<PAGE> 1
As filed with the Securities and Exchange Commission
October 24, 1997
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. 23 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 24 [X]
THE RIVERFRONT FUNDS
(Successor to The Riverfront 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
George O. Martinez
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)
[X] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following box:
[X] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of beneficial interest,
without par value.
<PAGE> 3
CROSS-REFERENCE SHEET
---------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT BALANCED FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
THE RIVERFRONT SMALL COMPANY SELECT FUND
Seven Funds of
The Riverfront Funds
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> <C>
1 Cover Page
2 Fee Table
3 Financial Highlights; Performance Data
4 Cover Page; The Trust and its
Portfolios; The Funds' Investment
Objectives and Policies
5 Trust Management and Expenses;
Additional Information
5A Not Applicable
6 The Trust and its Portfolios; Dividends
and Taxes; Trust 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
THE RIVERFRONT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT BALANCED FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT LARGE COMPANY
SELECT FUND
THE RIVERFRONT SMALL COMPANY SELECT
FUND
PROSPECTUS DECEMBER 1, 1997
The Riverfront Funds (the "Trust") 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 Trust
are: The Riverfront U.S. Government Securities Money Market Fund, The Riverfront
U.S. Government Income Fund, The Riverfront Ohio Tax-Free Bond Fund, The
Riverfront Balanced Fund, The Riverfront Income Equity Fund, The Riverfront
Large Company Select Fund and The Riverfront Small Company Select Fund (formerly
known as The Riverfront Stock Appreciation Fund).
The Funds are offered both to 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
Financial Group, Inc. ("PFG"). 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, PFG 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 POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE RIVERFRONT U.S.
GOVERNMENT INCOME FUND, THE RIVERFRONT OHIO TAX-FREE BOND FUND, THE RIVERFRONT
BALANCED FUND, THE RIVERFRONT INCOME EQUITY FUND, THE RIVERFRONT LARGE COMPANY
SELECT FUND AND THE RIVERFRONT SMALL COMPANY SELECT 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
3435 STELZER ROAD
COLUMBUS, OHIO 43219
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
<PAGE> 5
that a prospective investor should know about each Fund before investing.
Investors should read and retain this prospectus for future reference.
Additional information about the Trust 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 Trust and the Funds, write to the address or call the telephone number
listed above.
The Trust 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 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 BALANCED FUND (the "Balanced Fund") seeks long-term growth
of capital with some current income as a secondary objective.
-- 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 LARGE COMPANY SELECT FUND (the "Large Company Fund") seeks
long-term growth of capital with some current income as a secondary objective.
-- THE RIVERFRONT SMALL COMPANY SELECT FUND (the "Small Company Fund") seeks
capital growth.
The Money Market Fund, the Income Fund, the Ohio Tax-Free Fund, the Balanced
Fund, the Income Equity Fund, the Large Company Fund, and the Small Company Fund
are hereinafter collectively referred to as the "Funds" and individually as a
"Fund."
Each Fund, 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
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<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Prospectus Summary.................... 4
Fee Table............................. 8
Financial Highlights.................. 11
The Trust and Its Funds............... 24
The Funds' Investment Objectives and
Policies............................ 24
Investment Restrictions............... 43
Pricing Shares........................ 47
How To Buy Shares..................... 48
Sales Charges......................... 50
Reduced Sales Charges -- Investor A
Shares.............................. 52
Contingent Deferred Sales Charge --
Investor B Shares................... 53
Other Purchase Information............ 56
Exchanges............................. 56
How To Redeem Shares.................. 57
Shareholder Services.................. 60
Dividends and Taxes................... 60
Management and Expenses............... 63
Performance Data and Advertising...... 69
Trust Shares.......................... 70
Additional Information................ 71
</TABLE>
3
<PAGE> 7
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered................ Investor A shares of beneficial interest, no par value, of the
Money Market Fund, and Investor A and Investor B shares of
beneficial interest, no par value, of the Income Fund, the
Ohio Tax-Free Fund, the Balanced Fund, the Income Equity Fund,
the Large Company Fund and the Small Company Fund, seven
separate series (collectively, the "Funds") of The Riverfront
Funds, an Ohio business trust (the "Trust").
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 Ohio Tax-Free Fund, the Balanced Fund, the
Income Equity Fund, the Large Company Fund and the Small
Company 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 Balanced
Fund, the Income Equity Fund, the Large Company Fund, and the
Small Company Fund is a diversified series of the Trust, an
open-end, management investment company. The Ohio Tax-Free
Fund is a non-diversified series of the Trust.
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 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 BALANCED FUND, long-term growth of capital with some
current income as a secondary objective.
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 LARGE COMPANY FUND, long-term growth of capital with
some current income as a secondary objective.
For the SMALL COMPANY FUND, capital growth.
Investment Policies........... Under normal market conditions, the MONEY MARKET FUND invests
at least 65% of its total assets in obligations issued or
guaranteed as to principal and interest by the U.S. Govern-
ment, its agencies or instrumentalities, and in repurchase
agreements secured by such obligations.
Under normal market conditions, the INCOME FUND invests
primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in high
quality fixed rate and adjustable rate mortgage-backed securi-
ties and other asset-backed securities which are issued or
guaranteed by the U.S. Government, its agencies or instrumen-
talities or are rated no lower than one of the three highest
rating categories by a nationally recognized statistical
rating organization (an "NRSRO"), or if not so rated, are
deemed to be of comparable quality.
</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 BALANCED FUND invests in
common stocks, preferred stocks, fixed income securities and
securities convertible into common stocks.
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.
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 SMALL COMPANY 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.
</TABLE>
6
<PAGE> 10
<TABLE>
<S> <C>
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").
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 the Small
Company Fund, dividends from net income, if any, are declared
and generally paid semi-annually. 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").
Change in Domicile
Reorganization.............. On December 1, 1997 The Riverfront Funds, Inc., a Maryland
corporation, changed its form of organization by completing a
reorganization with The Riverfront Funds, an Ohio business
trust, created for such purpose. References herein to the
Trust and its Funds are intended to include The Riverfront
Funds, Inc. and its corresponding funds prior to the
reorganization.
</TABLE>
7
<PAGE> 11
FEE TABLE
The purpose of the fee table is to assist investors in understanding the costs
and expenses that an investor in a Fund will bear directly or indirectly. Such
costs and expenses do not include any fees charged by Provident or any of its
affiliates to its customers' accounts which may have invested in shares of the
Funds. The annual fund expenses for the Money Market Fund, the Income Equity
Fund, and the Small Company Fund have been restated to reflect current fees. For
more complete descriptions of the various costs and expenses, see the following
sections of this prospectus: "Management and Expenses," "How to Buy Shares,"
"Sales Charges," "Reduced Sales Charges -- Investor A Shares" and "Distribution
Plans."
INVESTOR A SHARES
<TABLE>
<CAPTION>
MONEY OHIO INCOME LARGE SMALL
MARKET INCOME TAX-FREE BALANCED EQUITY COMPANY COMPANY
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% .40%(2) .80%(2) .95% .80% .80%
12b-1 Fees After Voluntary Fee
Reduction...................... .10(3) .19(3) .25 .19(3) .22(3) .25 .25
Other Expenses(4)................ .44 .52 .80 .71 .64 .61(4) 1.06
--- ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses
After Voluntary Fee
Reductions..................... .69% 1.11% 1.45%(2) 1.70%(2) 1.81% 1.66% 2.11%
=== ==== ==== ==== ==== ==== ====
</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) Provident agreed with the Trust to reduce voluntarily the amount of its
investment advisory fee with respect to the Ohio Tax-Free Fund and the
Balanced Fund for the fiscal year ended December 31, 1996 and the fiscal
year ending December 31, 1997. Absent such voluntary fee reductions,
Investment Advisory Fees and Total Fund Operating Expenses for the Investor
A Shares for the fiscal year ended December 31, 1996, would have been .50%
and 1.55%, respectively, for the Ohio Tax-Free Fund, and .90% and 1.80%,
respectively, for the Balanced Fund.
(3) The Distributor has agreed with the Trust 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, Balanced and Income Equity Funds, for
the fiscal year ended December 31, 1996, and the fiscal year ending December
31, 1997. Absent such voluntary fee reduction, 12b-1 Fees for such Funds
would have been .25%.
(4) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
8
<PAGE> 12
INVESTOR B SHARES
<TABLE>
<CAPTION>
OHIO INCOME LARGE SMALL
INCOME TAX-FREE BALANCED EQUITY COMPANY COMPANY
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% .40%(2) .80%(2) .95% .80% .80%
12b-1 Fees........................... 1.00 1.00 1.00 1.00 1.00 1.00
Other Expenses....................... .56 .85 .74 .58 .61(3) 1.04
---- ---- ---- ---- ---- ----
Total Fund Operating Expenses After
Voluntary Fee Reduction............ 1.96%% 2.25%(2) 2.54%(2) 2.53% 2.41% 2.84%
==== ==== ==== ==== ==== ====
</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) Provident agreed with the Trust to reduce voluntarily the amount of its
investment advisory fee with respect to the Ohio Tax-Free Fund and the
Balanced Fund for the fiscal year ended December 31, 1996 and the fiscal
year ending December 31, 1997. Absent such voluntary fee reductions,
Investment Advisory Fees and Total Fund Operating Expenses for the Investor
B Shares for the fiscal year ended December 31, 1996, would have been .50%
and 2.35%, respectively, for the Ohio Tax-Free Fund, and .90% and 2.64%,
respectively, for the Balanced Fund.
(3) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
EXAMPLE(4) -- INVESTOR A SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
MONEY OHIO INCOME LARGE SMALL
MARKET INCOME TAX-FREE BALANCED EQUITY COMPANY COMPANY
FUND FUND FUND FUND FUND FUND FUND
------ ------ -------- -------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year...................... $ 7 $ 56 $ 59 $ 62 $ 63 $ 61 $ 65
Three Years................... $ 22 $ 79 $ 89 $ 96 $ 99 $ 95 $108
Five Years.................... $ 38 $103 $121 $133 $139 N/A $153
Ten Years..................... $ 86 $179 $211 $237 $248 N/A $278
</TABLE>
9
<PAGE> 13
EXAMPLE(4) -- INVESTOR B SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
OHIO INCOME LARGE SMALL
INCOME TAX-FREE BALANCED EQUITY COMPANY COMPANY
FUND FUND FUND FUND FUND FUND
------ -------- -------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 60 $ 63 $ 66 $ 66 $ 64 $ 69
Three Years................... $102 $110 $119 $119 $ 115 $128
Five Years.................... $126 $140 $155 $155 N/A $170
Ten Years..................... $229 $258 $288 $287 N/A $317
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
OHIO INCOME LARGE SMALL
INCOME TAX-FREE BALANCED EQUITY COMPANY COMPANY
FUND FUND FUND FUND FUND FUND
------ -------- -------- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 20 $ 23 $ 26 $ 26 $ 24 $ 29
Three Years................... $ 62 $ 70 $ 79 $ 79 $ 75 $ 88
Five Years.................... $106 $120 $135 $135 N/A $150
Ten Years..................... $229 $258 $288 $287 N/A $317
</TABLE>
- ---------------
(4) The Commission requires use of a 5% annual return figure for purposes of the
examples. Actual return for a Fund may be greater or less than 5%.
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 fees and
certain other class-specific expenses paid by the holders of Investor A shares
and Investor B shares differs.
FINANCIAL HIGHLIGHTS
The Money Market Fund, the Income Fund, the Ohio Tax-Free Fund, the
Balanced Fund (formerly known as The Riverfront Flexible Growth Fund), the
Income Equity Fund, the Large Company Fund and the Small Company Fund (formerly
known as The Riverfront Stock Appreciation Fund) are each a separate Fund of the
Company. The financial highlights of each of the Funds appear in the following
Financial Highlights tables. Ernst & Young LLP, independent auditors, audited
the financial highlights of each of the Funds, except for the Large Company
Fund, for the fiscal years ended December 31, 1996 and 1995, except that, with
respect to the Small Company Fund, Ernst & Young LLP audited the financial
highlights for the three-month period ended December 31, 1995. Other auditors
audited the financial highlights of each of the Funds for all of the other
fiscal year ends presented in the Financial Highlights tables.
The following financial highlights for each Fund for the six month period
ending June 30, 1997, are unaudited.
The financial statements of the Funds and the report issued by Ernst &
Young LLP on these financial statements for the year ended December 31, 1996,
appear in the Statement of Additional Information. Shareholders and prospective
investors may obtain the Statement of Additional Information upon request.
As of September 30, 1995, the Small Company 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 Small Company 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 of the Small Company Fund for each of the fiscal years ended
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 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.
On July 29, 1994, the shareholders of the Funds 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>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31, OCTOBER 1, 1992 TO
JUNE 30, ----------------------------------------------- DECEMBER 31,
1997 1996 1995 1994(d) 1993(d) 1992(a)(d)
----------- -------- -------- -------- -------- ------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities
Net Investment Income........ 0.024 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- -------- -------
Total from Investment
Activities................. 0.024 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- -------- -------
Distributions
Net Investment Income........ (0.024) (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- -------- -------
Total Distributions.......... (0.024) (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF
PERIOD..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =======
TOTAL RETURN................. 2.42%(b) 4.89% 5.52% 3.78% 2.90% 0.80%(b)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA
Net Assets, End of Period
(000)...................... $ 166,862 $181,017 $157,495 $149,374 $133,207 $ 37,083
Ratio of expenses to average
net assets................. 0.64%(c) 0.59% 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment
income to average net
assets..................... 4.83%(c) 4.78% 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average
net assets*................ 0.79%(c) 0.84% 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment
income to average net
assets*.................... 4.68%(c) 4.53% 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 YEAR ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1997 DECEMBER 31, 1996 1995 1995(a)
------------------------- ------------------------ ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.43 $ 10.64 $ 9.71 $10.95 $ 8.92 $10.00
Investment Activities
Net investment income.... 0.24 0.25 0.52 0.49 0.54 0.43
Net realized and
unrealized gains
(losses) from
investments............ 0.00 (0.03) (0.29) (0.31) 0.79 0.94
------- ------ ------- ------- ------- -------
Total from Investment
Activities............. 0.24 0.22 0.23 0.18 1.33 1.37
------- ------ ------- ------- ------- -------
Distributions
Net investment income.... (0.30) (0.34) (0.51) (0.49) (0.54) (0.42)
In excess of net
investment income...... -0- -0- -0- -0- -0- -0-
------- ------ ------- ------- ------- -------
Total Distributions...... (0.30) (0.34) (0.51) (0.49) (0.54) (0.42)
------- ------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 9.37 $ 10.52 $ 9.43 $10.64 $ 9.71 $10.95
======= ======= ======== ====== ======== =======
TOTAL RETURN (EXCLUDING
SALES/ REDEMPTION
CHARGE)................ 2.55%(b) 2.08%(b) 2.51% 1.72% 15.22% 13.96%(e)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of
period (000)........... $49,666 $ 1,437 $ 33,694 $1,296 $ 36,538 $1,263
Ratio of expenses to
average net assets..... 1.12%(c) 1.93%(c) 1.11% 1.96% 1.09% 1.90%(c)
Ratio of net investment
income to average net
assets................. 5.59%(c) 4.76%(c) 5.45% 4.59% 5.74% 4.80%(c)
Ratio of expenses to
average net assets*.... 1.18%(c) 1.93%(c) 1.20% 1.96% 1.18% 1.90%(c)
Ratio of net investment
income to average net
assets*................ 5.53%(c) 4.76%(c) 5.36% 4.59% 5.65% 4.80%(c)
Portfolio turnover....... 37%(d) 37%(d) 53%(d) 53%(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.
14
<PAGE> 18
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, AUGUST 9, 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%(d) 220%(d) 117%(d) 0% 0%
</TABLE>
15
<PAGE> 19
THE RIVERFRONT OHIO TAX-FREE BOND FUND
<TABLE>
<CAPTION>
YEAR JANUARY 17
ENDED 1995 TO
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, AUGUST 1,
JUNE 30, 1997 DECEMBER 31, 1996 1995 1995(a) 1994 TO
------------------------ ------------------------ ------------ ------------ DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(a)(f)
---------- ---------- ---------- ---------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD............... $10.41 $10.64 $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
Investment Activities
Net investment income..... 0.16 0.18 0.40 0.32 0.39 0.27 0.12
Net realized and
unrealized gains
(losses) from
investments............. 0.02 (0.06) (0.10) (0.09) 0.67 0.73 (0.17)
------ ------ -------- ------ -------- ------ --------
Total from Investment
Activities.............. 0.18 0.12 0.30 0.23 1.06 1.00 (0.05)
------ ------ -------- ------ -------- ------ --------
Distributions
Net investment income..... (0.29) (0.25) (0.40) (0.32) (0.38) (0.27) (0.12)
------ ------ -------- ------ -------- ------ --------
Total Distributions....... (0.29) (0.25) (0.40) (0.32) (0.38) (0.27) (0.12)
------ ------ -------- ------ -------- ------ --------
NET ASSET VALUE, END OF
PERIOD.................. $10.30 $10.51 $ 10.41 $10.64 $ 10.51 $10.73 $ 9.83
====== ====== ======== ====== ======== ====== ========
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION
CHARGE)................. 1.77%(e) 1.13%(e) 2.95% 2.21% 10.96% 10.10%(c) (0.47)%(e)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of
period (000)............ $7,189 $1,305 $ 10,693 $ 984 $ 11,091 $ 626 $ 10,190
Ratio of expenses to
average net assets...... 1.52%(d) 2.30%(d) 1.45% 2.25% 1.49% 2.27%(d) 1.08%(d)
Ratio of net investment
income to average net
assets.................. 3.97%(d) 3.11%(d) 3.87% 3.07% 3.77% 3.01%(d) 2.92%(d)
Ratio of expenses to
average net assets*..... 1.62%(d) 2.40%(d) 1.55% 2.36% 1.64% 2.41%(d) 1.44%(d)
Ratio of net investment
income to average net
assets*................. 3.87%(d) 3.01%(d) 3.77% 2.96% 3.62% 2.87%(d) 2.56%(d)
Portfolio turnover........ 0%(b) 0%(b) 6%(b) 6%(b) 34%(b) 34%(b) 29%(b)
</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.
16
<PAGE> 20
THE RIVERFRONT BALANCED FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
DECEMBER DECEMBER FROM
SIX MONTHS ENDED YEAR ENDED 31, 31, SEPTEMBER 1,
JUNE 30, 1997 DECEMBER 31, 1996 1995 1995(a) 1994 THROUGH
------------------------- ------------------------ ----------- ----------- DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(a)(f)
----------- ----------- ----------- ----------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 11.69 $ 12.04 $ 11.36 $ 11.70 $ 9.79 $ 10.00 $ 10.00
------- ------- ------- ------- ------- ------- -------
Investment Activities
Net investment income.......... 0.12 0.07 0.31 0.26 0.35 0.25 0.10
Net realized and unrealized
gains (losses) from
investments.................. 0.89 0.92 0.33 0.34 1.66 1.79 (0.18)
------- ------- ------- ------- ------- ------- -------
Total from Investment
Activities................... 1.01 0.99 0.64 0.60 2.01 2.04 (0.08)
------- ------- ------- ------- ------- ------- -------
Distributions
Net investment income.......... (0.12) (0.07) (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains............. -- -- -- -- (0.10) (0.10) --
------- ------- ------- ------- ------- ------- -------
Total Distributions............ (0.12) (0.07) (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD....................... $ 12.58 $ 12.96 $ 11.69 $ 12.04 $ 11.36 $ 11.70 $ 9.79
======= ======== ======= ======= ======= ======= =======
TOTAL RETURN (EXCLUDES
SALES/REDEMPTION CHARGE)..... 8.72%(d) 8.26%(d) 5.76% 5.27% 20.83% 20.53%(c) (0.82)%(e)
ANNUALIZED RATIOS/
SUPPLEMENTARY DATA:
Net Assets at end of period
(000)........................ $ 9,921 $10,740 $10,786 $10,008 $ 9,427 $ 5,030 $ 2,709
Ratio of expenses to average
net assets................... 1.88%(e) 2.73%(e) 1.70% 2.54% 1.28% 2.04%(e) 1.48%(e)
Ratio of net investment income
to average net assets........ 2.01%(e) 1.16%(e) 2.87% 2.03% 3.48% 2.69%(e) 4.01%(e)
Ratio of expenses to average
net assets*.................. 2.09%(e) 2.83%(e) 1.94% 2.68% 1.67% 2.84%(e) 4.61%(e)
Ratio of net investment income
to average net assets*....... 1.81%(e) 1.06%(e) 2.63% 1.89% 3.09% 1.89%(e) 0.88%(e)
Portfolio Turnover............. 72%(b) 72%(b) 98%(b) 98%(b) 13%(b) 13%(b) 1%(b)
Average commission rate
paid(g)...................... $0.0600 $0.0600 $0.0891 $0.0891 -- -- --
</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.
(g) 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.
17
<PAGE> 21
THE RIVERFRONT INCOME EQUITY FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1997 DECEMBER 31, 1996 1995 1995(a)
------------------------- ------------------------ ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ---------- ---------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 11.92 $ 12.16 $ 11.70 $ 11.85 $ 10.15 $ 10.00
Investment Activities
Net investment income................ 0.09 0.04 0.21 0.12 0.27 0.13
Net realized and unrealized gains
from investments................... 1.81 1.84 2.12 2.21 2.89 2.78
------- ------- -------- -------- -------- -------
Total from Investment Activities..... 1.90 1.88 2.33 2.33 3.16 2.91
------- ------- -------- -------- -------- -------
Distributions
Net investment income................ (0.09) (0.04) (0.21) (0.12) (0.27) (0.13)
In excess of net investment income... -0- -0- -0- -0- -0- -0-
Net realized gains................... -0- -0- (1.90) (1.90) (1.34) (0.93)
In excess of net realized gains...... -0- -0- -0- -0- -0- -0-
------- ------- -------- -------- -------- -------
Total Distributions.................. (0.09) (0.04) (2.11) (2.02) (1.61) (1.06)
------- ------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD....... $ 13.73 $ 14.00 $ 11.92 $ 12.16 $ 11.70 $ 11.85
======= ======= ======== ======== ======== =======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)........... 16.00%(h) 15.48%(h) 19.88% 19.67% 31.45% 29.28%(e)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000).... $83,796 $13,964 $ 73,368 $ 7,632 $ 60,845 $ 2,833
Ratio of expenses to average net
assets............................. 1.72%(c) 2.51%(c) 1.76% 2.48% 1.49% 2.46%(c)
Ratio of net investment income to
average net assets................. 1.45%(c) 0.68%(c) 1.62% 0.88% 2.27% 1.12%(c)
Ratio of expenses to average net
assets*............................ 1.77%(c) 2.51%(c) 1.85% 2.54% 1.74% 2.51%(c)
Ratio of net investment income to
average net assets*................ 1.40%(c) 0.68%(c) 1.53% 0.82% 2.02% 1.07%(c)
Portfolio turnover................... 75%(d) 75%(d) 166%(d) 166%(d) 180%(d) 180%(d)
Average commission rate paid(g)...... $0.0537 $0.0537 $ 0.0541 $ 0.0541 -- --
</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) 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.
(h) Not annualized.
18
<PAGE> 22
<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%(d) 145%(d) 12%(d) 0 % 0%
-- -- -- -- --
</TABLE>
19
<PAGE> 23
THE RIVERFRONT LARGE COMPANY SELECT FUND
<TABLE>
<CAPTION>
JANUARY 2, 1997
TO APRIL 30, 1997(a)
----------------------------
INVESTOR A INVESTOR B
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................................... $ 10.00 $ 10.00
Investment Activities
Net investment income (loss)....................................................... 0.00 (0.01)
Net realized and unrealized gains from investments................................. 1.89 1.86
------- -------
Total from Investment Activities................................................... 1.89 1.85
------- -------
Distributions
Net investment income.............................................................. (0.03) -0-
Net realized gains................................................................. -0- -0-
------- -------
Total Distributions................................................................ (0.03) -0-
------- -------
NET ASSET VALUE, END OF PERIOD..................................................... $ 11.86 $ 11.85
======= =======
TOTAL RETURN (EXCLUDING SALES/REDEMPTION CHARGE)................................... 18.91%(b) 18.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net assets at end of period (000).................................................. $30,662 $ 527
Ratio of expenses to average net assets............................................ 1.68%(c) 2.48%(c)
Ratio of net investment income to average net assets............................... (0.01)%(c) (0.67)%
Portfolio turnover................................................................. 15%(d) 15%(d)
Average commission rate paid(e).................................................... $0.0907 $0.0907
</TABLE>
- ---------------
(a) Period from commencement of operations.
(b) Not annualized.
(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 the total 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
[THIS PAGE INTENTIONALLY LEFT BLANK]
21
<PAGE> 25
THE RIVERFRONT SMALL COMPANY SELECT FUND
<TABLE>
<CAPTION>
FROM OCTOBER 1, FROM OCTOBER 1,
1995 THROUGH 1995 THROUGH
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1997 DECEMBER 31, 1996 1995(B) 1995(A)(B)
------------------------- ------------------------ --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ---------- ---------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 9.43 $ 9.77 $ 9.50 $ 9.91 $ 10.00 $ 10.00
Investment Activities
Net investment loss............ (0.03) (0.05) (0.14) (0.15) (0.01) (0.01)
Net realized and unrealized
gains (losses) from
investments.................. 0.56 0.58 1.10 1.04 (0.12) (0.08)
------- ------- -------- -------- ------- -------
Total from Investment
Activities................... 0.53 0.53 0.96 0.89 (0.13) (0.09)
------- ------- -------- -------- ------- -------
Distributions
Net investment income.......... -0- -0- -0- -0- -0- -0-
Net realized gains............. -0- -0- (1.03) (1.03) (0.37) -0-
Returns of capital............. -0- -0- -0- -0- -0- -0-
------- ------- -------- -------- ------- -------
Total Distributions............ -0- -0- (1.03) (1.03) (0.37) -0-
------- ------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD....................... $ 9.96 $ 10.30 $ 9.43 $ 9.77 $ 9.50 $ 9.91
======= ======= ======== ======== ======= =======
TOTAL RETURN (EXCLUDING SALES/
REDEMPTION CHARGE)........... 5.62%(c) 5.42%(c) 10.17% 9.05% (1.20)%(c) (0.90)%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL
DATA:
Net assets at end of period
(000s)....................... $24,048 $ 935 $ 31,227 $ 687 $40,995 $ 72
Ratio of expenses to average
net assets................... 2.11%(d) 2.87%(d) 1.91% 2.64% 1.76% (d) 2.30% (d)
Ratio of net investment income
to average net assets........ (0.45)%(d) (1.23)%(d) (1.25)% (2.01)% (0.49)%(d) (1.69)%(d)
Ratio of expenses to average
net assets*.................. (g) (g) 1.91% 2.64% 1.77% (d) 2.39% (d)
Ratio of net investment income
to average net assets*....... (g) (g) (1.25)% (2.01)% (0.50)%(d) (1.78)%(d)
Portfolio turnover(e).......... 48%(c) 48%(c) 162% (e) 162% (e) 46% (e) 46% (e)
Average commission rate
paid(h)...................... $0.0600 $0.0800 $ 0.0597 $ 0.0597 -- --
</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 Small Company 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 Small Company 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.
22
<PAGE> 26
<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>
23
<PAGE> 27
THE TRUST AND ITS FUNDS
The Riverfront Funds is an open-end management investment company, commonly
known as a mutual fund (the "Trust"), registered under the Investment Company
Act of 1940, as amended (the "1940 Act"). The Trust currently offers seven
series of shares of capital stock (individually a "Fund" and collectively the
"Funds"). Each Fund of the Trust, other than the Ohio Tax-Free Fund, is
diversified. The Ohio Tax-Free Fund is non-diversified. The Trust was originally
incorporated as a Maryland corporation on March 27, 1990. On October 11, 1996,
The Riverfront Funds, an Ohio business trust, was organized to acquire all of
the assets and liabilities of The Riverfront Funds, Inc., a Maryland corporation
(the "Conversion"). On December 1, 1997, upon receipt of shareholder approval,
pursuant to the terms of the Conversion, each Fund became a separate series of
the Ohio business trust.
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 "TRUST
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
24
<PAGE> 28
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-
25
<PAGE> 29
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 Funds' 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.
26
<PAGE> 30
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; (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 agencies or instrumentalities of the U.S. Government or by private
originators of, or investors in, mortgage loans, including savings
27
<PAGE> 31
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 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
28
<PAGE> 32
the State of Ohio, or any county, political subdivision or municipality thereof
(including any agency, board, authority or commission of any of the foregoing),
the interest on which, in the opinion of bond counsel to the issuer, is exempt
from federal income tax, is not a preference item for individuals for purposes
of the federal alternative minimum tax and is exempt from Ohio state income
taxes ("Ohio Exempt Securities") and in debt obligations issued by the
Government of Puerto Rico and such other governmental entities whose debt
obligations, either by law or treaty, generate interest income which is exempt
from federal income tax, is not a preference item for individuals for purposes
of the federal alternative minimum tax and is exempt from Ohio state income
taxes (together with Ohio Exempt Securities called "Exempt Securities"). In
addition, under normal market conditions, at least 65% of the Ohio Tax-Free
Fund's total assets will be invested in Ohio Exempt Securities. As a matter of
fundamental policy, under normal market conditions, at least 80% of the net
assets of the Ohio Tax-Free Fund will be invested in securities, the interest on
which is exempt from federal income tax and is not a preference item for
individuals for purposes of the federal alternative minimum tax.
The two principal classifications of Exempt Securities which may be held by
the Ohio Tax-Free Fund are "general obligation" securities and "revenue"
securities. General 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.
29
<PAGE> 33
OTHER ELIGIBLE INVESTMENTS
Under normal market conditions, at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in Exempt Securities. However, under normal
market conditions, up to 20% of the Ohio Tax-Free Fund's net assets may be
invested in taxable obligations. In addition, during temporary defensive periods
as determined by Provident, the Ohio Tax-Free Fund may hold up to 100% of its
total assets in taxable obligations. Such taxable obligations consist of
Short-Term Securities (as defined under "THE RIVERFRONT U.S. GOVERNMENT INCOME
FUND" above). These obligations are described further in the Statement of
Additional Information. The Ohio Tax-Free Fund may also invest up to 10% of the
value of its total assets in money market mutual funds for purposes of
short-term cash management, as described more fully below. During such defensive
periods and to the extent that the Ohio Tax-Free Fund is so invested in taxable
obligations, the Ohio Tax-Free Fund may not achieve its stated investment
objectives. In addition, the Ohio Tax-Free Fund may use one or more of the
investment techniques described below and is authorized to engage in options
transactions, including the writing of covered put and call options and the
purchase of put and call options. For further information about these investment
techniques, see the "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" section in the 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
Funds' 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
30
<PAGE> 34
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 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 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
31
<PAGE> 35
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. Treasury
bills, notes and bonds and securities issued by U.S. Government agencies and
instrumentalities, such as GNMA, FHLMC, FNMA, Federal Home Loan Bank, Federal
Farm Credit, Student Loan Marketing Association and the Tennessee Valley
Authority. 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 Funds'
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.
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 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
32
<PAGE> 36
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"). ADRs are receipts typically issued by a United States bank or trust
company evidencing ownership of the underlying foreign securities and are
denominated in U.S. dollars. Institutions issuing ADRs may not be sponsored by
the issuer. Unsponsored ADRs may be less liquid than sponsored ADRs, and there
may be less information available regarding the underlying foreign issuer for
unsponsored ADRs since a non-sponsored institution is not required to provide
the same shareholder information that a sponsored institution is required to
provide under its contractual arrangements with the issuer.
The Income Equity Fund may also invest under ordinary circumstances up to 35%
of its total assets in the Short-Term Securities described above under "THE
RIVERFRONT U.S. GOVERNMENT INCOME FUND -- OTHER ELIGIBLE INVESTMENTS," and when,
in DRZ's 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
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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.
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 and in
securities of equity real estate investment trusts ("REITs"). The Large Company
Fund does not expect to invest more than 15% of its total assets in foreign
securities, either directly or through ADRs.
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 con-
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tracts, 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 Funds' Statement of Additional
Information.
THE RIVERFRONT SMALL COMPANY SELECT FUND
INVESTMENT OBJECTIVE AND POLICIES
The Small Company Fund seeks capital growth.
PRINCIPAL INVESTMENTS
The Small 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 of small companies regardless of the movement of stock prices
generally. For purposes of this policy, the Trust defines small companies to
mean issuers with market capitalizations between $100 million and $1.5 billion.
It is expected that such common stocks will normally be traded on exchanges or
established over-the-counter markets.
The Small Company 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. The Small Company
Fund will also invest in securities of REITs. 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 Small Company Fund intends to invest as fully as possible in common
stocks as described above, for cash management purposes the Small Company 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 Small Company 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 Small Company will not be able to pursue its
investment objective.
The Small Company 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 purposes, to purchase and sell put and call options on securities and
security indices and to acquire foreign securities through ADRs. For expanded
descriptions of these investment
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<PAGE> 39
techniques, see below under "RISK FACTORS AND INVESTMENT TECHNIQUES."
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Income Fund, the Ohio Tax-Free Fund, the
Balanced Fund, the Income Equity Fund, the Large Company Fund and the Small
Company 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 Balanced, Income Equity,
Large Company and Small Company 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. 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) 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. Economic
difficulties in any of these areas could have an adverse impact on the finances
of the State of Ohio or its municipalities, which could adversely affect the
market value of the securities in which the Ohio Tax-Free Fund invests.
Historically, the State of Ohio has been heavily reliant upon durable goods
manufac-
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turing, 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 declining over the last several decades, and, although
manufacturing (including auto-related manufacturing) remains an important part
of Ohio's economy, the greatest growth in employment in Ohio in recent years has
been in the non-manufacturing area. During the period from 1970 to 1995, the
rate of non-agricultural payroll employment in manufacturing in Ohio dropped
from 36.1% to 21.0%. However, the rate of payroll employment in manufacturing in
Ohio still exceeds the national rate, which was 15.8% in 1995. The
non-manufacturing sector of Ohio's economy, which includes transportation,
retail trade, finance, and government, employs 79.0% of all non-agricultural
payroll workers in Ohio. Agriculture and related sectors are also an important
part of Ohio's economy, representing 15.9% of total employment in Ohio.
In the past three years, Ohio's unemployment rate has generally been lower than
the national average. The December 1996 unemployment rate for Ohio was 4.8%
compared to a rate of 5.0% for the nation as a whole. The December 1996
unemployment rates in Ohio ranged from a low of 2.6% in Franklin County, where
the City of Columbus is located, to a high of 15.8% in Morgan County, which is
in southeastern Ohio. In 1995 and 1994, Ohio's unemployment rates were 4.8% and
5.5%, respectively, compared to rates of 5.6% and 6.1%, respectively, for the
nation as a whole. Ohio is the 7th most populous state in the nation, with an
estimated statewide population of 11,172,782 as of July 1, 1996. The population
in Ohio has grown 3% since the 1990 census. During 1994 Ohio ranked 35th in the
nation in terms of state taxes per capita and 21st in the nation in terms of
government expenditures per capita. Since then, however, many states, including
Ohio, have enacted tax revisions.
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 the general obligation bonds of all five cities, and they are (in the
order reflected above) Aaa, A, Aa2, Aa1, and A, respectively. 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: Aa1 rating from Moody's and a AA+ rating from S&P. There
can be no assurance, however, that these ratings will continue.
The Ohio Supreme Court held in March 1997 that Ohio's system of funding
elementary and secondary public schools violates Section 2, Article VI of the
Ohio Constitution. The Ohio Supreme Court stated in its decision that the Ohio
General Assembly must create a new school financing system but left the
specifics of such a system to the Ohio General Assembly. It is not possible at
this point to predict what effect, if any, this decision will have on Ohio's
credit ratings or on its ability to pay debt service on its obligations.
Litigation pending in federal district court and in the Ohio Court of Claims
contests certain Medicaid financial eligibility rules promulgated by the Ohio
Department of Human Services effective January 1, 1996. If plaintiffs prevail in
this case, additional Medicaid expenditures, which plaintiffs have estimated to
be as much as $600,000,000, may have to be made. Under current law, it is
estimated that Ohio's share of these addi-
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tional expenditures would be approximately $240,000,000.
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 (the "Code"), 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, as of the end of any such quarter, 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 Ohio Tax-Free Fund, the
Balanced Fund, the Income Equity Fund, and the Large Company 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 or 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 Trust's Board of Trustees. The seller agrees to
repurchase such securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. Securities
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<PAGE> 42
subject to repurchase agreements must be of the same type and quality as those
in which a Fund may invest directly. For further information about repurchase
agreements, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on
Portfolio Instruments -- Repurchase Agreements" in the Funds' Statement of
Additional Information.
Reverse Repurchase Agreements. Each of the Funds, other than the Money Market
Fund and the Small Company 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 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 Funds' Statement of Additional
Information.
Except as otherwise disclosed to the shareholders of the Funds, the Trust 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.
Foreign Securities. The Balanced Fund, the Income Equity Fund, the Large
Company Fund and the Small Company Fund may each invest in foreign securities,
either directly or through ADRs. Investment in foreign securities, including
ADRs, 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, a 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.
REITS. The Large Company Fund and the Small Company Fund may invest in REITs.
REITs pool investors' funds for investment primarily in commercial real estate
properties. Investment in REITs may subject a 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
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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, a Fund would bear, along with other
shareholders, its pro rata portion of the REIT's operating expenses. These
expenses would be in addition to the advisory and other expenses that such Fund
bears directly in connection with its own operations.
Lending Portfolio Securities. In order to generate additional income, each
Fund, other than the Small Company 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
eligible 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 Trust's Board of
Trustees.
When-Issued or Delayed-Delivery Purchases. Each of the Funds, other than
the Small Company Fund, may purchase securities on a when-issued or
delayed-delivery basis. These transactions are arrangements in which a Fund
purchases securities with payment and delivery scheduled for a future time. A
Fund will engage in when-issued and delayed-delivery transactions only for the
purpose of acquiring portfolio securities consistent with and in furtherance of
its investment objectives and policies, not for investment leverage, although
such transactions represent a form of leveraging. When-issued securities are
securities purchased for delivery beyond the normal settlement date at a stated
price and yield and thereby involve a risk that the yield obtained in the
transaction will be less than those 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
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one investment company, (2) no more than 3% of the securities of any investment
company, and (3) no more than 10% of its total assets in such securities.
Investment companies in which a Fund may invest may impose a sales or
distribution charge in connection with the purchase or redemption of their
shares as well as other types of commissions or charges. Such investment
companies will charge management and other fees which will be borne by the Fund.
Such charges will be payable by the Fund and, therefore, will be borne
indirectly by its shareholders. The income on securities of other investment
companies may be taxable at the state or local level.
Mortgage- or Asset-Backed Securities.
Mortgage-backed and asset-backed securities have certain characteristics which
are different from traditional debt securities. Among the major differences are
that interest and principal payments are made more frequently, usually monthly,
and that principal may be prepaid at any time because the underlying mortgage
loans or other assets generally may be prepaid at any time. As a result, if the
Income Fund purchases such a security at a premium, a prepayment rate that is
faster than expected will reduce yield to maturity, while a prepayment rate that
is slower than expected will have the opposite effect of increasing yield to
maturity. Alternatively, if the Income Fund purchases these securities at a
discount, faster than expected prepayments will increase, while slower than
expected prepayments will reduce, yield to maturity. Provident will seek to
manage these risks (and potential benefits) by investing in a variety of such
securities and through hedging techniques.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of declining interest rates.
Accordingly, amounts available for reinvestment by the Income Fund are likely to
be greater during a period of declining interest rates and, as a result, likely
to be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-backed securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors,
such as changes in credit use and payment patterns resulting from social, legal
and economic factors, will predominate. Mortgage-backed securities and
asset-backed securities generally decrease in value as a result of increases in
interest rates and may 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
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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.
Put and Call Options. Subject to its investment policies and for purposes of
hedging against market risks related to its portfolio securities, the Small
Company Fund may purchase exchange-traded put and call options on securities.
Purchasing options is a specialized investment technique that entails a
substantial risk of a complete loss of the amounts paid as premiums to writers
of options. The Small Company Fund will purchase put and call options only on
securities in which such Fund may otherwise invest. The Small Company Fund may
also engage in selling (writing) exchange-traded call options from time to time
as Provident deems appropriate for purposes of gaining additional income in the
form of premiums paid by the purchaser of the option and/or for hedging
purposes. The Small Company Fund will write only covered call options (options
on securities owned by that Fund). In order to close out a call option it has
written, the Small Company Fund will enter into a "closing purchase
transaction"-- the purchase of a call option on the same security with the same
exercise price and expiration date as the call option which the Fund previously
had written. When a portfolio security to a call option is sold, such Fund will
effect a closing purchase transaction to close out any existing call option on
that security. If the Small Company Fund is unable to effect a closing purchase
transaction, it will not be able to sell the underlying security until the
option expires or the Fund delivers the underlying security upon exercise.
The Small Company Fund, as part of its option transactions, also may purchase
exchange-traded index put and call options and write exchange-traded index
options. Through the writing or purchase of index options the Small Company Fund
can achieve many of the same objectives as through the use of options on
individual securities. Options on securities indices are similar to options on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, upon exercise of the option, an amount of cash if the
closing level of the securities index upon which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option.
Price movements in securities which the Small Company Fund owns or intends to
purchase probably will not correlate perfectly with movements in the level of an
index and, therefore, the Small Company Fund bears the risk of a loss on an
index option that is not completely offset by movements in the price of such
securities. Because index options are settled in cash, a call writer cannot
determine the amount of its settlement obligations in advance and, unlike call
writing on specific securities, cannot provide in advance for, or cover, its
potential settlement obligations by acquiring and holding the underlying
securities. The Small Company Fund will be required to segregate assets and/or
provide an initial margin to cover index options that would require it to
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<PAGE> 46
pay cash upon exercise. Under normal market conditions, it is not expected that
the underlying value of portfolio securities and/or cash subject to such options
written by the Small Company Fund (including any assets segregated in connection
therewith), when added to the greater of the market value or the cost of any
options purchased by that Fund, will exceed 25% of the net assets of that Fund
at any one time.
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 Funds'
Statement of Additional Information.
PORTFOLIO TURNOVER
For regulatory purposes, the portfolio turnover rate for the Money Market Fund
is expected to be zero. For information about the portfolio turnover rates for
the Income Fund, the Ohio Tax-Free Fund, the Balanced Fund, the Income Equity
Fund and the Small Company Fund for the year ended December 31, 1996, see
"FINANCIAL HIGHLIGHTS" above. 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 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
43
<PAGE> 47
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 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.
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<PAGE> 48
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 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 Large Company Fund and the Small 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.
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<PAGE> 49
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 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
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<PAGE> 50
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 Balanced Fund, the
Large Company Fund and the Small Company Fund is non-fundamental and may be
changed by the Trust's Board of Trustees 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 Funds' Statement of Additional
Information.
PRICING SHARES
The net asset value of each Fund is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (generally 4:00 p.m. Eastern Time for the purpose of pricing Fund
shares) (the "Valuation Time") except on days when changes in the value of a
Fund's securities do not affect the current net asset value of its shares or on
days during which no shares are tendered for redemption and no orders to
purchase shares are received. The Exchange is currently closed on weekends, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share for a
particular class of each Fund is determined by valuing each Fund's assets
allocable to such class, subtracting its liabilities allocable to such class and
any liabilities charged directly to that class and dividing the result by the
number of its shares of that class outstanding.
The Trustees 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 Trustees believed
would result in a material dilution to shareholders or purchasers, the Board of
Trustees 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
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<PAGE> 51
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, the principal
market for which is a securities exchange or the over-the-counter National
Market System ("NMS"), are valued at the closing sale price on that exchange or
NMS or, in the absence of any sales, at the mean of the bid and asked price on
such exchange or NMS. 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 Trustees. Securities, including mortgage-backed and
asset-backed securities, may be valued on the basis of independent pricing
services approved by the Board of Trustees, which use information with respect
to transactions in such securities, quotations from dealers, market transactions
in comparable securities and various relationships between securities in
determining value.
HOW TO BUY SHARES
Shares of the Funds are offered on each day on which the Exchange is open for
business.
THE MONEY MARKET FUND
There is no sales charge when an investor purchases shares of the Money Market
Fund. Purchase payments are fully invested. Broker-dealers (other than the
Distributor) through whom shares are purchased may charge fees for their
services. Orders for the purchase of the Money Market Fund's shares become
effective after good funds become available to the Money Market Fund. If a
purchase order in proper form is received prior to 12:00 Noon (Eastern time) and
payment in Federal funds is received by the close of the Federal funds wire on
the day the purchase order is received, dividends will accrue starting that day.
If a purchase order is received after 12:00 Noon (Eastern time) and payment in
Federal funds is received by the close of the Federal funds wire on the day the
purchase order is received, the order will be effected that day as of the close
of business of the Trust, 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 Trust
receives the purchase order. The net asset value for the Money Market Fund 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 Trust receives the purchase order in proper form, plus any
applicable sales charge. Therefore, orders for shares of a Fund received by the
Trust 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
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(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 Trust,
Provident and the Distributor. In the case of an order for the purchase of
shares placed through a broker-dealer, the applicable public offering price will
be the net asset value as so determined, plus any applicable sales charge, but
only if the broker-dealer receives the order prior to the Valuation Time for
that day and transmits it to the Distributor prior to the Valuation Time for
that day. The broker-dealer is responsible for transmitting such orders
promptly. If the broker-dealer fails to do so, the investor's right to that
day's closing price must be settled between the investor and the broker-dealer.
If the broker-dealer receives the order after the Valuation Time for that day,
the price will be based on the net asset value determined as of the Valuation
Time for the next business day.
Shares may also be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by Provident or its correspondent or
affiliated banks (collectively, the "Banks").
Shares of a Fund sold to the Banks acting in a fiduciary, advisory, custodial
(other than for IRAs), agency, or other similar capacity on behalf of Customers
will normally be held of record by the Banks. With respect to shares of the
Funds so sold, it is the responsibility of the particular Bank to transmit
purchase or redemption orders to the Distributor and to deliver federal funds
for purchase on a timely basis. Beneficial ownership of shares will be recorded
by the Banks and reflected in the account statements provided by the Banks to
Customers. A Bank will exercise voting authority for those shares for which it
is granted authority by the Customer.
In addition, an account for the purchase of shares of a Fund may be opened by
mailing to the Trust, c/o The Provident Bank, Mutual Fund Services, P.O. Box
14967, Cincinnati, Ohio 45250-0967, 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
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<PAGE> 53
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 Fund 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 Fund account number.
2. The bank wiring the funds to be invested must designate the Fund account
number which Provident has assigned to the investor and wire the Federal Funds
to:
The Provident Bank/Cincinnati
ABA: 042000424
Mutual Fund Services
Account 0895-261
for further credit to:
________ Fund
of The Riverfront Funds
Account Number ____________
Account Name ____________
The Trust 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 of securities that are permissible investments for that 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 each Fund's
Investor A shares (other than the Money Market Fund) 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, Ohio Tax-Free, Balanced, Income Equity, Large Company, and Small
Company 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 Let-
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<PAGE> 54
ters 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.
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 Trust, 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 & Investment Company, 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
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<PAGE> 55
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 Load Portfolio
and which are still held by the Purchaser. As an example, if a Purchaser held
Investor A shares of the Income Fund valued at $100,000 in aggregate and
purchased an additional $5,000 of Investor A shares of the Income Fund, the
sales charge for the $5,000 purchase would be 3.50% as indicated in the Sales
Charge Schedule applicable to a $105,000 purchase. The Distributor must be
notified at the time of purchase that a Purchaser is entitled to a reduced sales
charge which will be granted subject to confirmation of the Purchaser's
holdings. Rights of Accumulation may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Investor A
shares of a 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.
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<PAGE> 56
When the minimum investment specified in the Letter of Intent is completed
(either prior to or by the end of the thirteen month period), the Purchaser will
be notified and the escrowed Investor A shares will be released. If the intended
investment is not completed, the Purchaser will be asked to remit to the
Distributor any difference between the sales charge on the amount specified and
on the amount actually purchased. If the Purchaser does not, within 20 days
after receipt of a written request by the Distributor or the shareholder's
dealer, pay such difference in sales charge, Provident, as transfer agent (the
"Transfer Agent"), will redeem an appropriate number of the escrowed Investor A
shares in order to realize such difference. Investor A shares remaining after
any such redemption will be released by the Transfer Agent. Any redemptions made
by the Purchaser during the thirteen-month period will be subtracted from the
amount of the purchases for purposes of determining whether the Letter of Intent
has been completed. In the event of a total redemption of the account prior to
completion of the Letter of Intent, the additional sales charge due will be
deducted from the proceeds of the redemption and the balance will be forwarded
to the Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
the Transfer Agent its attorney to surrender for redemption any or all escrowed
shares with full power of substitution. The Purchaser or his dealer must inform
the Distributor or the Transfer Agent that a Letter of Intent is in effect each
time a purchase is made.
WAIVER OF SALES CHARGES
Investor A shares may also be sold, to the extent permitted by applicable law,
at net asset value without the imposition of an initial sales charge to: (1)
personal trust, employee benefit, agency and custodial (other than IRA) clients
of Provident; (2) 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 Trust; (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 Trust 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
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<PAGE> 57
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.
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 Trust will refuse all
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<PAGE> 58
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 a Fund's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B shares would, however, own shares that are subject to
higher annual expenses and, for a six-year period, such shares would be subject
to a contingent deferred sales charge ranging from 4.00% to 1.00% upon
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate
annual Investor B shares' Rule 12b-1 fees to the cost of the initial sales
charge and Rule 12b-1 fee on the Investor A shares. Over time, the expense of
the annual Rule 12b-1 fee on the Investor B shares may equal or exceed the
initial sales charge and annual Rule 12b-1 fee applicable to Investor A shares.
For example, if net asset value remains constant and assuming no waiving of any
Rule 12b-1 fees, the aggregate Rule 12b-1 fee with respect to Investor B shares
of a Fund would equal or exceed the initial sales charge and aggregate Rule
12b-1 fee of Investor A shares approximately seven years after the purchase. In
order to reduce such fees of investors that hold Investor B shares for seven
years or more, Investor B shares will be automatically converted to Investor A
shares, as described below, at the end of an eight-year period. This example
assumes that the initial purchase of Investor A shares would be subject to the
maximum initial sales charge of 4.50%. This example does not take into account
the time value of money which reduces the impact of the Investor B shares' Rule
12b-1 fee on the investment, the benefit of having the additional initial
purchase price invested during the period before it is effectively paid out as a
Rule 12b-1 fee, fluctuations in net asset value, any waiver of Rule 12b-1 fees
or the effect of different performance assumptions.
If a shareholder who owns both Investor A shares and Investor B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Investor B shares that are not subject to a contingent
deferred sales charge; (b) Investor A shares; and (c) Investor B shares subject
to a contingent deferred sales charge, unless shareholder has made a specific
election otherwise.
CONVERSION FEATURE
Investor B shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fee. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge or
other charge except that the Rule 12b-1 fee applicable to Investor A shares
shall there-
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<PAGE> 59
after 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
Funds during the eight-year period, the holding period for shares so exchanged
will be counted toward such period.
OTHER PURCHASE INFORMATION
SYSTEMATIC INVESTMENT PLAN
Shareholders may also arrange for systematic monthly or quarterly investments
in their accounts. Once proper authorization has been given, a shareholder's
bank account will be debited on the date specified to purchase shares in a Fund.
A confirmation will be received from the Transfer Agent for every transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Provident offers tax-advantaged Individual Retirement Accounts ("IRAs") for
which the Money Market Fund, the Income Fund, the Balanced Fund, the Income
Equity Fund, the Large Company Fund or the Small Company Fund may be an
appropriate investment. A minimum initial investment of $500 is required. For
details, including fees and an application form, please call the telephone
number listed below under "Shareholder Services" or contact Mutual Fund
Services, P.O. Box 14967, Cincinnati, Ohio 45250-0967.
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 Funds 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 45250-0967. Subject to the
qualifications and limitations described below under "How to Redeem Shares --
Telephone," neither the Trust 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 Fund
for Investor B shares of another Fund.
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 peri-
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<PAGE> 60
ods. If less than all of a shareholder's Investor B shares of a Fund are
exchanged into the Money Market Fund, the shareholder's Investor B shares will
be deemed to be exchanged in the following order: (1) Investor B shares that are
not subject to a contingent deferred sales charge, and (2) Investor B shares in
the reverse order in which such shares were acquired (i.e., last in, first out).
Effective December 1, 1997, exchanges of Investor B shares of a Fund for shares
of the Money Market Fund will no longer be permitted.
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 Trust prior to the close of business
on any day the Trust is open for business will be executed at the respective net
asset values determined as of the close of business that day. Orders for
exchanges received after the close of business will be executed at the
respective net asset values next determined after the close of the next business
day.
An excessive number of exchanges may be disadvantageous to the Trust.
Therefore the Trust, 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 Funds 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 Fund being acquired. An exchange constitutes a sale for federal income tax
purposes.
The exchange privilege is available only in states where shares of the Fund
being acquired may legally be sold. The Trust reserves the right, at any time,
to modify or terminate any of the foregoing exchange privileges. The Trust,
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 Trust, c/o The Provident Bank, Mutual Fund Services, P.O. Box
14967, Cincinnati, Ohio 45250-0967. 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 Trust 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 Trust may be requested to redeem shares for which it has
not
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<PAGE> 61
yet received good payment. In such a case, the Trust 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 Trust, stands ready to repurchase the
Funds' shares upon orders from dealers at the net asset value next computed
after the Distributor receives the order. When the Distributor has received
proper documentation, it will pay the redemption proceeds to the broker-dealer
placing the order within 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 Trust 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 Trust and the Transfer Agent reserve
the right to withdraw this waiver at any time.
If the Trust receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Trust cannot
execute the order. In such cases, the Trust 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
Trust 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
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<PAGE> 62
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 Trust 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 Trust nor
any of its service providers assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder in writing or by
telephone nor will any of them be liable when following instructions received by
telephone that the Transfer Agent reasonably believes to be genuine. The
Transfer Agent will employ procedures designed to provide reasonable assurance
that instructions received by telephone are genuine. If, for any reason,
reasonable procedures are not followed, the Trust or its service providers may
be liable for any losses due to unauthorized or fraudulent instructions. The
Trust 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 Trust
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 Trust
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.
Investor B Shares -- If an account has a value of at least $10,000 in Investor
B shares of a Fund, a shareholder may arrange for regular monthly or quarterly
withdrawal payments. Each payment must be at least $100 and may be as much as
.833% per month or 2.5% per quarter of the total net asset value of the Fund's
Investor B shares in the account when the Automatic Withdrawal Plan is opened.
The contingent deferred sales charge on such withdrawal payments will be waived.
General -- 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
paya-
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ble 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 Trust 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 at least 45 days to purchase additional shares
in order to increase the balance over $500.
REDEMPTIONS IN KIND
If conditions arise that would make it undesirable for the Trust to pay for
all redemptions in cash, the Trust may authorize payment to be made in portfolio
securities or other property. However, the Trust 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. The Small Company Fund intends to declare and
distribute to its shareholders dividends from net investment income, if any,
semi-annually. Each of the other Funds intends to declare and distribute to its
shareholders dividends from net investment income monthly. Each Fund intends to
declare and distribute all net realized long-term capital gains annually and 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.
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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 certain other class
specific expenses paid by the respective class.
Unless the Trust 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 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 mid-term or long-term capital gain
over net short-term capital loss is taxable to share-
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holders as mid-term or long-term capital gain, respectively, 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 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
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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.
MANAGEMENT AND EXPENSES
BOARD OF TRUSTEES
Overall responsibility for management of the Trust rests with its Board of
Trustees. Unless so required by the Trust's Declaration of Trust or By-Laws or
by Ohio law, at any given time all of the Trustees may not have been elected by
the shareholders of the Trust. The Trust will be managed by the Trustees in
accordance with the laws of Ohio governing business trusts. The Trustees, in
turn, elect the officers of the Trust to supervise actively its day-to-day
operations. Subject to the authority of the Board of Trustees, Provident,
directly and through DRZ as subadviser with respect to the Income Equity Fund,
supervises the investment programs of each Fund.
INVESTMENT ADVISER
Provident, an Ohio banking corporation located at One East Fourth Street,
Cincinnati, Ohio 45202, has entered into a Investment Advisory Agreement with
the Trust 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 Balanced Fund, the Large Company Fund, the Small Company 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 Financial Group, Inc. ("PFG"), a bank
holding company located in Cincinnati, Ohio with approximately $6.8 billion in
consolidated assets as of December 31, 1996. Through offices in Ohio and
Kentucky, PFG 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 Small Company Fund equal to .80% of the Small Company 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 .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
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higher than it would otherwise be in the absence of such a reduction. The
advisory fees with respect to the Income Equity Fund, the Small Company 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 fees 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 November 15, 1996, Provident adopted 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 Trust,
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 $1.4
billion. Pursuant to the terms of such Sub-Investment Advisory Agreement, DRZ
was retained by Provident to manage the day-to-day investment and reinvestment
of that portion of the assets of the Income Equity Fund allocated to DRZ by the
Trust's Board of Trustees. 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 Trust's Board of Trustees. Currently
approximately $4.6 million of the Income Equity Fund's assets are managed
directly by Provident. The remainder of the Income Equity Fund's assets up to
approximately $75 million (exclusive of capital appreciation or depreciation and
reinvested dividends) are managed by DRZ. Any assets in excess of such $75
million limit will be managed directly 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 Trust's Board of Trustees, and Provident is
responsible for selecting and monitoring DRZ and reporting the activities of DRZ
to the Trust's Board of Trustees.
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 will manage net
assets of the Income Equity Fund up to $75 million, but not beyond. The Trustees
of the Trust 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
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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 Trust to provide transfer agency services to each Fund. Under
the Master Transfer and Recordkeeping Agreement, the Funds pay Provident the
following fees for such services. The Money Market Fund pays a minimum annual
fee of $24,000 for the first 500 shareholder accounts. For shareholder accounts
of the Money Market Fund in excess of 500, the Money Market Fund pays an
additional annual fee of $24 for each open shareholder account and $12 for each
closed shareholder account. The Small Company Fund pays a minimum annual fee of
$36,000 for the first 750 shareholder accounts. For shareholder accounts of the
Small Company Fund in excess of 750, the Small Company Fund pays an additional
annual fee of $18 for each open shareholder account and $9 for each closed
shareholder account. All other Funds pay a minimum annual fee of $40,000 for the
first 750 shareholder accounts and, for shareholder accounts of that Fund in
excess of 750, an additional annual fee of $20 for each open shareholder account
and $10 for each closed shareholder account.
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 Trust, 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 Balanced
Fund's, the Large Company Fund's and the Small Company Fund's average daily net
assets; and .14% of the Ohio Tax-Free Fund's average daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
The Distributor, located at 3435 Stelzer Road, Columbus, Ohio 43219, is the
administrator for each Fund, and also acts as the Funds' principal underwriter
(the "Administrator" or the "Distributor," as the context indicates).
The Administrator generally assists in all aspects of a Fund's administration
and operation. For expenses assumed and services provided as administrator
pursuant to its administration agreement with the Trust, 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 Trust, but may
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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 Trust has also adopted an Investor B Distribution
Plan (the "Investor B Plan") with respect to Investor B shares of the Income
Fund, the Ohio Tax-Free Fund, the Income Equity Fund, the Balanced Fund, the
Large Company Fund and the Small Company 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 Trust's Board of Trustees. 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 ser-
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vices 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 Trustees of the Trust, including a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Trust and who have no direct or indirect financial interest in the operation
of the Plans or in any agreements related to the Plans ("Independent Trustees").
The Plans continue in effect as long as such continuance is specifically
approved at least annually by the Trust's Trustees, including a majority of the
Independent Trustees.
The Plans may be terminated by a vote of a majority of the Independent
Trustees, 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 Trustees,
including a majority of the Independent Trustees, 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 Trustees is
committed to the discretion of the Independent Trustees.
SHAREHOLDER SERVICES PLAN
The Trust 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 ad-
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ministrative 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 Trust, as described in this Prospectus, without
violation of applicable banking laws and regulations, and has so represented in
its Investment Advisory Agreement with the Trust. 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 TRUST - 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 Trustees 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 Trustees
deem appropriate ("Class Expenses"). In such event, Class Expenses would be
limited to: transfer agency fees identified by the Transfer Agent as
attributable to a specific class; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; Blue Sky registration fees incurred by a
class of shares; Commission registration fees incurred by a class of shares;
expenses related to administrative personnel and services as required to support
the shareholders of a specific class; litigation or other legal expenses
relating solely to one class of shares; and Trustees' fees incurred as a result
of issues relating solely to one class of shares.
SECURITIES TRANSACTIONS
Under policies established by the Board of Trustees, 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
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for a Fund may from time to time be affiliated with the Trust, 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. 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 includes the performance
of the CIFs for the periods prior to the effectiveness of the Trust'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 Trust's Annual Report to Shareholders for the fiscal year
ended December 31, 1996, 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
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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.
TRUST SHARES
The Trust presently offers seven series of shares of beneficial interest,
without par value (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 Trust. 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 dollar of value invested and a
proportionate fractional vote for any fraction of a dollar invested. 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 Trustees.
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 other shareholders of the Trust with respect to the election of
Trustees 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 Trust, for purposes of approval of the Investment Advisory
Agreement with respect to that Fund. 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 Trust may dispense with an annual meeting of shareholders in any fiscal
year in which it is not required in order to elect Trustees under the 1940 Act
or state law. The Trust has represented to the Commission that the Trustees will
call a special meeting of shareholders for purposes of considering the removal
of one or more Trustees upon written request therefor from shareholders holding
not less than 10% of the outstanding votes of the Trust. 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 affirm-
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ative vote, at a meeting of shareholders duly called, of the lesser of (a) 67%
or more of the votes of shareholders of such Fund present at such meeting, if
holders of more than 50% of the votes attributable to shareholders of record of
such Fund are present or represented by proxy, or (b) the holders of more than
50% of the outstanding votes of shareholders of such Fund.
As of October 16, 1997, Provident possessed, directly or 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, Ohio Tax-Free,
Balanced and Large Company 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 Trust
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 SECURITIES MONEY
MARKET FUND
PROSPECTUS THE RIVERFRONT
DECEMBER 1, 1997 U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT
OHIO TAX-FREE
BOND FUND
THE RIVERFRONT
BALANCED FUND
THE RIVERFRONT
INCOME EQUITY
FUND
THE RIVERFRONT
LARGE COMPANY
SELECT FUND
THE RIVERFRONT
SMALL COMPANY
SELECT FUND
THE RIVERFRONT FUNDS
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> 76
STATEMENT OF ADDITIONAL INFORMATION
THE RIVERFRONT FUNDS
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT BALANCED FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
THE RIVERFRONT SMALL COMPANY SELECT FUND
December 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 Fund
(the "Money Market Fund"), The Riverfront U.S. Government Income Fund (the
"Income Fund"), The Riverfront Ohio Tax-Free Bond Fund (the "Ohio Tax-Free
Fund"), The Riverfront Balanced Fund (the "Balanced Fund"), The Riverfront
Income Equity Fund (the "Income Equity Fund"), The Riverfront Large Company
Select Fund (the "Large Company Fund") and The Riverfront Small Company Select
Fund (the "Small Company Fund") (the Money Market Fund, the Income Fund, the
Ohio Tax-Free Fund, the Balanced Fund, the Income Equity Fund, the Large Company
Fund, and the Small Company 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, an Ohio business
trust (the "Trust"). 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 January 2, 1997, the Balanced Fund changed its name from The Riverfront
Flexible Growth Fund to The Riverfront Balanced Fund. On December 1, 1997, the
Small Company Fund changed its name from The Riverfront Stock Appreciation Fund
to The Riverfront Small Company Select 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.
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TABLE OF CONTENTS
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Page
THE TRUST 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-26
TRUSTEES AND OFFICERS......................................................B-29
MANAGEMENT OF THE FUNDS....................................................B-31
SECURITIES TRANSACTIONS....................................................B-37
ADMINISTRATOR..............................................................B-42
DISTRIBUTOR................................................................B-44
DISTRIBUTION PLANS.........................................................B-45
CAPITAL STOCK..............................................................B-47
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS.............................B-48
ADDITIONAL INFORMATION.....................................................B-53
FINANCIAL STATEMENTS.......................................................B-56
APPENDIX ...................................................................A-1
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THE TRUST AND ITS FUNDS
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The Riverfront Funds (the "Trust") is an open-end management investment
company, commonly known as a mutual fund, which currently issues seven series of
shares of beneficial interest which are described in this Statement of
Additional Information (the "Funds"). Each Fund of the Trust, other than the
Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund is a non-diversified
Fund. The Trust was organized under Ohio law on October 11, 1996. On December 1,
1997, The Riverfront Funds, Inc., a Maryland corporation, changed its form of
organization by completing a reorganization with The Riverfront Funds, an Ohio
business trust created for such purpose. References herein to the Trust and its
Funds are intended to include The Riverfront Funds, Inc. and its corresponding
funds prior to the reorganization.
The Provident Bank ("Provident") serves as investment adviser, either
directly or through a sub-adviser, 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 record keeping services for the Trust.
DePrince, Race & Zollo, Inc. ("DRZ") serves as the sub-adviser 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"): (a) 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 Small Company 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 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 Small Company Fund;
therefore, the performance and financial information of the Small Company Fund
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 Trust and its Funds is
contained in the Prospectus. This Statement of Additional Informa-
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tion provides additional information about the Trust 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 defined in the Prospectus. No
investment in shares of a Fund should be made without first reading such Fund's
Prospectus.
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INVESTMENT OBJECTIVES AND POLICIES
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THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Riverfront U.S. Government Securities Money Market Fund (the "Money
Market Fund") 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 OHIO TAX-FREE BOND FUND
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.
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The Ohio Tax-Free Fund is designed for investors seeking to invest in a
fund which generates income that is exempt from federal and Ohio state income
taxes and not a preference item for individuals for purposes of the federal
alternative minimum tax.
THE RIVERFRONT BALANCED FUND
The Riverfront Balanced Fund (the "Balanced Fund") seeks 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.
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.
THE RIVERFRONT LARGE COMPANY SELECT FUND
The Riverfront Large Company Select Fund (the "Large Company Fund")
seeks 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 SMALL COMPANY FUND
The Riverfront Small Company Fund (the "Small Company Fund") seeks
capital growth.
The Small Company Fund is designed for investors seeking growth of
capital.
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.
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Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Bankers' acceptances invested in by such 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 Ohio Tax-Free Fund, the Balanced Fund, the Income
Equity Fund, the Large Company Fund and the Small 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 Ohio Tax-Free Fund, the Balanced Fund, the Income
Equity Fund, the Large Company Fund, and the Small
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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 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 Ohio Tax-Free Fund, the Balanced Fund, the
Income Equity Fund, the Large Company Fund, and the Small 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 Balanced Fund, the Income Equity Fund, the Large
Company Fund, and the Small 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
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from the Treasury; others are supported by the discretionary authority of the
U.S. Government to purchase the agency's obligations; and still others are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. Government would provide financial support to U.S. Government-
sponsored agencies or instrumentalities if it is not obligated to do so by law.
EXEMPT SECURITIES. As stated in the Prospectus of the Ohio Tax-Free
Fund, under normal market conditions at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in bonds, notes, debentures, commercial paper and
other obligations of the State of Ohio or any county, municipality, political
subdivision, instrumentality, agency or authority thereof (collectively,
"agencies"), the interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal income tax, is not a preference item for purposes
of the federal alternative minimum tax and is exempt from Ohio state income tax
("Ohio Exempt Securities") and in debt obligations issued by the Government of
Puerto Rico and such other governmental entities whose debt obligations, either
by law or by treaty, generate interest income which is exempt from federal
income tax, is not a preference item for individuals for the federal alternative
minimum tax, and is exempt from Ohio state income taxes (together with Ohio
Exempt Securities called "Exempt Securities"). Under normal market conditions,
at least 65% of the total assets of the Ohio Tax-Free Fund will be invested in
Ohio Exempt Securities.
Exempt Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Exempt Securities if the interest paid thereon is
exempt from federal income tax and is not treated as a preference item for
purposes of the federal alternative minimum tax. However, if such interest is
subject to the federal alternative minimum tax, such securities will not be
considered as Exempt Securities for purposes of complying with the Ohio Tax-Free
Fund's 80% required investment in Exempt Securities as described above.
Among other types of Exempt Securities, the Ohio Tax-Free Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt
Commercial Paper, Construction Loan Notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. In addition, the Ohio Tax-Free Fund may invest in other types of
tax-
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exempt instruments, such as municipal bonds, private activity bonds, and
pollution control bonds.
Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the Prospectus of the Ohio Tax-Free Fund, the two
principal classifications of Exempt Securities consist of "general obligation"
and "revenue" issues. The Ohio Tax-Free Fund may also acquire "moral obligation"
issues, which are normally issued by special purpose authorities. There are, of
course, variations in the quality of Exempt Securities, both within a particular
classification and between classifications, and the yields on Exempt Securities
depend upon a variety of factors, including the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
Ratings represent the opinion of an NRSRO as to the quality of Exempt
Securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and Exempt Securities with the same maturity,
interest rate and rating may have different yields, while Exempt Securities of
the same maturity and interest rate with different ratings may have the same
yield. Subsequent to purchase, an issue of Exempt Securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase. Provident will consider such an event in determining whether the Ohio
Tax-Free Fund should continue to hold the obligation.
An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.
VARIABLE AND FLOATING RATE NOTES. Each 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
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to have a market value that approximates its par value. A floating rate note is
one whose terms provide for the adjustment of its interest rate whenever a
specified interest rate changes and which, at any time, can reasonably be
expected to have a market value that approximates its par value. Such notes are
frequently not rated by credit rating agencies; however, unrated variable and
floating rate notes purchased by such 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 Small Company 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 liquid
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 total 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 cause the Fund to incur a loss or miss an opportunity to
obtain a price considered to be advantageous. Such Funds will
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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 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 Trust's
Board of Trustees, 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
Trustees of the Trust 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
Trust 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 Prospectus, 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
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agreement, it will place in a segregated custodial account assets such as U.S.
Government securities or other liquid securities consistent with the Fund's
investment restrictions having a value equal to the repurchase price (including
accrued interest), and will subsequently continually monitor the account to
ensure that such equivalent value is maintained at all times. Reverse repurchase
agreements involve the risk that the market value of the securities sold by a
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 Trust 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 Small Company Fund's
investment restrictions permit it to engage in reverse repurchase agreements
without prior shareholder approval, the Small Company 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 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. 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 the same time they
tend to limit any potential gain which might result from an increase in the
value
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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, Ohio
Tax-Free, Balanced, Income Equity, Large Company, and Small Company Funds may
write covered call and covered put options on securities or on 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 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 the bid and asked price. Such options will be listed on
national securities or futures exchanges or will 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 mean between the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if the Fund enters
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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.
Such Funds may also purchase or sell index options. Index options (or
options on securities indices) are similar in many respects to options on
securities except that an index option gives the holder the right to receive,
upon exercise, cash instead of securities, if the closing level of the
securities index upon which the option is based is greater than, in the case of
a call, or less than, in the case of a put, the exercise price of the option.
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).
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The Ohio Tax-Free Fund intends to enter into puts only with dealers,
banks, and broker-dealers which, in Provident's opinion, present minimal credit
risks.
OPTIONS AND FUTURES STRATEGIES. In addition, each of the Income, Ohio
Tax-Free, Balanced, Income Equity, Large Company, and Small Company 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 below and in the Prospectus. 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.
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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 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 purchaser or 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" (e.g., 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 option 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 liquid 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, Ohio Tax-Free, Balanced, Income
Equity, Large Company and Small Company 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.
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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 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 liquid 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 liquid 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
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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, 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 securities, 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 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.
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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 votes of
shareholders of that Fund present at a meeting at which more than 50% of the
votes attributable to shareholders of record of such Fund are represented in
person or by proxy or (2) the holders of more than 50% of the outstanding votes
of shareholders of that Fund).
In addition to the investment restrictions set forth in the Prospectus,
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 Balanced Fund, the Large
Company Fund and the Small Company 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 of the Ohio Tax-Free Fund, the Balanced Fund, the Large Company Fund and
the Small Company Fund has adopted the following additional restrictions, which
may be changed by the Board of Trustees without the vote of a Fund's
shareholders. Each such 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 securities of other investment companies, except
(a) in connection with a merger, consolidation, acquisition or
reorganization, and (b) to the extent permitted by the 1940 Act or
pursuant to any exemptions therefrom; and
4. Mortgage or hypothecate the Fund's assets in excess of
one third of the Fund's total assets.
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 the Money Market Fund invests entirely in securities with
maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of
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portfolio turnover rate, the portfolio turnover rate with respect to the Money
Market Fund is expected to be zero percent for regulatory purposes.
The portfolio turnover rates for each of the Funds (other than the
Money Market Fund and the Large Company Fund) for the two fiscal years ended
December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
Fund 12/31/96 12/31/95
---- -------- --------
<S> <C> <C>
Income Fund 53% 75%
Income Equity Fund 166% 180%
Ohio Tax-Free Fund 6% 34%
Balanced Fund 98%(1) 13%
Small Company Fund 162% 46%(2)
<FN>
- --------------------
(1) The portfolio turnover rate of the Balanced Fund increased materially
for the fiscal year ended December 31, 1996, from the previous fiscal
year as such Fund's portfolio was realigned by its portfolio manager in
response to then current market conditions.
(2) Reflects operations for the fiscal period from October 1, 1995 through
December 31, 1995. For the fiscal year ended September 30, 1995, the
portfolio turnover rate for the Small Company Fund was 197%.
</TABLE>
Portfolio turnover rates are not yet available for the Large Company
Fund because it commenced operations on January 2, 1997. However, the Large
Company Fund's portfolio turnover rate is not expected to exceed 30% for the
fiscal year ending December 31, 1997.
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.
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- -------------------------------------------------------------------------------
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 Money Market Fund, the Income Fund 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 Balanced
Fund, the Income Equity Fund, the Large Company Fund and the Small Company
Fund's income distributions will be eligible for the 70% corporate dividends
received deduction.
ADDITIONAL TAX INFORMATION
Each of the Funds of the Trust is treated as a separate entity for
federal income tax purposes and intends to qualify as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code") for so
long as such qualification is in the best interest of that Fund's shareholders.
In order to qualify as a regulated investment company, each Fund must, among
other things: diversify its investments within certain prescribed limits; 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; and, in taxable
years beginning on or before August 5, 1997, 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. 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
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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 mid-term or 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.
THE MONEY MARKET FUND, THE INCOME FUND, THE BALANCED FUND, THE INCOME
EQUITY FUND, THE LARGE COMPANY FUND, AND THE SMALL COMPANY 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 mid-term or net long-term
capital gain over net short-term capital loss is taxable to shareholders as
mid-term or long-term capital gain, respectively, 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.
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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.
Long-term capital gains of individuals are subject to a maximum tax
rate of 20% (or 10% for individuals in the 15% ordinary income tax bracket).
Mid-term 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. The holding period for mid-term capital gains is more than one
year but not more than eighteen months; the holding period for long-term
capital gains is more than eighteen months.
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 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.
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THE OHIO TAX-FREE FUND. The Code permits a regulated investment company
which invests in Exempt Securities to pay to its shareholders "exempt-interest
dividends," which are excluded from gross income for federal income tax
purposes, if at the close of each quarter at least 50% of the value of its total
assets consist of Exempt Securities.
An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by the Ohio Tax-Free Fund that is derived from
interest received by the Ohio Tax-Free Fund that is excluded from gross income
for federal income tax purposes, net of certain deductions, provided the
dividend is designated as an exempt-interest dividend in a written notice mailed
to shareholders not later than sixty days after the close of the Ohio Tax- Free
Fund's taxable year. The percentage of the total dividends paid by the Ohio
Tax-Free Fund during any taxable year that qualifies as exempt-interest
dividends will be the same for all shareholders receiving dividends during such
year. Exempt-interest dividends shall be treated by the Ohio Tax-Free Fund's
shareholders as items of interest excludable from their gross income for Federal
income tax purposes under Section 103(a) of the Code. However, a shareholder is
advised to consult his tax adviser with respect to whether exempt-interest
dividends retain the exclusion under Section 103(a) of the Code if such
shareholder is a "substantial user" or a "related person" to such user under
Section 147(a) of the Code with respect to any of the Exempt Securities held by
the Ohio Tax-Free Fund. If a shareholder receives an exempt-interest dividend
with respect to any share and such share is held by the shareholder for six
months or less, any loss on the sale or exchange of such share shall be
disallowed to the extent of the amount of such exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible for federal income tax
purposes if the Ohio Tax-Free Fund distributes exempt-interest dividends during
the shareholder's taxable year. A shareholder of the Ohio Tax-Free Fund that is
a financial institution may not deduct interest expense attributable to
indebtedness incurred or continued to purchase or carry shares of the Ohio
Tax-Free Fund if the Ohio Tax-Free Fund distributes exempt-interest dividends
during the shareholder's taxable year. Certain federal income tax deductions of
property and casualty insurance companies holding shares of the Ohio Tax-Free
Fund and receiving exempt-interest dividends may also be adversely affected. 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 mid-term or
long-term capital gains, the Ohio Tax-Free Fund intends to distribute
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any realized net mid-term or 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 mid-term or long-term capital gains, respectively, 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
long-term capital gains of individuals are subject to a maximum tax rate of 20%
(or 10% for individuals in the 15% ordinary income tax bracket) and mid-term
capital gains are taxed like ordinary income except that net mid-term capital
gains of individuals are subject to a maximum federal income tax rate of 28%.
Any net short-term capital gains are taxed at ordinary income tax rates. If a
shareholder receives a capital gain dividend with respect to any share and then
sells the share before he has held it for more than six months, any loss on the
sale of the share is treated as long-term capital loss to the extent of the
capital gain dividend received.
Although it is expected that under normal market conditions at least
80% of the net assets of the Ohio Tax-Free Fund will be invested in bonds,
notes, debentures, commercial paper and other obligations, the interest on which
is not a preference item for individuals for the federal alternative minimum
tax, exempt-interest dividends attributable to interest on certain municipal
obligations in which the Ohio Tax-Free Fund may invest, including those issued
on or after August 8, 1986 to finance certain private activities, will be
treated as tax preference items in computing an individual's alternative minimum
tax. For individuals, the alternative minimum tax rate is 26% on alternative
minimum taxable income up to $175,000 and 28% on the excess of $175,000.
Also, all exempt-interest dividends of the Ohio Tax-Free Fund may
subject corporations to alternative minimum tax as a result of the inclusion of
such dividends in alternative minimum taxable income of 75% of the excess of the
adjusted current earnings over pre-adjustment alternative minimum taxable
income. Adjusted current earnings would include exempt-interest dividends of the
Ohio Tax-Free Fund. For corporations the alternative minimum tax rate is 20%.
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
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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 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 105th 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.
B - 25
<PAGE> 102
- -------------------------------------------------------------------------------
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
- -------------------------------------------------------------------------------
Shares of each of the Trust'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.
The Trust 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 Trust of
securities owned by it is not reasonably practical, or (ii) it is not reasonably
practical for the Trust to determine the fair value of its net assets.
- -------------------------------------------------------------------------------
VALUATION OF SECURITIES
- -------------------------------------------------------------------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Trustees have determined that the amortized cost method for valuing
the Money Market Fund's securities is the best method currently available. The
Trustees review this method of valuation to ensure that such Fund's securities
are valued at their fair value, as determined by the Trustees in good faith. The
Trustees 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 Trustees' 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
Trustees will consider
B - 26
<PAGE> 103
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 Trustees 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
Trustees have determined present minimal credit risk and which are "Eligible
Securities" as defined by Rule 2a-7 of the 1940 Act. The Money Market Fund is
also required to maintain a dollar weighted average portfolio maturity (not more
than 90 days) appropriate to its objective of maintaining a stable net asset
value of $1.00 per share, and this precludes the purchase of any security with a
remaining maturity of more than 397 days. Should the disposition of a security
result in a dollar weighted average portfolio maturity of more than 90 days, the
Money Market Fund will invest its available cash in such a manner as to reduce
such maturity to 90 days or less as soon as practicable. For the 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.
B - 27
<PAGE> 104
Since the net income of the Money Market Fund is declared as a dividend
each time net income is determined, the net asset value per share remains at
$1.00 per share immediately after each dividend declaration. The Money Market
Fund expects to have net income at the time of each dividend determination made
at the close of the Exchange. If for any reason there is a net loss which would
result in the Money Market Fund's not being able to price its shares at $1.00
per share, the Money Market Fund will first offset such amount pro rata against
dividends accrued during the month in each shareholder account. To the extent
that such a net loss would exceed such accrued dividends, the Money Market Fund
will reduce the number of its outstanding shares by having each shareholder
contribute to the Money Market Fund's capital his pro rata portion of the total
number of shares required to be cancelled in order to maintain a net asset value
of $1.00. EACH SHAREHOLDER WILL BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION
IN THESE CIRCUMSTANCES BY HIS INVESTMENT IN THE MONEY MARKET FUND.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND, THE RIVERFRONT OHIO TAX-FREE BOND
FUND, THE RIVERFRONT BALANCED FUND, THE RIVERFRONT INCOME EQUITY FUND, THE
RIVERFRONT LARGE COMPANY FUND, AND THE RIVERFRONT SMALL COMPANY 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 Trustees;
(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 Trustees;
(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
B - 28
<PAGE> 105
quotations are not available, such instruments are valued at fair value as
determined by the Board of Trustees; and
(5) The following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Trustees: (a) securities, including
restricted securities, for which complete quotations are not readily available,
(b) listed securities or those on NMS if, in the Trust's opinion, the last sales
price does not reflect a current market value or if no sale occurred, and (c)
other assets.
- -------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- -------------------------------------------------------------------------------
The Trustees and officers of the Trust are:
J. VIRGIL EARLY, Age 59, Trustee; Principal in J. Virgil Early
& Associates (business consulting); 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.
WALTER B. GRIMM*, Age 52, President and Trustee; employee of BISYS
Fund Services Limited Partnership since June, 1992.
WILLIAM M. HIGGINS, Age 53, Trustee; Senior Vice President and
Director of Sena Weller Rohs Williams Inc. (investment advisory services);
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.
HARVEY M. SALKIN, PH.D.*, Age 51, Trustee; Professor, Case Western
Reserve University; 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 since April, 1995; prior to April, 1995, Vice
President and Associate General Counsel of Alliance Capital Management L.P.
(investment management firm).
THOMAS E. LINE, Age 29, Treasurer; employee of BISYS Fund Services
Limited Partnership since January, 1997; prior to January, 1997, Senior Audit
Manager of KPMG Peat Marwick LLP (independent public accountants).
C. DAVID BUNSTINE, Age 31, Secretary; employee of BISYS Fund Services
Limited Partnership since December, 1987.
B - 29
<PAGE> 106
ALAINA V. METZ, Age 30, Assistant Secretary; employee of BISYS Fund
Services Limited Partnership since June, 1995; prior to June, 1995, supervisor
at Alliance Capital Management, L.P. (investment management firm).
*These Trustees are interested persons of the Trust as defined
under the 1940 Act.
Except as set forth above, the address of all Trustees and officers of
the Trust is 3435 Stelzer Road, Columbus, Ohio 43219.
During the fiscal year ended December 31, 1996, no Trustee or officer
affiliated with Provident, DRZ, any other sub-adviser, the Distributor or BISYS
Fund Services Ohio, Inc. received any direct remuneration from the Trust.
The following table sets forth information regarding all compensation
paid by the Trust to its trustees for their services during the fiscal year
ended December 31, 1996. The Trust has no pension or retirement plans.
<TABLE>
<CAPTION>
COMPENSATION TABLE
Aggregate Total Compensation
Name and Position Compensation from from the Trust and
With the Trust the Trust The Fund Complex*
-------------- --------- ---------
<S> <C> <C>
J. Virgil Early, $8,500 $8,500
Trustee
William M. Higgins, 8,500 8,500
Trustee
Harvey M. Salkin, 8,500 8,500
Trustee
Stephen G. Mintos(1) -0- -0-
<FN>
- --------------------
* 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.
</TABLE>
(1) Mr. Mintos resigned his position as a director of The Riverfront Funds,
Inc. effective November 30, 1997.
- -------------------------------------------------------------------------------
MANAGEMENT OF THE FUNDS
- -------------------------------------------------------------------------------
INVESTMENT ADVISER
B - 30
<PAGE> 107
Subject to the general supervision of the Trust's Board of Trustees and
in accordance with the Funds' investment objectives, policies and restrictions,
investment advisory services are provided to the Funds by The Provident Bank,
One East Fourth Street, Cincinnati, Ohio 45202 ("Provident") pursuant to an
Investment Advisory Agreement dated as of December 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, with Provident (the "Prior Management
Agreement"), an Investment Advisory Agreement with Provident with respect to the
Income Fund dated April 30, 1993 (the "Provident Advisory Agreement"), and an
Investment Advisory Agreement with 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
Capital Management Group. Provident's Trust and Financial Services Group
currently manages assets of approximately $800 million. The Funds are the first
series of a registered investment company for which Provident has provided
investment advisory services.
Provident is an Ohio banking corporation which, with its affiliates, on
December 31, 1996, 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 Financial
Group, Inc., a bank holding company headquartered in Cincinnati, Ohio, with
approximately $6.8 billion in total consolidated assets as of December 31,
1996. Through its Ohio and Kentucky banking subsidiaries, Provident Financial
Group, Inc. provides a wide range of banking services to individuals and
businesses.
Provident's Capital Management 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 sub-advisers, investment
advisory services for each of the Funds as described in the Prospectus. For the
services provided and expenses assumed pursuant to the Investment Advisory
Agreement, each Fund 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; fifty one-hundredths of one percent (.50%)
for the Ohio Tax-Free Fund; ninety one-hundredths of one percent (.90%) for the
Balanced Fund;
B - 31
<PAGE> 108
ninety-five one-hundredths of one percent (.95%) for the Income Equity Fund; and
eighty one-hundredths of one percent (.80%) for each of the Large Company Fund
and the Small Company 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 period from January 1,
1994 to July 31, 1994, the Money Market Fund incurred $130,493 in management
fees, the Income Fund incurred $58,055 in management fees, and the Income Equity
Fund incurred $69,030 in management fees. For the fiscal years ended December
31, 1996 and 1995, and for the period from August 1, 1994 to December 31, 1994,
the Funds incurred the following fees for the investment advisory services of
Provident:
<TABLE>
<CAPTION>
Period from
Year Ended Year Ended 8/01/94 to
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $ 259,214 $ 221,912 $ 96,715
Income 143,483 144,461 68,703
Ohio Tax-Free 56,870 56,114 20,864
Balanced 183,256 76,231 2,255(1)
Income Equity 688,484 407,229 59,054
Small Company 294,183 83,982(2) N/A(2)
<FN>
- --------------------
(1) Commenced operations on September 1, 1994.
(2) Commenced operations on September 30, 1995.
</TABLE>
The Large Company Fund paid no investment advisory fees to Provident
for the fiscal years listed in the foregoing table because the Large Company
Fund did not commence operations until January 2, 1997.
For the fiscal years ended December 31, 1996, 1995 and 1994, Provident
waived investment advisory fees or reimbursed the Funds for certain expenses in
the following amounts:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Money Market -- -- --
Income -- $ 548 --
Ohio Tax-Free $11,373 11,778 $ 4,394
Balanced 28,720 69,745 16,264
Income Equity 36,661 73,635 --
</TABLE>
B - 32
<PAGE> 109
<TABLE>
<S> <C> <C> <C>
Small Company -- 900 --
</TABLE>
The Directors of Provident are Allen L. Davis, Jack M. Cook,
Thomas D. Grote, Jr., Philip R. Myers, Joseph A. Pedoto, Sidney A.
Peerless, M.D., 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; and Mark E. Magee, Senior Vice President,
General Counsel and Secretary.
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 Trust's Board of
Trustees or by vote of a majority of votes attributable to the outstanding
shares of such Fund (as defined under "The Trust and its Funds" in the
Prospectus) and a majority of the Trustees 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
sub-adviser, on 60 days' prior written notice from such sub-adviser. 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 judgment or mistake of law or for
any loss suffered by the Trust 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.
SUB-ADVISER
Pursuant to the terms of the Investment Advisory Agreement, Provident
has entered into a Sub-Investment Advisory Agreement dated as of December 1,
1997, with DePrince, Race & Zollo, Inc., 201 South Orange Avenue, Suite 850,
Orlando, Florida 32801
B - 33
<PAGE> 110
("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 Trust's
Board of Trustees subject to the direction and control of the Trust's Board of
Trustees.
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 Trust's Board of Trustees, and for
reporting the activities of DRZ in managing the Income Equity Fund to the
Trust's Board of Trustees.
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 (exclusive of capital appreciation and
depreciation and reinvestment of dividends), but not beyond. The Board of
Trustees 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. Prior to
April 1995, Messrs. DePrince, Race and Zollo were officers and directors of
SunBank Capital Management, N.A., 200 South Orange Avenue, Orlando, Florida
32801 ("SunBank"), and now serve as the directors and officers of DRZ.
From August 1, 1994, to August 14, 1995, SunBank served as the
sub-investment adviser to the Income Equity Fund pursuant to a Sub- Investment
Advisory Agreement dated August 1, 1994 (the "SunBank Sub-Advisory Agreement").
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.
B - 34
<PAGE> 111
For the period from January 1, 1994 to July 31, 1994, the Income Equity
Fund paid SunBank $67,502 in advisory fees. Pursuant to the terms of the SunBank
Sub-Advisory Agreement, for the period from August 1, 1994, to December 31,
1994, and for the period from January 1, 1995, to August 14, 1995, Provident
paid $51,630 and $92,579, respectively, to SunBank in sub-investment advisory
fees. For the year ended December 31, 1996 and for the period from August 15,
1995 to December 31, 1995, Provident paid $298,193 and $77,303, respectively, 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 years ended December 31, 1996 and
1995, and for the period of September 1, 1994, through December 31, 1994,
Provident paid JIR a total of $77,267, $25,332 and $2,819, respectively, in sub-
investment advisory fees.
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
In addition to serving as investment adviser, Provident has entered
into a Custodian, Fund Accounting and Recordkeeping Agreement with the Trust to
provide custody and certain fund accounting services to the Funds (the
"Custodian Agreement"). Under the Custodian Agreement, 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; .14% for the Ohio Tax-Free Fund; and .15% for each of the
Income Equity Fund, the Balanced Fund, the Large Company Fund and the Small
Company Fund. As custodian, Provident is responsible for safeguarding all
securities and cash of the Funds.
The following table sets forth the fees incurred by the Funds for the
custody and fund accounting services provided by Provident for the fiscal years
ended December 31, 1996, and 1995, and for the period of August 1, 1994 through
December 31, 1994. No such fees were paid by the Large Company Fund during these
periods because the Large Company Fund did not commence operations until January
2, 1997.
B - 35
<PAGE> 112
<TABLE>
<CAPTION>
Fiscal Year Ended
December 31, August 1, 1994
----------------- through
Fund 1996 1995 December 31, 1994
---- ---- ---- -----------------
<S> <C> <C> <C>
Money Market $86,401 $73,973 $60,632
Income 35,870 36,115 21,295
Ohio Tax-Free 15,923 15,708 5,764
Balanced 30,516 12,666 835(1)
Income Equity 108,638 72,596 38,288
Small Company 55,160 15,578(2) N/A
<FN>
- -----------------------
(1) Commenced operations September 1, 1994.
(2) Commenced operations September 30, 1995.
</TABLE>
Under the Master Transfer and Recordkeeping Agreement, the Funds pay
Provident the following fees for transfer agency services. The Money Market Fund
pays a minimum annual fee of $24,000 for the first 500 shareholder accounts. For
shareholder accounts of the Money Market Fund in excess of 500, the Money Market
Fund pays an additional annual fee of $24 for each open shareholder account and
$12 for each closed shareholder account. The Small Company Fund pays a minimum
annual fee of $36,000 for the first 750 shareholder accounts. For shareholder
accounts in excess of 750, the Small Company Fund pays an additional annual fee
of $12 for each open shareholder account and $9 for each closed shareholder
account. All other Funds pay a minimum annual fee of $40,000 for the first 750
shareholder accounts and, for shareholder accounts in excess of 750, an
additional annual fee of $20 for each open shareholder account and $10 for each
closed shareholder account.
The following table sets forth the total amount of fees incurred by the
Funds with respect to transfer agency and recordkeeping services for the fiscal
years ended December 31, 1996, 1995 and 1994. No such fees were paid by the
Large Company Fund during these periods because the Large Company Fund did not
commence operations until January 2, 1997.
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $79,137 $59,257 $30,122
Income 38,891 37,402 11,528
Ohio Tax-Free 26,007 25,445 1,686(1)
Balanced 44,600 22,857 263(2)
</TABLE>
B - 36
<PAGE> 113
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended Ended Ended
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Income Equity 58,165 42,860 12,105
Small Company 38,988 9,834(3) N/A(3)
<FN>
- ---------------------------
(1) Commenced operations September 1, 1994.
(2) Commenced operations August 1, 1994
(3) Commenced operations September 30, 1995.
</TABLE>
- ------------------------------------------------------------------------------
SECURITIES TRANSACTIONS
- ------------------------------------------------------------------------------
Each adviser, under policies established by the Board of Trustees,
selects broker-dealers to execute transactions for the Funds. It is the policy
of the Trust, 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 the price paid or received and any
commissions and other costs paid, the breadth of the market where executed, the
efficiency with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, the availability of the
broker to stand ready to execute potentially difficult transactions in the
future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Board of Trustees 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 broker-dealers who provide 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
B - 37
<PAGE> 114
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
Trust. 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 Trust and its Funds.
From time to time DRZ may direct brokerage transactions for the Income
Equity Fund to brokerage firms in return for research services from such firms.
Such research services include performance measurement services, databases
containing financial and other information on companies, news retrieval systems,
stock quote systems, and computer software programs that measure performance,
identify companies on the basis of certain selection criteria, and allocate
trades. For the fiscal year ended December 31, 1996, DRZ directed such
transactions to the following brokers in the following amounts and paid the
following brokerage commissions:
<TABLE>
<CAPTION>
Brokerage
Broker Amount Of Transaction Commissions
------ --------------------- -----------
<S> <C> <C>
Alpha Management $ 964,173 $ 1,551
Donaldson, Lufkin & 8,221,133 12,455
Jenrette
Donaldson and Company 635,817 814
Factset 4,261,816 6,396
First Boston Co. 4,956,443 7,975
Merrill Lynch Co. 1,884,699 2,793
Paine Webber Co. 5,198,062 7,810
Robertson, Stephens 174,167 258
Company
Standard & Poors Co. 3,436,240 4,694
----------- -----------
TOTAL $29,732,550 $ 44,746
=========== ===========
</TABLE>
In addition, DRZ, on behalf of the Income Equity Fund, in the past has
directed brokerage transactions to First Boston Corporation, which participates
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
B - 38
<PAGE> 115
year ended December 31, 1995, the total amount of brokerage
transactions directed by DRZ to First Boston Corp. was $29,487,974,
and the total amount of brokerage commissions paid to First Boston
Corp. under this arrangement was $50,199.
On behalf of the Small Company Fund, Provident from time to time
directs brokerage transactions to Autranet (a subsidiary of Donaldson, Lufkin &
Jenrette), to William O'Neill & Company, and to Kalb Vorrhis & Company in return
for fundamental and technical research on equity securities. For the fiscal year
ended December 31, 1996, Provident directed brokerage transactions to these
firms in the following amounts: $16,163,421, $12,859,396, and $374,650,
respectively, and paid to such brokers on behalf of the Small Company Fund the
following brokerage commissions for those transactions: $38,864, $28,845 and
$900, respectively.
The Money Market Fund, the Income Fund, the Ohio Tax-Free Fund and the
Balanced Fund expect that purchases and sales of income securities usually will
be principal transactions. Income 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 Provident 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 Balanced Fund, the Large Company Fund and
the Small Company Fund expect that purchases and sales of equity securities
usually will be effected through brokerage transactions for which commissions
will be payable. Purchases from underwriters will include the underwriting
commission or concession, and purchases from dealers serving as market makers
B - 39
<PAGE> 116
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.
The Trust's Board of Trustees 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 Trust with respect to brokerage is and will be
reviewed by the Board of Trustees 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.
The following table sets forth brokerage commissions paid by the Funds
for the past three fiscal years:
<TABLE>
<CAPTION>
For the Year Ended(1)
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $ -0- $ -0- $ -0-
Income -0- -0- -0-
Ohio Tax-Free -0- -0- -0-
Balanced 27,535 15,465 2,217
Income Equity 304,979(2) 269,007(3) 93,502
Small Company 218,171 446,816(4) 557,458(5)
- --------------------
</TABLE>
B - 40
<PAGE> 117
(1) Unless otherwise indicated, no brokerage commissions were paid
to an affiliated broker-dealer.
(2) Of this amount, $76,751 was paid to Provident Securities & Investment
Company, an affiliate of Provident.
(3) Of this amount, $67,723 was paid to Provident Securities & Investment
Company, an affiliate of Provident.
(4) Includes the fiscal year ended September 30, 1995 and the fiscal period
of October 1, 1995, through December 30, 1995.
(5) For the fiscal year ended September 30, 1994.
No brokerage commissions were paid by the Large Company Fund during any
of the foregoing periods, because the Large Company Fund did not commence
operations until January 2, 1997.
During the fiscal year ended December 31, 1996, the Money Market Fund,
the Income Fund, the Ohio Tax-Free Fund and the Small Company Fund held
securities of their regular brokers or dealers, as defined in Rule 10b-1 under
the 1940 Act, or their parent companies, including those of Dean Witter,
Donaldson Lufkin & Jenrette, Goldman Sachs & Co., Lehman Brothers Holdings,
Inc., Merrill Lynch & Co., Inc., PaineWebber Group, Inc. and Prudential Funding
Corp. At December 31, 1996, the Money Market Fund held approximately $7,000,000
of Merrill Lynch discount notes, an $18,295,000 repurchase agreement with Dean
Witter and a $35,000,000 repurchase agreement with Prudential Funding Corp. At
December 31, 1996, the Income Fund held approximately $540,000 of Lehman
Brothers Holdings corporate bonds, and the Ohio Tax-Free Fund held approximately
$443,000 of the Goldman Tax-Free Fund.
- --------------------------------------------------------------------------------
ADMINISTRATOR
- --------------------------------------------------------------------------------
BISYS Fund Services Limited Partnership serves as administrator (the
"Administrator") to the Trust and each Fund pursuant to an Administration
Agreement (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 Agreement and Sub-Investment Advisory
Agreement, as applicable, and by Provident under the Custodian Agreement 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.
B - 41
<PAGE> 118
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Trust, 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 Trust with the Trust'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) from the Money Market Fund's
amortized cost price per share; and generally assist in all aspects of the
Trust'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 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, 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, 199_. 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 Administration 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 Trust's Board of Trustees
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
B - 42
<PAGE> 119
any loss suffered by the Trust 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.
The following table sets forth the fees paid by the Funds to the
Administrator for administrative services for the past two fiscal years and the
period of February 1, 1994 through December 31, 1994:
<TABLE>
<CAPTION>
From 2/1/94
Year Ended Year Ended through
Fund 12/31/96 12/31/95 12/31/94
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $345,611 $296,225 282,711(1)
Income 71,742 72,231 53,444(1)
Ohio Tax-Free 22,744 22,439 8,346(2)
Balanced 40,688 16,888 1,113(3)
Income Equity 144,850 96,796 59,369(1)
Small Company 73,546 20,771(4) N/A
<FN>
- --------------------
(1) Keystone Custodian Funds, Inc., 200 Berkeley Street, Boston,
Massachusetts 02116 ("Keystone") provided administration
services for the one-month period ended January 31, 1994. For
such period the Income Fund paid Keystone an administration
fee of $8,178, the Income Equity Fund paid Keystone an
administration fee of $8,904, and the Money Market Fund paid
to or accrued for the account of Keystone an administration
fee of $12,019.
(2) Commenced operations August 1, 1994.
(3) Commenced operations September 1, 1994.
(4) Commenced operations October 1, 1995.
</TABLE>
The Large Company Fund did not pay administration fees to the
Administrator for any of the foregoing periods because it did not commence
operations until January 2, 1997.
- --------------------------------------------------------------------------------
DISTRIBUTOR
- --------------------------------------------------------------------------------
The Distributor serves as distributor to each of the Funds pursuant to
a Distribution Agreement dated December 1, 1997 (the
B - 43
<PAGE> 120
"Distribution Agreement"). Unless otherwise terminated, the Distribution
Agreement continues until December 31, 1998, and for successive one-year periods
thereafter ending December 31 of each year if approved at least annually by the
Trust's Board of Trustees or by the vote of a majority of the votes attributable
to the outstanding shares of the Trust, and by the vote of a majority of the
Trustees of the Trust 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 years ended December 31, 1996 and 1995 and for the
period from 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 Funds, after discounts to dealers, were $675,842, $314,870 and $311,412,
respectively. For such periods, $634,802, $190,064 and $276,225 were reallowed
by the Distributor to Provident Securities & Investment Company, an affiliate of
Provident.
For the one-month period ended January 31, 1994, Fiduciary Investment
Company, Inc. ("FICO") served as principal underwriter for the Trust pursuant to
a Principal Underwriting Agreement (the "Underwriting Agreement"). For the
one-month period ended January 31, 1994, FICO received no payments from the
Money Market Fund, the Income Fund or the Income Equity Fund.
- --------------------------------------------------------------------------------
DISTRIBUTION PLANS
- --------------------------------------------------------------------------------
Each Fund has adopted a Distribution and Shareholder Service Plan
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 Ohio
Tax-Free Fund, the Balanced Fund, the Income Equity Fund, the Large Company Fund
and the Small Company Fund has adopted a Distribution and Shareholder Service
Plan 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
B - 44
<PAGE> 121
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 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 Trust's Board of Trustees 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
B - 45
<PAGE> 122
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 Trustees
of the Trust who are not "interested persons" as defined by the 1940 Act
("Independent Trustees") is committed to the discretion of the Independent
Trustees then in office.
Each Plan was approved by the Board of Trustees and by those
Independent Trustees who have no direct or indirect financial interest in the
operation of each Plan or any agreements of the Trust or any other person
related to a Plan ("Rule 12b-1 Trustees"), 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 Trustees, and by a majority of the Rule 12b-1
Trustees, 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 Trustees or a majority of the outstanding voting shares of the effected
class of that Fund.
For the fiscal year ended December 31, 1996, the following amounts were
payable by the funds (except for the large Company fund, which did not commence
operations until January 2, 1997) 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>
Money Market Fund $432,174 $432,174 N/A(1)
Income Fund 86,548 30,720 $ 12,436 $ 0
Ohio Tax-Free Fund 26,681 N/A 7,017 0
Balanced Fund 30,170 11,929 82,801 0
Income Equity Fund 168,345 30,199 51,209 0
Small Company Fund 90,637 N/A 5,182 0
<FN>
- ---------------------------
1 The Money Market Fund does not offer Investor B shares and therefore
does not make payments under the Investor B Plan.
</TABLE>
B - 46
<PAGE> 123
- --------------------------------------------------------------------------------
CAPITAL STOCK
- --------------------------------------------------------------------------------
The Trust is an Ohio business trust. The Trust was organized on October
11, 1996, and the Trust's Declaration of Trust was filed with the Secretary of
Ohio on May 2, 1997. On December 1, 1997, the Trust acquired all of the assets
and liabilities of The Riverfront Funds, Inc., a Maryland corporation. The
Declaration of Trust authorizes the Board of Trustees to issue an unlimited
number of shares, which are shares of beneficial interest, without par value.
The Trust presently has seven series of shares which represent interests in the
Funds of the Trust. 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. The Trust's Declaration of Trust authorizes the Board of Trustees to
divide or redivide any unissued shares of the Trust into one or more additional
series by setting or changing in any one or more respects their respective
preferences, conversion or other rights, voting power, restrictions, limitations
as to dividends, qualifications, and terms and conditions of redemption.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectus and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Trust,
shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Trust shall not be deemed to have been effectively acted
upon unless approved by the holders of a majority of the outstanding shares of
each fund affected by the matter. For purposes of determining whether the
approval of a majority of the outstanding shares of a Fund will be required in
connection with a matter, a Fund will be deemed to be affected by a matter
unless it is clear that the interests of each Fund in the matter are identical,
or that the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in investment
policy would be effectively acted upon with respect to a Fund only if approved
by a majority of the outstanding shares of such Fund. However, Rule 18f-2 also
provides that the election of Trustees may
B - 47
<PAGE> 124
be effectively acted upon by shareholders of the Trust voting
without regard to series.
- --------------------------------------------------------------------------------
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
- --------------------------------------------------------------------------------
TOTAL RETURN
Total return quotations for each of the Income Fund, the Ohio Tax-Free
Fund, the Balanced Fund, the Income Equity Fund, the Large Company Fund, and the
Small Company 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.
The average annual total returns of each of the Investor A Shares of
the Funds are as follows:
<TABLE>
<CAPTION>
Investor A Shares
With Front-end Sales Loads Without Front-end Sales Loads
-------------------------- -----------------------------
One Year Five Years Inception One Year Five Years Inception
Ended Ended to Ended Ended to
Fund 6/30/97 6/30/97 6/30/97(1) 6/30/97 6/30/97 6/30/97(1)
---- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Money Market 4.92% N/A 4.28% 4.92% N/A 4.28%
Income (1.60%) N/A 3.36% 6.39% N/A 4.37%
Ohio Tax-Free (0.93%) N/A 3.49% 5.67% N/A 5.13%
Balanced 10.76% N/A 10.18% 15.94% N/A 11.98%
Income Equity 21.36% N/A 18.07% 27.08% N/A 19.22%
Small
Company(2) 4.79% 9.36% 9.58% 9.67% 10.38% 10.09%
<FN>
- -----------------------
1 Dates of Inception: Money Market and Income Funds -- 10/1/92;
Ohio Tax-Free Fund -- 8/1/94; the Balanced Fund -- 9/1/94;
Income Equity Fund -- 10/8/92; and Small Company Fund -- 7/23/87.
2 The performance for the Small Company Fund includes the performance of
the MIM Stock Appreciation Fund, the Small Company Fund's predecessor.
</TABLE>
The average annual total returns of each of the Investor B Shares of
the Funds are as follows:
B - 48
<PAGE> 125
<TABLE>
<CAPTION>
Investor B Shares
Fund One Year Ended 6/30/97 Inception To 6/30/97(3)(4)
---- ----------------------- ---------------------------
<S> <C> <C>
Income 5.53% 3.85%
Ohio Tax-Free 4.57% 4.36%
Balanced 15.23% 11.53%
Income Equity 26.92% 18.64%
Small Company 9.02% 9.99%
<FN>
- -------------------------
(3) Dates of Inception -- the Income, Tax-Free, Balanced and Income Equity
Funds -- 1/15/95; and the Small Company Fund --
10/1/95.
(4) Includes the total return for the Investor A shares from January 1,
1995 to January 16, 1995.
</TABLE>
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
Ohio Tax-Free Fund, the Balanced Fund and the Income Equity Fund for such
periods would have been lower.
For the one year, five year and ten year periods ended June 30, 1997,
the average annual total returns for the Large Company Fund, including the CIFs
(the predecessors to the Large Company Fund whose returns have been restated to
reflect the estimated fees for the Large Company Fund for the current fiscal
year) are as follows:
<TABLE>
<CAPTION>
Investor A Shares
-----------------
With Front-end Sales Loads Without Front-end Sales Loads
-------------------------- -----------------------------
One Year Five Year Ten Year One Year Five Year Ten Year
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
28.55% 17.23% 11.94% 34.57% 18.34% 12.46%
</TABLE>
<TABLE>
<CAPTION>
Investor B Shares
-----------------
One Year Five Year Ten Year
-------- --------- --------
Without Contingent Deferred Sales Loads
---------------------------------------
<S> <C> <C> <C>
33.59% 17.46% 11.62%
</TABLE>
With Contingent Deferred Sales Loads
---------------------------------------
29.59% 17.25% 11.62%
These performance figures are not those of the Large Company Fund. And,
of course, past performance is no guarantee as to future performance.
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
B - 49
<PAGE> 126
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.
For the 30-day period ended June 30, 1997 the yields of the indicated
Portfolios are as follows:
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR B SHARES
With Front- Without Without Contingent
End Sales Front-End Deferred Sales
Loads Sales Loads Load
----- ----------- ----
<S> <C> <C> <C>
Income Fund 5.26% 5.51% 4.69%
Ohio Tax-Free Fund 2.95% 3.09% 2.32%
Balanced Fund 1.91% 2.00% 1.15%
Income Equity Fund 1.05% 1.10% 0.30%
</TABLE>
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.
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, 1997
the tax-equivalent yield for the Investor A shares of the Ohio Tax-Free Fund
(assuming a 39.6% federal tax rate) was 4.88%, assuming the imposition of the
maximum sales charge, and 5.11%, 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 3.84%.
For the 30-day period ended June 30, 1997, the yield of the Investor A
Shares of the Large Company Fund was 0.18%, assuming the imposition of the
maximum sales load. For the same period, the yield of the Investor B shares of
the Large Company Fund was (0.44)%, assuming no imposition of the maximum
contingent deferred sales charge.
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
B - 50
<PAGE> 127
seven-day period ended June 30, 1997, the current yield of the Money Market Fund
was 4.98%.
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, 1997, the
effective yield of the Money Market Fund was 5.11%.
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 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 Ohio Tax-Free Fund, the Balanced Fund, the
Income Equity Fund, and the Small Company Fund may from time to time advertise
current distribution rates which are calculated in accordance with the method
disclosed in the Prospectus. The following table sets forth the distribution
rates of the Investor A and B Shares for the year ended June 30, 1997.
<TABLE>
<CAPTION>
Investor A Shares
With Front-End Sales Loads Without Front-End Sales Loads
Includes Excludes Includes Excludes
-------- -------- -------- --------
Fund Capital Gains Capital Gains Capital Gains Capital Gains
- ---- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Income 5.62% 5.62% 5.88% 5.88%
Ohio Tax-Free 4.53% 4.53% 4.75% 4.75%
Balanced 2.01% 2.01% 2.10% 2.10%
Income Equity 14.56% 1.37% 15.25% 1.43%
Small Company 9.92% 0.00% 10.39% 0.00%
</TABLE>
B - 51
<PAGE> 128
<TABLE>
<CAPTION>
Without Contingent Deferred Sales Loads
Includes Capital Gains Excludes Capital Gains
---------------------- ----------------------
Fund
- ----
<S> <C> <C>
Income 5.50% 5.50%
Ohio Tax-Free 3.91% 3.91%
Balanced 1.57% 1.57%
Income Equity 14.31% 0.76%
Small Company 10.04% 0.00%
</TABLE>
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 Trust may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (a) discussions of general economic or financial principles (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 Trust; (e) descriptions of investment strategies for one or
more of the Funds within the Trust; (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 rankings or
ratings by recognized rating organizations; and (j) testimonials describing the
experience of persons who have invested in one or more of the Funds.
B - 52
<PAGE> 129
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
PRINCIPAL HOLDERS OF SECURITIES
To the knowledge of the Trust, as of October 16, 1997, the persons
listed below owned of record 5% or more of the outstanding shares of the
following Funds:
<TABLE>
<CAPTION>
Name and Address
Fund Of Owner Of Record % Ownership
- ---- ------------------ -----------
<S> <C> <C>
Money Market, The Provident Bank
Investor A Shares P.O. Box 691198
Cincinnati, Ohio 45269-1198 72.81%
BHC Securities, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103(1) 20.66%
Income, The Provident Bank
Investor A Shares One East Fourth Street
Cincinnati, Ohio 45202 48.37%
The Provident Bank Trust Department
P.O. Box 691198
Cincinnati, Ohio 45269-1198 37.62%
The Provident Bank TTEE FBO
Provident Financial Group
401K Equity
P.O. Box 691198
Cincinnati, Ohio 45269-1198 7.15%
The Provident Bank Trust Department
Employee Benefit Plan
P.O. Box 691198
Cincinnati, Ohio 45269-1198 5.32%
Income, The Fifth Third Bank as Trustee FBO
Investor B Shares Cincinnati Institute of Fine Arts
P.O. Box 630074
Cincinnati, Ohio 45263 20.47%
Ohio Tax-Free, The Provident Bank Trust Department
Investor A Shares P.O. Box 691198
Cincinnati, Ohio 45269-1198 96.97%
Ohio Tax-Free, Jeannette Sparo Rabinowitz
Investor B Shares 4016 Beechwood Avenue
Cincinnati, Ohio 45229 10.97%
Raymond L. Affolter
10065 Tanager Lane
Cincinnati, Ohio 45215 5.37%
Dorothy S. Paeltz
6141 State Route 125
Georgetown, Ohio 45121 5.63%
Adleta B. Follmer Revocable Trust
2105 Evergreen Ridge Drive
Cincinnati, Ohio 45215 6.58%
Patricia L. Rinckenberger
2228 Cathedral Ave.
Norwood, Ohio 45212 7.78%
David F. Stratman Trust
6280 Kaywood Dr.
Cincinnati, Ohio 45243 5.20%
Thelma N. Rieger Trust
5414 Moundcrest Dr.
Cincinnati, Ohio 45212 5.94%
The Provident Bank, Custodian
FBO Irma Allman
P.O. Box 691198
Cincinnati, Ohio 45269-1198 7.68%
Balanced, BHC Securities, Inc.
Investor A Shares One Commerce Square
Philadelphia, Pennsylvania 19103(1) 57.79%
The Provident Bank TTEE FBO
Provident Financial Group
401K Equity
P.O. Box 691198
Cincinnati, Ohio 45269-1198 24.64%
The Provident Bank Trust Department
Employee Benefit Plan
P.O. Box 691198
Cincinnati, Ohio 45269-1198 13.61%
Large Company, The Provident Bank Trust Department
Investor A Shares P.O. Box 691198
Cincinnati, Ohio 45269-1198 97.58%
Large Company, The Provident Bank Custodian FBO
Investor B Shares Christine Thomas IRA
750 Straight St.
Cincinnati, Ohio 45214 5.81%
</TABLE>
B - 53
<PAGE> 130
<TABLE>
<CAPTION>
Name and Address
Fund Of Owner Of Record % Ownership
- ---- ------------------ -----------
<S> <C> <C>
Income Equity, The Chase Manhattan Bank as Trustee
Investor A Shares for The General Cable Corporation
4 Tesseneer Drive
Highland Heights, Kentucky 41076 46.16%
Provident Bank TTEE FBO
Provident Bancorp 401(k)
Equity
P.O. Box 691198
Cincinnati, Ohio 45269-1198 8.80%
BHC Securities, Inc.
One Commerce Square
Philadelphia, Pennsylvania 19103(1) 29.47%
<FN>
- --------------------
(1) BCH Securities, Inc. holds such shares for various underlying
beneficial owners.
</TABLE>
AUDITORS
The financial statements of each of the Funds at and for the fiscal
year ended December 31, 1996, 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 the authority of Ernst & Young
LLP as experts in auditing and accounting.
B - 54
<PAGE> 131
LEGAL COUNSEL
Baker & Hostetler LLP, 65 East State Street, Columbus, Ohio 43215, is
counsel to the Trust 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 Trust 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 Trust 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 - 55
<PAGE> 132
- --------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The following financial statements relate to each of the Funds, except
the Large Company Fund, at and for the fiscal year ended December 31, 1996.
Effective January 2, 1997, The Riverfront Flexible Growth Fund changed its name
to The Riverfront Balanced Fund. Financial statements of the Large Company Fund
are not included in this Statement of Additional Information because the Large
Company Fund did not commence operations until January 2, 1997.
The following unaudited financial statements for the Funds for the
period ended June 30, 1997, 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, 1997.
B-56
<PAGE> 133
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
------------- ------------ -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost $138,894,483; $50,483,675;
and $91,728,691, respectively) $138,894,483 $50,746,823 $98,836,450
Repurchase agreements (Cost $28,393,000; $0; and $0,
respectively) 28,393,000
------------- ------------ -----------
TOTAL INVESTMENTS 167,287,483 50,746,823 98,836,450
Cash 568
Interest and dividends receivable 331,002 629,484 250,177
Receivable for capital shares issued 35 28,853
Receivable for investments sold 828,769
Prepaid expenses and other assets 6,423 26,060 22,158
------------- ------------ -----------
TOTAL ASSETS 167,625,476 51,402,402 99,966,407
------------- ------------ -----------
LIABILITIES:
Cash Overdraft 1,313,821
Dividends payable 639,438 243,576 139,305
Payable for capital shares redeemed 2,214
Payable for investments purchased 620,649
Accrued expenses and other payables:
Investment advisory fees 19,783 24,577 76,007
Administration fees 3,520 1,126 1,615
Custodian and accounting fees 6,595 4,214 12,001
12b-1 fees (Investor A) 13,188 7,874 12,306
12b-1 fees (Investor B) 1,206 11,224
Registration and filing fees 47 735 1,308
Transfer agent fees 3,714 1,233
Audit and legal fees 52,979 7,685 13,361
Printing fees 18,088 6,523 1,889
Other 6,074 447 1,381
------------- ------------ -----------
TOTAL LIABILITIES 763,426 299,196 2,207,081
------------- ------------ -----------
NET ASSETS:
Capital 166,864,340 52,659,539 78,690,906
Undistributed (distributions in excess of) net investment income (253,921)
Net unrealized apppreciation/depreciation on investments 263,148 7,107,759
Accumulated undistributed net realized gains (losses)
on investment transactions (2,290) (1,565,560) 11,960,661
------------- ------------ -----------
NET ASSETS $166,862,050 $51,103,206 $97,759,326
============= ============ ===========
Net Assets
Investor A Shares $166,862,050 $49,666,097 $83,795,721
Investor B Shares NA 1,437,109 13,963,605
------------- ------------ -----------
Total $166,862,050 $51,103,206 $97,759,326
============= ============ ===========
Shares of capital stock
Investor A Shares 166,864,343 5,302,121 6,103,750
Investor B Shares NA 136,631 997,420
------------- ------------ -----------
Total 166,864,343 5,438,752 7,101,170
============= ============ ===========
Net asset value
Investor A Shares--redemption price per share $1.00 $9.37 $13.73
Investor B Shares--offering price per share* NA 10.52 14.00
============= ============ ===========
Maximum Sales Charge (Investor A) NA 4.50% 4.50%
============= ============ ===========
Maximum Offering Price per share (100%/(100%-- Maximum Sales Charge)
of net asset value adjusted to nearest cent) (Investor A) (a) $1.00 $9.81 $14.38
============= ============ ===========
<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.
NA Not applicable
</TABLE>
See Notes to Financial Statements.
B-57
<PAGE> 134
STATEMENTS OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
STOCK LARGE COMPANY
OHIO TAX-FREE BALANCED APPRECIATION SELECT
BOND FUND FUND FUND FUND
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $7,971,128; $18,290,057;
$20,444,122, and $16,266,787, respectively) .......................... $ 8,434,852 $20,574,248 $ 25,063,972 $ 31,160,763
Cash .................................................................... 28,751
Interest and dividends receivable ....................................... 82,407 135,211 13,256 49,853
Receivable for capital shares issued .................................... 31,035 5,732 4,156 3,124
Unamortized organization costs .......................................... 3,806 18,152
Prepaid expenses and other assets ....................................... 2,360 22,059 1,941 3,321
----------- ----------- ------------ ------------
TOTAL ASSETS ............................................................ 8,550,654 20,766,001 25,087,131 31,235,213
----------- ----------- ------------ ------------
LIABILITIES:
Cash Overdraft .......................................................... 13,532
Dividends payable ....................................................... 28,414 22,767
Capital gains distribution payable ...................................... 10,179
Payable for capital shares redeemed ..................................... 38,924 195
Payable for investments purchased ....................................... 50,625
Accrued expenses and other payables:
Investment advisory fees ......................................... 2,918 13,671 16,656 17,219
Administration fees .............................................. 187 455 543
Custodian and accounting fees .................................... 1,021 2,563 3,123 3,229
12b-1 fees (Investor A) .......................................... 1,863 2,140 5,192 5,285
12b-1 fees (Investor B) .......................................... 1,090 7,805 744 384
Registration and filing fees ..................................... 813 6,816
Transfer agent fees .............................................. 3,286 3,045 1,815
Audit and legal fees ............................................. 1,454 14,978 6,361 3,164
Printing fees .................................................... 1,643 1,267 2,836
Organizational fees .............................................. 11,184
Other ............................................................ 289 880 1,011 424
----------- ----------- ------------ ------------
TOTAL LIABILITIES ....................................................... 56,510 105,450 104,490 45,540
----------- ----------- ------------ ------------
NET ASSETS:
Capital ................................................................. 7,736,322 17,249,310 16,186,528 13,648,835
Undistributed (distributions in excess of) net
investment income ...................................................... (96,661) 636 (95,083) (79,111)
Net unrealized appreciation/depreciation on
investments ............................................................ 463,724 2,284,191 4,619,850 14,893,976
Accumulated undistributed net realized gains on
investment transactions ................................................ 390,759 1,126,414 4,271,346 2,725,973
----------- ----------- ------------ ------------
NET ASSETS ....................................................... $ 8,494,144 $20,660,551 $ 24,982,641 $ 31,189,673
=========== =========== ============ ============
Net Assets
Investor A Shares ................................................ $ 7,188,727 $ 9,920,666 $ 24,047,882 $ 30,662,331
Investor B Shares ................................................ 1,305,417 10,739,885 934,759 527,342
----------- ----------- ------------ ------------
Total ..................................................... $ 8,494,144 $20,660,551 $ 24,982,641 $ 31,189,673
=========== =========== ============ ============
Shares of capital stock
Investor A Shares ................................................ 698,204 788,710 2,413,467 2,586,108
Investor B Shares ................................................ 124,163 828,643 90,723 44,495
----------- ----------- ------------ ------------
Total ..................................................... 822,367 1,617,353 2,504,190 2,630,603
=========== =========== ============ ============
Net asset value
Investor A Shares--redemption price per share .................... $ 10.30 $ 12.58 $ 9.96 $ 11.86
Investor B Shares--offering price per share* ..................... 10.51 12.96 10.30 11,85
=========== =========== ============ ============
Maximum Sales Charge (Investor A) ....................................... 4.50% 4.50% 4.50% 4.50%
=========== =========== ============ ============
Maximum Offering Price per share (100%/(100%-- Maximum Sales Charge) of
net asset value adjusted to nearest cent) (Investor A) ............... $ 10.79 $ 13.17 $ 10.43 $ 12.42
=========== =========== ============ ============
<FN>
- ----------
* Redemption price of Investor B shares varies based on length of time shares
are held.
</TABLE>
See Notes to Financial Statements.
B-58
<PAGE> 135
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
U.S. Government U.S. Government Income
Securities Money Income Equity
Market Fund Fund Fund
----------- ------------ ------------
<S> <C> <C> <C>
Investment Income:
Interest income ................................................... $ 4,560,706 $ 1,645,692 $ 44,359
Dividend income ................................................... 1,351,164
----------- ------------ ------------
TOTAL INCOME ...................................................... 4,560,706 1,645,692 1,395,523
----------- ------------ ------------
Expenses:
Investment advisory fees .......................................... 125,052 98,055 417,890
Administration fees ............................................... 166,737 49,028 87,978
12b-1 fees (Investor A) ........................................... 208,419 59,530 96,688
12b-1 fees (Investor B) ........................................... 7,017 53,132
Custodian and accounting fees ..................................... 41,685 24,513 65,983
Audit and legal fees .............................................. 45,141 18,385 26,727
Trustees' fees and expenses ....................................... 7,128 2,026 3,294
Transfer agent fees ............................................... 16,684 24,407 34,205
Registration and filing fees ...................................... 127 1,506 904
Printing costs .................................................... 39,639 8,057 20,930
Other ............................................................. 8,360 2,005 11,636
----------- ------------ ------------
GROSS EXPENSES .................................................... 658,972 294,529 819,367
Less: Fee waivers .......................................... (125,052) (14,287) (19,605)
----------- ------------ ------------
Net Expenses ........................................ 533,920 280,242 799,762
----------- ------------ ------------
Net Investment Income ............................................. 4,026,786 1,365,450 595,761
----------- ------------ ------------
Realized/Unrealized Gains (Losses) from Investments
Net realized gains from investment transactions ................... 289,879 9,599,533
Net change in unrealized appreciation/depreciation from investments (382,061) 3,123,401
----------- ------------ ------------
Net realized/unrealized gains (losses) from investments ........... (92,182) 12,722,934
----------- ------------ ------------
Change in net assets resulting from operations .................... $ 4,026,786 $ 1,273,268 $ 13,318,695
=========== ============ ============
</TABLE>
See Notes to Financial Statements.
B-59
<PAGE> 136
STATEMENTS OF OPERATIONS
- ------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Ohio Stock Large
Tax-Free Balanced Appreciation Company
Bond Fund Fund Fund Select Fund*
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Income:
Interest income ........................................ $ 298,618 $ 272,077 $ 53,890 $ 27,906
Dividend income ........................................ 117,338 174,699 211,436
--------- ----------- ----------- -----------
TOTAL INCOME ........................................... 298,618 389,415 228,589 239,342
--------- ----------- ----------- -----------
Expenses:
Investment advisory fees ............................... 27,235 90,074 110,134 114,907
Administration fees .................................... 11,192 20,017 27,534 28,727
12b-1 fees (Investor A) ................................ 12,199 12,307 33,459 35,726
12b-1 fees (Investor B) ................................ 5,674 50,855 3,833 744
Custodian and accounting fees .......................... 7,626 15,012 20,650 21,545
Audit and legal fees ................................... 3,969 20,740 8,151 9,042
Organization costs ..................................... 56 7,602 1,848
Trustees' fees and expenses ............................ 463 840 1,293 1,182
Transfer agent fees .................................... 20,196 22,891 59,244 19,384
Registration and filing fees ........................... 1,477 2,160 9,441 2,161
Printing costs ......................................... 2,220 4,825 11,023 5,328
Other .................................................. 359 6,854 1,515 1,106
--------- ----------- ----------- -----------
GROSS EXPENSES ......................................... 92,610 246,631 293,879 241,700
Less: Fee waivers ............................... (5,447) (15,319)
--------- ----------- ----------- -----------
Net Expenses ............................. 87,163 231,312 293,879 241,700
--------- ----------- ----------- -----------
Net Investment Income (Loss) ........................... 211,455 158,103 (65,290) (2,358)
--------- ----------- ----------- -----------
Realized/Unrealized Gains (Losses) from Investments
Net realized gains (losses) from investment transactions 393,488 1,280,076 2,235,214 2,725,973
Net change in unrealized appreciation/depreciation
from investments .................................... (451,482) 230,592 (823,228) 2,301,591
--------- ----------- ----------- -----------
Net realized/unrealized gains (losses) from investments (57,994) 1,510,668 1,411,986 5,027,564
--------- ----------- ----------- -----------
Change in net assets resulting from operations ......... $ 153,461 $ 1,668,771 $ 1,346,696 $ 5,025,206
========= =========== =========== ===========
<FN>
- ----------
* For the period January 2, 1997 (commencement of operations) through June 30, 1997.
</TABLE>
See Notes to Financial Statements.
B-60
<PAGE> 137
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
U.S. Government U.S. Government
Securities Money Market Income
Fund Fund
-------------------------------- ------------------------------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
1997 1996 1997 1996
------------- ------------- ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income .............................. $ 4,026,786 $ 8,268,622 $ 1,365,450 $ 1,942,237
Net realized gains (losses) from
investment transactions .......................... 289,879 90,347
Net change in unrealized appreciation/
depreciation from investments .................... (382,061) (1,183,269)
------------- ------------- ------------ ------------
Change in net assets resulting from operations ........... 4,026,786 8,268,622 1,273,268 849,315
------------- ------------- ------------ ------------
Distributions to Investor A Shareholders:
From net investment income ......................... (4,026,786) (8,268,622) (1,604,908) (1,865,718)
In excess of net investment income
From net realized gains from investments
Distributions to Investor B Shareholders:
From net investment income ......................... (44,492) (56,824)
In excess of net investment income
From net realized gains from investments
In excess of net realized gains
------------- ------------- ------------ ------------
Change in net assets from shareholder
distributions ......................................... (4,026,786) (8,268,622) (1,649,400) (1,922,542)
------------- ------------- ------------ ------------
Capital Transactions:
Proceeds from shares issued ........................ 215,012,058 413,837,358 19,590,644 2,867,087
Dividends reinvested ............................... 1,205,512 2,193,920 228,919 486,495
Cost of shares redeemed ............................ (230,372,779) (392,509,518) (3,331,058) (5,090,697)
------------- ------------- ------------ ------------
Change in net assets from capital transactions ........... (14,155,209) 23,521,760 16,488,505 (1,737,115)
------------- ------------- ------------ ------------
Change in net assets ..................................... (14,155,209) 23,521,760 16,112,373 (2,810,342)
Net Assets:
Beginning of period ................................ 181,017,259 157,495,499 34,990,833 37,801,175
------------- ------------- ------------ ------------
End of period ...................................... $ 166,862,050 $ 181,017,259 $ 51,103,206 $ 34,990,833
============= ============= ============ ============
Share Transactions:
Issued ............................................. 215,012,058 413,837,358 2,076,722 299,041
Reinvested ......................................... 1,205,512 2,193,920 24,160 51,049
Redeemed ........................................... (230,372,779) (392,509,518) (355,574) (534,677)
------------- ------------- ------------ ------------
Change in shares ......................................... (14,155,209) 23,521,760 1,745,308 (184,587)
============= ============= ============ ============
<CAPTION>
Income Equity
Fund
----------------------------
Six months
ended Year ended
June 30, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
From Investment Activities:
Operations:
Net investment income .............................. $ 595,761 $ 1,134,267
Net realized gains (losses) from
investment transactions .......................... 9,599,533 13,473,952
Net change in unrealized appreciation/
depreciation from investments .................... 3,123,401 (1,397,638)
------------ ------------
Change in net assets resulting from operations ........... 13,318,695 13,210,581
------------ ------------
Distributions to Investor A Shareholders:
From net investment income ......................... (561,313) (1,089,197)
In excess of net investment income ................. (11,775)
From net realized gains from investments ........... (10,109,545)
Distributions to Investor B Shareholders:
From net investment income ......................... (34,448) (45,070)
In excess of net investment income ................. (1,105)
From net realized gains from investments ........... (941,583)
In excess of net realized gains .................... (94,220)
------------ ------------
Change in net assets from shareholder
distributions ......................................... (595,761) (12,292,495)
------------ ------------
Capital Transactions:
Proceeds from shares issued ........................ 10,136,855 12,638,065
Dividends reinvested ............................... 446,715 12,143,803
Cost of shares redeemed ............................ (6,547,202) (8,378,319)
------------ ------------
Change in net assets from capital transactions ........... 4,036,368 16,403,549
------------ ------------
Change in net assets ..................................... 16,759,302 17,321,635
Net Assets:
Beginning of period ................................ 81,000,024 63,678,389
------------ ------------
End of period ...................................... $97,759,326 $81,000,024
============ ============
Share Transactions:
Issued ............................................. 795,352 997,947
Reinvested ......................................... 35,145 1,001,471
Redeemed ........................................... (511,236) (656,491)
------------ ------------
Change in shares ......................................... 319,261 1,342,927
============ ============
</TABLE>
See Notes to Financial Statements.
B-61
<PAGE> 138
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Ohio Tax-Free Bond Fund Balanced Fund
---------------------------- ----------------------------
Six months Six months
ended Year ended ended Year ended
June 30, December 31, June 30, December 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss) ....................... $ 211,455 $ 434,913 $ 158,103 $ 514,538
Net realized gains (losses) from
investment transactions .......................... 393,488 (2,919) 1,280,076 (153,623)
Net change in unrealized appreciation/
depreciation from investments .................... (451,482) (107,900) 230,592 853,589
------------ ------------ ------------ ------------
Change in net assets resulting
from operations ...................................... 153,461 324,094 1,668,771 1,214,504
------------ ------------ ------------ ------------
Distributions to Investor A Shareholders:
From net investment income ......................... (288,601) (412,215) (100,684) (346,017)
In excess of net investment income ................. (1,775)
From net realized gains from
investments ......................................
Distributions to Investor B Shareholders:
From net investment income ......................... (26,272) (21,400) (59,336) (168,520)
In excess of net investment income ................. (1,028)
From net realized gains from
investments ......................................
------------ ------------ ------------ ------------
Change in net assets from shareholder
distributions ........................................ (314,873) (433,615) (160,020) (517,340)
------------ ------------ ------------ ------------
Capital Transactions:
Proceeds from shares issued ........................ 11,907,778 632,048 1,529,683 11,628,310
Dividends reinvested ............................... 22,822 26,194 165,154 546,821
Cost of shares redeemed ............................ (14,952,068) (588,738) (3,337,515) (6,534,711)
------------ ------------ ------------ ------------
Change in net assets from capital
transactions ......................................... (3,021,468) 69,504 (1,642,678) 5,640,420
------------ ------------ ------------ ------------
Change in net assets .................................... (3,182,880) (40,017) (133,927) 6,337,584
Net Assets:
Beginning of period ................................ 11,677,024 11,717,041 20,794,478 14,456,894
------------ ------------ ------------ ------------
End of period ...................................... $ 8,494,144 $ 11,677,024 $ 20,660,551 $ 20,794,478
============ ============ ============ ============
Share Transactions:
Issued ............................................. 1,143,934 59,532 125,784 1,017,399
Reinvested ......................................... 2,182 2,490 13,694 47,842
Redeemed ........................................... (1,443,696) (55,955) (276,190) (571,147)
------------ ------------ ------------- ------------
Change in shares ........................................ (297,580) 6,067 (136,712) 494,094
============ ============ ============ ============
<CAPTION>
Stock Large
Appreciation Company
Fund Select Fund
---------------------------- ------------
Six months For the
ended Year ended period ended
June 30, December 31, June 30,
1997 1996 1997*
------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss) ....................... $ (65,290) $ (462,477) $ (2,358)
Net realized gains (losses) from
investment transactions .......................... 2,235,214 5,645,154 2,725,973
Net change in unrealized appreciation/
depreciation from investments .................... (823,228) (1,674,745) 2,301,591
------------ ------------ ------------
Change in net assets resulting
from operations ...................................... 1,346,696 3,507,932 5,025,206
------------ ------------ ------------
Distributions to Investor A Shareholders:
From net investment income ......................... (76,753)
In excess of net investment income ................. (289)
From net realized gains from
investments ...................................... (3,106,226)
Distributions to Investor B Shareholders:
From net investment income
In excess of net investment income
From net realized gains from
investments ...................................... (65,866)
------------ ------------ ------------
Change in net assets from shareholder
distributions ........................................ (3,172,381) (76,753)
------------ ------------ ------------
Capital Transactions:
Proceeds from shares issued ........................ 1,913,602 3,709,128 29,182,489
Dividends reinvested ............................... 2,969,201 95
Cost of shares redeemed ............................ (10,191,994) (16,166,715) (2,941,364)
------------ ------------ ------------
Change in net assets from capital
transactions ......................................... (8,278,392) (9,488,386) 26,241,220
------------ ------------ ------------
Change in net assets .................................... (6,931,696) (9,152,835) 31,189,673
Net Assets:
Beginning of period ................................ 31,914,337 41,067,172 --
------------ ------------ ------------
End of period ...................................... $ 24,982,641 $ 31,914,337 $ 31,189,673
============ ============ ============
Share Transactions:
Issued ............................................. 202,969 373,503 2,902,527
Reinvested ......................................... 315,294 8
Redeemed ........................................... (1,081,817) (1,628,699) (271,932)
------------ ------------ ------------
Change in shares ........................................ (878,848) (939,872) 2,630,603
============ ============ ============
<FN>
For the period January 2, 1997 (commencement of operations) through June 30, 1997
</TABLE>
See Notes to Financial Statements.
B-62
<PAGE> 139
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. June 30, 1997
U.S. Government Securities Money Market Fund
(Unaudited)
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
- ------------- ------------------------------------ ------------
<S> <C>
U.S. GOVERNMENT AGENCIES (59.6%):
Federal Farm Credit Bank:
$ 2,000,000 5.55%, 7/1/97 ....................... $ 2,000,000
3,000,000 Discount Note, 7/22/97 .............. 2,990,410
2,000,000 Discount Note, 7/28/97 .............. 1,991,720
Federal Home Loan Bank:
4,500,000 Discount Note, 7/3/97 ............... 4,498,623
3,000,000 Discount Note, 9/19/97 .............. 2,964,200
Federal Home Loan Mortgage Corp.:
21,558,000 Discount Note, 7/1/97 ............... 21,558,000
3,000,000 Discount Note, 7/2/97 ............... 2,999,543
7,000,000 Discount Note, 7/3/97 ............... 6,997,896
5,000,000 Discount Note, 7/7/97 ............... 4,995,492
6,000,000 Discount Note, 7/11/97 .............. 5,990,976
4,000,000 Discount Note, 7/24/97 .............. 3,986,174
2,000,000 5.84%, 4/8/98 ....................... 1,997,332
Federal National Mortgage Assoc.:
4,000,000 Discount Note, 7/18/97 .............. 3,989,555
6,000,000 Discount Note, 7/23/97 .............. 5,980,163
2,000,000 Discount Note, 8/4/97 ............... 1,989,611
4,000,000 5.62%, 8/12/97 ...................... 3,999,207
4,000,000 5.27%*, 7/1/97 ...................... 3,999,734
2,000,000 5.36%*, 9/2/97 ...................... 2,000,000
2,000,000 5.50%, 9/11/97 ...................... 2,000,000
1,500,000 5.52%*, 7/12/97 ..................... 1,499,868
3,000,000 Discount Note, 10/9/97 .............. 2,953,667
2,000,000 5.79%, 10/16/97 ..................... 2,000,000
2,000,000 5.65%, 10/20/97 ..................... 1,998,922
4,000,000 5.71%, 3/18/98 ...................... 3,994,885
-----------
Total U.S. Government Agencies 99,375,978
-----------
COMMERCIAL PAPER (23.1%):
Building Materials (1.2%):
2,000,000 Sherwin-Williams Co., Discount
Note, 7/21/97 ..................... 1,993,855
-----------
Chemicals (4.2%):
4,000,000 Monsanto Co., Discount Note, 7/2/97 . 3,999,381
3,000,000 Monsanto Co., Discount Note, 9/22/97 2,961,267
-----------
6,960,648
Financial Services (13.0%): -----------
3,000,000 Merrill Lynch, Discount Note, 7/14/97 2,993,955
<CAPTION>
Principal Security Amortized
Amount Description Cost
- -------------- ----------------------------------------- ------------
<S> <C>
COMMERCIAL PAPER, CONTINUED:
Financial Services, continued:
$ 4,000,000 Merrill Lynch, Discount Note, 7/29/97 ...... $ 3,982,671
3,000,000 Morgan Stanley Group, Discount
Note, 7/22/97 .............................. 2,990,252
3,000,000 Morgan Stanley Group, Discount
Note, 8/8/97 ............................... 2,982,330
2,745,000 Safeco Corp., Discount Note, 7/11/97 ....... 2,740,738
2,000,000 Safeco Corp., Discount Note, 7/28/97 ....... 1,991,570
1,436,000 Sunbelt-Dix, Inc., Discount
Note, 8/26/97 .............................. 1,423,558
2,600,000 Sunbelt-Dix, Inc., Discount
Note, 9/9/97 ............................... 2,571,841
-----------
21,676,915
Utilities--Electric (4.7%): -----------
7,970,000 Baltimore Gas & Electric, Discount
Note, 9/5/97 ............................... 7,887,152
-----------
Total Commercial Paper
38,518,570
CORPORATE BONDS (0.6%): -----------
Financial Services (0.6%):
1,000,000 General Electric Capital Corp.,
5.32%*, 7/1/97 ........................ 999,935
-----------
Total Corporate Bonds
999,935
-----------
REPURCHASE AGREEMENTS (17.0%):
8,393,000 Dean Witter, 6.10%, 7/1/97,
(Collateralized by $21,893,955
various U.S. Government Agency
Securities, 5.50%-12.00%, 7/25/97-
5/1/27, market value--$8,560,861) ......... 8,393,000
20,000,000 Prudential Funding Corp., 5.90%,
7/1/97, (Collateralized by $28,283,147
various U.S. Treasury and U.S. ............
Government Agency Securities,
5.50%-12.50%, 1/1/00-7/20/24,
market value--$20,401,006) ................ 20,000,000
-----------
Total Repurchase Agreements
28,393,000
Total (Cost--$167,287,483)(a) ------------
$167,287,483
============
<FN>
- ----------
The percentages indicated are based on net assets of $166,862,050.
* Variable Rate. Rate presented represents rate in effect at June 30, 1997.
Maturity date reflects the next rate change date.
(a) Cost and value for federal income tax reporting purposes are the same.
</TABLE>
See Notes to Financial Statements.
B-63
<PAGE> 140
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
U.S. Government Income Fund
(Unaudited)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- ------------ --------------------------------------------- ----------------
<S> <C>
CORPORATE BONDS (29.2%):
Automobile (0.3%):
$ 150,000 General Motors Corp., 9.63%, 12/1/00.......... $ 163,313
-----------
Banking (8.7%):
1,000,000 MBNA Master Credit Card Trust, Series
1995-D, Class A, 6.05%, 11/15/02
ABS............................................. 990,320
500,000 Mellon Capital I, 7.72% 12/1/26, Callable
12/1/06 @ 103.86, Guaranteed by
Mellon Bank Corp................................ 481,875
1,000,000 Midland Bank PLC, (HSBC), 6.95%,
3/15/11......................................... 965,000
1,983,187 PNC Mortgage Securities Corp., Series
1997-3, Class 2A3, 7.50%, 5/25/27
CMO............................................. 1,999,901
-----------
4,437,096
Beverages (0.4%): -----------
200,000 PepsiCo, Inc., 7.75%, 10/1/98..................... 203,482
-----------
Computers & Software (0.4%):
200,000 International Business Machines Corp.,
9.38%, 11/1/97.................................... 200,418
-----------
Financial Services (14.9%):
200,000 American Express Master Trust, Series
1994-1, Class A, 7.15%, 8/15/99 ABS............. 202,910
200,000 Associates Corp., N.A., 5.25%, 3/3/00........... 193,500
1,000,000 Boatmen's Auto Trust, Series 1996-A,
Class A3, 6.75% 1/15/03 ABS..................... 1,009,690
690,000 Discover Card Trust, Series 1992-B, Class
A, 6.80%, 6/16/00 ABS........................... 692,946
1,000,000 First Chicago Master Trust II, Series 1994-
L, Class A, 7.15%, 4/15/01 ABS.................. 1,015,540
200,000 Ford Capital BV, 9.88%, 5/15/02,
Guaranteed by Ford Motor Co..................... 225,000
500,000 Ford Motor Credit Co., 6.25%, 12/8/05........... 472,500
500,000 Grand Metropolitian Investment Co.,
7.45%, 4/15/35, Putable 4/15/05 @ 100,
Guaranteed by Grand Metropolitan
PLC............................................. 517,500
500,000 Lehman Brothers Holdings, 8.50%, 5/1/07......... 540,000
1,000,000 Premier Auto Trust, Series 1994-4, Class
CTFS, 6.85%, 5/22/99 ABS........................ 1,013,020
650,000 Security Pacific Acceptance Corp., Series
1995-1, Class A2, 6.70%, 4/10/20 ABS............ 649,441
797,109 The Money Store Home Equity Trust,
Series 1995-A, Class A2, 7.93%,
2/15/14 CMO..................................... 810,787
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- ----------- --------------------------------------------- ----------------
<S> <C>
CORPORATE BONDS, CONTINUED:
Financial Services, continued:
$ 250,000 Toyota Motor Credit, 7.13%, 9/26/06,
Callable 9/26/99 @ 100....................... $ 252,500
-----------
7,595,334
Gas--Transmission (0.7%): -----------
356,000 Trans-Canada Pipelines, 6.77%, 4/30/01......... 357,335
-----------
Retail--Department Stores (0.5%):
250,000 Sears, Roebuck & Co., 9.50%, 6/1/99............ 264,062
-----------
Steel (0.4%):
200,000 Worthington Industries, Inc. 7.13%,
5/15/06....................................... 201,000
-----------
Telecommunication (2.2%):
150,000 Northern Telecom, 8.75%, 6/12/01............... 160,687
1,000,000 U.S. West Capital Funding, Inc., 6.31%,
11/1/05, Putable 11/1/00 @ 100................. 991,250
-----------
1,151,937
-----------
Utility--Electric (0.7%):
200,000 Oklahoma Gas & Electric, 6.25%,
10/15/00....................................... 198,250
150,000 Pacific Gas & Electric, 8.75%, 1/1/01.......... 159,563
-----------
357,813
-----------
Total Corporate Bonds 14,931,790
-----------
MUNICIPAL BONDS (0.4%):
Kentucky (0.4%):
200,000 Covington, IRS Center, 6.00%, 12/1/97**........ 200,168
-----------
Total Municipal Bonds 200,168
-----------
U.S. GOVERNMENT AGENCIES (55.0%):
Federal Farm Credit:
25,000 7.75%, 12/9/97.................................. 25,236
Federal Home Loan Bank:
200,000 6.50%, 3/2/01, Callable 9/2/97 @ 100........... 200,136
300,000 5.52%*, 7/2/97................................. 299,970
500,000 7.04%, 5/24/99................................. 507,450
500,000 6.67%, 4/6/01.................................. 501,735
875,000 6.38%, 4/29/03................................. 852,250
690,000 9.50%, 2/25/04................................. 792,134
Federal Home Loan Mortgage Corp.:
800,000 6.30%, 4/8/99, Continuously Callable
@ 100.......................................... 798,576
1,343,819 6.00%, 12/1/99, Gold Pool #M80147.............. 1,315,854
1,000,000 6.55%, 1/4/00.................................. 1,004,550
700,000 6.80%, 9/18/02, Continuously Callable
@ 100.......................................... 695,093
</TABLE>
B-64
<PAGE> 141
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
U.S. Government Income Fund
(Unaudited)
Continued
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- ---------- -------------------------------------------- ------------
<S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp., continued:
$ 225,000 6.20%, 4/15/03............................... $ 220,203
200,000 7.98%, 9/8/04, Callable 9/8/97 @ 100......... 200,356
1,000,000 5.90%, 2/14/06............................... 943,150
436,505 7.50%, 3/15/15, Series 1262,
Class F CMO.................................. 439,308
1,000,000 6.00%, 1/15/18, Series 1527,
Class E CMO.................................. 990,510
1,000,000 7.20%, 6/15/18, Series 1350,
Class F CMO.................................. 1,003,210
Federal National Mortgage Assoc.:
500,000 5.62%, 8/12/97............................... 500,220
1,000,000 5.33%, 6/26/98, Continuously Callable
@ 100........................................ 995,450
500,000 6.62%, 7/24/98, Callable 7/24/97 @ 100....... 500,360
500,000 9.05%, 4/10/00............................... 533,115
1,000,000 6.71%, 3/13/02, Callable 3/13/00 @ 100....... 999,000
200,000 7.00%, 8/12/02, Callable 8/25/97 @ 100....... 200,068
200,000 6.95%, 9/10/02, Callable 9/10/97 @ 100....... 199,806
200,000 7.30%, 10/28/02, Callable 10/28/97
@ 100........................................ 200,066
1,181,311 6.00%, 2/1/03, Pool #335463.................. 1,151,471
1,481,719 6.00%, 5/1/03, Pool #347156.................. 1,439,534
625,000 6.38%, 6/25/03, Continuously Callable
@ 100........................................ 608,487
300,000 6.85%, 4/5/04................................ 303,291
169,187 6.75%, 8/25/04, Series 1992-152,
Class H CMO.................................. 168,708
1,050,000 8.50%, 2/1/05, Callable 2/1/00 @ 100......... 1,093,292
1,000,000 7.00%, 9/25/05, Series 1992-110,
Class G CMO.................................. 1,002,440
1,000,000 7.55%, 3/27/07, Callable 3/27/00 @ 100....... 1,011,610
1,000,000 7.50%, 3/17/14, Series 1997-39,
Class A CMO.................................. 1,004,223
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- ---------- -------------------------------------------- ------------
<S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
$ 612,199 7.00%, 9/25/19, Series 1991-155,
Class PE CMO................................. $ 610,840
Government National Mortgage Assoc.:
678,197 8.00%, 5/15/23, Pool #351752................. 692,866
Private Export Funding Corp.:
1,000,000 6.24%, 5/15/02............................... 987,500
Student Loan Marketing Assoc.:
1,000,000 6.05%, 9/14/00............................... 989,310
862,906 5.61%*, 10/25/04, Series 1996-3,
Class A1 ABS................................. 863,424
Tennessee Valley Authority:
1,250,000 6.24%, 7/15/45, Putable 7/15/01 @ 100,
Callable 7/15/20............................. 1,235,938
-----------
Total U.S. Government Agencies 28,080,740
-----------
U.S. TREASURY NOTES (12.3%):
750,000 5.88%, 2/28/99............................... 748,230
1,000,000 5.88%, 3/31/99............................... 997,350
750,000 8.00%, 5/15/01............................... 791,745
1,000,000 6.63%, 4/30/02............................... 1,008,880
250,000 6.25%, 2/15/03............................... 248,068
1,000,000 6.88%, 5/15/06............................... 1,020,170
1,450,000 7.00%, 7/15/06............................... 1,490,992
-----------
Total U.S. Treasury Notes 6,305,435
-----------
INVESTMENT COMPANIES (2.4%):
92,187Dreyfus Treasury Prime Fund........ 92,187
1,136,503Federated U.S. Treasury Services Fund 1,136,503
-----------
Total Investment Companies 1,228,690
-----------
Total (Cost--$50,483,675)(a) $50,746,823
===========
<FN>
- ----------
Percentages indicated are based on net assets of $51,103,206.
* Variable Rate.
** Federally taxable.
ABS--Asset Backed Security
CMO--Collateralized Mortgage Obligation
PLC--Public Liability Company (British)
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation........... $ 529,636
Unrealized depreciation........... (266,488)
----------
Net unrealized appreciation....... $ 263,148
==========
</TABLE>
See Notes to Financial Statements.
B-65
<PAGE> 142
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
THE RIVERFRONT FUNDS, INC.
- -----------------------------------------------------------------
Income Equity Fund JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- -------- ------------------------------------ -----------
<S> <C>
COMMON STOCK (99.3%):
Aerospace (2.0%):
45,300 B.F. Goodrich Co. ...................... $1,962,056
----------
Apparel (1.8%):
5,700 Intimate Brands, Inc. .................. 119,700
81,100 The Limited, Inc. ...................... 1,642,275
----------
1,761,975
Automobile (0.6%): ----------
3,000 Ford Motor Co. ......................... 113,250
15,200 Volvo AB--ADR .......................... 406,600
----------
519,850
Auto Parts (7.0%): ----------
39,900 Dana Corp. ............................. 1,516,200
62,400 Echlin, Inc. ........................... 2,246,400
81,000 ITT Industries, Inc. ................... 2,085,750
18,000 TRW, Inc. .............................. 1,022,625
----------
6,870,975
----------
Banks (4.1%):
1,550 BankBoston Corp. ....................... 111,697
15,800 Bankers' Trust New York Corp. .......... 1,374,600
17,200 Central Fidelity Banks, Inc. ........... 610,600
35,800 Crestar Financial Corp. ................ 1,391,725
15,400 Magna Group, Inc. ...................... 535,150
----------
4,023,772
Brokers (0.9%): ----------
20,300 A.G. Edwards, Inc. ..................... 875,437
----------
Chemicals (5.7%):
84,500 Ethyl Corp. ............................ 781,625
30,000 Hercules, Inc. ......................... 1,436,250
35,100 Imperial Chemical Industries PLC ADR ... 1,996,313
24,200 PPG Industries, Inc. ................... 1,406,625
----------
5,620,813
----------
Computers & Software (0.2%):
3,300 Seagate Technology, Inc. (b) ........... 116,119
----------
Cosmetics (2.1%):
41,200 International Flavors & Fragrances, Inc. 2,080,600
----------
Department Stores (4.3%):
44,500 May Department Stores Co. .............. 2,102,625
40,100 J.C. Penney Co., Inc. .................. 2,092,719
----------
4,195,344
Distribution/Wholesale (0.9%): ----------
56,300 Unisource Worldwide, Inc. .............. 900,800
----------
Diversified (0.1%):
1,500 National Service Industries, Inc. ...... 73,031
----------
Electronics (3.4%):
45,400 AMP, Inc. .............................. 1,895,450
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- -------- ------------------------------------ -----------
<S> <C>
COMMON STOCK, CONTINUED:
Electronics, continued:
26,600 Thomas & Betts Corp. ............... $1,398,162
----------
3,293,612
Engineering & Construction (1.8%): ----------
42,800 Foster Wheeler Corp. ............... 1,733,400
----------
Financial Services (3.4%):
74,600 H & R Block, Inc. .................. 2,405,850
14,900 Reuters Holdings PLC ............... 938,700
----------
3,344,550
Forest Products (5.0%): ----------
18,600 International Paper Co. ............ 903,263
63,300 Louisiana-Pacific Corp. ............ 1,337,213
27,700 Rayonier, Inc. ..................... 1,165,131
29,600 Union Camp Corp. ................... 1,480,000
----------
4,885,607
Grocery Stores (2.2%): ----------
57,400 Food Lion, Inc.--Class A ........... 410,769
46,800 Giant Food, Inc.--Class A .......... 1,515,150
5,000 Winn-Dixie Stores, Inc. ............ 186,250
----------
2,112,169
Health Products/Care (1.5%): ----------
40,300 Bard (C. R.), Inc. ................. 1,463,394
----------
Industrial Machinery (6.1%):
29,900 Aeroquip-Vickers, Inc. ............. 1,412,775
46,600 General Signal Corp. ............... 2,032,925
18,300 Tecumseh Products Co.--Class A ..... 1,095,713
57,600 Federal Signal Corp. ............... 1,447,200
----------
5,988,613
Insurance (2.0%): ----------
25,100 PartnerRe Ltd. ..................... 956,938
10,500 Transamerica Corp. ................. 982,406
----------
1,939,344
Manufacturing (2.2%): ----------
92,900 Pall Corp. ......................... 2,159,925
----------
Metals (2.0%):
27,800 Reynolds Metals Co. ................ 1,980,750
----------
Mining (1.5%):
48,100 Freeport-McMoRan Copper & Gold, Inc.
Class B ............................ 1,497,112
1,900 Laguna Gold Co. (b) ................ 665
----------
1,497,777
Office Equipment & Supplies (1.0%): ----------
31,600 Wallace Computer Services, Inc. .... 949,975
----------
Oil & Gas Producers (7.6%):
1,300 Amoco Corp. ........................ 113,019
</TABLE>
Continued
B-66
<PAGE> 143
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC.
- ----------------------------------------------------------------------------
Income Equity Fund JUNE 30, 1997
(Unaudited)
Continued
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- --------- ----------------------------------------------------- -----------
<S> <C>
COMMON STOCK, CONTINUED:
Oil & Gas Producers, continued:
32,900 Kerr-McGee Corp. .................................. $2,085,038
21,800 LG&E Energy Corp. ................................. 480,962
69,600 MAPCO, Inc. ....................................... 2,192,400
14,400 Mobil Corp. ....................................... 1,006,200
11,600 National Fuel Gas Co. ............................. 486,475
33,600 Ultramar Diamond Shamrock Corp. ................... 1,096,200
----------
7,460,294
Oil--International (0.6%): ----------
5,000 Chevron Corp. ..................................... 369,687
1,800 Exxon Corp. ....................................... 110,700
575 Royal Dutch Petroleum Co.--New York
Shares ............................................ 122,834
----------
603,221
Packaged Food (2.8%): ----------
22,300 CPC International, Inc. ........................... 2,058,569
37,900 Lance, Inc. ....................................... 724,837
----------
2,783,406
Packaging & Container (4.0%): ----------
31,100 Sonoco Products Co. ............................... 946,606
15,400 Temple-Inland, Inc. ............................... 831,600
45,000 Tenneco, Inc. (b) ................................. 2,128,756
----------
3,906,962
Paper (2.6%): ----------
19,100 Consolidated Papers, Inc. ......................... 1,031,400
49,000 Westvaco Corp. .................................... 1,540,437
----------
2,571,837
Pharmaceuticals (2.1%): ----------
59,100 Pharmacia & Upjohn, Inc. ......................... 2,053,725
----------
Printing & Publishing (0.1%):
2,000 McGraw-Hill Cos., Inc. ........................... 117,625
----------
Savings & Loans (0.5%):
10,500 First Commerce Corp. ............................. 462,000
----------
Steel (2.0%):
63,500 Allegheny Teledyne, Inc. ......................... 1,714,500
2,500 Carpenter Technology Corp. ....................... 114,375
6,100 Worthington Industries, Inc. ..................... 111,706
----------
1,940,581
<CAPTION> ----------
Shares or
Principal Security Market
Amount Description Value
- --------- --------------------------------------------- -----------
<S> <C>
COMMON STOCK, CONTINUED:
Tobacco (0.2%):
5,000 Fortune Brands, Inc.......................... $ 186,563
-----------
Tools (1.1%):
26,500 Snap-On, Inc................................. 1,043,437
-----------
Transportation--Rail (1.4%):
38,200 Illinois Central Corp........................ 1,334,613
-----------
Utilities--Electric (3.1%):
3,400 CINergy Corp................................. 118,363
10,800 DPL, Inc..................................... 265,950
4,000 KU Energy Corp............................... 136,500
20,200 Long Island Lighting Co...................... 464,600
2,750 OGE Energy Corp.............................. 125,125
77,400 PacifiCorp................................... 1,702,800
9,600 SCANA Corp................................... 238,200
-----------
3,051,538
Utilities--Gas (2.6%): -----------
27,400 AGL Resources, Inc........................... 561,700
28,300 Brooklyn Union Gas Co........................ 810,088
17,100 NICOR, Inc................................... 613,462
15,000 People's Energy Corp......................... 561,563
-----------
2,546,813
Utilities--Telecommunications (6.8%): -----------
58,200 Alltel Corp.................................. 1,946,062
3,100 AT&T Corp.................................... 108,694
68,000 Frontier Corp................................ 1,355,750
34,600 GTE Corp..................................... 1,518,075
43,500 Southern New England
Telecommunications Corp...................... 1,691,063
1,500 US West Communications Group................. 56,531
-----------
6,676,175
-----------
Total Common Stock 97,088,678
------------
INVESTMENT COMPANIES (1.8%):
$ 13,300 Dreyfus Treasury Prime Fund.................. 13,300
164,620 Federated Short Term Government Fund......... 164,620
1,569,852 Federated U.S. Treasury Services Fund........ 1,569,852
-----------
Total Investment Companies 1,747,772
-----------
Total (Cost--$91,728,691)(a) $98,836,450
===========
<FN>
- ----------
Percentages indicated are based on net assets of $97,759,326.
(a) Represents cost for federal income tax purposes and
differs from value by net unrealized appreciation of
securities as follows:
Unrealized appreciation........... $ 8,250,457
Unrealized depreciation........... (1,142,698)
-----------
Net unrealized appreciation....... $ 7,107,759
===========
(b) Non-income producing security.
ADR--American Depository Receipt
PLC--Public Limited Company (British)
</TABLE>
See Notes to Financial Statements.
B-67
<PAGE> 144
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC.
- ------------------------------------------------------------------------------
Ohio Tax-Free Bond Fund JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
- -------- ------------------------------------------------------------------------------------------------------------- ----------
<S> <C>
MUNICIPAL BONDS (89.8%):
Indiana (3.2%):
$250,000 Columbus, Multi-School Building Corp., 7.15%, 1/15/02, Prerefunded 1/15/01 @ 102............................. $ 275,313
----------
Ohio (83.0%):
100,000 Aurora, City School District, GO, 5.40%, 12/1/06, Callable 12/1/05 @ 102 FGIC................................ 104,625
230,000 Butler County, Hospital Facilities Revenue, Middletown Regional Hospital Project, 6.00%, 11/15/10,
Callable 5/15/04 @ 101....................................................................................... 241,787
250,000 Cincinnati, GO, 5.25%, 12/1/01............................................................................... 258,438
150,000 Clermont County, Hospital Facilities Revenue, Mercy Health System, 6.38%, 9/1/01 AMBAC....................... 160,875
250,000 Clermont County, Waterworks Revenue, 6.63%, 12/1/16, Prerefunded 12/1/01 @ 102 AMBAC......................... 276,562
240,000 Cleveland, Waterworks Revenue, 1st Mortgage, Series F-92 A, 6.25%,
1/1/05, Prerefunded 1/1/02 @ 102
AMBAC........................................................................................................ 261,300
10,000 Cleveland, Waterworks Revenue, 1st Mortgage, Series F-92 A, 6.25%, 1/1/05, Callable 1/1/02 @ 102
AMBAC........................................................................................................ 10,750
250,000 Columbus, Sewer Revenue, 6.13%, 6/1/03, Callable 6/1/02 @ 102................................................ 270,938
175,000 Edgewood, City School District, GO, 6.30%, 12/1/02, Callable 12/1/01 @ 101 FGIC.............................. 189,656
250,000 Franklin County, Hospital Revenue, Children's Hospital Project, Series A, 6.40%, 11/1/06, Prerefunded
11/1/01 @ 102................................................................................................ 273,438
155,000 Hamilton County, Sewer System Revenue, Series A, 6.40%, 12/1/03, Callable 6/1/01 @ 102....................... 167,206
95,000 Hamilton County, Sewer System Revenue, Series A, 6.40%, 12/1/03, Prerefunded 6/1/01 @ 102.................... 103,550
80,000 Hamilton County, Sewer System Revenue, Series A, 6.40%, 12/1/04, Prerefunded 6/1/01 @ 102.................... 87,200
250,000 Mahoning County, GO, 5.60%, 12/1/02 MBIA..................................................................... 262,500
250,000 Montgomery County, GO, Issue I, Series A, 6.55%, 9/1/06, Prerefunded 9/1/01@ 100............................. 270,000
250,000 Olentangy Local School District, GO, Series A, 5.70%, 12/1/05, Callable 12/1/04 @ 102........................ 265,312
250,000 Pickerington Local School District, GO, 5.55%, 12/1/07, Callable 12/1/03 @ 102 AMBAC......................... 261,563
100,000 Springboro, City School District, GO, 6.60%, 12/1/02, Prerefunded 12/1/01 @ 102.............................. 110,125
250,000 State, GO, 5.80%, 8/1/01..................................................................................... 263,438
100,000 State, GO, 5.60%, 8/1/02..................................................................................... 105,125
100,000 State Building Authority, State Transportation Facilities, Series A, 7.00%, 9/1/07, Callable 9/1/00 @ 102
MBIA......................................................................................................... 108,875
245,000 State Building Authority, Adult Correctional Building Fund, Series A, 6.13%, 10/1/09, Callable 10/1/03 @
102.......................................................................................................... 263,987
95,000 State Building Authority, State Facilities, James Rhodes Project, 6.25%, 6/1/11, Callable 6/1/01 @ 102
MBIA-IBC..................................................................................................... 100,225
250,000 State Higher Educational Facilities Revenue, Series 11-1990-A, 6.70%, 5/1/02, Callable 5/1/00 @ 102
MBIA......................................................................................................... 268,750
160,000 State Housing Finance Agency, Single Family Mortgage Revenue, Series D, 6.80%, 9/1/05, Callable 9/1/01
@ 102........................................................................................................ 168,600
200,000 State Public Facilities Commission, Higher Education Capital Facilities, Series II-A, 5.20%, 5/1/05
AMBAC........................................................................................................ 205,250
250,000 State Public Facilities Commission, Higher Education Capital Facilities, Series II-B, 5.70% 11/1/03
AMBAC........................................................................................................ 265,000
175,000 State Public Facilities Commission, Higher Educational Facilities, 6.50%, 12/1/02, Callable 12/1/99 @ 102
AMBAC........................................................................................................ 186,156
200,000 State Water Development Authority Revenue, Pure Water, Series I, 6.90%, 12/1/98, ETM MBIA.................... 207,750
</TABLE>
Continued
B-68
<PAGE> 145
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Ohio Tax-Free Bond Fund
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------- ------------------------------------------------------------------------------------------------------ ----------
MUNICIPAL BONDS (CONTINUED):
Ohio, continued
<S> <C> <C>
$250,000 State Water Development Authority Revenue, Pure Water, 5.75%, 6/1/03, Callable 12/1/02 @ 102 MBIA .... $ 264,375
250,000 State Water Development Authority Revenue, Pure Water, 5.75%, 6/1/04, Callable 12/1/02 @ 102 MBIA .... 265,000
250,000 State Water Development Authority Revenue, Pure Water, 5.75%, 12/1/05, Callable 12/1/02 @ 102 MBIA ... 264,063
250,000 University of Cincinnati, Series I-1, 6.95%, 6/1/00, Prerefunded 6/1/99 @ 102......................... 267,500
250,000 University of Toledo, 7.00%, 6/1/03, Prerefunded 6/1/00 @ 102 MBIA ................................... 273,125
----------
Total Ohio Municipal Bonds 7,053,044
----------
Oregon (3.6%):
285,000 Tri-County Metropolitan Transportation District, GO, Light Rail Extension, Series A, 5.70%, 7/1/04,
Callable 7/1/02 @ 101............................................................................. 302,100
----------
Total Municipal Bonds 7,630,457
----------
INVESTMENT COMPANIES (9.5%):
370,495 Dreyfus Municipal Money Market Fund............................................................. 370,495
433,900 Federated Tax Free Money Market Fund............................................................ 433,900
----------
Total Investment Companies 804,395
----------
Total (Cost--$7,971,128)(a)
$8,434,852
- ------------ ==========
Percentages indicated are based on net assets of $8,494,144.
(a) Represents cost for federal income tax purposes and differs from value by net unrealized
appreciation of securities as follows:
<S> <C>
Unrealized appreciation... $ 463,724
Unrealized depreciation... 0
---------
Net unrealized appreciation $ 463,724
=========
AMBAC--Insured by AMBAC Indemnity Corp.
ETM--Escrowed to Maturity
FGIC--Insured by Financial Guaranty Insurance Corp.
GO--General Obligation
MBIA--Insured by Municipal Bond Insurance Assoc.
</TABLE>
See Notes to Financial Statements.
B-69
<PAGE> 146
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Balanced Fund
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------- ---------------------------------------------- -----------
<S> <C> <C>
COMMON STOCK (58.4%):
Aerospace (0.9%):
3,400 Boeing Co....................... ............ $ 180,413
-----------
Agricultural Machinery (1.8%):
6,800 Deere & Co...................... ............ 373,150
-----------
Apparel (0.9%):
3,100 Nike, Inc., Class B............. ............ 180,963
-----------
Automobile (0.8%):
4,350 Ford Motor Co................... ............ 164,213
-----------
Banks (3.6%):
4,600 BankBoston Corp................. ............ 331,488
1,500 Chase Manhattan Corp............ ............ 145,594
2,650 J.P. Morgan & Co................ ............ 276,594
-----------
753,676
-----------
Chemicals (0.9%):
3,000 E. I. du Pont de Nemours & Co... ............ 188,625
-----------
Confections & Beverages (1.8%):
4,000 Anheuser-Busch Cos., Inc........ ............ 167,750
2,850 Coca-Cola Co.................... ............ 198,788
-----------
366,538
-----------
Computers & Software (10.4%):
9,400 Cisco Systems, Inc. (b)......... ............ 630,975
4,000 Compaq Computer Corp. (b)....... ............ 397,000
4,300 Computer Associates International, Inc. ..... 239,456
4,600 Electronic Data Systems Corp.... ............ 188,600
3,000 Intel Corp...................... ............ 425,437
1,200 Microsoft Corp. (b)............. ............ 151,650
7,800 Silicon Graphics, Inc. (b)...... ............ 117,000
-----------
2,150,118
-----------
Diversified (1.8%):
5,600 General Electric Co............. ............ 366,100
-----------
Finance--Mortgage Loan/Banker (1.5%):
7,000 Federal National Mortgage Assoc. ............ 305,375
-----------
Financial Services (1.7%):
2,750 Student Loan Marketing Assoc.... ............ 349,250
-----------
Food Processing (1.1%):
10,000 Archer Daniels Midland Co....... ............ 235,000
-----------
Health Products/Care (2.0%):
7,400 Columbia/HCA Healthcare Corp.... ............ 290,912
2,000 Johnson & Johnson............... ............ 128,750
-----------
419,662
-----------
Household Products/Wares (2.1%):
3,000 Procter & Gamble Co............. ............ 423,750
-----------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------- ---------------------------------------------- -----------
<S> <C> <C>
COMMON STOCK, CONTINUED :
Industrial Machinery (0.9%):
1,700 Caterpillar, Inc............... ............. $ 182,537
-----------
Instruments--Scientific (1.5%):
7,200 Millipore Corp................. ............. 316,800
-----------
Insurance (1.1%):
4,500 Sunamerica, Inc................ ............. 219,375
-----------
Oil & Gas Producers (1.0%):
2,000 Texaco, Inc.................... ............. 217,500
-----------
Oil--International (5.1%):
4,600 Amoco Corp..................... ............. 399,912
5,000 British Petroleum PLC, ADR..... ............. 374,375
4,600 Exxon Corp..................... ............. 282,900
-----------
1,057,187
-----------
Pharmaceuticals (4.4%):
6,500 Bristol-Myers Squibb Co........ ............. 526,500
2,400 Merck & Co., Inc............... ............. 248,400
1,200 Pfizer, Inc.................... ............. 143,400
-----------
918,300
-----------
Printing & Publishing (1.1%):
4,500 New York Times Co--Class A...... ............ 227,250
-----------
Real Estate (1.5%):
17,000 Health & Retirement Properties Tr 319,812
-----------
Restaurants (1.0%):
8,150 Wendy's International, Inc..... ............. 211,391
-----------
Rubber & Tires (0.8%):
2,550 Goodyear Tire & Rubber Co...... ............. 161,447
-----------
Steel (0.7%):
8,000 Worthington Industries, Inc.... ............. 146,500
-----------
Tobacco (1.7%):
7,800 Philip Morris Cos., Inc........ ............. 346,125
-----------
Tools (1.0%):
5,400 Black & Decker Corp............ ............. 200,812
-----------
Utilities--Electric (2.1%):
6,000 CINergy Corp................... ............. 208,875
4,500 Duke Power Co.................. ............. 215,719
-----------
424,594
-----------
Utilities--Telecommunications (3.2%):
2,300 Ameritech Corp................. ............. 156,256
4,400 AT&T Corp...................... ............. 154,275
5,400 Cincinnati Bell, Inc........... ............. 170,100
</TABLE>
Continued
B-70
<PAGE> 147
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Balanced Fund
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- --------------------------------------------- -----------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Utilities--Telecommunications, continued:
4,300 GTE Corp.......................... $ 188,662
-----------
669,293
-----------
Total Common Stock 12,075,756
-----------
CORPORATE BONDS (3.7%):
Brokers (0.8%):
$ 163,000 Merrill Lynch & Co., Inc., 9.00%, 5/1/98 167,130
-----------
Department Stores (1.0%):
200,000 Sears, Roebuck & Co., 5.82%, 2/22/99 199,000
-----------
Tobacco (1.9%):
382,000 Philip Morris Cos., Inc., 8.38%, 6/1/01 404,443
-----------
Total Corporate Bonds 770,573
-----------
U.S. GOVERNMENT AGENCIES (10.9%):
Federal Home Loan Bank:
100,000 5.97%, 12/14/98................... 100,023
500,000 6.25%,7/16/99..................... 500,635
200,000 6.11%, 1/18/01.................... 196,750
300,000 6.04%, 2/14/01.................... 294,543
-----------
1,091,951
-----------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- --------------------------------------------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Assoc.:
$ 410,000 5.69%,11/29/00, continuously callable ....... $ 398,983
-----------
FEDERAL NATIONAL MORTGAGE ASSOC.:
300,000 6.95%,11/13/06 .............................. 297,555
-----------
Government National Mortgage Assoc.:
468,654 6.50%,11/15/10 .............................. 462,107
-----------
Total U.S. Government Agencies 2,250,596
-----------
U.S. TREASURY NOTES (23.8%):
1,000,000 5.75%, 12/31/98 ............................. 996,890
50,000 5.88%, 2/28/99 .............................. 498,820
700,000 6.25%, 5/31/00 .............................. 700,133
300,000 6.25%, 10/31/01 ............................. 298,431
300,000 6.38%, 8/15/02 .............................. 299,844
500,000 5.75%, 8/15/03 .............................. 482,665
600,000 6.88%, 5/15/06 .............................. 612,102
1,000,000 6.53%, 7/15/06 .............................. 1,028,270
-----------
Total U.S. Treasury Notes 4,917,155
-----------
INVESTMENT COMPANIES (2.7%):
2,028 Dreyfus Treasury Prime Fund 2,028
558,140 Federal U.S. Treasury Services Fund 558,140
-----------
Total Investment Companies 560,168
-----------
Total (Cost--$18,290,057)(a) $20,574,248
===========
- ---------------
The percentages indicated are based on net assets of $20,660,551.
(a) Represents cost for federal income tax purposes and differs from value by net unrealized
appreciation of securities as follows:
Unrealized appreciation ............ $2,464,438
Unrealized depreciation ............ (180,247)
----------
Net unrealized appreciation ........ $2,284,191
==========
(b) Non-income producing security.
ADR--American Depository Receipt
PLC--Public Liability Company
</TABLE>
See Notes to Financial Statements.
B-71
<PAGE> 148
SCHEDULE OF PORTFOLIO INVESTMENTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Stock Appreciation Fund
(Unaudited)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- --------------------------------------------- -----------
<S> <C> <C>
COMMON STOCK (96.3%):
Apparel (3.2%):
10,000 Intimate Brands, Inc............. ........... 210,000
12,500 Jones Apparel Group, Inc. (b).... ........... 596,875
-----------
806,875
-----------
Auto Parts (1.7%):
16,000 Gentex Corp. (b)................. ........... 316,000
10,000 Simpson Industries, Inc.......... ........... 106,250
-----------
422,250
-----------
Banks (4.0%):
14,400 Colonial BancGroup, Inc.......... ........... 349,200
4,000 HUBCO, Inc....................... ........... 116,000
14,000 Sterling Bancorp................. ........... 260,750
6,000 Vermont Financial Services Corp.. ........... 282,000
-----------
1,007,950
-----------
Building--Mobile Home (1.4%):
20,000 Coachmen Industries, Inc......... ........... 342,500
-----------
Building Materials (1.1%):
8,600 Congoleum Corp.--Class A (b)...... .......... 101,050
4,500 Medusa Corp...................... ........... 172,688
-----------
273,738
-----------
Chemicals (1.7%):
6,000 Cabot Corp....................... ........... 170,250
27,000 CFC International, Inc. (b)...... ........... 263,250
-----------
433,500
-----------
Computer, Software & Services (18.6%):
3,200 Adaptec, Inc. (b)................ ........... 111,200
10,000 Cisco Systems, Inc. (b).......... ........... 671,250
6,000 Compuware Corp. (b).............. ........... 286,500
3,500 Comverse Technology, Inc. (b).... ........... 182,000
8,000 Dell Computer Corp. (b).......... ........... 939,500
6,000 Gateway 2000, Inc. (b)........... ........... 194,625
9,900 Microsoft Corp. (b).............. ........... 1,251,113
10,000 Nimbus CD International, Inc. (b) ........... 110,000
10,000 Structural Dynamics Research Corp. (b) ...... 262,500
7,000 Sun Microsystems, Inc. (b)....... ........... 260,531
40,000 The Learning Co., Inc. (b)....... ........... 375,000
-----------
4,644,219
-----------
Cosmetics & Toiletries (3.3%):
15,000 Nature's Sunshine Products, Inc.. 271,875
20,000 NBTY, Inc. (b)................... ........... 560,000
-----------
831,875
-----------
Data Processing (1.0%):
5,000 National Data Corp............... ........... 216,562
-----------
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------- --------------------------------------------- -----------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Direct Marketing (1.3%):
7,000 Catalina Marketing Corp. (b)..... $ 336,875
-----------
Distribution/Wholesaling (2.3%):
18,000 Tech Data Corp. (b).............. 565,875
-----------
Electrical (1.5%):
15,000 Chicago Miniature Lamp, Inc. (b). 373,125
-----------
Electronics (0.3%):
5,000 ADFlex Solutions, Inc. (b)....... 75,000
-----------
Environmental Control (1.6%):
15,000 U.S. Filter Corp. (b)............ 408,750
-----------
Household Products/Wares (0.8%):
20,000 USA Detergents, Inc. (b)......... 205,000
-----------
Human Resources (0.8%):
10,000 Alternative Resources, Inc. (b).. 203,750
-----------
Industrial Machinery (2.1%):
8,000 AGCO Corp........................ 287,500
9,900 Federal Signal Corp.............. 248,738
-----------
536,238
-----------
Instruments--Scientific (1.2%):
6,600 Millipore Corp................... 290,400
-----------
Insurance (0.7%):
4,000 Life Re Corp..................... 186,500
-----------
Manufacturing (0.3%):
5,000 Optical Coating Laboratories, Inc. 67,500
-----------
Medical--Instruments/Products (4.4%):
20,700 Physio-Control International Corp. (b) 310,500
11,000 Steris Corp. (b)................. 411,125
10,000 U.S. Surgical Corp............... 372,500
-----------
1,094,125
-----------
Motorcycles (1.9%):
10,000 Harley-Davidson, Inc............. 479,375
-----------
Oil Equipment, Wells & Services (5.8%):
12,000 ENSCO International, Inc. (b).... 633,000
25,000 Global Marine, Inc. (b).......... 581,250
12,000 Tuboscope Vetco International Corp. (b) 238,500
-----------
1,452,750
-----------
Pharmaceuticals (1.5%):
8,000 Jones Medical Industries, Inc.... 380,000
-----------
Power Conversion--Supply Equipment (1.4%):
18,000 American Power Conversion Corp. (b) 342,000
-----------
</TABLE>
Continued
B-72
<PAGE> 149
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. June 30, 1997
Stock Appreciation Fund
(Unaudited)
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------- ---------------------------------------------------- ------------
COMMON STOCK, CONTINUED:
Printing & Publishing (0.5%):
<S> <C> <C>
5,000 World Color Press, Inc. (b)......................... $ 118,750
-----------
Real Estate (14.1%):
4,200 American Health Properties, Inc..................... 105,525
4,200 Amli Residential Properties Trust................... 98,700
3,000 Cali Realty Corp.................................... 102,000
3,200 CarrAmerica Realty Corp............................. 92,000
2,800 Chelsea GCA Realty, Inc............................. 106,400
10,000 Duke Realty Investments, Inc........................ 405,000
3,500 Essex Property Trust, Inc........................... 112,437
2,700 FelCor Suite Hotels, Inc............................ 100,575
3,700 Franchise Finance Corp. of America.................. 96,431
2,800 Health Care Property Investors, Inc................. 98,700
8,000 Health & Retirement Property Trust ................. 150,500
2,900 Highwood Properties, Inc............................ 92,800
4,000 JP Realty, Inc...................................... 108,500
10,000 Jameson Inns, Inc................................... 117,500
4,500 Manufactured Home Communities, Inc. ................ 103,781
8,000 National Golf Properties, Inc....................... 278,000
3,000 OMEGA Healthcare Investors, Inc..................... 98,063
5,000 Pacific Gulf Properties, Inc........................ 110,000
3,000 Realty Income Corp.................................. 78,750
4,400 Reckson Associates Realty Corp...................... 101,200
4,200 Security Capital Pacific Trust...................... 96,075
3,300 Shurgard Storage Centers, Inc....................... 92,400
3,200 Sovran Self Storage, Inc............................ 93,600
4,450 Storage Trust Realty................................ 117,925
8,500 Summit Properties, Inc.............................. 175,313
5,000 Tanger Factory Outlet Centers, Inc.................. 134,375
3,400 Urban Shopping Centers, Inc......................... 108,375
6,000 Walden Residential Properties, Inc.................. 153,750
----------
3,528,675
----------
Recreational Equipment (1.4%):
10,000 Callaway Golf Co................ ................... 355,000
----------
Restaurant (2.0%):
15,000 Boston Chicken, Inc. (b)............................ 210,000
11,000 Wendy's International, Inc.......................... 285,312
----------
495,312
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------- ---------------------------------------------------- ------------
COMMON STOCK, CONTINUED:
Savings & Loans (2.4%):
<S> <C> <C>
7,000 Astoria Financial Corp.............................. $ 332,500
5,000 Charter One Financial, Inc.......................... 269,375
-----------
601,875
-----------
Sporting Goods (1.2%):
17,000 Cannondale Corp. (b)................................ 301,750
-----------
Steel (2.9%):
9,000 Carpenter Technology Corp........................... 411,750
16,400 Worthington Industries, Inc......................... 300,325
-----------
712,075
-----------
Telecommunications (3.2%):
16,000 Aspect Telecommunications Corp.(b).................. 356,000
20,000 LCI International, Inc. (b)......................... 437,500
-----------
793,500
-----------
Tools (1.2%):
8,000 Black & Decker Corp................................ 297,500
-----------
Tobacco (0.5%):
5,000 DIMON, Inc......................................... 132,500
-----------
Transportation--Airlines (1.1%):
10,000 Comair Holdings, Inc............................... 276,875
-----------
Utilities--Electric (1.9%):
10,000 Commonwealth Energy System......................... 239,374
4,900 OGE Energy Corp.................................... 222,950
-----------
462,324
-----------
Total Common Stock 24,052,868
-----------
INVESTMENT COMPANIES (4.0%):
$272,376 Dreyfus Treasury Prime Fund........................ 272,376
738,728 Federated U.S. Treasury Services #125 ............. 738,728
-----------
Total Investment Companies 1,011,104
-----------
Total (Cost--$20,444,122)(a) $25,063,972
===========
<FN>
- --------------------------
The percentages indicated are based on net assets of $24,982,641.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation ................................... $5,589,845
Unrealized depreciation ................................... (969,995)
----------
Net unrealized appreciation ............................... $4,619,850
==========
(b) Non-income producing security.
</TABLE>
B-73
See Notes to Financial Statements.
<PAGE> 150
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Large Company Select Fund
(Unaudited)
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------ ------------------------------------------------ -----------
COMMON STOCK (94.5%):
Aerospace (2.3%):
<S> <C> <C>
13,600 Boeing Co....................................... $ 721,650
-----------
Agricultural Machinery (3.0%):
17,000 Deere & Co...................................... 932,875
-----------
Apparel (0.5%):
2,500 Nike, Inc.--Class B............................. 145,938
-----------
Automobile (1.7%):
14,150 Ford Motor Co................................... 534,163
-----------
Banks (3.6%):
5,400 BankAmerica Corp................................ 348,638
4,200 BankBoston Corp................................. 302,662
900 Citicorp........................................ 108,506
5,200 KeyCorp......................................... 290,550
1,600 Mellon Bank Corp................................ 72,200
-----------
1,122,556
-----------
Building & Construction (0.9%):
3,800 Armstrong World Industries, Inc. ............... 278,825
-----------
Confections & Beverages (3.1%):
11,600 Coca-Cola Co.................................... 809,100
3,000 PepsiCo, Inc.................................... 112,687
1,050 So. African Brewers Ltd......................... 31,196
-----------
952,983
-----------
Computers & Software (15.4%):
11,850 Cisco Systems, Inc. (b)......................... 795,431
2,150 Compaq Computer Corp. (b)....................... 213,388
10,450 Computer Associates International, Inc. ........ 581,934
11,500 Electronic Data Systems Corp.................... 471,500
9,000 Intel Corp...................................... 1,276,313
600 International Business Machines Corp. .......... 54,112
10,000 Hewlett-Packard Co.............................. 560,000
6,200 Microsoft Corp. (b)............................. 783,525
2,701 NCR Corp. (b)................................... 80,355
-----------
4,816,558
-----------
Cosmetics & Toiletries (3.2%):
1,600 Avon Products, Inc.............................. 112,900
9,200 Gillette Co..................................... 871,700
-----------
984,600
-----------
Diversified (3.4%):
16,100 General Electric Co............................. 1,052,537
-----------
Electrical (1.1%):
6,200 Emerson Electric Co............................. 341,387
-----------
Entertainment (1.4%):
5,600 The Walt Disney Co.............................. 449,400
-----------
</TABLE>
<TABLE>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------ ------------------------------------------------ -----------
COMMON STOCK, CONTINUED:
Finance--Mortgage Loan/Banker (2.1%):
<S> <C> <C>
15,200 Federal National Mortgage Assoc. .............. $ 663,100
-----------
Financial Services (4.0%):
11,600 American Express Co............................ 864,200
2,900 Student Loan Marketing Assoc................... 368,300
-----------
1,232,500
-----------
Food Processing (0.8%):
10,000 Archer-Daniels-Midland Co...................... 235,000
-----------
Health Products/Care (0.3%):
1,200 Johnson & Johnson.............................. 77,250
-----------
Household Products/Wares (2.6%):
5,800 Procter & Gamble Co............................ 819,250
-----------
Industrial Machinery (1.0%):
3,000 Caterpillar, Inc............................... 322,125
-----------
Instruments--Scientific (1.4%):
9,850 Millipore Corp................................. 433,400
-----------
Insurance (7.0%):
6,050 American International Group, Inc. 903,719
3,200 Chubb Corp..................................... 214,000
4,800 Marsh & McLennan Cos., Inc..................... 342,600
7,100 Sunamerica, Inc................................ 346,125
5,999 Travelers Group, Inc........................... 378,312
-----------
2,184,756
-----------
Mining (1.7%):
7,100 Potash Corp. of Saskatchewan, Inc. ............ 532,944
-----------
Oil & Gas Producers (2.5%):
3,100 Amoco Corp..................................... 269,506
7,200 Mobil Corp..................................... 503,100
-----------
772,606
-----------
Oil--International (4.4%):
11,600 Exxon Corp..................................... 713,400
3,100 Royal Dutch Petroleum--NY Shares .............. 662,238
-----------
1,375,638
-----------
Oil Equipment, Wells & Services (1.7%):
4,300 Schlumberger Ltd............................... 537,500
-----------
Packaged Foods (2.3%):
7,800 CPC International, Inc......................... 720,037
-----------
Pharmaceuticals (4.6%):
7,600 Merck & Co., Inc............................... 786,600
5,400 Pfizer, Inc.................................... 645,300
-----------
1,431,900
-----------
</TABLE>
Continued
B-74
<PAGE> 151
<TABLE>
<CAPTION>
SCHEDULE OF PORTFOLIO INVESTMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
Large Company Select Fund
(Unaudited)
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------ ------------------------------------------------ -----------
COMMON STOCK, CONTINUED:
Printing & Publishing (1.3%):
<S> <C> <C>
$ 4,000 Gannett Co., Inc................................. $ 395,000
-----------
Real Estate (1.6%):
10,500 Summit Properties, Inc............................ 216,563
11,000 Walden Residential Properties, Inc. 281,875
-----------
498,438
-----------
Restaurants (2.0%):
24,325 Wendy's International, Inc........................ 630,930
-----------
Retail (0.7%):
6,600 Wal-Mart Stores, Inc.............................. 223,162
-----------
Rubber & Tires (2.7%):
13,500 Goodyear Tire & Rubber Co......................... 854,718
-----------
Steel (1.0%):
3,000 Carpenter Technology Corp......................... 137,250
10,250 Worthington Industries, Inc....................... 187,703
-----------
324,953
-----------
Telecommunications (1.0%):
3,200 Ericsson (L.M.) Telefonaktiebolaget--
ADR.............................................. 126,000
2,656 Lucent Technologies, Inc.......................... 191,398
-----------
317,398
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------ ------------------------------------------------ -----------
COMMON STOCK, CONTINUED:
Tobacco (1.1%):
<S> <C> <C>
7,800 Philip Morris Cos., Inc........................... $ 346,125
-----------
Tools (0.5%):
4,000 Black & Decker Corp............................... 148,750
-----------
Transportation--Rail (0.5%):
6,000 Canadian Pacific Ltd.............................. 170,625
-----------
Utility--Gas & Electric (2.1%):
11,000 CINergy Corp...................................... 382,938
1 El Paso Natural Gas Co............................ 28
6,000 GE Energy Corp.................................... 273,000
-----------
655,966
-----------
Utility--Telecommunications (4.0%):
12,800 AT&T Corp......................................... 448,800
8,600 Cincinnati Bell, Inc.............................. 270,900
11,700 GTE Corp.......................................... 513,337
-----------
1,233,037
-----------
Total Common Stock 29,470,580
-----------
INVESTMENT COMPANIES (5.4%):
$ 579,262 Dreyfus Treasury Prime Fund....................... 579,262
1,110,921 Federated U.S. Treasury Services #125 ............ 1,110,921
-----------
Total Investment Companies
1,690,183
-----------
Total (Cost--$16,266,787)(a) $31,160,763
===========
<FN>
- -----------------------
The percentages indicated are based on net assets of $31,189,673.
(a) Represents cost for federal income tax purposes and differs from value
by net unrealized appreciation of securities as follows:
Unrealized appreciation.................... $15,022,873
Unrealized depreciation.................... (128,897)
-----------
Net unrealized appreciation................ $14,893,976
===========
(b) Non-income producing security.
</TABLE>
See Notes to Financial Statements.
B-75
<PAGE> 152
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(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 an open-end management
investment company. The Fund is authorized to issue seven 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 Balanced Fund
(formerly the Riverfront Flexible Growth Fund), The Riverfront Stock
Appreciation Fund and The Riverfront Large Company Select 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,
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
mortgaged back securities and other asset-backed securities. The investment
objective of the Income Equity Fund is to seek a high level of investment
income, with captial apprecitation as a secondary objective, 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 Ohio state income taxes and preservation of capital.
The investment objective of the Balanced 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. The
investment objective of the Large Company Select Fund is to seek long-term
growth of capital with some current income as a secondary objective.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001 per share. 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 Balanced Fund, the Stock Appreciation Fund and the Large
Company Select 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' prospectus. 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' prospectus. Each share class has identical
rights and privileges, except with respect to distribution and shareholder
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
Portfolios in preparation of their 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 reported amounts of
Continued
B-76
<PAGE> 153
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
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 amortized cost. 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, 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 closing
sale prices on the principal exchange (closing sales prices on the
over-the-counter National Market System) in which such securities are
normally traded, or in the absence of any sales, at the mean of the latest
available bid and asked quotations on such exchange. Municipal bonds are
valued by using market quotations or independent services that use prices
provided by market makers or estimates of market values obtained from yield
data relating to instruments or securities with similar characteristics.
Short-term investments maturing in 60 days or less are valued at amortized
cost, which 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 as determined in good faith 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 on an
identified cost basis.
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, as
applicable, 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-77
<PAGE> 154
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(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 generally paid monthly for each variable net asset value fund
with the exception of the Stock Appreciation Fund which declares and pays
any dividends semi annually.
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.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require classification. Dividends and distributions to shareholders which
exceed net investment income and net realized capital gains for financial
reporting purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized gains. To the extent they
exceed net investment income and net realized gains for tax purposes, they
are reported as distributions of capital.
FEDERAL INCOME TAXES:
It is the policy of the Portfolios to comply with all requirements of the
Internal Revenue Code (the "Code") applicable to regulated investment
companies and to distribute substantially all of their taxable income to
their shareholders, therefore, no federal tax provision was required.
EXPENSE ALLOCATIONS:
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.
Fees paid under a Portfolio's shareholder servicing or distribution plans
are borne by the specific class of shares to which they apply.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government Income Fund.................. $18,330,989 $16,645,985
Income Equity Fund........................... $69,788,180 $64,769,058
Ohio Tax-Free Bond Fund...................... $ 0 $13,476,041
Balanced Fund................................ $13,315,547 $12,976,732
Stock Appreciation Fund...................... $12,593,394 $19,170,213
Large Company Select Fund.................... $ 4,221,864 $ 6,808,227
</TABLE>
Continued
B-78
<PAGE> 155
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the portfolios with multiple classes of
shares were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT
INCOME FUND INCOME EQUITY FUND
--------------------------------- ------------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued ............ $ 19,371,293 $ 2,494,252 $ 4,647,935 $ 8,709,609
Dividends reinvested ................... 199,083 440,531 424,700 10,845,880
Shares redeemed ........................ (3,237,658) (4,741,047) (5,788,312) (7,958,218)
------------ ------------ ------------ ------------
Change in net assets from Investor share
transactions .......................... $ 16,332,718 $ (1,806,264) $ (715,677) $ 11,597,271
============ ============ ============ ============
Investor B Shares:
Proceeds from shares issued ............ $ 219,351 $ 372,835 $ 5,488,920 $ 3,928,456
Dividends reinvested ................... 29,836 45,964 22,015 1,297,923
Shares redeemed ........................ (93,400) (349,650) (758,890) (420,101)
------------ ------------ ------------ ------------
Change in net assets from Investor share
transactions .......................... $ 155,787 $ 69,149 $ 4,752,045 $ 4,806,278
============ ============ ============ ============
SHARE TRANSACTIONS:
Investor A Shares:
Issued ................................. 2,055,880 264,167 368,792 680,679
Reinvested ............................. 21,316 46,735 33,439 898,119
Redeemed ............................... (346,711) (502,013) (452,534) (624,637)
------------ ------------ ------------ ------------
Change in Investor A Shares ............ 1,730,485 (191,111) (50,303) 954,161
============ ============ ============ ============
Investor B Shares:
Issued ................................. 20,842 34,874 426,560 317,268
Reinvested ............................. 2,844 4,314 1,706 103,352
Redeemed ............................... (8,863) (32,664) (58,702) (31,854)
------------ ------------ ------------ ------------
Change in Investor B Shares ............ 14,823 6,524 369,564 388,766
============ ============ ============ ============
</TABLE>
Continued
B-79
<PAGE> 156
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
OHIO TAX-FREE FUND BALANCED FUND
-------------------------------- ------------------------------
SIX MONTHS ENDED SIX MONTHS ENDED
JUNE 30, YEAR ENDED JUNE 30, YEAR ENDED
1997 DECEMBER 31, 1997 DECEMBER 31,
(UNAUDITED) 1996 (UNAUDITED) 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued .............................. $ 11,566,283 $ 39,457 $ 673,769 $ 5,979,948
Dividends reinvested ..................................... 3,146 6,134 115,388 318,997
Shares redeemed .......................................... (14,924,002) (340,435) (2,390,772) (5,316,451)
------------ ------------ ------------ ------------
Change in net assets from Investor share
transactions ......................................... $ (3,354,573) $ (294,844) $ (1,601,615) $ 982,494
============ ============ ============ ============
Investor B Shares:
Proceeds from shares issued .............................. $ 341,495 $ 592,591 $ 855,914 $ 5,648,362
Dividends reinvested ..................................... 19,676 20,060 49,766 227,824
Shares redeemed .......................................... (28,066) (248,303) (946,743) (1,218,260)
------------ ------------ ------------ ------------
Change in net assets from Investor share
transactions ......................................... $ 333,105 $ 364,348 $ (41,063) $ 4,657,926
============ ============ ============ ============
SHARE TRANSACTIONS:
Investor A Shares:
Issued ................................................... 1,111,475 3,737 56,071 531,651
Reinvested ............................................... 306 593 9,676 28,295
Redeemed ................................................. (1,441,047) (32,383) (199,937) (466,939)
------------ ------------ ------------ ------------
Change in Investor A Shares .............................. (329,266) (28,053) (134,190) 93,007
============ ============ ============ ============
Investor B Shares:
Issued ................................................... 32,459 55,795 69,713 485,748
Reinvested ............................................... 1,876 1,897 4,018 19,547
Redeemed ................................................. (2,649) (23,572) (76,253) (104,208)
------------ ------------ ------------ ------------
Change in Investor B Shares .............................. 31,686 34,120 (2,522) 401,087
============ ============ ============ ============
</TABLE>
Continued
B-80
<PAGE> 157
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
LARGE COMPANY
STOCK APPRECIATION FUND SELECT FUND
--------------------------------- -------------
SIX MONTHS ENDED PERIOD ENDED
JUNE 30, YEAR ENDED JUNE 30,
1997 DECEMBER 31, 1997 *
(UNAUDITED) 1996 (UNAUDITED)
------------ ------------ ------------
<S> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued ......................... $ 1,618,266 $ 3,225,171 $ 28,683,651
Dividends reinvested ................................ 0 2,903,615 95
Shares redeemed ..................................... (10,091,113) (16,060,775) (2,936,034)
------------ ------------ ------------
Change in net assets from Investor share transactions $ (8,472,847) $ (9,931,989) $ 25,747,712
============ ============ ============
Investor B Shares:
Proceeds from shares issued ......................... $ 295,336 $ 483,957 $ 498,838
Dividends reinvested ................................ 0 65,586 0
Shares redeemed ..................................... (100,881) (105,940) (5,330)
------------ ------------ ------------
Change in net assets from Investor share $ 194,455 $ 443,603 $ 493,508
transactions ============ ============ ============
SHARE TRANSACTIONS:
Investor A Shares:
Issued .............................................. 172,193 307,057 2,857,580
Reinvested .......................................... 0 308,567 8
Redeemed ............................................ (1,071,386) (1,618,575) (271,480)
------------ ------------ ------------
Change in Investor A Shares ......................... (899,193) (1,002,951) 2,586,108
============ ============ ============
Investor B Shares:
Issued .............................................. 30,776 66,446 44,947
Reinvested .......................................... 0 6,727 0
Redeemed ............................................ (10,431) (10,094) (452)
------------ ------------ ------------
Change in Investor B Shares ......................... 20,345 63,079 44,495
============ ============ ============
<FN>
- ---------------------
* For the period January 2, 1997 (commencement of operations) through June 30,
1997.
</TABLE>
Continued
B-81
<PAGE> 158
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(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 Income Equity Fund, the Ohio Tax-Free Bond Fund,
the Balanced Fund, the Stock Appreciation Fund and the Large Company Select
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 a Sub-Investment Advisory Agreement with DePrince,
Race & Zollo, Inc. ("DRZ"), for the Income Equity Fund. DRZ provides
investment advice to and supervises the investment program of the Income
Equity Fund. Under the terms of the Sub-Investment Advisory Agreement, DRZ
receives from Provident fees calculated at 0.50% of average daily net assets
up to $55 million of the Income Equity Fund managed by DRZ and 0.55% of
average daily net assets above $55 million for this Portfolio managed by DRZ.
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 period ended June 30, 1997, Provident Securities & Investment
Company ("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 $35,720 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")
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. BISYS Ohio served as sub-transfer agent for the Investor B Shares
through March 24, 1997. On March 25, 1997, Provident became the Transfer
Agent for all shares of the Fund. Under the terms of the Master Transfer and
Recordkeeping 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 Services Plan, each Portfolio is
authorized to pay compensation to banks and other financial intitutions,
including Provident and BISYS or other providers for recordkeeping and/or
administrative support services. As of June 30, 1997, 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
and Agreement ("Investor A Plan") and an Investor B Distribution and
Shareholder Services Plan and Agreement ("Investor B Plan"), each in
accordance with Rule 12b-1 under the 1940 Act. Pursuant to the Investor A
Plan, each Portfolio is authorized to pay
Continued
B-82
<PAGE> 159
NOTES TO FINANCIAL STATEMENTS, continued
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
Continued
5. RELATED PARTY TRANSACTIONS, CONTINUED:
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
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, 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 period ended June 30, 1997, BISYS received $10,829 from commissions
on sales of capital shares, of which $156 was reallowed to brokers affiliated
with Provident.
Provident and certain of its affiliates own shares of the Portfolios of the
Fund. As of June 30, 1997, the aggregate value of capital shares owned by
Provident and its affiliates were as follows (amounts in thousands):
U.S. Government Money Market.............................. $ 113,996
U.S. Government Income Fund............................... $ 48,856
Income Equity Fund........................................ $ 13,988
Ohio Tax-Free Bond Fund................................... $ 7,006
Balanced Fund............................................. $ 4,004
Stock Appreciation........................................ $ 1,270
Large Company Select...................................... $ 30,594
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 period ended June 30, 1997:
<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 net assets) ......... 0.15% 0.40% 0.95%
Voluntary fee reductions .................... NA NA NA
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 .................... $ 125,052 $ 14,287 $ 19,605
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets) NA 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES ............... $ 41,685 $ 24,513 $ 65,983
TRANSFER AGENT FEES ......................... $ 16,684 $ 24,407 $ 34,205
</TABLE>
Continued
B-83
<PAGE> 160
NOTES TO FINANCIAL STATEMENTS, continued
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
Continued
5. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO TAX-FREE BALANCED STOCK LARGE COMPANY
BOND FUND FUND APPRECIATION FUND SELECT FUND
---------- ---------- ----------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets) ....... 0.50% 0.90% 0.80% 0.80%
Voluntary fee reductions .................... $ 5,447 $ 10,012 NA NA
ADMINISTRATION FEES:
Annual fee (percentage of average net assets) 0.20% 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% 0.25%
Voluntary fee reductions .................... NA $ 5,307 NA NA
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets) 1.00% 1.00% 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES ............... $ 7,626 $ 15,012 $ 20,650 $ 21,545
TRANSFER AGENT FEES ......................... $ 20,196 $ 22,891 $ 59,244 $ 19,384
NA--Not applicable
</TABLE>
6. ACQUISITION OF COMMON TRUST FUNDS A, B, C AND G
On January 2, 1997, the Large Company Select Fund issued Investor A shares to
acquire the assets and liabilities, including distributions payable of
$26,562, of the Common Trust A and Common Trust G of The Provident Bank. The
following is a summary of Investor A shares issued, net assets acquired, net
asset value per share and unrealized appreciation as of the date acquired:
Investor A Shares (000)....... ............................. 2,781
Net assets (000).............. ............................. $27,813
Net asset value............... ............................. $ 10.00
Unrealized appreciation (000). ............................. $12,593
On January 9, 1997, the Ohio Tax Free Fund issued Investor A shares to
acquire the assets and liabilities, including distributions payable of
$15,577, of the Common Trust Fund B of The Provident Bank. The following is a
summary of Investor A shares issued, net assets acquired, net asset value per
share and unrealized appreciation as of the date acquired.
Investor A Shares (000)....... ............................. 1,097
Net assets (000).............. ............................. $ 11,400
Net asset value............... ............................. $ 10.39
Unrealized appreciation (000). ............................. $ 465
Continued
B-84
<PAGE> 161
NOTES TO FINANCIAL STATEMENTS, continued
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC. JUNE 30, 1997
(Unaudited)
Continued
On January 23, 1997, the U.S. Government Income Fund issued Investor A shares
to acquire the assets and liabilities, including distributions payable of
$26,148, of the Common Trust Fund C of The Provident Bank. The following is a
summary of Investor A shares issued, net assets acquired, net asset value per
share and unrealized appreciation as of the date acquired.
Investor A Shares (000)..................................... 1,761
Net assets (000)............................................ $16,607
Net asset value............................................. $ 9.43
Unrealized appreciation (000)............................... $ 392
7. SUBSEQUENT EVENTS
The Company has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of March 21, 1997 (the "Plan"), with The Riverfront
Funds, an Ohio business trust (the "Trust"), whereby each Fund of the Company
will become a separate series of an Ohio business trust rather than a
separate series of a Maryland corporation (the "Conversion").
The Conversion is subject to certain regulatory approvals and to approval by
the shareholders of the Funds at a special Shareholder Meeting. If the
shareholders approve the Conversion and the necessary regulatory approval is
obtained, it is expected that the Conversion will take place prior to the end
of the Funds' fiscal year.
B-85
<PAGE> 162
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
U.S. Government Securities Money Market Fund
--------------------------------------------------------------------
Six Months
Ended Years ended December 31,
June 30, ---------------------------------------------
1997 1996 1995 1994 (a)
------------ ------------ ------------ ------------
(Unaudited)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 1.000 $ 1.000 $ 1.000 $ 1.000
------------ ------------ ------------ ------------
Investment Activities
Net investment income ............................. 0.024 0.046 0.050 0.040
------------ ------------ ------------ ------------
Distributions
Net investment income ............................. (0.024) (0.046) (0.050) (0.040)
------------ ------------ ------------ ------------
NET ASSET VALUE, END OF PERIOD ...................... $ 1.000 $ 1.000 $ 1.000 $ 1.000
============ ============ ============ ============
Total Return ........................................ 2.42%(b) 4.89% 5.52% 3.78%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ................... $ 166,862 $ 181,017 $ 157,495 $ 149,374
Ratio of expenses to average net assets ............. 0.64%(c) 0.59% 0.58% 0.51%
Ratio of net investment income to average net assets 4.83%(c) 4.78% 5.34% 3.70%
Ratio of expenses to average net assets* ............ 0.79%(c) 0.84% 0.83% 0.80%
Ratio of net investment income to average net assets* 4.68%(c) 4.53% 5.09% 3.41%
</TABLE>
<TABLE>
<CAPTION>
U.S. Government Securities Money Market Fund
---------------------------------------
Years ended October 1,
December 31, 1992 to
-------------- December 31,
1993 (a) 1992(a)(d)
------------ ------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 1.000 $ 1.000
------------ ------------
Investment Activities
Net investment income ............................. 0.030 0.010
------------ ------------
Distributions
Net investment income ............................. (0.030) (0.010)
------------ ------------
NET ASSET VALUE, END OF PERIOD ...................... $ 1.000 $ 1.000
============ ============
Total Return ........................................ 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ................... $ 133,207 $ 37,083
Ratio of expenses to average net assets ............. 0.32% 0.01%(c)
Ratio of net investment income to average net assets 2.85% 3.09%(c)
Ratio of expenses to average net assets* ............ 0.42% 0.68%(c)
Ratio of net investment income to average net assets* 2.75% 2.42%(c)
<FN>
- --------------------
* 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) Audited by other auditors.
(b) Not annualized.
(c) Annualized.
(d) Period from commencement of operations.
</TABLE>
See notes to Financial Statements.
B-86
<PAGE> 163
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
U.S. Government Income Fund
------------------------------------------------------------------------------------------------
January 17,
Year ended Year ended 1995 to
Six Months ended December 31, December 31, December 31,
June 30, 1997 1996 1995 1995(a)
----------------------------- --------------------------- ---------- ----------
Investor A Investor B Investor A Investor B Investor A Investor B
---------- ---------- ----------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ........ $ 9.43 $ 10.64 $ 9.71 $ 10.95 $ 8.92 $ 10.00
---------- ---------- ---------- ---------- ---------- ----------
Investment Activities
Net investment income .... 0.24 0.25 0.52 0.49 0.54 0.43
Net realized and
unrealized gains
(losses) from
investments ............ 0.00 (0.03) (0.29) (0.31) 0.79 0.94
---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Activities ........... 0.24 0.22 0.23 0.18 1.33 1.37
---------- ---------- ---------- ---------- ---------- ----------
Distributions
Net investment income .... (0.30) (0.34) (0.51) (0.49) (0.54) (0.42)
In excess of net
investment income ......
---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .... (0.30) (0.34) (0.51) (0.49) (0.54) (0.42)
---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD ....... $ 9.37 $ 10.52 $ 9.43 $ 10.64 $ 9.71 $ 10.95
========== ========== ========== ========== ========== ==========
Total Return (excludes
sales/redemption charge) 2.55%(b) 2.08%(b) 2.51% 1.72% 15.22% 13.96%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) ............. $ 49,666 $ 1,437 $ 33,694 $ 1,296 $ 36,538 $ 1,263
Ratio of expenses to average
net assets ............. 1.12%(c) 1.93%(c) 1.11% 1.96% 1.09% 1.90%(c)
Ratio of net investment
income to average net
assets ................... 5.59%(c) 4.76%(c) 5.45% 4.59% 5.74% 4.80%(c)
Ratio of expenses to average
net assets* .............. 1.18%(c) 1.93%(c) 1.20% 1.96% 1.18% 1.90%(c)
Ratio of net investment
income to average net
assets* .................. 5.53%(c) 4.76%(c) 5.36% 4.59% 5.65% 4.80%(c)
Portfolio Turnover(d) ...... 37% 37% 53% 53% 75% 75%
<CAPTION>
U.S. Government Income Fund
--------------------------------------------
Years ended December 31,
-----------------------------------------
1994(f) 1993(f) 1992(f)(g)
--------- ---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ........ $ 9.91 $ 9.76 $ 10.00
---------- ---------- ----------
Investment Activities
Net investment income .... 0.54 0.51 0.10
Net realized and
unrealized gains
(losses) from
investments ............ (0.99) 0.20 (0.23)
---------- ---------- ----------
Total from Investment
Activities ........... (0.45) 0.71 (0.13)
---------- ---------- ----------
Distributions
Net investment income .... (0.54) (0.50) (0.10)
In excess of net
investment income ...... (0.06) (0.01)
---------- ---------- ----------
Total Distributions .... (0.54) (0.56) (0.11)
---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD ....... $ 8.92 $ 9.91 $ 9.76
========== ========== ==========
Total Return (excludes
sales/redemption charge). (4.64)% 7.38% (1.31)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) ............. $ 32,721 $ 30,078 $ 24,588
Ratio of expenses to average
net assets ............... 0.86% 0.65% 0.66%
Ratio of net investment
income to average net
assets ................... 5.78% 5.05% 4.00%
Ratio of expenses to average
net assets* .............. 1.14% 1.08% 1.06%
Ratio of net investment
income to average net
assets* .................. 5.49% 4.62% 3.60%
Portfolio Turnover(d) ...... 83% 220% 117%
</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) 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) Investment operations and sales of shares to the public began on October 1,
1992.
See Notes to Financial Statements.
B-87
<PAGE> 164
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
Income Equity Fund
-----------------------------------------------------------------------------------------------------
January 17,
Year ended Year ended 1995 to
Six Months ended December 31, December 31, December 31,
June 30, 1997 1996 1995 1995(a)
------------------------------ ---------------------------- ------------ --------------
Investor A Investor B Investor A Investor B Investor A Investor B
------------ ------------ ------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...... $ 11.92 $ 12.16 $ 11.70 $ 11.85 $ 10.15 $ 10.00
------------ ------------ ------------ ------------ ------------ ------------
Investment Activities
Net investment income .... 0.09 0.04 0.21 0.12 0.27 0.13
Net realized and
unrealized gains from
investments ............ 1.81 1.84 2.12 2.21 2.89 2.78
------------ ------------ ------------ ------------ ------------ ------------
Total from Investment
Activities ........... 1.90 1.88 2.33 2.33 3.16 2.91
------------ ------------ ------------ ------------ ------------ ------------
Distributions
Net investment income .... (0.09) (0.04) (0.21) (0.12) (0.27) (0.13)
In excess of net
investment income ......
Net realized gains ....... (1.90) (1.90) (1.34) (0.93)
------------ ------------ ------------ ------------ ------------ ------------
Total Distributions .... (0.09) (0.04) (2.11) (2.02) (1.61) (1.06)
------------ ------------ ------------ ------------ ------------ ------------
NET ASSET VALUE,
END OF PERIOD............. $ 13.73 $ 14.00 $ 11.92 $ 12.16 $ 11.70 $ 11.85
============ ============ ============ ============ ============ ============
Total Return (excludes
sales/redemption charge).. 16.00%(b) 15.48%(b) 19.88% 19.67% 31.45% 29.28%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) ............. $ 83,796 $ 13,964 $ 73,368 $ 7,632 $ 60,845 $ 2,833
Ratio of expenses to average
net assets ............... 1.72%(c) 2.51%(c) 1.76% 2.48% 1.49% 2.46%(c)
Ratio of net investment
income to average net
assets ................... 1.45%(c) 0.68%(c) 1.62% 0.88% 2.27% 1.12%(c)
Ratio of expenses to average
net assets* .............. 1.77%(c) 2.51%(c) 1.85% 2.54% 1.74% 2.51%(c)
Ratio of net investment
income to average net
assets* .................. 1.40%(c) 0.68%(c) 1.53% 0.82% 2.02% 1.07%(c)
Portfolio Turnover (d) ..... 75% 75% 166% 166% 180% 180%
Average commission rate
paid (h) ................. $ 0.0537 $ 0.0537 $ 0.0541 $ 0.0541
<CAPTION>
Income Equity Fund
-------------------------------------------------
Years ended December 31,
--------------------------------------------
1994(f) 1993(f) 1992(f)(g)
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ...... $ 10.63 $ 10.78 $ 10.00
------------ ------------ ------------
Investment Activities
Net investment income .... 0.32 0.28 0.08
Net realized and
unrealized gains from
investments ............ 0.00 1.01 0.80
------------ ------------ ------------
Total from Investment
Activities ........... 0.32 1.29 0.88
------------ ------------ ------------
Distributions
Net investment income .... (0.31) (0.27) (0.08)
In excess of net
investment income ...... (0.03) (0.01)
Net realized gains ....... (0.49) (1.14)
------------ ------------ ------------
Total Distributions .... (0.80) (1.44) (0.10)
------------ ------------ ------------
NET ASSET VALUE,
END OF PERIOD............. $ 10.15 $ 10.63 $ 10.78
============ ============ ============
Total Return (excludes
sales/redemption charge).. 3.08% 12.11% 8.74%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000) ............. $ 34,965 $ 24,387 $ 12,262
Ratio of expenses to average
net assets ............... 1.30% 1.47% 1.48%
Ratio of net investment
income to average net
assets ................... 2.93% 2.55% 3.16%
Ratio of expenses to average
net assets* .............. 1.58% 1.64% 2.02%
Ratio of net investment
income to average net
assets* .................. 2.65% 2.38% 2.62%
Portfolio Turnover (d) ..... 119% 145% 12%
Average commission rate
paid (h) .................
</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) 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) Investment operations and sales of shares to the public began on
October 1, 1992.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio 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.
Disclosure is not required for periods ending prior to September 1, 1996.
See Notes to Financial Statements.
B-88
<PAGE> 165
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Ohio Tax-Free Bond Fund
----------------------------------------------------------------------------
Year ended Year ended
Six Months ended December 31, December 31,
June 30, 1997 1996 1995
--------------------------- ------------------------- ----------
Investor A Investor B Investor A Investor B Investor A
---------- ---------- ----------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ........................ $ 10.41 $ 10.64 $ 10.51 $ 10.73 $ 9.83
---------- ---------- ----------- ---------- ----------
Investment Activities
Net investment income ...................... 0.16 0.18 0.40 0.32 0.39
Net realized and unrealized gains (losses)
from investments ......................... 0.02 (0.06) (0.10) (0.09) 0.67
---------- ---------- ----------- ---------- ----------
Total from Investment Activities ......... 0.18 0.12 0.30 0.23 1.06
---------- ---------- ----------- ---------- ----------
Distributions
Net investment income ...................... (0.29) (0.25) (0.40) (0.32) (0.38)
---------- ---------- ----------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD ............................. $ 10.30 $ 10.51 $ 10.41 $ 10.64 $ 10.51
========== ========== =========== ========== ==========
Total Return (excludes sales/redemption
charge) .................................... 1.77%(b) 1.13%(b) 2.95% 2.21% 10.96%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............ $ 7,189 $ 1,305 $ 10,693 $ 984 $ 11,091
Ratio of expenses to average net assets ...... 1.52%(c) 2.30%(c) 1.45% 2.25% 1.49%
Ratio of net investment income to average
net assets ................................. 3.97%(c) 3.11%(c) 3.87% 3.07% 3.77%
Ratio of expenses to average net assets* ..... 1.62%(c) 2.40%(c) 1.55% 2.36% 1.64%
Ratio of net investment income to average
net assets* ................................ 3.87%(c) 3.01%(c) 3.77% 2.96% 3.62%
Portfolio Turnover (d) ....................... 0% 0% 6% 6% 34%
<CAPTION>
Ohio Tax-Free Bond Fund
-------------------------------
January 17, From August 1,
1995 to 1994 through
December 31, December 31,
1995 (a) 1994 (a)(e)
---------- ----------
Investor B
----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ........................ $ 10.00 $ 10.00
---------- ----------
Investment Activities
Net investment income ...................... 0.27 0.12
Net realized and unrealized gains (losses)
from investments ......................... 0.73 (0.17)
----------
Total from Investment Activities ......... 1.00 (0.05)
----------
Distributions
Net investment income ...................... (0.27) (0.12)
---------- ----------
NET ASSET VALUE,
END OF PERIOD ............................. $ 10.73 $ 9.83
========== ==========
Total Return (excludes sales/redemption
charge) .................................... 10.10%(f) (0.47)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............ $ 626 $ 10,190
Ratio of expenses to average net assets ...... 2.27%(c) 1.08%(c)
Ratio of net investment income to average
net assets ................................. 3.01%(c) 2.92%(c)
Ratio of expenses to average net assets* ..... 2.41%(c) 1.44%(c)
Ratio of net investment income to average
net assets* ................................ 2.87%(c) 2.56%(c)
Portfolio Turnover (d) ....................... 34% 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) Not annualized.
(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) Audited by other auditors.
(f) Represents total return for Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for Investor B shares from January
17, 1995 to December 31, 1995.
See Notes to Financial Statements.
B-89
<PAGE> 166
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Balanced Fund
-----------------------------------------------------------------------------
Year ended
Six Months ended December 31,
June 30, 1997 1996
--------------------------------- ------------------------------
Investor A Investor B Investor A Investor B
---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 11.69 $ 12.04 $ 11.36 $ 11.70
------------ ------------ ------------ ------------
Investment Activities
Net investment income ....................... 0.12 0.07 0.31 0.26
Net realized and unrealized gains
(losses) from investments ............. 0.89 0.92 0.33 0.34
------------ ------------ ------------ ------------
Total from Investment Activities .......... 1.01 0.99 0.64 0.60
------------ ------------ ------------ ------------
Distributions
Net investment income ....................... (0.12) (0.07) (0.31) (0.26)
Net realized gains ..........................
------------ ------------ ------------ ------------
Total Distributions ....................... (0.12) (0.07) (0.31) (0.26)
------------ ------------ ------------ ------------
NET ASSET VALUE,
END OF PERIOD ............................... $ 12.58 $ 12.96 $ 11.69 $ 12.04
============ ============ ============ ============
Total Return (excludes sales/redemption
charge) ..................................... 8.72%(c) 8.26%(c) 5.76% 5.27%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............. $ 9,921 $ 10,740 $ 10,786 $ 10,008
Ratio of expenses to average net assets ....... 1.88%(d) 2.73%(d) 1.70% 2.54%
Ratio of net investment income to
average net assets .......................... 2.01%(d) 1.16%(d) 2.87% 2.03%
Ratio of expenses to average net
assets*............................. 2.09%(d) 2.83%(d) 1.94% 2.68%
Ratio of net investment income to
average net assets*.................. 1.81%(d) 1.06%(d) 2.63% 1.89%
Portfolio Turnover (e) ........................ 72% 72% 98% 98%
Average commission rate paid (g) .............. $ 0.0600 $ 0.0600 $ 0.0891 $ 0.0891
<CAPTION>
Balanced Fund
------------------------------------------------------
January 17, From September 1,
Year ended 1995 to 1994 through
December 31, December 31, December 31,
1995 1995 (a) 1994 (a)(f)
------------ ----------------- -----------------
Investor A Investor B
---------- ----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ......................... $ 9.79 $ 10.00 $ 10.00
------------ ------------ ------------
Investment Activities
Net investment income ....................... 0.35 0.25 0.10
Net realized and unrealized gains
(losses) from investments ............. 1.66 1.79 (0.18)
------------ ------------ ------------
Total from Investment Activities .......... 2.01 2.04 (0.08)
------------ ------------ ------------
Distributions
Net investment income ....................... (0.34) (0.24) (0.13)
Net realized gains .......................... (0.10) (0.10)
------------ ------------ ------------
Total Distributions ....................... (0.44) (0.34) (0.13)
------------ ------------ ------------
NET ASSET VALUE,
END OF PERIOD ............................... $ 11.36 $ 11.70 $ 9.79
============ ============ ============
Total Return (excludes sales/redemption
charge) ..................................... 20.83% 20.53%(b) (0.82)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............. $ 9,427 $ 5,030 $ 2,709
Ratio of expenses to average net assets ....... 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment income to
average net assets .......................... 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to average net
assets*............................. 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment income to
average net assets*.................. 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover (e) ........................ 13% 13% 1%
Average commission rate paid (g) ..............
</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) 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.
(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) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio 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. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
B-90
<PAGE> 167
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Stock Appreciation Fund
----------------------------------------------------------------------------------------
From October 1, From October 1,
Year ended 1995 through 1995 through
Six Months ended December 31, December 31, December 31,
June 30, 1997 1996 1995 (b) 1995 (a)(b)
----------------------------- ----------------------- ------------- -----------
Investor A Investor B Investor A Investor B Investor A Investor B
---------- ----------- ---------- ---------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD .................. $9.43 $ 9.77 $9.50 $9.91 $10.00 $ 10.00
----- ------ ----- ----- ------ ---------
Investment Activities
Net investment income ................ (0.03) (0.05) (0.14) (0.15) (0.01) (0.01)
Net realized and unrealized gains
(losses) from investments .......... 0.56 0.58 1.10 1.04 (0.12) (0.08)
----- ------ ----- ----- ------ ---------
Total from Investment Activities ... 0.53 0.53 0.96 0.89 (0.13) (0.09)
----- ------ ----- ----- ------ ---------
Distributions
Net realized gains ................... (1.03) (1.03) (0.37)
----- ------ ----- ----- ------ ---------
NET ASSET VALUE,
END OF PERIOD .......................... $ 9.96 $10.30 $ 9.43 $ 9.77 $ 9.50 $ 9.91
===== ====== ===== ===== ====== =========
Total Return
(excludes sales/redemption charge) ... 5.62%(c) 5.42% (c) 10.17% 9.05% (1.20)%(c) (0.90)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ...... $ 24,048 $ 935 $ 31,227 $ 687 $40,995 $ 72
Ratio of expenses to average net assets 2.11% (d) 2.87% (d) 1.91% 2.64% 1.76%(d) 2.30% (d)
Ratio of net investment loss
to average net assets ................ (0.45)%(d) (1.23)%(d) (1.25)% (2.01) (0.49)%(d) (1.69)%(d)
Ratio of expenses to average net assets* (g) (g) (g) (g) 1.77% (d) 2.39% (d)
Ratio of net investment loss
to average net assets* ............... (g) (g) (g) (g) (0.50)%(d) (1.78)%(d)
Portfolio Turnover (e) ................. 48% 48% 162% 162% 46% 46%
Average commission rate paid (h) ....... $ 0.0600 $ 0.0600 $ 0.0597 $ 0.0597
<FN>
- ----------------------
* 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 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 portfolio 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.
Disclosure is not required for periods ending prior to September 1, 1996.
</TABLE>
See Notes to Financial Statements.
B-91
<PAGE> 168
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Stock Appreciation Fund
-------------------------------------------------------
Years ended September 30,
-------------------------------------------------------
1995 (f) 1994 (f) 1993 (f) 1992 (f)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................... $ 8.25 $ 10.18 $ 7.98 $ 7.70
---------- ---------- ---------- ----------
Investment Activities
Net investment loss .................. (0.07) (0.12) (0.17) (0.08)
Net realized and unrealized gains
(losses) from investments .......... 2.14 (1.26) 2.57 1.41
---------- ---------- ---------- ----------
Total from Investment Activities ... 2.07 (1.38) 2.40 1.33
---------- ---------- ---------- ----------
Distributions
Net realized gains ................... (0.32) (0.55) (0.20) (1.05)
---------- ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD ....................... $ 10.00 $ 8.25 $ 10.18 $ 7.98
========== ========== ========== ==========
Total Return
(excludes sales/redemption charge) ... 25.12% (13.91)% 30.61% 16.69%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ...... $ 44,500 $ 47,880 $ 59,330 $ 28,750
Ratio of expenses to average net assets 2.61% 2.44% 2.47% 2.70%
Ratio of net investment loss
to average net assets ................ (0.73)% (1.35)% (1.85)% (1.00)%
Ratio of expenses to average net assets* (g) (g) (g) (g)
Ratio of net investment loss
to average net assets* ............... (g) (g) (g) (g)
Portfolio Turnover (e) ................. 197% 254% 216% 288%
Average commission rate paid (h)
</TABLE>
See Notes to Financial Statements
B-92
<PAGE> 169
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
Large Company
Select Fund
--------------------------------
From January 2, 1997
through June 30, 1997(a)
---------------------------------
Investor A Investor B
------------ -------------
(Unaudited) (Unaudited)
<S> <C> <C>
NET ASSET VALUE, ................................... $ 10.00 $ 10.00
BEGINNING OF PERIOD ------------ ------------
Investment Activities
Net investment income (loss) ..................... 0.00 (0.01)
Net realized and unrealized gains
(losses) from investments ...................... 1.89 1.86
------------ ------------
Total from Investment Activities ............... 1.89 1.85
------------ ------------
Distributions
Net investment income ............................ (0.03) 0.00
------------ ------------
NET ASSET VALUE, ................................... $ 11.86 $ 11.85
END OF PERIOD ============ ============
Total Return (excludes sales/redemption charge) .... 18.91%(b) 18.50%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) .................. $ 30,662 $ 527
Ratio of expenses to average net assets ............ 1.68%(c) 2.48%(c)
Ratio of net investment income (loss)
to average net assets ............................ (0.01)%(c) (0.67)%(c)
Ratio of expenses to average net assets ............ (f) (f)
Ratio of net investment income to average net assets (f) (f)
Portfolio Turnover (d) ............................. 15% 15%
Average commission rate paid (e) ................... $ 0.0907 $ 0.0907
<FN>
- ------------------
(a) Period from commencement of operations.
(b) Not annualized.
(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 the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio 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.
(f) There were no waivers or reimbursements during the period.
</TABLE>
See Notes to Financial Statements.
B-93
<PAGE> 170
Report of Independent Accountants
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
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, 1996, the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended 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, and from October
1, 1995 to December 31, 1995 of the Stock Appreciation Fund, and financial
highlights for each of the two years ended December 31, 1996 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 and for the year
ended December 31, 1996 and the period October 1, 1995 to December 31, 1995 of
the 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 Stock
Appreciation Fund for the periods and 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, 1996, 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 statement
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, 1996, the results of their operations, the changes in their net assets and
the financial highlights for the respective periods ended December 31, 1996 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
------------------
Cincinnati, Ohio
February 20, 1997
B-94
<PAGE> 171
Statements of Assets and Liabilities
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
SECURITIES MONEY INCOME
MARKET FUND FUND
----------- ----
<S> <C> <C>
Assets:
Investments, at value (Cost $128,546,762; $34,345,949; and $77,468,431, respectively)... $128,546,762 $34,599,514
Repurchase agreements (Cost $53,295,000; $0; and $0, respectively)...................... 53,295,000
------------ -----------
TOTAL INVESTMENTS ...................................................................... 181,841,762 34,599,514
Interest and dividends receivable ...................................................... 53,298 424,677
Receivable for capital shares issued ................................................... 71
Receivable from brokers for investments sold ...........................................
Prepaid expenses and other assets ...................................................... 1,426 26,993
------------ -----------
TOTAL ASSETS ........................................................................... 181,896,486 35,051,255
------------ -----------
Liabilities:
Dividends payable ...................................................................... 708,084 412
Payable for capital shares redeemed .................................................... 7,558
Payable to brokers for investments purchased ...........................................
Accrued expenses AND other payables:
Investment advisory fees ........................................................... 21,577 11,883
Administration fees ................................................................ 28,769 5,943
12b-1 fees (Investor A) ............................................................ 4,314
12b-1 fees (Investor B) ............................................................ 1,100
Registration and filing fees ....................................................... 35,059 6,289
Transfer agent fees ................................................................ 6,368 3,345
Audit and legal fees ............................................................... 42,052 9,117
Printing fees ...................................................................... 26,134 7,306
Other .............................................................................. 11,184 3,155
------------ -----------
TOTAL LIABILITIES ...................................................................... 879,227 60,422
------------ -----------
Net Assets:
Capital ................................................................................ 181,019,549 36,562,678
Undistributed (distributions in excess of) net investment income (loss) ................ 30,029
Net unrealized apppreciation on investments ............................................ 253,565
Accumulated undistributed net realized gains (losses) on investment
transactions ........................................................................... (2,290) (1,855,439)
------------ -----------
NET ASSETS ......................................................................... $181,017,259 $34,990,833
============ ===========
Net Assets
Investor A Shares .................................................................. $181,017,259 $33,694,340
Investor B Shares .................................................................. NA 1,296,493
------------ -----------
Total .......................................................................... $181,017,259 $34,990,833
============ ===========
Shares of capital stock
Investor A Shares .................................................................. 181,019,549 3,571,637
Investor B Shares .................................................................. NA 121,807
------------ -----------
Total .......................................................................... 181,019,549 3,693,444
============ ===========
Net asset value
Investor A Shares -- redemption price per share .................................... $ 1.00 $ 9.43
Investor B Shares -- offering price per share* ..................................... NA 10.64
============ ===========
Maximum Sales Charge (Investor A) ...................................................... NA 4.50%
============ ===========
Maximum Offering Price per share (100%/(100%-Maximum Sales Charge) of net asset
value adjusted to nearest cent) (Investor A) (a) ..................................... $ 1.00 $ 9.87
============ ===========
</TABLE>
<TABLE>
<CAPTION>
INCOME
EQUITY
FUND
----
<S> <C>
Assets:
Investments, at value (Cost $128,546,762; $34,345,949; and $77,468,431, respectively) $81,452,789
Repurchase agreements (Cost $53,295,000; $0; and $0, respectively)
-----------
TOTAL INVESTMENTS ...................................................................... 81,452,789
Interest and dividends receivable ...................................................... 244,834
Receivable for capital shares issued ................................................... 44,285
Receivable from brokers for investments sold ........................................... 83,107
Prepaid expenses and other assets ...................................................... 19,622
-----------
TOTAL ASSETS ........................................................................... 81,844,637
-----------
Liabilities:
Dividends payable ......................................................................
Payable for capital shares redeemed .................................................... 11,492
Payable to brokers for investments purchased ........................................... 690,245
Accrued expenses and other payables:
Investment advisory fees ........................................................... 60,830
Administration fees ................................................................ 12,986
12b-1 fees (Investor A) ............................................................ 12,172
12b-1 fees (Investor B) ............................................................ 6,300
Registration and filing fees ....................................................... 12,246
Transfer agent fees ................................................................ 999
Audit and legal fees ............................................................... 14,209
Printing fees ...................................................................... 12,863
Other .............................................................................. 10,271
-----------
TOTAL LIABILITIES ...................................................................... 844,613
-----------
Net Assets:
Capital ................................................................................ 74,654,539
Undistributed (distributions in excess of) net investment income (loss) ................
Net unrealized apppreciation on investments ............................................ 3,984,358
Accumulated undistributed net realized gains (losses) on investment
transactions ........................................................................... 2,361,127
-----------
NET ASSETS ......................................................................... $81,000,024
===========
Net Assets
Investor A Shares .................................................................. $73,368,104
Investor B Shares .................................................................. 7,631,920
-----------
Total .......................................................................... $81,000,024
===========
Shares of capital stock
Investor A Shares .................................................................. 6,154,052
Investor B Shares .................................................................. 627,857
-----------
Total........................................................................... 6,781,909
===========
Net asset value
Investor A Shares -- redemption price per share .................................... $ 11.92
Investor B Shares -- offering price per share* ..................................... 12.16
===========
Maximum Sales Charge (Investor A) ...................................................... 4.50%
===========
Maximum Offering Price per share (100%/(100%-Maximum Sales Charge) of net asset
value adjusted to nearest cent) (Investor A) (a) ..................................... $ 12.48
===========
</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-95
<PAGE> 172
Statements of Assets and Liabilities
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE GROWTH
BOND FUND FUND
--------- ----
<S> <C> <C>
ASSETS:
Investments, at value (Cost $11,126,979; $18,999,696;
and $26,843,438, respectively).................................................... $11,577,458 $21,053,295
Cash ............................................................................... 1,912
Interest and dividends receivable .................................................. 70,747 116,765
Receivable for capital shares issued ............................................... 50,000 44,095
Receivable from brokers for investments sold .......................................
Unamortized organization costs .....................................................
Prepaid expenses and other assets
................................................................................... 729 24,321
----------- -----------
Total Assets ....................................................................... 11,700,846 21,238,476
----------- -----------
Liabilities:
Cash Overdraft ..................................................................... 364,681
Payable for capital shares redeemed ................................................ 28,247
Payable to brokers for investments purchased .......................................
Accrued expenses and other payables:
Investment advisory fees ....................................................... 3,935 14,917
Administration fees ............................................................ 1,964 3,728
12b-1 fees (Investor A) ........................................................ 2,413 1,460
12b-1 fees (Investor B) ........................................................ 807 8,469
Transfer agent fees ............................................................ 2,933 5,235
Audit and legal fees ........................................................... 3,723 5,259
Printing fees .................................................................. 3,000 5,394
Custodian fees ................................................................. 1,377 2,797
Organizational fees ............................................................ 3,456 983
Other .......................................................................... 214 2,828
----------- -----------
TOTAL LIABILITIES .................................................................. 23,822 443,998
----------- -----------
NET ASSETS:
Capital ............................................................................ 11,222,517 18,891,988
Undistributed (distributions in excess of) net investment income (loss) ............ 6,757 2,553
Net unrealized appreciation on investments ......................................... 450,479 2,053,599
Accumulated undistributed net realized gains (losses) on investment
transactions ..................................................................... (2,729) (153,662)
----------- -----------
Net Assets ..................................................................... $ 11,677,024 $ 20,794,478
============ ============
Net Assets
Investor A Shares .............................................................. $ 10,693,087 $ 10,786,341
Investor B Shares .............................................................. 983,937 10,008,137
----------- -----------
Total ........................................................................ $11,677,024 $ 20,794,478
=========== ============
Shares of capital stock
Investor A Shares .............................................................. 1,027,469 922,900
Investor B Shares .............................................................. 92,478 831,165
----------- -----------
Total ........................................................................ 1,119,947 1,754,065
=========== ============
Net asset value
Investor A Shares -- redemption price per share ................................ $ 10.41 $ 11.69
Investor B Shares -- offering price per share* ................................. 10.64 12.04
=========== ============
Maximum Sales Charge (Investor A) 4.50% 4.50%
=========== ============
Maximum Offering Price per share (100%/(100%-Maximum Sales Charge) of net asset
value adjusted to nearest cent) (Investor A) ..................................... $ 10.90 $ 12.24
=========== ============
</TABLE>
<TABLE>
<CAPTION>
STOCK APPRECIATION
FUND
----
<S> <C>
ASSETS:
Investments, at value (Cost $11,126,979; $18,999,696;
and $26,843,438, respectively) ................................................... $32,286,516
Cash ...............................................................................
Interest and dividends receivable .................................................. 5,883
Receivable for capital shares issued ............................................... 1,086
Receivable from brokers for investments sold ....................................... 171,819
Unamortized organization costs ..................................................... 11,408
Prepaid expenses and other assets .................................................. 8,546
-----------
Total Assets ....................................................................... 32,485,258
-----------
Liabilities:
Cash Overdraft .....................................................................
Payable for capital shares redeemed ................................................ 226
Payable to brokers for investments purchased ....................................... 503,806
Accrued expenses and other payables:
Investment advisory fees ....................................................... 21,791
Administration fees ............................................................ 5,448
12b-1 fees (Investor A) ........................................................ 6,663
12b-1 fees (Investor B) ........................................................ 568
Transfer agent fees ............................................................ 3,798
Audit and legal fees ........................................................... 8,709
Printing fees .................................................................. 7,579
Custodian fees ................................................................. 4,086
Organizational fees ............................................................
Other .......................................................................... 8,247
-----------
TOTAL LIABILITIES .................................................................. 570,921
-----------
NET ASSETS:
Capital ............................................................................ 24,464,920
Undistributed (distributions in excess of) net investment income (loss) ............ (29,793)
Net unrealized appreciation on investments ......................................... 5,443,078
Accumulated undistributed net realized gains (losses) on investment
transactions ..................................................................... 2,036,132
-----------
Net Assets ..................................................................... $ 31,914,337
============
Net Assets
Investor A Shares .............................................................. $ 31,227,057
Investor B Shares .............................................................. 687,280
-----------
Total ........................................................................ $ 31,914,337
============
Shares of capital stock
Investor A Shares .............................................................. 3,312,660
Investor B Shares .............................................................. 70,378
-----------
Total ........................................................................ 3,383,038
============
Net asset value
Investor A Shares -- redemption price per share ................................ $ 9.43
Investor B Shares -- offering price per share* ................................. 9.77
============
Maximum Sales Charge (Investor A) 4.50%
============
Maximum Offering Price per share (100%/(100%-Maximum Sales Charge) of net asset
value adjusted to nearest cent) (Investor A) ....................................... $ 9.87
============
</TABLE>
* Redemption price of Investor B shares varies based on length of time shares
are held.
See Notes to Financial Statements
B-96
<PAGE> 173
Statements of Operations
FOR THE YEAR ENDED
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
----------- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income ....................................................... $ 9,283,151 $ 2,350,114 $ 150,338
Dividend income ....................................................... 2,293,321
----------- ------------ ------------
TOTAL INCOME .......................................................... 9,283,151 2,350,114 2,443,659
----------- ------------ ------------
EXPENSES:
Investment advisory fees .............................................. 259,214 143,483 688,484
Administration fees ................................................... 345,611 71,742 144,850
12b-1 fees (Investor A) ............................................... 432,174 86,548 168,345
12b-1 fees (Investor B) ............................................... 12,436 51,209
Custodian and accounting fees ......................................... 86,401 35,870 108,638
Audit and legal fees .................................................. 102,687 20,450 51,060
Directors' fees and expenses .......................................... 17,526 3,033 7,296
Transfer agent fees ................................................... 79,137 38,891 58,165
Registration and filing fees .......................................... 53,745 10,751 42,059
Printing costs ........................................................ 51,497 10,848 25,038
Other ................................................................. 18,711 4,545 31,108
----------- ------------ ------------
TOTAL EXPENSES ........................................................ 1,446,703 438,597 1,376,252
Less: Fee waivers and expense reimbursements ..................... (432,174) (30,720) (66,860)
----------- ------------ ------------
Net Expenses ................................................ 1,014,529 407,877 1,309,392
----------- ------------ ------------
Net Investment Income ................................................. 8,268,622 1,942,237 1,134,267
----------- ------------ ------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains from investment transactions ....................... 90,347 13,473,952
Net change in unrealized appreciation (depreciation) from investments . (1,183,269) (1,397,638)
----------- ------------ ------------
Net realized/unrealized gains (losses) from investments ............... (1,092,922) 12,076,314
----------- ------------ ------------
Change in net assets resulting from operations ........................ $ 8,268,622 $ 849,315 $ 13,210,581
=========== ============ ============
</TABLE>
See Notes to Financial Statements
B-97
<PAGE> 174
Statements of Operations
THE RIVERFRONT FUNDS, IND. FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
OHIO FLEXIBLE STOCK
TAX-FREE GROWTH APPRECIATION
BOND FUND FUND FUND
--------- ---- ----
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income........................................................ $605,629 $ 662,585 $ 151,227
Dividend income........................................................ 268,337 91,741
-------- ----------- -----------
TOTAL INCOME........................................................... 605,629 930,922 242,968
-------- ----------- -----------
EXPENSES:
Investment advisory fees............................................... 56,870 183,256 294,183
Administration fees.................................................... 22,744 40,688 73,546
12b-1 fees (Investor A)................................................ 26,681 30,170 90,637
12b-1 fees (Investor B)................................................ 7,017 82,801 5,182
Custodian and accounting fees.......................................... 15,923 30,516 55,160
Audit and legal fees................................................... 6,894 11,351 30,631
Organization costs..................................................... 9,282 3,032 36,823
Directors' fees and expenses........................................... 1,178 2,077 4,093
Transfer agent fees.................................................... 26,007 44,600 38,988
Registration and filing fees........................................... 4,000 4,979 34,935
Printing costs......................................................... 3,745 15,967 36,655
Other.................................................................. 1,748 7,596 4,612
-------- ----------- -----------
TOTAL EXPENSES......................................................... 182,089 457,033 705,445
Less: fee waivers and expense reimbursements...................... (11,373) (40,649)
-------- ----------- -----------
Net Expenses................................................... 170,716 416,384 705,445
-------- ----------- -----------
Net Investment Income (Loss)........................................... 434,913 514,538 (462,477)
-------- ----------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS
Net realized gains (losses) from investment transactions............... (2,919) (153,623) 5,645,154
Net change in unrealized appreciation (depreciation) from investments.. (107,900) 853,589 (1,674,745)
-------- ----------- -----------
Net realized/unrealized gains (losses) from investments................ (110,819) 699,966 3,970,409
-------- ----------- -----------
Change in net assets resulting from operations......................... $324,094 $1,214,504 $3,507,932
======== ========== ==========
</TABLE>
See Notes to Financial Statements.
B-98
<PAGE> 175
STATEMENTS OF CHANGES IN NET ASSETS
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
U.S. Government U.S. Government
Securities Money Market Income
Fund Fund
-------------------------------- ---------------------------------
Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income .................... $ 8,268,622 $ 7,906,286 $ 1,942,237 $ 2,067,824
Net realized gains (losses) from
investment transactions ................ (1,415) 90,347 (517,451)
Net change in unrealized appreciation
(depreciation) from investments ........ (1,183,269) 3,520,908
------------- ------------- ------------ ------------
Change in net assets resulting from operations 8,268,622 7,904,871 849,315 5,071,281
------------- ------------- ------------ ------------
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS:
From net investment income ............... (8,268,622) (7,906,286) (1,865,718) (2,032,120)
In excess of net investment income .......
From net realized gains from investments .
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS:
From net investment income ............... (56,824) (22,977)
In excess of net investment income .......
From net realized gains from investments .
In excess of net realized gains ..........
------------- ------------- ------------ ------------
Change in net assets from shareholder
distributions .............................. (8,268,622) (7,906,286) (1,922,542) (2,055,097)
------------- ------------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .............. 413,837,358 331,872,719 2,867,087 5,670,500
Proceeds from shares issued in
connection with acquisition ........... 4,865,634
Dividends reinvested ..................... 2,193,920 1,518,099 486,495 578,837
Cost of shares redeemed .................. (392,509,518) (330,133,820) (5,090,697) (4,185,229)
------------- ------------- ------------ ------------
Change in net assets from capital transactions 23,521,760 8,122,632 (1,737,115) 2,064,108
------------- ------------- ------------ ------------
Change in net assets ......................... 23,521,760 8,121,217 (2,810,342) 5,080,292
NET ASSETS:
Beginning of period ...................... 157,495,499 149,374,282 37,801,175 32,720,883
------------- ------------- ------------ ------------
End of period ............................ $ 181,017,259 $ 157,495,499 $ 34,990,833 $ 37,801,175
============= ============= ============ ============
SHARE TRANSACTIONS:
Issued ................................... 413,837,358 331,872,719 299,041 592,903
Issued in connection with acquisition .... 4,865,634
Reinvested ............................... 2,193,920 1,518,099 51,049 61,636
Redeemed ................................. (392,509,518) (330,133,820) (534,677) (444,444)
------------- ------------- ------------ ------------
Change in shares ............................. 23,521,760 8,122,632 (184,587) 210,095
============= ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
Income Equity
Fund
----------------------------------
Year ended Year ended
December 31, December 31,
1996 1995
---- ----
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
<S> <C> <C>
Net investment income .................... $ 1,134,267 $ 1,082,073
Net realized gains (losses) from
investment transactions ................ 13,473,952 6,655,045
Net change in unrealized appreciation
(depreciation) from investments ........ (1,397,638) 5,311,784
------------ -------------
Change in net assets resulting from operations 13,210,581 13,048,902
------------ -------------
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS:
From net investment income ............... (1,089,197) (1,065,510)
In excess of net investment income ....... (11,775) (6,742)
From net realized gains from investments . (10,109,545) (6,293,075)
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS:
From net investment income ............... (45,070) (16,563)
In excess of net investment income ....... (1,105) (105)
From net realized gains from investments . (941,583) (222,170)
In excess of net realized gains .......... (94,220)
------------ -------------
Change in net assets from shareholder
distributions .............................. (12,292,495) (7,604,165)
----------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .............. 12,638,065 12,155,416
Proceeds from shares issued in
connection with acquisition ........... 9,727,219
Dividends reinvested ..................... 12,143,803 8,648,647
Cost of shares redeemed .................. (8,378,319) (7,262,834)
------------ -------------
Change in net assets from capital transactions 16,403,549 23,268,448
------------ -------------
Change in net assets ......................... 17,321,635 28,713,185
NET ASSETS:
Beginning of period ...................... 63,678,389 34,965,204
------------ -------------
End of period ............................ $ 81,000,024 $ 63,678,389
============ =============
SHARE TRANSACTIONS:
Issued ................................... 997,947 1,069,857
Issued in connection with acquisition .... 793,942
Reinvested ............................... 1,001,471 764,131
Redeemed ................................. (656,491) (634,159)
------------ -------------
Change in shares ............................. 1,342,927 1,993,771
============ =============
</TABLE>
See Notes to Financial Statements.
B-99
<PAGE> 176
STATEMENT OF CHANGES IN NET ASSETS
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND
----------------------- --------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income (loss).... $ 434,913 $ 419,775 $ 514,538 $ 275,589
Net realized gains (losses) from
investment transactions....... (2,919) 8,848 (153,623) 131,879
Net change in unrealized appreciation
(depreciation) from investments (107,900) 713,315 853,589 1,230,202
------------- ------------- ------------- -------------
Change in net assets resulting
from operations................... 324,094 1,141,938 1,214,504 1,637,670
------------- ------------- ------------- -------------
Distributions to Investor A Shareholders:
From net investment income...... (412,215) (401,164) (346,017) (202,502)
In excess of net investment income (1,775)
From net realized gains from
investments................... (85,787)
Tax return of capital...........
Distributions to Investor B Shareholders:
From net investment income...... (21,400) (13,152) (168,520) (63,921)
In excess of net investment income (1,028)
From net realized gains from
investments................... (43,216)
------------- ------------- ------------- -------------
Change in net assets from shareholder
distributions..................... (433,615) (414,316) (517,340) (395,426)
------------- ------------- ------------- -------------
Capital Transactions:
Proceeds from shares issued..... 632,048 895,943 11,628,310 11,076,750
Dividends reinvested............ 26,194 18,208 546,821 334,888
Cost of shares redeemed......... (588,738) (114,312) (6,534,711) (906,216)
------------- ------------- ------------- -------------
Change in net assets from capital
transactions...................... 69,504 799,839 5,640,420 10,505,422
------------- ------------- ------------- -------------
Change in net assets................ (40,017) 1,527,461 6,337,584 11,747,666
Net Assets:
Beginning of period............. 11,717,041 10,189,580 14,456,894 2,709,228
------------- ------------- ------------- -------------
End of period................... $ 11,677,024 $ 11,717,041 $ 20,794,478 $ 14,456,894
============= ============= ============= =============
Share Transactions:
Issued.......................... 59,532 87,181 1,017,399 1,035,102
Reinvested...................... 2,490 1,760 47,842 30,561
Redeemed........................ (55,955) (11,223) (571,147) (82,394)
------------- ------------- ------------- -------------
Change in shares.................... 6,067 77,718 494,094 983,269
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
-----------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, OCTOBER 1,
YEAR ENDED 1995 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 (A) 1995 (B)
---- -------- --------
<S> <C> <C> <C>
OPERATIONS:
Net investment income (loss).... $ (462,477) $ (51,131) $ (292,270)
Net realized gains (losses) from
investment transactions....... 5,645,154 1,556,383 3,024,858
Net change in unrealized appreciation
(depreciation) from investments (1,674,745) (2,070,853) 5,538,265
------------- ------------- -------------
Change in net assets resulting
from operations................... 3,507,932 (565,601) 8,270,853
------------- ------------- -------------
DISTRIBUTIONS TO INVESTOR A SHAREHOLDERS:
From net investment income...... (1,166,721)
In excess of net investment income (289)
From net realized gains from
investments................... (3,106,226) (1,556,383)
Tax return of capital........... (6,824)
DISTRIBUTIONS TO INVESTOR B SHAREHOLDERS:
From net investment income......
In excess of net investment income
From net realized gains from
investments................... (65,866)
------------- ------------- -------------
Change in net assets from shareholder
distributions..................... (3,172,381) (1,563,207) (1,166,721)
------------- ------------- -------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued..... 3,709,128 810,508
Dividends reinvested............ 2,969,201 1,542,781
Cost of shares redeemed......... (16,166,715) (3,611,887)
------------- ------------- -------------
Change in net assets from capital
transactions...................... (9,488,386) (1,258,598) (10,529,141)
------------- ------------- -------------
Change in net assets................ (9,152,835) (3,387,406) (3,425,009)
NET ASSETS:
Beginning of period............. 41,067,172 44,454,578 47,879,587
------------- ------------- -------------
End of period................... $ 31,914,337 $ 41,067,172 $ 44,454,578
============= ============= ============
SHARE TRANSACTIONS:
Issued.......................... 373,503 83,381
Reinvested...................... 315,294 164,279
Redeemed........................ (1,628,669) (370,208)
------------- ------------- -------------
Change in shares.................... (939,872) (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-100
<PAGE> 177
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
U.S. GOVERNMENT AGENCIES (44.4%):
Federal Farm Credit Bank:
<S> <C> <C> <C>
$ 2,000,000 Discount Note, 1/6/97....... $ 1,998,549
1,340,000 Discount Note, 1/10/97...... 1,338,255
3,000,000 Discount Note, 1/27/97...... 2,988,690
1,000,000 Discount Note, 3/6/97....... 990,720
2,000,000 Discount Note, 3/21/97...... 1,976,783
Federal Home Loan Bank:
10,000,000 Discount Note, 1/2/97....... 9,998,194
4,000,000 Discount Note, 1/9/97....... 3,995,333
2,000,000 Discount Note, 1/16/97...... 1,995,483
3,000,000 Discount Note, 1/27/97...... 2,988,560
Federal Home Loan Mortgage Corp.:
5,000,000 Discount Note, 1/3/97....... 4,998,520
1,000,000 Discount Note, 1/6/97....... 999,257
2,000,000 Discount Note, 1/15/97...... 1,995,854
1,630,000 Discount Note, 1/23/97...... 1,624,810
5,000,000 Discount Note, 1/31/97...... 4,978,033
2,433,000 Discount Note, 2/5/97....... 2,420,676
2,000,000 Discount Note, 2/6/97....... 1,989,480
2,000,000 Discount Note, 2/21/97...... 1,985,153
2,000,000 Discount Note, 2/24/97...... 1,984,310
Federal National Mortgage Assoc.:
3,000,000 Discount Note, 1/7/97....... 2,997,370
2,000,000 4.38%, 1/21/97.............. 1,998,794
1,000,000 Discount Note, 1/28/97...... 996,070
2,840,000 Discount Note, 2/6/97....... 2,824,664
3,000,000 Discount Note, 2/7/97....... 2,983,874
2,000,000 Discount Note, 2/11/97...... 1,988,156
2,000,000 Discount Note, 2/14/97...... 1,987,167
4,000,000 Discount Note, 2/20/97...... 3,970,778
2,000,000 Discount Note, 2,26,97...... 1,983,729
4,000,000 Discount Note, 3/27/97...... 3,949,378
2,000,000 5.36%*, 9/2/97.............. 2,000,000
1,500,000 5.43%*, 9/12/97............. 1,499,541
----------
Total U.S. Government Agencies 80,426,181
COMMERCIAL PAPER (26.6%):
Aerospace/Defense (3.9%):
3,000,000 International Lease Finance
Corp.,
Discount Note, 1/7/97....... 2,997,350
4,000,000 International Lease Finance
Corp.,
Discount Note, 1/23/97...... 3,987,044
----------
6,984,394
----------
Banking (6.2%):
6,300,000 Bank One Corp.,
Discount Note, 1/10/97......
6,291,652
5,000,000 Bankers Trust,
Discount Note, 3/3/97.......
4,955,606
----------
11,247,258
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
------ ----------- ----
Commercial Paper, continued:
Building Materials (1.7%):
<S> <C> <C> <C>
$ 3,000,000 Sherwin-Williams Co.,
Discount Note, 1/6/97......... $2,997,788
------------
Entertainment (3.3%):
4,000,000 Walt Disney,
Discount Note, 1/15/97........
3,991,802
2,000,000 Walt Disney,
Discount Note, 2/18/97........ 1,985,920
------------
5,977,722
------------
Financial Services (6.6%):
4,000,000 Merrill Lynch,
Discount Note, 1/22/97........ 3,987,563
3,000,000 Merrill Lynch,
Discount Note, 2/5/97......... 2,984,425
5,000,000 Safeco Corp.,
Discount Note, 2/14/97........ 4,967,489
------------
11,939,477
------------
Pharmaceuticals (3.3%):
5,000,000 Glaxo Wellcome PLC,
Discount Note, 1/24/97........ 4,963,070
1,000,000 Glaxo Wellcome PLC,
Discount Note, 1/27/97........ 996,172
------------
5,979,242
------------
Tobacco (1.6%):
3,000,000 Philip Morris Co., Inc.,
Discount Note, 1/13/97........ 2,994,700
------------
Total Commercial Paper 48,120,581
------------
Repurchase Agreements (29.4%):
18,295,000 Dean Witter, 6.45%, 1/2/97,
(Collateralized by various U.S.
Treasury and U.S. Government
Agency Securities,
6.09%-11.00%,
1/15/97-8/1/29, market value --
$18,561,852).................. 18,295,000
35,000,000 Prudential Funding Corp., 6.45%,
1/2/97, (Collateralized by various
U.S. Government Agency Securities,
6.00%-9.50%, 3/15/07-12/20/26,
market value -- $35,480,423).. 35,000,000
------------
Total Repurchase Agreements 53,295,000
------------
Total (Cost -- $181,841,762)(a) $181,841,762
============
</TABLE>
The percentages indicated are based on net assets of $181,017,259.
* Adjustable Rate Mortgage.
(a) Cost and value for federal income tax reporting purposes are the same.
See Notes to Financial Statements.
B-101
<PAGE> 178
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
<S> <C> <C>
CORPORATE BONDS (26.1%):
Banking (7.0%):
$1,000,000 MBNA Master Credit Card Trust,
6.05%, 11/15/02................... $ 995,190
500,000 Mellon Capital, 7.72% 12/1/26....... 489,375
1,000,000 Midland Bank PLC, (HSBC),
6.95%, 3/15/11.................... 978,750
---------
2,463,315
---------
Financial Services (16.2%):
1,000,000 Boatmen's Auto Trust, 6.75% 1/15/03.. 1,011,830
1,000,000 Chase Manhattan Corp., 8.50%, 2/15/02. 1,078,750
1,000,000 First Chicago Master Trust, Series L,
Class A 1994 7.15%, 4/15/01...... 1,025,480
500,000 Ford Motor Credit Corp.,
6.25%, 12/8/05................... 473,750
500,000 Grand Metropolitian Investment
Co., 7.45%, 4/15/35.............. 522,500
500,000 Lehman Brothers Holdings,
8.50%, 5/1/07.................... 538,750
1,000,000 Premier Auto Trust, 6.85% 5/22/99,
Series 1994-4.................... 1,012,488
---------
5,663,548
---------
Telecommunication (2.9%):
1,000,000 U.S. West Capital Corp.,
6.31%, 11/1/05................... 993,750
---------
Total Corporate Bonds 9,120,613
---------
U.S. GOVERNMENT AGENCIES (56.0%):
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97....................... 1,000,160
500,000 8.07%, 2/27/02....................... 507,900
875,000 6.38%, 4/29/03....................... 850,351
690,000 9.50%, 2/25/04........................ 804,160
Federal Home Loan Mortgage Corp.:
1,000,000 Discount Note, 1/2/97................ 999,700
1,000,000 6.55%, 1/4/00........................ 1,008,360
500,000 7.50%, 3/15/15....................... 504,030
1,000,000 6.00%, 1/15/18....................... 991,660
1,000,000 7.20%, 6/15/18....................... 1,004,840
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
------ ----------- -----
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc.:
<S> <C> <C>
$1,000,000 5.33%, 6/26/98..................... $ 990,470
500,000 9.05%, 4/10/00..................... 540,150
1,310,278 6.00%, 2/1/03...................... 1,281,413
625,000 6.38%, 6/25/03..................... 610,300
625,000 6.05%, 6/30/03..................... 610,144
351,767 6.75%, 8/25/04,
Series 1992-152 Class H......... 351,281
1,050,000 8.50%, 2/1/05...................... 1,103,214
1,000,000 7.00%, 9/25/05,
Series 1992-1110 Class G........ 1,007,830
749,864 7.00%, 9/25/19..................... 748,627
Government National Mortgage Assoc.:
712,881 8.00%, 5/15/03..................... 726,647
Private Export Funding Corp.:
1,000,000 6.24%, 5/15/02..................... 995,000
Student Loan Marketing Assoc.:
1,000,000 6.05%, 9/14/00..................... 991,410
959,177 5.54%*, 10/25/04................... 959,753
Tennessee Valley Authority:
1,000,000 6.24%, 7/15/45..................... 1,000,000
----------
Total U.S. Government Agencies 19,587,400
----------
U.S. TREASURY NOTES (11.5%):
1,000,000 6.00%, 11/30/97.................... 1,002,290
2,000,000 5.88%, 3/31/99..................... 1,997,900
1,000,000 6.63% 7/31/01...................... 1,015,630
----------
Total U.S. Treasury Notes 4,015,820
----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community,
9.13%, 3/15/01......................... 395,569
----------
Total Yankee Dollar Bonds 395,569
----------
INVESTMENT COMPANIES (4.2%):
1,480,112 Dreyfus Treasury Prime Fund........... 1,480,112
----------
Total Investment Companies 1,480,112
-----------
Total (Cost -- $34,345,949)(a) $34,599,514
===========
</TABLE>
- ---------------
Percentages indicated are based on net assets of $34,990,833.
* Variable Rate.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C> <C>
Unrealized appreciation........... $ 424,863
Unrealized depreciation........... (171,298)
---------
Net unrealized appreciation....... $ 253,565
=========
</TABLE>
See Notes to Financial Statements.
B-102
<PAGE> 179
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
INCOME EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------- -------------------------------- ----------
<S> <C> <C>
COMMON STOCK (97.2%):
Apparel (0.7%):
33,000 Intimate Brands, Inc............. $ 561,000
-----------
Automobile (0.8%):
28,200 Volvo AB-ADR..................... 613,350
-----------
Auto Parts (5.1%):
18,400 Briggs & Stratton Corp........... 809,600
53,600 Dana Corp........................ 1,748,700
49,100 Echlin, Inc...................... 1,552,788
-----------
4,111,088
-----------
Banks (4.3%):
46,600 Central Fidelity Banks, Inc...... 1,199,950
38,400 Crestar Financial Corp........... 1,428,000
14,900 First American Corp.--Tennessee.. 858,612
-----------
3,486,562
Broadcast/Radio, TV (0.0%):
1,500 U.S. West Media Group, Inc. (b).. 27,750
Chemicals (5.7%): -----------
18,500 Akzo Nobel N.V. ADR.............. 1,248,750
3,500 E. I. du Pont deNemours & Co..... 330,312
111,700 Ethyl Corp....................... 1,075,113
26,500 Lawter International, Inc........ 334,562
3,000 PPG Industries, Inc.............. 168,375
47,200 Witco Corp....................... 1,439,600
-----------
4,596,712
-----------
Confections & Beverages (1.2%):
29,000 Cadbury Schweppes PLC-ADR........ 989,625
-----------
Consumer Products (1.7%):
52,100 Stanley Works.................... 1,406,700
-----------
Cosmetics (2.1%):
37,100 International Flavors &
Fragrances, Inc.................. 1,669,500
-----------
Department Stores (4.8%):
35,600 May Department Stores Co......... 1,664,300
8,000 Mercantile Stores Co., Inc....... 395,000
34,900 J.C. Penney Co., Inc............. 1,701,375
3,000 Sears Roebuck & Co............... 138,375
-----------
3,899,050
-----------
Electrical (4.2%):
51,000 AMP, Inc......................... 1,957,125
33,400 Thomas & Betts Corp.............. 1,482,125
-----------
3,439,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------- ----------------- -----------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Electronics (3.7%):
44,600 National Service Industries, Inc. $ 1,666,925
33,800 Phillips Electronics N.V......... 1,352,000
-----------
3,018,925
-----------
Engineering & Construction (1.5%):
32,000 Foster Wheeler Corp.............. 1,188,000
-----------
Financial Services (4.1%):
52,900 H & R Block, Inc................. 1,534,100
71,500 ITT Industries, Inc.............. 1,751,750
-----------
3,285,850
-----------
Food Processing (0.2%):
9,500 Tasty Baking Co.................. 130,625
-----------
Forest Products (3.9%):
38,600 International Paper Co........... 1,558,475
15,500 Rayonier, Inc.................... 594,813
20,900 Union Camp Corp.................. 997,975
-----------
3,151,263
-----------
Grocery Stores (0.7%):
11,500 Giant Food--Class A............... 396,750
5,000 Winn-Dixie Stores, Inc........... 158,125
-----------
554,875
-----------
Health Products/Care (2.0%):
56,700 Bard (C. R.), Inc................ 1,587,600
-----------
Household Products/Wares (1.1%):
1,500 Colgate-Palmolive Co............. 138,375
32,100 Rubbermaid, Inc.................. 730,275
-----------
868,650
-----------
Insurance (1.6%):
1,500 American International Group, Inc. 162,375
11,100 ITT Hartford Group, Inc.......... 749,250
7,300 Lincoln National Corp............ 383,250
-----------
1,294,875
-----------
Manufacturing (0.3%):
3,500 Minnesota Mining & Manufacturing
Co............................... 290,062
-----------
Medical Supplies (0.2%):
3,000 Becton Dickinson & Co............ 130,125
-----------
Medical Products (2.2%):
43,800 Baxter International............. 1,795,800
-----------
Metal Fabricate/Hardware (1.4%):
25,100 Timken Co........................ 1,151,462
-----------
</TABLE>
Continued
B-103
<PAGE> 180
SCHEDULE OF PORTFOLIO INVESTMENTS
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
INCOME EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------ ----------- ----------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Metals (3.8%):
27,700 Reynolds Metals Co................ $ 1,561,588
33,200 Tenneco, Inc. (b)................. 1,498,150
-----------
3,059,738
-----------
Mining (1.4%):
37,500 Freeport-McMoRan Copper & Gold,
Inc............................... 1,120,313
-----------
Office Equipment & Supplies (1.9%):
23,000 Harris Corp....................... 1,578,375
-----------
Oil & Gas Producers (4.3%):
21,600 Amoco Corp........................ 1,741,500
11,300 LG&E Energy Corp.................. 276,850
12,200 Mobil Corp........................ 1,491,450
-----------
3,509,800
-----------
Oil--Domestic (1.6%):
53,800 Sun Company, Inc.................. 1,311,375
-----------
Oil--International (0.4%):
5,000 Chevron Corp...................... 325,000
-----------
Packaged Food (1.0%):
38,000 Lance, Inc........................ 684,000
2,500 Sara Lee Corp..................... 93,125
-----------
777,125
-----------
Packaging & Container (1.0%):
14,900 Temple-Inland, Inc................ 806,462
-----------
Paper (2.9%):
19,900 Consolidated Papers, Inc.......... 977,587
46,600 Westvaco Corp..................... 1,339,750
-----------
2,317,337
-----------
Pharmaceuticals (2.2%):
3,000 Abbott Laboratories............... 152,250
42,100 Pharmacia & Upjohn, Inc........... 1,668,212
-----------
1,820,462
-----------
Photography (0.3%):
3,500 Eastman Kodak Co.................. 280,875
-----------
Printing & Publishing (3.3%):
34,100 Dow Jones & Co., Inc.............. 1,155,137
33,300 McGraw-Hill Cos., Inc............. 1,535,963
-----------
2,691,100
-----------
Real Estate (0.1%):
3,200 New Plan Realty Trust............. 81,200
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------- ----------- --------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Savings & Loans (0.5%):
9,700 First Commerce Corp......... $377,087
---------
Steel (0.5%):
17,000 Allegheny Teledyne, Inc..... 391,000
---------
Telecommunications (4.0%):
47,200 Alltel Corp................. 1,480,900
24,500 Federal Signal Corp......... 633,937
48,400 Frontier Corp............... 1,095,050
---------
3,209,887
---------
Textiles (1.1%):
81,100 Shaw Industries, Inc........ 952,925
---------
Tobacco (0.3%):
5,000 American Brands, Inc........ 248,125
---------
Tools (1.4%):
32,500 Snap-On, Inc................ 1,157,813
---------
Transportation--Airlines (1.3%):
36,700 KLM Royal Dutch Air Lines
N.V......................... 1,023,013
---------
Transportation--Rail (1.5%):
38,400 Illinois Central Corp....... 1,228,800
---------
Utilities--Electric (4.9%):
33,200 Central & South West Corp... 850,750
26,500 Chilgener S.A., ADR......... 553,188
24,200 CINergy Corp................ 807,675
10,800 DPL, Inc.................... 264,600
14,500 Illinova Corp............... 398,750
1,000 KU Energy Corp.............. 30,000
9,600 Scana Corp.................. 256,800
27,200 Western Resources, Inc...... 839,800
---------
4,001,563
---------
Utilities--Gas (0.7%):
19,000 Brooklyn Union Gas Co....... 572,375
---------
Utilities--Telecommunications (3.3%):
26,200 GTE Corp.................... 1,188,825
36,300 Southern New England
Telecommunications Corp..... 1,411,163
1,500 U S West Communications Group 48,375
---------
2,648,363
----------
Total Common Stock 78,738,812
----------
</TABLE>
Continued
B-104
<PAGE> 181
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
INCOME EQUITY FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ----------- ---------
<S> <C> <C>
CORPORATE BONDS (0.8%):
100,000 Hasbro, Inc., 6.00%, 11/15/98... $ 135,500
50,000 Liebert Corp., 8.00%, 11/15/10.. 182,125
100,000 Pennzoil Co., 6.50%, 1/15/03.... 154,000
50,000 South Carolina National Corp.,
6.50%, 5/15/01.................. 147,375
---------
Total Corporate Bonds 619,000
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------- ----------- -----------
<S> <C> <C>
INVESTMENT COMPANIES (2.6%):
1,930,357 Dreyfus Treasury Prime Fund...... $ 1,930,357
164,620 Federated Short Term Government
Fund............................. 164,620
-----------
Total Investment Companies 2,094,977
-----------
Total (Cost--$77,468,431)(a)....................... $81,452,789
===========
</TABLE>
- -------------------
Percentages indicated are based on net assets of $81,000,024.
(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........... $5,615,970
Unrealized depreciation .......... (1,631,612)
----------
Net unrealized appreciation ...... $3,984,358
==========
</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-105
<PAGE> 182
Schedule of Portfolio Investments
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL Security Market
AMOUNT Description Value
- -------- -------------------------------------------------------------------------------------------------- --------
<S> <C> <C>
OHIO MUNICIPAL BONDS (91.7%):
$100,000 Aurora City School District, 5.40%, 12/1/06 ......................................................... $104,375
200,000 Beavercreek Local School District, GO, 5.30%, 12/1/08 ............................................... 203,500
100,000 Bowling Green City School District, GO, 5.70%, 12/1/11 .............................................. 101,500
230,000 Butler County Hospital Facilities, 6.00%, 11/15/10, Callable 5/15/04 @ 101 .......................... 242,650
200,000 Butler County Sewer System Revenue, 5.40%, 12/1/09 .................................................. 204,250
250,000 Butler County Sewer System Revenue, Series B, 6.20%, 12/1/09 ........................................ 264,375
250,000 Canton Waterworks System, GO, 5.75%, 12/1/10 ........................................................ 259,375
100,000 Chillicothe Water System Revenue, 5.10%, 12/1/05 .................................................... 101,500
250,000 Cincinnati, GO, 5.25%, 12/1/01 ...................................................................... 259,375
250,000 Clermont County Waterworks Revenue, 6.63%, 12/1/16 .................................................. 278,437
100,000 Cleveland, GO, 5.38%, 9/1/09 ........................................................................ 101,000
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 @ 102 ................................................ 258,750
200,000 Columbus, GO, 5.65%, 6/15/11 ........................................................................ 205,500
250,000 Columbus Sewer Revenue, 6.13%, 6/1/03 ............................................................... 271,250
100,000 Delaware County, GO, 5.60%, 12/1/10 ................................................................. 101,000
100,000 Dover Municipal Electric System Revenue, 5.35%, 12/1/06 ............................................. 103,375
250,000 Franklin County Hospital Revenue, 5.25%, 6/1/08 ..................................................... 250,937
250,000 Franklin County Hospital Revenue, Refunding, Riverside United Methodist, Series A, 5.30%, 5/15/02 ... 256,875
250,000 Fremont, GO, 5.45%, 12/15/07 ........................................................................ 258,125
250,000 Gahanna, GO, 5.85%, 6/1/08 .......................................................................... 263,750
170,000 Hamilton County Sewer System Unrefunded, Series A, 6.40%, 12/1/04 ................................... 183,812
80,000 Hamilton County Sewer Systems, Series A, 6.40%, 12/1/04 ............................................. 87,500
250,000 Hamilton County, Building Improvement & Refunding, Museum Center, GO, 5.75%, 12/1/00 ................ 262,187
250,000 Hilliard School District, GO, 5.35%, 12/1/04 ........................................................ 257,500
250,000 Kings Local School District, GO, 5.75%, 12/1/10 ..................................................... 258,125
100,000 Lake County Human Services Building, GO, 5.70%, 12/1/15 ............................................. 101,000
250,000 Lakota Local School District, 6.00%, 12/1/07, Callable 12/1/02 @101 ................................. 262,187
250,000 Mahoning County, GO, 5.60%, 12/1/02 ................................................................. 263,437
250,000 Mahoning County, GO, 5.70%, 12/1/08 ................................................................. 261,250
100,000 Marysville Exempt Village School District, GO, 5.30%, 12/1/09 ....................................... 100,875
200,000 Mason City School Disctrict, GO, 5.20%, 12/1/08 ..................................................... 201,250
250,000 Middletown Capital Facilities Improvement, 5.60%, 12/1/05 ........................................... 256,875
100,000 Montgomery County, GO, 5.40%, 9/1/09 ................................................................ 100,375
250,000 Olentangy Local School District, GO, Series A, 5.70%, 12/1/05 ....................................... 265,312
100,000 Solon, GO, 5.25%, 12/1/07 ........................................................................... 101,875
100,000 State, GO, 5.60%, 8/1/02 ............................................................................ 105,250
250,000 State Building Authority, 5.70%, 9/1/01 ............................................................. 263,438
250,000 State Building Authority, 6.00%, 10/1/07 ............................................................ 267,188
245,000 State Building Authority, 6.13%, 10/1/09 ............................................................ 260,925
95,000 State Building Authority, 6.25%, 6/1/11 ............................................................. 99,156
250,000 State Elementary & Secondary Capital Facilities, 5.45%, 6/1/99 ...................................... 257,500
200,000 State Public Facilities Commission, Higher Education Capital Facilities, Series II-A, 5.20%, 5/1/05.. 205,500
250,000 State Public Facilities Commission, Higher Education Capital Facilities, Series II-B, 5.70% 11/1/03.. 265,938
250,000 State Public Facilities Commission, Parks & Recreations, Series II-A, 5.25%, 6/1/06 ................. 255,313
250,000 State Water Development Authority Revenue, 5.75%, 6/1/03 ............................................ 265,625
</TABLE>
Continued
B-106
<PAGE> 183
Schedule of Portfolio Investments
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL Security Market
AMOUNT Description Value
- -------- ------------------------------------------------------------------------------------ -----------
<S> <C> <C>
$250,000 State Water Development Authority Revenue, 5.75%, 12/1/05, Callable 12/1/02 @ 102... $ 266,563
150,000 State Water Development Authority, 5.70%, 12/1/11 .................................. 153,750
100,000 Summit County, 5.45%, 12/1/10 ...................................................... 101,250
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04 ................................. 263,438
250,000 Warren County Waterworks, 5.75%, 12/1/09 ........................................... 257,188
100,000 West Clermont Local School District, 5.55%, 12/1/06 ................................ 104,500
250,000 Woodridge Local School District, GO, 5.75%, 12/1/07, Callable 12/1/04 @ 102 ........ 263,750
----------
Total Ohio Municipal Bonds 10,709,731
-----------
INVESTMENT COMPANIES (7.4%):
425,000 Dreyfus Municipal Money Market Fund ................................................ 425,000
442,727 Goldman Tax Free Fund .............................................................. 442,727
-----------
Total Investment Companies 867,727
-----------
Total (Cost--$11,126,979)(a) $11,577,458
===========
</TABLE>
- ----------------
Percentages indicated are based on net assets of $11,677,024.
(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.............. $450,479
Unrealized depreciation.............. 0
--------
Net unrealized appreciation ......... $450,479
========
</TABLE>
GO--General Obligation
See Notes to Financial Statements.
B-107
<PAGE> 184
Schedule of Portfolio Investments
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Flexible Growth Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL Security Market
AMOUNT Description Value
- -------------- ----------------------- --------
<S> <C> <C>
COMMON STOCK (52.6%):
Aerospace (1.8%):
4,200 Lockheed Martin Corp................ $384,300
--------
Agricultural Machinery (2.1%):
8,000 Case Corp........................... 436,000
--------
Apparel (1.4%):
8,000 Jones Apparel Group (b)............. 299,000
--------
Banks (0.9%):
2,000 Chase Manhattan Corp................ 178,500
--------
Building Materials (1.0%):
4,000 Texas Industries, Inc............... 202,500
--------
Chemicals (3.2%):
7,000 E. I. du Pont de Nemours &
Co.................................. 660,625
--------
Confections & Beverages (1.2%):
4,000 Anheuser-Busch Cos., Inc............ 160,000
2,000 Hershey Foods Corp.................. 87,500
--------
247,500
--------
Computers & Software ( 4.4%):
4,000 Compaq Computer Corp. (b)........... 297,500
3,000 Intel Corp.......................... 392,812
5,600 Seagate Technology, Inc. (b)........ 221,200
--------
911,512
--------
Finance--Mortgage Loan/Banker (1.3%):
7,000 Federal National Mortgage
Assoc............................... 263,375
--------
Forest Products (0.9%):
4,500 International Paper Co.............. 181,688
--------
Grocery (1.3%):
6,000 Kroger Co........................... 279,000
--------
Household Products/Wares (1.6%):
3,000 Procter & Gamble Co................. 322,875
--------
Industrial Machinery (1.2%):
3,400 Caterpillar, Inc.................... 255,850
--------
Metals (1.6%):
15,500 Placer Dome, Inc.................... 337,125
--------
Mining (2.7%):
12,000 Barrick Gold Corp................... 345,000
14,000 Santa Fe Pacific Gold Corp.......... 215,250
--------
560,250
Oil & Gas Producers (2.6%):
2,500 British Petroleum PLC, ADR.......... 353,438
--------
2,000 Texaco, Inc......................... 196,250
--------
549,688
--------
Oil--Domestic (3.7%):
8,000 Panenergy Corp.................... $ 360,000
16,000 YPF Sociedad Anonima-Sponsored ADR 404,000
----------
764,000
----------
Oil--International (1.1%):
2,300 Exxon Corp........................ 225,400
----------
Pharmaceuticals (2.9%):
3,000 Amgen, Inc. (b)................... 163,125
4,000 Bristol-Myers Squibb Co........... 435,000
----------
598,125
----------
Photography (1.5%):
4,000 Eastman Kodak Co.................. 321,000
----------
Printing & Publishing (1.6%):
9,000 New York Times Co--Class A......... 342,000
----------
Real Estate (3.3%):
4,000 Healthcare Properties Investment,
Inc............................... 140,000
17,000 Health & Retirement Properties
Trust............................. 329,375
7,000 Public Storage, Inc............... 217,000
----------
686,375
----------
Retail (0.6%):
3,000 Walgreen Co....................... 120,000
----------
Tobacco (2.3%):
4,300 Philip Morris Cos., Inc........... 485,900
----------
Telecommunications (5.4%):
6,500 Ameritech Corp.................... 394,062
4,000 CIA Telecomunicacion Chile, ADR... 404,500
4,000 Telecom of New Zealand, ADR....... 324,000
----------
1,122,562
----------
Utilities--Electric (1.0%):
4,500 Duke Power Co..................... 208,125
----------
Total Common Stock 10,943,275
----------
U.S. GOVERNMENT AGENCIES (10.5%):
Federal Home Loan Bank:
100,000 5.97%, 12/14/98................... 99,668
200,000 6.11%, 1/18/01.................... 195,964
300,000 6.04%, 2/14/01.................... 293,100
----------
588,732
----------
Federal National Mortgage Assoc.:
300,000 6.95%, 11/06...................... 296,430
----------
Government National Mortgage Assoc.:
503,671 7.50%, 9/15/26.................... 798,778
798,530 7.50%, 9/15/26.................... 503,826
----------
1,302,604
----------
Total U.S. Government Agencies 2,187,766
----------
</TABLE>
Continued
B-108
<PAGE> 185
Schedule of Portfolio Investments, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Flexible Growth Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL Security Market
AMOUNT Description Value
- ------------- ----------- ---------
<S> <C> <C>
U.S. TREASURY BILLS (4.8%):
1,000,000 Discount Note,3/6/97..... $ 991,020
---------
U.S. TREASURY NOTES (23.7%):
500,000 6.07%, 8/31/98........... 502,250
700,000 6.25%, 5/31/00........... 702,919
3,100,000 6.88%, 5/15/06........... 3,193,651
500,000 6.53%, 7/15/06........... 519,380
---------
Total U.S. Treasury Notes 4,918,200
=========
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL Security Market
AMOUNT Description Value
- ---------------- ----------- -----------
<S> <C> <C>
INVESTMENT COMPANIES (9.7%):
1,896,034 Dreyfus Treasury Prime Fund.... $ 1,896,034
8,000 Southern Africa Fund, Inc...... 117,000
-----------
Total Investment Companies 2,013,034
-----------
Total (Cost--$18,999,696)(a) $21,053,295
===========
</TABLE>
- ----------------
The percentages indicated are based on net assets of $20,794,478.
(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. $2,252,044
Unrealized depreciation (198,445)
----------
Net unrealized appreciation $2,053,599
==========
</TABLE>
(b) Non-income producing security.
ADR--American Depository Receipt
See Notes to Financial Statements.
B-109
<PAGE> 186
Schedule of Portfolio Investments
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------- ----------- ----------
<S> <C> <C>
COMMON STOCK (90.2%):
Apparel (6.4%):
2,400 Gymboree Corp. (b).......... $ 54,900
6,250 Intimate Brands, Inc........ 106,250
25,000 Jones Apparel Group (b)..... 934,375
15,000 Nautica Enterprises, Inc. (b) 378,750
12,000 TJX Cos., Inc............... 568,500
----------
2,042,775
----------
Automobile & Parts (1.0%):
15,000 Gentex Corp. (b)............ 301,875
2,500 Simpson Industries, Inc..... 27,227
----------
329,102
----------
Banks (0.7%):
2,000 Colonial BancGroup, Inc..... 80,000
4,700 Sterling Bancorp............ 69,325
2,100 Vermont Financial Services
Corp........................ 74,550
----------
223,875
----------
Beer, Wine & Distilled Beverages (0.2%):
2,200 Boston Beer Co., Inc. (b)... 22,550
3,800 Pete's Brewing Co. (b)...... 30,400
----------
52,950
----------
Building & Construction (0.1%):
2,000 Drew Industries, Inc. (b)... 44,000
----------
Building--Mobile Home (1.9%):
22,000 Coachmen Industries, Inc.... 624,250
----------
Building Materials (0.5%):
3,000 Medusa Corp................. 103,125
1,500 National Service Industries,
Inc......................... 56,062
----------
159,187
Chemicals (0.7%):
14,500 CFC International (b)....... 163,125
4,000 Lawter International, Inc... 50,500
----------
213,625
----------
Commercial Services (2.4%):
8,500 Paychex, Inc................ 437,219
12,000 Service Corp. International. 336,000
----------
773,219
----------
Computer, Software & Services (18.8%):
8,000 3 Com Corp. (b)............. 587,000
2,000 Broderbund Software, Inc. (b) 59,500
10,000 Cisco Systems, Inc. (b)..... 636,250
7,500 Compuware Corp. (b)......... 375,937
10,000 Comverse Technology, Inc. (b) 378,125
14,000 Dell Computer Corp. (b)..... 743,750
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------- ----------- ---------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Computer, Software & Services, continued:
8,000 Gateway 2000, Inc. (b)........... $ 428,500
13,200 Microsoft Corp. (b).............. 1,090,650
13,000 Oracle Corp. (b)................. 542,750
9,000 Parametric Technology Corp. (b).. 462,375
20,000 Structural Dynamics Research
Corp. (b)........................ 400,000
10,000 Sun Microsystems, Inc. (b)....... 256,875
3,300 The Learning Co. (b)............. 47,438
---------
6,009,150
---------
Data Processing (1.0%):
7,500 National Data Corp............... 326,250
---------
Department Stores (2.4%):
15,000 Dollar Tree Stores, Inc. (b)..... 573,750
5,000 Kohl's Corp. (b)................. 196,250
---------
770,000
---------
Direct Marketing (0.9%):
5,000 Catalina Marketing Corp. (b)..... 275,625
---------
Electronics (2.1%):
5,000 ADFlex Solutions, Inc. (b)....... 51,250
10,000 Micron Technology, Inc........... 291,250
20,000 S 3, Inc. (b).................... 325,000
---------
667,500
---------
Environmental Control (4.3%):
12,000 United Waste Systems, Inc. (b)... 412,500
10,200 USA Waste Services, Inc. (b)..... 325,125
20,000 U.S. Filter Corp. (b)............ 635,000
---------
1,372,625
Financial Services (1.2%):
10,000 Green Tree Financial Corp........ 386,250
---------
Firearms & Ammunition (0.2%):
4,000 Sturm Ruger & Co. Inc............ 77,500
---------
Home Improvement (1.3%):
20,000 Eagle Hardware & Garden, Inc. (b) 415,000
Hotel/Motel (1.8%):
8,000 Renaissance Hotel Group N.V. (b). 188,000
200 HFS, Inc. (b).................... 11,950
15,000 Hilton Hotels Corp............... 391,875
---------
591,825
---------
Human Resources (2.0%):
16,600 Alternative Resources, Inc. (b).. 288,425
4,000 Olsten Corp...................... 60,500
15,000 Employee Solutions, Inc. (b)..... 307,500
---------
656,425
---------
</TABLE>
Continued
B-110
<PAGE> 187
Schedule of Portfolio Investments, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
-------------- ----------- ---------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Industrial Machinery (2.2%):
4,000 AGCO Corp........................ $ 114,500
17,500 Cincinnati Milacron, Inc......... 382,812
3,500 Greenfield Industries, Inc....... 107,187
3,400 Lincoln Electric Co.--Class A..... 102,850
---------
707,349
---------
Instruments--Scientific (0.8%):
6,600 Millipore Corp................... 273,075
---------
Insurance (1.2%):
6,000 Progressive Corp................. 404,250
---------
Manufacturing (0.3%):
5,000 Optical Coating Laboratories, Inc. 53,750
2,500 Westinghouse Air Brake Co........ 31,563
---------
85,313
---------
Medical--Transportation (0.2%):
1,850 American Medical Response, Inc.
(b).............................. 60,125
---------
Medical--Information Systems (0.2%):
4,600 PHAMIS, Inc. (b)................. 59,225
---------
Medical--Instruments/Products (2.9%):
10,000 Boston Scientific Corp. (b)...... 600,000
3,000 CNS, Inc. (b).................... 43,125
12,200 Physio-Control International
Corp. (b)........................ 274,500
---------
917,625
---------
Mining (1.6%):
10,000 Barrick Gold Corp................ 287,500
5,000 Newmont Gold Co.................. 218,750
---------
506,250
---------
Minerals (0.3%):
12,500 Uranium Resources, Inc. (b)...... 98,438
---------
Motorcycle (1.5%):
10,000 Harley-Davidson, Inc............. 470,000
---------
Oil Equipment, Wells & Services (8.2%):
12,000 ENSCO International, Inc. (b).... 582,000
30,000 Global Marine, Inc. (b).......... 618,750
7,500 Nuevo Energy Co. (b)............. 390,000
11,000 Ranger Oil Ltd................... 108,625
20,000 Reading & Bates Corp. (b)........ 530,000
5,000 Transocean Offshore, Inc......... 313,125
4,000 Tuboscope Vetco International
Corp. (b)........................ 62,000
---------
2,604,500
---------
Pharmaceuticals (1.1%):
10,000 Jones Medical Industries, Inc.... 366,250
---------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------- ----------- ---------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Power Conversion--Supply Equipment (0.9%):
10,000 American Power Conversion (b)... $272,500
---------
Printing & Publishing (0.2%):
2,650 World Color Press, Inc. (b)..... 51,012
---------
Recreational Equipment (0.9%):
10,000 Callaway Golf Co................ 287,500
---------
Recreational Vehicles (0.4%):
5,000 Polaris Industries Inc.......... 118,750
---------
Restaurant (2.3%):
3,000 Bob Evans Farms................. 40,500
10,000 Dave & Buster's, Inc. (b)....... 201,250
10,000 Landry's Seafood Restaurants, 213,750
Inc. (b)........................ 41,500
4,000 Rock Bottom Restaurants, Inc. (b)
11,000 Wendy's International, Inc...... 225,500
---------
722,500
---------
Retail (4.3%):
5,000 Best Buy Co, Inc. (b)........... 53,125
22,000 PETsMART, Inc. (b).............. 481,250
7,000 Sunglass Hut International (b).. 50,750
10,000 Tiffany & Co.................... 366,250
15,000 Tech Data Corp. (b)............. 410,625
---------
1,362,000
---------
Savings & Loans (1.5%):
7,000 Astoria Financial Corp.......... 258,125
5,000 Charter One Financial, Inc...... 210,000
---------
468,125
---------
Sporting Goods (0.9%):
12,600 Cannondale Corp. (b)............ 283,500
---------
Steel (2.1%):
10,000 Carpenter Technology Corp....... 366,250
16,400 Worthington Industries, Inc..... 297,250
---------
663,500
---------
Textiles (0.7%):
10,000 Mohawk Industries, Inc. (b)..... 220,000
---------
Telecommunications (2.9%):
8,000 Aspect Telecommunications Corp.
(b)............................. 508,000
5,900 Federal Signal Corp............. 152,663
12,500 LCI International, Inc. (b)..... 268,750
---------
929,413
---------
Tools (1.0%):
10,500 Black & Decker Corp............. 316,312
---------
</TABLE>
Continued
B-111
<PAGE> 188
Schedule of Portfolio Investments, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------- ----------- ----------
<S> <C> <C>
COMMON STOCK, CONTINUED:
Tobacco (0.4%):
5,000 Dimon, Inc.................... $ 115,625
----------
Utilities--Electric (1.3%):
9,000 Commonwealth Energy System Cos. 211,500
4,900 Oklahoma Gas & Electric....... 204,575
----------
416,075
----------
Total Common Stock 28,790,345
----------
CORPORATE BONDS (1.3%):
Cosmetics & Toiletries (1.3%):
22,500 NBTY, Inc. (b)................ 427,500
----------
Total Corporate Bonds 427,500
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------- ----------- -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (3.1%):
Federal National Mortgage Assoc.:
$1,000,000 Discount Note, 1/2/97........... $ 999,700
-----------
Total U.S. Government Agencies 999,700
-----------
INVESTMENT COMPANIES (6.5%):
826,595 Dreyfus Treasury Prime Fund..... 826,595
1,242,376 Federated U.S. Treasury Services
#125............................ 1,242,376
-----------
Total Investment Companies 2,068,971
-----------
Total (Cost--$26,843,438)(a) $32,286,516
===========
</TABLE>
- ------------
The percentages indicated are based on net assets of $31,914,337.
(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. ................. $5,885,080
Unrealized depreciation. ................. (442,002)
----------
Net unrealized appreciation .............. $5,443,078
==========
</TABLE>
(b) Non-income producing security.
See Notes to Financial Statements.
B-112
<PAGE> 189
Notes to Financial Statements
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
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").
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, consistent with preservation of capital, 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 Ohio state income taxes and
preservation of capital. 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.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001 per share. 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' prospectus. 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' prospectus. 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 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
B-113
<PAGE> 190
Notes to Financial Statements (Continued)
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
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,
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 or
closing sale prices on the principal exchange (closing sales prices
on the over-the-counter National Market System) in which such
securities are normally traded. Municipal bonds are valued by using
market quotations or independent services that use prices provided by
market makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics.
Short-term investments maturing in 60 days or less are valued at
amortized cost, which 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 as
determined in good faith 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 on an identified cost basis.
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
Continued
B-114
<PAGE> 191
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
distributions have been reclassified to 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 the Funds to comply with all requirements of the
Internal Revenue Code (the "code") applicable to regulated investment
companies and to distribute substantially all of their taxable income
to their shareholders. The Portfolios have met the requirements of
the Code applicable to regulated investment companies for the year
ended December 31, 1996, therefore, no federal tax provision was
required.
EXPENSE ALLOCATIONS:
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 year ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Income Fund .... $ 17,096,653 $ 21,823,848
Income Equity Fund ............. $118,606,552 $115,043,248
Ohio Tax-Free Bond Fund ........ $ 607,267 $ 716,491
Flexible Growth Fund ........... $ 21,993,742 $ 17,772,833
Stock Appreciation Fund ........ $ 54,802,922 $ 76,115,297
</TABLE>
Continued
B-115
<PAGE> 192
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
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
-------------------------------- ------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued .............. $ 413,837,358 $ 331,872,719 $ 2,494,252 $ 4,352,572
Proceeds from shares issued in connection
with acquisition .................... 4,865,634
Dividends reinvested ..................... 2,193,920 1,518,099 440,531 569,125
Shares redeemed .......................... (392,509,518) (330,133,820) (4,741,047) (4,089,227)
------------- ------------- ----------- -----------
Change in net assets from Investor A share
transactions ........................ $ 23,521,760 $ 8,122,632 $(1,806,264) $ 832,470
============= ============= =========== ===========
Investor B Shares:
Proceeds from shares issued .............. $ 372,835 $ 1,317,928
Dividends reinvested ..................... 45,964 9,712
Shares redeemed .......................... (349,650) (96,002)
----------- -----------
Change in net assets from Investor B share
transactions ........................ $ 69,149 $ 1,231,638
=========== ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued ................................... 413,837,358 331,872,719 264,167 469,561
Issued in connection with acquisition .... 4,865,634
Reinvested ............................... 2,193,920 1,518,099 46,735 60,733
Redeemed ................................. (392,509,518) (330,133,820) (502,013) (435,482)
============= ============= =========== ===========
Change in Investor A Shares .............. 23,521,760 8,122,632 (191,111) 94,812
============= ============= =========== ===========
Investor B Shares:
Issued ................................... 34,874 123,342
Reinvested ............................... 4,314 903
Redeemed ................................. (32,664) (8,962)
----------- -----------
Change in Investor B Shares .............. 6,524 115,283
=========== ===========
</TABLE>
Continued
B-116
<PAGE> 193
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
INCOME EQUITY FUND OHIO TAX-FREE FUND
-------------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued .............. $ 8,709,609 $ 9,389,602 $ 39,457 $ 297,450
Proceeds from shares issued in connection
with acquisition .................... 9,727,219
Dividends reinvested ..................... 10,845,880 8,635,353 6,134 8,453
Shares redeemed .......................... (7,958,218) (7,219,484) (340,435) (109,278)
------------ ------------ --------- ---------
Change in net assets from Investor A share
transactions ........................ $ 11,597,271 $ 20,532,690 $(294,844) $ 196,625
============ ============ ========= =========
Investor B Shares:
Proceeds from shares issued .............. $ 3,928,456 $ 2,765,814 $ 592,591 $ 598,493
Dividends reinvested ..................... 1,297,923 13,294 20,060 9,755
Shares redeemed .......................... (420,101) (43,350) (248,303) (5,034)
------------ ------------ --------- ---------
Change in net assets from Investor B share
transactions ........................ $ 4,806,278 $ 2,735,758 $ 364,348 $ 603,214
============ ============ ========= =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued ................................... 680,679 828,287 3,737 29,259
Issued in connection with acquisition .... 793,942
Reinvested ............................... 898,119 763,006 593 833
Redeemed ................................. (624,637) (630,554) (32,383) (10,732)
------------ ------------ --------- ---------
Change in Investor A Shares .............. 954,161 1,754,681 (28,053) 19,360
============ ============ ========= =========
Investor B Shares:
Issued ................................... 317,268 241,570 55,795 57,922
Reinvested ............................... 103,352 1,125 1,897 927
Redeemed ................................. (31,854) (3,605) (23,572) (491)
------------ ------------ --------- ---------
Change in Investor B Shares .............. 388,766 239,090 34,120 58,358
============ ============ ========= =========
</TABLE>
Continued
B-117
<PAGE> 194
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND STOCK APPRECIATION FUND
------------------------------ -------------------------------
OCTOBER 1,
YEAR ENDED YEAR ENDED YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 (a)
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued .............. $ 5,979,948 $ 6,257,968 $ 3,225,171 $ 738,522
Dividends reinvested ..................... 318,997 282,271 2,903,615 1,542,781
Shares redeemed .......................... (5,316,451) (717,635) (16,060,775) (3,611,887)
----------- ----------- ------------ -----------
Change in net assets from Investor A share
transactions ........................ $ 982,494 $ 5,822,604 $ (9,931,989) $(1,330,584)
=========== =========== ============ ===========
Investor B Shares:
Proceeds from shares issued .............. $ 5,648,362 $ 4,818,782 $ 483,957 $ 71,986
Dividends reinvested ..................... 227,824 52,617 65,586
Shares redeemed .......................... (1,218,260) (188,581) (105,940)
----------- ----------- ------------ -----------
Change in net assets from Investor B share
transactions ........................ $ 4,657,926 $ 4,682,818 $ 443,603 $ 71,986
=========== =========== ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued ................................... 531,651 593,056 307,057 76,082
Reinvested ............................... 28,295 25,863 308,567 164,279
Redeemed ................................. (466,939) (65,727) (1,618,575) (370,208)
----------- ----------- ------------ -----------
Change in Investor A Shares .............. 93,007 553,192 (1,002,951) (129,847)
=========== =========== ============ ===========
Investor B Shares:
Issued ................................... 485,748 442,046 66,446 7,299
Reinvested ............................... 19,547 4,698 6,727
Redeemed ................................. (104,208) (16,667) (10,094)
----------- ----------- ------------ -----------
Change in Investor B Shares .............. 401,087 430,077 63,079 7,299
=========== =========== ============ ===========
</TABLE>
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
Continued
B-118
<PAGE> 195
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
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, Inc. ("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 Portfolio.
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders was held on December 30, 1996. At the
Meeting, shareholders voted (i) on an Amendment to the Investment Advisory
Agreement between the Fund and Provident to permit Provident to manage
directly that portion of the Income Equity Fund's portfolio allocated to
it by the Fund's Board of Directors; (ii) to approve the amendment to the
Sub-Investment Advisory Agreement between Provident and DRZ with respect
to the Income Equity Fund to clarify that DRZ will manage directly that
portion of the Income Equity Fund's portfolio allocated to it by the
Fund's Board of Directors; (iii) to approve an Amendment to the Investment
Advisory Arrangements for the Flexible Growth Fund with respect to the
management of its portfolio such that Provident will become the sole
manager of the Flexible Growth Fund's portfolio; (iv) to amend the
Articles of Incorporation of the Fund to reclassify (change the name of)
the currently issued and outstanding shares of The Flexible Growth Fund as
shares of The Riverfront Balanced Fund.
The results of all matters voted on by shareholders at the Special Meeting
held on December 30, 1996 were as follows:
A. Approval of Amendments to the Investment Advisory Agreement
between the Fund and Provident for the Income Equity Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
2,891,190 25,646 65,981
</TABLE>
B. Approval of the Amendment to the Sub-Investment Advisory
Agreement between Provident and DRZ for the Income Equity
Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
2,849,578 33,459 99,780
</TABLE>
Continued
B-119
<PAGE> 196
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
C. Approval of an Amendment to the Investment Advisory
Arrangements concerning the appointment of Provident as the
sole manager of the Flexible Growth Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
1,710,471 15,186 25,864
</TABLE>
D. Approval of the Amendment to the Articles of Incorporation of
the Fund with respect to the Flexible Growth Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
1,714,185 11,546 25,790
</TABLE>
All changes are to become effective January 1, 1997.
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, 1996, Provident Securities & Investment
Company ("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 $90,000 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") 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 December 31, 1996, 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 and Agreement ("Investor A Plan") and an Investor B Distribution and
Shareholder Services Plan and Agreement ("Investor B Plan"), each in
accordance with Rule 12b-1 under the 1940 Act. 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 average daily net asset value of
Investor A Shares of each Portfolio.
Continued
B-120
<PAGE> 197
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
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, 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, 1996, BISYS received $675,842 from
commissions on sales of capital shares, of which $634,802 was reallowed to
brokers affiliated with Provident.
Provident and certain of its affiliates own shares of Portfolios of the
Fund. As of December 31, 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 Securities Money Market........................................................ $ 121,952
U.S. Government Income Fund.................................................................... $ 8,930
Income Equity Fund............................................................................. $ 12,002
Ohio Tax-Free Bond Fund........................................................................ $ 10,567
Flexible Growth Fund........................................................................... $ 4,054
Stock Appreciation Fund........................................................................ $ 589
</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, 1996:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- ------
<S> <C> <C> <C>
INVESTMENT ADVISER FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets) ..... 0.15% 0.40% 0.95%
Voluntary fee reductions .................... NA NA $ 36,661
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 .................... $ 432,174 $ 30,720 $ 30,199
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets) NA 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES ............... $ 86,401 $ 35,870 $ 108,638
TRANSFER AGENT FEES ......................... $ 79,137 $ 38,891 $ 58,165
</TABLE>
Continued
B-121
<PAGE> 198
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE STOCK
BOND FUND GROWTH FUND APPRECIATION FUND
------------- ----------- -----------------
<S> <C> <C> <C>
INVESTMENT ADVISER FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets) ..... 0.50% 0.90% 0.80%
Voluntary fee reductions .................... $ 11,373 $ 28,720 NA
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 .................... NA $ 11,929 NA
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets) 1.00% 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES ............... $ 15,923 $ 30,516 $ 55,160
TRANSFER AGENT FEES ......................... $ 26,007 $ 44,600 $ 38,988
</TABLE>
NA--Not applicable
6. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Riverfront Funds, Inc. designated the following eligible distributions
for the dividends received deduction for corporations for the taxable year
ended December 31, 1996:
<TABLE>
<CAPTION>
STOCK INCOME FLEXIBLE
APPRECIATION EQUITY GROWTH
------------ ------ -------
<S> <C> <C> <C>
Dividend Income...................... $ 36,453 $2,153,446 $227,745
</TABLE>
7. EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Riverfront Funds, Inc. designates the following exempt-interest income
for the Ohio Tax-Free Bond Fund for the taxable year ended December 31,
1996:
<TABLE>
<S> <C>
Exempt-interest distributions................................................. $433,425
Exempt-interest distribution per share........................................ $ 0.387
</TABLE>
The percentage break-down of the exempt-interest by state for the Ohio
Tax-Free Bond Fund's taxable year ended December 31, 1996 was as follows:
<TABLE>
<S> <C>
Ohio....... 100%
----
100%
====
</TABLE>
Continued
B-122
<PAGE> 199
Notes to Financial Statements, continued
THE RIVERFRONT FUNDS, INC. DECEMBER 31, 1996
8. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Portfolios have capital
loss carryforwards as of December 31, 1996, 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 $1,348,718
U.S. Government Income Fund...................................... 2003 $ 516,479
Flexible Growth Fund............................................. 2004 $ 153,639
</TABLE>
9. CAPITAL GAINS DISTRIBUTIONS (UNAUDITED):
The Fund declared and distributed capital gains to shareholders in the
following amounts per share for the taxable year ended December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM SHORT-TERM
--------- ----------
<S> <C> <C>
Income Equity Fund................................... 0.6894 1.2127
Stock Appreciation Fund.............................. 0.8897 0.1448
</TABLE>
B-123
<PAGE> 200
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
--------------------------------------------------------------------
OCTOBER 1,
YEARS ENDED DECEMBER 31, 1992 TO
------------------------------------------------------ DECEMBER 31,
1996 1995 1994 (d) 1993(d) 1992 (a)(d)
-------- -------- -------- -------- --------
<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 ........................... 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- --------
Distributions
Net investment income ........................... (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD.................................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total Return ........................................ 4.89% 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ................... $181,017 $157,495 $149,374 $133,207 $ 37,083
Ratio of expenses to average net assets ............. 0.59% 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income to average net assets 4.78% 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net assets* ............ 0.84% 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income to average net assets* 4.53% 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.
See Notes to Financial Statements.
B-124
<PAGE> 201
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
-------------------------------------------------------------------
JANUARY 17,
YEAR ENDED YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (a)
---------------------------- ---------- ----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ....................... $ 9.71 $ 10.95 $ 8.92 $ 10.00
--------- --------- --------- ---------
Investment Activities
Net investment income ..................... 0.52 0.49 0.54 0.43
Net realized and unrealized gains (losses)
from investments .................. (0.29) (0.31) 0.79 0.94
--------- --------- --------- ---------
Total from Investment Activities ...... 0.23 0.18 1.33 1.37
--------- --------- --------- ---------
Distributions
Net investment income ..................... (0.51) (0.49) (0.54) (0.42)
In excess of net investment income ........
--------- --------- --------- ---------
Total Distributions ................... (0.51) (0.49) (0.54) (0.42)
--------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD ............................. $ 9.43 $ 10.64 $ 9.71 $ 10.95
========= ========= ========= =========
Total Return
(excludes sales/redemption charge)......... 2.51% 1.72% 15.22% 13.96%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............. $ 33,694 $ 1,296 $ 36,538 $ 1,263
Ratio of expenses to average net assets ....... 1.11% 1.96% 1.09% 1.90%(c)
Ratio of net investment income to ............. 5.45% 4.59% 5.74% 4.80%(c)
average net assets
Ratio of expenses to average net assets* ...... 1.20% 1.96% 1.18% 1.90%(c)
Ratio of net investment income to ............. 5.36% 4.59% 5.65% 4.80%(c)
average net assets*
Portfolio Turnover ............................ 53%(d) 53%(d) 75%(d) 75%(d)
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 (f) 1993 (f) 1992 (b)(f)
--------- -------- -----------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ....................... $ 9.91 $ 9.76 $ 10.00
--------- --------- ---------
Investment Activities
Net investment income ..................... 0.54 0.51 0.10
Net realized and unrealized gains
(losses) from investments ......... (0.99) 0.20 (0.23)
--------- --------- ---------
Total from Investment Activities ...... (0.45) 0.71 (0.13)
--------- --------- ---------
Distributions
Net investment income ..................... (0.54) (0.50) (0.10)
In excess of net investment income ........ (0.06) (0.01)
--------- --------- ---------
Total Distributions ................... (0.54) (0.56) (0.11)
--------- --------- ---------
NET ASSET VALUE,
END OF PERIOD.............................. $ 8.92 $ 9.91 $ 9.76
========= ========= =========
Total Return
(excludes sales/redemption charge)......... (4.64)% 7.38% (1.31)%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............. $ 32,721 $ 30,078 $ 24,588
Ratio of expenses to average net assets ....... 0.86% 0.65% 0.66%
Ratio of net investment income to.............. 5.78% 5.05% 4.00%
average net assets
Ratio of expenses to average net a
Ratio of net investment income to ............. 5.49% 4.62% 3.60%
average net assets*
Portfolio Turnover ............................ 83%(d) 220%(d) 117%(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 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> 202
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
INCOME EQUITY FUND
------------------------------------------------------------------
JANUARY 17,
YEAR ENDED YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (a)
---------------------------- ---------- ----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ................................. $ 11.70 $ 11.85 $ 10.15 $ 10.00
---------- ---------- ---------- ----------
Investment Activities
Net investment income ............................... 0.21 0.12 0.27 0.13
Net realized and unrealized gains
from investments .................................. 2.12 2.21 2.89 2.78
---------- ---------- ---------- ----------
Total from Investment Activities ................ 2.33 2.33 3.16 2.91
---------- ---------- ---------- ----------
Distributions
Net investment income ............................... (0.21) (0.12) (0.27) (0.13)
In excess of net investment income ..................
Net realized gains .................................. (1.90) (1.90) (1.34) (0.93)
In excess of net realized gains .....................
---------- ---------- ---------- ----------
Total Distributions ............................. (2.11) (2.02) (1.61) (1.06)
---------- ---------- ---------- ----------
NET ASSET VALUE, ........................................ $ 11.92 $ 12.16 $ 11.70 $ 11.85
========== ========== ========== ==========
END OF PERIOD
Total Return (excludes sales/redemption charge) ......... 19.88% 19.67% 31.45% 29.28%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ....................... $ 73,368 $ 7,632 $ 60,845 $ 2,833
Ratio of expenses to average net assets ................. 1.76% 2.48% 1.49% 2.46%(c)
Ratio of net investment income to average net assets .... 1.62% 0.88% 2.27% 1.12%(c)
Ratio of expenses to average net assets* ................ 1.85% 2.54% 1.74% 2.51%(c)
Ratio of net investment income to average net assets* ... 1.53% 0.82% 2.02% 1.07%(c)
Portfolio Turnover ...................................... 166%(d) 166%(d) 180%(d) 180%(d)
Average commission rate paid (h) ........................ $ 0.0541 $ 0.0541
<CAPTION>
INCOME EQUITY FUND
---------------------------------------------
YEARS ENDED DECEMBER 31,
----------------------------------------------
1994 (f) 1993 (f) 1992 (b)(f)
--------- -------- ------------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.................................. $ 10.63 $ 10.78 $ 10.00
---------- ---------- ----------
Investment Activities
Net investment income ............................... 0.32 0.28 0.08
Net realized and unrealized gains
from investments .................................. 1.01 0.80
---------- ---------- ----------
Total from Investment Activities ................ 0.32 1.29 0.88
---------- ---------- ----------
Distributions
Net investment income ............................... (0.31) (0.27) (0.08)
In excess of net investment income .................. (0.03) (0.01)
Net realized gains .................................. (0.49) (1.14)
In excess of net realized gains ..................... (0.01)
---------- ---------- ----------
Total Distributions ............................. (0.80) (1.44) (0.10)
---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD........................................ $ 10.15 $ 10.63 $ 10.78
========== ========== ==========
Total Return (excludes sales/redemption charge) ......... 3.08% 12.11% 8.74%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ....................... $ 34,965 $ 24,387 $ 12,262
Ratio of expenses to average net assets ................. 1.30% 1.47% 1.48%
Ratio of net investment income to average net assets .... 2.93% 2.55% 3.16%
Ratio of expenses to average net assets* ................ 1.58% 1.64% 2.02%
Ratio of net investment income to average net assets* ... 2.65% 2.38% 2.62%
Portfolio Turnover ...................................... 119%(d) 145%(d) 12%(d)
Average commission rate paid (h) ........................
</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.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio 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.
See Notes to Financial Statements.
B-126
<PAGE> 203
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
------------------------------------------------------------------
JANUARY 17, FROM AUGUST 1,
YEAR ENDED YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (a) 1994 (a)(e)
----------------------- ------------ ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ----------- ----------
<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 ..................................... 0.40 0.32 0.39 0.27 0.12
Net realized and unrealized gains (losses)
from investments......................................... (0.10) (0.09) 0.67 0.73 (0.17)
-------- ------- -------- ------- --------
Total from Investment Activities ...................... 0.30 0.23 1.06 1.00 (0.05)
-------- ------- -------- ------- --------
Distributions
Net investment income ..................................... (0.40) (0.32) (0.38) (0.27) (0.12)
-------- ------- -------- ------- --------
NET ASSET VALUE,
END OF PERIOD.............................................. $ 10.41 $ 10.64 $ 10.51 $ 10.73 $ 9.83
======== ======= ======== ======= ========
Total Return (excludes sales/redemption charge) ............... 2.95% 2.21% 10.96% 10.10%(d) (0.47)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ............................. $ 10,693 $ 984 $ 11,091 $ 626 $ 10,190
Ratio of expenses to average net assets ....................... 1.45% 2.25% 1.49% 2.27%(c) 1.08%(c)
Ratio of net investment income to average net assets .......... 3.87% 3.07% 3.77% 3.01%(c) 2.92%(c)
Ratio of expenses to average net assets* ...................... 1.55% 2.36% 1.64% 2.41%(c) 1.44%(c)
Ratio of net investment income to average net assets* ......... 3.77% 2.96% 3.62% 2.87%(c) 2.56%(c)
Portfolio Turnover ............................................ 6%(b) 6%(b) 34%(b) 34%(b) 29%(b)
</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-127
<PAGE> 204
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND
-------------------------------------------------------------------------
JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (a) 1994 (a)(f)
------------------------- ----------- ----------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ----------
<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 .............................. 0.31 0.26 0.35 0.25 0.10
Net realized and unrealized gains (losses)
from investments ................................ 0.33 0.34 1.66 1.79 (0.18)
------- ------- ------ ------ ------
Total from Investment Activities ............... 0.64 0.60 2.01 2.04 (0.08)
------- ------- ------ ------ ------
Distributions
Net investment income .............................. (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains ................................. 0 0 (0.10) (0.10)
------- ------- ------ ------ ------
Total Distributions ............................ (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD....................................... $ 11.69 $ 12.04 $11.36 $11.70 $ 9.79
======= ======= ====== ====== ======
Total Return (excludes sales/redemption charge) ........ 5.76% 5.27% 20.83% 20.53%(c) (0.82)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ...................... $10,786 $10,008 $9,427 $5,030 $2,709
Ratio of expenses to average net assets ................ 1.70% 2.54% 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment income to average net assets ... 2.87% 2.03% 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to average net assets* ............... 1.94% 2.68% 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment income to average net assets* .. 2.63% 1.89% 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover ..................................... 98%(b) 98%(b) 13%(b) 13%(b) 1%(b)
Average commission rate paid (g) ....................... $0.0891 $0.0891
</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.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio 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.
See Notes to Financial Statements.
B-128
<PAGE> 205
Financial Highlights
THE RIVERFRONT FUNDS, INC.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
----------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
YEAR ENDED 1995 THROUGH 1995 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 (b) 1995 (a)(b)
----------------------------------- --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 9.50 $ 9.91 $ 10.00 $ 10.00
------------ ---------- ---------- ----------
Investment Activities
Net investment income .............. (0.14) (0.15) (0.01) (0.01)
Net realized and unrealized gains
(losses) from investments ...... 1.10 1.04 (0.12) (0.08)
------------ ---------- ---------- ----------
Total from Investment Activities 0.96 0.89 (0.13) (0.09)
------------ ---------- ---------- ----------
Distributions
Net realized gains ................. (1.03) (1.03) (0.37)
------------ ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD....................... $ 9.43 $ 9.77 $ 9.50 $ 9.91
============ ========== ========== ==========
Total Return
(excludes sales/redemption charge) . 10.17% 9.05% (1.20)%(c) (0.90)%(c)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ...... $ 31,227 $ 687 $ 40,995 $ 72
Ratio of expenses to average net assets 1.91% 2.64% 1.76%(d) 2.30%(d)
Ratio of net investment income ......... (1.25)% (2.01)% (0.49)%(d) (1.69)%(d)
to average net assets
Ratio of expenses to average net assets* 1.91% 2.64% 1.77%(d) 2.39%(d)
Ratio of net investment income ......... (1.25)% (2.01)% (0.50)%(d) (1.78)%(d)
to average net assets*
Portfolio Turnover ..................... 162%(e) 162%(e) 46%(e) 46%(e)
Average commission rate paid (h) ....... $ 0.0597 $ 0.0597
<CAPTION>
STOCK APPRECIATION FUND
--------------------------------------------------------------------
YEARS ENDED SEPEMBER 30,
-------------------------------------------------------------------
1995 (f) 1994 (f) 1993 (f) 1992 (f)
---------- -------- -------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD................. $ 8.25 $ 10.18 $ 7.98 $ 7.70
---------- ---------- ---------- ----------
Investment Activities
Net investment income .............. (0.07) (0.12) (0.17) (0.08)
Net realized and unrealized gains
(losses) from investments ...... 2.14 (1.26) 2.57 1.41
---------- ---------- ---------- ----------
Total from Investment Activities 2.07 (1.38) 2.40 1.33
---------- ---------- ---------- ----------
Distributions
Net realized gains ................. (0.32) (0.55) (0.20) (1.05)
---------- ---------- ---------- ----------
NET ASSET VALUE,
END OF PERIOD....................... $ 10.00 $ 8.25 $ 10.18 $ 7.98
========== ========== ========== ==========
Total Return
(excludes sales/redemption charge) . 25.12% (13.91)% 30.61% 16.69%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) ...... $ 44,500 $ 47,880 $ 59,330 $ 28,750
Ratio of expenses to average net assets 2.61% 2.44% 2.47% 2.70%
Ratio of net investment income ......... (0.73)% (1.35)% (1.85)% (1.00)%
to average net assets
Ratio of expenses to average net assets* (g) (g) (g) (g)
Ratio of net investment income ......... (g) (g) (g) (g)
to average net assets*
Portfolio Turnover ..................... 197% 254% 216% 288%
Average commission rate paid (h) .......
</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 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 portfolio 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.
See Notes to Financial Statements.
B-129
<PAGE> 206
- --------------------------------------------------------------------------------
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 certain protective elements may be
lacking or may be
A-1
<PAGE> 207
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
senior debt that is assigned an actual or implied BBB
rating.
A-2
<PAGE> 208
B Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or
BB- rating.
Description of six highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury
debt.
AA+ High credit quality. Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
A- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
BBB Debt has below average protection factors but is still
considered sufficient for prudent investment. However, there
is considerable variability in risk during economic cycles.
Description of the six highest long-term debt ratings by Fitch (plus or
minus signs are used with a rating symbol to indicate the relative position of
the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
A-3
<PAGE> 209
BBB Bonds rated BBB are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings for these bonds
will fall below investment grade is higher than for bonds
with higher ratings.
BB Bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected
over time by adverse economic changes. However, business and
financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B Bonds rated B are considered highly speculative. While bonds
in this class are currently meeting debt service requirements,
the probability of continued timely payments of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
IBCA's description of its six highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low expectation of
investment risk. Capacity for timely repayment of principal
and interest is adequate, although adverse changes in
business, economic, or financial conditions are more likely to
lead to increased investment risk than for obligations in
other categories.
A-4
<PAGE> 210
BB Obligations for which there is a possibility of investment
risk developing. Capacity for timely repayment of principal
and interest exists, but is susceptible over time to adverse
changes in business, economic, or financial conditions.
B Obligations for which investment risk exists. Timely repayment
of principal and interest is not sufficiently protected
against adverse changes in business, economic or financial
conditions.
Thomson's description of its six highest long-term debt ratings
(Thomson may include a plus (+) or minus (-) designation to indicated where
within the respective category the issue is placed):
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB The lowest investment grade category and indicates an
acceptable capacity to repay principal and interest. Issues
rated BBB are, however, more vulnerable to adverse
developments (both internal and external) than obligations
with higher ratings.
BB While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for
lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated
issues. Adverse developments could well negatively affect the
payment of interest and principal on a timely basis.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
A-5
<PAGE> 211
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions)
have a superior capacity for repayment of senior
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by many of the
following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of
financial markets and assured sources of
alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions)
have a strong capacity for repayment of senior
short-term debt obligations. This will normally be
evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics,
while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is
maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and
profitability may result in changes in the level of
debt protection measurements and may require
relatively high financial leverage. Adequate
liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety
regarding timely payment is strong. Those issues
A-6
<PAGE> 212
determined to have extremely strong safety characteristics are
denoted with a plus sign (+).
A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative
degree of safety is not as high as for issues designated
"A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors
and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.
Duff 1- High certainty of timely payment. Liquidity
factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are small.
Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.
Fitch's description of its three highest short-term debt ratings:
F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest degree
of assurance for timely payment.
A-7
<PAGE> 213
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
or F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rated below investment
grade.
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Thomson's description of its three highest short-term ratings:
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid
on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
Municipal Obligations Ratings
- -----------------------------
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or VMIG-1
designations are of the best quality, enjoying strong protection by established
cash flows, superior
A-8
<PAGE> 214
liquidity support or demonstrated broad-based access to the market for
refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality with ample
margins of protection although not so large as in the preceding rating group.
Obligations bearing MIG-3 or VMIG-3 denote favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest
ratings assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and
interest.
"SP-3": Speculative capacity to pay principal and
interest.
The following summarizes the four highest ratings used by Moody's for
state and municipal bonds:
"Aaa": Bonds judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa": Bonds judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
"A": Bonds which possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
A-9
<PAGE> 215
"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> 216
Registration Statement
of
THE RIVERFRONT FUNDS
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 Ohio Tax-Free Bond Fund
Financial Highlights
(iv) The Riverfront Balanced Fund
Financial Highlights
(v) The Riverfront Income Equity Fund
Financial Highlights
(vi) The Riverfront Large Company Select Fund
Financial Highlights
(vii) The Riverfront Small Company Select Fund
Financial Highlights
Included in Part B:
(i) The Riverfront U.S. Government Securities Money Market
Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
C-1
<PAGE> 217
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
Financial Highlights for the years ended December 31, 1996,
1995, 1994, 1993 and for the period from commencement of
operations (October 1, 1992) to December 31, 1992
Report of Independent Auditors dated February 20, 1997
(ii) The Riverfront U.S. Government Income Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
Financial Highlights for the years ended December 31, 1996,
1995, 1994, 1993, and 1992 (Investor A Shares) and for the
year ended December 31, 1996 and the period from commencement
of operations (January 17, 1995) to December 31, 1995
(Investor B Shares)
Report of Independent Auditors dated February 20, 1997
(iii) The Riverfront Ohio Tax-Free Bond Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995
C-2
<PAGE> 218
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
Financial Highlights for the years ended December 31, 1996 and
1995 and the period from commencement of operations (August 1,
1994) to December 31, 1994 (Investor A Shares) and for the
year ended December 31, 1996 and the period from commencement
of operations (January 17, 1995) to December 31, 1995
(Investor B Shares)
Report of Independent Auditors dated February 20, 1997
(iv) The Riverfront Balanced Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statements of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
Financial Highlights for the years ended December 31, 1996 and
1995 and the period from commencement of operations (September
1, 1994) to December 31, 1994 (Investor A shares) and for the
year ended December 31, 1996 and the period from commencement
of operations (January 17, 1995) to December 31, 1995
(Investor B shares)
Report of Independent Auditors dated February 20, 1997
(v) The Riverfront Income Equity Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
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<PAGE> 219
Financial Highlights for the years ended December 31, 1996,
1995, 1994, 1993, and 1992 (Investor A Shares) and for the
year ended December 31, 1996 and the period from commencement
of operations (January 17, 1995) to December 31, 1995
(Investor B Shares)
Report of Independent Auditors dated February 20, 1997
(vi) The Riverfront Large Company Select Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from commencement of
operations (January 2, 1997) through June 30, 1997 (Investor
A and B shares) (unaudited)
(vii) The Riverfront Small Company Select Fund
Statement of Assets and Liabilities dated June 30, 1997
(unaudited)
Statement of Operations for the period ended June 30,
1997 (unaudited)
Statement of Changes in Net Assets for the period ended
June 30, 1997 (unaudited)
Schedule of Portfolio Investments dated June 30, 1997
(unaudited)
Notes to Financial Statements as of June 30, 1997
(unaudited)
Financial Highlights for the period from January 1, 1997
through June 30, 1997 (Investor A and B shares) (unaudited)
Statement of Assets and Liabilities dated December 31,
1996
Statement of Operations for the year ended December 31,
1996
Statement of Changes in Net Assets for the year ended December
31, 1996, the period from the date of acquisition (October 1,
1995) through December 31, 1995 and the year ended September
30, 1995
Schedule of Portfolio Investments dated December 31, 1996
Notes to Financial Statements as of December 31, 1996
Financial Highlights for the year ended December 31, 1996, the
period from the date of acquisition (October 1, 1995) through
December 31, 1995, and the years ended September 30, 1995,
1994, 1993 and 1992 (Investor A shares) and for the year ended
December 31, 1996 and the period from commencement of
operations (October 1, 1995) through December 31, 1995
(Investor B shares)
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<PAGE> 220
Report of Independent Auditors dated February 20, 1997
(viii) All required financial statements are included in Part B
hereof. All other financial statements and schedules are
inapplicable.
(b) Exhibits
(1) Registrant's Declaration of Trust dated October 11, 1996,
is incorporated by reference to Exhibit (1) of Post-
Effective Amendment No. 19 to Registrant's Registration
Statement on Form N-1A (File No. 33-34154) filed on May
2, 1997.
(2) Registrant's By-Laws are incorporated by reference to
Exhibit (2) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File
No. 33-34154) filed on May 2, 1997.
(3) Not applicable.
(4) Certificates for shares are not issued. Articles IV, V, VI and
VII of the Declaration of Trust, filed as Exhibit (1) hereto,
define rights of holders of Shares.
(5)(a) Proposed Investment Advisory Agreement dated as of
_____________, 1997, between the Registrant and The
Provident Bank is incorporated by reference to Exhibit
(5)(a) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154)
filed on May 2, 1997.
(b) Proposed Sub-Investment Advisory Agreement dated as of
__________________, 1997, between The Provident Bank and
DePrince, Race & Zollo, Inc. is incorporated by reference
to Exhibit (5)(b) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File
No. 33-34154) filed on May 2, 1997.
(6)(a) Proposed Distribution Agreement dated as of
______________, 1997, between Registrant and BISYS Fund
Services Limited Partnership is incorporated by reference
to Exhibit (6)(a) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File
No. 33-34154) filed on May 2, 1997.
(b) Form of Dealer Agreement between BISYS Fund Services
Limited Partnership and Provident Securities & Investment
Company is incorporated by reference to Exhibit (6)(b) of
Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154)
filed on May 2, 1997.
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<PAGE> 221
(7) Not applicable.
(8) Proposed Custodian, Fund Accounting and Recordkeeping
Agreement dated as of __________________, 1997, between
the Registrant and The Provident Bank is incorporated by
reference to Exhibit (8) of Post-Effective Amendment No.
19 to Registrant's Registration Statement on Form N-1A
(File No. 33-34154) filed on May 2, 1997.
(9)(a) Proposed Administration Agreement dated as of
________________, 1997, between the Registrant and BISYS
Fund Services Limited Partnership is incorporated by
reference to Exhibit (9)(a) of Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-
1A (File No. 33-34154) filed on May 2, 1997.
(b) Proposed Master Transfer and Recordkeeping Agreement
dated as of ________________, 1997, between the
Registrant and The Provident Bank is incorporated by
reference to Exhibit (9)(b) of Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-
1A (File No. 33-34154) filed on May 2, 1997.
(c) Proposed Shareholder Services Plan is incorporated by
reference to Exhibit (9)(c) of Post-Effective Amendment
No. 19 to Registrant's Registration Statement on Form N-
1A (File No. 33-34154) filed on May 2, 1997.
(d) Proposed form of Servicing Agreement to Shareholder
Services Plan is incorporated by reference to Exhibit
(9)(d) of Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154)
filed on May 2, 1997.
(e) Agreement and Plan of Reorganization and Liquidation
dated as of March 21, 1997, between the Registrant and
The Riverfront Funds, Inc. is incorporated by reference
to Exhibit (9)(e) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File
No. 33-34154) filed on May 2, 1997.
(10) Opinion of counsel as to the legality of the shares of The
Riverfront Funds is incorporated by reference to Exhibit 10 of
Post-Effective Amendment No. 20 to Registrant's Registration
Statement on Form N-1A (File No. 33-34154) filed on June 27,
1997. 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 Small Company Fund and The Riverfront Balanced
Fund was filed with Registrant's Rule 24f-2 Notice on February
25, 1997.
(11) Consent of Ernst & Young LLP, independent auditors.
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<PAGE> 222
(12) Not applicable.
(13) A copy of the Subscription Agreement is incorporated by
reference to Exhibit (13) to Registrant's Registration
Statement on Form N-1A (File No. 33-34154) filed on April
10, 1990.
(14) Not applicable.
(15)(a) Proposed Investor A Distribution and Shareholder Service
Plan is incorporated by reference to Exhibit (15)(a) of
Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154)
filed on May 2, 1997.
(b) Proposed Investor B Distribution and Shareholder Service
Plan is incorporated by reference to Exhibit (15)(b) of
Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154)
filed on May 2, 1997.
(c) Proposed form of Dealer Agreement between BISYS Fund
Services Limited Partnership and Provident Securities &
Investment Company is incorporated by reference to
Exhibit (15)(c) of Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-1A (File
No. 33-34154) filed on May 2, 1997.
(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
Balanced 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
Small Company Select Fund was filed on September 21,
1995, with Post-Effective Amendment No. 14 as Exhibit
(16)(e) and is incorporated by reference herein.
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<PAGE> 223
(f) Computation of Performance Quotations for The Riverfront Large
Company Select Fund is incorporated by reference to Exhibit
(16)(f) of Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A (File No. 33-34154) filed
on June 27, 1997.
(17) Financial Data Schedules.
(18) Rule 18f-3 Plan to be filed by amendment.
(19)(a) Copies of the Powers of Attorney of the Officers and
Directors of The Riverfront Funds, Inc. 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 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.
(c) 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.
(d) Powers of Attorney for Walter B. Grimm, Virgil J. Early,
William M. Higgins, Harvey M. Salkin and Thomas E. Line are
incorporated by reference to Exhibit (19)(d) of Post-Effective
Amendment No. 20 to Registrant's Registration Statement on
Form N-1A (File No. 33-34154) filed on June 27, 1997.
(e) Consent of Baker & Hostetler LLP
Item 25. Persons Controlled by or Under Common Control With
Registrant
Not Applicable.
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<PAGE> 224
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record
Holders
as of August 20, 1997
---------------------
Investor A Investor B
Shares Shares
------ ------
Title of Series
---------------
<S> <C> <C>
The Riverfront U.S. Government 439 N/A
Securities Money Market Fund, shares of
capital stock, $.001 par value
The Riverfront U.S. Government Income 16 66
Fund, shares of capital stock, $.001
par value
The Riverfront Income Equity Fund, 879 941
shares of capital stock, $.001 par
value
The Riverfront Ohio Tax-Free Bond Fund, 27 28
shares of capital stock, $.001 par
value
The Riverfront Balanced Fund, shares of 8 624
capital stock, $.001 par value
The Riverfront Stock Appreciation Fund, 3,603 107
shares of capital stock, $.001 par
value
The Riverfront Large Company Select 29 60
Fund, shares of capital stock, $.001
par value
</TABLE>
Item 27. Indemnification
Article VI, Section 6.4 of the Registrant's Declaration of Trust,
filed as Exhibit 1 hereto, provides for the indemnification of
Registrant's Trustees and officers. Indemnification of the
Registrant's principal underwriter, custodian, investment adviser,
administrator and transfer agent is provided for, respectively, in
Section 1.12 of the Distribution Agreement filed as Exhibit 6(a)
hereto, Section 7.A. of the Custodian, Fund Accounting and
Recordkeeping Agreement filed as Exhibit 8 hereto, Section 8 of the
Investment Advisory Agreement filed as Exhibit 5(a) hereto, Section 8
of the Administration Agreement filed as Exhibit 9(a) hereto, and
Section 8 of the Master Transfer and Recordkeeping Agreement filed as
Exhibits 9(b) hereto. As of the effective date of this Registration
Statement, the
C-9
<PAGE> 225
Registrant will have obtained from a major insurance carrier a
trustees' and officers' liability policy covering certain
types of errors and omissions. In no event will Registrant
indemnify any of its trustees, officers, employees or agents
against any liability to which such person would otherwise be
subject by reason of his willful misfeasance, bad faith, or
gross negligence in the performance of his duties, or by
reason of his reckless disregard of the duties involved in the
conduct of his office or under his agreement with Registrant.
Registrant will comply with Rule 484 under the Securities Act
of 1933 and Release 11330 under the Investment Company Act of
1940 in connection with any indemnification.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers,
and controlling persons of Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person
of Registrant in the successful defense of any action, suit,
or proceeding) is asserted by such trustee, officer, or
controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of
whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
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.
C-10
<PAGE> 226
<TABLE>
<CAPTION>
Position with
Name The Provident Bank Other Business
---- ------------------ --------------
<S> <C> <C>
Jack M. Cook Director President and Chief
Executive Officer of
Health Alliance of
Greater Cincinnati
Thomas D. Grote, Director President, Thomas J.
Jr. Dyer Company
Joseph A. Podoto Director President, JLM
Financial, Inc.
Sidney A. Peerless, Director President of E.N.T.
M.D. Associates; staff
member at several
hospitals in the
Cincinnati area
Joseph A. Steger, Director President,
Ph.D. University of
Cincinnati
</TABLE>
(b) To the knowledge of Registrant, none of the officers or
directors of DePrince, Race & Zollo, Inc. ("DRZ") except
those set forth below, is or has been at any time during
the past two fiscal years engaged in any other business,
profession, vocation or employment. Set forth below are
the names and principal business addresses of the
directors and officers of DRZ who are engaged in any
other business, profession, vocation or employment of a
substantial nature.
<TABLE>
<CAPTION>
Position with
Name DRZ Other Business
---- --- --------------
<S> <C> <C>
Gregory M. DePrince Director Prior to April 1995,
Director and Senior
Vice President of
SunBank Capital
Management, N.A.,
200 South Orange
Avenue, Orlando,
Florida 32801
</TABLE>
C-11
<PAGE> 227
<TABLE>
<CAPTION>
Position with
Name DRZ Other Business
---- --- --------------
<S> <C> <C>
John D. Race Director Prior to April 1995,
Director, Executive
Vice President and
Chief Administrative
Officer of SunBank
Capital Management,
N.A., 200 South
Orange Avenue,
Orlando, Florida
32801
Victor A. Zollo Director and Prior to April 1995,
President Director and Senior
Vice President of
SunBank Capital
Management, N.A.,
200 South Orange
Avenue, Orlando,
Florida 32801
</TABLE>
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 the following management investment
companies: American Performance Funds, AmSouth Mutual Funds, The ARCH Fund,
Inc., The BB&T Mutual Funds Group, The Coventry Group, Empire Builder Tax Free
Bond Fund, First Choice Funds Trust, Fountain Square Funds, Hirtle Callaghan
Trust, HSBC Family of Funds, The Infinity Mutual Funds, Inc., Intrust Funds, The
Kent Funds, Magna Funds, Marketwatch Funds, Meyers Sheppard Investment Trust,
Minerva Funds, MMA Praxis Mutual Funds, M.S.D.& T. Funds, Pacific Capital Funds,
Parkstone Group of Funds, The Parkstone Advantage Funds, Pegasus Funds,
Qualivest Funds, The Republic Funds Trust, The Republic Advisors Funds Trust,
SBSF Funds, Inc., d/b/a Key Mutual Funds, Sefton Funds, The Sessions Group,
Summit Investment Trust, The Time Horizon Funds, Variable Insurance Funds and
The Victory Portfolios.
(b) To the best of Registrant's knowledge, the partners of
BISYS Fund Services are as follows:
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<PAGE> 228
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
---------------- ------------------- ----------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of None
150 Clove Road BISYS Fund Services,
Little Falls, New Jersey Inc.
07424
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, New Jersey
07424
WC Subsidiary Corporation Limited Partner None
150 Clove Road
Little Falls, New Jersey
07424
</TABLE>
(c) None
Item 30. Location of Accounts and Records
(1) BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as
administrator and distributor).
(2) The Provident Bank, One East Fourth Street,
Cincinnati, Ohio 45202 (records relating to its
functions as investment adviser, 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) Baker & Hostetler LLP, 65 East State Street,
Columbus, Ohio 43215 (Declaration of Trust, Bylaws
and Minutes).
Item 31. Management Services
Not applicable.
Item 32. Undertakings
None
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<PAGE> 229
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, The Riverfront Funds, Inc. certifies that it has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Columbus, in the State of
Ohio, on the 24th day of October, 1997.
THE RIVERFRONT FUNDS, INC.
By /s/Walter B. Grimm
------------------------------
Walter B. Grimm
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
designated on the 24th day of October, 1997.
SIGNATURES TITLE
- ---------- -----
/s/Walter B. Grimm President
- --------------------------
Walter B. Grimm
/s/Thomas E. Line Treasurer (Principal Accounting
- -------------------------- and Financial Officer)
Thomas E. Line
/s/Stephen G. Mintos Director
- --------------------------
Stephen G. Mintos
/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 Riverfront
Funds, Inc. pursuant to powers of attorney duly executed by such persons.
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<PAGE> 230
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, The Riverfront Funds (i) expressly adopts this Registration
Statement, including prior amendments, of The Riverfront Funds, Inc. as its own
for all purposes, as set forth in Rule 414(d) of the Securities Act of 1933, and
(ii) certifies that it has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Columbus, in the State of Ohio, on the 24th day of October, 1997.
THE RIVERFRONT FUNDS
By /s/ Walter B. Grimm
------------------------
Walter B. Grimm
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
designated on the 24th day of October, 1997.
SIGNATURES TITLE
- ---------- -----
/s/ Walter B. Grimm President and Trustee
- ---------------------------
Walter B. Grimm
/s/Thomas E. Line Treasurer (Principal
- --------------------------- Accounting and Financial
Thomas E. Line Officer)
/s/* J. Virgil Early Trustee
- ---------------------------
J. Virgil Early
/s/* William M. Higgins Trustee
- ---------------------------
William M. Higgins
/s/* Harvey M. Salkin Trustee
- ---------------------------
Harvey M. Salkin
*By/s/ Walter B. Grimm
---------------------------
Walter B. Grimm
Attorney-in-Fact
*Walter B. Grimm, by signing his name hereto, does hereby sign this document on
behalf of each of the above-named Trustees of The Riverfront Funds pursuant to
powers of attorney duly executed by such persons.
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<PAGE> 231
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(1) The Registrant's Declaration of Trust was
filed as Exhibit (1) to Post-Effective
Amendment No. 19 to Registrant's Registration
Statement on Form N-1A on May 2, 1997.
(2) Bylaws of Registrant were filed as Exhibit (2)
to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-
1A on May 2, 1997.
(5) (a) Proposed Investment Advisory Agreement dated
as of ___________________, 1997, between
Registrant and The Provident Bank was filed as
Exhibit (5)(a) to Post-Effective Amendment No.
19 to Registrant's Registration Statement on
Form N-1A on May 2, 1997.
(b) Proposed Sub-Investment Advisory Agreement
dated as of __________________, 1997, between
The Provident Bank and DePrince, Race & Zollo,
Inc. was filed as Exhibit (5)(b) to Post-
Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A on May 2,
1997.
(6) (a) Proposed Distribution Agreement dated as of
__________, 1997, between Registrant and BISYS
Fund Services Limited Partnership was filed as
Exhibit (6)(a) to Post-Effective Amendment No.
19 to Registrant's Registration Statement on
Form N-1A on May 2, 1997.
(b) Proposed form of Dealer Agreement between BISYS Fund
Services Limited Partnership and Provident Securities
& Investment Company was filed as Exhibit (6)(b) to
Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A on May 2, 1997.
(8) Proposed Custodian, Fund Accounting and
Recordkeeping Agreement dated as of
________________, 1997, between Registrant and
The Provident Bank was filed as Exhibit (8) to
Post-Effective Amendment No. 19 to
</TABLE>
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<PAGE> 232
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
Registrant's Registration Statement on Form N- 1A on
May 2, 1997.
(9) (a) Proposed Administration Agreement dated as of
________________, 1997, between the Registrant
and BISYS Fund Services Limited Partnership
was filed as Exhibit (9)(a) to Post-Effective
Amendment No. 19 to Registrant's Registration
Statement on Form N-1A on May 2, 1997.
(b) Proposed Master Transfer and Recordkeeping
Agreement dated as of _____________________,
1997, between Registrant and The Provident
Bank was filed as Exhibit (9)(b) to Post-
Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A on May 2,
1997.
(c) Proposed Shareholder Services Plan was filed
as Exhibit (9)(c) to Post-Effective Amendment
No. 19 to Registrant's Registration Statement
on Form N-1A on May 2, 1997.
(d) Proposed form of Servicing Agreement to
Shareholder Services Plan was filed as Exhibit
(9)(d) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-
1A on May 2, 1997.
(e) Agreement and Plan of Reorganization and
Liquidation dated as of March 21, 1997,
between the Registrant and The Riverfront
Funds, Inc. was filed as Exhibit (9)(e) to
Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-
1A on May 2, 1997.
(10) An Opinion of Counsel as to the legality of the shares
of Registrant was filed as Exhibit (10) to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A on June 27, 1997.
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 Small Company Select
Fund and The Riverfront Balanced Fund was filed with
Registrant's Rule 24f-2 Notice on February 25, 1997.
</TABLE>
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<PAGE> 233
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(11) Consent of Ernst & Young LLP, independent
auditors.
(13) The Subscription Agreement. Filed as an
Exhibit to Registrant's Registration Statement
on April 10, 1990.
(15) (a) Proposed Investor A Distribution and
Shareholder Service Plan was filed as Exhibit
(15)(a) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-
1A on May 2, 1997.
(b) Proposed Investor B Distribution and
Shareholder Service Plan was filed as Exhibit
(15)(b) to Post-Effective Amendment No. 19 to
Registrant's Registration Statement on Form N-
1A on May 2, 1997.
(c) Proposed form of Dealer Agreement between BISYS Fund
Services Limited Partnership and Provident Securities
& Investment Company was filed as Exhibit (15)(c) to
Post-Effective Amendment No. 19 to Registrant's
Registration Statement on Form N-1A on May 2, 1997.
(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.
(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 Balanced Fund
was filed as Exhibit (16)(d) to Registrant's
Post-Effective Amendment No. 9 on January 31,
1995.
</TABLE>
C-17
<PAGE> 234
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(e) Schedule for the calculation of performance
quotations for The Riverfront Small Company
Select 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 was filed as Exhibit (16)(f) to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form W-1A on June 27, 1997.
(17) Financial Data Schedules.
(18) Rule 18f-3 Plan to be filed by amendment.
(19) (a) Powers of Attorney of the Officers and
Directors of The Riverfront Funds, Inc. were
filed as an Exhibit to Registrant's
Post-Effective Amendment No. 6 on March 1,
1994.
(b) 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.
(c) 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.
(d) Powers of Attorney for Walter B. Grimm, Virgil
J. Early, William M. Higgins, Harvey M. Salkin
and Thomas E. Line were filed as Exhibit (19)(d) to
Post-Effective Amendment No. 20 to Registrant's
Registration Statement on Form N-1A on June 27, 1997.
(e) Consent of Baker & Hostetler LLP.
</TABLE>
C-18
<PAGE> 235
As filed with the Securities and Exchange Commission October 24, 1997.
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. 23 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 24 [x]
The Riverfront Funds
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(800) 470-8000
C-19
<PAGE> 1
Exhibit (11)
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 inclusion in Post-Effective Amendment Number 23 to the
Registration Statement (Form N-1A No. 33-34154) of the Riverfront Funds, Inc.,
of our report dated February 20, 1997 on 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.)
ERNST & YOUNG LLP
Cincinnati, Ohio
October 22, 1997
<PAGE> 1
Exhibit (19)(e)
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.
BAKER & HOSTETLER LLP
Columbus, Ohio
October 24, 1997
<TABLE> <S> <C>
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<NUMBER> 01
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</TABLE>
<TABLE> <S> <C>
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<NAME> THE RIVERFRONT FUNDS INC
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<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
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<TABLE> <S> <C>
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<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 022
<NAME> RIVERFRONT US GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
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<FN>
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</FN>
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<TABLE> <S> <C>
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<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
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<NAME> RIVERFRONT INCOME EQUITY FUND
<S> <C>
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<FN>
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<SERIES>
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<FN>
<F1>Class B Shares
</FN>
</TABLE>
<TABLE> <S> <C>
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<CIK> 0000862342
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<SERIES>
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<GROSS-EXPENSE> 92,610
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<PER-SHARE-NII> 0.16<F1>
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<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 042
<NAME> RIVERFRONT OHIO TAX FREE BOND FUND
<S> <C>
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,729
<GROSS-ADVISORY-FEES> 27,235
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92,610
<AVERAGE-NET-ASSETS> 1,144,286<F1>
<PER-SHARE-NAV-BEGIN> 10.64<F1>
<PER-SHARE-NII> 0.18<F1>
<PER-SHARE-GAIN-APPREC> (0.06)<F1>
<PER-SHARE-DIVIDEND> 0.25<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.51<F1>
<EXPENSE-RATIO> 2.30<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class B Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 051
<NAME> RIVERFRONT BALANCED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-01-1997
<INVESTMENTS-AT-COST> 18,290,057
<INVESTMENTS-AT-VALUE> 20,574,248
<RECEIVABLES> 140,943
<ASSETS-OTHER> 50,810
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,766,001
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,450
<TOTAL-LIABILITIES> 105,450
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,249,310
<SHARES-COMMON-STOCK> 788,710<F1>
<SHARES-COMMON-PRIOR> 922,900<F1>
<ACCUMULATED-NII-CURRENT> 636
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,126,414
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,284,191
<NET-ASSETS> 20,660,551
<DIVIDEND-INCOME> 117,338
<INTEREST-INCOME> 272,077
<OTHER-INCOME> 0
<EXPENSES-NET> 231,312
<NET-INVESTMENT-INCOME> 158,103
<REALIZED-GAINS-CURRENT> 1,280,076
<APPREC-INCREASE-CURRENT> 230,592
<NET-CHANGE-FROM-OPS> 1,668,771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 100,684<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,257,843
<NUMBER-OF-SHARES-REDEEMED> 2,761,905
<SHARES-REINVESTED> 13,694
<NET-CHANGE-IN-ASSETS> (133,927)
<ACCUMULATED-NII-PRIOR> 2,553
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (153,662)
<GROSS-ADVISORY-FEES> 90,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 246,631
<AVERAGE-NET-ASSETS> 9,927,215<F1>
<PER-SHARE-NAV-BEGIN> 11.69<F1>
<PER-SHARE-NII> 0.12<F1>
<PER-SHARE-GAIN-APPREC> 0.89<F1>
<PER-SHARE-DIVIDEND> 0.12<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.58<F1>
<EXPENSE-RATIO> 1.88<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 052
<NAME> RIVERFRONT BALANCED FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-01-1997
<INVESTMENTS-AT-COST> 18,290,057
<INVESTMENTS-AT-VALUE> 20,574,248
<RECEIVABLES> 140,943
<ASSETS-OTHER> 50,810
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,766,001
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 105,450
<TOTAL-LIABILITIES> 105,450
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17,249,310
<SHARES-COMMON-STOCK> 828,643<F1>
<SHARES-COMMON-PRIOR> 831,165<F1>
<ACCUMULATED-NII-CURRENT> 636
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,126,414
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,284,191
<NET-ASSETS> 20,660,551
<DIVIDEND-INCOME> 117,338
<INTEREST-INCOME> 272,077
<OTHER-INCOME> 0
<EXPENSES-NET> 231,312
<NET-INVESTMENT-INCOME> 158,103
<REALIZED-GAINS-CURRENT> 1,280,076
<APPREC-INCREASE-CURRENT> 230,592
<NET-CHANGE-FROM-OPS> 1,668,771
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 59,336<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,257,843
<NUMBER-OF-SHARES-REDEEMED> 2,761,905
<SHARES-REINVESTED> 13,694
<NET-CHANGE-IN-ASSETS> (133,927)
<ACCUMULATED-NII-PRIOR> 2,553
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (153,662)
<GROSS-ADVISORY-FEES> 90,074
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 246,631
<AVERAGE-NET-ASSETS> 10,255,185<F1>
<PER-SHARE-NAV-BEGIN> 12.04<F1>
<PER-SHARE-NII> 0.07<F1>
<PER-SHARE-GAIN-APPREC> 0.92<F1>
<PER-SHARE-DIVIDEND> 0.07<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 12.96<F1>
<EXPENSE-RATIO> 2.73<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class B Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 061
<NAME> RIVERFRONT STOCK APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-01-1997
<INVESTMENTS-AT-COST> 20,444,122
<INVESTMENTS-AT-VALUE> 25,063,972
<RECEIVABLES> 17,412
<ASSETS-OTHER> 5,747
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,087,131
<PAYABLE-FOR-SECURITIES> 50,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,865
<TOTAL-LIABILITIES> 104,490
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,186,528
<SHARES-COMMON-STOCK> 2,413,467<F1>
<SHARES-COMMON-PRIOR> 3,312,660<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 95,083
<ACCUMULATED-NET-GAINS> 4,271,346
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,619,850
<NET-ASSETS> 24,982,641
<DIVIDEND-INCOME> 174,699
<INTEREST-INCOME> 53,890
<OTHER-INCOME> 0
<EXPENSES-NET> 293,879
<NET-INVESTMENT-INCOME> (65,290)
<REALIZED-GAINS-CURRENT> 2,235,214
<APPREC-INCREASE-CURRENT> (823,228)
<NET-CHANGE-FROM-OPS> 1,346,696
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 202,969
<NUMBER-OF-SHARES-REDEEMED> 1,081,817
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,931,696)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,036,132
<OVERDISTRIB-NII-PRIOR> 29,793
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 110,134
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 293,879
<AVERAGE-NET-ASSETS> 26,988,722<F1>
<PER-SHARE-NAV-BEGIN> 9.43<F1>
<PER-SHARE-NII> (0.03)<F1>
<PER-SHARE-GAIN-APPREC> 0.56<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 9.96<F1>
<EXPENSE-RATIO> 2.11<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 062
<NAME> RIVERFRONT STOCK APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-01-1997
<INVESTMENTS-AT-COST> 20,444,122
<INVESTMENTS-AT-VALUE> 25,063,972
<RECEIVABLES> 17,412
<ASSETS-OTHER> 5,747
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25,087,131
<PAYABLE-FOR-SECURITIES> 50,625
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,865
<TOTAL-LIABILITIES> 104,490
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,186,528
<SHARES-COMMON-STOCK> 90,723<F1>
<SHARES-COMMON-PRIOR> 70,378<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 95,083
<ACCUMULATED-NET-GAINS> 4,271,346
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,619,850
<NET-ASSETS> 24,982,641
<DIVIDEND-INCOME> 174,699
<INTEREST-INCOME> 53,890
<OTHER-INCOME> 0
<EXPENSES-NET> 293,879
<NET-INVESTMENT-INCOME> (65,290)
<REALIZED-GAINS-CURRENT> 2,235,214
<APPREC-INCREASE-CURRENT> (823,228)
<NET-CHANGE-FROM-OPS> 1,346,696
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 202,969
<NUMBER-OF-SHARES-REDEEMED> 1,081,817
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (6,931,696)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,036,132
<OVERDISTRIB-NII-PRIOR> 29,793
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 110,134
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 293,879
<AVERAGE-NET-ASSETS> 773,000<F1>
<PER-SHARE-NAV-BEGIN> 9.77<F1>
<PER-SHARE-NII> (0.05)<F1>
<PER-SHARE-GAIN-APPREC> 0.58<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 10.30<F1>
<EXPENSE-RATIO> 2.87<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class B Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 071
<NAME> RIVERFRONT LARGE COMPANY SELECT
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 16,266,787
<INVESTMENTS-AT-VALUE> 31,160,763
<RECEIVABLES> 52,977
<ASSETS-OTHER> 21,473
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,235,213
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,540
<TOTAL-LIABILITIES> 45,540
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,648,835
<SHARES-COMMON-STOCK> 2,586,108<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 79,111
<ACCUMULATED-NET-GAINS> 2,725,973
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,893,976
<NET-ASSETS> 31,189,673
<DIVIDEND-INCOME> 211,436
<INTEREST-INCOME> 27,906
<OTHER-INCOME> 0
<EXPENSES-NET> 241,700
<NET-INVESTMENT-INCOME> (2,358)
<REALIZED-GAINS-CURRENT> 2,725,973
<APPREC-INCREASE-CURRENT> 2,301,591
<NET-CHANGE-FROM-OPS> 5,025,206
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 76,753<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,902,527
<NUMBER-OF-SHARES-REDEEMED> 271,932
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 31,189,673
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 114,907
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 241,700
<AVERAGE-NET-ASSETS> 29,135,939<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0<F1>
<PER-SHARE-GAIN-APPREC> 1.89<F1>
<PER-SHARE-DIVIDEND> 0.03<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.86<F1>
<EXPENSE-RATIO> 1.68<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class A Shares
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC
<SERIES>
<NUMBER> 072
<NAME> RIVERFRONT LARGE COMPANY SELECT
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 16,266,787
<INVESTMENTS-AT-VALUE> 31,160,763
<RECEIVABLES> 52,977
<ASSETS-OTHER> 21,473
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31,235,213
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,540
<TOTAL-LIABILITIES> 45,540
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,648,835
<SHARES-COMMON-STOCK> 44,495<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 79,111
<ACCUMULATED-NET-GAINS> 2,725,973
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14,893,976
<NET-ASSETS> 31,189,673
<DIVIDEND-INCOME> 1,351,164
<INTEREST-INCOME> 443
<OTHER-INCOME> 44,359
<EXPENSES-NET> 799,762
<NET-INVESTMENT-INCOME> 595,761
<REALIZED-GAINS-CURRENT> 9,599,533
<APPREC-INCREASE-CURRENT> 3,123,401
<NET-CHANGE-FROM-OPS> 13,318,695
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,902,527
<NUMBER-OF-SHARES-REDEEMED> 271,932
<SHARES-REINVESTED> 8
<NET-CHANGE-IN-ASSETS> 31,189,673
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 114,907
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 241,700
<AVERAGE-NET-ASSETS> 152,536<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> (0.01)<F1>
<PER-SHARE-GAIN-APPREC> 1.86<F1>
<PER-SHARE-DIVIDEND> 0<F1>
<PER-SHARE-DISTRIBUTIONS> 0<F1>
<RETURNS-OF-CAPITAL> 0<F1>
<PER-SHARE-NAV-END> 11.85<F1>
<EXPENSE-RATIO> 2.48<F1>
<AVG-DEBT-OUTSTANDING> 0<F1>
<AVG-DEBT-PER-SHARE> 0<F1>
<FN>
<F1>Class B Shares
</FN>
</TABLE>
