unreasonably withheld or delayed.
6. STANDARD OF CARE - Provident shall at all times use its best efforts
and act in good faith and in a non-negligent manner in performing all services
pursuant to this Agreement.
7. UNCONTROLLABLE EVENTS - Provident shall not be liable for damage,
loss of data, delays or errors occurring by reason of circumstances beyond its
control including, but not limited to, acts of civil or military authority,
national emergencies, fire, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or power supply. However,
Provident shall keep in a separate and safe place additional copies of all
records required to be maintained pursuant to this Agreement or additional tapes
or discs necessary to reproduce all such records. Furthermore, at all times
during this Agreement, Provident shall maintain an arrangement whereby Provident
will have a backup computer facility available for its use in providing the
services required hereunder in the event circumstances beyond Provident's
control result in Provident not being able to process the necessary work at its
principal computer facility. Provident shall, from time to time, upon request
from the Fund provide written evidence and details of its arrangement for
obtaining the use of such a backup computer facility. Provident shall use
reasonable care to minimize the likelihood of all damage, loss of data, delays
and errors resulting from an uncontrollable event, and should such damage, loss
of data, delays or errors occur, Provident shall use its best efforts to
mitigate the effects of such occurrence. Representatives of the Fund shall be
entitled to inspect Provident's premises and operating capabilities within
reasonable business hours and upon reasonable notice to Provident.
8. INDEMNIFICATION - The Fund shall indemnify and hold Provident, its
employees and agents harmless against any losses, claims, damages, judgments,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from (1) transactions which occurred prior to the date Provident began
serving as Transfer Agent to the Fund; (2) action taken or permitted by
Provident in good faith with due care and without negligence in reliance upon
instructions received from the Fund in accordance with Section 9 hereof or with
respect to the Fund, upon the opinion of counsel for the Fund, as to anything
arising in connection with its performance under this Agreement or which arises
out of the Fund's lack of good faith or willful misconduct; (4) the sale of
shares in violation of any requirement of federal or state securities laws; or
(5) any act done or suffered by Provident with respect to the Fund in good faith
with due care and without negligence in connection with its performance under
this Agreement in reliance upon any instruction, order, stock certificate or
other instrument reasonably believed by it to be genuine and to bear the genuine
signature of any person or persons authorized to sign, countersign or execute
same, and which complies
-2-
<PAGE> 4
with all applicable requirements of the Fund's current prospectus and statement
of additional information, this Agreement and instructions (it being
specifically agreed that, for the purpose of this indemnification, if any
instruction received by Provident in accordance with Section 9 hereof differs
from the requirements set forth in the current prospectus or statement of
additional information then, with regard to that difference, Provident need only
comply with such instruction and not the current prospectus or statement of
additional information) and other governing documents provided to Provident by
the Fund. In the event Provident requests the Fund to indemnify or hold it
harmless hereunder, Provident shall use its best efforts to inform the Fund of
the relevant facts concerning the matter in question. Provident shall use
reasonable care to identify and promptly notify the Fund concerning any matter
which Provident believes may result in a claim for indemnification against the
Fund, and shall notify the Fund within seven days of notice to Provident of the
filing of any suit or other legal action. or the institution by a government
agency of any administrative action or investigation against Provident which
involves its duties under this Agreement. The Fund shall have the election of
defending Provident against any claim with respect to the Fund which may be the
subject of indemnification or holding harmless hereunder. In the event the Fund
so elects, it will so notify Provident and thereupon the Fund shall take over
defense of the claim and, if so requested by the Fund, Provident shall incur no
further legal or other expenses related thereto for which it shall be entitled
to indemnity or holding harmless hereunder; provided, however, that nothing
herein contained shall prevent Provident from retaining counsel to defend any
claim at Provident's own expense. Except with the prior written consent of the
Fund, Provident shall in no event confess any claim or make any compromise in
any matter in which the Fund will be asked to indemnify or hold Provident
harmless hereunder. Provident shall be without liability to the Fund with
respect to anything done or omitted to be done, in accordance with the terms of
this Agreement or instructions properly received pursuant hereto, if done in
good faith and without negligence or willful or wanton misconduct, and in no
event shall Provident be liable for consequential damages, lost profits, or
other special damages, even if Provident has been informed of the possibility of
such damage or loss by the Fund or by third parties. Notwithstanding the
forgoing, Provident shall be liable to the Fund for any damage or losses
suffered by the Fund as a result of a delay or negligence on the part of
Provident in processing a purchase or liquidation transaction or in making
payment to a shareholder of the Fund; it being agreed that, without in any way
limiting Provident's liability for other transactions hereunder, such damages
shall not be deemed to be consequential or special.
9. INSTRUCTIONS - Provident shall comply with all instructions issued
by the Fund in the form prescribed below which are permitted or required under
Exhibit A attached hereto. Wherever Provident takes action hereunder pursuant to
instructions from the Fund, Provident shall be entitled to rely upon such
instructions
-3-
<PAGE> 5
only when such instructions are signed by the President or Treasurer of the Fund
or by an individual designated in writing by the President or Treasurer as a
person authorized to give instructions hereunder. The Fund may waive the
requirement that all instructions be in writing, if such waiver defines the
occurrences not requiring written instruction, indicates the persons authorized
to give such non-written instructions, and is signed by one of the persons
pursuant to the immediately preceding sentence of this Section 9. In the event
Provident obtains the Fund"s written waiver, it may rely on non-written
instructions received pursuant thereto.
10. CONFIDENTIALITY - Provident agrees to treat all records and other
information relative to the Fund and the Fund's shareholders confidentially, and
Provident on behalf of itself and its employees agrees to keep confidential all
such information, except, after prior notification to and approval by the Fund,
which approval shall not be unreasonably withheld and may not be withheld where
Provident may be exposed to civil or criminal contempt proceedings, when
requested to divulge such. information by duly constituted authorities or when
so requested by a shareholder of the Fund seeking information about his own or
an appropriately related account.
11. REPORTS - Provident will furnish to the Fund and to properly
authorized auditors, examiners, investment companies, dealers, salesmen,
insurance companies, transfer agents, registrars, investors and others
designated by the Fund in writing, such reports at such times as are prescribed
for each service on Exhibit A attached hereto.
12. RIGHT OF OWNERSHIP - Provident agrees that all records and other
data received, computed, developed, used and/or stored pursuant to this
Agreement are the exclusive property of the Fund and that all such records and
other data will be furnished without additional charge to the Fund in available
machine readable data form immediately upon termination of this Agreement with
respect to the Fund for any reason whatsoever. Furthermore, upon the Fund's
request at any time or times while this Agreement is in effect, Provident shall
deliver to the Fund at the Fund's expense any or all of the data and records
held by Provident pursuant to this Agreement in the form as requested by the
Fund. On the effective date of termination of this Agreement or, if later, on
the date the Fund ceases to use Provident's services, Provident will promptly
return to the Fund any and all records and other data belong to the Fund free of
any claim or retention of rights by Provident.
13. REDEMPTION OF SHARES - The parties hereto agree that Provident
shall process liquidations, redemptions or repurchases of shares of the Fund, as
the agent for the Fund, in the manner described in the then current prospectus
and statement of additional information for the Fund. Notwithstanding the
foregoing, Provident shall be liable for any losses, damages, claims or expenses
resulting from Provident's failure to obtain the
-4-
<PAGE> 6
appropriate signature guarantee with regard to any redemption or transfer
processed by Provident unless Provident is authorized in writing by the Fund to
waive such a requirement.
14. SUBCONTRACTING - The Fund may require that Provident or Provident
may, with the prior written consent of the Fund, subcontract with one or more of
its affiliates or other persons to perform all or part of its obligations
hereunder, provided, however, that, notwithstanding any such subcontract,
Provident shall be fully responsible to the Fund hereunder.
15. ASSIGNMENT - This Agreement and the rights and duties hereunder
shall not be assignable by Provident or the Fund except by the specific written
consent of the other party.
16. TERMINATION - This Agreement may be terminated by Provident or not
less than 180 days prior written notice to the Fund on by the Fund on not less
than 90 days prior written notice to Provident. Upon such termination, Provident
will use its best efforts to cooperate and assist in accomplishing a timely,
efficient and accurate conversion to the person or firm which will provide the
services described hereunder. This Agreement may be terminated by the Fund
without the payment of any penalty, forfeiture, compulsory buyout amount or
performance of any other obligation which could deter termination, provided,
however, that for the purpose of this Section any amount due under Section 2 of
this Agreement which is undisputed is not considered a penalty, forfeiture,
compulsory buyout amount or performance of any other obligation which could
deter termination.
This Agreement may be terminated by the Fund after written notice to
Provident by the Fund if there is a material breach or violation of this
Agreement or if Provident fails to perform any of its obligations under this
Agreement and the failure continues for more than thirty (30) days after the
Fund gives notice of the failure to Provident or bankruptcy or insolvency
proceedings of any nature are instituted by or against Provident.
17. INSURANCE - Provident shall maintain throughout the term of this
Agreement a fidelity bond(s) in an amount in excess of the minimum amount
required to be obtained by the Fund pursuant to Rule 17g-1 under the Investment
Company Act of 1940 (the "1940 Act") covering the acts of its officers,
employees or agents in performing any and all of the services required to be
performed hereunder. Provident agrees to promptly notify the Fund in writing of
any material amendment or cancellation of such bond(s) and Provident shall at
such times as the Fund may request, but at least once each year, notify the Fund
of any claims made pursuant to such bond(s).
18. AMENDMENT - This Agreement may be amended at any time by an
instrument in writing executed by both Provident and the Fund, or each of their
respective successors, provided that any such
-5-
<PAGE> 7
amendment will conform to the requirements set forth in the 1940 Act and the
rules and regulations thereunder.
19. NOTICE - Any notice shall be sufficiently given when sent by
registered or certified mail to a party at the address of such party set forth
above or at such other address as such party may from time to time specify in
writing to the other party.
20. SECTION HEADINGS - Section headings are included for convenience
only and are not to be used to construe or interpret this Agreement.
21. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, Provident and the Fund may agree from time to time on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their combined opinions be consistent with the general tenor of this Agreement.
Furthermore, Provident and the Fund may agree to add to, delete from or change
the services set forth on Exhibit A to this Agreement. Each such interpretive or
additional provision, and each addition, deletion or change is to be signed by
the parties and annexed hereto, and no such provision, addition, deletion or
change shall contravene any applicable federal or state law or regulation and no
such provision, addition, deletion or change shall be deemed to be an amendment
of any provision of this Agreement with the exception of Exhibit A hereto.
22. GOVERNING LAW - This Agreement shall be governed by and its
provisions shall be construed in accordance with the Laws of the State of Ohio.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE PROVIDENT BANK
/s/ Jerry L. Grace
Title: Senior Vice President
THE RIVERFRONT FUNDS, INC.
/s/ Mary L. Hidden
Title: President
-6-
<PAGE> 8
EXHIBIT A - SERVICES
The services provided for in this Agreement shall be performed by
Provident or any agent appointed by Provident pursuant to Section 14 of this
Agreement under the name of The Provident Bank (Provident) and this name or any
similar name or logo will not be used by Provident or its agents for any
purposes other than those related to this Agreement or to any other agreement
which Provident may enter into with the Fund or with companies affiliated with
the Fund.
The offices of Provident shall be open to perform the services pursuant
to this Agreement on all days when the Fund is open to transact business.
Provident will perform all services normally provided to investment
companies such as the Fund and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by
Provident. With respect to the Fund, by way of illustration, but not limitation,
these services will include:
1. Establishing, maintaining, safeguarding and reporting an
shareholder account information and account histories,
(including registration, name and address recorded in
generally accepted form, dealer, representative, branch, and
territory information, mailing address, distribution address,
various codes and specific information relating to (if
applicable); level payments, letters of intent, insured
redemption plans, account groupings for rights of accumulation
discount processing, and for account group reporting for plan
accounts and other accounts grouped for master sub-account
reporting).
2. Recording and controlling shares outstanding in certificate
("issued") and non certificate ("unissued") form.
3. Maintaining a record for each certificate issued to include
certificate number, account number, issued date, number of
shares, cancelled date or stop date, where appropriate.
4. Reconciling the number of outstanding shares of the Fund on a
daily basis with the Fund and the Fund's custodian, promptly
correcting any differences noted.
5. Establishing and maintaining a trade file on behalf of the
Fund based on trade information furnished to the transfer
agent by the Fund or its distributors.
-1-
<PAGE> 9
6. Accepting and processing direct cash investments however
received and investing such investments promptly in
shareholder accounts.
7. Passing upon the adequacy of documents properly endorsed and
guaranteed submitted by or on behalf of a shareholder to
transfer ownership or redeem shares.
8. Transferring ownership of shares upon the books of each Fund.
9. Redeeming shares and preparing and mailing redemption checks
or wire proceeds as instructed.
10. Preparing and promptly mailing account statements to the
shareholder or such other authorized address and, when
appropriate, as instructed by the Fund, to the dealer or
dealer branch, whenever transaction activity effecting share
balances are posted to the Fund's accounting that is of the
type that should receive such statement.
11. Checking surrendered certificates for stop transfer
instructions.
12. Cancelling certificates surrendered.
13. Issuing certificates as replacements for those cancelled, or
as an original issue of additional shares or upon the
reduction of an equal number of unissued shares.
14. Maintaining and updating a stop transfer file, promptly
placing stop transfer codes upon notification of possible
loss, destruction or disappearance of a certificates Upon
receipt of proper documentation obtaining necessary insurance
forms and issuing replacement certificates.
15. Balancing outstanding shares of record with the custodian
prior to each distribution and calculating and paying or
reinvesting distributions to shareholders of record and to
open trade receivables and free stock.
16. Processing exchanges of shares of the Fund or Portfolio for
another, calculating proper sales charges and collecting fees
as required.
17. Processing level payment liquidations according to plan
instructions.
18. Reporting to the Fund and its custodian daily the capital
stock activities and dollar amount of transactions.
19. Promptly answering inquiring from shareholders, dealers, Fund
personnel, and others as requested in accordance
-2-
<PAGE> 10
with the terms of this Agreement as to account matters,
referring policy or investment matters to the Fund.
20. Mailing reports and special mailings, as directed by the Fund
to all shareholders or selected holders or dealers.
21. Providing services with regard to the annual or special
meetings of the Fund, including preparation and timely mailing
of proxy material to shareholders of record and others as
directed by the Fund, and receiving, examining and recording
all properly executed proxies and performing such follow-up as
required by the Fund.
22. Providing periodic listings and tallies of shareholder votes
and certifying the final tally.
23. Providing an inspector of elections at the annual or any
special meeting of the Fund.
24. Maintaining tax information for each account, deducting
amounts where required and furnishing to the Fund, its
shareholders, dealers and, when appropriate, regulatory
bodies, the necessary tax information all in compliance with
the various applicable laws.
25. Maintaining records of account and distribution information
for checks and confirmations returned as undeliverable by the
Post Office.
26. Maintaining records and reporting sales information for Blue
Sky reporting purposes.
27. Calculating and processing Fund mergers or stock dividends, as
directed by the Fund.
28. Maintaining all Fund, records as outlined in the record and
tape retention schedule delivered by the Fund.
29. Reconciling all investment, distribution and redemption
accounts.
30. Providing for the replacement of uncashed distribution or
redemption checks.
31. Maintaining and safeguarding an inventory of unissued blank
stock certificates, checks and other Fund records.
32. Making available to the Fund and its distributors at their
locations, CRTS which will provide immediate electronic access
to computerized records maintained for the Fund.
33. Providing space and such technical expertise as may be
required to enable the Fund and its properly authorized
-3-
<PAGE> 11
auditors, examiners and others designated by the Fund in
writing to properly understand and examine all books, records,
computer files, microfilm and other items maintained pursuant
to this Agreement, and to assist as required in such
examination.
34. Mailing prospectuses to existing accounts on receipt of the
first direct investment transaction after a new prospectus has
been issued by the Fund.
35. Mailing cash election notices when required prior to capital
gains distributions.
36. Maintaining information, performing the necessary research and
producing reports required to comply with all applicable state
escheat or abandoned property laws.
With respect to each Portfolio of the Fund, the Transfer Agent will
produce reports as requested by the Fund including but not limited to the
following:
Shareholder Account Confirmation As required
Redemption Checks When redemption is
made
Certificates When requested
Level payment checks On payment cycle
Distribution checks As required
Name and address labels (per As requested
account registration)
Proxy When required
1099 Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
Daily (monthly) share proof Daily
Daily master control Daily
Blue Sky exception Daily
-4-
<PAGE> 12
Blue Sky master list Monthly and whenever
a new permit is
issued by a state
Blue Sky sales reports Cycle as designated
in advance by
distributor
Check register Daily
Account information reports When requested
(Monthly) Cumulative Transaction Monthly
New account list Monthly
Shareholder master list When requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Proxy tallies and vote listings When requested
Level payment account check Monthly
reconciliation
Dividend account check As required
reconciliation
-5-
<PAGE> 1
EXHIBIT 10
[BAKER & HOSTETLER LETTERHEAD]
October 18, 1996
The Riverfront Funds, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
Subject: The Riverfront Funds, Inc. ("The Company") -- Post-Effective
Amendement No. 17 to Registration Statement on Form N-1A, File
No. 33-34154, filed under the Securities Act of 1933, as
amended, and Amendment No. 18 to Registration Statement on
Form N-1A, File No. 811-6082, filed under the Investment
Company Act of 1940, as amended (the "Amendment")
Ladies and Gentlemen:
In connection with the filing of the Amendment, it is our opinion that,
upon the effectiveness of the Amendment, the indefinite number of authorized
shares of capital stock, $.001 par value, of The Riverfront Large Company
Select Fund, an investment portfolio of the Company, when issued as described
in the Amendment and for the consideration described in the Amendement
including the Prospectus which is a part thereof, will be legally issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Amendment.
Very Truly yours,
BAKER & HOSTETLER
<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.
17 to the Registration Statement (Form N-1A No. 33-34154).
ERNST & YOUNG LLP
Cincinnati, Ohio
October 17, 1996
<PAGE> 1
EXHIBIT (15)(a)
<PAGE> 2
Schedule C
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
INVESTOR A DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
AND AGREEMENT
This Plan (the "Investor A Plan") constitutes a distribution and
shareholder service plan of The Riverfront Funds, Inc., a Maryland corporation
(the "Fund"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Investor A Plan relates to the Investor A
Shares of those investment portfolios identified on Schedule B to the Fund's
Distribution Agreement and as amended from time to time (the "Investor A Plan
Portfolios").
SECTION 1. Each Investor A Plan Portfolio shall pay to BISYS Fund
Services Limited Partnership, an Ohio limited partnership and the distributor
(the "Distributor") of the Fund's capital stock, par value $.001 per share, of
its Investor A class (the "Investor A Shares"), a fee in an amount not to exceed
on an annual basis .25% of the average daily net asset value of the Investor A
Shares of such Investor A Plan Portfolio (the "Investor A Plan Fee") for: (a)
(i) efforts of the Distributor expended in respect of or in furtherance of sales
of Investor A shares, and (ii) to enable the Distributor to make payments to
banks and other institutions and broker/dealers (a "Participating Organization")
for distribution assistance and/or shareholder service pursuant to an agreement
with the Participating Organization; and (b) reimbursement of expenses (i)
incurred by the Distributor, and (ii) incurred by a Participating Organization
pursuant to an agreement in connection with distribution assistance and/or
shareholder service including, but not limited to, the reimbursement of expenses
relating to printing and distributing prospectuses to persons other than
Shareholders of an Investor A Plan Portfolio, printing and distributing
advertising and sales literature and reports to Shareholders used in connection
with the sale of Investor A Shares, and personnel and communication equipment
used in servicing Shareholder accounts and prospective shareholder inquiries.
For purposes of the Investor A Plan, a Participating Organization may include
any of the Distributor's affiliates or subsidiaries.
C - 1
<PAGE> 3
SECTION 2. The Investor A Plan Fee shall be paid by the Investor A Plan
Portfolio to the Distributor only to compensate or to reimburse the Distributor
for payments or expenses incurred pursuant to Section 1.
SECTION 3. The Investor A Plan shall not take effect with respect to
the Investor A Shares of any subsequently created Investor A Plan Portfolio
until it has been approved by a vote of at least a majority of the outstanding
Investor A Shares of such Investor A Plan Portfolio.
SECTION 4. The Investor A Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Directors of the Fund, and (b) the Independent Directors of the Fund cast in
person at a meeting called for the purpose of voting on the Investor A Plan or
such agreement.
SECTION 5. The Investor A Plan shall continue in effect for a period of
more than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor A Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Investor A Plan Funds pursuant to the Investor A Plan or
any related agreement shall provide to the Directors of the Fund, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
SECTION 7. The Investor A Plan may be terminated at any time by vote of
a majority of the Independent Directors, or, with respect to an Investor A Plan
Portfolio, by vote of a majority of the outstanding Investor A Shares of the
Investor A Plan Portfolio.
SECTION 8. All agreements with any person relating to implementation of
the Investor A Plan shall be in writing, and any agreement related to the
Investor A Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Directors or, with respect to an Investor A Plan Portfolio, by vote of
a majority of the outstanding Investor A Shares of the Investor A Plan
Portfolio, on not more than 60 days' written notice to any other party
to the agreement; and
(b) That such agreement shall terminate automatically in the
event of its assignment.
C - 2
<PAGE> 4
SECTION 9. The Investor A Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant to Section 1
hereof without approval in the manner provided in Section 3 hereof, and all
material amendments to the Investor A Plan shall be approved in the manner
provided for approval of the Investor A Plan in Section 4.
SECTION 10. As used in the Investor A Plan, (a) the term "Independent
Directors" shall mean those Directors of the Fund who are not interested persons
of the Fund, and have no direct or indirect financial interest in the operation
of the Investor A Plan or any agreements related to it, and (b) the terms
"assignment", "interested person" and "majority of the outstanding voting
securities" shall have the respective meanings specified in the 1940 Act and the
rules and regulations thereunder, subject to such exemptions as may be granted
by the Securities and Exchange Commission.
SECTION 11. This Plan amends in their entirety and supersedes the
Distribution Plans of The Riverfront U.S. Government Securities Money Market
Fund, The Riverfront U.S. Government Income Fund and The Riverfront Income
Equity Fund in effect at the time of adoption and implementation of this Plan.
THE RIVERFRONT FUNDS, INC.
By
-----------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.
General Partner
By
-----------------------------
Adopted by the Directors of the Fund on June 8, 1994, as amended as
of November 17, 1995
C - 3
<PAGE> 1
EXHIBIT (15)(b)
<PAGE> 2
EXHIBIT 15(b)
Schedule E
to the
Distribution Agreement
between The Riverfront Funds, Inc. and
BISYS Fund Services Limited Partnership
August 1, 1994, as amended as of November 17, 1995
INVESTOR B DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
AND AGREEMENT
This Plan (the "Investor B Plan") constitutes a distribution and
shareholder service plan of The Riverfront Funds, Inc., a Maryland corporation
(the "Fund"), adopted pursuant to Rule 12b-1 under the Investment Company Act of
1940, as amended (the "1940 Act"). The Investor B Plan relates to the Investor B
Shares of those investment portfolios identified on Schedule D to the Fund's
Distribution Agreement and as amended from time to time (the "Investor B Plan
Portfolios").
SECTION 1. Each Investor B Plan Portfolio is authorized to pay to BISYS
Fund Services Limited Partnership, an Ohio limited partnership and the
distributor (the "Distributor") of the Fund's capital stock, par value $.001 per
share, of its Investor B class (the "Investor B Shares"):
(a) a distribution fee in an amount not to exceed on an annual
basis .75% of the average daily net asset value of the Investor B
Shares of such Investor B Plan Portfolio (the "Distribution Fee") for:
(i) (a) efforts of the Distributor expended in respect of or in
furtherance of sales of Investor B Shares, and (b) to enable the
Distributor to make payments to banks and other institutions and
broker/dealers (a "Participating Organization") for distribution
assistance pursuant to an agreement with the Participating
Organization; and (ii) reimbursement of expenses (a) incurred by the
Distributor, and (b) incurred by a Participating Organization pursuant
to an agreement in connection with distribution assistance including,
but not limited to, the reimbursement of expenses relating to printing
and distributing prospectuses to persons other than Shareholders of an
Investor B Plan Portfolio, printing and distributing advertising and
sales literature and reports to Shareholders for use in connection with
the sales of Investor B Shares, processing purchase, exchange and
redemption requests from customers and placing orders with the
Distributor or the Fund's transfer agent, and personnel and
communication equipment used in servicing Shareholder accounts and
prospective shareholder inquiries; and
E - 1
<PAGE> 3
(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 Investor B Plan Portfolio (the "Service Fee") for: (i)
(a) efforts of the Distributor expended in servicing shareholders
holding Investor B Shares, and (b) to enable the Distributor to make
payments to a Participating Organization for shareholder services
pursuant to an agreement with the Participating Organization; and (ii)
reimbursement of expenses (a) incurred by the Distributor, and (b)
incurred by a Participating Organization pursuant to an agreement in
connection with shareholder service including, but not limited to
personal, continuing services to investors in the Investor B Shares of
an Investor B Plan Portfolio, providing sub-accounting with respect to
Investor B Shares beneficially owned by customers or the information
necessary for sub-accounting, arranging for bank wires, and providing
office space, equipment, telephone facilities and various personnel
including clerical, supervisory and computer, as is necessary or
beneficial in connection therewith.
For purposes of the Investor B Plan, a Participating Organization may include
any of the Distributor's affiliates or subsidiaries.
SECTION 2. The Distribution Fee and the Service Fee shall be paid by
the Investor B Plan Portfolios to the Distributor only to compensate or to
reimburse the Distributor for payments or expenses incurred pursuant to Section
1.
SECTION 3. The Investor B Plan shall not take effect with respect to
the Investor B Shares of an Investor B Plan Portfolio until it has been approved
by a vote of the initial Shareholder of the Investor B Shares of such Investor B
Plan Portfolio.
SECTION 4. The Investor B Plan shall not take effect until it has been
approved, together with any related agreements, by votes of the majority (or
whatever greater percentage may, from time to time, be required by Section 12(b)
of the 1940 Act or the rules and regulations thereunder) of both (a) the
Directors of the Fund, and (b) the Independent Directors of the Fund cast in
person at a meeting called for the purpose of voting on the Investor B Plan or
such agreement.
E - 2
<PAGE> 4
SECTION 5. The Investor B Plan shall continue in effect for a period of
more than one year after it takes effect only so long as such continuance is
specifically approved at least annually in the manner provided for approval of
the Investor B Plan in Section 4.
SECTION 6. Any person authorized to direct the disposition of monies
paid or payable by the Investor B Plan Portfolios pursuant to the Investor B
Plan or any related agreement shall provide to the Directors of the Fund, and
the Directors shall review, at least quarterly, a written report of the amounts
so expended and the purposes for which such expenditures were made.
SECTION 7. The Investor B Plan may be terminated at any time by vote of
a majority of the Independent Directors, or, with respect to an Investor B Plan
Portfolio, by vote of a majority of the outstanding Investor B Shares of the
Investor B Plan Portfolio.
SECTION 8. All agreements with any person relating to implementation of
the Investor B Plan shall be in writing, and any agreements related to the
Investor B Plan shall provide:
(a) That such agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Independent
Directors or, with respect to an Investor B Plan Portfolio, by vote of
a majority of the outstanding Investor B Shares of the Investor B Plan
Portfolio, on not more than 60 days' written notice to any other party
to the agreement; and
(b) That such agreement shall terminate automatically in
the event of its assignment.
SECTION 9. The Investor B Plan may not be amended to increase
materially the amount of the Distribution Fee and Service Fee permitted pursuant
to Section 1 hereof without approval in the manner provided in Section 3 hereof,
and all material amendments to the Investor B Plan shall be approved in the
manner provided for approval of the Investor B Plan in Section 4.
SECTION 10. As used in the Investor B Plan, (a) the term "Independent
Directors" shall mean those Directors of the Fund who are not interested persons
of the Fund, and have no direct or indirect financial interest in the operation
of the Investor B Plan
E - 3
<PAGE> 5
or any agreements related to it, and (b) the terms "assignment," "interested
person" and "majority of the outstanding voting securities" shall have the
respective meanings specified in the 1940 Act and the rules and regulations
thereunder, subject to such exemptions as may be granted by the Securities and
Exchange Commission.
THE RIVERFRONT FUNDS, INC.
By
------------------------------
BISYS FUND SERVICES LIMITED
PARTNERSHIP
By BISYS Fund Services, Inc.,
General Partner
By
------------------------------
Adopted by the Directors of the Fund on June 8, 1994 and as amended as of
November 17, 1995.
E - 4
<PAGE> 1
EXHIBIT (16)(f)
<PAGE> 2
THE RIVERFRONT FUNDS, INC.
EXHIBIT 16(f)
TOTAL RETURN
LARGE COMPANY SELECT FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 4.50%
----------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
ONE YEAR: ( 10/01/95 TO 09/30/96 ):
( 1,145.47 /1,000) - 1 = 14.55%
THREE YEAR: ( 10/01/93 TO 09/30/96 ):
( 1,496.61 /1,000 to the power of (1/(1095/365))-1) = 14.39%
FIVE YEAR: ( 10/01/91 TO 09/30/96 ):
( 1,807.87 /1,000 to the power of (1/(1825/365))-1) = 12.57%
TEN YEAR: ( 10/01/86 TO 09/30/96 ):
( 3,045.87 /1,000 to the power of (1/(3650/365))-1) = 11.79%
</TABLE>
<PAGE> 3
THE RIVERFRONT FUNDS, INC
EXHIBIT 16(f)
TOTAL RETURN
LARGE COMPANY SELECT FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
WITH SALES CHARGE OF: 0.00%
------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
ONE YEAR: ( 10/01/95 TO 09/30/96 ):
( 1,199.55/1,000) - 1 = 19.96%
THREE YEAR: ( 10/01/93 TO 09/30/96 ):
( 1,567.17/1,000 to the power of (1/(1095/365))-1) = 16.16%
FIVE YEAR: ( 10/01/91 TO 09/30/96 ):
( 1,893.20/1,000 to the power of (1/(1825/365))-1) = 13.62%
TEN YEAR: ( 10/01/86 TO 09/30/96 ):
( 3,191.48/1,000 to the power of (1/(3650/365))-1) = 12.31%
</TABLE>
<PAGE> 4
THE RIVERFRONT FUNDS, INC.
EXHIBIT 16(f)
TOTAL RETURN
CLASS B SHARES
WITHOUT CDSC LOAN
LARGE COMPANY SELECT FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
ONE YEAR: ( 10/01/95 TO 09/30/96 ):
4.00%( 1,190.8 /1,000) - 1 = 19.08%
THREE YEAR: ( 10/01/93 TO 09/30/96 ):
3.00%( 1,532.9 /1,000 to the power of (1/(1095/365))-1) = 15.30%
FIVE YEAR: ( 10/01/91 TO 09/30/96 ):
1.00%( 1,824.5 /1,000 to the power of (1/(1825/365))-1) = 12.78%
TEN YEAR: ( 10/01/86 TO 09/30/96 ):
0.00%( 2,963.0 /1,000 to the power of (1/(3650/365))-1) = 11.47%
</TABLE>
<PAGE> 5
THE RIVERFRONT FUNDS, INC.
EXHIBIT 16(f)
TOTAL RETURN
CLASS B SHARES
CDSC LOAN CALCULATIONS
LARGE COMPANY SELECT FUND
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
----------------------------------------
T = (ERV/P) to the power of 1/N - 1
WHERE: T = TOTAL RETURN
ERV = ENDING REDEEMABLE VALUE AT THE END
OF THE PERIOD OF A HYPOTHETICAL
$1,000 INVESTMENT MADE AT THE
BEGINNING OF THE PERIOD.
P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000.
N = NUMBER OF DAYS
EXAMPLE:
ONE YEAR: ( 10/01/95 TO 09/30/96 ):
WITH CDSC OF 4.00% ( 1,150.8 /1,000) - 1 = 15.08%
THREE YEAR: ( 10/01/93 TO 09/30/96 ):
WITH CDSC OF 3.00% ( 1,502.9 /1,000 to the power of (1/( 1095/365))-1) = 14.55%
FIVE YEAR: ( 10/01/91 TO 09/30/96 ):
WITH CDSC OF 1.00% ( 1,814.5 /1,000 to the power of (1/( 1825/365))-1) = 12.66%
TEN YEAR: ( 10/01/86 TO 09/30/96 ):
WITH CDSC OF 0% ( 2,963.0 /1,000 to the power of (1/( 3650/365))-1) = 11.47%
</TABLE>
<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
October 17, 1996
C-27
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<NAME> RIVERFRONT U.S. GOVERNMENT INCOME FUND INVESTOR B SHARES
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 31
<NAME> RIVERFRONT INCOME EQUITY FUND INVESTOR B SHARES
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
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<RECEIVABLES> 757115
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<PAYABLE-FOR-SECURITIES> 974951
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 203124
<TOTAL-LIABILITIES> 1178075
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 61564894
<SHARES-COMMON-STOCK> 381416
<SHARES-COMMON-PRIOR> 239090
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 6186
<ACCUMULATED-NET-GAINS> 6730440
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4222994
<NET-ASSETS> 4900180
<DIVIDEND-INCOME> 1075742
<INTEREST-INCOME> 70966
<OTHER-INCOME> 0
<EXPENSES-NET> 604624
<NET-INVESTMENT-INCOME> 542084
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