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Rule 497(c)
Registration No. 33-34154
File No. 811-6082
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY
SELECT FUND
THE RIVERFRONT BALANCED FUND
PROSPECTUS JANUARY 2, 1997
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company which currently issues seven series of shares (individually,
a "Fund" and collectively, the "Funds"), each having a different investment
objective and investing in a different portfolio of securities. The Funds
offered by the Company are: The Riverfront U.S. Government Securities Money
Market Fund, The Riverfront U.S. Government Income Fund, The Riverfront Income
Equity Fund, The Riverfront Ohio Tax-Free Bond Fund, The Riverfront Stock
Appreciation Fund, The Riverfront Large Company Select Fund and The Riverfront
Balanced Fund.
The Funds are offered 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 Bancorp,
Inc. ("PBI"). Provident, directly or through a sub-investment adviser with
respect to The Riverfront Income Equity Fund, serves as investment adviser to
each of the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OF, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, PROVIDENT, PBI OR ANY OF THEIR AFFILIATES, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD OR ANY OTHER AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS,
INCLUDING RISK OF LOSS OF PRINCIPAL. THE VALUE OF THE RIVERFRONT U.S.
GOVERNMENT INCOME FUND, THE RIVERFRONT INCOME EQUITY FUND, THE RIVERFRONT OHIO
TAX-FREE BOND FUND, THE RIVERFRONT STOCK APPRECIATION FUND, THE RIVERFRONT
LARGE COMPANY SELECT FUND AND THE RIVERFRONT BALANCED FUND SHARES MAY
FLUCTUATE, AND WHEN REDEEMED THEIR VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT
ORIGINALLY PAID BY THE PURCHASER.
AN INVESTMENT IN THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. WHILE THE RIVERFRONT
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND INTENDS TO MAINTAIN A NET ASSET
VALUE PER SHARE OF $1.00, THERE IS NO ASSURANCE THAT IT WILL BE ABLE TO DO SO.
For Information Contact:
THE RIVERFRONT FUNDS, INC.
ONE EAST FOURTH STREET
CINCINNATI, OHIO 45202
CALL TOLL FREE 1-800-424-2295
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
This prospectus relates to each of the Funds and sets forth concisely
information that a prospective investor should know about each Fund before
investing. Investors should read and retain this prospectus for future
reference.
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Additional information about the Company and the Funds is contained in a
Statement of Additional Information and Appendix thereto dated as of the date
hereof, which has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated by reference into this prospectus. For a free
copy of the Statement of Additional Information, or for other information about
the Company and the Funds, write to the address or call the telephone number
listed above.
The Company is designed to enable investors to pursue financial goals through
a choice of the following Funds:
-- THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (the "Money
Market Fund") seeks current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity. The dollar weighted average
maturity of the Money Market Fund will not exceed 90 days.
-- THE RIVERFRONT U.S. GOVERNMENT INCOME FUND (the "Income Fund") seeks a high
level of current income, consistent with preservation of capital, by investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, and in high quality fixed rate and adjustable
rate mortgage-backed securities and other asset-backed securities. The Income
Fund intends to invest in securities with dollar-weighted average durations of
between three and seven years. The dollar-weighted average life of the Income
Fund's securities is expected to be in the range of four to ten years.
-- THE RIVERFRONT INCOME EQUITY FUND (the "Income Equity Fund") seeks a high
level of investment income, with capital appreciation as a secondary objective,
through investment primarily in income-producing equity securities of U.S.
issuers. To provide investment advisory services to the Income Equity Fund,
Provident has entered into a sub-investment advisory agreement with DePrince,
Race & Zollo, Inc., Orlando, Florida.
-- THE RIVERFRONT OHIO TAX-FREE BOND FUND (the "Ohio Tax-Free Fund") seeks (1)
income, which is exempt from federal income tax and Ohio state income taxes, and
(2) preservation of capital.
-- THE RIVERFRONT STOCK APPRECIATION FUND (the "Stock Appreciation Fund")
seeks capital growth.
-- THE RIVERFRONT LARGE COMPANY SELECT FUND (the "Large Company Fund") seeks
long-term growth of capital with some current income as a secondary objective.
-- THE RIVERFRONT BALANCED FUND (the "Balanced Fund") seeks long-term growth
of capital with some current income as a secondary objective.
The Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund are hereinafter collectively referred to as the "Funds" and
individually as a "Fund."
Each Fund of the Company, other than the Money Market Fund, offers two classes
of shares. This prospectus describes the one class of shares of the Money Market
Fund --Investor A shares, and the two classes of shares of each of the other
Funds -- Investor A shares and Investor B shares.
2
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<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
<S> <C>
Prospectus Summary.................... 4
Fee Table............................. 8
Financial Highlights.................. 11
The Company and Its Funds............. 23
The Funds' Investment Objectives and
Policies............................ 23
Investment Restrictions............... 42
Pricing Shares........................ 45
How To Buy Shares..................... 46
Sales Charges......................... 49
Reduced Sales Charges -- Investor A
Shares.............................. 50
Contingent Deferred Sales Charge --
Investor B Shares................... 52
Other Purchase Information............ 54
Exchanges............................. 55
How To Redeem Shares.................. 56
Shareholder Services.................. 59
Dividends and Taxes................... 59
Company Management and Expenses....... 61
Performance Data and Advertising...... 67
Company Shares........................ 68
Additional Information................ 69
</TABLE>
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PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered................ Investor A shares of capital stock, $0.001 par value, of the
Money Market Fund, and Investor A and Investor B shares of
capital stock, $0.001 par value, of the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced
Fund, seven separate series (collectively, the "Funds") of The
Riverfront Funds, Inc., a Maryland corporation (the "Com-
pany").
Offering Price................ The public offering price of the INVESTOR A SHARES of the
Money Market Fund is equal to the net asset value per share.
The public offering price of INVESTOR A SHARES of each of the
other Funds is equal to the net asset value per share plus a
sales charge equal to 4.50% of the public offering price
(4.71% of the net amount invested), reduced on investments of
$100,000 or more (See "Sales Charges -- Investor A Shares").
Under certain circumstances, the sales charge may be elimi-
nated (See "Reduced Sales Charges -- Investor A Shares").
The public offering price of INVESTOR B SHARES of each of the
Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund,
the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund is equal to the net asset value per share, but
investors may be subject to a contingent deferred sales charge
ranging from 4% to 1% when Investor B shares are redeemed
within the first six years after purchase.
Minimum Purchase.............. $1,000 minimum initial investment with $100 minimum subse-
quent investments. Such minimum initial and subsequent
investments are waived for employees of The Provident Bank and
BISYS Fund Services Limited Partnership. Investor B shares may
only be purchased in an amount of less than $250,000.
Type of Company............... Each of the Money Market Fund, the Income Fund, the Income
Equity Fund, the Stock Appreciation Fund, the Large Company
Fund and the Balanced Fund is a diversified series of the
Company, an open-end, management investment company. The Ohio
Tax-Free Fund is a non-diversified series of the Company.
Investment Objectives......... For the MONEY MARKET FUND, current income from U.S. Government
short-term securities while preserving capital and maintaining
liquidity.
</TABLE>
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<TABLE>
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For the INCOME FUND, a high level of current income,
consistent with preservation of capital, by investing
primarily in securities issued or guaranteed by the U.S.
Government, its agencies and instrumentalities, and in high
quality fixed rate and adjustable rate mortgage-backed
securities and other asset-backed securities.
For the INCOME EQUITY FUND, a high level of investment income,
with capital appreciation as a secondary objective, through
investment primarily in income-producing equity securities of
U.S. issuers.
For the OHIO TAX-FREE FUND, (1) income, which is exempt from
federal income tax and Ohio state income taxes, and (2)
preservation of capital.
For the STOCK APPRECIATION FUND, capital growth.
For the LARGE COMPANY FUND, long-term growth of capital with
some current income as a secondary objective.
For the BALANCED FUND, as its primary objective, long-term
growth of capital with some current income as a secondary
objective.
Investment Policies........... Under normal market conditions, the MONEY MARKET FUND invests
at least 65% of its total assets in obligations issued or
guaranteed as to principal and interest by the U.S. Govern-
ment, its agencies or instrumentalities, and in repurchase
agreements secured by such obligations.
Under normal market conditions, the INCOME FUND invests
primarily in securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities and in high
quality fixed rate and adjustable rate mortgage-backed securi-
ties and other asset-backed securities which are issued or
guaranteed by the U.S. Government, its agencies or instrumen-
talities or are rated no lower than one of the three highest
rating categories by a nationally recognized statistical
rating organization (an "NRSRO"), or if not so rated, are
deemed to be of comparable quality.
Under normal market conditions, the INCOME EQUITY FUND invests
at least 65% of its total assets in common stocks and
securities convertible into common stocks, such as bonds and
preferred stocks, rated in one of the four highest rating
categories by an NRSRO, or if not so rated, are deemed to be
of comparable quality.
</TABLE>
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<TABLE>
<S> <C>
Under normal market conditions, the OHIO TAX-FREE FUND invests
at least 80% of its net assets in a portfolio of obligations
consisting of bonds, notes, commercial paper, debentures and
certificates of indebtedness, issued by or on behalf of the
State of Ohio, or any county, political subdivision or
municipality thereof (including any agency, board, authority
or commission of any of the foregoing), and in debt
obligations issued by the Government of Puerto Rico and such
other governmental entities whose debt obligations, either by
law or treaty, generate interest income which is exempt from
federal income tax, is not a preference item for individuals
for purposes of the federal alternative minimum tax and is
exempt from Ohio state income taxes.
Under normal market conditions, the STOCK APPRECIATION FUND
invests at least 65% of its total assets in a portfolio of
common stocks that, in the opinion of Provident based upon its
analysis of various fundamental and technical standards, have
appreciation potential.
Under normal market conditions, the LARGE COMPANY FUND invests
substantially all, but in no event less than 65%, of its total
assets in common stocks and securities convertible into common
stocks, such as bonds and preferred stocks, of issuers with
market capitalizations of at least $4 billion.
Under normal market conditions, the BALANCED FUND invests in
common stocks, preferred stocks, fixed income securities and
securities convertible into common stocks.
Risk Factors and Investment
Techniques.................. An investment in any of the Funds is subject to certain risks,
as set forth in detail below under "Risk Factors and Invest-
ment Techniques." As with other mutual funds, there can be no
assurance that any of the Funds will achieve its investment
objective or objectives. The Funds, to the extent set forth
under "Risk Factors and Investment Techniques," may engage in
the following practices: the use of repurchase and reverse
repurchase agreements, entering into options and futures
transactions, the lending of portfolio securities, the
purchase of securities on a when-issued or delayed-delivery
basis and investing in warrants, foreign securities and
derivatives. The Ohio Tax-Free Fund is also subject to the
risks associated with being a non-diversified portfolio.
Investment Adviser............ The Provident Bank ("Provident").
</TABLE>
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<TABLE>
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Sub-Investment Adviser........ DePrince, Race & Zollo, Inc. ("DRZ"), with respect to the
Income Equity Fund.
Dividends..................... For the Money Market Fund, dividends from net income are
declared daily and generally paid monthly. For each of the
other Funds, dividends from net income are declared and
generally paid monthly. Net realized capital gains are
distributed at least annually.
Distributor................... BISYS Fund Services Limited Partnership (the "Distributor").
</TABLE>
7
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FEE TABLE
The purpose of the fee tables is to assist investors in understanding the costs
and expenses that an investor in a Fund will bear directly or indirectly. Such
costs and expenses do not include any fees charged by Provident or any of its
affiliates to its customers' accounts which may have invested in shares of the
Funds. For more complete descriptions of the various costs and expenses, see the
following sections of this prospectus: "Company Management and Expenses," "How
to Buy Shares," "Sales Charges," "Reduced Sales Charges -- Investor A Shares"
and "Distribution Plans."
INVESTOR A SHARES
<TABLE>
<CAPTION>
MONEY INCOME OHIO STOCK LARGE
MARKET INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Charge (as a percentage of
offering price)................ 0% 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1) 4.50%(1)
ANNUAL FUND EXPENSES
(AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Investment Advisory Fees After
Voluntary Fee Reduction........ .15% .40% .95%(2) .40%(3) .80% .80% .80%
12b-1 Fees After Voluntary
Fee Reduction.................. .10(4) .19(4) .22(4) .25 .25 .25 .19(4)
Other Expenses(5)................ .36 .47 .51 .69 .56 .61(6) .57
----- ------ ------ ------- ------ ------- -------
Total Fund Operating Expenses
After Voluntary Fee
Reductions..................... .61% 1.06% 1.68% 1.34% 1.61% 1.66% 1.56%
===== ====== ====== ======= ====== ======= =======
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<FN>
(1) The sales charge applied to purchases of Investor A shares declines as the
amount invested increases. In addition, all or a portion of the sales charge
may be waived by the Distributor on certain sales of Investor A shares. See
"Sales Charges -- Investor A Shares" and "Reduced Sales Charges -- Investor
A Shares."
(2) The above table with respect to the Income Equity Fund reflects the
cessation of the agreement by Provident and DRZ to waive 5 basis points
(.05%) of the investment advisory and sub-investment advisory fees as of
January 1, 1997. Absent such fee waivers, the Investment Advisory Fees and
Total Fund Operating Expenses for the Investor A Shares of the Income Equity
Fund would have been .95% and 1.74%, respectively, during the period of
January 1, 1996, to December 31, 1996.
(3) Provident has agreed with the Company to reduce voluntarily the amount of
its investment advisory fee with respect to the Ohio Tax-Free Fund for the
fiscal year ending December 31, 1997. Absent such voluntary fee reduction,
Investment Advisory Fees and Total Fund Operating Expenses for the Investor
A Shares of the Ohio Tax-Free Fund would be .50% and 1.44%, respectively.
(4) The Distributor has agreed with the Company to reduce voluntarily the amount
of its 12b-1 fees under the Investor A Plan, as described below, with
respect to the Money Market, Income Equity, Income and Balanced Funds, for
the fiscal year ending December 31, 1997. Absent such voluntary fee
reduction, 12b-1 Fees for such Funds would be .25%.
</TABLE>
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(5) "Other Expenses" with respect to the Income Equity Fund, the Ohio Tax-Free
Fund, the Balanced Fund and the Stock Appreciation Fund have been restated
to reflect current fees.
(6) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
INVESTOR B SHARES
<TABLE>
<CAPTION>
INCOME OHIO STOCK LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Deferred Sales Load (as a percentage
of original purchase price or
redemption proceeds, as
applicable)(1)..................... 4.00% 4.00% 4.00% 4.00% 4.00% 4.00%
ANNUAL FUND EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Investment Advisory Fees After
Voluntary Fee Reduction............ .40% .95%(2) .40%(3) .80% .80% .80%
12b-1 Fees........................... 1.00 1.00 1.00 1.00 1.00 1.00
Other Expenses....................... .47 .52 .69 .76(4) .61(4) .57
----- ----- ------ ------ ------ ------
Total Fund Operating Expenses After
Voluntary Fee Reduction............ 1.87% 2.47% 2.09% 2.56% 2.41% 2.37%
===== ===== ====== ======= ====== ======
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<FN>
(1) A contingent deferred sales load ranging from 4% to 1% is charged with
respect to Investor B shares redeemed within the first six years after
purchase. See "Contingent Deferred Sales Charge -- Investor B Shares" below.
(2) The above table with respect to the Income Equity Fund reflects the
cessation of the agreement by Provident and DRZ to waive 5 basis points
(0.05%) of the investment advisory and sub-investment advisory fees as of
January 1, 1997. Absent such fee waivers, the Investment Advisory Fees and
Total Fund Operating Expenses for the Investor B Shares of the Income Equity
Fund would have been .95% and 2.52%, respectively, during the period of
January 1, 1996 to December 31, 1996.
(3) Provident has agreed with the Company to reduce voluntarily the amount of
its investment advisory fee with respect to the Ohio Tax-Free Fund for the
fiscal year ending December 31, 1997. Absent such voluntary fee reduction,
Investment Advisory Fees and Total Fund Operating Expenses for the Investor
B Shares of the Ohio Tax-Free Fund would be .50% and 2.19%, respectively.
(4) "Other Expenses" is based upon estimated amounts for the fiscal year ending
December 31, 1997.
</TABLE>
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EXAMPLE(5) -- INVESTOR A SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
MONEY INCOME OHIO STOCK LARGE
MARKET INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND FUND
------ ------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
One Year...................... $ 6 $ 55 $ 61 $ 58 $ 63 $ 61 $ 60
Three Years................... $ 20 $ 77 $ 96 $ 85 $ 99 $ 95 $ 92
Five Years.................... $ 34 $101 $132 $115 $139 N/A $126
Ten Years..................... $ 76 $168 $235 $199 $248 N/A $222
</TABLE>
EXAMPLE(5) -- INVESTOR B SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
INCOME OHIO STOCK LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 59 $ 65 $ 61 $ 66 $ 64 $ 64
Three Years................... $ 99 $117 $105 $120 $ 115 $114
Five Years.................... $121 $181 $132 N/A N/A $146
Ten Years..................... $219 $280 $242 N/A N/A $270
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
INCOME OHIO STOCK LARGE
INCOME EQUITY TAX-FREE APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ -------- ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
One Year...................... $ 19 $ 25 $ 21 $ 26 $ 24 $ 24
Three Years................... $ 59 $ 79 $ 65 $ 80 $ 75 $ 74
Five Years.................... $101 $137 $112 N/A N/A $126
Ten Years..................... $219 $280 $242 N/A N/A $270
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<FN>
(5) The Commission requires use of a 5% annual return figure for purposes of the
examples. Actual return for a Fund may be greater or less than 5%.
AMOUNTS SHOWN IN THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. As a result of the payment of sales loads and Rule 12b-1
fees, long-term shareholders may pay more than the maximum front-end sales
charge permitted by the Rules of the National Association of Securities Dealers,
Inc. (the "NASD"). The NASD has adopted rules which generally limit the
aggregate of any sales charges paid and payments under a Fund's Investor A and
Investor B Distribution Plans to 6.25% of total new gross sales, plus interest.
A Fund would stop accruing payments under a Distribution Plan if, to the extent,
and for as long as, such limit would otherwise be exceeded.
</TABLE>
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The information set forth in the foregoing Fee Tables and examples relates
to the Investor A and Investor B Shares (except with respect to the Money Market
Fund which only has Investor A shares) of the Funds. The two classes of shares
are subject to the same expenses except that the level of Rule 12b-1 and
transfer agency fees paid by the holders of Investor A shares and Investor B
shares differs.
FINANCIAL HIGHLIGHTS
The Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund (formerly known as The Riverfront Flexible Growth Fund) are seven
separate Funds of the Company. The following financial highlights for the fiscal
year ended December 31, 1995, for each of the Funds, other than the Stock
Appreciation Fund and the Large Company Fund, and for the three month period
ended December 31, 1995 for the Stock Appreciation Fund, have been audited by
Ernst & Young LLP, independent auditors, whose report, together with the
financial statements of the Funds, appears in the Statement of Additional
Information. The following financial highlights: for the fiscal years ended
December 31, 1994 and 1993, and the three month period ended December 31, 1992,
for the Money Market Fund; the fiscal years ended December 31, 1994, 1993, 1992,
and 1991, for the Income Fund and the Income Equity Fund; the five month period
ended December 31, 1994, for the Ohio Tax-Free Fund; and the four month period
ended December 31, 1994, for the Balanced Fund have been audited by other
auditors.
The Statement of Additional Information may be obtained by shareholders and
prospective investors upon request.
As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of each of the Stock Appreciation Fund and the Stock Growth Fund of MIM
Mutual Funds, Inc., in exchange for the assumption of such Funds' stated
liabilities and a number of full and fractional Investor A shares of the Stock
Appreciation Fund having an aggregate net asset value equal to such Funds' net
assets (the "Reorganization"). For accounting purposes, the MIM Stock
Appreciation Fund is deemed to be the survivor of the Reorganization. The
following Financial Highlights with respect to each of the fiscal years ending
September 30, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and 1988 and the fiscal
period from commencement of operations (July, 1987) to September 30, 1987, for
the Stock Appreciation Fund have been audited by other auditors and, except for
September 30, 1995 (the effective date of the Reorganization), reflect the
operations of the MIM Stock Appreciation Fund prior to the Reorganization.
The following financial highlights for the period ended June 30, 1996, are
unaudited. No financial highlights are provided for the Large Company Fund since
it has not yet commenced operations.
On June 8, 1994, the Board of Directors of the Company and on July 29,
1994, the shareholders of the Company approved the reclassification of the
Funds' then outstanding shares into Class A shares. Such reclassification was
effective as of August 1, 1994.
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THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, OCTOBER 1, 1992
---------------------------------- TO DECEMBER 31,
1995 1994(d) 1993(d) 1992(a)(d)
SIX MONTHS -------- -------- -------- ----------------
ENDED JUNE
30, 1996
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities
Net Investment Income(b)........ 0.02 0.05 0.04 0.03 0.01
-------- ------- ------- ------- ------
Total from Investment
Activities.................... 0.02 0.05 0.04 0.03 0.01
-------- ------- ------- ------- ------
Distributions
Net Investment Income........... (0.02) (0.05) (0.04) (0.03) (0.01)
-------- ------- ------- ------- ------
Total Distributions............. (0.02) (0.05) (0.04) (0.03) (0.01)
-------- ------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD........................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======= ======= ======= ======
TOTAL RETURN.................... 2.39%(b) 5.52% 3.78% 2.90% 0.80%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of Period
(000)......................... $ 172,984 $157,495 $149,374 $133,207 $ 37,083
Ratio of expenses to average net
assets........................ 0.60%(c) 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income
to average net assets......... 4.75%(c) 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net
assets*....................... 0.85%(c) 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income
to average net assets*........ 4.50%(c) 5.09% 3.41% 2.75% 2.42%(c)
- ---------------
<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) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
</TABLE>
12
<PAGE> 13
[THIS PAGE INTENTIONALLY LEFT BLANK]
13
<PAGE> 14
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1995(a)
-------------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........................ $ 9.71 $ 10.95 $ 8.92 $ 10.00
Investment Activities
Net investment income........................ 0.26 0.24 0.54 0.43
Net realized and unrealized gains (losses)
from investments........................... (0.37) (0.42) 0.79 0.94
------- ------- ------- -------
Total from Investment Activities............. (0.11) (0.18) 1.33 1.37
------- ------- ------- -------
Distributions
Net investment income........................ (0.26) (0.24) (0.54) (0.42)
In excess of net investment income........... -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions.......................... (0.26) (0.24) (0.54) (0.42)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............... $ 9.34 $ 10.53 $ 9.71 $ 10.95
======= ======= ======= =======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)................... (1.19)%(g) (1.61)%(g) 15.22% 13.96%(e)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period (000)............ $34,145 $ 1,190 $ 36,538 $ 1,263
Ratio of expenses to average net assets...... 1.14%(c) 1.93%(c) 1.09% 1.90%(c)
Ratio of net investment income to average net
assets..................................... 5.43%(c) 4.65%(c) 5.74% 4.80%(c)
Ratio of expenses to average net assets*..... 1.22%(c) 1.93%(c) 1.18% 1.90%(c)
Ratio of net investment income to average net
assets*.................................... 5.35%(c) 4.65%(c) 5.65% 4.80%(c)
Portfolio turnover........................... 30%(d) 30%(d) 75%(d) 75%(d)
- ---------------
<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) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
(g) Not annualized.
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
------------------------------------------ DECEMBER 31,
1994(f) 1993(f) 1992(b)(f) 1991(f) 1990(a)(f)
------- ------- ------- ------ ------------
<S> <C> <C> <C> <C> <C>
$ 9.91 $ 9.76 $ 10.00 $10.00 $10.00
0.54 0.51 0.10 0.73 0.12
(0.99) 0.20 (0.23) -0- -0-
------- ------- ------- ------- ------
(0.45) 0.71 (0.13) 0.73 0.12
------- ------- ------- ------- ------
(0.54) (0.50) (0.10) (0.73) (0.12)
-0- (0.06) (0.01) -0- -0-
------- ------- ------- ------- ------
(0.54) (0.56) (0.11) (0.73) (0.12)
------- ------- ------- ------- ------
$ 8.92 $ 9.91 $ 9.76 $10.00 $10.00
======= ======= ======= ======= ======
(4.64)% 7.38% (1.31)% N/A N/A
$32,721 $30,078 $24,588 $ 33 $ 0
0.86% 0.65% 0.66% 0.00% 1.67%(c)
5.78% 5.05% 4.00% 7.34% 1.17%(c)
1.14% 1.08% 1.06% N/A N/A
5.49% 4.62% 3.60% N/A N/A
83% 220% 117% 0% 0%
</TABLE>
15
<PAGE> 16
THE RIVERFRONT INCOME EQUITY FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
SIX MONTHS ENDED DECEMBER 31, DECEMBER 31,
JUNE 30, 1996 1995 1995(a)
--------------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........ $ 11.70 $ 11.85 $ 10.15 $10.00
Investment Activities
Net investment income....................... 0.10 0.05 0.27 0.13
Net realized and unrealized gains from
investments............................... 1.00 1.00 2.89 2.78
------- ------- ------- -------
Total from Investment Activities............ 1.10 1.05 3.16 2.91
------- ------- ------- -------
Distributions
Net investment income....................... (0.10) (0.05) (0.27) (0.13)
In excess of net investment income.......... -0- -0- -0- -0-
Net realized gains.......................... -0- -0- (1.34) (0.93)
In excess of net realized gains............. -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions......................... (0.10) (0.05) (1.61) (1.06)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD.............. $ 12.70 $ 12.85 $ 11.70 $11.85
======= ======= ======= =======
TOTAL RETURN (EXCLUDING SALES/REDEMPTION
CHARGE)................................... 9.43%(g) 8.88%(g) 31.45% 29.28%(e)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)........... $67,612 $ 4,900 $ 60,845 $2,833
Ratio of expenses to average net assets..... 1.72%(c) 2.47%(c) 1.49% 2.46%(c)
Ratio of net investment income to average
net assets................................ 1.63%(c) 0.85%(c) 2.27% 1.12%(c)
Ratio of expenses to average net assets*.... 1.82%(c) 2.52%(c) 1.74% 2.51%(c)
Ratio of net investment income to average
net assets*............................... 1.53%(c) 0.80%(c) 2.02% 1.07%(c)
Portfolio turnover.......................... 81%(d) 81%(d) 180%(d) 180%(d)
Average commission rate paid(h)............. $0.0405 $0.0405 -- --
- ---------------
<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 operation.
(b) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
(g) Not annualized.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
------------------------------------------- DECEMBER 31,
1994(f) 1993(f) 1992(b)(f) 1991(f) 1990(a)(f)
------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
$ 10.63 $ 10.78 $ 10.00 $10.00 $10.00
0.32 0.28 0.08 0.73 0.12
-0- 1.01 0.80 -0- -0-
------- ------- ---------- ------- ------------
0.32 1.29 0.88 0.73 0.12
------- ------- ---------- ------- ------------
(0.31) (0.27) (0.08) (0.73) (0.12)
-0- (0.03) (0.01) -0- -0-
(0.49) (1.14) -0- -0- -0-
-0- -0- (0.01) -0- -0-
------- ------- ---------- ------- ------------
(0.80) (1.44) (0.10) (0.73) (0.12)
------- ------- ---------- ------- ------------
$ 10.15 $ 10.63 $ 10.78 $10.00 $10.00
======= ======= ========= ======= ===========
3.08% 12.11% 8.74% N/A N/A
$34,965 $24,387 $ 12,262 $ 43 $ 40
1.30% 1.47% 1.48% 0.00% 1.67%(c)
2.93% 2.55% 3.16% 7.34% 1.17%(c)
1.58% 1.64% 2.02% N/A N/A
2.65% 2.38% 2.62% N/A N/A
119% 145% 12% 0% 0%
-- -- -- -- --
</TABLE>
17
<PAGE> 18
THE RIVERFRONT OHIO TAX-FREE BOND FUND
<TABLE>
<CAPTION>
SIX MONTHS YEAR JANUARY 17
ENDED ENDED 1995 TO
JUNE 30, DECEMBER 31, DECEMBER 31, AUGUST 1,
1996 1995 1995(a) 1994 TO
---------------------------- ------------ ------------ DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(a)(f)
----------- ----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 10.51 $ 10.73 $ 9.83 $10.00 $ 10.00
Investment Activities
Net investment income.............. 0.20 0.16 0.39 0.27 0.12
Net realized and unrealized gains
(losses) from investments........ (0.29) (0.28) 0.67 0.73 (0.17)
------- ------ ------- ------ -------
Total from Investment Activities... (0.09) (0.12) 1.06 1.00 (0.05)
------- ------ ------- ------ -------
Distributions
Net investment income.............. (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
Total Distributions................ (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
NET ASSET VALUE, END OF PERIOD..... $ 10.22 $ 10.45 $ 10.51 $10.73 $ 9.83
======= ====== ======= ====== =======
TOTAL RETURN (EXCLUDING SALES/
REDEMPTION CHARGE)............... (0.85)%(e) (1.16)%(e) 10.96% 10.10%(c) (0.47)%(e)
ANNUALIZED RATIOS/SUPPLEMENTAL
DATA:
Net assets at end of period (000).. $10,538 $ 677 $ 11,091 $ 626 $ 10,190
Ratio of expenses to average net
assets........................... 1.46%(d) 2.17%(d) 1.49% 2.27%(d) 1.08%(d)
Ratio of net investment income to
average net assets............... 3.88%(d) 3.17%(d) 3.77% 3.01%(d) 2.92%(d)
Ratio of expenses to average net
assets*.......................... 1.56%(d) 2.27%(d) 1.64% 2.41%(d) 1.44%(d)
Ratio of net investment income to
average net assets*.............. 3.78%(d) 3.08(d) 3.62% 2.87%(d) 2.56%(d)
Portfolio turnover................. 5%(b) 5%(b) 34%(b) 34%(b) 29%
- ---------------
<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) 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.
</TABLE>
18
<PAGE> 19
[THIS PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 20
THE RIVERFRONT STOCK APPRECIATION FUND
<TABLE>
<CAPTION>
SIX MONTHS FROM OCTOBER 1, FROM OCTOBER 1,
ENDED 1995 THROUGH 1995 THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995(b) 1995(a)(b)
------------------------- --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- --------------- ---------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD................................... $ 9.50 $ 9.91 $ 10.00 $ 10.00
Investment Activities
Net investment loss........................ (0.06) (0.06) (0.01) (0.01)
Net realized and unrealized gains (losses)
from investments......................... 0.64 0.60 (0.12) (0.08)
------- ------- ------- -------
Total from Investment Activities........... 0.58 0.54 (0.13) (0.09)
------- ------- ------- -------
Distributions
Net investment income...................... -0- -0- -0- -0-
Net realized gains......................... -0- -0- (0.37) -0-
Returns of capital....................... -0- -0- -0- -0-
------- ------- ------- -------
Total Distributions........................ -0- -0- (0.37) -0-
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD............. $ 10.08 $ 10.45 $ 9.50 $ 9.91
======= ======= ======= =======
TOTAL RETURN (EXCLUDING SALES/
REDEMPTION CHARGE)....................... 6.11%(c) 5.45%(c) (1.20)%(c) (0.90)%(c)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000s)......... $37,759 $ 619 $40,995 $ 72
Ratio of expenses to average net assets.... 1.86% (d) 2.55% (d) 1.76% (d) 2.30% (d)
Ratio of net investment income to average
net assets............................... (1.19)%(d) (1.94)%(d) (0.49)%(d) (1.69)%(d)
Ratio of expenses to average net assets*... 1.86% (d) 2.55% (d) 1.77% (d) 2.39% (d)
Ratio of net investment income to average
net assets*.............................. (1.19)%(d) (1.94)%(d) (0.50)%(d) (1.78)%(d)
Portfolio turnover......................... 87% (e) 87% (e) 46% (e) 46% (e)
Average commission rate paid(h)............ $0.0019 $0.0019 -- --
<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 period prior to September 30, 1995 represents the
performance of the MIM Stock Appreciation Fund. The per share data for the
period prior to September 30, 1995 have been restated to reflect the impact
of the change of the net asset value of the Stock Appreciation Fund on
September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1995(f) 1994(f) 1993(f) 1992(f) 1991(f) 1990(f) 1989(f) 1988(f) 1987(a)(f)
------- ------- ------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55 $ 5.81 $ 5.77
(0.07) (0.12) (0.17) (0.08) (0.11) (0.01) 0.11 0.02 0.01
2.14 (1.26) 2.57 1.41 3.17 (0.21) 0.31 (1.26) 0.04
------- ------- ------- ------- ------ ------ ------ ------ ------
2.07 (1.38) 2.40 1.33 3.06 (0.22) 0.42 (1.24) 0.05
------- ------- ------- ------- ------ ------ ------ ------ ------
-0- -0- -0- -0- -0- -0- (0.11) (0.01) (0.01)
(0.32) (0.55) (0.20) (1.05) -0- -0- -0- -0- -0-
-0- -0- -0- -0- -0- (0.01) -0- (0.01) -0-
------- ------- ------- ------- ------ ------ ------ ------ ------
(0.32) (0.55) (0.20) (1.05) -0- (0.01) (0.11) (0.02) (0.01)
------- ------- ------- ------- ------ ------ ------ ------ ------
$ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55 $ 5.81
======= ======= ======= ======= ====== ====== ====== ====== ======
25.12% (13.91)% 30.61% 16.69% 66.04% (4.44)% 9.41% (21.29)% 0.92%(c)
$44,500 $47,880 $59,330 $28,750 $9,600 $4,310 $1,420 $1,990 $3,020
2.61% 2.44% 2.47% 2.70% 2.89% 2.76% 3.07% 2.82% 0.53%(d)
(0.73)% (1.35)% (1.85)% (1.00)% (1.72)% (0.62)% 2.25% 0.43% 0.18%(d)
(g) (g) (g) (g) (g) (g) (g) (g) (g)
(g) (g) (g) (g) (g) (g) (g) (g) (g)
197% 254% 216% 288% 240% 185% 71% 207% 0%
-- -- -- -- -- -- -- -- --
</TABLE>
21
<PAGE> 22
THE RIVERFRONT BALANCED FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31, FROM SEPTEMBER 1,
SIX MONTHS ENDED 1995 1995(a) 1994 THROUGH
JUNE 30, 1996 -------------- -------------- DECEMBER 31,
------------------------- INVESTOR A INVESTOR B 1994(a)(f)
INVESTOR A INVESTOR B -------------- -------------- -----------------
---------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 11.36 $ 11.70 $ 9.79 $10.00 $ 10.00
------- ----- ----- ----- -----
INVESTMENT ACTIVITIES
Net investment income......... 0.17 0.12 0.35 0.25 0.10
Net realized and unrealized
gains (losses) from
investments................. (0.26) (0.26) 1.66 1.79 (0.18)
------- ----- ----- ----- -----
Total from Investment
Activities................ (0.09) (0.14) 2.01 2.04 (0.08)
------- ----- ----- ----- -----
DISTRIBUTIONS
Net investment income......... (0.17) (0.12) (0.34) (0.24) (0.13)
Net realized gains............ -- -- (0.10) (0.10) --
------- ----- ----- ----- -----
Total Distributions......... (0.17) (0.12) (0.44) (0.34) (0.13)
------- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD........................ $ 11.10 $ 11.44 $11.36 $11.70 $ 9.79
======= ===== ===== ===== =====
Total Return (excludes sales/
redemption charge)............ (0.83)%(e) (1.09)%(c) 20.83% 20.53%(c) (0.82)%(e)
ANNUALIZED RATIOS/ SUPPLEMENTARY
DATA:
Net Assets at end of period
(000)......................... $13,121 $ 8,710 $9,427 $5,030 $ 2,709
Ratio of expenses to average net
assets........................ 1.55%(d) 2.36%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment income
to average net assets......... 2.99%(d) 2.19%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to average net
assets*....................... 1.86%(d) 2.56%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment income
to average net assets*........ 2.68%(d) 1.99%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover.............. 52%(b) 52%(b) 13%(b) 13%(b) 1%
Average commission rate
paid(g)....................... $0.0043 $0.0043 -- -- --
<FN>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary f%e reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
(f) Audited by other auditors.
(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.
</TABLE>
22
<PAGE> 23
THE COMPANY AND ITS FUNDS
The Riverfront Funds, Inc. is an open-end management investment company,
commonly known as a mutual fund (the "Company"), registered under the Investment
Company Act of 1940, as amended (the "1940 Act"). The Company currently offers
seven series of shares of capital stock (individually a "Fund" and collectively
the "Funds"). Each Fund of the Company, other than the Ohio Tax-Free Fund, is
diversified. The Ohio Tax-Free Fund is non-diversified. The Company was
incorporated in Maryland on March 27, 1990. The Funds currently offered by the
Company are the Money Market Fund, the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund (formerly known as The Riverfront Flexible Growth Fund).
The investment objectives of each Fund are fundamental policies and as such
may not be changed without a vote of the holders of a majority of the
outstanding voting securities of that Fund (as defined below under "COMPANY
SHARES"). There can be no assurance that the investment objectives of any Fund
will be achieved.
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTMENT OBJECTIVE AND POLICIES
The Money Market Fund seeks current income from U.S. Government short-term
securities while preserving capital and maintaining liquidity. The
dollar-weighted average maturity of the Money Market Fund will not exceed 90
days.
PRINCIPAL INVESTMENTS
The Money Market Fund invests at least 65% of its total assets in obligations
issued or guaranteed as to principal and interest by the U.S. Government, its
agencies or instrumentalities, and in repurchase agreements secured by such
obligations. Securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities include U.S. Treasury securities which differ only
in their interest rates, maturities and times of issuance. Treasury bills have
initial maturities of one year or less; Treasury notes have initial maturities
of one to ten years; and Treasury bonds generally have initial maturities of
greater than ten years. Some obligations issued or guaranteed by the U.S.
Government, such as those issued by the Government National Mortgage Association
("GNMA") and Federal Housing Administration ("FHA"), are backed by the full
faith and credit of the U.S. Government as to payment of principal and interest
and are the highest quality government securities. Other securities, such as
those issued by the Federal Farm Credit System, the Federal Land Bank
Association and the Federal National Mortgage Association ("FNMA"), are
supported by each agency's right to borrow money from the U.S. Treasury under
certain circumstances. Others, such as those issued by the Federal Home Loan
Mortgage Corporation ("FHLMC"), are supported only by the credit of the issuing
agency and not by the U.S. Government.
Under normal market conditions, the Money Market Fund may invest up to 35% of
its total assets in Short-Term Securities as described below under "THE
RIVERFRONT U.S. GOVERNMENT INCOME FUND -- OTHER ELIGIBLE INVESTMENTS," except
that with respect to corporate obligations, such securities will have or be
deemed to have remaining maturities of thirteen months or less and shall be
23
<PAGE> 24
rated in one of the two highest rating categories by an NRSRO or, if unrated,
are determined to be of comparable quality by Provident.
Pursuant to Rule 2a-7 under the 1940 Act, the Money Market Fund's investments
will be limited to U.S. dollar-denominated instruments with remaining maturities
of 397 days or less.
The Money Market Fund may purchase and sell securities on a when-issued or
delayed delivery basis, enter into repurchase agreements and lend securities to
broker-dealers and financial institutions. For expanded descriptions of these
investment techniques, see the "RISK FACTORS AND INVESTMENT TECHNIQUES" below.
The securities in which the Money Market Fund may invest may not earn as high a
level of current income as longer term or lower quality securities, which
generally have less liquidity, greater market risk and more price fluctuation.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
INVESTMENT OBJECTIVES AND POLICIES
The Income Fund seeks a high level of current income, consistent with
preservation of capital, by investing primarily in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and in high
quality fixed rate and adjustable rate mortgage-backed securities and other
asset-backed securities which are issued or guaranteed by the U.S. Government,
its agencies and instrumentalities or rated no lower than one of the three
highest rating categories by an NRSRO (e.g., at least "A" from Moody's Investors
Services ("Moody's") or Standard & Poor's Corporation ("S&P"), including all
sub-classifications indicated by a "plus" or "minus" sign or by a number) or, if
unrated, are determined to be of comparable quality by Provident. For a
description of these ratings by NRSROs, see the Appendix to the Statement of
Additional Information. It is expected that under normal circumstances the
dollar-weighted average duration of the Income Fund's securities will be between
three and seven years and that the dollar-weighted average life of the Income
Fund's securities will be in the range of four and ten years. While there is no
limit on the maturity of any single security purchased by the Income Fund, it is
expected that the maturity of any single security will not exceed 30 years.
The Income Fund seeks to achieve a high level of current income, consistent
with preservation of capital, by investing in a diversified portfolio of
securities which Provident believes will, in the aggregate, perform well in all
stages of the business and interest rate cycles. Although the values of
fixed-income securities generally increase during periods of declining interest
rates and decrease during periods of increasing interest rates, the extent of
these fluctuations has historically generally been smaller for shorter term
securities than for securities with longer maturities. Conversely, the yield
available on shorter term securities has also historically been lower on average
than those available from longer term securities.
PRINCIPAL INVESTMENTS
Under ordinary circumstances, the Income Fund intends to invest at least 65%
of its total assets in U.S. Government securities, U.S. Government agency
mortgage-backed securities and U.S. Government agency derivatives described
below under "COLLATERALIZED MORTGAGE OBLIGATIONS." U.S. Government securities
consist of U.S. Treasury bills, notes and bonds and securities issued by U.S.
Government agencies and instrumen-
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talities, such as GNMA, FHLMC, FNMA, Federal Home Loan Bank, Federal Farm
Credit, Student Loan Marketing Association and the Tennessee Valley Authority.
OTHER ELIGIBLE INVESTMENTS
The Income Fund may invest up to 35% of its total assets in non-government
agency mortgage-backed securities, asset-backed securities, corporate debt
securities, including adjustable rate securities, and foreign government bonds.
Each such security will be rated in one of the three highest rating categories
by an NRSRO or, if unrated, are determined to be of comparable quality by
Provident.
The Income Fund may also invest up to 35% of its total assets in the following
securities: (1) bankers' acceptances which are guaranteed by U.S. commercial
banks having total assets at the time of purchase in excess of $1.5 billion; (2)
certificates of deposit of domestic and foreign branches of U.S. banks which are
members of the Federal Reserve System or the Federal Deposit Insurance
Corporation and have total assets at the time of purchase in excess of $1.5
billion; (3) commercial paper (including master demand notes) rated in the
highest rating category by an NRSRO or, if unrated, determined to be of
comparable quality by Provident; (4) repurchase agreements; and (5) corporate
obligations with remaining maturities of one year or less and rated in one of
the three highest rating categories by an NRSRO or, if unrated, determined to be
of comparable quality by Provident. (Items (1) through (5) are hereafter
referred to as "Short-Term Securities.") For expanded descriptions of such
Short-Term Securities, see "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" in the Company's Statement of Additional
Information. When, in Provident's opinion, market conditions warrant, Provident
may invest up to 100% of the Income Fund's assets for temporary defensive
purposes in such Short-Term Securities.
The Income Fund may also invest in securities issued by other investment
companies which invest in securities in which the Income Fund is permitted to
invest, as more fully described below under "RISK FACTORS AND INVESTMENT
TECHNIQUES."
The Income Fund is authorized to engage in options transactions, including the
writing of covered put and call options, the purchase of call and put options on
individual securities and interest rate index futures contracts, engage in
interest rate index futures contracts, enter into repurchase agreements, reverse
repurchase agreements, dollar rolls and when-issued, delayed delivery and
forward commitment transactions and lend securities to broker-dealers and
financial institutions. The Income Fund presently does not intend to enter into
options or futures transactions. For expanded descriptions of these investment
techniques, see below under "RISK FACTORS AND INVESTMENT TECHNIQUES" section of
this prospectus and the "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" section in the Company's Statement of
Additional Information.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are securities that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
secured by real property. The term mortgage-backed securities includes
adjustable rate mortgage securities and derivative mortgage products such as
collateralized mortgage obligations and other products described below.
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<PAGE> 26
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
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<PAGE> 27
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. The Income Fund may purchase
portions or "tranches" of CMOs, which are designed to permit purchasers to
choose varying lengths of maturity. The shorter maturity tranches are less
volatile and carry less risk of non-payment on the underlying securities and
therefore may provide a lower yield than the longer maturity tranches. The
prices of CMOs are affected by changes in interest rates similar to the way
mortgage-backed securities are affected as is described above.
ASSET-BACKED SECURITIES
The securitization techniques used to develop mortgage-backed securities are
also applied to a broad range of other assets. Through the use of trusts and
special purpose corporations, various types of assets, primarily automobile and
credit card receivables and home equity loans, are being securitized in
pass-through structures similar to the mortgage pass-through structures
described above or in a pay-through structure similar to the CMO structure.
New instruments and variations of existing mortgage-backed securities and
asset-backed securities continue to be developed. The Income Fund may invest in
any such instruments to the extent consistent with its investment objectives and
policies and applicable regulatory requirements.
TYPES OF CREDIT ENHANCEMENT
Mortgage-backed securities and asset-backed securities are often backed by a
pool of assets representing the obligations of a number of different parties. To
lessen the effect of failures by obligors on underlying assets to make payments,
those securities may contain elements of credit support, which fall into two
categories: (1) liquidity protection and (2) protection against losses resulting
from ultimate default by an obligor on the underlying assets. Liquidity
protection refers to the provision of advances, generally by the entity
administering the pool of assets, to ensure that the receipt of payments on the
underlying pool occurs in a timely fashion. Protection against losses resulting
from default ensures ultimate payments of the obligations on at least a portion
of the assets in the pool. This protection may be provided through guarantees,
insurance policies or letters of credit obtained by the issuer or sponsor from
third parties, through various means of structuring the transaction or through a
combination of such approaches. The degree of credit support provided for each
issue is generally based on historical information respecting the level of
credit risk associated with the underlying assets. Delinquencies or losses in
excess of those anticipated could adversely affect the return on an investment
in a security. The Income Fund will not pay any fees for credit support,
although the existence of credit support may increase the price of a security.
THE RIVERFRONT INCOME EQUITY FUND
INVESTMENT OBJECTIVES AND POLICIES
The Income Equity Fund seeks a high level of investment income, with capital
appreciation as a secondary objective through investment primarily in
income-producing equity securities of U.S. issuers.
PRINCIPAL INVESTMENTS
The Income Equity Fund has a fundamental policy of investing at least 65% of
its total assets in common stocks and securities convertible into common stock,
such as bonds and preferred stocks, rated in one of the four
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<PAGE> 28
highest rating categories by an NRSRO (or, if not rated, deemed by the Fund's
adviser to be of comparable quality to securities so rated) as to which there is
an expectation of dividend or other income generation. The Income Equity Fund
also may acquire rights and warrants to purchase such securities. The Income
Equity Fund generally will invest in equity securities of U.S. issuers with a
demonstrated record of dividend payments and high total returns which are listed
on the New York Stock Exchange or the American Stock Exchange or traded in the
over-the-counter market. The Income Equity Fund may invest in income-producing
equity securities of varying quality. For a discussion of securities rated
within the fourth highest rating group assigned by the NRSROs, see "RISK FACTORS
AND INVESTMENT TECHNIQUES" below.
OTHER ELIGIBLE INVESTMENTS
The Income Equity Fund may invest in non-investment grade convertible debt
securities rated no lower than B by an appropriate NRSRO or in unrated
securities which are deemed by DRZ or Provident, as the case may be, to be of
comparable quality. The Income Equity Fund currently expects that less than 5%
of its total assets will be invested in non-investment grade securities.
Non-investment grade securities are commonly referred to as high yield or high
risk securities. High yield, high risk securities are generally riskier than
higher quality securities and are subject to more credit risk, including risk of
default, and volatility than higher quality securities. In addition, such
securities may have less liquidity and experience more price fluctuation than
higher quality securities.
Convertible debt securities which are rated B by Moody's generally lack
characteristics of a desirable investment, since the assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small. Debt rated B by S&P is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
The Income Equity Fund may also invest in foreign securities directly and
through the purchase of sponsored and unsponsored American Depositary Receipts
("ADRs"). 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
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<PAGE> 29
and repurchase agreements with respect to such securities. Such fixed-income
securities may include U.S. Treasury bills, notes and bonds and securities of
agencies and instrumentalities of the U.S. Government which may not be direct
obligations of the U.S. Treasury. The maximum initial or remaining maturities of
the fixed-income securities at the time of purchase will generally be less than
ten years.
The Income Equity Fund may also invest in securities issued by other
investment companies which invest in securities in which the Income Equity Fund
is permitted to invest, as described more fully below.
The Income Equity Fund is authorized to engage in options transactions,
including the writing of covered put and call options, the purchase of call and
put options on individual stocks, equity indices and equity index futures
contracts, engage in equity index futures contracts, enter into reverse
repurchase agreements and when-issued, delayed delivery and forward commitment
transactions and lend securities to broker-dealers and financial institutions.
The Income Equity Fund presently does not intend to enter into options or
futures transactions. For expanded descriptions of these investment techniques,
see below under "RISK FACTORS AND INVESTMENT TECHNIQUES" section of this
prospectus and the "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information
on Portfolio Instruments" section in the Company's Statement of Additional
Information.
THE RIVERFRONT OHIO TAX-FREE BOND FUND
INVESTMENT OBJECTIVES AND POLICIES
The Ohio Tax-Free Fund seeks as its investment objectives (1) income, which is
exempt from federal income tax and Ohio state income taxes, and (2) preservation
of capital.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Ohio Tax-Free Fund will invest at least
80% of its net assets in a portfolio of obligations consisting of bonds, notes,
commercial paper, debentures, certificates of indebtedness and other
indebtedness, issued by or on behalf of the State of Ohio, or any county,
political subdivision or municipality thereof (including any agency, board,
authority or commission of any of the foregoing), the interest on which, in the
opinion of bond counsel to the issuer, is exempt from federal income tax, is not
a preference item for individuals for purposes of the federal alternative
minimum tax and is exempt from Ohio state income taxes ("Ohio Exempt
Securities") and in debt obligations issued by the Government of Puerto Rico and
such other governmental entities whose debt obligations, either by law or
treaty, generate interest income which is exempt from federal income tax, is not
a preference item for individuals for purposes of the federal alternative
minimum tax and is exempt from Ohio state income taxes (together with Ohio
Exempt Securities called "Exempt Securities"). In addition, under normal market
conditions, at least 65% of the Ohio Tax-Free Fund's total assets will be
invested in Ohio Exempt Securities. As a matter of fundamental policy, under
normal market conditions, at least 80% of the net assets of the Ohio Tax-Free
Fund will be invested in securities, the interest on which is exempt from
federal income tax and is not a preference item for individuals for purposes of
the federal alternative minimum tax.
The two principal classifications of Exempt Securities which may be held by
the Ohio Tax-Free Fund are "general obligation" securities and "revenue"
securities. General obli-
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gation securities are secured by the issuer's pledge of its full faith, credit
and taxing power for the payment of principal and interest. Revenue securities
are payable only from the revenues derived from a particular facility or class
of facilities or, in some cases, from proceeds of a special excise tax or other
specific revenue source such as the user of the facility being financed. Private
activity bonds held by the Ohio Tax-Free Fund are in most cases revenue
securities and are not payable from the unrestricted revenues of the issuer.
Consequently, the credit quality of private activity bonds is usually directly
related to the credit standing of the corporate user of the facility involved.
The Ohio Tax-Free Fund may also invest in "moral obligation" securities, which
are normally issued by special purpose public authorities. If the issuer of
moral obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.
The Ohio Tax-Free Fund invests in Exempt Securities which are rated at the
time of purchase within the four highest rating groups assigned by one or more
appropriate NRSROs for bonds, notes, tax-exempt commercial paper, or variable
rate demand obligations, as the case may be. The Ohio Tax-Free Fund may also
purchase Exempt Securities which are unrated at the time of purchase but are
determined to be of comparable quality by Provident. The applicable Exempt
Securities ratings are described in the Appendix to the Statement of Additional
Information. For a discussion of debt securities rated within the fourth highest
rating group assigned by the NRSROs, see "RISK FACTORS AND INVESTMENT
TECHNIQUES" below.
The Ohio Tax-Free Fund may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of Provident, suitable
Exempt Securities are unavailable. There is no percentage limitation on the
amount of assets which may be held uninvested. Uninvested cash reserves will not
earn income.
OTHER ELIGIBLE INVESTMENTS
Under normal market conditions, at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in Exempt Securities. However, under normal
market conditions, up to 20% of the Ohio Tax-Free Fund's net assets may be
invested in taxable obligations. In addition, during temporary defensive periods
as determined by Provident, the Ohio Tax-Free Fund may hold up to 100% of its
total assets in taxable obligations. Such taxable obligations consist of
Short-Term Securities (as defined under "THE RIVERFRONT U.S. GOVERNMENT INCOME
FUND" above). These obligations are described further in the Statement of
Additional Information. The Ohio Tax-Free Fund may also invest up to 10% of the
value of its total assets in money market mutual funds for purposes of
short-term cash management, as described more fully below. During such defensive
periods and to the extent that the Ohio Tax-Free Fund is so invested in taxable
obligations, the Ohio Tax-Free Fund may not achieve its stated investment
objectives. In addition, the Ohio Tax-Free Fund may use one or more of the
investment techniques described below and is authorized to engage in options
transactions, including the writing of covered put and call options and the
purchase of put and call options. For further information about these investment
techniques, see the "INVESTMENT OBJECTIVES AND POLICIES -- Additional
Information on Portfolio Instruments" section in the Funds' Statement of
Additional Information. Use of such techniques
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may cause the Ohio Tax-Free Fund to earn income which would be taxable to its
shareholders.
Interest income from certain types of securities may be exempt from federal
and Ohio state income taxes but may be subject to federal alternative minimum
tax. The Ohio Tax-Free Fund may invest up to 20% of its net assets in such types
of securities but may not treat such securities as Exempt Securities for
purposes of compliance with its requirement to have at least 80% of its net
assets invested in Exempt Securities as described above. For additional
information relating to the types of municipal securities the interest on which
may be a preference item for individuals for purposes of the federal alternative
minimum tax, see "ADDITIONAL INFORMATION -- Additional Tax Information" in the
Company's Statement of Additional Information.
Opinions relating to the validity of Exempt Securities and to the exemption of
interest thereon from federal and Ohio state income taxes are normally rendered
by bond counsel to the respective issuers at the time of issuance. Neither the
Ohio Tax-Free Fund nor Provident will review the proceedings relating to the
issuance of Exempt Securities or the basis for such opinions.
Exempt Securities purchased by the Ohio Tax-Free Fund may include rated and
unrated variable and floating rate tax-exempt securities. A variable rate
security is one whose terms provide for the adjustment of its interest rate on
set dates and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. A floating rate security is one
whose terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its par value. Such securities are frequently
not rated by credit rating agencies; however, unrated variable and floating rate
securities purchased by the Ohio Tax-Free Fund will be determined by Provident
to be of comparable quality at the time of purchase to rated instruments
eligible for purchase under the Ohio Tax-Free Fund's investment policies. In
making such determinations, Provident will consider the creditworthiness of the
issuers of such notes and will continuously monitor their financial condition.
There may be no active secondary market with respect to a particular variable or
floating rate security. Nevertheless, the periodic readjustments of their
interest rates tend to assure that their value to the Ohio Tax-Free Fund will
approximate their par value. Variable and floating rate securities for which no
readily available market exists will be purchased in an amount which, together
with other illiquid securities, exceeds 15% of the Ohio Tax-Free Fund's net
assets only if such notes are subject to a demand feature that will permit the
Ohio Tax-Free Fund to receive payment of the principal within seven days after
demand by the Ohio Tax-Free Fund.
An increase in interest rates will generally reduce the value of the
investments in the Ohio Tax-Free Fund, and a decline in interest 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.
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The Ohio Tax-Free Fund will not purchase or otherwise acquire any security if,
as a result, more than 15% of its net assets would be invested in securities
that are illiquid. Illiquid securities include securities which are not readily
marketable and repurchase agreements with maturities in excess of seven days.
THE RIVERFRONT STOCK APPRECIATION FUND
INVESTMENT OBJECTIVE AND POLICIES
The Stock Appreciation Fund seeks capital growth.
PRINCIPAL INVESTMENTS
The Stock Appreciation Fund, under normal market conditions, will have
substantially all, but in no event less than 65%, of its total assets invested
in common stocks regardless of the movement of stock prices generally. It is
expected that such common stocks will normally be traded on exchanges or
established over-the-counter markets.
The Stock Appreciation Fund seeks its investment objective by investing in
common stocks which, in the opinion of Provident, upon review of certain
fundamental and technical standards of selection, have appreciation potential.
Fundamental investment criteria include, but are not limited to, earnings
figures, price to earnings ratios, debt to equity ratios, and the general growth
prospects of the issuer. Technical selection considerations may include, but are
not limited to, relative stock price strength and magnitude of trading volume.
In addition, the Stock Appreciation Fund generally acquires common stocks of
issuers with market capitalizations between $100 million and $2 billion. The
Stock Appreciation Fund will also invest in securities of equity real estate
investment trusts ("REITs"), as described more fully below under "RISK FACTORS
AND INVESTMENT TECHNIQUES." However, Provident is not obligated to conform to
any particular fundamental or technical standard of selection, to the ranking of
such standards or to any particular level of market capitalization. Standards of
selection and their ranking and the level of market capitalization will vary
according to Provident's judgment.
OTHER ELIGIBLE INVESTMENTS
While the Stock Appreciation Fund intends to invest as fully as possible in
common stocks as described above, for cash management purposes the Stock
Appreciation Fund may also invest, under normal market conditions, up to 35% of
its total assets in Short-Term Securities and in short-term U.S. Government
securities. For expanded descriptions of such Short-Term Securities, see "THE
RIVERFRONT U.S. GOVERNMENT INCOME FUND -- OTHER ELIGIBLE INVESTMENTS" above.
When, in Provident's opinion, market conditions warrant, Provident may invest up
to 100% of the Stock Appreciation Fund's total assets for temporary defensive
purposes in such Short-Term Securities and in short-term U.S. Government
securities. During any such defensive period, the Stock Appreciation will not be
able to pursue its investment objective.
The Stock Appreciation Fund is authorized to enter into repurchase agreements,
to invest no more than 5% of its net assets in warrants, to acquire securities
of other investment companies to achieve its investment objective and for cash
management 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 techniques, see below under "RISK FACTORS AND
INVESTMENT TECHNIQUES."
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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
REITs. The Large Company Fund does not expect to invest more than 15% of its
total assets in such 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 contracts, engage in equity index futures
contracts, enter into reverse repurchase agreements and when-issued, delayed
delivery and forward commitment transactions and lend securities to
broker-dealers and financial institutions. The Large Company Fund presently does
not intend to enter into options or futures transactions. For expanded
descriptions of these investment techniques, see below under "RISK FACTORS AND
INVESTMENT TECHNIQUES" section of this prospectus and the "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Infor-
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mation on Portfolio Instruments" section in the Company's Statement of
Additional Information.
THE RIVERFRONT BALANCED FUND
INVESTMENT OBJECTIVES AND POLICIES
The Balanced Fund seeks, as its primary investment objective, long-term growth
of capital with some current income as a secondary objective. The Balanced Fund
intends to invest based on combined considerations of risk, income and capital
enhancement.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Balanced Fund will invest in common
stocks, preferred stocks, fixed income securities and securities convertible
into common stocks (i.e., warrants, rights, convertible preferred stock, fixed
rate preferred stock and convertible fixed-income securities). Under normal
market conditions, the Balanced Fund expects that at least 25% of its total
assets will be invested in fixed income senior securities. The proportion of the
Balanced Fund's portfolio that is invested in equity securities versus fixed
income securities may vary greatly depending upon Provident's judgment of market
conditions.
The common and preferred stocks and securities convertible into common stocks
selected for the Balanced Fund will be those that Provident believes will
contribute to the Balanced Fund's objective of providing long-term growth of
capital. The Balanced Fund will invest in common and preferred stocks and
securities convertible into common stocks of domestic issuers and foreign
issuers (subject to the limitations described below), with market
capitalizations of not less than $50 million and which are traded either in
established over-the-counter markets or on national exchanges.
The Balanced Fund's fixed income securities consist of high grade corporate
debt securities rated at the time of purchase in one of the four highest rating
categories assigned by an appropriate NRSRO, or if unrated, are deemed by
Provident to be of comparable quality to those so rated, and securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities. Such
U.S. Government securities consist of U.S. 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 Company's
Statement of Additional Information.
Subject to the limitations described below, the Balanced Fund may invest in
securities issued by other investment companies which Provident believes will
contribute to the Balanced Fund's investment objectives and in money market
mutual funds for cash management purposes.
The Balanced Fund may also invest up to 20% of its total assets in foreign
securities
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directly and through the purchase of sponsored and unsponsored ADRs.
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund, the Stock Appreciation Fund, the Large Company Fund and the
Balanced Fund is that risk common to any security, that the net asset value will
fluctuate in response to changes in economic conditions, interest rates and the
market's perception of the underlying securities of such Fund, and there can be
no assurance that any Fund will achieve its investment objective or objectives.
Like any investment program, an investment in any of the Funds entails certain
risks. Equity securities such as those in which the Income Equity, Large
Company, Stock Appreciation and Balanced Funds may invest are more volatile and
carry more risk than some other forms of investment including investments in
high grade fixed income securities. Therefore, such Funds are each subject to
stock market risk, i.e., the possibility that stock prices in general will
decline over short or even extended periods of time.
Since the Income Fund, the Ohio Tax-Free Fund and the Balanced Fund each
invest in bonds, investors in those Funds are exposed to bond market risk, i.e.,
fluctuations in the market value of bonds. Bond prices are influenced primarily
by changes in the level of interest rates. When interest rates rise, the prices
of bonds generally fall; conversely, when interest rates fall, bond prices
generally rise although certain types of bonds are subject to the risks of
prepayment as described above when interest rates fall. 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.
Historically, the State of Ohio has been heavily reliant upon durable goods
manufacturing with the key industries in this sector including transportation
equipment, industrial machinery, fabricated metal products, primary metals, and
stone, clay and glass
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products. However, the goods-producing sector of Ohio's economy has been
steadily declining over the last several decades. Since 1982, the total amount
of Ohio's workforce employed in the goods-producing sector has dropped from 31%
to 25% as of February, 1996. Ohio's manufacturing in the durable goods area
still exceeds the national share, with 14.7% of Ohio's total payroll employment
concentrated in durable goods manufacturing in 1991 versus the 9.7% national
share in the same year.
As goods-producing industries have declined in Ohio, the economy of Ohio has
become largely dependent upon service-producing industries. As of February,
1996, approximately 75% of the total workforce in Ohio was employed in
service-producing industries, such as transportation, retail trade, finance and
government.
In the past three years, Ohio's unemployment rate has generally been lower
than the national average. The February 1996 unemployment rate for Ohio was 5.0%
compared to 5.5% for the nation as a whole. Ohio is the 7th most populous state
in the nation, with an estimated statewide population of 11,102,000 as of July
1, 1994. During 1993 Ohio ranked 42nd in the nation in terms of state taxes per
capita and 33rd in the nation in terms of government expenditures per capita.
The five largest cities in Ohio by population are Columbus, Cleveland,
Cincinnati, Toledo, and Akron, in order from largest to smallest. Moody's has
rated long-term bonds for all five cities, and they are (in the order reflected
above) AAA (under review), A (under review), Aa, Baa1, and A, 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: Aa rating from Moody's and a AA rating from
S&P.
There are also risks of reduced diversification because the Ohio Tax-Free Fund
invests a substantial portion of its assets in obligations of issuers within a
single state. As a result, the Ohio Tax-Free Fund is more likely to invest its
assets in the obligations of fewer issuers because of the relatively smaller
number of issuers of Exempt Securities in the State of Ohio.
The Ohio Tax-Free Fund's classification as a "non-diversified" investment
company means that the proportion of the Ohio Tax-Free Fund's assets that may be
invested in the securities of a single issuer is not limited by the 1940 Act.
However, the Ohio Tax-Free Fund intends to conduct its operations so as to
qualify as a "regulated investment company" for purposes of the Internal Revenue
Code of 1986, as amended (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, 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.
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Medium Grade Debt Securities. As described above, the Income Equity Fund, the
Ohio Tax-Free Fund, the Large Company Fund and the Balanced Fund may each invest
in debt securities rated within the fourth highest rating group assigned by one
or more appropriate NRSROs, in addition to debt securities rated in the three
higher groups, and in comparable unrated securities. Debt securities which are
within such fourth highest rating group are considered by Moody's to have some
speculative characteristics, and are more vulnerable to changes in economic
conditions, higher interest rates or adverse issuer specific developments which
are more likely to lead to a weaker capacity to make principal and interest
payments than comparable higher rated debt securities.
Should subsequent events cause the rating of a debt security purchased by any
such Fund to fall below the fourth highest rating category, Provident 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 Company's Board of Directors. The seller agrees
to repurchase such securities at a mutually agreed upon date and price. The
repurchase price generally equals the price paid by the Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. Securities subject to
repurchase agreements must be of the same type and quality as those in which a
Fund may invest directly. For further information about repurchase agreements,
see "INVESTMENT OBJECTIVES AND POLICIES -- Additional Information on Portfolio
Instruments -- Repurchase Agreements" in the Company's Statement of Additional
Information.
Reverse Repurchase Agreements. Each of the Funds, other than the Money Market
Fund and the Stock Appreciation Fund, may borrow funds for temporary purposes by
entering into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase them at a mutually agreed-upon date and price. At the
time the Fund enters into a reverse repurchase agreement, it will place in a
segregated custodial account assets such as U.S. Government securities or other
liquid high-grade debt securities, consistent with the Fund's investment
restrictions, having a value equal to the repurchase price (including accrued
interest), and will continually monitor the account to ensure that such
equivalent value is maintained at all times. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which the Fund is obligated to repurchase the
securities. Reverse repurchase agreements are considered to be borrowings by a
Fund under the 1940 Act. For further information about reverse repurchase
agreements, see "INVESTMENT OBJECTIVE AND POLICIES -- Additional Information on
Portfolio Instruments -- Reverse Repurchase Agreements" in the Company's
Statement of Additional Information.
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Except as otherwise disclosed to the shareholders of the Funds, the Company
will not acquire portfolio securities issued by, make savings deposits in, or
enter into repurchase or reverse repurchase agreements with Provident, the
Distributor, or their affiliates, and will not give preference to Provident's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Foreign Securities. 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. 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 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 Stock Appreciation Fund, may, from time to time, lend its
portfolio securities to broker-dealers, banks, or institutional borrowers of
securities. A Fund must receive at least 100% collateral in the form of cash or
U.S. Government securities. This collateral will be valued daily by Provident or
DRZ, as the case may be. Should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund. During
the time portfolio securities are on loan, the borrower pays the Fund any
dividends or interest received on such securities. Loans are subject to
termination by the Fund or the borrower at any time. While a Fund does not have
the right to vote securities on loan, each Fund intends to terminate the loan
and regain the right to vote if that is considered important with respect to the
investment. In the event the borrower would default in its obligations, the Fund
bears the risk of delay in recovery of the portfolio securities and the loss of
rights in the collateral. The Funds will enter into loan agreements only with
broker-dealers, banks, or other institutions that Provident or DRZ, as the case
may be, has determined are creditworthy under guidelines established by the
Company's Board of Directors.
When-Issued or Delayed-Delivery
Purchases. Each of the Funds, other than the Stock Appreciation Fund, may
purchase securities on a when-issued or delayed-delivery basis. These
transactions are arrangements in which a Fund purchases securities
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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 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 de-
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clining 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 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 Stock
Appreciation 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 Stock Appreciation Fund will purchase put and call
options only on securities in which such Fund may otherwise invest. The Stock
Appreciation 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 Stock Appreciation 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 Stock Appreciation 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 Stock Appreciation Fund is
unable to effect a closing purchase transaction, it will not be able to sell the
underly-
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ing security until the option expires or the Fund delivers the underlying
security upon exercise.
The Stock Appreciation 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 Stock
Appreciation 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 Stock Appreciation Fund owns or
intends to purchase probably will not correlate perfectly with movements in the
level of an index and, therefore, the Stock Appreciation 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 Stock Appreciation Fund will be required to segregate
assets and/or provide an initial margin to cover index options that would
require it to 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 Stock Appreciation 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
Company's Statement of Additional Information.
PORTFOLIO TURNOVER
For regulatory purposes, the portfolio turnover rate for the Money Market Fund
is expected to be zero. For information about the portfolio turnover rates for
the Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the Balanced
Fund and the Stock Appreciation Fund for the year ended December 31, 1995, 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.
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INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions and policies relating to the
investment of their respective assets. These restrictions and policies are
fundamental and may not be changed with respect to a Fund without the approval
of the holders of a majority of such Fund's outstanding voting securities.
Unless otherwise stated, all references to a Fund's assets are in terms of
current market value.
The Money Market Fund may not:
1. Purchase any security (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities) of any issuer if as a result
more than 5% of its total assets would be invested in securities of the issuer;
2. Purchase securities on margin, except that it may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities;
3. Borrow money, except that the Money Market Fund may borrow money from banks
for temporary or emergency purposes in aggregate amounts up to one-third of the
value of the Money Market Fund's net assets; provided that while borrowings from
banks exceed 5% of the Money Market Fund's net assets, any such borrowings will
be repaid before additional investments are made;
4. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
5. Issue senior securities; the purchase or sale of securities on a "when
issued" basis is not deemed to be the issuance of a senior security;
6. Make loans, except that the Money Market Fund may purchase or hold debt
securities consistent with its investment
objective, lend portfolio securities valued at not more than 15% of its total
assets to brokers, dealers and financial institutions and enter into repurchase
agreements;
7. Purchase any security of any issuer if as a result more than 25% of its
total assets would be invested in a single industry; there is no restriction
with respect to obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities; and
8. Invest more than 15% of its total assets in repurchase agreements maturing
in more than seven days.
With respect to Investment Restriction (8), the Money Market Fund will limit
its investments in repurchase agreements maturing in more than seven days to no
more than 10% of its total assets.
Each of the Income Fund and the Income Equity Fund may not:
1. Invest in securities of any one issuer (other than the U.S. government, its
agencies and instrumentalities) if, immediately after and as a result of such
investment, the current market value of the holdings of such Fund in the
securities of such issuer exceeds 5% of the Fund's total assets;
2. Invest in the securities of companies primarily engaged in any one industry
(other than the U.S. government, its agencies and instrumentalities) if,
immediately after and as a result of such investment, the current market value
of the aggregate holdings of the Fund in the securities of companies in such
industry exceeds 25% of the Fund's total assets. However, an industry
concentration in excess of such percentage limitation is permitted if it occurs
incidentally as a result of changes in the market value of portfolio securities;
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3. Acquire the outstanding voting securities of any one issuer if, immediately
after and as a result of such investment, the current market value of the
holdings of the Fund in the securities of such issuer exceeds 10% of the market
value of such issuer's outstanding voting securities;
4. Borrow money, which includes entering into reverse repurchase agreements,
except that each Fund may enter into reverse repurchase agreements or borrow
money from banks for temporary or emergency purposes in aggregate amounts up to
one-third of the value of the Fund's net assets; provided that while borrowings
from banks exceed 5% of a Fund's net assets, any such borrowings and reverse
repurchase agreements will be repaid before additional investments are made;
5. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
6. Invest more than 15% of the value of the Fund's net assets in restricted or
illiquid securities or instruments including, but not limited to, securities for
which there are no readily available market quotations, dealer (OTC) options,
assets used to cover dealer options written by the Fund or repurchase agreements
that mature in more than 7 days; and
7. Lend more than 30% in value of the Fund's securities to brokers, dealers or
other financial organizations. All such loans will be collateralized by cash or
U.S. government obligations that are maintained at all times in an amount equal
to at least 102% of the current value of the loaned securities.
With respect to investment restrictions 1 and 3, the percentage limits stated
therein apply to 75% of each Fund's total assets.
The Ohio Tax-Free Fund may not:
1. Purchase any securities which would cause more than 25% of the value of the
Ohio Tax-Free Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For example, gas,
gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that the Ohio Tax-Free Fund
may borrow from banks or enter into reverse repurchase agreements or dollar roll
agreements for temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing, and except as permitted pursuant to
appropriate exemptions from the 1940 Act. The Ohio Tax-Free Fund will not
purchase securities while its borrowings (including reverse repurchase
agreements and dollar roll agreements) exceed 5% of its total assets.
3. Make loans, except that the Ohio Tax-Free Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objectives and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
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The following additional investment restriction with respect to the Ohio
Tax-Free Fund may be changed without the vote of a majority of the outstanding
shares of such Fund. The Ohio Tax-Free Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if at
the end of each fiscal quarter, (a) more than 5% of the value of such Fund's
total assets (taken at current value) would be invested in such issuer (except
that up to 50% of the value of such Fund's total assets may be invested without
regard to such 5% limitation), or (b) more than 25% of its total assets (taken
at current value) would be invested in securities of a single issuer. There is
no limit to the percentage of assets that may be invested in U.S. Treasury
bills, notes or other obligations issued or guaranteed by the U.S. Government or
its agencies or instrumentalities. For purposes of this limitation, a security
is considered to be issued by the governmental entity (or entities) whose assets
and revenues back the security, or, with respect to a private activity bond that
is backed only by the assets and revenues of a non-governmental user, such
non-governmental user.
The Stock Appreciation Fund and the Large Company Fund may each not:
1. Purchase securities of any one issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities and
repurchase agreements involving such securities) if as a result more than 5% of
the total assets of such Fund would be invested in the securities of such issuer
or the Fund would hold more than 10% of the outstanding voting securities of
such issuer. This restriction applies to 75% of the Fund's total assets.
2. Purchase any securities which would cause 25% or more of the Fund's total
assets at the time of purchase to be invested in securities of one or more
issuers conducting their principal business activities in the same industry,
provided that (a) there is no limitation with respect to obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities and
repurchase agreements secured by obligations of the U.S. Government or its
agencies or instrumentalities; (b) wholly owned finance companies will be
considered to be in the industries of their parents if their activities are
primarily related to financing the activities of their parents; and (c)
utilities will be divided according to their services. For example, gas, gas
transmission, electric and gas, electric, and telephone will each be considered
a separate industry.
3. Borrow money or issue senior securities, except that the Fund may borrow
from banks or enter into reverse repurchase agreements for temporary purposes in
amounts up to one-third of its total assets at the time of such borrowing, and
except as permitted pursuant to appropriate exemptions from the 1940 Act. The
Fund will not purchase securities while its borrowings (including reverse
repurchase agreements) exceed 5% of its total assets.
4. Make loans, except that the Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions, and enter into
repurchase agreements.
The Balanced Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the
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<PAGE> 45
Balanced Fund's total assets would be invested in such issuer, or the Balanced
Fund would hold more than 10% of any class of securities of the issuer, except
that up to 25% of the value of the Balanced Fund's total assets may be invested
without regard to such limitations. There is no limit to the percentage of
assets that may be invested in U.S. Treasury bills, notes, or other obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of the
Balanced Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For examples,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. Borrow money or issue senior securities, except that the Balanced Fund may
borrow from banks or enter into reverse repurchase agreements or dollar roll
agreements for temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing, and except as permitted pursuant to
appropriate exemptions from the 1940 Act.
4. Make loans, except that the Balanced Fund may purchase or hold debt
instruments and lend portfolio securities in accordance with its investment
objectives and policies, make time deposits with financial institutions, and
enter into repurchase agreements.
The following additional investment restriction of the Stock Appreciation
Fund, the Large Company Fund and the Balanced Fund is non-fundamental and may be
changed by the Company's Board of Directors without shareholder approval. Such
Funds may not:
1. Purchase or otherwise acquire any securities, if as a result, more than 15%
of its net assets would be invested in securities that are illiquid.
In addition to the above investment restrictions, the Funds are subject to
certain other investment restrictions set forth under "INVESTMENT OBJECTIVES AND
POLICIES -- Investment Restrictions" in the Company's Statement of Additional
Information.
PRICING SHARES
The net asset value of each Fund is computed each day on which the New York
Stock Exchange (the "Exchange") is open as of the close of trading on the
Exchange (generally 4:00 p.m. Eastern Time for the purpose of pricing Fund
shares) (the "Valuation Time") except on days when changes in the value of a
Fund's securities do not affect the current net asset value of its shares or on
days during which no shares are tendered for redemption and no orders to
purchase shares are received. The Exchange is currently closed on weekends, New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. The net asset value per share for a
particular class of each Fund is determined by valuing each Fund's assets
allocable to such class, subtracting its liabilities allocable to such class and
any liabilities charged directly to
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<PAGE> 46
that class and dividing the result by the number of its shares of that class
outstanding.
The Directors have determined that the best method currently available for
valuing the Money Market Fund's investments is amortized cost, which means that
the investments are valued at their acquisition costs (as adjusted for
amortization of premium or discount) rather than at current market values.
Calculations are made to compare the value of the Money Market Fund's
investments valued at amortized cost with market values. Market valuations are
obtained by using actual quotations provided by market makers, estimates of
market value, or values obtained from yield data relating to classes of money
market instruments published by reputable sources at the mean between the bid
and asked prices for the instruments. If a deviation of 1/2 of 1% or more were
to occur between the Money Market Fund's net asset value per share calculated by
reference to market values and the Money Market Fund's $1.00 per share net asset
value, or if there were any other deviation which the Board of Directors
believed would result in a material dilution to shareholders or purchasers, the
Board of Directors would promptly consider what action, if any, should be
initiated.
Since the net income of the Money Market Fund is declared as a dividend each
time net income is determined, the net asset value per share remains at $1.00
per share immediately after each dividend declaration. If for any reason there
is a net loss, the loss will be first offset pro rata against dividends accrued
during the month in each shareholder account. To the extent that such a net loss
would exceed such accrued dividends, the Money Market Fund will reduce the
number of its outstanding shares by having each shareholder contribute to
capital his pro rata portion of the total number of shares required to be
cancelled in order to maintain a net asset value of $1.00. EACH SHAREHOLDER WILL
BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS
INVESTMENT IN THE MONEY MARKET FUND.
With respect to each of the other Funds, portfolio securities listed on an
exchange are valued on the basis of the last quoted sale price on the exchange
where such securities are principally traded on the valuation date, prior to the
close of trading on the exchange, or, in the absence of any sales, at the mean
of the bid and asked price on such principal exchange prior to the close of
trading on the exchange. Other securities and instruments for which market
quotations are not readily available are valued at fair value, as determined in
good faith by the Board of Directors. Securities, including mortgage-backed and
asset-backed securities, may be valued on the basis of independent pricing
services approved by the Board of Directors, which use information with respect
to transactions in such securities, quotations from dealers, market transactions
in comparable securities and various relationships between securities in
determining value.
HOW TO BUY SHARES
Shares of the Funds are offered on each day on which the Exchange is open for
business.
THE MONEY MARKET FUND
There is no sales charge when an investor purchases shares of the Money Market
Fund. Purchase payments are fully invested. Broker-dealers (other than the
Distributor) through whom shares are purchased may charge fees for their
services. Orders for the purchase of the Money Market Fund's shares become
effective after good funds become available to the Money Market Fund. If
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<PAGE> 47
a purchase order in proper form is received prior to 12:00 Noon (Eastern time)
and payment in Federal funds is received by the close of the Federal funds wire
on the day the purchase order is received, dividends will accrue starting that
day. If a purchase order is received after 12:00 Noon (Eastern time) and payment
in Federal funds is received by the close of the Federal funds wire on the day
the purchase order is received, the order will be effected that day as of the
close of business of the Company, but dividends will not begin to accrue until
the following business day. The Money Market Fund's shares are sold at the
offering price which is the net asset value per share next computed after the
Company receives the purchase order. The net asset value for the 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 Company receives the purchase order in proper form, plus any
applicable sales charge. Therefore, orders for shares of a Fund received by the
Company prior to the close of the Exchange will receive the offering price
computed at the close of trading on the Exchange on the same day. Orders
received after that day's close of trading on the Exchange will receive the next
business day's offering price. A confirmation will be sent by the Transfer Agent
for every new purchase. No certificates are issued.
GENERAL
There is a $1,000 minimum initial purchase requirement for both Investor A and
Investor B shares of each of the Funds and a $100 minimum subsequent purchase
requirement (except for reinvestment of dividends and distributions). The
initial and subsequent minimum investment amounts have been waived for employees
of Provident and the Distributor. The minimum initial purchase requirement is
lowered to $500 for IRAs. Shareholders receiving banking or other services from
Provident or its affiliates will be charged the usual and customary fees for
such services even if such services include the purchase of a Fund's shares.
However, a shareholder who maintains an investment balance of $10,000 or more in
a Fund and has either a Provident Advantage or Provident Silver Advantage
checking account will be eligible to have his/her monthly service charge waived
on his/her respective Advantage account (one per customer). If a balance of
$30,000 or more is maintained in a Fund by a shareholder, the monthly service
charge on a Premier Advantage checking account will be waived.
Shares may be purchased through the Distributor. The Distributor is located at
3435 Stelzer Road, Columbus, Ohio 43219. Shares also may be purchased through
other broker-dealers, including broker-dealers affiliated with the Company,
Provident and the Distributor. In the case of an order for the purchase of
shares placed through a broker-dealer, the applicable public offering price will
be the net asset value as so determined, plus any applicable sales charge, but
only if the broker-dealer receives the order prior to the Valuation Time for
that day and transmits it to the Distributor prior to the Valuation Time for
that day. The broker-dealer is responsible for transmitting such orders
promptly. If the broker-dealer fails to do so,
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<PAGE> 48
the investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next business day.
Shares may also be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by Provident or its correspondent or
affiliated banks (collectively, the "Banks").
Shares of a Fund sold to the Banks acting in a fiduciary, advisory, custodial
(other than for IRAs), agency, or other similar capacity on behalf of Customers
will normally be held of record by the Banks. With respect to shares of the
Funds so sold, it is the responsibility of the particular Bank to transmit
purchase or redemption orders to the Distributor and to deliver federal funds
for purchase on a timely basis. Beneficial ownership of shares will be recorded
by the Banks and reflected in the account statements provided by the Banks to
Customers. A Bank will exercise voting authority for those shares for which it
is granted authority by the Customer.
In addition, an account for the purchase of shares of a Fund may be opened by
mailing to the Company, c/o The Provident Bank, Mutual Fund Services, P.O. Box
14967, Cincinnati, Ohio 45202-0967, a completed account application and a check
made payable to the appropriate Fund for $1,000 or more. An account may also be
opened by contacting The Provident Bank, Mutual Fund Services, at
1-800-424-2295, to obtain the number of an account to which wire or electronic
funds transfer ("EFT") can be made and by sending in a completed account
application. Subsequent investments in a Fund in the minimum amount of $100 may
be made by check, by wiring Federal funds or by an EFT.
If payment is made by Federal funds wire with respect to any Fund, other than
the Money Market Fund, funds must be received by 3:00 p.m., Eastern time, on the
next business day following the order. Purchases of any of the Funds may be made
by wiring the Fund's custodian in accordance with the following procedures:
1. Telephone Provident at 1-800-424-2295 and specify the 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
for further credit to:
________ Fund
of The Riverfront Funds
Account Number ____________
Account Name ____________
The Company and the Distributor reserve the right to reject any order for the
purchase of shares in whole or in part, including purchases made with foreign or
third party drafts or checks, or to limit or suspend without prior notice the
offering of any Fund's shares.
IN KIND PURCHASES
Payment for shares of a Fund may, in the discretion of Provident, be made in
the form
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<PAGE> 49
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 the Income Fund's,
Income Equity Fund's, Ohio Tax-Free Fund's, Stock Appreciation Fund's, Large
Company Fund's and Balanced Fund's Investor A shares which is a percentage of
the offering price. The sales charge is paid to the Distributor which in turn
may reallow all or a portion of the sales charge to other broker-dealers. The
applicable sales charges are as follows:
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
CONCESSION
AS A% TO DEALERS
AS A% OF OF NET AS A % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED* PRICE
- ----------------------- --------- --------- ----------
<S> <C> <C> <C>
Under $100,000......... 4.50% 4.71% 4.00%
$100,000--$249,999..... 3.50% 3.63% 3.00%
$250,000--$499,999..... 2.50% 2.56% 2.00%
$500,000--$999,999..... 1.50% 1.52% 1.00%
$1,000,000 and over.... 0.0% 0.0% 0.0%
</TABLE>
- ------------
* Rounded to the nearest one-hundredth percent.
The Sales Charge Schedule is applicable to (1) purchases of Investor A shares
of the Income, Income Equity, Tax-Free, Stock Appreciation, Large Company and
Balanced Funds and any other Fund sold with a sales charge (a "Load Portfolio")
made at one time, (2) concurrent purchases of Investor A shares (see "Concurrent
Purchases"), or (3) purchases of Investor A shares made pursuant to Rights of
Accumulation or Letters of Intent by any purchaser ("Purchaser"), which includes
the following persons: an individual; an individual, his or her spouse and
children under the age of 21; a trustee or other fiduciary of a single trust
estate or single fiduciary account established for their benefit; an
organization exempt from federal income tax under Section 501(c)(3) or (13) of
the Code; a pension, profit-sharing or other employee benefit plan whether or
not qualified under Section 401 of the Code; or other organized groups of
persons, whether incorporated or not, provided the organization has been in
existence for at least six months and has some purpose other than the purchase
of redeemable securities of a registered investment company at a discount. In
order to qualify for a lower sales charge, all orders from an organized group
will have to be placed through a single investment dealer or other firm and
identified as originating from a qualifying Purchaser.
INVESTOR B SHARES
Investor B shares may only be purchased in amounts of less than $250,000.
There is no sales charge imposed upon purchases of Investor B shares, but
investors may be subject to a contingent deferred sales charge ranging from 4%
to 1% when Investor B shares are redeemed within the first six years after
purchase. See "CONTINGENT DEFERRED SALES CHARGE -- Investor B Shares" below. The
Money Market Fund does not offer Investor B shares.
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<PAGE> 50
GENERAL
Upon written notice to dealers with whom it has dealer agreements, the
Distributor may reallow up to the full applicable sales charge. Dealers to whom
more than 90% of the entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
The Distributor, at its expense, will also provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the Company, and/or
other dealer-sponsored special events. In some instances, this compensation will
be made available only to certain dealers whose representatives have sold a
significant amount of such Shares. Compensation will include payment for travel
expenses, including lodging, incurred in connection with trips taken by invited
registered representatives and members of their families to locations within or
outside of the United States for meetings or seminars of a business nature.
Compensation will also include the following types of non-cash compensation
offered through sales contests: (1) vacation trips, including the provision of
travel arrangements and lodging at luxury resorts at an exotic location, (2)
tickets for entertainment events (such as concerts, cruises and sporting events)
and (3) merchandise (such as clothing, trophies, clocks and pens). Dealers may
not use sales of a Fund's Shares to qualify for this compensation to the extent
such may be prohibited by the laws of any state or any self-regulatory agency,
such as the NASD. None of the aforementioned compensation is paid for by any
Fund or its Shareholders.
Provident Securities, Inc., an affiliate of Provident ("PSI"), will pay
additional consideration to dealers not to exceed 4.0% of the offering price per
share on all sales of Investor B shares as an expense of PSI for which PSI will
be reimbursed by the Distributor under the Investor B Plan or upon receipt of a
contingent deferred sales charge. Any additional consideration or incentive
program may be terminated at any time by the Distributor.
REDUCED SALES CHARGES --
INVESTOR A SHARES
The sales charges set forth in the Sales Charge Schedule set forth above may
be reduced as follows:
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of a Fund's Investor A shares sold with a sales load
and Investor A shares of any other Load Portfolio.
RIGHTS OF ACCUMULATION
In calculating the sales charge applicable to current purchases of a Fund's
Investor A shares, a Purchaser is entitled to accumulate current purchases with
the current value of previously purchased Investor A shares of a 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
50
<PAGE> 51
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.
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
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<PAGE> 52
Transfer Agent that a Letter of Intent is in effect each time a purchase is
made.
WAIVER OF SALES CHARGES
Investor A shares may also be sold, to the extent permitted by applicable law,
at net asset value without the imposition of an initial sales charge to: (1)
personal trust, employee benefit, agency and custodial (other than IRA) clients
of Provident; (2) employees of Provident, the Distributor, and their spouses;
(3) broker/dealers purchasing shares for their own accounts; (4) all affiliates
of Provident; (5) corporations; (6) employees (and their spouses and children
under the age of 21) of any broker-dealer with which the Distributor enters into
a dealer agreement to sell Investor A shares of the Company; (7) orders placed
on behalf of other investment companies distributed by The BISYS Group, Inc., or
any of its affiliates, including the Distributor; (8) persons investing directly
through the Distributor pursuant to a Systematic Investment Plan; and (9)
persons investing directly through a discount brokerage firm which has entered
into a dealer agreement with the Distributor.
In addition, a shareholder who has redeemed all or any portion of his or her
investment in Investor A shares of a Load Portfolio may purchase without a sales
charge Investor A shares of any other Load Portfolio in an amount up to a
maximum dollar amount of such shares redeemed within 30 days after such
redemption. In order to so purchase Investor A shares without a sales charge,
the shareholder, or his or her dealer, must notify the Company at the time an
order is placed that such a purchase qualifies for this exemption from sales
charges and must provide any other information necessary for confirmation of
qualification.
CONTINGENT DEFERRED SALES CHARGE -- INVESTOR B SHARES
Investor B shares which are redeemed within the first six years of purchase
will be subject to a contingent deferred sales charge equal to the applicable
percentage set forth below of an amount equal to the lesser of the net asset
value at the time of purchase of the Investor B shares being redeemed or the net
asset value of such shares at the time of redemption. Accordingly, a contingent
deferred sales charge will not be imposed on amounts representing increases in
net asset value above the net asset value at the time of purchase. In addition,
a charge will not be assessed on Investor B shares purchased through
reinvestment of dividends or capital gains distributions. The Money Market Fund
does not offer Investor B shares.
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
- ------------------------------- --------------------
<S> <C>
First.......................... 4%
Second......................... 4%
Third.......................... 4%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
Seventh and following.......... 0%
</TABLE>
Solely for purposes of determining whether a year has elapsed from the time of
purchase of any Investor B shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares acquired pursuant to reinvestment of dividends
or distributions and then from the earliest purchase of shares.
52
<PAGE> 53
For example, assume an investor purchased 100 Investor B shares with a net
asset value of $10 per share (i.e., at an aggregate net asset value of $1,000)
and in the eleventh month after purchase, the net asset value per share is $12
and, during such time, the investor has acquired five additional Investor B
shares through dividend reinvestment. If the investor makes an initial
redemption of 50 Investor B shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor B shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of $2 per share. Therefore, $450 of the $600 redemption proceeds
will be subject to the charge of 4% ($18.00).
The contingent deferred sales charge is waived on redemptions of Investor B
shares (i) following the death or disability (as defined in the Code) of a
shareholder, (ii) to the extent that the redemption represents a minimum
required distribution from an IRA or a Custodial Account under Code Section
403(b)(7) to a shareholder who has
reached age 70 1/2, and (iii) to the extent the redemption represents the
minimum distribution from retirement plans under Code Section 401(a) where such
redemption is necessary to make distributions to plan participants.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES
Before purchasing Investor A shares or Investor B shares of a Fund, investors
should consider whether, during the anticipated life of their investment in a
Fund, the accumulated Rule 12b-1 fee and potential contingent deferred sales
charges on Investor B shares prior to conversion (as described below) would be
less than the initial sales charge and accumulated Rule 12b-1 fee on Investor A
shares purchased at the same time, and to what extent such differential would be
offset by the higher yield of Investor A shares. In this regard, to the extent
that the sales charge for the Investor A shares is waived or reduced by one of
the methods described above or the investment is $100,000 or more, investments
in Investor A shares become more desirable. The Company will refuse all purchase
orders for Investor B shares of over $250,000.
Although Investor A shares are subject to a Rule 12b-1 fee, they are not
subject to the higher Rule 12b-1 fee applicable to Investor B shares. For this
reason, Investor A shares can be expected to pay correspondingly higher
dividends per share. However, because initial sales charges are deducted at the
time of purchase, purchasers of Investor A shares who do not qualify for waivers
of or reductions in the initial sales charge would have less of their purchase
price initially invested in the Fund than purchasers of Investor B shares.
As described above, purchasers of Investor B shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B shares. Because the Company's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B shares would, however, own shares that are subject to
higher annual expenses and, for a six-year period, such shares would be subject
to a contingent deferred sales charge ranging from 4.00% to 1.00% upon
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate an-
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<PAGE> 54
nual Investor B shares' Rule 12b-1 fees to the cost of the initial sales charge
and Rule 12b-1 fee on the Investor A shares. Over time, the expense of the
annual Rule 12b-1 fee on the Investor B shares may equal or exceed the initial
sales charge and annual Rule 12b-1 fee applicable to Investor A shares. For
example, if net asset value remains constant and assuming no waiving of any Rule
12b-1 fees, the aggregate Rule 12b-1 fee with respect to Investor B shares of a
Fund would equal or exceed the initial sales charge and aggregate Rule 12b-1 fee
of Investor A shares approximately seven years after the purchase. In order to
reduce such fees of investors that hold Investor B shares for seven years or
more, Investor B shares will be automatically converted to Investor A shares, as
described below, at the end of an eight-year period. This example assumes that
the initial purchase of Investor A shares would be subject to the maximum
initial sales charge of 4.50%. This example does not take into account the time
value of money which reduces the impact of the Investor B shares' Rule 12b-1 fee
on the investment, the benefit of having the additional initial purchase price
invested during the period before it is effectively paid out as a Rule 12b-1
fee, fluctuations in net asset value, any waiver of Rule 12b-1 fees or the
effect of different performance assumptions.
If a shareholder who owns both Investor A shares and Investor B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Investor B shares that are not subject to a contingent
deferred sales charge; (b) Investor A shares; and (c) Investor B shares subject
to a contingent deferred sales charge, unless shareholder has made a specific
election otherwise.
CONVERSION FEATURE
Investor B shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fee. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge or
other charge except that the Rule 12b-1 fee applicable to Investor A shares
shall thereafter be applied to such converted shares. Such investors will then
benefit from the lower Rule 12b-1 fee of Investor A shares. Because the per
share net asset value of the Investor A shares may be higher than that of the
Investor B shares at the time of conversion, a Shareholder may receive fewer
Investor A shares than the number of Investor B shares converted, although the
dollar value will be the same. Reinvestments of dividends and distributions in
Investor B shares will not be considered a new purchase for purposes of the
conversion feature and will convert to Investor A shares in the same proportion
as the number of the shareholder's Investor B shares converting to Investor A
shares bears to the shareholder's total Investor B shares not acquired through
dividends and distributions.
If a shareholder effects one or more exchanges among Investor B shares of the
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
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will be debited on the date specified to purchase shares in a Fund. A
confirmation will be received from the Transfer Agent for every transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Provident offers tax-advantaged Individual Retirement Accounts ("IRAs") for
which the Money Market Fund, the Income Fund, the Income Equity Fund, the Stock
Appreciation Fund, the Large Company Fund or the Balanced Fund may be an
appropriate investment. A minimum initial investment of $500 is required. For
details, including fees and an application form, please call the telephone
number listed below under "Shareholder Services" or contact Mutual Fund
Services, P.O. Box 14967, Cincinnati, Ohio 45202-0967.
Investment in shares of the Ohio Tax-Free Fund or in shares of any other
tax-exempt fund would not be appropriate for an IRA. Shareholders are advised to
consult a tax adviser on IRA contribution and withdrawal requirements and
restrictions and whether an investment in the Ohio Tax-Free Fund would be
appropriate.
EXCHANGES
If a shareholder has obtained the appropriate prospectus, he or she may
exchange Investor A or Investor B shares of a Fund for shares of the same class
of any of the other 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 45202-0967. Subject to the
qualifications and limitations described below under "How to Redeem Shares --
Telephone," neither the Company nor any of its service providers assumes
responsibility for the authenticity of any telephone request for an exchange.
Shares purchased by check are eligible for exchange after 15 days. No contingent
deferred sales charge is imposed upon exchanges of Investor B shares of one 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 periods. 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).
Orders to exchange Investor A or Investor B shares of a Fund for shares of the
Money Market Fund will be executed by redeeming the shares of the Fund and
purchasing Investor A shares of the Money Market Fund at the net asset value of
such shares next determined after the proceeds from such redemption become
available, which may be up to seven days after such redemption. In all other
cases, orders for exchanges received by the Company prior to the close of
business on any day the Company is open for business will be executed at the
respective net asset values determined as of the close of business that day.
Orders for exchanges received after the close of business will be executed at
the respective net asset values next determined after the close of the next
business day.
An excessive number of exchanges may be disadvantageous to the Company.
Therefore
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the Company, in addition to its right to reject any exchange, reserves the right
to terminate the exchange privilege of any shareholder who makes more than five
exchanges of shares of the 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 Company reserves the right, at any time,
to modify or terminate any of the foregoing exchange privileges. The Company,
however, will give shareholders 60 days' advance written notice of any such
modification or termination.
HOW TO REDEEM SHARES
Shares of the Funds may be redeemed for cash at their net asset value, less
any applicable contingent deferred sales charge, upon written order by the
shareholder to the Company, c/o The Provident Bank, Mutual Fund Services, P.O.
Box 14967, Cincinnati, Ohio 45202-0967. A shareholder's signature(s) on the
written order must be guaranteed as described below. In order to redeem by
telephone, shareholders must have completed the authorization in their account
applications. Proceeds for shares redeemed on telephonic order will be deposited
by wire or EFT only to the bank account designated in the account application.
The redemption value is the net asset value per share, less any applicable
contingent deferred sales charge, and may be more or less than the shareholder's
cost of the Fund's shares depending upon changes in the value of the Fund's
securities between purchase and redemption. The Company computes the amount due
a shareholder at the next Valuation Time after it has received all proper
documentation. Payment of the amount due on redemption will be made within seven
days thereafter except as discussed below.
At various times, the Company may be requested to redeem shares for which it
has not yet received good payment. In such a case, the Company may delay the
mailing of a redemption check or the wiring or EFT of redemption proceeds until
good payment has been collected for the purchase of such shares. This may take
up to 15 days. Any delay may be avoided by purchasing shares either with a
certified check or by Federal Reserve or bank wire of funds or EFT. Although the
mailing of a redemption check, wiring or EFT of redemption proceeds may be
delayed, the redemption value will be determined and the redemption processed in
the ordinary course of business upon receipt of proper documentation. In such a
case, after the redemption and prior to the release of the proceeds, no
appreciation or depreciation will occur in the value of the redeemed shares and
no interest will be paid on the redemption proceeds. If the payment of a
redemption has been delayed, the check will be mailed or the proceeds wired or
sent EFT promptly after good payment has been collected.
Shareholders may also redeem their shares through broker-dealers. The
Distributor, acting as agent for the Company, stands ready to repurchase the
Funds' shares upon orders from dealers at the net asset value next computed
after the Distributor receives the order. When the Distributor has received
proper documentation, it will pay the redemption proceeds to the broker-dealer
placing the order within three business days
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thereafter. The Distributor charges no fees for this service, except to the
extent that a contingent deferred sales charge may be imposed upon redemptions
of Investor B shares. However, a shareholder's broker-dealer may charge a
service fee.
For the protection of shareholders, regardless of the number of shares or
amount of money involved in a redemption or repurchase, signatures on stock
powers and all written orders or authorizations must be guaranteed by a U.S.
stock exchange member, a U.S. commercial bank or trust company or other person
eligible to guarantee signatures under the Securities Exchange Act of 1934 and
the Transfer Agent's policies. The Company or the Transfer Agent may waive this
requirement but may also require additional documents in certain cases.
Currently the requirement for a signature guarantee has been waived on
redemptions of $50,000 or less where the account address of record has been the
same for a minimum period of 90 days. The Company and the Transfer Agent reserve
the right to withdraw this waiver at any time.
If the Company receives a redemption order but a shareholder has not clearly
indicated the amount of money or number of shares involved, the Company cannot
execute the order. In such cases, the Company will request the missing
information and process the order on the day such information is received.
If a shareholder requests redemption by telephone and a bank account has
previously been designated, the shareholder should state whether the proceeds
should be wired, sent EFT or mailed to such bank. In the absence of a request
that the proceeds be wired, sent EFT or mailed to such bank, they will be sent
by check to the shareholder's address as it appears on the account registration.
The redemption order also should include the account name as registered with the
Company and the account number.
TELEPHONE
Under ordinary circumstances, shareholders may redeem up to $50,000 from their
accounts by telephoning Mutual Fund Services at: 1-800-424-2295.
In order to ensure that instructions received by the Transfer Agent are
genuine when a telephone transaction is initiated, a shareholder will be asked
to verify certain information specific to its account. At the conclusion of the
transaction, the shareholder will be given a transaction number confirming the
request, and written confirmation of the transaction will be mailed within 72
hours of the telephone transaction. The shareholder's telephone instructions
will be recorded. Redemptions by telephone are allowed only if the address and
bank account of record have been the same for a minimum period of 30 days.
The Company reserves the right at any time to terminate, suspend or change the
terms of any redemption method described in this prospectus, except redemption
by mail, and to impose fees. Except as otherwise noted, neither the Company nor
any of its service providers assumes responsibility for the authenticity of any
instructions received by any of them from a shareholder in writing or by
telephone nor will any of them be liable when following instructions received by
telephone that the Transfer Agent reasonably believes to be genuine. The
Transfer Agent will employ procedures designed to provide reasonable assurance
that instructions received by telephone are genuine. If, for any reason,
reasonable procedures are not followed, the Company or its service providers may
be liable for any losses due to
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unauthorized or fraudulent instructions. The Company may temporarily suspend the
right to redeem its shares when (1) the Exchange is closed, other than customary
weekend and holiday closings; (2) trading on the Exchange is restricted; (3) an
emergency exists and the Company cannot dispose of its investments or fairly
determine their value; or (4) the Commission so orders.
If the redemption proceeds are less than $2,500, they will be mailed by check.
If they are $2,500 or more, they will be mailed, wired or sent EFT to a
previously designated bank account as directed by the shareholder. If the
Company cannot be reached by telephone, shareholders should follow the
procedures for redeeming by mail or through a broker as set forth above.
AUTOMATIC WITHDRAWAL PLAN -- INVESTOR A SHARES
Under an Automatic Withdrawal Plan, if an account has a value of at least
$10,000 in Investor A shares of a Fund, a shareholder may arrange for regular
monthly or quarterly fixed withdrawal payments. Each payment must be at least
$100 and may be as much as 1.5% per month or 4.5% per quarter of the total net
asset value of the Fund's Investor A shares in the account when the Automatic
Withdrawal Plan is opened. Excessive withdrawals may decrease or deplete the
value of an account. Purchases of additional shares, including use of the
Systematic Investment Plan, concurrent with withdrawals may be disadvantageous
to certain shareholders because of tax liabilities and sales charges.
CHECKWRITING
If requested on your account application, the Money Market Fund will establish
a checking account for you with Provident. Checks may be drawn for $250 or more
payable to anyone. When a check is presented to Provident for payment, it will
cause the Money Market Fund to redeem at the net asset value next determined a
sufficient number of your shares to cover the check. You will receive the daily
dividends declared on the shares redeemed to cover your check through the day
Provident instructs the Money Market Fund to redeem the shares. There is
currently no charge to you for this checking account. Money Market Fund checking
accounts are subject to Provident's rules and regulations governing checking
accounts. If there is an insufficient number of shares in your account when a
check is presented to Provident for payment, the check will be returned. If you
present a check on your account in person to Provident it will be treated as a
redemption by mail received that day.
Since the aggregate amount in your account changes each day because of the
daily dividend, you should not attempt to withdraw the full amount in your
account by using a check.
SMALL ACCOUNTS
Because of the high cost of maintaining small accounts, the Company reserves
the right to redeem an account if its value has fallen below $500 as a result of
your redemptions (but not as a result of market action). The shareholder will be
notified in writing and allowed 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 Company to pay for
all redemptions in cash, the Company may authorize payment to be made in
portfolio
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securities or other property. However, the Company has obligated itself under
the 1940 Act to redeem for cash all shares presented for redemption by any one
shareholder up to $250,000, or 1% of the applicable Fund's net assets if that is
less, in any 90-day period. Securities delivered in payment of redemptions would
be valued at the same value assigned to them in computing the net asset value
per share. Shareholders receiving such securities would incur brokerage costs
when the securities are sold.
SHAREHOLDER SERVICES
Details on all shareholder services may be obtained from Provident by calling
toll free 1-800-424-2295 or by writing the Distributor at 3435 Stelzer Road,
Columbus, Ohio, 43219.
DIVIDENDS AND TAXES
DIVIDENDS
The Money Market Fund intends to declare dividends daily from its net
investment income and to distribute all of its net investment income to its
shareholders monthly. Any net realized long-term gains will be declared and
distributed at least annually. Each of the other Funds intends to declare and
distribute to its shareholders dividends from net investment income monthly and
to declare and distribute all net realized long-term capital gains annually.
Each Fund intends to distribute its net long-term capital gains as capital gains
dividends; such dividends are treated by shareholders as long-term capital
gains. Such distributions will be designated as long-term capital gains
dividends by a written notice mailed to each shareholder no later than 60 days
after the close of the Fund's fiscal year.
Each Fund's net investment income available for distribution to the holders of
Investor A shares and Investor B shares (if any) will be reduced by the amount
of Rule 12b-1 fees payable under the respective Plan and the transfer agency
fees paid by the respective class.
Unless the Company receives instructions to the contrary before the record
date, it will assume that a shareholder wishes to receive that distribution and
future capital gains and income distributions in additional shares. Instructions
continue in effect until changed in writing. Account statements and/or checks as
appropriate will be mailed to shareholders within seven days after the Fund pays
the distribution.
If a shareholder elects to receive distributions in cash and checks (1) are
returned and marked as "undeliverable" or (2) remain uncashed for six months,
the shareholder's cash election will be changed automatically and future
dividend and capital gains distributions will be reinvested in the applicable
Fund at the per share net asset value determined as of the date of payment of
the distribution. In addition, any undeliverable checks or checks that remain
uncashed for six months will be canceled and will be reinvested in the
applicable Fund at the per share net asset value determined as of the date of
cancellation.
FEDERAL TAXES -- GENERAL
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company" under the
Code for so long as such qualification is in the best interest of that Fund's
shareholders. Qualification as a 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
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interest income excludable from gross income under Section 103(a) of the Code.
Each Fund contemplates declaring as dividends all or substantially all of such
Fund's investment company taxable income and its exempt income (before deduction
of dividends paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a nondeductible excise tax equal to 4% of the deficiency.
It is expected that each Fund will distribute annually to shareholders all or
substantially all of the Fund's net ordinary income and net recognized capital
gains, if any, and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal income
tax purposes, even if paid in additional shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends received deduction, if any, received by the
Fund bear to its gross income.
Distribution by a Fund of the excess of net long-term capital gain over net
short-term capital loss is taxable to shareholders as long-term capital gain in
the year in which it is received, regardless of how long the shareholder has
held the shares. Such distributions are not eligible for the dividends-received
deduction.
Prior to purchasing shares, the impact of dividends or capital gains
distributions which are expected to be declared or have been declared, but have
not been paid, should be carefully considered. Any such dividends or capital
gains distributions paid shortly after a purchase of shares prior to the record
date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
THE OHIO TAX-FREE FUND
The Ohio Tax-Free Fund will distribute substantially all of its net investment
income and net capital gains to shareholders. Dividends derived from interest
earned on Exempt Securities constitute "exempt-interest dividends" when
designated as such by the Ohio Tax-Free Fund, will be excludable from gross
income for federal income taxes and will not be a preference item for
individuals for purposes of the federal alternative minimum tax.
Distributions, if any, derived from capital gains will generally be taxable to
shareholders as capital gains for federal income tax purposes to the extent so
designated by the Ohio Tax-Free Fund. Dividends, if any, derived from sources
other than interest excluded from gross income for federal income tax purposes
and capital gains will be taxable to shareholders as ordinary income for 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
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and will notify each shareholder annually of the tax status of all
distributions.
If a shareholder receives an exempt-interest dividend with respect to any
share and such share is held by the shareholder for six months or less, any loss
on the sale or exchange of such share will be disallowed to the extent of the
amount of such exempt-interest dividend. In certain limited instances, the
portion of Social Security benefits that may be subject to federal income
taxation, may be affected by the amount of tax-exempt interest income, including
exempt-interest dividends, received by a shareholder.
Interest on indebtedness incurred or continued by a shareholder to purchase or
carry shares of the Ohio Tax-Free Fund is not deductible for federal income
taxes assuming the Ohio Tax-Free Fund distributes exempt-interest dividends
during the shareholder's taxable year. It is anticipated that distributions from
the Ohio Tax-Free Fund will not be eligible for the dividends received deduction
for corporations.
Distributions of interest income and gain by the Ohio Tax-Free Fund, to the
extent derived from Ohio Exempt Securities, will be exempt from the Ohio
personal income tax, Ohio school district income taxes and Ohio municipal income
taxes, and will not be includible in the net income base of the Ohio corporate
franchise tax; provided, however, that at all times at least 50% of the value of
the total assets of the Ohio Tax-Free Fund consists of Ohio Exempt Securities or
similar obligations of other states or their subdivisions. Shares of the Ohio
Tax-Free Fund will be included in a corporation's tax base for purposes of
computing the Ohio corporate franchise tax on a net worth basis. The Ohio
Tax-Free Fund will report annually to shareholders the percentage and source of
interest income earned by the Ohio Tax-Free Fund. Each investor should consult
his or her own tax adviser to determine the tax status of distributions from the
Ohio Tax-Free Fund in his or her state and locality.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors in a Fund are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situations.
The Transfer Agent will inform shareholders at least annually of the amount
and nature of such income and capital gains.
COMPANY MANAGEMENT AND EXPENSES
BOARD OF DIRECTORS
Under Maryland law, the Company's Board of Directors, which is elected by the
Company's shareholders, has absolute and exclusive control over the management
and disposition of all assets of each Fund of the Company. The Directors, in
turn, elect the officers of the Company to supervise actively its day-to-day
operations. Subject to the authority of the Board of Directors, Provident,
directly and through DRZ as subadviser with respect to the Income Equity Fund,
supervises the investment programs of each Fund.
INVESTMENT ADVISER
Provident, an Ohio banking corporation located at One East Fourth Street,
Cincinnati, Ohio 45202, has entered into a Investment Advisory Agreement with
the Company whereby Provident supervises and manages the investment and
reinvestment of the assets of the Money Market Fund, the Income
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Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund, the Large Company
Fund, the Balanced Fund and, with DRZ, the Income Equity Fund. Provident has
been providing investment advisory services to individual and corporate trust
accounts since 1902.
Provident is a subsidiary of Provident Bancorp, Inc. ("PBI"), a bank holding
company located in Cincinnati, Ohio with approximately $6.2 billion in
consolidated assets as of December 31, 1995. Through offices in Ohio and
Kentucky, PBI and its subsidiaries provide a broad range of financial services
to individuals and businesses. Under the Investment Advisory Agreement with the
Company, for services rendered and expenses assumed as investment adviser,
Provident receives annually a fee (1) from the Money Market Fund equal to .15%
of the Money Market Fund's average net assets; (2) from the Income Fund equal to
.40% of the Income Fund's average net assets; (3) from the Income Equity Fund
equal to .95% of the Income Equity Fund's average net assets; (4) from the Ohio
Tax-Free Fund equal to .50% of the Ohio Tax-Free Fund's average net assets; (5)
from the Stock Appreciation Fund equal to 0.80% of the Stock Appreciation Fund's
average net assets; (6) from the Large Company Fund equal to .80% of the Large
Company Fund's average net assets; and (7) from the Balanced Fund equal to 0.90%
of the Balanced Fund's average net assets. Provident may periodically
voluntarily reduce all or a portion of its advisory fee with respect to a Fund
to increase the net income of that Fund available for distribution as dividends.
The voluntary fee reduction will cause the yield of that Fund to be higher than
it would otherwise be in the absence of such a reduction. The advisory fees with
respect to the Income Equity Fund, the Stock Appreciation Fund, the Large
Company Fund and the Balanced Fund are higher, in the opinion of the Commission,
than that paid by most investment companies, but Provident believes the 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 decided to adopt a team approach with respect
to each of the Funds in order to take advantage of the experience of its entire
portfolio management team. Provident's investment staff consists of seven
individuals. All Funds are reviewed on a regular basis by Provident's Investment
Policy Committee to ensure they are invested in accordance with the Funds' and
Provident's investment policies.
Pursuant to the terms of its Investment Advisory Agreement with the Company,
Provident has entered into a Sub-Investment Advisory Agreement with DRZ, a
registered investment adviser, 201 South Orange Avenue, Suite 850, Orlando,
Florida 32801, with respect to the Income Equity Fund. DRZ is owned equally by
Mr. Gregory DePrince, Mr. John D. Race and Mr. Victor A. Zollo, Jr., each of
whom are former employees of SunBank Capital Management N.A., the former
sub-investment adviser of the Income Equity Fund ("SunBank"). In April, 1995,
Messrs. DePrince, Race and Zollo left SunBank to form DRZ. In addition to the
Income Equity Fund, DRZ provides investment management services to mutual funds
and other institutions and currently manages assets of approximately $470
million. Pursuant to the terms of such Sub-Investment Advisory Agreement, DRZ
was retained by Provident to manage the day-to-day investment and reinvestment
of that portion of the assets of the Income Equity Fund allocated to DRZ by the
Company's Board of Directors. The re-
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mainder of the Income Equity Fund's assets are managed on a day-to-day basis by
Provident. The amount of the assets of the Income Equity Fund to be allocated
between DRZ and Provident from time to time is subject to the discretion of the
Company's Board of Directors. Currently the first $70 million of the Income
Equity Fund's assets are managed by DRZ with the remainder being managed by
Provident. Both DRZ's and Provident's day-to-day management of the Income Equity
Fund's portfolio is subject to the direction and control of the Company's Board
of Directors, and Provident is responsible for selecting and monitoring DRZ and
reporting the activities of DRZ to the Company's Board of Directors.
For its services provided and expenses assumed pursuant to its Sub-Investment
Advisory Agreement with Provident, DRZ receives from Provident a fee, computed
daily and paid monthly, at the annual rate of 0.50% of the Income Equity Fund's
average daily net assets up to $55 million and 0.55% of the average daily net
assets of such Fund of $55 million and above. In addition, DRZ has indicated a
willingness to manage net assets of the Income Equity Fund up to $75 million,
but not beyond. The Directors of the Company shall take such limitation into
account when determining the allocation of the Income Equity Fund's assets
between Provident and DRZ.
Gregory M. DePrince is primarily responsible for the management of that
portion of the Income Equity Fund's portfolio allocated to DRZ to manage. Since
April 1995, Mr. DePrince has been a director and Executive Vice President of
DRZ. Prior to April 1995, Mr. DePrince served as the Equity Income Portfolio
Manager at SunBank where he also managed the STI Classic Value Income Fund.
In addition to serving as investment adviser, Provident has entered into an
agreement with the Company to provide transfer agency services to the Company
and each Fund. Under the Master Transfer and Recordkeeping Agreement, Provident
receives from each Fund a fee computed daily and paid monthly. Such fee is
calculated by adding the sum of (i) .04% of the Fund's average daily net assets
attributable to its Investor A Shares and (ii) $20,000 annual fee plus $23 per
shareholder account and certain other fixed fees and out-of-pocket expenses
attributable to its Investor B Shares. BISYS Fund Services Ohio, Inc., an
affiliate of the Distributor ("BISYS"), provides sub-transfer agency services
for the Investor B shares of the Funds pursuant to a Sub-Transfer Agency
Agreement between Provident and BISYS.
CUSTODIAN AND FUND ACCOUNTANT
The Provident Bank (the "Custodian") also serves as custodian for and provides
certain fund accounting services to each of the Funds. Pursuant to the
Custodian, Fund Accounting and Recordkeeping Agreement with the Company, the
Custodian receives compensation from the Funds for such services in an amount
equal to a fee, computed daily and paid monthly, at the following annual rate of
.05% of the Money Market Fund's average daily net assets; .10% of the Income
Fund's average daily net assets; .15% of the Income Equity Fund's, the Stock
Appreciation Fund's, the Large Company Fund's and the Balanced Fund's average
daily net assets; and .14% of the Ohio Tax-Free Fund's average daily net assets.
ADMINISTRATOR AND DISTRIBUTOR
The Distributor, located at 3435 Stelzer Road, Columbus, Ohio 43219, is the
administrator for each Fund, and also acts as the
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Funds' principal underwriter (the "Administrator" or the "Distributor," as the
context indicates).
The Administrator generally assists in all aspects of a Fund's administration
and operation. For expenses assumed and services provided as administrator
pursuant to its administration agreement with the Company, the Administrator
receives a fee from each Fund, computed daily and paid periodically, at an
annual rate of 0.20% of such Fund's average daily net assets. The Administrator
may periodically voluntarily reduce all or a portion of its administration fee
with respect to a Fund to increase the net income of that Fund available for
distribution as dividends. The voluntary fee reduction will cause the yield of
the Fund to be higher than it would otherwise be in the absence of such a
reduction.
The Distributor acts as agent for the Funds in the distribution of their
shares and, in that capacity, solicits orders for the sale of shares,
advertises, and pays the cost of that advertising, office space and its
personnel involved in such activities. The Distributor receives no compensation
under its Distribution Agreement with the Company, but may retain some or all of
any sales charge imposed upon the shares and may receive compensation under the
Distribution Plans described below.
DISTRIBUTION PLANS -- INVESTOR A SHARES
The Investor A shares of each Fund may bear some of the costs of selling such
shares under an Investor A Distribution Plan adopted pursuant to Rule 12b-1
under the 1940 Act (the "Investor A Plan"). The Investor A Plan of each Fund
provides that such Fund may expend daily amounts at an annual rate of up to
0.25% of the average daily net asset value of that Fund's Investor A shares to
finance any activity which is principally intended to result in the sale of such
Fund's Investor A shares including, without limitation, expenditures consisting
of payments to the Distributor (1) to enable the Distributor to pay or to have
paid to others who sell Investor A shares of that Fund a maintenance or other
fee, at such intervals as the Distributor may determine, with respect to
Investor A shares of the Fund previously sold by others and remaining
outstanding during the period with respect to which such fee is or has been
paid; and/or (2) to compensate the Distributor for its efforts with respect to
sales of Investor A shares of the Fund since inception of the Plan.
Fees paid pursuant to the Investor A Plan are accrued daily and paid monthly,
and are charged as expenses of Investor A shares of such Fund as accrued.
DISTRIBUTION PLANS -- INVESTOR B SHARES
Pursuant to Rule 12b-1, the Company has also adopted an Investor B
Distribution Plan (the "Investor B Plan") with respect to Investor B shares of
the Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced Fund. Pursuant to the
Investor B Plan, a Fund is authorized to pay or reimburse the Distributor (a) a
distribution fee in an amount not to exceed on an annual basis 0.75% of the
average daily net asset value of Investor B shares of such Fund (the
"Distribution Fee") and (b) a service fee in an amount not to exceed on an
annual basis 0.25% of the average daily net asset value of the Investor B shares
of such Fund (the "Service Fee"). Payments under the Investor B Plan will be
calculated daily and paid monthly at a rate not to exceed the limits described
above, which rates are set from time to time by the
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Company's Board of Directors. Payments of the Distribution Fee to the
Distributor pursuant to the Investor B Plan will be used (i) to compensate
Participating Organizations (as defined below) for providing distribution
assistance relating to Investor B shares, and (ii) for promotional activities
intended to result in the sale of Investor B shares such as to pay for the
preparation, printing and distribution of prospectuses to other than current
shareholders, and payments of the Service Fee to the Distributor pursuant to the
Investor B Plan will be used to compensate Participating Organizations for
providing shareholder services with respect to their customers who are, from
time to time, beneficial and record holders of Investor B shares. Participating
Organizations include banks (including Provident and its affiliates),
broker-dealers and other financial institutions.
Fees paid pursuant to the Investor B Plan are accrued daily and paid monthly,
and are charged as expenses of Investor B shares of such Fund as accrued.
Pursuant to the Investor B Plan, the Distributor may enter into Rule 12b-1
Agreements with Participating Organizations for providing distribution and
shareholder services to their customers who are the record or beneficial owners
of Investor B shares. Such Participating Organizations will be compensated at
the annual rate of up to 1.00% of the average daily net asset value of the
Investor B shares held of record or beneficially by such customers. The
distribution services provided by Participating Organizations for which the
Distribution Fee may be paid may include promoting the purchase of Investor B
shares of such Funds by their customers; processing purchase, exchange, and
redemption requests from customers and placing orders with the Distributor or
the transfer agent; processing dividend and distribution payments from a Fund on
behalf of customers; providing information periodically to customers, including
information showing their positions in Investor B shares; responding to
inquiries from customers concerning their investment in Investor B shares; and
providing other similar services as may be reasonably requested. The services
provided by Participating Organizations for which the Service Fee may be paid
may include providing shareholders information about their investment in the
Investor B shares of a Fund and providing other continuing personal services to
holders of Investor B shares.
As required by Rule 12b-1, the Investor A Plan and the Investor B Plan (the
"Plans") were each approved by the Directors of the Company, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Company and who have no direct or indirect financial interest
in the operation of the Plans or in any agreements related to the Plans
("Independent Directors"). The Plans continue in effect as long as such
continuance is specifically approved at least annually by the Company's
Directors, including a majority of the Independent Directors.
The Plans may be terminated by a vote of a majority of the Independent
Directors, or by a vote of a majority of the holders of the outstanding voting
securities of the class of shares subject thereto. Any change in the Plans that
would increase materially the distribution expenses paid by a Fund requires
shareholder approval; otherwise, the Plans may be amended by the Directors,
including a majority of the Independent Directors, by a vote cast in person at a
meeting called for the purpose of voting upon the amendment. As long as either
Plan is in effect, the selection or nomination of the Independent Directors is
committed to the discretion of the Independent Directors.
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<PAGE> 66
SHAREHOLDER SERVICES PLAN
The Company has adopted a Shareholder Services Plan (the "Services Plan")
pursuant to which each Fund is authorized to pay compensation to banks and other
financial institutions (each a "Service Organization"), which may include
Provident, its correspondent and affiliated banks, and the Distributor, which
agree to provide certain ministerial, recordkeeping and/or administrative
support services for their customers or account holders (collectively
"customers") who are the beneficial or record owners of shares of that Fund. In
consideration for such services, a Service Organization receives a fee from the
Fund computed daily and paid monthly, at an annual rate of up to 0.25% of the
average daily net asset value of shares of that Fund owned beneficially or of
record by such Service Organization's customers for whom the Service
Organization provides such services.
The servicing agreements adopted under the Services Plan (the "Servicing
Agreements") require the Services Organizations receiving such compensation to
perform certain ministerial, recordkeeping and/or administrative support
services with respect to the beneficial or record owners of shares of a Fund,
including activities such as responding to shareholder inquiries regarding
accounts, collecting information regarding changes in accounts and further
assisting the Transfer Agent in maintaining the Fund's records, processing
dividend and distribution payments from the Fund on behalf of customers,
providing periodic statements to customers showing their positions in the shares
of the Fund, providing sub-accounting with respect to shares beneficially owned
by such customers and providing customers with a service that invests the assets
of their accounts in shares of that Fund pursuant to specific or pre-authorized
instructions. As of the date of this Prospectus, no Servicing Agreements have
been entered into on behalf of any of the Funds.
BANKING LAWS
Provident believes that it possesses the legal authority to perform the
investment advisory services for the Funds as set forth in its Investment
Advisory Agreement with the Company, as described in this Prospectus, without
violation of applicable banking laws and regulations, and has so represented in
its Investment Advisory Agreement with the Company. Future changes in Federal or
state statutes and regulations relating to permissible activities of banks or
bank holding companies and their subsidiaries and affiliates as well as further
judicial or administrative decisions or interpretations of present and future
statutes and regulations could change the manner in which Provident performs
such services for the Funds. See "MANAGEMENT OF THE COMPANY - Glass-Steagall
Act" in the Statement of Additional Information for further discussion of
applicable law and regulations.
FUND EXPENSES
Provident, DRZ and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser, sub-investment adviser
and administrator, respectively, other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
The Directors reserve the right, subject to the receipt of any necessary
relevant regulatory approvals or rulings, to allocate certain expenses (other
than those associated with the applicable Plan) to the shareholders of a
particular class on a basis other than relative net asset value as the Directors
deem appropriate ("Class Expenses"). In
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such event, Class Expenses would be limited to: transfer agency fees identified
by the Transfer Agent as attributable to a specific class; printing and postage
expenses related to preparing and distributing materials such as shareholder
reports, prospectuses and proxies to current shareholders; Blue Sky registration
fees incurred by a class of shares; Commission registration fees incurred by a
class of shares; expenses related to administrative personnel and services as
required to support the shareholders of a specific class; litigation or other
legal expenses relating solely to one class of shares; and Directors' fees
incurred as a result of issues relating solely to one class of shares.
SECURITIES TRANSACTIONS
Under policies established by the Board of Directors, Provident and DRZ, as
the case may be, selects broker-dealers to execute portfolio transactions for
the Funds subject to receipt of best execution. When selecting broker-dealers,
Provident and DRZ may consider as a factor the number of shares of the Funds
sold by a broker-dealer. In addition, broker-dealers executing transactions for
a Fund may from time to time be affiliated with the Company, Provident, DRZ or
their affiliates. The Funds may pay higher commissions to broker-dealers which
provide research services. Provident and DRZ each may use these services in
advising the Funds as well as in advising their other clients.
PERFORMANCE DATA AND ADVERTISING
From time to time the Money Market Fund may advertise "yield" and "effective
yield," and the other Funds may advertise "total return" and/or "current yield."
Such figures are based on historical earnings and are not intended to indicate
future performance. The yield of the Money Market Fund refers to the income
generated by the Money Market Fund over a seven-day period (which period will be
stated in the advertisement). This income is then annualized. That is, the
amount of income generated by the Money Market Fund during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage.
The effective yield is calculated similarly but, when annualized, the income
earned from the Money Market Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment. Average annual total return refers to a Fund's
average annual compounded rates of return over specified periods determined by
comparing the initial amount invested to the ending redeemable value of that
amount. The resulting equation assumes reinvestment of all dividends and
distributions and deduction of any sales charge and all recurring charges, if
any, applicable to all shareholder accounts. Aggregate total return is computed
similarly to average annual total return; however, the resulting rate of return
is not annualized. Performance of a Fund may also be presented excluding the
effect of a sales charge, if any.
Current yield quotations for the Funds, other than the Money Market Fund,
represent the yield on an investment for a stated 30-day period computed by
dividing net investment income earned per share during the base period by the
maximum offering price per share on the last day of the base period.
The Large Company Fund has been initially funded by the transfer of all of the
assets of two corresponding common trust funds managed by Provident (the
"CIFs"). Because the management of the Large Company Fund is substantially the
same as the CIFs, the quoted performance of such Fund will include the
performance of the CIFs for the
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<PAGE> 68
periods prior to the effectiveness of the Company's registration statement as it
relates to the Large Company Fund. The CIFs were not registered under the 1940
Act, and therefore were not subject to certain investment restrictions that are
imposed by the 1940 Act. If the CIFs had been so registered, their performance
might have been adversely affected.
The Funds may also include comparative performance information in advertising
or marketing their shares, such as data from Lipper Analytical Services, Inc.,
Standard & Poor's 500 Composite Stock Price Index or other industry
publications. The Funds may include in sales and advertising material general
mutual fund industry information compiled from financial and industry
publications. The Company's annual report to Shareholders for the fiscal year
ended December 31, 1995, contains additional performance information and will be
made available to prospective investors and shareholders without cost.
In addition, from time to time each Fund may present its distribution rates
for a class of shares in supplemental sales literature which is accompanied or
preceded by a prospectus and in shareholder reports. Distribution rates will be
computed by dividing the distribution per share of a class made by a Fund over a
twelve-month period by the maximum offering price per share. The calculation of
income in the distribution rate includes both income and capital gain dividends
and does not reflect unrealized gains or losses, although the Funds may also
present a distribution rate excluding the effect of capital gains. The
distribution rate differs from the yield, because it includes capital gains
which are often non-recurring in nature, whereas yield does not include such
items. Distribution rates may also be presented excluding the effect of a sales
charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor A and Investor B shares. Because of differences in the fees and/or
expenses borne by Investor A and Investor B shares of the Funds, the net yield
and total return on Investor A shares can be expected, at any given time, to
differ from the net yield and total return on Investor B shares for the same
period.
COMPANY SHARES
The Company presently offers seven series of shares of capital stock, par
value $.001 per share (the "Funds"). The shares of each of the Funds, other than
the Money Market Fund, are offered in two separate classes: Investor A shares
and Investor B shares. The Money Market Fund has only the Investor A class of
shares. When issued and paid for, shares of each Fund are fully paid and
nonassessable by the Company. Shares may be exchanged or converted as explained
above but will have no other preference, conversion, exchange or preemptive
rights. Shareholders are entitled to one vote for each full share owned and
fractional votes for fractional shares. Shares are transferable, redeemable and
freely assignable as collateral. There are no sinking fund provisions.
Each share represents an equal proportionate interest in a Fund with other
shares of the same Fund based upon such share's net asset value, and is entitled
to such dividends and distributions out of the income earned on the assets
belonging to that Fund as are declared at the discretion of the Directors.
Shareholders will vote in the aggregate and not by Fund except as otherwise
expressly required by law. For example, Shareholders of a Fund will vote in the
aggregate with
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<PAGE> 69
other shareholders of the Company with respect to the election of Directors and
ratification of the selection of independent accountants. However, Shareholders
of a Fund will vote as a Fund, and not in the aggregate with other shareholders
of the Company, for purposes of approval of 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 Company may dispense with an annual meeting of shareholders in any fiscal
year in which it is not required in order to elect directors under the 1940 Act
or state law. However, shareholders are entitled to call a special meeting of
shareholders for purposes of voting on the removal of a director or directors
when 10% of the outstanding shares request such a meeting. Shareholders may be
eligible for shareholder communication assistance in connection with a special
meeting.
As used in this Prospectus and the Statement of Additional Information, a
"vote of the holders of a majority of the outstanding voting securities" of a
Fund means the affirmative vote, at a meeting of shareholders duly called, of
the lesser of (a) 67% or more of the outstanding shares of such Fund present at
such meeting, if holders of more than 50% of the shares are present or
represented by proxy, or (b) more than 50% of the shares of such Fund.
As of October 16, 1996, 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 and
Balanced Funds and therefore may be presumed to control each of these Funds
within the meaning of the 1940 Act.
ADDITIONAL INFORMATION
Except as otherwise stated in this prospectus or required by law, the Company
reserves the right to change the terms of the offer stated in this prospectus
without shareholder approval, including the right to impose or change fees for
services provided.
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---------------------------------------
<TABLE>
<S> <C> <C>
THE THE RIVERFRONT
RIVERFRONT U.S. GOVERNMENT
FUNDS, INC. SECURITIES MONEY
MARKET FUND
PROSPECTUS THE RIVERFRONT
JANUARY 2, 1997 U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT
INCOME EQUITY
FUND
THE RIVERFRONT
OHIO TAX-FREE
BOND FUND
THE RIVERFRONT
STOCK APPRECIATION
FUND
THE RIVERFRONT
LARGE COMPANY
FUND
THE RIVERFRONT
BALANCED FUND
THE RIVERFRONT FUNDS, INC.
Investment Adviser
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
Distributor
BISYS Fund Services Limited Partnership
3435 Stelzer Rd.
Columbus, Ohio 43219
For additional information call
The Provident Bank
Mutual Fund Services
1-800-424-2295
</TABLE>
<PAGE> 72
Rule 497(c)
Registration No. 33-34154
File No. 811-6082
STATEMENT OF ADDITIONAL INFORMATION
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT OHIO TAX-FREE BOND FUND
THE RIVERFRONT BALANCED FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
January 2, 1997
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with the prospectus (the
"Prospectus"), of The Riverfront U.S. Government Securities Money Market (the
"Money Market Fund"), The Riverfront U.S. Government Income Fund (the "Income
Fund"), The Riverfront Income Equity Fund (the "Income Equity Fund"), The
Riverfront Ohio Tax-Free Bond Fund (the "Ohio Tax-Free Fund"), The Riverfront
Stock Appreciation Fund (the "Stock Appreciation Fund"), The Riverfront Large
Company Select Fund (the "Large Company Fund") and The Riverfront Balanced Fund
(the "Balanced Fund") (the Money Market Fund, the Income Fund, the Income Equity
Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund and the Balanced Fund
are hereinafter collectively referred to as the "Funds" and individually as a
"Fund") dated the date hereof. The Funds are currently seven series or
portfolios of The Riverfront Funds, Inc. (the "Company"). On January 9, 1995,
the Ohio Tax-Free Fund changed its name from The Riverfront Municipal Bond Fund
to The Riverfront Ohio Tax-Free Bond Fund. On January 2, 1997, the Balanced
Fund changed its name from The Riverfront Flexible Growth Fund to The Riverfront
Balanced Fund. This Statement of Additional Information is incorporated in its
entirety into the Prospectus. A copy of the Prospectus may be obtained from
BISYS Fund Services Limited Partnership, 3435 Stelzer Road, Columbus, Ohio
43219.
TABLE OF CONTENTS
Page
THE COMPANY AND ITS FUNDS..................................................B-1
INVESTMENT OBJECTIVES AND POLICIES.........................................B-2
DIVIDENDS AND TAXES.......................................................B-20
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................B-26
VALUATION OF SECURITIES...................................................B-27
DIRECTORS AND OFFICERS....................................................B-30
MANAGEMENT OF THE FUNDS...................................................B-31
SECURITIES TRANSACTIONS...................................................B-37
ADMINISTRATOR.............................................................B-41
DISTRIBUTOR...............................................................B-43
DISTRIBUTION PLANS........................................................B-44
CAPITAL STOCK.............................................................B-46
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS............................B-47
ADDITIONAL INFORMATION....................................................B-51
FINANCIAL STATEMENTS......................................................B-53
APPENDIX ..................................................................A-1
<PAGE> 73
THE COMPANY AND ITS FUNDS
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company, commonly known as a mutual fund, which currently issues
seven series of shares of capital stock which are described in this Statement of
Additional Information (the "Funds"). Each Fund of the Company, other than the
Ohio Tax-Free Fund, is diversified. The Ohio Tax-Free Fund is a non-diversified
Fund.
The Company was incorporated in Maryland on March 27, 1990. The
Provident Bank ("Provident") serves as investment adviser, either directly or
through a subadviser, to each Fund, and BISYS Fund Services Limited Partnership
(the "Distributor") serves as Administrator and Distributor. Provident also
serves as custodian and transfer agent for each of the Funds, and provides
certain fund accounting and recordkeeping services for the Company. DePrince,
Race & Zollo, Inc. ("DRZ") serves as the subadviser to the Income Equity Fund.
As of September 30, 1995, pursuant to an Agreement and Plan of
Reorganization and Liquidation with MIM Mutual Funds, Inc. ("MIM"), the Company
acquired all of the assets and liabilities of MIM as follows: the Money Market
Fund acquired all of the assets and liabilities of the MIM Money Market Fund;
(b) the Income Equity Fund acquired all of the assets and liabilities of the MIM
Bond Income Fund, the MIM Stock Income Fund and the AFA Equity Income Fund; and
(c) the Stock Appreciation Fund acquired all of the assets and liabilities of
the MIM Stock Growth Fund and the MIM Stock Appreciation Fund (collectively, the
"Reorganization"). In exchange for such assets and liabilities, the respective
Fund of the Company issued a number of its Investor A shares equal in value to
the net assets of the corresponding MIM Fund acquired in the Reorganization. For
accounting and performance purposes, the MIM Stock Appreciation Fund is
considered to be the successor of the Stock Appreciation Fund; therefore, the
performance and financial information included in this Statement of Additional
Information prior to September 30, 1995, relates to the operations of the MIM
Stock Appreciation Fund prior to the Reorganization.
The essential information about the Company and its Funds is contained
in the Prospectus. This Statement of Additional Information provides additional
information about the Company and each of the Funds that may be of interest to
investors.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are
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<PAGE> 74
defined in the Prospectus. No investment in shares of a Fund should be made
without first reading such Fund's Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Riverfront U.S. Government Securities Money Market Fund (the "Money
Market Fund") is a series of shares of the Company which seeks current income
from U.S. Government short-term securities while preserving capital and
maintaining liquidity.
The Money Market Fund is designed for investors who wish to keep
temporary cash balances in a fund invested in short-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
The Riverfront U.S. Government Income Fund (the "Income Fund") seeks a
high level of current income, consistent with preservation of capital, by
investing primarily in securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities, and in high quality fixed rate and
adjustable rate mortgage-backed securities and other asset-backed securities.
The Income Fund intends to invest in securities with dollar-weighted average
durations of between three and seven years. The dollar-weighted average life of
the Income Fund's securities is expected to be in the range of four to ten
years.
The Income Fund is designed for investors seeking to provide for
near-term income needs by investing in a fund which seeks to provide higher
returns than those offered by certificates of deposits or U.S. Government money
market funds.
THE RIVERFRONT INCOME EQUITY FUND
The Riverfront Income Equity Fund (the "Income Equity Fund") seeks a
high level of investment income, with capital appreciation as a secondary
objective, through investment primarily in income-producing equity securities of
U.S. issuers. To provide investment advisory services to the Income Equity Fund,
Provident has entered into a sub-investment advisory agreement with DRZ.
The Income Equity Fund is designed for investors seeking to invest for
retirement, educational and other long-term needs.
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<PAGE> 75
THE RIVERFRONT OHIO TAX-FREE BOND FUND
The Riverfront Ohio Tax-Free Bond Fund (the "Ohio Tax-Free Fund") seeks
as its investment objectives (1) income which is exempt from federal income tax
and Ohio state income taxes and (2) preservation of capital.
The Ohio Tax-Free Fund is designed for investors seeking to invest in a
fund which generates income exempt from federal and Ohio state income taxes and
is not a preference item for individuals for purposes of the federal alternative
minimum tax.
THE RIVERFRONT STOCK APPRECIATION FUND
The Riverfront Stock Appreciation Fund (the "Stock
Appreciation Fund") seeks as its investment objective capital
growth.
The Stock Appreciation Fund is designed for investors who wish to seek
growth of capital.
THE RIVERFRONT LARGE COMPANY SELECT FUND
The Riverfront Large Company Select Fund (the "Large Company Fund")
seeks as its investment objective long-term growth of capital with current
income as a secondary objective.
The Large Company Fund is designed for investors seeking long-term
growth of capital with some current income.
THE RIVERFRONT BALANCED FUND
The Riverfront Balanced Fund (the "Balanced Fund") seeks as its primary
investment objective long-term growth of capital with some current income as a
secondary objective.
The Balanced Fund is designed for investors seeking to invest in a fund
which generates long-term growth of capital with some current income.
ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
The following policies supplement the investment objectives and
policies of each Fund as set forth in the Prospectus.
Bank Obligations. Each Fund may invest in bank obligations
such as bankers' acceptances, certificates of deposit, and demand
and time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in
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effect, that the bank unconditionally agrees to pay the face value of the
instrument on maturity. Bankers' acceptances invested in by such Funds will be
those guaranteed by U.S. commercial banks having, at the time of investment,
capital, surplus, and undivided profits in excess of $1,500,000,000 (as of the
date of their most recently published financial statements).
Certificates of deposit are negotiable certificates issued against
funds deposited in a commercial bank or a savings and loan association for a
definite period of time and earning a specified return. Certificates of deposit
will be those of domestic and foreign branches of U.S. banks which are members
of the Federal Reserve System or the Federal Deposit Insurance Corporation, if
at the time of investment the depository institution has capital, surplus, and
undivided profits in excess of $1,500,000,000 (as of the date of its most
recently published financial statements).
The Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the
Stock Appreciation Fund and the Large Company Fund may also each invest in
Eurodollar Certificates of Deposit, which are U.S. dollar denominated
certificates of deposit issued by offices of foreign and domestic banks located
outside the United States ("ECDs"); and Yankee Certificates of Deposit, which
are certificates of deposit issued by a U.S. branch of a foreign bank
denominated in U.S. dollars and held in the United States.
ECDs may be general obligations of the parent bank in addition to the
issuing branch, or may be limited by the terms of a specific obligation and by
government regulation. Payment of interest and principal upon these obligations
may also be affected by governmental action in the country of domicile of the
branch (generally referred to as sovereign risk). In addition, evidences of
ownership of such obligations may be held outside the U.S. and a Fund may be
subject to the risks associated with the holding of such property overseas.
Examples of governmental actions would be the imposition of currency controls,
interest limitations, withholding taxes, seizure of assets or the declaration of
a moratorium. Various provisions of federal law governing domestic branches do
not apply to foreign branches of domestic or foreign banks.
Commercial Paper. Commercial paper consists of unsecured promissory
notes issued by corporations. Except as noted below with respect to variable
amount master demand notes, issues of commercial paper normally have maturities
of less than nine months and fixed rates of return.
The Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund, the
Stock Appreciation Fund, the Balanced Fund and the Large Company Fund may invest
in commercial paper which is rated by applicable nationally recognized
statistical rating organizations ("NRSROs") in the highest rating category, or
if unrated, is deemed
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by that Fund's investment adviser to be of comparable quality to commercial
paper so rated.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Income Fund, the Income Equity Fund, the Ohio Tax-Free Fund,
the Stock Appreciation Fund, the Balanced Fund and the Large Company Fund may
invest, are unsecured demand notes that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate according to the
terms of the instrument. Because master demand notes are direct lending
arrangements between a Fund and the issuer, they are not normally traded.
Although there is no secondary market in the notes, a Fund may demand payment of
principal and accrued interest at any time within 30 days. While such notes are
not typically rated by credit rating agencies, variable amount master demand
notes must be determined by Provident or DRZ, as the case may be, to be of
comparable quality to the commercial paper which such Fund may purchase. The
Fund's investment adviser or sub-adviser, as the case may be, will consider the
earning power, cash flow, and other liquidity ratios of the issuers of such
notes and will continuously monitor their financial status and ability to meet
payment on demand. In determining average weighted portfolio maturity, a
variable amount master demand note will be deemed to have a maturity equal to
the longer of the period of time remaining until the next interest rate
adjustment or the period of time remaining until the principal amount can be
recovered from the issuer through demand.
Foreign Investment. Investments in securities issued by foreign
branches of U.S. banks, foreign banks, or other foreign issuers, including ADRs,
may subject a Fund to investment risks that differ in some respects from those
related to investment in obligations of U.S. domestic issuers or in U.S.
securities markets. Such risks include future adverse political and economic
developments, possible seizure, nationalization, or expropriation of foreign
investments, less stringent disclosure requirements, the possible establishment
of exchange controls or taxation at the source, or the adoption of other foreign
governmental restrictions. The Income Equity Fund, the Stock Appreciation Fund,
the Balanced Fund and the Large Company Fund will acquire such securities only
when such Fund's investment adviser or sub-adviser, as the case may be, believes
the risks associated with such investments are minimal.
U.S. Government Obligations. Each Fund may invest in obligations issued
or guaranteed as to principal and interest by the U.S. Government or its
agencies or instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are supported by the full faith and
credit of the U.S. Treasury; others are supported by the right of the issuer to
borrow from the Treasury; others are supported by the discretionary authority of
the U.S. Government to purchase the agency's
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obligations; and still others are supported only by the credit of the
instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government- sponsored agencies or
instrumentalities if it is not obligated to do so by law.
Exempt Securities. As stated in the Prospectus of the Ohio Tax-Free
Fund, under normal market conditions at least 80% of the net assets of the Ohio
Tax-Free Fund will be invested in bonds, notes, debentures, commercial paper and
other obligations of the State of Ohio or any county, municipality, political
subdivision, instrumentality, agency or authority thereof (collectively,
"agencies"), the interest on which, in the opinion of bond counsel to the
issuer, is exempt from federal income tax, is not a preference item for purposes
of the federal alternative minimum tax and is exempt from Ohio state income tax
("Ohio Exempt Securities") and in debt obligations issued by the Government of
Puerto Rico and such other governmental entities whose debt obligations, either
by law or by treaty, generate interest income which is exempt from federal
income tax, is not a preference item for individuals for the federal alternative
minimum tax, and is exempt from Ohio state income taxes (together with Ohio
Exempt Securities called "Exempt Securities"). Under normal market conditions,
at least 65% of the total assets of the Ohio Tax-Free Fund will be invested in
Ohio Exempt Securities.
Exempt Securities include debt obligations issued by governmental
entities to obtain funds for various public purposes, such as the construction
of a wide range of public facilities, the refunding of outstanding obligations,
the payment of general operating expenses, and the extension of loans to other
public institutions and facilities. Private activity bonds that are issued by or
on behalf of public authorities to finance various privately-operated facilities
are included within the term Exempt Securities if the interest paid thereon is
exempt from federal income tax and is not treated as a preference item for
purposes of the federal alternative minimum tax. However, if such interest is
subject to the federal alternative minimum tax, such securities will not be
considered as Exempt Securities for purposes of complying with the Ohio Tax-Free
Fund's 80% required investment in Exempt Securities as described above.
Among other types of Exempt Securities, the Ohio Tax-Free Fund may
purchase short-term General Obligation Notes, Tax Anticipation Notes, Bond
Anticipation Notes, Revenue Anticipation Notes, Project Notes, Tax-Exempt
Commercial Paper, Construction Loan Notes and other forms of short-term
tax-exempt loans. Such instruments are issued with a short-term maturity in
anticipation of the receipt of tax funds, the proceeds of bond placements or
other revenues. In addition, the Ohio Tax-Free Fund may invest in other types of
tax-exempt instruments, such as municipal bonds, private activity bonds, and
pollution control bonds.
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Project Notes are issued by a state or local housing agency and are
sold by the Department of Housing and Urban Development. While the issuing
agency has the primary obligation with respect to its Project Notes, they are
also secured by the full faith and credit of the United States through
agreements with the issuing authority which provide that, if required, the
federal government will lend the issuer an amount equal to the principal of and
interest on the Project Notes.
As described in the Prospectus of the Ohio Tax-Free Fund, the two
principal classifications of Exempt Securities consist of "general obligation"
and "revenue" issues. The Ohio Tax-Free Fund may also acquire "moral obligation"
issues, which are normally issued by special purpose authorities. There are, of
course, variations in the quality of Exempt Securities, both within a particular
classification and between classifications, and the yields on Exempt Securities
depend upon a variety of factors, including the financial condition of the
issuer, general conditions of the municipal bond market, the size of a
particular offering, the maturity of the obligation and the rating of the issue.
Ratings represent the opinion of an NRSRO as to the quality of Exempt
Securities. It should be emphasized, however, that ratings are general and are
not absolute standards of quality, and Exempt Securities with the same maturity,
interest rate and rating may have different yields, while Exempt Securities of
the same maturity and interest rate with different ratings may have the same
yield. Subsequent to purchase, an issue of Exempt Securities may cease to be
rated or its rating may be reduced below the minimum rating required for
purchase. Provident will consider such an event in determining whether the Ohio
Tax-Free Fund should continue to hold the obligation.
An issuer's obligations under its Exempt Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights and
remedies of creditors, such as the federal bankruptcy code, and laws, if any,
which may be enacted by Congress or state legislatures extending the time for
payment of principal or interest, or both, or imposing other constraints upon
the enforcement of such obligations or upon the ability of municipalities to
levy taxes. The power or ability of an issuer to meet its obligations for the
payment of interest on and principal of its Exempt Securities may be materially
adversely affected by litigation or other conditions.
Variable and Floating Rate Notes. Each Fund may acquire variable and
floating rate notes, subject to such Fund's investment objective, policies and
restrictions. A variable rate note is one whose terms provide for the adjustment
of its interest rate on set dates and which, upon such adjustment, can
reasonably be expected to have a market value that approximates its par value. A
floating rate note is one whose terms provide for the adjustment of its interest
rate whenever a specified interest rate changes and which,
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at any time, can reasonably be expected to have a market value that approximates
its par value. Such notes are frequently not rated by credit rating agencies;
however, unrated variable and floating rate notes purchased by such Funds will
be determined by Provident or DRZ, as the case may be, to be of comparable
quality at the time of purchase to rated instruments eligible for purchase under
that particular Fund's investment policies. In making such determinations,
Provident or DRZ, as the case may be, will consider the earning power, cash flow
and other liquidity ratios of the issuers of such notes (such issuers include
financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, the Fund may attempt to resell the note at any time to a
third party. The absence of an active secondary market, however, could make it
difficult for a Fund to dispose of a variable or floating rate note in the event
the issuer of the note defaulted on its payment obligations and the Fund could,
as a result or for other reasons, suffer a loss to the extent of the default.
When-Issued Securities. As discussed in the Prospectus, each of the
Funds, other than the Stock Appreciation Fund, may purchase securities on a
"when-issued" basis (i.e., for delivery beyond the normal settlement date at a
stated price and yield). When such a Fund agrees to purchase securities on a
"when-issued" basis, the Fund's custodian will set aside cash or high quality
liquid debt securities equal to the amount of the commitment in a separate
account. Normally, the Fund's custodian will set aside portfolio securities to
satisfy the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or high quality liquid debt securities to satisfy its purchase
commitments in the manner described above, such Fund's liquidity and the ability
of Provident or DRZ, as the case may be, to manage it might be affected in the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
its total assets. Under normal market conditions, however, a Fund's commitment
to purchase "when-issued" or "delayed-delivery" securities will not exceed 25%
of its assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in
such Fund's incurring a loss or missing the opportunity to obtain a price
considered to be advantageous. Such Funds will engage in "when-issued" delivery
transactions only for the purpose of acquiring portfolio securities consistent
with the Funds' investment objectives and policies and not for investment
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leverage. If the Ohio Tax-Free Fund sells a "when-issued" or "delayed-delivery"
security before delivery, any gain would not be tax-exempt.
Repurchase Agreements. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from banks and registered broker-dealers which the
investment adviser deems creditworthy under guidelines approved by the Company's
Board of Directors, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price would
generally equal the price paid by the Fund plus interest negotiated on the basis
of current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller under a repurchase agreement will be
required to maintain continually the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued interest).
This requirement will be continually monitored by Provident or DRZ, as the case
may be. If the seller were to default on its repurchase obligation or become
insolvent, the Fund holding such obligation would suffer a loss to the extent
that the proceeds from a sale of the underlying portfolio securities were less
than the repurchase price under the agreement, or to the extent that the
disposition of such securities by the Fund were delayed pending court action.
Additionally, there is no controlling legal precedent confirming that a Fund
would be entitled, as against a claim by such seller or its receiver or trustee
in bankruptcy, to retain the underlying securities, although the Board of
Directors of the Company believes that, under the regular procedures normally in
effect for custody of a Fund's securities subject to repurchase agreements and
under federal laws, a court of competent jurisdiction would rule in favor of the
Company if presented with the question. Securities subject to repurchase
agreements will be held by that Fund's custodian or another qualified custodian
or in the Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by a Fund under the 1940 Act.
Reverse Repurchase Agreements. As discussed in the Prospectuses, each
of the Funds, other than the Money Market Fund, may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with that
Fund's investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers,
and agree to repurchase the securities at a mutually agreed-upon date and price.
Each Fund intends to enter into reverse repurchase agreements only to avoid
otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. Government
securities or other liquid, high grade debt securities consistent with the
Fund's investment restrictions
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having a value equal to the repurchase price (including accrued interest), and
will subsequently continually monitor the account to ensure that such equivalent
value is maintained at all times. Reverse repurchase agreements involve the risk
that the market value of the securities sold by a Fund may decline below the
price at which a Fund is obligated to repurchase the securities. Reverse
repurchase agreements are considered to be borrowings by a Fund under the 1940
Act.
Except as otherwise disclosed to the shareholders of the particular
Fund, the Company will not acquire portfolio securities issued by, make savings
deposits in, or enter into repurchase agreements with Provident, DRZ, the
Distributor, or their affiliates, and will not give preference to Provident's
correspondents with respect to such transactions, securities, savings deposits
and repurchase agreements. In addition, while the Stock Appreciation Fund's
investment restrictions permit it to engage in reverse repurchase agreements
without prior shareholder approval, the Stock Appreciation Fund does not
currently intend to enter into such agreements.
Hedging Transactions. Hedging transactions, including the use of
options and futures, in which a Fund may be authorized to engage as described in
the Prospectus or below, have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the investment adviser's view as to certain market movements is incorrect, the
risk that the use of such hedging transactions could result in losses greater
than if they had not been used.
Use of put and call options may result in losses to a Fund, force the
sale or purchase of portfolio securities at inopportune times or for prices
higher than (in the case of put options) or lower than (in the case of call
options) current market values, limit the amount of appreciation a Fund can
realize on its investments or cause the Fund to hold a security it might
otherwise sell. The use of 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
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the same time they tend to limit any potential gain which might result from an
increase in value of such position. Finally, the daily variation margin
requirements for futures contracts would create a greater ongoing potential
financial risk than would purchases of options, where the exposure is limited to
the cost of the initial premium. Losses resulting from the use of hedging
transactions would reduce net asset value, and possible income, and such losses
can be greater than if the hedging transactions had not been utilized.
Writing Covered Call and Put Options. Each of the Income, Income
Equity, Ohio Tax-Free, Stock Appreciation, Large Company and Balanced Funds may
write covered call and covered put options on securities, or futures contracts
regarding securities, in which the particular Fund may invest, in an effort to
realize additional income. A put option gives the purchaser the right to sell
the underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security. A
call option gives the purchaser of the option the right to buy, and a writer has
the obligation to sell, the underlying security at the stated exercise price at
any time prior to the expiration of the option, regardless of the market price
of the security. The premium paid to the writer is consideration for undertaking
the obligations under the option contract. Put and call options purchased by a
Fund will be valued at the last sale price, or in the absence of such a price,
at the mean between bid and asked price. Such options will be listed on national
securities or futures exchanges or be available in the over-the-counter market
through pricing reports of broker-dealers. A Fund may write covered call options
as a means of seeking to enhance its income through the receipt of premiums in
instances in which the adviser determines that the underlying securities or
futures contracts are not likely to increase in value above the exercise price.
A Fund also may seek to earn additional income through the receipt of premiums
by writing put options. Covered call options give the purchaser the right, for a
stated period, to buy the underlying securities from a Fund at a stated price,
while put options give the purchaser the right, for a stated period, to sell the
underlying securities to a Fund at a stated price. By writing a call option, a
Fund limits its opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option; by writing a put
option, a Fund assumes the risk that it may be required to purchase the
underlying security at a price in excess of its then current market value.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the
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mean between the closing bid and asked prices. If an option expires on the
stipulated expiration date or if the Fund enters into a closing purchase
transaction, it will realize a gain (or a loss if the cost of a closing purchase
transaction exceeds the net premium received when the option is sold) and the
deferred credit related to such option will be eliminated. If an option is
exercised, the Fund may deliver the underlying security in the open market. In
either event, the proceeds of the sale will be increased by the net premium
originally received and the Fund will realize a gain or loss.
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).
The Ohio Tax-Free Fund intends to enter into puts only with dealers,
banks, and broker-dealers which, in Provident's opinion, present minimal credit
risks.
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Options and Futures Strategies. In addition, each of the Income, Income
Equity, Ohio Tax-Free, Stock Appreciation, Large Company and Balanced Funds may
purchase put and call options written by third parties covering those types of
financial instruments in which such Fund may invest to attempt to provide
protection against adverse price effects from anticipated changes in prevailing
prices for such instruments. The purchase of a put option is intended to protect
the value of a Fund's holdings in a falling market while the purchase of a call
option is intended to protect the value of a Fund's positions in a rising
market.
In purchasing a call option, a Fund would be in a position to realize a
gain if, during the option period, the price of the underlying security, index
or futures contract increased by an amount in excess of the premium paid for the
call option. It would realize a loss if the price of the underlying security,
index or futures contract declined or remained the same or did not increase
during the period by more than the amount of the premium. By purchasing a put
option, a Fund would be in a position to realize a gain if, during the option
period, the price of the security, index or futures contract declined by an
amount in excess of the premium paid. It would realize a loss if the price of
the security, index or futures contract increased or remained the same or did
not decrease during that period by more than the amount of the premium. If a put
or call option purchased by a Fund were permitted to expire without being sold
or exercised, its premium would represent a realized loss to a Fund.
General Characteristics of Options. Put options and call options
typically have similar structural characteristics and operational mechanics
regardless of the underlying instrument on which they are purchased or sold.
Thus, the following general discussion relates to each of the particular types
of options discussed 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.
With certain exceptions, exchange-listed options generally settle by
physical delivery of the underlying security or currency, although in the future
cash settlement may become available. Index options are cash settled for the net
amount, if any, by which the
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option is "in-the-money" (i.e., where the value of the underlying instrument
exceeds, in the case of a call option, or is less than, in the case of a put
option, the exercise price of the option) at the time the option is exercised.
Frequently, rather than taking or making delivery of the underlying instrument
through the process of exercising the option, listed options are closed by
entering into offsetting purchase or sale transactions that do not result in
ownership of the new option. A Fund's ability to close out its position as a
purchase of seller of a put or call option is dependent in part, upon the
liquidity of the option market. In addition, the hours of trading for listed
options may not coincide with the hours during which the underlying financial
instruments are traded. To the extent that the option markets close before the
markets for the underlying financial instruments, significant price and rate
movements can take place in the underlying markets that cannot be reflected in
the option markets.
All options written by a Fund must be "covered" (i.e., the Fund must
own the securities or futures contract subject to a call option or must meet the
asset segregation requirements) as long as the call is outstanding. Even though
a Fund will receive the option premium to help protect it against loss, a call
option written by a Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold. With respect to put options
written by a Fund, such Fund will place high quality liquid debt securities in a
segregated account to cover its obligations under such put option and will
monitor the value of the assets in such account and its obligations under the
put option daily.
Futures Contracts. Each of the Income, Income Equity, Ohio Tax-Free,
Large Company and Balanced Funds may purchase or sell contracts for the future
delivery of the specific financial instruments in which the particular Fund may
invest, and indices based upon the types of securities in which the particular
Fund may invest (collectively, "Futures Contracts"). A Fund may use this
investment technique to hedge against anticipated future changes in market
interest rates, which otherwise might adversely affect either the value of the
Fund's securities or the prices of securities which the Fund intends to purchase
at a later date. Alternatively, the Funds may purchase or sell futures contracts
to hedge against changes in market interest rates which may result in the
premature call at par value of certain securities which the Fund has purchased
at a premium.
The Income Equity Fund and the Large Company Fund may purchase or sell
futures contracts based upon an equity index, commonly referred to as "equity
index futures contracts." This type of futures contract is an agreement by the
Fund to buy or sell by a specified date and at a specified price the market
value of equity
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securities included in a particular equity index. No payment is made for the
index or securities when the Fund buys an equity index futures contract and
neither the index nor any securities are delivered when the Fund sells an equity
index futures contract. Instead, the Fund makes a deposit of "initial margin"
equal to a percentage of the value of the futures contract. Payment or delivery
is made upon the closing out of the futures position or the expiration of the
equity index futures contract. Equity index futures contracts will be used only
as a hedge against anticipated changes in the level of stock prices.
The Income Fund may purchase or sell futures contracts based upon fixed
income securities, commonly referred to as "interest rate futures contracts." An
interest rate futures contract is an agreement by the Fund to buy or sell, by a
specified date and at a specified price, the market value of fixed income
securities included in a particular fixed income index. As with the futures
contracts, no payment is made for securities when the Fund buys an interest rate
futures contract and no securities are delivered when the Fund sells an interest
rate futures contract; instead, the Fund makes an initial margin deposit and
payment or delivery is made upon the closing out of the futures position or the
expiration of the interest rate futures contract. Interest rate futures
contracts will be used only as a hedge against anticipated changes in the level
of interest rates.
In general, the value of futures contracts sold by a Fund to offset
declines in its portfolio securities will not exceed the total market value of
the portfolio securities to be hedged, and futures contracts purchased by the
Fund will be covered by a segregated account consisting of cash or liquid
securities in an amount equal to the total market value of such futures
contracts, less the initial margin deposited therefor.
When selling futures contracts short, when buying futures contracts and
when writing put options, a Fund will be required to segregate in a separate
account cash and/or U.S. government securities in an amount sufficient to meets
its obligations. When writing call options, a Fund will be required to own the
financial instrument or futures contract underlying the option or segregate cash
and/or U.S. government securities in an amount sufficient to meet its
obligations under written calls.
This investment technique is designed primarily to hedge against
anticipated future changes in market conditions or interest rates which
otherwise might adversely affect the value of securities which such a Fund holds
or intends to purchase. For example, when interest rates are expected to rise or
market values of portfolio securities are expected to fall, a Fund can seek
through the sale of futures contracts to offset a decline in the value of its
portfolio securities. When interest rates are expected to fall or market values
are expected to rise, a Fund,
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through the purchase of such contracts, can attempt to secure better rates or
prices for the Fund than might later be available in the market when it effects
anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid high grade debt obligations, to cover its performance under such
contracts. A Fund may lose the expected benefit of futures transactions if
interest rates or securities prices move in an unanticipated manner. Such
unanticipated changes may also result in poorer overall performance than if the
Fund had not entered into any futures transactions. In addition, the value of a
Fund's futures positions may not prove to be perfectly or even highly correlated
with the value of its portfolio securities, limiting the Fund's ability to hedge
effectively against interest rate and/or market risk and giving rise to
additional risks. There is no assurance of liquidity in the secondary market for
purposes of closing out futures positions.
Regulatory Restrictions. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, a Fund will maintain in a segregated
account cash or liquid high-grade securities equal to the value of such
contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of such Fund's total assets after
taking into account unrealized profits and unrealized losses on any contracts
entered into. Such Fund will not engage in transactions in futures contracts or
options thereon for speculation, but only to attempt to hedge against changes in
market conditions affecting the values of securities which such Fund holds or
intends to purchase.
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FUNDAMENTAL NATURE OF INVESTMENT OBJECTIVES
The investment objective of each of the Funds is fundamental and may
not be changed without approval of the holders of a majority of such Fund's
outstanding voting shares (which means the lesser of (1) 67% of the shares
represented at a meeting at which more than 50% of the outstanding shares are
represented or (2) more than 50% of the outstanding shares).
In addition to the investment restrictions set forth in the
Prospectuses, the Money Market Fund may not:
1. Invest more than 5% of its total assets in securities of
any company having a record, together with its predecessors, of
less than three years of continuous operation;
2. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or of securities which, without payment of any further consideration,
are convertible into or exchangeable for securities of the same issue as, and
equal in amount to, the securities sold short; and
3. Underwrite securities of other issuers, except that the Money Market
Fund may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objective.
Each of the Income Fund and the Income Equity Fund may not:
1. Invest in securities of an issuer (other than an agency or
instrumentality of the U.S. Government) which, together with any predecessor of
the issuer, has been in operation for less than three years if, immediately
after and as a result of such investment, more than 5% of the value of the
Fund's total assets would then be invested in the securities of such issuer; and
2. Invest more than 10% of the value of the Fund's net assets in fixed
time deposits which are non-negotiable and/or which impose a penalty for early
withdrawal and which have maturities of more than 7 days.
Finally, each of the Ohio Tax-Free Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced Fund may
not:
1. Purchase securities on margin, except for use of short-term credit
necessary for clearance of purchases of portfolio securities and except as may
be necessary to make margin payments in connection with derivative securities
transactions;
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2. Underwrite the securities issued by other persons, except to the
extent that a Fund may be deemed to be an underwriter under certain securities
laws in the disposition of "restricted securities";
3. Purchase or sell commodities or commodity contracts, except to the
extent disclosed in the current Prospectus of the Fund; and
4. Purchase or sell real estate (although investments in marketable
securities of companies engaged in such activities and securities secured by
real estate or interests therein are not prohibited by this restriction).
In addition to the investment restrictions contained in the Prospectus,
each Fund has adopted the following additional restrictions, which may be
changed by the Board of Directors without the vote of a Fund's shareholders:
1. A Fund may not purchase or retain securities of an issuer if, to the
knowledge of the Company, officers, Trustees or Directors of the Company,
Provident, any sub-adviser or the Distributor, each owning beneficially more
than 1/2 of 1% of the securities of such issuer, own in the aggregate more than
5% of the securities of such issuer, or such persons or management personnel of
the Company, Provident, any sub-adviser or the Distributor have a substantial
beneficial interest in the securities of such issuer. Provident, any
sub-adviser, the Distributor or any affiliates thereof or any of their Trustees,
Directors, officers or employees may not purchase or sell as principal any
securities of the Funds. Nor may securities of any of the Funds be loaned to
Provident, any sub-adviser, the Distributor or any affiliates or any of their
Trustees, Directors, officers or employees.
In addition, each of the Ohio Tax-Free Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced Fund may
not:
1. Engage in any short sales, except to the extent disclosed in the
current Prospectus of the Fund;
2. Invest more than 10% of total assets in the securities of issuers,
which together with any predecessors, have a record of less than three years of
continuous operation;
3. Purchase participation or direct interests in oil, gas or other
mineral exploration or development programs (although investments by such Funds
in marketable securities of companies engaged in such activities are not
prohibited by this restriction);
4. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or
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reorganization, and (b) to the extent permitted by the 1940 Act or pursuant to
any exemptions therefrom; and
5. Mortgage or hypothecate the Fund's assets in excess of one third of
the Fund's total assets.
In order to permit the sale of a Fund's shares in certain states, the
Company may make commitments more restrictive than the investment restrictions
described in the Prospectus. Should the Company determine that any such
commitment is no longer in the best interests of a Fund, it will revoke the
commitment by terminating sales of a Fund's shares in the state involved.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in asset value
is not a violation of the limit.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Because of Money Market Fund intends to invest entirely in securities
with maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of portfolio turnover rate, the
portfolio turnover with respect to the Money Market Fund is expected to be zero
percent for regulatory purposes.
The portfolio turnover rate for each of the Funds (other than the Money
Market Fund, the Stock Appreciation Fund and the Large Company Fund) for the two
fiscal years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended December 31,
Fund 1995 1994
---- ---- ----
<S> <C> <C>
Income Fund 75% 83%
Income Equity Fund 180% 119%
Ohio Tax-Free Fund(1) 34% 29%
Balanced Fund(2) 13% 1%
</TABLE>
(1) Commenced operations August 1, 1994
(2) Commenced operations September 1, 1994
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The portfolio turnover rates for the Stock Appreciation Fund for the
fiscal period ended December 31, 1995, and the two fiscal years ended September
30, 1995 and 1994 were 46%, 197% and 254%, respectively. There are no portfolio
turnover rates for the Large Company Fund since it has not yet commenced
operations; however, such Fund's portfolio turnover rate for the fiscal year
ending December 31, 1997, is not expected to exceed 30%.
The portfolio turnover rate for each Fund may vary greatly from year to
year as well as within a particular year, and may also be affected by cash
requirements for redemptions of shares. High portfolio turnover rates will
generally result in higher transaction costs, including brokerage commissions to
a Fund, and may result in additional tax consequences to such Fund's
shareholders. Portfolio turnover will not be a limiting factor in making
investment decisions.
DIVIDENDS AND TAXES
Each Fund intends to distribute to its shareholders dividends from net
investment income monthly and all net realized long-term capital gains annually
in shares of the Fund or, at the option of the shareholder, in cash.
Shareholders who have not opted prior to the record date for any distribution to
receive cash will have the number of such shares determined on the basis of the
Fund's net asset value per share computed at the end of the next business day
following the record date. Net asset value is used in computing the number of
shares in both gains and income distribution reinvestments. Account statements
and/or checks as appropriate will be mailed to shareholders within seven days
after a Fund pays the distribution. Unless a Fund receives instructions to the
contrary from a shareholder before the record date, it will assume that the
shareholder wishes to receive that distribution and all future gains and income
distributions in shares. Instructions continue in effect until changed in
writing.
It is not expected that the Income Fund's, the Money Market Fund's or
the Ohio Tax-Free Fund's income dividends will be eligible for the corporate
dividends received deduction. It is expected that a portion of the Income Equity
Fund's, the Stock Appreciation Fund's, the Large Company Fund's and the Balanced
Fund's income distributions will be eligible for the 70% corporate dividends
received deduction.
ADDITIONAL TAX INFORMATION
Each of the Funds of the Company is treated as a separate entity for
federal income tax purposes and intends to qualify as a
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"regulated investment company" under the Internal Revenue Code of 1986, as
amended (the "Code") for so long as such qualification is in the best interest
of that Fund's shareholders. In order to qualify as a regulated investment
company, each Fund must, among other things: derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans, and
gains from the sale or other disposition of stock or securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities, or currencies; derive less than 30% of its gross income
from the sale or other disposition of stock, securities, options, futures,
forward contracts or foreign currencies held less than three months; and
diversify its investments within certain prescribed limits. In addition, to
utilize the tax provisions specially applicable to regulated investment
companies, each Fund must distribute to its shareholders at least 90% of its
investment company taxable income for the year and 90% of its interest income
which is excludable from income under Section 103(a) of the Code. In general, a
Fund's investment company taxable income will be its taxable income subject to
certain adjustments and excluding the excess of any net long-term capital gain
for the taxable year over the net short-term capital loss, if any, for such
year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. Dividends
declared in October, November and December in any year and distributed in
January of the following year will be treated as having been paid in the prior
year. If distributions during a calendar year were less than the required
amount, a Fund would be subject to a non-deductible excise tax equal to 4% of
the deficiency.
Although each such Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in which it is otherwise deemed to be conducting business, a Fund
may be subject to the tax laws of such states or localities. In addition, if for
any taxable year a Fund does not qualify for the special tax treatment afforded
regulated investment companies, all of its taxable income will be subject to
federal tax at regular corporate rates (without any deduction for distributions
to its shareholders). In such event, dividend distributions would be taxable to
shareholders to the extent of earnings and profits, and would be eligible for
the dividends received deduction for corporations.
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The Money Market Fund, the Income Fund, the Income Equity Fund, the
Stock Appreciation Fund, the Large Company Fund and the Balanced Fund. It is
expected that each such Fund will distribute annually to shareholders all or
substantially all of the Fund's net ordinary income and net realized capital
gains and that such distributed net ordinary income and distributed net realized
capital gains will be taxable income to shareholders for federal income tax
purposes, even if paid in additional shares of the Fund and not in cash.
Distribution by a Fund of the excess of net long-term capital gain over
net short-term capital loss is taxable to shareholders as long-term capital gain
in the year in which it is received, regardless of how long the shareholder has
held the shares. Such distributions are not eligible for the dividends-received
deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on capital gains of
individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
to future years.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so
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<PAGE> 95
designated may not exceed the amount received by the Fund for its taxable year
that qualifies for the dividends received deduction. Because all of the Money
Market Fund's and Income Fund's net investment income is expected to be derived
from earned interest, it is anticipated that no distributions from those Funds
will qualify for the 70% dividends received deduction.
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities, if any. Since less than 50% of
the value of any Fund's total assets at the end of its fiscal year is expected
to be invested in stock or securities of foreign corporations, a Fund will not
be entitled under the Code to pass through to its shareholders their pro rata
share of the foreign taxes paid by the Fund, if any. These taxes will be taken
as a deduction by such Fund.
The Ohio Tax-Free Fund. The Code permits a regulated investment company
which invests in Exempt Securities to pay to its shareholders "exempt-interest
dividends," which are excluded from gross income for federal income tax
purposes, if at the close of each quarter at least 50% of the value of its total
assets consist of Exempt Securities.
An exempt-interest dividend is any dividend or part thereof (other than
a capital gain dividend) paid by the Ohio Tax-Free Fund that is derived from
interest received by the Ohio Tax-Free Fund that is excluded from gross income
for federal income tax purposes, net of certain deductions, provided the
dividend is designated as an exempt-interest dividend in a written notice mailed
to shareholders not later than sixty days after the close of the Ohio Tax-Free
Fund's taxable year. The percentage of the total dividends paid by the Ohio
Tax-Free Fund during any taxable year that qualifies as exempt-interest
dividends will be the same for all shareholders receiving dividends during such
year. Exempt-interest dividends shall be treated by the Ohio Tax-Free Fund's
shareholders as items of interest excludable from their gross income for Federal
income tax purposes under Section 103(a) of the Code. However, a shareholder is
advised to consult his tax adviser with respect to whether exempt-interest
dividends retain the exclusion under Section 103(a) of the Code if such
shareholder is a "substantial user" or a "related person" to such user under
Section 147(a) of the Code with respect to any of the Exempt Securities held by
the Ohio Tax-Free Fund. If a shareholder receives an exempt-interest dividend
with respect to any share and such share is held by the shareholder for six
months or less, any loss on the sale or exchange of such share shall be
disallowed to the extent of the amount of such exempt-interest dividend.
In general, interest on indebtedness incurred or continued by a
shareholder to purchase or carry shares is not deductible for federal income tax
purposes if the Ohio Tax-Free Fund distributes exempt-interest dividends during
the shareholder's taxable year.
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<PAGE> 96
A shareholder of the Ohio Tax-Free Fund that is a financial institution may not
deduct interest expense attributable to indebtedness incurred or continued to
purchase or carry shares of the Ohio Tax-Free Fund if the Ohio Tax-Free Fund
distributes exempt-interest dividends during the shareholder's taxable year.
Certain federal income tax deductions of property and casualty insurance
companies holding shares of the Ohio Tax-Free Fund and receiving exempt-interest
dividends may also be adversely affected. In certain limited instances, the
portion of Social Security benefits received by a shareholder which may be
subject to federal income tax may be affected by the amount of tax-exempt
interest income, including exempt-interest dividends received by shareholders of
the Ohio Tax-Free Fund.
In the unlikely event the Ohio Tax-Free Fund realizes long-term capital
gains, the Ohio Tax-Free Fund intends to distribute any realized net long-term
capital gains annually. If the Ohio Tax-Free Fund distributes such gains, the
Ohio Tax-Free Fund will have no tax liability with respect to such gains, and
the distributions will be taxable to shareholders as long-term capital gains
regardless of how long the shareholders have held shares. Any such distributions
will be designated as a capital gain dividend in a written notice mailed by the
Ohio Tax-Free Fund to the shareholders not later than sixty days after the close
of the Ohio Tax-Free Fund's taxable year. It should be noted, however, that
capital gains are taxed like ordinary income except that net capital gains of
individuals are subject to a maximum federal income tax rate of 28%. Net capital
gains are the excess of net long-term capital gains over net short-term capital
losses. Any net short-term capital gains are taxed at ordinary income tax rates.
If a shareholder receives a capital gain dividend with respect to any share and
then sells the share before he has held it for more than six months, any loss on
the sale of the share is treated as long-term capital loss to the extent of the
capital gain dividend received.
Although it is expected that under normal market conditions at least
80% of the net assets of the Ohio Tax-Free Fund will be invested in bonds,
notes, debentures, commercial paper and other obligations, the interest on which
is not a preference item for individuals for the federal alternative minimum
tax, exempt-interest dividends attributable to interest on certain municipal
obligations in which the Ohio Tax-Free Fund may invest, including those issued
on or after August 8, 1986 to finance certain private activities, will be
treated as tax preference items in computing an individual's alternative minimum
tax. For individuals, the alternative minimum tax rate is 26% on alternative
minimum taxable income up to $175,000 and 28% on the excess of $175,000.
Also, all exempt-interest dividends of the Ohio Tax-Free Fund may
subject corporations to alternative minimum tax as a result of the inclusion of
such dividends in alternative minimum taxable
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<PAGE> 97
income of 75% of the excess of the adjusted current earnings over pre-adjustment
alternative minimum taxable income. Adjusted current earnings would include
exempt-interest dividends of the Ohio Tax-Free Fund. For corporations the
alternative minimum tax rate is 20%.
For taxable years of corporations beginning before 1996, the Superfund
Revenue Act of 1986 imposes an additional tax (which is deductible for federal
income tax purposes) on a corporation at a rate of 0.12 of one percent on the
excess over $2,000,000 of such corporation's "modified alternative minimum
taxable income", which would include a portion of the exempt-interest dividends
distributed by the Ohio Tax-Free Fund to such corporation. In addition,
exempt-interest dividends distributed to certain foreign corporations doing
business in the United States could be subject to a branch profits tax imposed
by Section 884 of the Code.
As indicated in the Prospectus, the Ohio Tax-Free Fund may acquire
rights regarding specified portfolio securities under puts. See "INVESTMENT
OBJECTIVES AND POLICIES -- Additional Information on Portfolio Instruments -
Puts" in this Statement of Additional Information. The policy of the Ohio
Tax-Free Fund is to limit its acquisition of puts to those under which it will
be treated for federal income tax purposes as the owner of the Exempt Securities
acquired subject to the put and the interest on the Exempt Securities will be
tax-exempt to it. Although the Internal Revenue Service has issued a published
ruling that provides some guidance regarding the tax consequences of the
purchase of puts, there is currently no guidance available from the Internal
Revenue Service that definitively establishes the tax consequences of many of
the types of puts that the Ohio Tax-Free Fund could acquire under the 1940 Act.
Therefore, although the Ohio Tax-Free Fund will only acquire a put after
concluding that it will have the tax consequences described above, the Internal
Revenue Service could reach a different conclusion.
Distributions of exempt-interest dividends by the Ohio Tax-Free Fund
may be subject to local taxes even though a substantial portion of such
distributions may be derived from interest on obligations which, if received
directly, would be exempt from such taxes. The Ohio Tax-Free Fund will report to
its shareholders annually after the close of its taxable year the percentage and
source of interest income earned on municipal obligations held by the Ohio
Tax-Free Fund during the preceding year. Shareholders are advised to consult
their tax advisers concerning the application of state and local taxes.
GENERAL
Each Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any shareholder, and the proceeds of
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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.
Information as to the federal income tax status of all distributions
will be mailed annually to each shareholder.
FISCAL YEAR
Each Fund's fiscal year ends December 31.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each of the Company's Funds are sold on a continuous basis by
the Distributor, and the Distributor has agreed to use appropriate efforts to
solicit all purchase orders. In addition to purchasing shares directly from the
Distributor, shares may be purchased through procedures established by the
Distributor in connection with the requirements of accounts at Provident or
Provident's affiliated entities (collectively, "Entities"). Customers purchasing
shares of the Funds may include officers, directors, or employees of Provident
or the Entities.
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The Company may suspend the right of redemption or postpone the date of
payment for shares during any period when (a) trading on the New York Stock
Exchange (the "Exchange") is restricted by applicable rules and regulations of
the Commission, (b) the Exchange is closed for other than customary weekend and
holiday closings, (c) the Commission has by order permitted such suspension, or
(d) an emergency exists as a result of which (i) disposal by the Company of
securities owned by it is not reasonably practical, or (ii) it is not reasonably
practical for the Company to determine the fair value of its net assets.
VALUATION OF SECURITIES
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Directors have determined that the amortized cost method for
valuing the Money Market Fund's securities is the best method currently
available. The Directors review this method of valuation to ensure that such
Fund's securities are valued at their fair value, as determined by the Directors
in good faith. The Directors are obligated, as a particular responsibility
within the overall duty of care owed to shareholders, to establish procedures
reasonably designed, taking into account current market conditions and the Money
Market Fund's investment objective, to stabilize the net asset value per share
as computed for the purposes of distribution and redemption at $1.00 per share.
The Directors' procedures include periodically monitoring, as
appropriate and at such intervals as are reasonable in light of current market
conditions, the relationship between the amortized cost value per share and a
net asset value per share based upon available indications of market value. The
Directors will consider what steps should be taken, if any, in the event of a
difference of more than one-half of one percent between the two. The Directors
will take such steps as they consider appropriate including (1) the sale of the
Money Market Fund's instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; (2) withholding dividends
or payment of distributions from capital or capital gains; (3) redemptions of
shares in kind; or (4) establishing a net asset value per share by using
available market quotations or equivalents in order to minimize any material
dilution or other unfair results which might arise from differences between the
two.
The Money Market Fund limits its investments to instruments which the
Directors have determined present minimal credit risk and which are "Eligible
Securities" as defined by Rule 2a-7 of the 1940
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<PAGE> 100
Act. The Money Market Fund is also required to maintain a dollar weighted
average portfolio maturity (not more than 90 days) appropriate to its objective
of maintaining a stable net asset value of $1.00 per share, and this precludes
the purchase of any security with a remaining maturity of more than 397 days.
Should the disposition of a security result in a dollar weighted average
portfolio maturity of more than 90 days, the Money Market Fund will invest its
available cash in such a manner as to reduce such maturity to 90 days or less as
soon as practicable. For the purpose of determining the dollar weighted average,
any instrument with a stated maturity of six months or less which has a coupon
(or yield) which is subject to renegotiation at designated periods of time
(e.g., every 30 days), or any instrument having a coupon (or yield) which
fluctuates with the change in a predetermined standard (e.g., the so-called
"Prime Rate"), shall be deemed to have a maturity equivalent to the time
remaining to the next date of renegotiation or the next date on which the
predetermined standard may change.
It is the normal practice of the Money Market Fund to hold securities
to maturity and realize par therefor, unless a sale or other disposition is
mandated by redemption requirements or other extraordinary circumstances. Under
the amortized cost method of valuation traditionally employed by institutions
for valuation of money market instruments, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the Money Market Fund. In periods of declining interest rates,
the indicated daily yield on shares of the Money Market Fund, computed by
dividing its annualized daily income by the net asset value computed as above,
may tend to be lower than similar computations made by utilizing a method of
valuation based upon market prices and estimates. In periods of rising interest
rates, the daily yield of shares at the value computed as described above may
tend to be higher than a similar computation made by utilizing a method of
calculation based upon market prices and estimates.
Since the net income of the Money Market Fund is declared as a dividend
each time net income is determined, the net asset value per share remains at
$1.00 per share immediately after each dividend declaration. The Money Market
Fund expects to have net income at the time of each dividend determination made
at the close of the Exchange. If for any reason there is a net loss which would
result in the Money Market Fund's not being able to price its shares at $1.00
per share, the Money Market Fund will first offset such amount pro rata against
dividends accrued during the month in each shareholder account. To the extent
that such a net loss would exceed such accrued dividends, the Money Market Fund
will reduce the number of its outstanding shares by having each shareholder
contribute to the Money Market Fund's capital his pro rata portion of the total
number of shares required to be cancelled in order to maintain a net asset value
of $1.00. EACH SHAREHOLDER WILL BE
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DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS
INVESTMENT IN THE MONEY MARKET FUND.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND, THE RIVERFRONT INCOME EQUITY FUND,
THE RIVERFRONT OHIO TAX-FREE BOND FUND, THE RIVERFRONT STOCK APPRECIATION FUND,
THE RIVERFRONT LARGE COMPANY FUND AND THE RIVERFRONT BALANCED FUND
Current values for such Funds' securities are determined as follows:
(1) Securities that are traded on a securities exchange or the
over-the-counter National Market System (NMS) are valued on the basis of the
closing sales price on the exchange where primarily traded or NMS prior to the
time of the valuation, provided that a sale has occurred and that this price
reflects current market value according to procedures established by the Board
of Directors;
(2) Securities traded in the over-the-counter market, other than on
NMS, for which market quotations are readily available, or in the event no sale
has occurred under (1) above, are valued at the mean of the bid and asked prices
at the time of valuation;
(3) Short-term instruments which are purchased with maturities of sixty
days or less are valued at amortized cost (original purchase cost as adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; short-term instruments maturing in more
than sixty days when purchased which are held on the sixtieth day prior to
maturity are valued at amortized cost (market value on the sixtieth day adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; and which in either case reflects fair
value as determined by the Board of Directors;
(4) Short-term money market instruments having maturities of more than
sixty days for which market quotations are readily available are valued at
current market value; where market quotations are not available, such
instruments are valued at fair value as determined by the Board of Directors;
and
(5) The following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Directors: (a) securities,
including restricted securities, for which complete quotations are not readily
available, (b) listed securities or those on NMS if, in the Company's opinion,
the last sales price does not reflect a current market value or if no sale
occurred, and (c) other assets.
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DIRECTORS AND OFFICERS
The Directors and officers of the Company are:
J. VIRGIL EARLY, Age 58, Director; Principal in J. Virgil Early &
Associates and former Executive Vice President of Huntington Bankshares, Inc.
Mr. Early's business address is J. Virgil Early & Associates, 11 Bliss Lane,
Jekyll Island, Georgia 31527.
WILLIAM M. HIGGINS, Age 51, Director; President and Director of Sena
Weller Rohs Williams Inc.; former President and Director of Reynolds DeWitt
Advisers, Inc. and former Vice President of Reynolds DeWitt Securities Co. Mr.
Higgins' business address is Sena Weller Rohs Williams, Inc., 300 Main Street,
4th Fl., Cincinnati, OH 45202.
STEPHEN G. MINTOS, Age 41, Director and President of the Company;
Executive Vice President, BISYS Fund Services Limited Partnership (formerly The
Winsbury Company).*
HARVEY M. SALKIN, PH.D., Age 50, Director; Retired; former President
and major shareholder of Mathematical Investing Systems, Inc.* Dr. Salkin's
business address is Case Western Reserve University, Department of Operations
Research, 10900 Euclid Avenue, Cleveland, Ohio 44106-7235.
GEORGE O. MARTINEZ, Age 37, Vice President; employee of BISYS Fund
Services Limited Partnership (formerly The Winsbury Company) since April, 1995;
prior to April, 1995, he was Vice President and Associate General Counsel of
Alliance Capital Management L.P. (investment firm).
WALTER B. GRIMM, Age 50, Vice President and Treasurer; employee of
BISYS Fund Services Limited Partnership (formerly The Winsbury Company) since
June, 1992; prior to June, 1992, he was the President of Leigh Investments
Consulting (investment firm).
JAMES E. WHITE, Age 41, Secretary; employee of BISYS Fund Services
Limited Partnership since December, 1995; prior to December, 1995, he was a
Sales Director/Variable Products at Financial Horizons Distributors Agency, Inc.
(third party products marketer to banks).
ALAINA V. METZ, Age 28, Assistant Secretary; employee of BISYS Fund
Services Limited Partnership since June, 1995; prior to June, 1995, she was a
supervisor at Alliance Capital Management, L.P. (investment firm).
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<PAGE> 103
*These Directors are interested persons of the Company as defined under
the 1940 Act.
Except as set forth above, the address of all Directors and officers of
the Company is 3435 Stelzer Road, Columbus, Ohio 43219.
During the fiscal year ended December 31, 1995, no Director or officer
affiliated with Provident, DRZ, any other sub-adviser, the Distributor or
BISYS Fund Services Ohio, Inc. received any direct remuneration from the
Company.
The following table sets forth information regarding all compensation
paid by the Company to its directors for their services as directors during the
fiscal year ended December 31, 1995. The Company has no pension or retirement
plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Aggregate Total Compensation
Name and Position Compensation From The Company
With The Company From The Company and the Fund Complex*
- ---------------- ---------------- ---------------------
<S> <C> <C>
J. Virgil Early $5,500 $5,500
Director
William M. Higgins $5,500 $5,500
Director
Harvey M. Salkin $1,750 $1,750
Director
Stephen G. Mintos $ 0 $ 0
Director
</TABLE>
*For purposes of this Table, Fund Complex means one or more mutual
funds, including the Funds, which have a common investment adviser or affiliated
investment advisers or which hold themselves out to the public as being related.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISER
Subject to the general supervision of the Company's Board of Directors
and in accordance with the Funds' investment objectives, policies and
restrictions, investment advisory services are provided to the Funds of the
Company by The Provident Bank, One East Fourth Street, Cincinnati, Ohio 45202
("Provident") pursuant
B - 31
<PAGE> 104
to the Investment Advisory Agreement dated as of August 1, 1994, as amended as
of January 1, 1997 (the "Investment Advisory Agreement"). Prior to August 1,
1994, such services were provided to the Money Market Fund, the Income Fund and
the Income Equity Fund pursuant to a Management Agreement dated August 6, 1992,
between the Company and Provident (the "Prior Management Agreement"), an
Investment Advisory Agreement between the Company and Provident with respect to
the Income Fund dated April 30, 1993 (the "Provident Advisory Agreement"), and
an Investment Advisory Agreement between the Company and SunBank Capital
Management, N.A. ("SunBank") with respect to the Income Equity Fund dated August
1, 1992 (the "SunBank Agreement").
Provident's services as investment adviser are provided through its
Trust and Financial Services Group. Provident's Trust and Financial Services
Group currently manages assets of approximately $300 million. The Company is the
first registered investment company for which Provident has provided investment
advisory services.
Provident is an Ohio banking corporation which, with its affiliates, on
December 31, 1995, provided commercial lending, lease financing, consumer
credit, credit card, discount brokering, data processing, personal loan
financing and trust and asset management services through over 70 branch offices
located in Ohio and Kentucky. Provident is a subsidiary of Provident Bancorp,
Inc., a bank holding company headquartered in Cincinnati, Ohio, with
approximately $6.2 billion in total consolidated assets as of December 31, 1995.
Through its Ohio and Kentucky banking subsidiaries, Provident Bancorp, Inc.
provides a wide range of banking services to individuals and businesses.
Provident's Trust and Financial Services Group employs an experienced
staff of professional investment analysts, portfolio managers and traders and
uses several proprietary computer-based systems in conjunction with fundamental
analysis to identify investment opportunities.
Under the Investment Advisory Agreement, Provident has agreed to
provide, either directly or through one or more subadvisers, investment advisory
services for each of the Company's Funds as described in the Prospectus. For the
services provided and expenses assumed pursuant to the Investment Advisory
Agreement, each of the Company's Funds pays Provident a fee, computed daily and
paid monthly, at an annual rate calculated as a percentage of the average daily
net assets of that Fund. The annual rates for the Funds are as follows: fifteen
one-hundredths of one percent (.15%) for the Money Market Fund; forty
one-hundredths of one percent (.40%) for the Income Fund; ninety-five
one-hundredths of one percent (.95%) for the Income Equity Fund; fifty
one-hundredths of one percent (.50%) for the Ohio Tax-Free Fund; eighty
one-hundredths of one percent (.80%) for the Stock Appreciation Fund;
B - 32
<PAGE> 105
eighty one-hundredths of one percent (.80%) for the Large Company Fund;
and ninety one-hundredths of one percent (.90%) for the Balanced Fund.
Provident may periodically voluntarily reduce all or a portion of its advisory
fee with respect to a Fund to increase the net income of that Fund available
for distribution as dividends.
Under the Prior Management Agreement, for the fiscal year ended
December 31, 1993, and the period from January 1, 1994 to July 31, 1994, the
Income Fund incurred $82,342 and $58,055, respectively, in management fees; the
Income Equity Fund incurred $83,536 and $69,030, respectively, in management
fees; and the Money Market Fund incurred $156,711 and $130,493, respectively, in
management fees. Under the Investment Advisory Agreement, for the period August
1, 1994 to December 31, 1994, and the fiscal year ended December 31, 1995, the
Funds incurred the following investment advisory fees:
<TABLE>
<CAPTION>
Year Ended August 31, 1994 to
Fund December 31, 1995 December 31, 1994
---- ----------------- -----------------
<S> <C> <C>
Money Market $221,912 $96,715
Income 144,461 68,703
Income Equity 407,229 59,054
Tax-Free 56,114 20,864
Stock Appreciation 83,982(1) N/A(1)
Balanced 76,231 2,255
</TABLE>
(1) Commenced operations September 30, 1995.
The Company did not pay any investment advisory fees to Provident with
respect to the Large Company Fund since such Fund has not yet commenced
operations.
For the fiscal period January 1, 1993 through April 30, 1993, Keystone
Custodian Funds, Inc. ("Keystone") served as adviser to the Income Fund. For
that period, the Company paid Keystone $8,288 in advisory fees. The Agreement
between Keystone and the Company, on behalf of the Income Fund was terminated by
mutual agreement on April 30, 1993.
For the fiscal period May 1, 1993 through December 31, 1993, the
Company, on behalf of the Income Fund, paid Provident $19,159 in advisory fees.
B - 33
<PAGE> 106
The Directors of Provident are Allen L. Davis, Jack M. Cook, Thomas D.
Grote, Jr., S. Paul Mathews, Philip R. Myers, Joseph A. Pedoto, Sidney A.
Peerless and Joseph A. Steger.
The principal executive officers of Provident are Allen L. Davis,
President and Chief Executive Officer; Philip R. Myers, Senior Executive Vice
President; Robert L. Hoverson, Executive Vice President; John R. Farrenkopf,
Senior Vice President and Chief Financial Officer; Mark E. Magee, Senior Vice
President, General Counsel and Secretary; John S. Catlin, Richard J. Deyhle,
Geoffrey R. Glick, Jerry L. Grace, Roy L. Hiles, Drew T. Kagan, Noel Knox,
Roland E. Koch, John R. Mirlisena, John E. Rubenbauer and Bradley J. Smith,
Senior Vice Presidents.
For the fiscal year ended December 31, 1993, the Income Fund paid
$293,437 in expenses, of which amount Provident reimbursed such Fund $115,029,
and the Income Equity Fund paid $337,251 in expenses, of which amount Provident
reimbursed such Fund $35,381. For the fiscal year ended December 31, 1994,
Provident waived investment advisory fees or reimbursed the Funds for certain
expenses in the following amounts: the Balanced Fund - $16,264; and the Ohio
Tax-Free Fund - $4,394, respectively. For the fiscal year ended December 31,
1995, Provident waived investment advisory fees or reimbursed the Funds for
certain expenses in the following amounts: the Income Fund - $548; the Income
Equity Fund - $73,635; the Tax Free Fund - $11,778; the Balanced Fund - $69,745;
and the Stock Appreciation Fund - $900.
Unless sooner terminated, the Investment Advisory Agreement and the
Sub-Investment Advisory Agreement (as described below) continue in effect as to
a particular Fund for successive one-year periods ending December 31 of each
year if such continuance is approved at least annually by the Company's Board of
Directors or by vote of a majority of the outstanding shares of such Fund (as
defined under "The Company and its Funds" in the Prospectus), and a majority of
the Directors who are not parties to the Investment Advisory Agreement or the
Sub-Investment Advisory Agreement or interested persons (as defined in the 1940
Act) of any party to the Investment Advisory Agreement or the Sub-Investment
Advisory Agreement by votes cast in person at a meeting called for such purpose.
The Investment Advisory Agreement and the Sub-Investment Advisory Agreement are
terminable as to a particular Fund at any time on 60 days' written notice
without penalty by the Fund, by vote of a majority of the outstanding shares of
that Fund, or by Provident or, in the case of a subadviser, on 60 days' prior
written notice from such subadviser. Such Agreements also terminate
automatically in the event of any assignment, as defined in the 1940 Act.
The Investment Advisory Agreement and the Sub-Investment Advisory
Agreement provide that the respective investment adviser or sub-investment
adviser shall not be liable for any error of
B - 34
<PAGE> 107
judgment or mistake of law or for any loss suffered by the Company in connection
with the performance of their duties, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith, or gross negligence on the
part of the respective investment advisers or sub-investment adviser in the
performance of their duties, or from reckless disregard of their duties and
obligations thereunder.
SUBADVISERS
Pursuant to the terms of the Investment Advisory Agreement, Provident
has entered into a Sub-Investment Advisory Agreement dated as of August 15,
1995, as amended as of January 1, 1997, with DePrince, Race & Zollo, Inc., 201
South Orange Avenue, Suite 850, Orlando, Florida 32801 ("DRZ"). Pursuant to the
terms of such Sub-Investment Advisory Agreement, DRZ has been retained by
Provident to manage the investment and reinvestment of that portion of the
assets of the Income Equity Fund allocated to DRZ by the Company's Board of
Directors subject to the direction and control of the Company's Board of
Directors.
Under this arrangement, DRZ is responsible for the day-to-day
management of that specified portion of the Income Equity Fund's assets,
investment performance, policies and guidelines, and maintaining certain books
and records, and Provident is responsible for selecting and monitoring the
performance of DRZ, the day-to-day management of that portion of the Income
Equity Fund's assets allocated to it by the Company's Board of Directors, and
for reporting the activities of DRZ in managing the Income Equity Fund to the
Company's Board of Directors.
For its services provided and expenses assumed pursuant to its
Sub-Investment Advisory Agreement with Provident, DRZ receives from Provident, a
fee computed daily and paid monthly, at the annual rate of fifty one-hundredths
of one percent (0.50%) of the Income Equity Fund's average daily net assets of
up to $55 million and fifty-five one-hundredths of one percent (0.55%) of the
Income Equity Fund's average daily net assets of $55 million and above. In
addition, DRZ has indicated a willingness to manage net assets of the Income
Equity Fund up to $75 million, but not beyond. The Board of Directors have
considered and shall continue to consider such limitation in determining what
portion of the Income Equity Fund's assets should be allocated to DRZ to be
managed.
DRZ is owned jointly by Gregory M. DePrince, John D. Race and Victor A.
Zollo, Jr. DRZ was established on March 1, 1995, to provide mutual funds and
other institutional investors with investment management services. Messrs.
DePrince, Race and Zollo prior to April 1995 were officers and directors of
SunBank Capital Management, N.A., 200 South Orange Avenue, Orlando, Florida
32801 ("SunBank"), and now serve as the directors and officers of DRZ.
B - 35
<PAGE> 108
From August 1, 1994, to August 14, 1995, SunBank served as the
sub-investment adviser to the Income Equity Fund pursuant to a Sub-Investment
Advisory Agreement dated August 1, 1994 (the "SunBank Sub-Advisory Agreement")
and from August 1, 1992 to July 31, 1994, SunBank served as investment adviser
to the Income Equity Fund pursuant to the SunBank Agreement. Pursuant to the
SunBank Sub-Advisory Agreement and the SunBank Agreement, SunBank received a
fee computed daily and paid monthly, at the annual rate of thirty-five
one-hundredths of one percent (0.35%) of the Income Equity Fund's average daily
net assets.
For the fiscal year ended December 31, 1993, and the period of January
1, 1994 to July 31, 1994, the Income Equity Fund paid SunBank $73,097 and
$67,502, respectively, in advisory fees. Pursuant to the terms of the SunBank
Sub-Advisory Agreement, for the period of August 1, 1994, to December 31, 1994,
and for the period of January 1, 1995, to August 14, 1995, Provident paid
$51,630 and $92,579, respectively, to SunBank in sub-investment advisory fees.
For the period August 15, 1995 to December 31, 1995, Provident paid $77,303 to
DRZ in sub-investment advisory fees.
From August 1, 1994 to December 31, 1996, James Investment Research,
Inc., 1349 Fairground Road, Beavercreek, Ohio 45385 ("JIR"), served as the
sub-investment adviser to the Balanced Fund pursuant to a Sub-Investment
Advisory Agreement dated August 1, 1994 (the "JIR Sub-Advisory Agreement").
For its services provided and expenses assumed pursuant to the JIR
Sub-Advisory Agreement with Provident, JIR received from Provident a fee,
computed daily and paid monthly, at the annual rate of fifty one-hundredths of
one percent (.50%) of the Balanced Fund's average daily net assets. Pursuant to
the terms of the JIR Sub-Advisory Agreement, for the fiscal year ended December
31, 1995 and the period of September 1, 1994, to December 31, 1994, Provident
paid $25,332 and $2,819, respectively, to JIR in sub-investment advisory fees.
JIR is owned by Frank James, Ph.D., who established it in 1972. JIR
provides advice to institutional as well as individual clients, including NYSE
listed companies, colleges, banks, hospitals, foundations, trusts, endowment
funds and individuals. The principal executive officers and directors of JIR are
Frank E. James, Ph.D. - President and Director; Barry R. James - Vice President;
Suzie Smith - Treasurer; Francis E. James III - Vice President; Ann Marie Shaw -
Vice President Operations; Jerome G. Peppers - Director; and Robert G. Hawkins -
Director.
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<PAGE> 109
CUSTODIAN, TRANSFER AGENT AND FUND ACCOUNTANT
In addition to serving as investment adviser, Provident has entered
into an Amended and Restated Custodian, Fund Accounting and Recordkeeping
Agreement with the Company to provide custody and certain fund accounting
services to Funds. Under the Amended and Restated Custodian, Fund Accounting and
Recordkeeping Agreement dated as of August 1, 1994, as amended as of January 1,
1997, Provident receives an annual fee from each Fund, computed daily and paid
monthly, at an annual rate calculated as a percentage of the average daily net
assets of that Fund. The annual rates for the Funds are as follows: .05% for the
Money Market Fund; .10% for the Income Fund; .15% for each of the Income Equity
Fund, the Balanced Fund, the Large Company Fund and the Stock Appreciation Fund;
and .14% for the Ohio Tax-Free Fund. Provident as custodian is responsible for
safeguarding all securities and cash of the Funds. For the year ended December
31, 1995, the Money Market Fund, the Income Fund, the Income Equity Fund, the
Balanced Fund, the Stock Appreciation Fund and the Ohio Tax-Free Fund incurred
$73,973, $36,115, $72,596, $12,666, $15,578 and $15,708, respectively, for such
custody and fund accounting services. During such period, no fees were paid to
Provident for such services with respect to the Large Company Fund since such
Fund had not yet commenced operations.
Under the Master Transfer and Recordkeeping Agreement, Provident
receives from each Fund a fee, computed daily and paid monthly. Such fee is
calculated by adding the sum of (i) 0.04% of the Fund's average daily net assets
attributable to its Investor A shares and (ii) $20,000 annual fee plus $23 per
shareholder account and certain other fixed fees and out-of-pocket expenses
attributable to its Investor B shares. Pursuant to a Sub-Transfer Agency
Agreement dated as of January 1, 1995, between Provident and BISYS Fund Services
Ohio, Inc., an affiliate of the Distributor ("BISYS"), BISYS provides
sub-transfer agency services for the Investor B shares of each of the Funds. For
such services, BISYS receives from Provident an annual fee of $20,000 plus $23
per Investor B shareholder account and certain other fixed fees and
out-of-pocket expenses.
SECURITIES TRANSACTIONS
Each adviser, under policies established by the Board of Directors,
selects broker-dealers to execute transactions for the Funds. It is the policy
of the Company, in effecting transactions in portfolio securities, to seek best
execution of and best price for orders. The determination of what may constitute
best execution and price in the execution of a transaction by a broker involves
a number of considerations, including, without limitation, the overall direct
net economic result to a Fund, involving both price paid or received and any
commissions and other costs paid, the breadth of the market where executed, the
efficiency with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, the availability of the
broker to stand ready to execute potentially difficult transactions
B - 37
<PAGE> 110
in the future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Board of Directors in
determining the overall reasonableness of brokerage commissions paid. In
determining best execution and selecting brokers to execute transactions, the
advisers may consider brokerage and research services, such as analyses and
reports concerning issuers, industries, securities, economic factors and trends
and other statistical and factual information provided to the Funds or to any
other account over which the advisers or their affiliates exercise investment
discretion. Each adviser is authorized to pay a broker-dealer who provides such
brokerage and research services a commission for executing each such Fund's
transactions which is in excess of the amount of commission another broker would
have charged for effecting that transaction if, but only if, the adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker viewed in
terms of that particular transaction or in terms of all of the accounts over
which it exercises investment discretion. Any such research and other
statistical and factual information provided by brokers to a Fund or to the
adviser is considered to be in addition to and not in lieu of services required
to be performed by such adviser under its agreement with the Company. The cost,
value and specific application of such information are indeterminable and hence
are not practicably allocable among the Funds and other clients of the adviser
who may indirectly benefit from the availability of such information. Similarly,
the Funds may indirectly benefit from information made available as a result of
transactions effected for such other clients. Under the Investment Advisory
Agreements, the advisers are permitted to pay higher brokerage commissions for
brokerage and research services in accordance with Section 28(e) of the
Securities Exchange Act of 1934. In the event the advisers do follow such a
practice, they will do so on a basis which is fair and equitable to the Company,
and its Funds.
DRZ may direct some brokerage transactions to large brokerage firms in
return for research regarding equity securities. In addition, DRZ, on behalf of
the Income Equity Fund, intends to direct brokerage transactions to one or more
brokerage firms which participate in fee recapture programs whereby such
brokerage firms refund a portion of the Income Equity Fund's brokerage
commissions to the Income Equity Fund. For the fiscal year ended December 31,
1995, the total amount of brokerage transactions directed by such Fund's
sub-adviser and commissions paid to First Boston Corp. under such an arrangement
were $29,487,974 and $50,199, respectively.
Provident, on behalf of the Stock Appreciation Fund, may from time to
time direct brokerage transactions to Autranet, a subsidiary of Donaldson,
Lufkin & Jenrette, William O'Neill & Company and Kalb Vorrhis & Company in
return for research regarding fundamental and technical research on equity
securities. For the fiscal period ended December 31, 1995, Provident directed
brokerage
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<PAGE> 111
transactions to such firms in the following principal amounts: $9,939,693,
$659,945 and $552,401, respectively, and paid to such brokers on behalf of the
Stock Appreciation Fund the following brokerage commissions for those
transactions: $22,160, $2,220 and $1,080, respectively.
The Money Market Fund, the Income Fund and the Ohio Tax-Free Fund
expect that purchases and sales of income securities usually will be principal
transactions. Such securities are normally purchased directly from the issuer or
from an underwriter or market maker for the securities. There usually will be no
brokerage commissions paid by such Fund for such purchases. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark up
or reflect a dealer's mark down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
The Income Fund may seek to maximize the rate of return on its
portfolio by engaging in short-term trading consistent with its investment
objective. Trading will occur primarily in anticipation of or in response to
market developments or to take advantage of a market decline (a rise in interest
rates) or to purchase in anticipation of a market rise (a decline in interest
rates) and later sell. In addition, a security may be sold and another purchased
at approximately the same time to take advantage of what the adviser believes to
be a temporary disparity in the normal yield relationship between the two
securities. Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, due to such things as changes in the overall demand for, or supply of,
various types of U.S. government securities and other eligible securities or
changes in the investment objectives of investors. This policy of short-term
trading may result in a higher portfolio turnover and increased expenses.
The Income Equity Fund, the Stock Appreciation Fund, the Large Company
Fund and the Balanced Fund expect that purchases and sales of securities usually
will be effected through brokerage transactions for which commissions are
payable. Purchases from underwriters will include the underwriting commission or
concession, and purchases from dealers serving as market makers will include a
dealer's mark up or mark down. Where transactions are made in the
over-the-counter market, such Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
The Income Equity Fund may participate, if and when practicable, in
group bidding for the purchase directly from an issuer of certain securities for
such Fund in order to take advantage of the lower purchase price available to
members of such a group.
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<PAGE> 112
The Company's Board of Directors has determined that each Fund may
follow a policy of considering sales of shares as a factor in the selection of
broker-dealers to execute portfolio transactions, subject to the requirements of
best execution, including best price, described above.
The policy of the Company with respect to brokerage is and will be
reviewed by the Board of Directors from time to time. Because of the possibility
of further regulatory developments affecting the securities exchanges and
brokerage practices generally, the foregoing practices may be changed, modified
or eliminated.
Investment decisions for the Funds are made independently from similar
accounts managed by the advisers. Such similar accounts may also invest in the
same securities as the Funds. When a purchase or sale of the same security is
made at substantially the same time on behalf of a Fund and such accounts
managed by the advisers, the transaction will be averaged as to price and
available investments allocated as to amount in the manner which each adviser
believes to be equitable to a Fund and such accounts. In some instances, these
investment procedures may adversely affect the price paid or received by a Fund
or the size of the position obtained by a Fund. To the extent permitted by law,
each adviser may aggregate the securities to be sold or purchased for a Fund
with those to be sold or purchased for its similar accounts in order to obtain
best execution.
For the fiscal years ended December 31, 1993, 1994 and 1995, no
brokerage commissions were paid by the Money Market Fund, the Income Fund or the
Ohio Tax-Free Fund. For the same periods, the Income Equity Fund paid $36,297,
$93,502 and $269,007, respectively, in brokerage commissions. Of such amount
paid for the year ended December 31, 1995, $67,723 were paid to Provident
Securities & Investment Company, an affiliate of Provident. For the fiscal year
ended December 31, 1995 and the fiscal period ended December 31, 1994, the
Balanced Fund paid $15,465 and $2,217, respectively, in brokerage commissions,
none of which were paid to an affiliated broker-dealer. For the fiscal years
ended September 30, 1993, 1994 and 1995 and for the fiscal period ended December
31, 1995, the Stock Appreciation Fund paid $484,148, $557,458, $339,168 and
$107,648, respectively, in brokerage commissions, none of which were paid to an
affiliated broker-dealer.
Each of the Money Market Fund, the Income Fund and the Stock
Appreciation Fund from time to time during the fiscal year ended December 31,
1995, held securities of its regular brokers or dealers, as defined in Rule
10b-1 under the 1940 Act, or their parent companies, consisting of those of
Prudential, Dean Witter and Merrill, Lynch, Pierce, Fenner & Smith, with respect
to the Money Market Fund; Lehman Brothers, with respect to the Income Fund; and
Donaldson, Lufkin & Jenrette, with respect to the Stock
B - 40
<PAGE> 113
Appreciation Fund. At December 31, 1995, the Money Market Fund held $7,000,000
of commercial paper of Merrill, Lynch, Pierce, Fenner & Smith, and had
repurchase agreements in the following amounts with Prudential and Dean Witter:
$35,000,000 and $24,137,000, respectively. At December 31, 1995, the Income Fund
held corporate bonds in the aggregate amount of $1,000,000 of Lehman Brothers.
And, as of that date, the Stock Appreciation Fund held 5,000 shares of
Donaldson, Lufkin & Jenrette at a value of approximately $156,250. None of the
other Funds held securities of its regular brokers or dealers during such year.
ADMINISTRATOR
BISYS Fund Services Limited Partnership (formerly The Winsbury Company)
serves as administrator (the "Administrator") to the Company and each Fund
pursuant to the Administration Agreement dated February 1, 1996, as amended as
of January 1, 1997 (the "Administration Agreement"). The Administrator assists
in supervising all operations of each Fund (other than those performed by
Provident and DRZ under the Investment Advisory Agreements and Sub-Investment
Advisory Agreement, as applicable, and by Provident under the Custodian, Fund
Accounting and Recordkeeping Agreements and under the Master Transfer and
Recordkeeping Agreement). The Administrator is a broker-dealer registered with
the Commission, and is a member of the National Association of Securities
Dealers, Inc. The Administrator provides financial services to institutional
clients.
Under the Administration Agreement, the Administrator has agreed to
maintain office facilities for the Company, furnish statistical and research
data, clerical and certain bookkeeping services and stationery and office
supplies; prepare the periodic reports to the Commission on Form N-SAR or any
replacement forms therefor; compile data for, prepare for execution by the Funds
and file all the Funds' federal and state tax returns and required tax filings
other than those required to be made by the Funds' custodian and transfer agent;
prepare compliance filings pursuant to state securities laws; assist to the
extent requested by the Company with the Company's preparation of its Annual and
Semi-Annual Reports to Shareholders and its Registration Statements (on Form
N-1A or any replacement therefor); compile data for, prepare and file timely
Notices to the Commission required pursuant to Rule 24f-2 under the 1940 Act;
keep and maintain the financial accounts and records of the Funds, including
calculation of daily expense accruals; in the case of the Money Market Fund,
periodic review of the amount of the deviation, if any, of the current net
asset value per share (calculated using available market quotations or an
appropriate substitute that reflects current market conditions)
B - 41
<PAGE> 114
from the Money Market Fund's amortized cost price per share; and generally
assist in all aspects of the Company's operations other than those performed by
Provident and DRZ under the Investment Advisory Agreement and Sub-Investment
Advisory Agreement, and by Provident under the Custodian, Fund Accounting and
Recordkeeping Agreement and under the Master Transfer and Recordkeeping
Agreement. Under the Administration Agreement, the Administrator may delegate
all or any part of its responsibilities thereunder.
The Administrator receives a fee from each Fund for its services as
Administrator and expenses assumed pursuant to the Administration Agreement,
calculated daily and paid periodically, equal a fee calculated at the annual
rate of 0.20% of that Fund's average daily net assets. The Administrator may
voluntarily reduce all or a portion of its fee with respect to any Fund in order
to increase the net income of one or more of the Funds available for
distribution as dividends.
Unless sooner terminated as provided therein, the Administration
Agreement will continue in effect until December 31, 1997. The Administration
Agreement thereafter shall be renewed automatically for successive two-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administrative Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on no less than 60 days' written notice by the Company's Board of
Directors or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any error or judgment or mistake of law or any loss suffered by
the Company in connection with the matters to which the Administration Agreement
relates, except a loss resulting from willful misfeasance, bad faith, or gross
negligence in the performance of its duties, or from the reckless disregard by
the Administrator of its obligations and duties thereunder.
For the fiscal year ended December 31, 1995, the Administrator received
$296,225, $72,231, $96,796, $22,439, $20,771 and $16,888, respectively, from the
Money Market Fund, the Income Fund, the Income Equity Fund, the Ohio Tax-Free
Fund, the Stock Appreciation Fund and the Balanced Fund, for administrative
services. For the period February 1, 1994, to December 31, 1994, the
Administrator received $282,711, $53,444 and $59,369, respectively, from the
Money Market Fund, the Income Fund and the Income Equity Fund, for
administration services. For the fiscal period ended December 31, 1994, the
Administrator received $8,346 and $1,113, respectively, from the Ohio Tax-Free
Fund and the Balanced Fund, for administration services. For the fiscal year
ended December 31, 1993, and the one-month period ended January 31, 1994,
Keystone
B - 42
<PAGE> 115
Custodian Funds, Inc., 200 Berkeley Street, Boston, Massachusetts 02116
("Keystone") provided administrative services for the Company. For the fiscal
year ended December 31, 1993, and the one-month period ended January 31, 1994,
the Income Fund paid Keystone an administration fee of $100,000 and $8,178,
respectively; the Income Equity Fund paid Keystone an administration fee of
$100,000 and $8,904, respectively; and the Money Market Fund paid to or accrued
for the account of Keystone an administration fee of $116,552 and $12,019,
respectively. The Administrator received no fees during such period with respect
to the Large Company Fund since such Fund had not yet commenced operations.
DISTRIBUTOR
The Distributor serves as distributor to the Company and each of the
Funds pursuant to the Distribution Agreement dated February 1, 1994, as amended
January 1, 1997 (the "Distribution Agreement"). Unless otherwise terminated, the
Distribution Agreement continues for successive one-year periods ending December
31 of each year if approved at least annually by the Company's Board of
Directors or by the vote of a majority of the outstanding shares of the Company,
and by the vote of a majority of the Directors of the Company who are not
parties to the Distribution Agreement or interested persons (as defined in the
1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement may be terminated in the event of any assignment, as defined in the
1940 Act.
For the fiscal year ended December 31, 1995 and the period of February
1, 1994 to December 31, 1994, commissions paid to the Distributor under the
Distribution Agreement with respect to the sale of shares of the Company, after
discounts to dealers, were $314,870 and $311,412, respectively. For such
periods, $190,064 and $276,225 were reallowed by the Distributor to Provident
Securities & Investment Company, an affiliate of Provident.
For the fiscal year ended December 31, 1993, and for the one-month
period of January 1, 1994 to January 31, 1994, Fiduciary Investment Company,
Inc. ("FICO") served as principal underwriter for the Company pursuant to a
Principal Underwriting Agreement (the "Underwriting Agreement") between the
Company and FICO. For the fiscal year ended December 31, 1993, and for the
one-month period of January 1, 1994 to January 31, 1994, FICO received no
payments from the Money Market Fund, the Income Fund or the Income Equity Fund.
B - 43
<PAGE> 116
DISTRIBUTION PLANS
Each Fund has adopted a Distribution and Shareholder Service Plan and
Agreement relating to its Investor A class of shares (the "Investor A Plan")
pursuant to Rule 12b-1 under the 1940 Act. In addition, each of the Income Fund,
the Income Equity Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund, the
Large Company Fund and the Balanced Fund has adopted a Distribution and
Shareholder Service Plan and Agreement pursuant to Rule 12b-1 under the 1940 Act
relating to its Investor B Class of Shares (the "Investor B Plan"). The
Investor A Plan and the Investor B Plan are hereinafter referred to as the
"Plans." Rule 12b-1 regulates circumstances under which an investment company
may bear expenses associated with the distribution of its shares. Each Fund
adopted both its Investor A Plan and Investor B Plan prior to the public
offering of its shares of that class. The Investor A Plan provides that a Fund
may incur certain expenses which may not exceed a maximum amount up to 0.25% of
such Fund's average daily net assets for any fiscal year occurring after the
inception of the Investor A Plan. Amounts paid under the Investor A Plan are
to be paid to the Distributor in order to pay costs of distribution of a Fund's
Investor A shares, including payment to the Distributor for efforts expended in
respect of or in furtherance of sales of Investor A shares of the Fund and to
enable the Distributor to pay or to have paid to others who sell or have sold
Fund Investor A shares a maintenance or other fee, at such intervals as the
Distributor may determine in respect of Fund Investor A shares previously sold
by any such others at any time and remaining outstanding during the period in
respect of which such fee is or has been paid. Such payments would be made
through the Distributor to compensate broker-dealers and others whose clients
invest in Investor A shares of a Fund for continuing services to their clients
based on the average daily net asset value of such accounts remaining
outstanding on the books of the Fund for specified periods.
The Investor B Plan authorizes a Fund to make payments to the
Distributor in an amount not in excess, on an annual basis, of 1.00% of the
average daily net asset value of the Investor B shares of that Fund. Pursuant to
the Investor B Plan, a Fund is authorized to pay or reimburse the Distributor
(a) a distribution fee in an amount not to exceed on an annual basis .75% of the
average daily net asset value of Investor B shares of that Fund (the
"Distribution Fee") and (b) a service fee in an amount not to exceed on an
annual basis .25% of the average daily net asset value of the Investor B shares
of such Fund (the "Service Fee"). Payments of the Distribution Fee to the
Distributor pursuant to the Investor B Plan will be used (i) to compensate
Participating
B - 44
<PAGE> 117
Organizations (as defined below) for providing distribution assistance relating
to Investor B shares, and (ii) for promotional activities intended to result in
the sale of Investor B shares such as to pay for the preparation, printing and
distribution of prospectuses to other than current shareholders. Payments of
the Service Fee to the Distributor pursuant to the Investor B Plan will be used
to compensate Participating Organizations for providing shareholder services
with respect to their customers who are, from time to time, beneficial and
record holders of Investor B shares. Participating Organizations include banks
(including Provident and its affiliates), broker-dealers and other institutions.
The Funds make no payments in connection with the sales of their shares
other than the fees paid to the Distributor under the respective Plans. As a
result, the Funds do not pay for unreimbursed expenses of the Distributor,
including amounts expended by the Distributor in excess of amounts received by
it from the Funds, or interest, carrying or other financing charges in
connection with excess amounts expended.
All persons authorized to direct the disposition of monies paid or
payable by a Fund pursuant to a Plan or any related agreement must provide to
the Company's Board of Directors at least quarterly a written report of the
amounts so expended and the purposes for which such expenditures were made.
Representatives, brokers, dealers or others receiving payments from the
Distributor pursuant to a Plan must determine that such payments and the
services provided in connection with such payments are appropriate for such
persons and are not in violation of regulatory limitations applicable to such
persons.
While each Plan is in effect, the selection and nomination of Directors
of the Company who are not "interested persons" as defined by the 1940 Act
("Independent Directors") is committed to the discretion of the Independent
Directors then in office.
Each Plan was approved by the Board of Directors and by those
Independent Directors who have no direct or indirect financial interest in the
operation of each Plan or any agreements of the Company or any other person
related to a Plan ("Rule 12b-1 Directors"), cast in person at a meeting called
for the purpose of voting on such Plan. Each Plan may be continued annually if
approved by a majority vote of the Directors, and by a majority of the Rule
12b-1 Directors, cast in person at a meeting called for that purpose. Each Plan
may not be amended in order to increase materially the amount of distribution
expenses permitted under a Plan without being approved by a majority vote of the
outstanding voting shares of that class of the Fund. Each Plan may be
terminated as to a specific class of a Fund at any time by a majority vote of
the Rule 12b-1 Directors or a majority of the outstanding voting shares of the
effected class of that Fund.
B - 45
<PAGE> 118
For the fiscal year ended December 31, 1995, the following amounts were
payable by the Funds (other than the Large Company Fund which had not yet
commenced operations) to the Distributor and waived by the Distributor,
respectively, under the Plans.
<TABLE>
<CAPTION>
Investor A Plan Investor B Plan
Fund Payable Waived Payable Waived
---- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Money Market Fund $369,910 $369,910 N/A(1) N/A(1)
Income Fund $ 89,106 $ 33,246 $ 4,833 $ 36
Income Equity Fund $117,603 $ 30,381 $14,271 $ 40
Ohio Tax-Free Fund $ 26,953 $ 4,699 $ 4,410 $ 8
Stock Appreciation Fund $ 26,239 $ 281 $ 21 $ 2
Balanced Fund $ 15,101 $ 5,552 $24,218 $ 79
</TABLE>
(1) The Money Market Fund does not offer Investor B shares and therefore
does not make payments under the Investor B Plan.
CAPITAL STOCK
The Company has authorized capital of 3,000,000,000 shares, $.001 par
value. The Company's Articles of Incorporation authorizes the Board of Directors
to divide the Company's capital stock into unlimited series and classes. The
Company presently has seven series of shares which represent interests in the
Funds of the Company. The shares of each Fund, other than the Money Market Fund,
are offered in two separate Classes: Investor A shares and Investor B shares.
Shares of the Money Market Fund are only offered in the Investor A class of
shares. Each share of the Company is entitled to one vote. Fractional shares
have proportionate voting rights and participate pro rata in dividends and
distributions. Shares are fully paid and non-assessable when issued and have no
preemptive, conversion or exchange rights except as otherwise described in the
Prospectus. Shareholders are entitled to redeem their shares as set forth under
"How to Redeem Shares" in the Prospectus. The shares are transferable without
restriction. The Company does not issue certificates representing shares.
Company shares have non-cumulative rights, which means that the holders
of more than 50% of shares voting for the election of Directors can elect 100%
of the Directors if they choose to do so
B - 46
<PAGE> 119
and, in such event, the holders of the remaining shares so voting are not able
to elect any Directors.
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS
TOTAL RETURN
Total return quotations for each of the Income Fund, the Income Equity
Fund, the Ohio Tax-Free Fund, the Stock Appreciation Fund, the Large Company
Fund and the Balanced Fund as they may appear from time to time in
advertisements are calculated by finding the average annual compounded rates of
return over one, five and ten year periods, or the time periods for which a Fund
has had operations, whichever is relevant, on a hypothetical $1,000 investment
that would equate the initial amount invested to the ending redeemable value. To
the initial investment all dividends and distributions are added, and all
recurring fees charged to all shareholder accounts are deducted. The ending
redeemable value assumes a complete redemption at the end of the relevant
periods. Aggregate total return is a measure of the change in value of an
investment in a Fund over the relevant period and is calculated similarly to
average annual total return except that the result is not annualized.
The average annual total returns of each of the Funds are as follows:
Investor A Shares
<TABLE>
<CAPTION>
With Sales Loads Without Sales Loads
One Year Five Years Inception One Year Five Years Inception
Ended Ended to Ended Ended to
Fund 6/30/96 6/30/96 6/30/96(1) 6/30/96 6/30/96 6/30/96(1)
---- ------- ------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Money Market 5.11% N/A 4.11% 5.11% N/A 4.11%
Income (0.77)% N/A 2.55% 3.94% N/A 3.81%
Income Equity 17.64% N/A 15.78% 23.17% N/A 17.21%
Ohio Tax-Free (0.63)% N/A 2.37% 4.05% N/A 4.85%
Stock
Appreciation(2) 13.37% 12.81% 9.57% 18.70% 13.85% 10.14%
Balanced 2.74% N/A 7.17% 7.62% N/A 9.89%
</TABLE>
(1) Dates of Inception: Money Market and Income Funds -- 10/1/92; Income
Equity Fund -- 10/8/92; Ohio Tax-Free Fund -- 8/1/94; Stock
Appreciation Fund -- 7/23/87; and the Balanced Fund -- 9/1/94.
B - 47
<PAGE> 120
(2) The performance for the Stock Appreciation Fund includes the
performance of the MIM Stock Appreciation Fund, the Stock Appreciation
Fund's predecessor.
Investor B Shares
<TABLE>
<CAPTION>
Fund One Year Ended 6/30/96(3) Inception to 6/30/96(4)
---- ------------------------- -----------------------
<S> <C> <C>
Income (0.92%) 2.65%
Income Equity 18.04% 16.00%
Ohio Tax-Free (0.71%) 2.23%
Stock Appreciation 14.34% 10.10%
Balanced 3.52% 7.64%
</TABLE>
(3) Includes the total return for the Investor A Shares from January 1,
1995 to January 16, 1995
(4) Dates of Inception -- the Income, Income Equity, Tax-Free and Balanced
Fund -- 1/15/95; and the Stock Appreciation Fund -- 10/1/95.
Without reimbursement of expenses and/or waiver of fees by Provident,
the average annual total returns of the Money Market Fund, the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Balanced Fund for such
periods would have been lower.
For the one year, five year and ten year periods ended September 30,
1996, the average annual total returns for the CIFs (the predecessors to the
Large Company Fund) have been restated to reflect the estimated fees for the
Large Company Fund for the current fiscal year and are as follows:
Investor A Shares
-----------------
With Sales Loads Without Sales Loads
---------------- -------------------
One Year Five Year Ten Year One Year Five Year Ten Year
-------- --------- -------- -------- --------- --------
14.55% 12.57% 11.79% 19.96% 13.62% 12.31%
Invester B Shares
-----------------
One Year Five Year Ten Year
-------- --------- --------
15.08% 12.66% 11.47%
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 30-day period,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the base
period.
The current yields of the Investor A shares of the Income Fund, the
Income Equity Fund, the Ohio Tax-Free Fund and the Balanced Fund were 5.17%,
1.27%, 3.61% and 2.75%, respectively, for the 30-day period ended June 30, 1996,
assuming the imposition of a sales load, and 5.42%, 1.33%, 3.78% and 2.88%,
respectively, without the imposition of a sales load. For such period, the
current yields of the Investor B Shares of the Income Fund, the Income Equity
Fund, the Ohio Tax-Free Fund and the Balanced Fund were 4.61%, 0.64%, 3.08% and
2.08%, respectively. Without reimbursement of expenses and/or waiver of fees by
Provident, the current yields of the Income Fund, the Income Equity Fund,the
Ohio Tax-Free Fund and the Balanced Fund for the same period would have been
lower.
B - 48
<PAGE> 121
In addition, with respect to the Ohio Tax-Free Fund, tax equivalent
yields will be computed by dividing that portion of the Ohio Tax-Free Fund's
yield (as computed above) which is tax-exempt by one minus a stated income tax
rate and adding that result to that portion, if any, of the yield of the Ohio
Tax-Free Fund which is not tax-exempt. For the 30-day period ended June 30,
1996, the tax-equivalent yield for the Investor A shares of the Ohio Tax-Free
Fund (assuming a 39.6% federal tax rate) were 5.98%, assuming the imposition of
the maximum sales charge, and 6.26%, excluding the effect of a sales charge. For
that same period, the tax-equivalent yield for the Investor B shares of the Ohio
Tax-Free Fund (assuming a 39.6% federal tax rate) was 5.10%.
SEVEN-DAY YIELD
The yield for the Money Market Fund as it may appear from time to time
in advertisements will be calculated by determining the net change, exclusive of
capital changes (all realized and unrealized gains and losses), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, multiplying the base period return by (365/7) and carrying the resulting
yield figure to the nearest hundredth of one percent. The determination of net
change in account value will reflect the value of additional shares purchased
with dividends from the original share and dividends declared on both the
original share and any such additional shares and all fees charged to all
shareholder accounts in proportion to the length of the base period and the
Money Market Fund's average account size.
If realized and unrealized gains and losses were included in the yield
calculation, the yield of the Money Market Fund might vary materially from that
reported in advertisements. For the seven-day period ended June 30, 1996, the
current yield of the Money Market Fund was 4.74%.
In addition to the yield of the Money Market Fund, its effective yield
may appear from time to time in advertisements. The effective yield will be
calculated by compounding the unannualized base period yield by adding 1 to the
quotient, raising the sum to a power equal to 365 divided by 7, subtracting 1
from the result and carrying the resulting effective yield figure to the nearest
hundredth of one percent. For the seven-day period ended June 30, 1996, the
effective yield of the Money Market Fund was 4.85%.
The yield and effective yield as quoted in such advertisements will not
be based on information as of a date more than fourteen days prior to the date
of their publication. Each yield will vary depending on market conditions and
principal. Each yield also depends on the quality, maturity and type of
instruments held and
B - 49
<PAGE> 122
operating expenses. The advertisements will include, among other things, the
length of the base period and the date of the last day in the base period used
in computing the quotation.
DISTRIBUTION RATES
Each of the Income Fund, the Income Equity Fund, the Ohio Tax-Free
Fund and the Balanced Fund may from time to time advertise current distribution
rates which are calculated in accordance with the method disclosed in the
Prospectus. For the 12 month period ended June 30, 1996, the distribution rates
for the Investor A shares of the Income Fund, the Income Equity Fund, the Ohio
Tax-Free Fund and the Balanced Fund assuming the imposition of the maximum
sales charge, were 5.32%, 11.71%, 3.66% and 3.91%, respectively, including
capital gains, and 5.32%, 1.67%, 3.66% and 3.01%, respectively, excluding
capital gains. For the 12 month period ended June 30, 1996, the distribution
rates for the Investor B shares of the Income Fund, the Income Equity Fund, the
Ohio Tax-Free Fund and the Balanced Fund were 4.58%, 8.08%, 2.99% and 3.18%,
respectively, including capital gains, and 4.58%, 0.85%, 2.99% and 2.30%,
respectively, excluding capital gains.
GENERAL
The yield and total return of any investment are generally a function
of quality and maturity, type of investment and operating expenses. A Fund's
yields and total return will fluctuate from time to time and are not necessarily
representative of future results.
Yield and total return information is useful in reviewing a Fund's
performance, but because yield and total return will fluctuate, such information
may not provide a basis for comparison with bank deposits or other investments
that pay a fixed yield for a stated period of time. An investor's principal is
not guaranteed by the Fund.
From time to time, the Company may include the following types of
information in advertisements, supplemental sales literature and reports to
shareholders: (a) discussions of general economic or financial principals (such
as the effects of inflation, the power of compounding and the benefits of
dollar-cost averaging); (b) discussions of general economic trends; (c)
presentations of statistical data to supplement such discussions; (d)
descriptions of past or anticipated portfolio holdings for one or more of the
Funds within the Company; (e) descriptions of investment strategies for one or
more of the Funds within the Company; (f) descriptions of investment strategies
for one or more of such Funds; (g) descriptions or comparisons of various
investment products, which may or may not include the Funds; (h) comparisons of
investments products (including the Funds) with relevant market or industry
indices or other appropriate benchmarks; (i) discussions of fund
B - 50
<PAGE> 123
rankings or ratings by recognized rating organizations; and (j) testimonials
describing the experience of persons that have invested in one or more of the
Funds.
ADDITIONAL INFORMATION
To the knowledge of the Company, as of October 16, 1996: The Provident
Bank, One East Fourth Street, Cincinnati, Ohio 45202, owned of record 69.41% of
the outstanding Investor A shares of the Income Fund, 70.12% of the outstanding
Investor A shares of the Money Market Fund and 96.99% of the outstanding
Investor A shares of the Ohio Tax-Free Fund; The Provident Bank Trust
Department Employee Benefit Plan, 3 East Fourth Street, Cincinnati, Ohio 45207
owned of record 13.96% of the outstanding Investor A shares of the Income Fund,
7.66% of the outstanding Investor A shares of the Income Equity Fund and 14.74%
of the outstanding Investor A shares of the Balanced Fund; The Provident Bank
Trust Department, 3 East Fourth Street, Cincinnati, Ohio 45202, owned of record
7.44% of the outstanding Investor A shares of the Income Fund, and 5.87% of the
outstanding Investor A shares of the Balanced Fund; The Chase Manhattan Bank as
Trustee for The General Cable Corporation, 4 Tesseneer Drive, Highland Heights,
Kentucky 41076, owned of record 41.09% of the outstanding Investor A shares of
the Income Equity Fund; Provident Bank TTEE FBO Provident Bancorp 401K Equity,
3 East Fourth Street, Cincinnati, Ohio 45202, owned of record 8.36% of the
outstanding Investor A shares of the Balanced Fund; James Investment Research,
Inc. Pension and Profit Sharing Plan, P.O. Box 8, Alpha, Ohio 45301-0008,
owned 7.32% of the outstanding Investor A shares of the Balanced Fund; and
Construction Industry Manufacturers Association, Suite 940, 111 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202, owned of record 5.31% of the outstanding
Investor A Shares of the Income Equity Fund.
As of October 16, 1996, The Fifth Third Bank, FBO Cincinnati Institute
of Fine Arts, P. O. Box 63074, Cincinnati, Ohio 45263, owned beneficially 19.78%
of the outstanding Investor B Shares of the Income Fund. As of such date, BHC
Securities, Inc., One Commerce Square, 2005 Market Street, Suite 1200,
Philadelphia, Pennsylvania 19103, to the knowledge of the Company, owned of
record 23.3% of the outstanding Investor A Shares of the Money Market Fund;
44.35% of the outstanding Investor A Shares of the Balanced Fund; 25.09% of the
outstanding Investor A Shares of the Income Equity Fund; 73.88% of the
outstanding Investor B shares of Ohio Tax-Free Fund; and 26.88% of the
outstanding Investor B shares of the Stock Appreciation Fund. BHC Securities,
Inc. holds such shares as recordholder for various underlying beneficial owners.
As of such date, the Company knows of no one investor who owns 5% or
more of the outstanding Investor A shares of the Income Equity Fund, the Income
Fund or the Balanced Fund.
B - 51
<PAGE> 124
As of the date immediately preceding the public offering of the shares
of the Large Company Fund, BISYS Fund Services Ohio, Inc., an affiliate of the
Distributor, owned all of the outstanding shares of the Large Company Fund. It
is anticipated that immediately after such public offering, BISYS Fund Services
Ohio, Inc.'s holding will be decreased below 5% of the Large Company Fund's
issued and outstanding Shares.
AUDITORS
The financial statements for each of the Funds, other than the Stock
Appreciation Fund and the Large Company Fund, at and for the fiscal year ended
December 31, 1995, and for the Stock Appreciation Fund at and for the three
months ended December 31, 1995, appearing in this Statement of Additional
Information have been audited by Ernst & Young LLP, 1300 Chiquita Center, 250
East Fifth Street, Cincinnati, Ohio 45202, independent certified public
accountants, as set forth in their report appearing elsewhere herein and are
included in reliance upon such report given on their authority as experts in
auditing and accounting.
LEGAL COUNSEL
Baker & Hostetler, 65 East State Street, Columbus, Ohio 43215, is
counsel to the Company and will pass upon the legality of the shares offered
hereby.
GENERAL
Except as otherwise stated in the Prospectus, this Statement of
Additional Information, or required by law, the Company reserves the right to
change the terms of the offer stated in the Prospectus or this Statement of
Additional Information without shareholder approval, including the right to
impose or change fees for services provided.
No dealer, salesman or other person is authorized to give any
information or to make any representation not contained in the Prospectus, this
Statement of Additional Information or in supplemental sales literature issued
by the Company or the Distributor, and no person is entitled to rely on any
information or representation not contained therein.
The Prospectus and this Statement of Additional Information omit
certain information contained in the registration statement filed with the
Securities and Exchange Commission (the "Commission") which may be obtained from
the Commission's principal office in Washington, D.C. upon payment of the fee
prescribed by the Rules and Regulations promulgated by the Commission.
B - 52
<PAGE> 125
FINANCIAL STATEMENTS
Effective January 2, 1997, The Riverfront Flexible Growth Fund, the
financial statements of which are included herein, changed its name to The
Riverfront Balanced Fund.
The following unaudited financial statements for the period ended June 30,
1996, reflect all adjustments which are, in the opinion of management, necessary
to a fair statement of the results for the interim periods presented. Of
course, there can be no guarantee that such results will be reflected in the
financial statements as of December 31, 1996.
B - 53
<PAGE> 126
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES MONEY U.S. GOVERNMENT INCOME
MARKET FUND INCOME FUND EQUITY FUND
---------------- --------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$118,594,200; $35,104,732; and
$68,690,785, respectively)...... $118,594,200 $35,112,277 $72,913,779
Repurchase agreements (Cost
$55,150,000; $0; and $0,
respectively).................... 55,150,000 -- --
------------ ----------- -----------
Total Investments............. 173,744,200 35,112,277 72,913,779
Interest and dividends
receivable....................... 24,473 419,215 193,334
Receivable for capital shares
issued........................... -- -- 37,337
Receivable for investments sold.. -- -- 481,918
Receivable from investment
adviser.......................... -- 36,688 44,526
Prepaid expenses and other
assets........................... 9,442 5,517 19,323
------------ ----------- -----------
Total Assets.................. 173,778,115 35,573,697 73,690,217
------------ ----------- -----------
LIABILITIES:
Dividends payable................ 663,920 148,404 75,143
Payable for capital shares
redeemed......................... -- 47,990 27,684
Payable for investments
purchased........................ -- -- 974,951
Accrued expenses and other
payables:
Investment advisory fees........ 25,335 11,507 53,169
Administration fees............. 30,233 5,754 11,247
12b-1 fees (Investor A)......... -- 4,190 10,933
12b-1 fees (Investor B)......... -- 978 3,893
Audit and legal fees............ 37,123 10,039 7,980
Other........................... 37,676 10,173 13,075
------------ ----------- -----------
Total Liabilities............. 794,287 239,035 1,178,075
------------ ----------- -----------
NET ASSETS:
Capital.......................... 172,986,118 37,227,426 61,564,894
Undistributed (distributions in
excess of) net investment income. -- 18,462 (6,186)
Net unrealized appreciation on
investments...................... -- 7,545 4,222,994
Accumulated undistributed net
realized gains (losses) on
investment transactions......... (2,290) (1,918,771) 6,730,440
------------ ----------- -----------
Net Assets.................... $172,983,828 $35,334,662 $72,512,142
============ =========== ===========
Net Assets
Investor A Shares............... $172,983,828 $34,144,538 $67,611,962
Investor B Shares............... NA 1,190,124 4,900,180
------------ ----------- -----------
Total......................... $172,983,828 $35,334,662 $72,512,142
============ =========== ===========
Shares of capital stock
Investor A Shares............... 172,986,121 3,655,928 5,325,955
Investor B Shares............... NA 112,972 381,416
------------ ----------- -----------
Total......................... 172,986,121 3,768,900 5,707,371
============ =========== ===========
Net asset value
Investor A Shares--redemption
price per share................. $ 1.00 $ 9.34 $ 12.70
Investor B Shares--offering
price per share*................ NA $ 10.53 $ 12.85
============ =========== ===========
Maximum Sales Charge (Investor
A)............................... 4.50% 4.50%
=========== ===========
Maximum Offering Price
(100%/(100%--Maximum Sales
Charge)
of net asset value adjusted to
nearest cent) per share
(Investor A).................... $ 1.00(a) $ 9.78 $ 13.30
============ =========== ===========
</TABLE>
- ------
(a)Offering price and redemption price are the same for the U.S. Government
Securities Money Market Fund.
*Redemption price of Investor B shares varies based on length of time shares
are held.
NA Not applicable.
See notes to financial statements.
B-54
<PAGE> 127
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE GROWTH STOCK APPRECIATION
BOND FUND FUND FUND
------------- --------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$10,940,541; $20,633,173; and
$32,532,749, respectively)... $11,191,246 $21,627,078 $38,363,504
Interest and dividends
receivable.................... 65,735 139,297 6,874
Receivable for capital shares
issued........................ -- 89,354 1,909
Receivable from investment
adviser....................... -- 39,694 --
Unamortized organization
costs......................... 911 229 28,691
Prepaid expenses and other
assets........................ 4,972 13,566 28,787
----------- ----------- -----------
Total Assets............... 11,262,864 21,909,218 38,429,765
----------- ----------- -----------
LIABILITIES:
Dividends payable............. 32,810 37,118 --
Payable for capital shares
redeemed...................... -- 3,220 156
Accrued expenses and other
payables:
Investment advisory fees..... 3,653 13,825 25,678
Administration fees.......... 1,826 3,456 6,420
12b-1 fees (Investor A)...... 2,290 1,425 7,904
12b-1 fees (Investor B)...... 591 6,910 481
Audit and legal fees......... 4,030 3,708 5,155
Custodian fees............... 1,278 2,592 4,815
Other........................ 1,529 5,723 858
----------- ----------- -----------
Total Liabilities.......... 48,007 77,977 51,467
----------- ----------- -----------
NET ASSETS:
Capital....................... 10,962,591 21,075,251 29,011,041
Undistributed (distributions
in excess of) net investment
income........................ 4,291 6,052 (233,107)
Net unrealized appreciation on
investments................... 250,705 993,905 5,830,755
Accumulated undistributed net
realized gains (losses) on
investment transactions...... (2,730) (243,967) 3,769,609
----------- ----------- -----------
Net Assets................. $11,214,857 $21,831,241 $38,378,298
=========== =========== ===========
Net Assets
Investor A Shares............ $10,538,311 $13,121,118 $37,759,161
Investor B Shares............ 676,546 8,710,123 619,137
----------- ----------- -----------
Total...................... $11,214,857 $21,831,241 $38,378,298
=========== =========== ===========
Shares of capital stock.......
Investor A Shares............ 1,030,877 1,181,864 3,746,931
Investor B Shares............ 64,747 761,462 59,260
----------- ----------- -----------
Total...................... 1,095,624 1,943,326 3,806,191
=========== =========== ===========
Net asset value...............
Investor A Shares--
redemption price per share... $ 10.22 $ 11.10 $ 10.08
Investor B Shares--offering
price per share*............. $ 10.45 $ 11.44 $ 10.45
=========== =========== ===========
Maximum Sales Charge (Investor
A)............................ 4.50% 4.50% 4.50%
=========== =========== ===========
Maximum Offering Price
(100%/(100%--Maximum Sales
Charge) of net asset value
adjusted to nearest cent) per
share (Investor A)........... $ 10.70 $ 11.62 $ 10.55
=========== =========== ===========
</TABLE>
- ------
* Redemption price of Investor B shares varies based on length of time shares
are held.
See notes to financial statements.
B-55
<PAGE> 128
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT
SECURITIES MONEY U.S. GOVERNMENT INCOME EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- -------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................. $4,577,860 $ 1,190,822 $ 70,966
Dividend income................. -- -- 1,075,742
---------- ----------- -----------
Total Income................ 4,577,860 1,190,822 1,146,708
---------- ----------- -----------
EXPENSES:
Investment advisory fees........ 128,251 72,518 325,427
Administration fees............. 170,993 36,259 68,463
12b-1 fees (Investor A)......... 213,848 43,784 80,717
12b-1 fees (Investor B)......... -- 6,092 19,629
Custodian and accounting fees... 42,748 18,129 51,348
Audit and legal fees............ 64,642 14,682 28,822
Trustees' fees and expenses..... 7,114 1,680 2,990
Transfer agent fees............. 34,381 18,236 24,538
Registration and filing fees.... 38,777 7,635 25,082
Printing costs.................. 18,740 4,400 8,548
Other........................... 5,456 1,823 2,169
---------- ----------- -----------
Expenses before fee waivers and
expense reimbursements..... 724,950 225,238 637,733
Less: Fee waivers and expense
reimbursements................. (213,848) (13,694) (33,109)
---------- ----------- -----------
Net Expenses................ 511,102 211,544 604,624
---------- ----------- -----------
Net Investment Income........... 4,066,758 979,278 542,084
---------- ----------- -----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS
Net realized gains (losses) from
investment transactions........ -- (11,433) 6,703,449
Net change in unrealized
depreciation from investments.. -- (1,429,289) (1,159,002)
---------- ----------- -----------
Net realized/unrealized gains
(losses) from investments...... -- (1,440,722) 5,544,447
---------- ----------- -----------
Change in net assets resulting
from operations................ $4,066,758 $ (461,444) $ 6,086,531
========== =========== ===========
</TABLE>
See notes to financial statements.
B-56
<PAGE> 129
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE STOCK
OHIO TAX-FREE GROWTH APPRECIATION
BOND FUND FUND FUND
------------- --------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.......................... $ 301,982 $ 302,638 $ 73,771
Dividend income.......................... -- 114,153 56,152
--------- --------- -----------
Total Income......................... 301,982 416,791 129,923
--------- --------- -----------
EXPENSES:
Investment advisory fees................. 28,245 82,480 155,525
Administration fees...................... 11,301 18,287 38,881
12b-1 fees (Investor A).................. 13,308 14,044 48,137
12b-1 fees (Investor B).................. 3,273 35,370 1,860
Custodian and accounting fees............ 7,911 13,716 29,161
Audit and legal fees..................... 4,882 5,878 17,724
Organization costs....................... 4,914 1,820 19,540
Trustees' fees and expenses.............. 558 898 1,919
Transfer agent fees...................... 12,462 12,755 18,115
Registration and filing fees............. 1,998 3,396 17,577
Printing costs........................... 1,281 5,961 12,867
Other.................................... 910 539 1,435
--------- --------- -----------
Expenses before fee waivers and expense
reimbursements.......................... 91,043 195,144 362,741
Less: Fee waivers and expense
reimbursements...................... (5,643) (24,242) --
--------- --------- -----------
Net Expenses......................... 85,400 170,902 362,741
--------- --------- -----------
Net Investment Income (Loss)............. 216,582 245,889 (232,818)
--------- --------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS
Net realized gains (losses) from
investment transactions................. (2,920) (243,967) 3,769,609
Net change in unrealized depreciation
from investments........................ (307,674) (206,105) (1,287,068)
--------- --------- -----------
Net realized/unrealized gains (losses)
from investments........................ (310,594) (450,072) 2,482,541
--------- --------- -----------
Change in net assets resulting from
operations.............................. $ (94,012) $(204,183) $ 2,249,723
========= ========= ===========
</TABLE>
See notes to financial statements.
B-57
<PAGE> 130
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES U.S. GOVERNMENT INCOME EQUITY
MONEY MARKET FUND INCOME FUND FUND
---------------------------- ------------------------- -------------------------
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED ENDED YEAR ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1995 1996 1995 1996 1995
------------- ------------- ----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income.. $ 4,066,758 $ 7,906,286 $ 979,278 $ 2,067,824 $ 542,084 $ 1,082,073
Net realized gains
(losses) from
investment
transactions.......... -- (1,415) (11,433) (517,451) 6,703,449 6,655,045
Net change in
unrealized
appreciation
(depreciation) from
investments........... -- -- (1,429,289) 3,520,908 (1,159,002) 5,311,784
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
resulting from
operations............. 4,066,758 7,904,871 (461,444) 5,071,281 6,086,531 13,048,902
------------- ------------- ----------- ----------- ----------- -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income................ (4,066,758) (7,906,286) (940,840) (2,032,120) (531,555) (1,065,510)
In excess of net
investment income..... -- -- -- -- -- (6,742)
From net realized gains
from investments...... -- -- -- -- -- (6,293,075)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment
income................ -- -- (27,782) (22,977) (16,715) (16,563)
In excess of net
investment income..... -- -- -- -- -- (105)
From net realized gains
from investments...... -- -- -- -- -- (222,170)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from shareholder
distributions.......... (4,066,758) (7,906,286) (968,622) (2,055,097) (548,270) (7,604,165)
------------- ------------- ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 187,416,065 331,872,719 1,359,606 5,670,500 6,943,511 12,155,416
Proceeds from shares
issued in connection
with acquisition...... -- 4,865,634 -- -- -- 9,727,219
Dividends reinvested... 1,076,488 1,518,099 216,290 578,837 707,286 8,648,647
Cost of shares
redeemed.............. (173,004,224) (330,133,820) (2,612,343) (4,185,229) (4,355,305) (7,262,834)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets
from capital
transactions........... 15,488,329 8,122,632 (1,036,447) 2,064,108 3,295,492 23,268,448
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets.... 15,488,329 8,121,217 (2,466,513) 5,080,292 8,833,753 28,713,185
NET ASSETS:
Beginning of period.... 157,495,499 149,374,282 37,801,175 32,720,883 63,678,389 34,965,204
------------- ------------- ----------- ----------- ----------- -----------
End of period.......... $ 172,983,828 $ 157,495,499 $35,334,662 $37,801,175 $72,512,142 $63,678,389
============= ============= =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 187,416,065 331,872,719 140,407 592,903 562,689 1,069,857
Issued in connection
with acquisition...... -- 4,865,634 -- -- -- 793,942
Reinvested............. 1,076,488 1,518,099 22,547 61,636 58,270 764,131
Redeemed............... (173,004,224) (330,133,820) (272,085) (444,444) (352,570) (634,159)
------------- ------------- ----------- ----------- ----------- -----------
Change in shares........ 15,488,329 8,122,632 (109,131) 210,095 268,389 1,993,771
============= ============= =========== =========== =========== ===========
</TABLE>
See notes to financial statements.
B-58
<PAGE> 131
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND
------------------------- -------------------------
SIX SIX
MONTHS YEAR MONTHS YEAR
ENDED ENDED ENDED ENDED
JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31,
1996 1995 1996 1995
----------- ------------ ----------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income..... $ 216,582 $ 419,775 $ 245,889 $ 275,589
Net realized gains
(losses) from investment
transactions............ (2,920) 8,848 (243,967) 131,879
Net change in unrealized
appreciation
(depreciation) from
investments............. (307,674) 713,315 (206,105) 1,230,202
----------- ----------- ----------- -----------
Change in net assets
resulting from
operations............... (94,012) 1,141,938 (204,183) 1,637,670
----------- ----------- ----------- -----------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment
income................... (207,865) (401,164) (170,197) (202,502)
From net realized gains
from investments......... -- -- -- (85,787)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment
income................... (9,885) (13,152) (78,806) (63,921)
From net realized gains
from investments......... -- -- -- (43,216)
----------- ----------- ----------- -----------
Change in net assets from
shareholder distributions. (217,750) (414,316) (249,003) (395,426)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................... 252,290 895,943 8,894,629 11,076,750
Dividends reinvested...... 11,379 18,208 252,100 334,888
Cost of shares redeemed... (454,091) (114,312) (1,319,196) (906,216)
----------- ----------- ----------- -----------
Change in net assets from
capital transactions..... (190,422) 799,839 7,827,533 10,505,422
----------- ----------- ----------- -----------
Change in net assets....... (502,184) 1,527,461 7,374,347 11,747,666
NET ASSETS:
Beginning of period....... 11,717,041 10,189,580 14,456,894 2,709,228
----------- ----------- ----------- -----------
End of period............. $11,214,857 $11,717,041 $21,831,241 $14,456,894
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued.................... 23,706 87,181 778,082 1,035,102
Reinvested................ 1,080 1,760 22,095 30,561
Redeemed.................. (43,042) (11,223) (116,822) (82,394)
----------- ----------- ----------- -----------
Change in shares........... (18,256) 77,718 683,355 983,269
=========== =========== =========== ===========
</TABLE>
See notes to financial statements.
B-59
<PAGE> 132
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------
PERIOD PERIOD
SIX MONTHS FROM OCTOBER 1, FROM OCTOBER 1, 1994
ENDED 1995 THROUGH THROUGH
JUNE 30, 1996 DECEMBER 31, 1995 (a) SEPTEMBER 30, 1995 (b)
------------- --------------------- ----------------------
(UNAUDITED)
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss.... $ (232,818) $ (51,131) $ (292,270)
Net realized gains from
investment
transactions......... 3,769,609 1,556,383 3,024,858
Net change in
unrealized
appreciation
(depreciation) from
investments.......... (1,287,068) (2,070,853) 5,538,265
----------- ----------- -----------
Change in net assets
resulting from
operations............ 2,249,723 (565,601) 8,270,853
----------- ----------- -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income................ (289) -- (1,166,721)
From net realized gains
from investments...... -- (1,556,383) --
Tax return of capital.. -- (6,824) --
----------- ----------- -----------
Change in net assets
from shareholder
distributions.......... (289) (1,563,207) (1,166,721)
----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 2,261,501 810,508 --
Dividends reinvested... 554 1,542,781 --
Cost of shares
redeemed.............. (7,200,363) (3,611,887) --
----------- ----------- -----------
Change in net assets
from capital
transactions.......... (4,938,308) (1,258,598) (10,529,141)
----------- ----------- -----------
Change in net assets.... (2,688,874) (3,387,406) (3,425,009)
NET ASSETS:
Beginning of period.... 41,067,172 44,454,578 47,879,587
----------- ----------- -----------
End of period.......... $38,378,298 $41,067,172 $44,454,578
=========== =========== ===========
SHARE TRANSACTIONS:
Issued................. 228,156 83,381
Reinvested............. 59 164,279
Redeemed............... (744,934) (370,208)
----------- -----------
Change in shares........ (516,719) (122,548)
=========== ===========
</TABLE>
- ------
(a)Period from date acquired by Riverfront Stock Appreciation Fund.
(b)Represents statements of changes in net assets for the MIM Stock
Appreciation Fund. Audited by other auditors.
See notes to financial statements.
B-60
<PAGE> 133
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (39.9%):
Federal Farm Credit Bank:
$1,535,000 Discount Note, 7/12/96.............................. $ 1,532,552
5,000,000 Discount Note, 7/31/96.............................. 4,978,208
2,910,000 Discount Note, 10/21/96............................. 2,863,013
Federal Home Loan Mortgage Corp.:
3,000,000 Discount Note, 7/1/96............................... 3,000,000
3,000,000 Discount Note, 7/3/96............................... 2,999,153
3,852,000 Discount Note, 8/1/96............................... 3,834,752
5,000,000 Discount Note, 8/12/96.............................. 4,969,083
3,025,000 Discount Note, 8/14/96.............................. 3,005,737
4,000,000 Discount Note, 8/19/96.............................. 3,971,689
2,000,000 Discount Note, 8/22/96.............................. 1,984,689
4,000,000 Discount Note, 9/12/96.............................. 3,956,849
4,000,000 Discount Note, 9/18/96.............................. 3,953,390
Federal National Mortgage Assoc.:
3,000,000 Discount Note, 7/5/96............................... 2,998,373
5,000,000 Discount Note, 7/10/96.............................. 4,993,563
3,200,000 Discount Note, 7/24/96.............................. 3,189,369
3,000,000 Discount Note, 8/6/96............................... 2,984,250
4,000,000 Discount Note, 8/23/96.............................. 3,971,616
3,000,000 Discount Note, 9/6/96............................... 2,970,911
3,000,000 Discount Note, 9/9/96............................... 2,968,908
4,000,000 Discount Note, 10/10/96............................. 3,940,859
------------
Total U.S. Government Agencies 69,066,964
------------
COMMERCIAL PAPER (28.6%):
Automobiles (1.7%):
3,000,000 Daimler-Benz North America Corp., Discount Note,
7/22/96............................................ 2,991,250
------------
Banking (1.7%):
3,000,000 Banc One Funding, Discount Note, 8/1/96............. 2,986,179
------------
Beverages (2.9%):
5,000,000 PepsiCo, Discount Note, 8/19/96..................... 4,963,658
------------
Computers (1.7%):
3,000,000 Epson American, Series B, Discount Note, 8/5/96..... 2,985,271
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Financial (12.6%):
$3,000,000 Bank of Tokyo Financial, Discount Note, 7/2/96...... $ 2,999,543
4,000,000 Cargill Financial, Discount Note, 7/26/96........... 3,986,056
4,000,000 Merrill Lynch, Discount Note, 8/12/96............... 3,975,360
4,000,000 Merrill Lynch, Discount Note, 8/26/96............... 3,967,022
3,000,000 Sunbelt Dixie, Discount Note, 7/16/96............... 2,993,337
4,000,000 Sunbelt Dixie, Discount Note, 7/30/96............... 3,982,826
------------
21,904,144
------------
Holding Companies (1.7%):
3,000,000 Japan Leasing U.S. Funding Corp., Discount Note,
7/18/96............................................ 2,992,378
------------
Manufacturing (2.6%):
3,000,000 Hanson PLC, Discount Note, 7/11/96.................. 2,995,500
1,500,000 Hanson PLC, Discount Note, 7/29/96.................. 1,493,700
------------
4,489,200
------------
Transportation (1.9%):
3,229,000 Holland Limited Securitization, Inc., Discount Note,
7/29/96............................................ 3,215,564
------------
Telecommunications (1.8%):
3,000,000 AT&T, Discount Note, 7/2/96......................... 2,999,592
------------
Total Commercial Paper 49,527,236
------------
Total Investments, at amortized cost 118,594,200
------------
</TABLE>
Continued
B-61
<PAGE> 134
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------------------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS (31.9%):
$25,150,000 Dean Witter, 5.20%, 7/1/96 (Collateralized by
various U.S. Treasury and U.S. Government Agency
Securities, 0.00%-11.90%, 7/10/96-2/15/15, market
value--$25,654,047)................................. $ 25,150,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
---------- ---------------------------------------------------- ------------
<C> <S> <C>
30,000,000 Prudential, 5.43%, 7/1/96 (Collateralized by various
U.S. Government Agency Securities, 6.00%-7.74%,
11/1/22--4/1/26, market value--$30,600,001)......... $ 30,000,000
------------
Total Repurchase Agreements 55,150,000
------------
Total (Amortized cost--$173,744,200)(a) $173,744,200
============
</TABLE>
- --------
Percentages indicated are based on net assets of $172,983,828.
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
See notes to financial statements.
B-62
<PAGE> 135
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ ----------
<C> <S> <C>
CORPORATE BONDS (21.2%):
Automotive (1.3%):
$ 500,000 Ford Motor Credit Corp., 6.25%, 12/8/05............... $ 463,750
----------
Financial (14.2%):
1,000,000 Chase Manhattan Corp., 8.50%, 2/15/02................. 1,068,750
1,000,000 First Chicago Master Trust, Series-L, Class A 1994
7.15%, 4/15/01....................................... 1,017,740
500,000 Grand Metropolitan Investment Co., 7.45%, 4/15/35..... 508,125
500,000 Lehman Brothers Holdings, 8.50%, 5/1/07............... 527,500
1,000,000 MBNA Master Credit Card Trust, 6.05%, 11/15/02........ 981,730
1,000,000 Midland Bank PLC, (HSBC), 6.95%, 3/15/11.............. 941,250
----------
5,045,095
----------
Telecommunications (2.8%):
1,000,000 U.S. West Capital Corp., 6.31%, 11/1/05............... 982,500
----------
Tobacco (2.9%):
1,000,000 Philip Morris Companies, Inc., 7.50%, 3/15/97......... 1,010,000
----------
Total Corporate Bonds 7,501,345
----------
U.S. GOVERNMENT AGENCIES (66.4%):
Federal Farm Credit:
1,000,000 Discount Note, 7/15/96................................ 997,480
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97........................................ 996,490
500,000 8.07%, 2/27/02........................................ 507,920
875,000 6.38%, 4/29/03........................................ 837,428
Federal Home Loan Mortgage Corp.:
1,500,000 Discount Note, 7/22/96................................ 1,494,720
1,000,000 6.55%, 1/4/00......................................... 996,890
1,000,000 6.78%, 3/28/01........................................ 987,860
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- -------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal Home Loan Mortgage Corp., continued:
$1,000,000 7.35%, 5/16/05.................................... $ 994,120
500,000 7.50%, 3/15/15.................................... 503,665
1,000,000 7.00%, 10/15/17................................... 989,720
1,000,000 6.00%, 1/15/18.................................... 981,790
1,000,000 7.20%, 6/15/18.................................... 996,780
Federal National Mortgage Assoc.:
1,000,000 5.33%, 6/26/98.................................... 980,490
500,000 9.05%, 4/10/00.................................... 539,045
1,000,000 6.40%, 5/2/01..................................... 989,650
1,317,649 6.00%, 2/1/03..................................... 1,272,032
1,000,000 6.71%, 5/21/03.................................... 995,380
625,000 6.38%, 6/25/03.................................... 598,100
625,000 6.05%, 6/30/03.................................... 599,456
578,254 6.75%, 8/25/04, Series 1992-152, Class H.......... 578,775
1,050,000 8.50%, 2/1/05..................................... 1,092,000
1,000,000 7.00%, 9/25/05, Series 1992-1110, Class G......... 998,760
849,946 7.00%, 9/25/19.................................... 845,535
Government National Mortgage Assoc.
737,574 8.00%, 5/15/03, Pool #35172....................... 743,717
Private Export Funding Corp.:
1,000,000 6.24%, 5/15/02.................................... 975,000
Student Loan Marketing Assoc.:
1,000,000 6.05%, 9/14/00.................................... 978,710
-----------
Total U.S. Government Agencies 23,471,513
-----------
U.S. TREASURY NOTES (7.1%):
1,000,000 6.00%, 11/30/97................................... 1,000,590
1,000,000 5.88%, 3/31/99.................................... 990,280
500,000 7.25%, 5/15/04.................................... 518,090
-----------
Total U.S. Treasury Notes 2,508,960
-----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community, 9.13%, 3/15/01.......... 393,744
-----------
Total Yankee Dollar Bonds 393,744
-----------
</TABLE>
Continued
B-63
<PAGE> 136
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
INVESTMENT COMPANIES (3.5%):
1,236,715 Dreyfus Treasury Prime Fund............................ $ 1,236,715
-----------
Total Investment Companies 1,236,715
-----------
Total (Cost--$35,104,732)(a) $35,112,277
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $35,334,662.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............ $357,092
Unrealized depreciation............ (349,547)
--------
Net unrealized appreciation........ $ 7,545
========
</TABLE>
See notes to financial statements.
B-64
<PAGE> 137
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (94.2%):
Apparel (0.3%):
3,100 V.F. Corp.............................................. $ 184,838
-----------
Auto Parts (1.0%):
18,800 Echlin, Inc............................................ 712,050
-----------
Banks (7.7%):
5,100 BayBanks, Inc.......................................... 549,525
44,700 Central Fidelity Banks, Inc............................ 1,016,925
17,800 Crestar Financial Corp................................. 950,075
14,000 First American Corp.................................... 589,750
28,300 Jefferson Bankshares, Inc.............................. 626,138
12,800 Magna Group, Inc....................................... 307,200
11,800 Signet Banking Corp.................................... 274,350
35,250 Summit Bancorp......................................... 1,238,156
-----------
5,552,119
-----------
Broadcast/Radio, TV (0.0%):
1,500 U.S. West Media Group, Inc. (b)........................ 27,375
-----------
Building Materials (1.9%):
46,000 Masco Corp............................................. 1,391,500
-----------
Chemicals (7.4%):
14,000 Akzo Nobel N.V. ADR.................................... 836,500
3,500 E.I. du Pont deNemours & Co............................ 276,938
94,500 Ethyl Corp............................................. 909,563
26,500 Lawter International, Inc.............................. 331,250
3,000 PPG Industries, Inc.................................... 146,250
16,600 RPM, Inc............................................... 259,375
20,900 Rohm & Haas Co......................................... 1,311,475
37,200 Witco Corp............................................. 1,278,750
-----------
5,350,101
-----------
Commercial Services (0.8%):
32,000 Ogden Corp............................................. 580,000
-----------
Consumer Products (2.9%):
10,000 B.A.T. Industries, PLC-ADR............................. 158,125
6,972 Corning, Inc........................................... 267,550
22,300 CPC International...................................... 1,605,600
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Consumer Products, continued:
800 Genuine Parts Co........................................ $ 36,600
----------
2,067,875
----------
Cosmetics (1.6%):
24,500 International Flavors................................... 1,166,813
----------
Department Stores (3.0%):
22,500 May Department Stores Co................................ 984,375
19,800 J.C. Penney Co.......................................... 1,039,500
3,000 Sears Roebuck & Co...................................... 145,875
----------
2,169,750
----------
Electrical (3.5%):
34,100 AMP Inc................................................. 1,368,262
31,000 Thomas & Betts Corp..................................... 1,162,500
----------
2,530,762
----------
Electronics (4.2%):
4,000 General Electric Co..................................... 346,000
28,900 General Signal Corp..................................... 1,094,588
1,500 National Service Industries, Inc........................ 58,688
47,000 Phillips NV (b)......................................... 1,533,375
----------
3,032,651
----------
Energy & Oil (0.1%):
1,000 British Petroleum, PLC-ADR.............................. 106,875
----------
Financial Services (4.5%):
39,200 H & R Block, Inc........................................ 1,278,900
60,400 ITT Industries, Inc..................................... 1,517,550
5,500 J.P. Morgan & Co........................................ 465,437
----------
3,261,887
----------
Food Processing (2.1%):
53,600 Grand Metropolitan, PLC-ADR (b)......................... 1,433,800
9,500 Tasty Baking Co......................................... 109,250
----------
1,543,050
----------
</TABLE>
Continued
B-65
<PAGE> 138
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Forest Products (2.6%):
38,600 International Paper Co................................. $ 1,423,375
13,000 Rayonier, Inc.......................................... 494,000
-----------
1,917,375
-----------
Holding Company (1.9%):
9,600 Unilever N.V........................................... 1,393,200
-----------
Household Products/Wares (0.2%):
1,500 Colgate-Palmolive Co................................... 127,125
-----------
Industrial Machinary (0.7%):
11,600 Cooper Industries, Inc................................. 481,400
-----------
Insurance (4.9%):
29,900 American General Corp.................................. 1,087,613
1,500 American International Group........................... 147,937
21,500 ITT Hartford Group, Inc................................ 1,144,875
13,100 Lincoln National Corp.................................. 605,875
13,700 Torchmark Corp......................................... 599,375
-----------
3,585,675
-----------
Manufacturing (0.3%):
3,500 Minnesota Mining & Manufacturing Co.................... 241,500
-----------
Medical Services & Supplies (0.2%):
1,500 Becton Dickinson & Co.................................. 120,375
-----------
Metals (2.1%):
28,600 Reynolds Metals Co..................................... 1,490,775
-----------
Office Equipment & Supplies (1.0%):
12,900 Xerox Corp............................................. 690,150
-----------
Oil & Gas Production (8.9%):
18,900 Amoco Corp............................................. 1,367,887
10,800 Atlantic Richfield Co.................................. 1,279,800
11,400 Mobil Corp............................................. 1,278,224
15,500 Texaco, Inc............................................ 1,300,062
37,400 Unocal Corp............................................ 1,262,250
-----------
6,488,223
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------- -------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Oil--International (0.5%):
5,000 Chevron Corp.................... $ 295,000
1,000 Exxon Corp...................... 86,875
-----------
381,875
-----------
Packaged Food (1.0%):
38,000 Lance, Inc...................... 627,000
2,500 Sara Lee Corp................... 80,937
-----------
707,937
-----------
Paper (3.4%):
13,000 Consolidated Papers, Inc........ 676,000
15,700 Kimberly-Clark Corp............. 1,212,825
20,500 Westvaco Corp................... 612,437
-----------
2,501,262
-----------
Pharmaceuticals (6.3%):
33,300 Abbott Laboratories............. 1,448,550
1,600 Bristol Myers Squibb Co......... 144,000
34,500 Pharmacia & Upjohn, Inc......... 1,530,938
26,000 Warner-Lambert Co............... 1,430,000
-----------
4,553,488
-----------
Photography (0.4%):
3,500 Eastman Kodak Co................ 272,125
-----------
Pipelines (1.9%):
26,400 Tenneco, Inc.................... 1,349,700
-----------
Printing & Publishing (1.6%):
12,800 American Greetings, Class A..... 350,400
19,800 Dow Jones & Co.................. 826,650
-----------
1,177,050
-----------
Real Estate Investment Trusts (0.2%):
3,000 Federal Realty Investment Trust. 68,250
3,200 New Plan Realty Trust........... 67,600
-----------
135,850
-----------
</TABLE>
Continued
B-66
<PAGE> 139
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Retail (0.2%):
5,000 Winn Dixie Stores, Inc................................. $ 176,875
----------
Savings & Loans (0.8%):
31,900 Roosevelt Financial Group, Inc......................... 614,075
----------
Steel (0.6%):
22,700 Allegheny Ludlum Corp.................................. 428,462
----------
Tires & Rubber (0.1%):
1,600 B.F. Goodrich Co....................................... 59,800
----------
Tobacco (1.0%):
5,000 American Brands, Inc................................... 226,875
5,000 Philip Morris Cos., Inc................................ 520,000
----------
746,875
----------
Tools (0.6%):
9,800 Snap-On, Inc........................................... 464,275
----------
Transportation (1.8%):
13,700 Conrail, Inc........................................... 909,337
2,500 Norfolk Southern Corp.................................. 211,875
7,200 Ryder System, Inc...................................... 202,500
----------
1,323,712
----------
Utilities--Electric (3.5%):
33,900 Central & Southwest Corp............................... 983,100
12,300 Chilgener S.A., ADR (b)................................ 295,200
1,000 KU Energy Corp......................................... 29,875
14,700 Pacificorp............................................. 327,075
32,500 Public Services Enterprise Group....................... 889,688
----------
2,524,938
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- --------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Gas (0.1%):
1,500 Consolidated Natural Gas Co........................ $ 78,375
-----------
Utilities--Telecommunications (6.4%):
32,200 Frontier Corp...................................... 986,125
17,500 GTE Corp........................................... 783,125
46,000 Peco Energy Co..................................... 1,196,000
22,700 Southern New England Telecommunications Corp....... 953,400
15,500 Sprint Corp........................................ 651,000
1,500 US West, Inc....................................... 47,813
-----------
4,617,463
-----------
Total Common Stocks 68,327,581
===========
CORPORATE BONDS (1.2%):
$50,000 Chubb Capital Corp., 6.00%, 5/15/98................ 59,125
50,000 Cincinnati Financial Corp., 5.50%, 5/1/02.......... 66,313
85,000 Cooker Restaurant, 6.75%,
10/1/02........................................... 76,925
100,000 Hasbro, Inc., 6.00%, 11/15/98...................... 125,625
150,000 INA Republic of Italy, 5.00%, 6/28/01.............. 153,000
50,000 Liebert Corp., 8.00%, 11/15/10..................... 166,500
100,000 Pennzoil Co., 6.50%, 1/15/03....................... 141,250
50,000 South Carolina National Corp., 6.50%, 5/15/01...... 115,500
-----------
Total Corporate Bonds 904,238
-----------
</TABLE>
Continued
B-67
<PAGE> 140
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
INVESTMENT COMPANIES (5.1%):
2,851,960 Dreyfus Treasury Prime Fund............................ $ 2,851,960
830,000 Federated Short Term Government Fund................... 830,000
-----------
Total Investment Companies 3,681,960
-----------
Total (Cost--$68,690,785)(a) $72,913,779
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $72,512,142.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting in excess of federal income tax reporting of
$76,532. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.......... $5,443,701
Unrealized depreciation.......... (1,297,239)
----------
Net unrealized appreciation...... $4,146,462
==========
</TABLE>
(b)Non-income producing security.
ADR--American Depository Receipt
NV--Naamloze Vennootschap (Dutch Corporation)
PLC--Public Limited Company (British)
See notes to financial statements.
B-68
<PAGE> 141
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
OHIO MUNICIPAL BONDS (92.8%):
$100,000 Aurora City School District, GO, 5.40%, 12/1/06........ $ 101,625
200,000 Beavercreek Local School District, GO, 5.30%, 12/1/08.. 199,250
100,000 Bowling Green City School District, GO, 5.70%, 12/1/11. 99,000
230,000 Butler County Hospital Facilities, 6.00%, 11/15/10,
Callable 5/15/04 @101................................. 236,612
200,000 Butler County Sewer System Revenue, 5.40%, 12/1/09..... 197,750
250,000 Butler County Sewer System Revenue, Series B, 6.20%,
12/1/09............................................... 257,500
250,000 Canton Waterworks System, GO, 5.75%, 12/1/10........... 253,437
100,000 Chillicothe Water System Revenue, 5.10%, 12/1/05....... 98,875
250,000 Cincinnati, GO, 5.25%, 12/1/01......................... 256,875
250,000 Clermont County Waterworks Revenue, 6.63%, 12/1/16..... 276,562
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 @102.... 252,812
200,000 Columbus, GO, 5.65%, 6/15/11........................... 200,000
250,000 Columbus Sewer Revenue, 6.13%, 6/1/03.................. 267,812
100,000 Delaware County, GO, 5.60%, 12/1/10.................... 99,000
100,000 Dover Municipal Electric System Revenue, 5.35%,
12/1/06............................................... 100,375
250,000 Franklin County Hospital Revenue, 5.25%, 6/1/08........ 243,125
250,000 Franklin County Hospital Revenue Refunding, Riverside
United Methodist, Series A, 5.30%, 5/15/02............ 253,437
250,000 Fremont, GO, 5.45%, 12/15/07........................... 251,875
250,000 Gahanna, GO, 5.85%, 6/1/08............................. 258,437
80,000 Hamilton County Sewer Systems, Series A, 6.40%,
12/1/04............................................... 87,000
170,000 Hamilton County Sewer System Unrefunded, Series A,
6.40%, 12/1/04........................................ 183,600
250,000 Hamilton County, Building Improvement & Refunding,
Museum Center, GO, 5.75%, 12/1/00..................... 260,312
250,000 Hilliard School District, GO, 5.35%, 12/1/04........... 252,813
250,000 Kings Local School District, GO, 5.75%, 12/1/10........ 253,125
100,000 Lake County Human Services Building, GO, 5.70%,
12/1/15............................................... 98,875
250,000 Lakota Local School District, GO, 6.00%, 12/1/07,
Callable 12/1/02 @101................................. 257,500
250,000 Mahoning County, GO, 5.60%, 12/1/02.................... 259,375
250,000 Mahoning County, GO, 5.70%, 12/1/08.................... 257,188
100,000 Marysville Exempt Village School District, GO, 5.30%,
12/1/09............................................... 97,750
200,000 Mason City School District, GO, 5.20%, 12/1/08......... 195,250
250,000 Middletown Capital Facilities Improvement, 5.60%,
12/1/05............................................... 251,875
100,000 Montgomery County, GO, 5.40%, 9/1/09................... 98,250
250,000 Olentangy Local School District, GO, Series A, 5.70%,
12/1/05............................................... 260,312
</TABLE>
Continued
B-69
<PAGE> 142
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
OHIO MUNICIPAL BONDS, CONTINUED:
$100,000 Solon, GO, 5.25% 12/1/07.............................. $ 98,250
100,000 State, GO, 5.60%, 8/1/02.............................. 104,625
250,000 State Building Authority, 5.70%, 9/1/01............... 261,250
250,000 State Building Authority, 6.00%, 10/1/07.............. 262,812
245,000 State Building Authority, 6.13%, 10/1/09.............. 256,944
95,000 State Building Authority, 6.25%, 6/1/11............... 97,138
250,000 State Elementary & Secondary Capital Facilities,
5.45%, 6/1/99........................................ 256,875
250,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-B, 5.70%, 11/1/03...... 261,563
250,000 State Public Facilities Commission, Parks &
Recreations, Series II-A, 5.25%, 6/1/06.............. 250,000
200,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-A, 5.20%, 5/1/05....... 201,000
250,000 State Water Development Authority Revenue, 5.75%,
6/1/03............................................... 261,563
250,000 State Water Development Authority Revenue, 5.75%,
12/1/05, Callable 12/1/02 @102....................... 261,563
150,000 State Water Development Authority Revenue, 5.70%,
12/1/11.............................................. 150,375
100,000 Summit County, 5.45%, 12/1/10......................... 99,504
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04.... 259,063
250,000 Warren County Waterworks, 5.75%, 12/1/09.............. 250,313
100,000 West Clermont Local School District, GO, 5.55%,
12/1/06.............................................. 101,875
250,000 Woodridge Local School District, GO, 5.75%, 12/1/07,
Callable 12/1/04 @102................................ 257,188
-----------
Total Ohio Municipal Bonds...................................... 10,409,485
-----------
INVESTMENT COMPANIES (7.0%):
325,000 Dreyfus Municipal Money Market Fund................... 325,000
456,761 Goldman Tax Free Fund................................. 456,761
-----------
Total Investment Companies...................................... 781,761
-----------
Total (Cost--$10,940,541)(a).................................... $11,191,246
===========
</TABLE>
- --------
Percentages indicated are based on net assets of $11,214,857.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation............. $267,576
Unrealized depreciation............. (16,871)
--------
Net unrealized appreciation......... $250,705
========
</TABLE>
GO--General Obligation
See notes to financial statements.
B-70
<PAGE> 143
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (46.9%):
Aerospace (0.9%):
2,200 Lockheed Martin Corp................................... $ 184,800
-----------
Agricultural Machinery (1.8%):
8,000 Case Corp.............................................. 384,000
-----------
Apparel (0.9%):
4,000 Jones Apparel Group (b)................................ 196,500
-----------
Beverages (0.7%):
2,000 Anheuser-Busch Cos., Inc............................... 150,000
-----------
Building Materials (1.3%):
4,000 Texas Industries, Inc.................................. 274,500
-----------
Chemicals (0.9%):
2,500 E. I. du Pont de Nemours & Co.......................... 197,813
-----------
Computers & Software (1.9%):
4,800 Seagate Technology, Inc. (b)........................... 216,000
4,000 Compaq Computer Corp. (b).............................. 197,000
-----------
413,000
-----------
Department Stores (0.8%):
3,000 Mercantile Stores Co., Inc............................. 175,875
-----------
Drugs (2.4%):
3,000 Amgen, Inc. (b)........................................ 162,000
4,000 Bristol-Myers Squibb Co................................ 360,000
-----------
522,000
-----------
Food Processing (2.3%):
8,000 IBP, Inc............................................... 221,000
8,500 H. J. Heinz Co......................................... 258,187
-----------
479,187
-----------
Forest Products (0.3%):
2,000 International Paper Co................................. 73,750
-----------
Grocery (1.1%):
6,000 Kroger Co. (b)......................................... 237,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Household Products/Wares (1.1%):
2,700 Clorox Co............................................. $ 239,287
-----------
Industrial Machinery (1.1%):
3,400 Caterpillar, Inc...................................... 230,350
-----------
Leisure Time (0.5%):
5,000 Brunswick Corp. 100,000............................... 100,000
-----------
Manufacturing (0.6%):
4,000 TRINOVA Corp.......................................... 133,500
-----------
Metals (1.2%):
11,000 Placer Dome, Inc...................................... 262,625
-----------
Mining (2.6%):
10,000 Barrick Gold Corp..................................... 271,250
4,000 Homestake Mining Co................................... 68,500
14,000 Santa Fe Pacific Gold Corp............................ 197,750
-----------
537,500
-----------
Oil & Gas Producers (6.5%):
2,500 British Petroleum PLC, ADR............................ 267,188
2,300 Exxon Corp............................................ 199,813
1,200 Mobil Corp............................................ 134,550
8,000 Panenergy Corp........................................ 263,000
2,000 Texaco, Inc........................................... 167,750
16,000 YPF Sociedad Anonima-Sponsored ADR.................... 360,000
-----------
1,392,301
-----------
Photography (1.4%):
4,000 Eastman Kodak Co...................................... 311,000
-----------
Real Estate (3.6%):
13,000 Healthcare Properties Investment, Inc................. 438,750
12,000 Health & Retirement Properties Trust.................. 207,000
7,000 Public Storage Inc.................................... 144,375
-----------
790,125
-----------
</TABLE>
Continued
B-71
<PAGE> 144
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Restaurants (0.8%):
5,000 Outback Steakhouse, Inc. (b)........................... $ 172,422
-----------
Retail (1.5%):
3,000 Albertson's, Inc....................................... 124,125
6,000 Walgreen Co............................................ 201,000
-----------
325,125
-----------
Transportation--Rail (0.7%):
3,000 CSX Corp. 144,750...................................... 144,750
-----------
Tobacco (2.0%):
4,300 Philip Morris Cos., Inc................................ 447,200
-----------
Utilities--Electric (2.0%):
7,000 Consolidated Edison of
New York.............................................. 204,750
4,500 Duke Power Co.......................................... 230,625
-----------
435,375
-----------
Utilities--Telecommunications (6.0%):
6,500 Ameritech Corp......................................... 385,937
4,000 Atmel Corp. (b)........................................ 120,500
2,000 CIA Telecomunicacion Chile, ADR........................ 196,250
4,000 Telecom of New Zealand, ADR............................ 267,000
11,000 Telefonica De Argentina,
ADR (b)............................................... 325,875
-----------
1,295,562
-----------
Total Common Stocks 10,105,547
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
U.S. GOVERNMENT AGENCIES (5.8%):
FEDERAL HOME LOAN BANK:
$ 100,000 5.97%, 12/14/98....................................... $ 98,723
400,000 5.78%, 1/8/99......................................... 391,540
200,000 6.11%, 1/18/01........................................ 194,344
300,000 6.04%, 2/14/01........................................ 289,647
300,000 7.00%, 3/28/01........................................ 296,844
-----------
Total U.S. Government Agencies 1,271,098
-----------
U.S. TREASURY NOTES (39.3%):
500,000 Discount Note, 9/19/96................................ 494,085
300,000 Discount Note, 12/19/96............................... 292,371
1,300,000 6.50%, 5/15/97........................................ 1,308,151
500,000 6.00%, 12/31/97....................................... 500,280
2,950,000 7.25%, 5/15/04........................................ 3,056,731
2,500,000 6.88%, 5/16/06........................................ 2,525,750
400,000 7.25%, 5/15/16 ....................................... 409,908
-----------
Total U.S. Treasury Notes 8,587,276
-----------
U.S. TREASURY BILLS (4.3%):
950,000 6.25%, 5/31/00........................................ 944,091
-----------
Total U.S. Treasury Bills 944,091
-----------
U.S. TREASURY BONDS (1.5%):
300,000 8.13%, 8/15/19........................................ 336,672
-----------
Total U.S. Treasury Bonds 336,672
-----------
</TABLE>
Continued
B-72
<PAGE> 145
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<S> <C> <C>
INVESTMENT COMPANIES (1.8%):
$248,394 Dreyfus Treasury Prime Fund........................... $ 248,394
8,000 Southern Africa Fund, Inc............................. 134,000
-----------
Total Investment Companies 382,394
-----------
Total (Cost--$20,633,173)(a) $21,627,078
===========
</TABLE>
- ------
The percentages indicated are based on net assets of $21,831,241.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........... $1,293,514
Unrealized depreciation........... (299,609)
----------
Net unrealized appreciation....... $ 993,905
==========
</TABLE>
(b) Non-income producing security.
ADR--American Depository Receipt
See notes to financial statements.
B-73
<PAGE> 146
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS (95.7%):
Apparel (8.7%):
15,000 Jones Apparel Group (b)................................ $ 736,875
7,000 Nike, Inc., Class B.................................... 719,250
14,000 The GAP, Inc........................................... 449,750
24,000 The Men's Wearhouse, Inc. (b).......................... 774,000
12,000 TJX Companies, Inc..................................... 405,000
15,000 Vans, Inc. (b)......................................... 255,000
-----------
3,339,875
-----------
Brokerage (1.1%):
8,000 Alex Brown, Inc........................................ 452,000
-----------
Business Services (0.7%):
9,750 PMT Services, Inc. (b)................................. 279,094
-----------
Building Materials (0.4%):
5,000 NCI Building Systems, Inc. (b)......................... 168,750
-----------
Commercial Services (4.8%):
10,000 Employee Solutions, Inc. (b)........................... 315,000
8,000 Greenwich Air Services, Inc., Class A (b).............. 196,000
8,000 Greenwich Air Services, Inc., Class B (b).............. 156,000
10,500 Paychex, Inc........................................... 505,312
20,000 Prepaid Legal Services, Inc. (b)....................... 370,000
8,600 Wackenhut Corrections
Corp. (b)............................................. 287,025
-----------
1,829,337
-----------
Computer, Software & Services (16.1%):
7,500 Aspen Technologies, Inc. (b)........................... 412,500
20,000 Auspex Systems, Inc. (b)............................... 300,000
11,250 Cadence Design Systems, Inc. (b)....................... 379,688
20,000 Cisco Systems, Inc. (b)................................ 1,132,500
36,000 Cognos, Inc. (b)....................................... 828,000
12,500 Comverse Technology, Inc. (b).......................... 381,250
10,000 Dialogic Corp. (b)..................................... 596,250
12,300 In Focus Systems, Inc. (b)............................. 298,275
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Computer, Software & Services, continued:
7,000 Microsoft Corp. (b).................................... $ 840,875
6,000 Peoplesoft, Inc. (b)................................... 427,500
8,000 Sun Microsystems, Inc. (b)............................. 471,000
15,000 Unisys Corp. (b)....................................... 106,875
-----------
6,174,713
-----------
Cosmetics (0.7%):
10,000 Nature's Sunshine
Products, Inc......................................... 255,000
-----------
Department Stores (2.2%):
15,000 Dollar Tree Stores, Inc. (b)........................... 476,250
10,000 Kohl's Corp. (b)....................................... 366,250
-----------
842,500
-----------
Drugs (2.8%):
11,000 Gilead Sciences, Inc. (b).............................. 277,750
24,000 Jones Medical Industries, Inc.......................... 798,000
-----------
1,075,750
-----------
Electronics (7.6%):
30,000 Alliance Semiconductor
Corp. (b)............................................. 251,250
12,500 Analog Devices, Inc. (b)............................... 318,750
11,000 Applied Materials, Inc. (b)............................ 335,500
25,000 Checkpoint Systems, Inc. (b)........................... 859,375
10,000 Kent Electronics Corp. (b)............................. 312,500
7,500 Lam Research Corp. (b)................................. 195,000
15,000 Micron Technology, Inc................................. 388,125
10,000 Vitesse Semiconductor
Corp. (b)............................................. 240,000
-----------
2,900,500
-----------
Entertainment (2.2%):
7,500 Circus Circus Enterprises,
Inc. (b).............................................. 307,500
10,000 Mirage Resorts, Inc. (b)............................... 540,000
-----------
847,500
-----------
</TABLE>
Continued
B-74
<PAGE> 147
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<S> <C>
COMMON STOCKS, CONTINUED:
Environmental Control (1.4%):
15,000 Allied Waste Industries, Inc. (b)....................... $ 133,125
12,000 United Waste Systems, Inc. (b).......................... 387,000
----------
520,125
----------
Financial Services (3.8%):
15,000 Aames Financial Corp.................................... 538,125
10,000 Green Tree Financial Corp. (b).......................... 312,500
27,500 The Money Store, Inc.................................... 608,438
10 Transport Holdings, Inc.,
Class A (b)............................................ 460
----------
1,459,523
----------
Food Service (1.9%):
15,000 Longhorn Steaks, Inc. (b)............................... 375,000
10,000 Outback Steakhouse, Inc. (b)............................ 344,844
----------
719,844
----------
Homebuilders (1.8%):
15,000 Cavalier Homes, Inc..................................... 346,875
16,000 Oakwood Homes Corp...................................... 330,000
----------
676,875
----------
Home Improvememt (1.6%):
40,000 Eagle Hardware And Garden, Inc. (b)..................... 610,000
----------
Hospital Management & Services (1.7%):
20,000 Prime Medical Services, Inc. (b)........................ 347,500
12,000 Universal Health Services, Inc., Class B (b)............ 313,500
----------
661,000
----------
Industrial Machinery (1.0%):
5,000 JLG Industries, Inc..................................... 371,250
----------
Insurance (0.0%):
200 Highlands Insurance Group (b)........................... 3,750
----------
Lodging (1.3%):
7,000 HFS, Inc. (b)........................................... 490,000
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Medical Supplies (1.0%):
15,000 Mentor Corp............................................ $ 382,500
-----------
Metals (0.9%):
15,000 Placer Dome, Inc....................................... 358,125
-----------
Mining (2.8%):
15,000 Barrick Gold Corp...................................... 406,875
7,500 Newmont Gold Co........................................ 377,812
25,000 Pegasus Gold, Inc. (b)................................. 306,250
-----------
1,090,937
-----------
Oil Equipment, Wells & Services (7.7%):
12,000 Ensco International, Inc. (b).......................... 390,000
30,000 Global Marine, Inc. (b)................................ 416,250
11,000 Pogo Producing Co...................................... 419,375
20,000 Reading & Bates Corp. (b).............................. 442,500
25,000 Rowan Companies, Inc. (b).............................. 368,750
5,000 Sonat Offshore Drilling Co............................. 252,500
15,000 Tidewater, Inc......................................... 658,125
-----------
2,947,500
-----------
Printing & Publishing (1.0%):
10,000 Gartner Group, Inc.,
Class A (b)........................................... 366,250
-----------
Recreational Equipment (1.3%):
15,000 Callaway Golf Co....................................... 498,750
-----------
Retail (9.3%):
15,000 Bed Bath & Beyond, Inc. (b)............................ 401,250
10,000 Boise Cascade Office Products Corp. (b)................ 346,250
10,000 Consolidated Stores Corp. (b).......................... 367,500
15,000 Corporate Express, Inc. (b)............................ 600,000
11,000 PetsMart, Inc. (b)..................................... 525,250
13,500 Regis Corp............................................. 421,875
9,000 Ross Stores, Inc. ..................................... 312,750
</TABLE>
Continued
B-75
<PAGE> 148
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
JUNE 30, 1996
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Retail, continued:
10,000 Tech Data Corp. (b).................................... $ 217,500
5,000 Tiffany & Co........................................... 365,000
-----------
3,557,375
-----------
Steel (1.0%)
10,000 AK Steel Holding Corp.................................. 391,250
-----------
Telecommunications (5.2%)
8,000 Aspect Telecommunications Corp. (b).................... 396,000
15,000 ECI Telecommunications Limited Designs................. 348,750
5,000 Glenayre Technologies, Inc. (b)........................ 250,000
10,000 LCI International, Inc. (b)............................ 313,750
12,500 Worldcom, Inc. (b)..................................... 692,187
-----------
2,000,687
-----------
Textiles (2.0%):
6,500 Tommy Hilfiger Corp. (b)............................... 348,563
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<S> <C>
COMMON STOCKS, CONTINUED:
Textiles, continued:
15,000 G & K Services, Inc., Class A.......................... $ 427,500
-----------
776,063
-----------
Transportation (1.7)%
7,500 Coachmen Industries, Inc............................... 262,500
15,000 Conair Holdings, Inc................................... 405,000
-----------
667,500
-----------
Total Common Stocks 36,714,323
-----------
U.S. GOVERNMENT AGENCIES (2.6%)
Federal National Mortgage Assoc.:
1,000,000 Discount Notes, 7/3/96................................. 999,260
-----------
Total U.S. Government Agencies 999,260
-----------
INVESTMENT COMPANIES (1.7%):
649,921 Dreyfus Treasury Prime Fund............................ 649,921
-----------
Total Investment Companies 649,921
-----------
Total (Cost--$41,721,425)(a) $38,363,504
===========
</TABLE>
- ------
The percentages indicated are based on net assets of $38,378,298.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........ $ 7,467,921
Unrealized depreciation........ (1,637,166)
------------
Net unrealized appreciation.... $ 5,830,755
============
</TABLE>
(b) Non-income producing security.
See notes to financial statements.
B-76
<PAGE> 149
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
corporation on March 27, 1990, and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as a diversified, open-
end management investment company. The Fund is authorized to issue six
series of shares of capital stock, representing interests in different
portfolios of securities as follows: The Riverfront U.S. Government
Securities Money Market Fund, The Riverfront U.S. Government Income Fund,
The Riverfront Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund,
The Riverfront Flexible Growth Fund and The Riverfront Stock Appreciation
Fund (each, a "Portfolio"; and collectively, the "Portfolios").
The investment objective of the U.S. Government Securities Money Market
Fund is to seek current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity. The investment
objective of the U.S. Government Income Fund is to seek a high level of
current income by investing primarily in securities issued or guaranteed by
the U.S. Government, its agencies and instrumentalities. The investment
objective of the Income Equity Fund is to seek a high level of investment
income through investment primarily in income-producing equity securities
of U.S. issuers. The investment objective of the Ohio Tax-Free Bond Fund is
to seek income exempt from federal and state income taxes and preservation
of capital through bonds or notes issued by the State of Ohio. The
investment objective of the Flexible Growth Fund is to seek long-term
growth of capital with some current income as a secondary objective. The
investment objective of the Stock Appreciation Fund is to seek capital
growth by investing primarily in common stocks.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001. Sales of shares of the Portfolios may be made to customers of The
Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, the Income Equity Fund, the Ohio Tax-Free
Bond Fund, the Flexible Growth Fund and the Stock Appreciation Fund
(collectively, "the variable net asset value funds") each offers two share
classes: Investor A Shares and Investor B Shares. The U.S. Government
Securities Money Market Fund (the "money market fund") offers only the
Investor A Shares. Investor A Shares of the variable net asset value funds
are subject to initial sales charges imposed at the time of purchase, in
accordance with the Portfolios' prospectuses. Certain redemptions of the
Investor B Shares of the variable net asset value funds made within six
years of purchase are subject to varying contingent deferred sales charges
in accordance with the Portfolios' prospectuses. Each share class has
identical rights and privileges, except with respect to distribution and
services (12b-1) fees paid by each share class, voting rights on matters
affecting a single share class, and the exchange privileges of each share
class.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and
assumptions that affect the
Continued
B-77
<PAGE> 150
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses for the period.
Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the money market fund are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the
maturity of the security. In addition, the money market fund may not (a)
purchase any instrument with a remaining maturity greater than 397 days
unless such investment is subject to a demand feature, or (b) maintain a
dollar-weighted-average portfolio maturity which exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, municipal
bonds, commercial paper and U.S. Government securities of the variable net
asset value funds are valued at their market values determined on the basis
of the mean of the latest available bid and asked quotations on the
principal exchange (closing sales prices if the over-the-counter National
Market System) in which such securities are normally traded. Short-term
investments maturing in 60 days or less are valued at amortized cost which,
combined with accrued interest, approximates market value. Investments in
investment companies are valued at their net asset values as reported by
such investment companies. Other securities for which quotations are not
readily available are valued at their fair value by the investment adviser
under the supervision of the Fund's Board of Directors. The differences
between the cost and market values of investments held by the variable net
asset value funds are reflected as either unrealized appreciation or
depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
REPURCHASE AGREEMENTS:
The Portfolios may acquire repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser or the Portfolio's sub-investment adviser deems
creditworthy under guidelines approved by the Board of Directors, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price
paid by each Portfolio plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller, under a repurchase agreement, is required
to maintain the value of collateral held pursuant to the agreement at not
less than the repurchase price (including accrued interest). Securities
subject to repurchase agreements are held by each Portfolio's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by the Portfolios
under the 1940 Act.
Continued
B-78
<PAGE> 151
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Any taxable distributions declared in
December and paid in the following fiscal year will be taxable to
shareholders in the year declared.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Timing differences relating to shareholder
distributions are reflected in the components of net assets and permanent
book and tax basis differences relating to shareholder distributions have
been reclassified to additional paid-in capital. These differences are due
primarily to differing treatments for dollar roll transactions, the
deferral of certain losses and expiring capital loss carryforwards.
FEDERAL INCOME TAXES:
It is the policy of each Portfolio to qualify or continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
OTHER:
Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses of the Fund are
prorated to the portfolios, generally on the basis of relative net assets.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
six months ended June 30, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
----------- -----------
<S> <C> <C>
U.S. Government Income Fund......................... $10,036,208 $13,633,145
Income Equity Fund.................................. $53,911,172 $53,175,699
Ohio Tax-Free Bond Fund............................. $ 499,504 $ 716,491
Flexible Growth Fund................................ $15,044,234 $ 8,647,209
Stock Appreciation Fund............................. $31,930,644 $35,070,302
</TABLE>
Continued
B-79
<PAGE> 152
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND U.S. GOVERNMENT INCOME FUND
---------------------------- -----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995
------------- ------------- -------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued.............. $ 187,416,065 $ 331,872,719 $ 1,130,930 $ 4,352,572
Proceeds from shares
issued in connection
with acquisition.... -- 4,865,634 -- --
Dividends reinvested. 1,076,488 1,518,099 195,234 569,125
Shares redeemed...... (173,004,224) (330,133,820) (2,338,203) (4,089,227)
------------- ------------- ------------- -------------
Change in net assets
from Investor A
share transactions.. $ 15,488,329 $ 8,122,632 $ (1,012,039) $ 832,470
============= ============= ============= =============
INVESTOR B SHARES:
Proceeds from shares
issued.............. -- -- $ 228,676 $ 1,317,928
Dividends reinvested. -- -- 21,056 9,712
Shares redeemed...... (274,140) (96,002)
------------- ------------- ------------- -------------
Change in net assets
from Investor B
share transactions.. -- -- $ (24,408) $ 1,231,638
============= ============= ============= =============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued............... 187,416,065 331,872,719 119,163 469,561
Issued in connection
with acquisition.... -- 4,865,634 -- --
Reinvested........... 1,076,488 1,518,099 20,586 60,733
Redeemed............. (173,004,224) (330,133,820) (246,569) (435,482)
------------- ------------- ------------- -------------
Change in Investor A
Shares.............. 15,488,329 8,122,632 (106,820) 94,812
============= ============= ============= =============
INVESTOR B SHARES:
Issued............... -- -- 21,244 123,342
Reinvested........... -- -- 1,961 903
Redeemed............. -- -- (25,516) (8,962)
------------- ------------- ------------- -------------
Change in Investor B
Shares.............. -- -- (2,311) 115,283
============= ============= ============= =============
</TABLE>
Continued
B-80
<PAGE> 153
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
INCOME EQUITY FUND OHIO TAX-FREE FUND
---------------------------- ----------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995
------------ ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued .............. $ 5,267,395 $ 9,389,602 $ 39,306 $ 297,450
Proceeds from shares
issued in connection
with acquisition .... -- 9,727,219 -- --
Dividends reinvested . 480,302 8,635,353 2,841 8,453
Shares redeemed ...... (4,221,291) (7,219,484) (301,788) (109,278)
------------ ------------ ------------ ------------
Change in net assets
from Investor A share
transactions ........ $ 1,526,406 $ 20,532,690 $ (259,641) $ 196,625
============ ============ ============ ============
INVESTOR B SHARES:
Proceeds from shares
issued .............. $ 1,676,116 $ 2,765,814 $ 212,984 $ 598,493
Dividends reinvested . 226,984 13,294 8,538 9,755
Shares redeemed ...... (134,014) (43,350) (152,303) (5,034)
------------ ------------ ------------ ------------
Change in net assets
from Investor B share
transactions ........ $ 1,769,086 $ 2,735,758 $ 69,219 $ 603,214
============ ============ ============ ============
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued ............... 428,872 828,287 3,723 29,259
Issued in connection
with acquisition .... -- 793,942 -- --
Reinvested ........... 39,085 763,006 274 833
Redeemed ............. (341,894) (630,554) (28,642) (10,732)
------------ ------------ ------------ ------------
Change in Investor A
Shares .............. 126,063 1,754,681 (24,645) 19,360
============ ============ ============ ============
INVESTOR B SHARES:
Issued ............... 133,817 241,570 19,983 57,922
Reinvested ........... 19,185 1,125 806 927
Redeemed ............. (10,676) (3,605) (14,400) (491)
------------ ------------ ------------ ------------
Change in Investor B
Shares .............. 142,326 239,090 6,389 58,358
============ ============ ============ ============
</TABLE>
Continued
B-81
<PAGE> 154
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND STOCK APPRECIATION FUND
-------------------------- --------------------------
SIX MONTHS YEAR ENDED SIX MONTHS YEAR ENDED
ENDED DECEMBER 31, ENDED DECEMBER 31,
JUNE 30, 1996 1995 JUNE 30, 1996 1995(a)
------------- ------------ ------------- ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares
issued .............. $ 4,796,993 $ 6,257,968 $ 1,721,983 $ 738,522
Dividends reinvested . 138,211 282,271 554 1,542,781
Shares redeemed ...... (967,355) (717,635) (7,182,625) (3,611,887)
----------- ----------- ----------- -----------
Change in net assets
from Investor A share
transactions ........ $ 3,967,849 $ 5,822,604 $(5,460,088) $(1,330,584)
=========== =========== =========== ===========
INVESTOR B SHARES:
Proceeds from shares
issued .............. $ 4,097,636 $ 4,818,782 $ 539,518 $ 71,986
Dividends reinvested . 113,889 52,617 -- --
Shares redeemed ...... (351,841) (188,581) (17,738) --
----------- ----------- ----------- -----------
Change in net assets
from Investor B share
transactions ........ $ 3,859,684 $ 4,682,818 $ 521,780 $ 71,986
=========== =========== =========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued ............... 426,109 593,056 174,475 76,082
Reinvested ........... 12,288 25,863 59 164,279
Redeemed ............. (86,427) (65,727) (743,214) (370,208)
----------- ----------- ----------- -----------
Change in Investor A
Shares .............. 351,970 553,192 (568,680) (129,847)
=========== =========== =========== ===========
INVESTOR B SHARES:
Issued ............... 351,973 442,046 53,681 7,299
Reinvested ........... 9,807 4,698 -- --
Redeemed ............. (30,395) (16,667) (1,720) --
----------- ----------- ----------- -----------
Change in Investor B
Shares .............. 331,385 430,077 51,961 7,299
=========== =========== =========== ===========
</TABLE>
- --------
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
Continued
B-82
<PAGE> 155
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30,1996
(UNAUDITED)
5.RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment of
the assets of the U.S. Government Securities Money Market Fund, the U.S.
Government Income Fund, the Ohio Tax-Free Bond Fund and the Stock
Appreciation Fund. Under the terms of the Investment Advisory Agreement,
Provident is entitled to receive fees based on a percentage of the average
net assets of each Portfolio.
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into Sub-Investment Advisory Agreements with
DePrince, Race & Zollo, Inc. ("DRZ"), for the Income Equity Fund and with
James Investment Research ("JIR") for the Flexible Growth Fund. DRZ and JIR
provide investment advice to and supervise the investment program of the
Income Equity Fund and the Flexible Growth Fund, respectively. Under the
terms of the Sub-Investment Advisory Agreements, JIR receives from
Provident fees calculated at 0.50% of the average daily net assets of the
Flexible Growth Fund, and DRZ receives from Provident fees calculated at
0.50% of average daily net assets up to $55 million of the Income Equity
Fund and 0.55% of average daily net assets above $55 million for this Fund.
In addition to serving as Investment Adviser, Provident serves as custodian
and fund accountant to the Portfolios. Under the terms of the Custodian,
Fund Accounting and Recordkeeping Agreement, Provident is entitled to
receive fees based on a percentage of the average daily net assets of each
Portfolio.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are
affiliated, serves the Fund as administrator, principal underwriter and
distributor. Such officers and director are paid no fees directly by the
Portfolios for serving as officers and as director of the Fund. Under the
terms of the Administration Agreement, BISYS' fees are computed at 0.20% of
the average daily net assets of each Portfolio.
Provident also serves as transfer agent and shareholder servicing agent to
the Fund and BISYS Ohio serves as sub-transfer agent for the Investor B
Shares. Under the terms of the Master Transfer and Record-keeping
Agreement, Provident is entitled to receive fees based on the number of
shareholders of each Portfolio and certain out-of-pocket expenses. Under
the terms of the Shareholder Servicing Agreement, Provident may receive a
fee computed daily at an annual rate of up to 0.25% of the average daily
net assets of certain shares of each Portfolio. This fee may be used to
reimburse BISYS or other providers of record keeping and/or administrative
support services. As of June 30, 1996, there were no shareholder servicing
agreements entered into on behalf of any of the Portfolios.
The Fund has adopted an Investor A Distribution Plan ("Investor A Plan")
and an Investor B Distribution and Services Plan ("Investor B Plan"), each
in accordance with Rule 12b-1 under the Investment Company Act of 1940.
Pursuant to the Investor A Plan, each Portfolio is authorized to pay or
reimburse BISYS, as distributor of Investor A Shares, a periodic amount,
calculated at an annual rate not to exceed 0.25% of the
Continued
B-83
<PAGE> 156
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
average daily net asset value of Investor A Shares of each Portfolio.
Pursuant to the Investor B Plan, each variable net asset value fund is
authorized to pay or reimburse BISYS, as distributor of Investor B Shares,
(a) a distribution fee in an amount not to exceed, on an annual basis,
0.75% of the average daily net asset value of Investor B Shares of that
Portfolio and (b) a service fee in an amount not to exceed 0.25% of the
average daily net asset value of Investor B Shares of that Portfolio. These
fees may be used by BISYS to pay banks, broker dealers and other
institutions, including Provident, DRZ and JIR, or to reimburse BISYS or
its affiliates, to finance any activity which is principally intended to
result in the sale of shares or to compensate for providing shareholder
services. For the six months ended June 30, 1996, BISYS received $163,841
from commissions on sales of capital shares, of which $10,697 was reallowed
to the affiliated brokers.
Provident and certain of its affiliates own shares of Portfolios of the
Fund. As of June 30, 1996, the aggregate value of capital shares owned by
Provident and its affiliates were as follows (amounts in thousands):
<TABLE>
<S> <C>
U.S. Government Income Fund..................................... $23,490,656
Ohio Tax-Free Bond Fund......................................... $10,220,000
</TABLE>
Fees may be voluntarily reduced or reimbursed to assist the Portfolios in
maintaining competitive expense ratios.
Information regarding these transactions is as follows for the six months
ended June 30, 1996:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- -------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets)................. 0.15% 0.40% 0.95%
Voluntary fee reductions........... -- -- $17,346
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)....................... 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions (percentage of average
net assets)....................... 0.25% 0.25% 0.25%
Voluntary fee reductions........... $213,848 $13,694 $12,400
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)....................... NA 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:..... $ 42,748 $18,129 $51,348
TRANSFER AGENT FEES:............... $ 34,381 $18,236 $24,538
REIMBURSED FEES:................... -- -- $ 3,363
</TABLE>
Continued
B-84
<PAGE> 157
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
STOCK
OHIO TAX-FREE FLEXIBLE APPRECIATION
BOND FUND GROWTH FUND FUND
------------- ----------- ------------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions (percentage of average
daily net assets).................... 0.50% 0.90% 0.80%
Voluntary fee reductions.............. $ 5,643 $17,547 --
ADMINISTRATION FEES:
Annual fee (percentage of average net
assets).............................. 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions (percentage of average net
assets).............................. 0.25% 0.25% 0.25%
Voluntary fee reductions.............. -- $ 4,985 --
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net
assets).............................. 1.00% 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:........ $ 7,911 $13,716 $29,161
TRANSFER AGENT FEES:.................. $12,462 $12,755 $18,115
REIMBURSED FEES:...................... -- $ 1,710 --
</TABLE>
--------
NA--Not applicable
B-85
<PAGE> 158
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
-------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
-------------------------------------------
SIX MONTHS OCTOBER 1,
ENDED 1992 TO
JUNE, 30 DECEMBER 31,
1996 1995 1994(d) 1993(d) 1992(a)(d)
----------- ----------- ----------- ----------- ------------
(UNAUDITED)
-----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITIES
Net investment income . 0.02 0.05 0.04 0.03 0.01
----------- ----------- ----------- ----------- -----------
DISTRIBUTIONS
Net investment income . (0.02) (0.05) (0.04) (0.03) (0.01)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========== =========== =========== =========== ===========
Total Return ........... 2.39%(b) 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) .......... $ 172,984 $ 157,495 $ 149,374 $ 133,207 $ 37,083
Ratio of expenses to
average net assets .... 0.60%(c) 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment
income to average net
assets ................ 4.75%(c) 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to
average net assets* ... 0.85%(c) 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment
income to average net
assets* ............... 4.50%(c) 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or reduced
reimbursed. If such voluntary fee reductions and/or expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
See notes to financial statements.
B-86
<PAGE> 159
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------------------------------------------------------------------------------------
SIX MONTHS JANUARY 17,
ENDED YEAR ENDED 1995 TO
JUNE 30, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) YEARS ENDED DECEMBER 31,
----------------------------- ------------ ------------ --------------------------------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(f) 1993(f) 1992(b)(f)
----------- ----------- ------------ ------------ ------- ------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ... $ 9.71 $ 10.95 $ 8.92 $ 10.00 $ 9.91 $ 9.76 $ 10.00
---------- ---------- ---------- ---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES
Net investment income . 0.26 0.24 0.54 0.43 0.54 0.51 0.10
Net realized and
unrealized gains
(losses) from
investments .......... (0.37) (0.42) 0.79 0.94 (0.99) 0.20 (0.23)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total from Investment
Activities ......... (0.11) (0.18) 1.33 1.37 (0.45) 0.71 (0.13)
---------- ---------- ---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS
Net investment income . (0.26) (0.24) (0.54) (0.42) (0.54) (0.50) (0.10)
In excess of net
investment income ... -- -- -- -- -- (0.06) (0.01)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Distributions .. (0.26) (0.24) (0.54) (0.42) (0.54) (0.56) (0.11)
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF
PERIOD ................ $ 9.34 $ 10.53 $ 9.71 $ 10.95 $ 8.92 $ 9.91 $ 9.76
========== ========== ========== ========== ========== ========== ==========
Total Return (excludes
sales/redemption
charge) ............... (1.19)%(g) (1.61)%(g) 15.22% 13.96%(e) (4.64)% 7.38% (1.31)%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000) .......... $ 34,145 $ 1,190 $ 36,538 $ 1,263 $ 32,721 $ 30,078 $ 24,588
Ratio of expenses to
average net assets .... 1.14%(c) 1.93%(c) 1.09% 1.90%(c) 0.86% 0.65% 0.66%
Ratio of net investment
income to average net
assets ................ 5.43%(c) 4.65%(c) 5.74% 4.80%(c) 5.78% 5.05% 4.00%
Ratio of expenses to
average net assets* ... 1.22%(c) 1.93%(c) 1.18% 1.90%(c) 1.14% 1.08% 1.06%
Ratio of net investment
income to average net
assets* ............... 5.35%(c) 4.65%(c) 5.65% 4.80%(c) 5.49% 4.62% 3.60%
Portfolio Turnover ..... 30%(d) 30%(d) 75%(d) 75%(d) 83% 220% 117%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursued. If such voluntary fee reductions and/or expense
reimbursements had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on October
1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
(g) Not annualized
See notes to financial statements.
B-87
<PAGE> 160
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND
------------------------------------------------------------------------
SIX MONTHS JANUARY 17,
ENDED YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
JUNE 30, DECEMBER 31, DECEMBER 31, ----------------------------
1996 1995 1995(a) 1994(f) 1993(f) 1992(b)(f)
------------------------- ------------ ------------ ------- ------- ----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.70 $ 11.85 $ 10.15 $10.00 $ 10.63 $ 10.78 $ 10.00
------- ------- ------- ------ ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.10 0.05 0.27 0.13 0.32 0.28 0.08
Net realized and
unrealized gains from
investments........... 1.00 1.00 2.89 2.78 -- 1.01 0.80
------- ------- ------- ------ ------- ------- -------
Total from Investment
Activities............. 1.10 1.05 3.16 2.91 0.32 1.29 0.88
------- ------- ------- ------ ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.10) (0.05) (0.27) (0.13) (0.31) (0.27) (0.08)
In excess of net
investment income...... -- -- -- -- -- (0.03) (0.01)
Net realized gains..... -- -- (1.34) (0.93) (0.49) (1.14) --
In excess of net
realized gains......... -- -- -- -- -- -- (0.01)
------- ------- ------- ------ ------- ------- -------
Total Distributions... (0.10) (0.05) (1.61) (1.06) (0.80) (1.44) (0.10)
------- ------- ------- ------ ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 12.70 $ 12.85 $ 11.70 $11.85 $ 10.15 $ 10.63 $ 10.78
======= ======= ======= ====== ======= ======= =======
Total Return (excludes
sales/redemption
charge)................ 9.43%(g) 8.88%(g) 31.45% 29.28%(e) 3.08% 12.11% 8.74%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $67,612 $ 4,900 $60,845 $2,833 $34,965 $24,387 $12,262
Ratio of expenses to
average net assets..... 1.72%(c) 2.47%(c) 1.49% 2.46%(c) 1.30% 1.47% 1.48%
Ratio of net investment
income to average net
assets................. 1.63%(c) 0.85%(c) 2.27% 1.12%(c) 2.93% 2.55% 3.16%
Ratio of expenses to
average net assets*.... 1.82%(c) 2.52%(c) 1.74% 2.51%(c) 1.58% 1.64% 2.02%
Ratio of net investment
income to average net
assets*................ 1.53%(c) 0.80%(c) 2.02% 1.07%(c) 2.65% 2.38% 2.62%
Portfolio Turnover...... 81%(d) 81%(d) 180%(d) 180%(d) 119% 145% 12%
Average commission rate
paid (h)............... $0.0405 $0.0405 -- -- -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on October
1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
(g) Not annualized.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-88
<PAGE> 161
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
-------------------------------------------------------------------------
SIX MONTHS YEAR JANUARY 17 FROM AUGUST 1,
ENDED ENDED 1995 TO 1994 THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) 1994(a)(e)
-------------------------- ------------ ------------ --------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
------- ------ ------- ------ -------
INVESTMENT ACTIVITIES
Net investment income.. 0.20 0.16 0.39 0.27 0.12
Net realized and
unrealized gains
(losses) from
investments........... (0.29) (0.28) 0.67 0.73 (0.17)
------- ------ ------- ------ -------
Total from Investment
Activities.......... (0.09) (0.12) 1.06 1.00 (0.05)
------- ------ ------- ------ -------
DISTRIBUTIONS
Net investment income.. (0.20) (0.16) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.22 $10.45 $ 10.51 $10.73 $ 9.83
======= ====== ======= ====== =======
Total Return (excludes
sales/redemption
charge)................ (0.85)%(d) (1.16)%(d) 10.96% 10.10%(d) (0.47)%(d)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)........... $10,538 $ 677 $11,091 $ 626 $10,190
Ratio of expenses to
average net assets..... 1.46%(c) 2.17%(c) 1.49% 2.27%(c) 1.08%(c)
Ratio of net investment
income to average net
assets................. 3.88%(c) 3.17%(c) 3.77% 3.01%(c) 2.92%(c)
Ratio of expenses to
average net assets*.... 1.56%)(c) 2.27%(c) 1.64% 2.41%(c) 1.44%(c)
Ratio of net investment
income to average net
assets*................ 3.78%(c) 3.08%(c) 3.62% 2.87%(c) 2.56%(c)
Portfolio Turnover...... 5%(b) 5%(b) 34%(b) 34%(b) 29%
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Annualized.
(d) Not annualized.
(e) Audited by other auditors.
See notes to financial statements.
B-89
<PAGE> 162
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND
---------------------------------------------------------------------------
SIX MONTHS JANUARY 17, FROM SEPTEMBER 1,
ENDED YEAR ENDED 1995 TO 1994 THROUGH
JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995(a) 1994(a)(f)
-------------------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
----------- ----------- ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income.. 0.17 0.12 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments........... (0.26) (0.26) 1.66 1.79 (0.18)
------- ------- ------ ------ ------
Total from Investment
Activities.......... (0.09) (0.14) 2.01 2.04 (0.08)
------- ------- ------ ------ ------
DISTRIBUTIONS
Net investment income.. (0.17) (0.12) (0.34) (0.24) (0.13)
Net realized gains..... -- -- (0.10) (0.10) --
------- ------- ------ ------ ------
Total Distributions... (0.17) (0.12) (0.44) (0.34) (0.13)
------- ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD................. $ 11.10 $ 11.44 $11.36 $11.70 $ 9.79
======= ======= ====== ====== ======
Total Return (excludes
sales redemption
charge)................ (0.83)%(e) (1.09)%(e) 20.83% 20.53%(c) (0.82)%(e)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of
period (000)........... $13,121 $ 8,710 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets..... 1.55%(d) 2.36%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets................. 2.99%(d) 2.19%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets*.... 1.86%(d) 2.56%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets*................ 2.68%(d) 1.99%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover...... 52%(b) 52%(b) 13%(b) 13%(b) 1%
Average commission rate
paid (h)............... $0.0043 $0.0043 -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
(f) Audited by other auditors.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-90
<PAGE> 163
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
--------------------------------------------------------------------------------------------------------
SIX MONTHS FROM OCTOBER 1, FROM OCTOBER 1,
ENDED 1995 THROUGH 1995 THROUGH YEARS ENDED SEPTEMBER 30,
JUNE 30, DECEMBER 31, DECEMBER 31, ------------------------------------------
1996 1995(b) 1995(a)(b) 1995(f) 1994(f) 1993(f) 1992(f)
-------------------------- --------------- --------------- ------- ------- ---------- -------
INVESTOR A INVESTOR B INVESTOR B INVESTOR A
----------- ----------- --------------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.50 $ 9.91 $ 10.00 $10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
------- ------- ------- ------ ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss.... (0.06) (0.06) (0.01) (0.01) (0.07) (0.12) (0.17) (0.08)
Net realized and
unrealized gains
(losses) from
investments........... 0.64 0.60 (0.12) (0.08) 2.14 (1.26) 2.57 1.41
------- ------- ------- ------ ------- ------- ------- -------
Total from Investment
Activities.......... 0.58 0.54 (0.13) (0.09) 2.07 (1.38) 2.40 1.33
------- ------- ------- ------ ------- ------- ------- -------
DISTRIBUTIONS
Net realized gains..... -- -- (0.37) -- (0.32) (0.55) (0.20) (1.05)
------- ------- ------- ------ ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD................. $ 10.08 $ 10.45 $ 9.50 $ 9.91 $ 10.00 $ 8.25 $ 10.18 $ 7.98
======= ======= ======= ====== ======= ======= ======= =======
Total Return (excludes
sales/redemption
charge)................ 6.11%(c) 5.45%(c) (1.20)%(c) (0.90)%(c) 25.12% (13.91)% 30.61% 16.69%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $37,759 $ 619 $40,995 $ 72 $44,500 $47,880 $59,330 $28,750
Ratio of expenses to
average net assets..... 1.86%(d) 2.55%(d) 1.76%(d) 2.30%(d) 2.61% 2.44% 2.47% 2.70%
Ratio of net investment
loss to average net
assets................. (1.19)%(d) (1.94)%(d) (0.49)%(d) (1.69)%(d) (0.73)% (1.35)% (1.85)% (1.00)%
Ratio of expenses to
average net assets*.... 1.86%(d) 2.55%(d) 1.77%(d) 2.39%(d) (g) (g) (g) (g)
Ratio of net investment
loss to average net
assets*................ (1.19)%(d) (1.94)%(d) (0.50)%(d) (1.78)%(d) (g) (g) (g) (g)
Portfolio Turnover...... 87%(e) 87%(e) 46%(e) 46%(e) 197% 254% 216% 288%
Average commission rate
paid (h)............... $0.0019 $0.0019 -- -- -- -- -- --
</TABLE>
- ------
* During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or expense reimbursements
had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for periods prior to September 30, 1995 represent the
performance of the MIM Stock Appreciation Fund. The per share data for the
periods prior to September 30, 1995 have been restated to reflect the
impact of the change of the net asset value of the Stock Appreciation Fund
on September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on Portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Portfolio
as a whole without distinguishing between the classes of shares issued.
See notes to financial statements.
B-91
<PAGE> 164
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Directors
The Riverfront Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of portfolio investments of The Riverfront Funds, Inc.
(comprising, respectively, U.S. Government Securities Money Market Fund, U.S.
Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, Flexible
Growth Fund, and Stock Appreciation Fund) as of December 31, 1995, and the
related statements of operations, and changes in net assets and the financial
highlights for the year then ended of U.S. Government Securities Money Market
Fund, U.S. Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund,
and Flexible Growth Fund, and from October 1, 1995 to December 31, 1995 of Stock
Appreciation Fund. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial statements and financial highlights of the U.S. Government
Securities Money Market Fund, U.S. Government Income Fund, Income Equity Fund,
Ohio Tax-Free Bond Fund, and Flexible Growth Fund for the periods prior to
January 1, 1995, were audited by other auditors whose report dated January 20,
1995, expressed an unqualified opinion on those statements and financial
highlights. The financial statements and financial highlights of the Stock
Appreciation Fund for the years ended prior to October 1, 1995, were audited by
other auditors whose report dated October 11, 1995, expressed an unqualified
opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1995, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statements
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Riverfront Funds, Inc. at December
31, 1995, the results of their operations, the changes in their net assets and
the financial highlights for the respective periods ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ Ernst and Young LLP
Cincinnati, Ohio
January 15, 1996
B-92
<PAGE> 165
THE RIVERFRONT FUNDS, INC.
Statement of Assets and Liabilities
December 31, 1995
<TABLE>
<CAPTION>
U.S. Government
Securities Money U.S. Government Income
Market Fund Income Fund Equity Fund
------------- ------------- -------------
ASSETS:
<S> <C> <C> <C>
Investments, at value $ 99,079,165 $ 37,305,693 $ 62,969,968
Repurchase agreements 59,137,000
------------- ------------- -------------
Total Investments 158,216,165 37,305,693 62,969,968
Interest receivable 32,077 495,240 218,178
Receivable for capital shares issued 1,883 19,306
Receivable from brokers for investments sold 1,123,881
Receivable from investment adviser 42,403 69,570
Prepaid expenses and other assets 14,492 1,487 6,924
------------- ------------- -------------
Total Assets 158,262,734 37,846,706 64,407,827
------------- ------------- -------------
LIABILITIES:
Dividends payable 668,431 4,750 219,989
Payable for capital shares redeemed 13,933
Payable to brokers for investments purchased 404,849
Accrued expenses and other payables:
Investment advisory fees 24,438 12,899 48,471
Administration fees 29,047 6,450 10,203
Audit and legal fees 22,846 7,142 7,299
Other 22,473 14,290 24,694
------------- ------------- -------------
Total Liabilities 767,235 45,531 729,438
------------- ------------- -------------
NET ASSETS:
Capital 157,497,789 38,263,873 58,269,402
Undistributed net investment income 7,806
Net unrealized appreciation from investments 1,436,834 5,381,996
Accumulated undistributed net realized gains (losses) from investment
transactions (2,290) (1,907,338) 26,991
------------- ------------- -------------
Net Assets $ 157,495,499 $37,801,175 $ 63,678,389
============= ============= =============
Net Assets
Investor A Shares $ 157,495,499 $ 36,538,296 $ 60,845,149
Investor B Shares 1,262,879 2,833,240
------------- ------------- -------------
Total $ 157,495,499 $37,801,175 $ 63,678,389
============= ============= =============
Shares of capital stock
Investor A Shares 157,497,789 3,762,748 5,199,892
Investor B Shares 115,283 239,090
------------- ------------- -------------
Total 157,497,789 3,878,031 5,438,982
============= ============= =============
Net asset value
Investor A Shares--redemption price per share $ 1.00 $ 9.71 11.70
Investor B Shares--offering price per share* 10.95 11.85
============= ============= =============
Maximum Sales Charge (Investor A) 4.50% 4.50%
============= =============
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net asset
value adjusted to nearest cent) per share (Investor A) $ 1.00(a) $ 10.17 12.25
============= ============= =============
Investments, at cost $ 158,216,165 $ 35,868,859 $ 57,587,972
============= ============= =============
<FN>
(a) Offering price and redemption price are the same for the U.S. Government
Securities Money Market Fund.
* Redemption price of Investor B Shares varies based on length of time shares
are held.
</TABLE>
See notes to financial statements
B-93
<PAGE> 166
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
Ohio Tax-Free Flexible Growth Stock Appreciation
Bond Fund Fund Fund
----------- ----------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value $11,650,714 $14,811,639 $39,420,991
Repurchase agreements 1,579,159
----------- ----------- -----------
Total Investments 11,650,714 14,811,639 41,000,150
Interest receivable 76,834 122,851 26,709
Receivable for capital shares issued 22,430 44,007
Receivable from investment adviser 612 58,705
Unamortized organization costs 5,825 2,049 48,231
Prepaid expenses and other assets 620 4,372 3,943
----------- ----------- -----------
Total Assets 11,734,605 15,022,046 41,123,040
----------- ----------- -----------
LIABILITIES:
Dividends payable 1,449 51,444
Payable for capital shares redeemed 17,633
Payable to brokers for investments purchased 474,680
Accrued expenses and other payables:
Investment advisory fees 3,976 7,238 27,648
Administration fees 1,988 2,413 6,912
Audit and legal fees 3,299 2,945 279
Other 6,852 8,799 21,029
----------- ----------- -----------
Total Liabilities 17,564 565,152 55,868
----------- ----------- -----------
NET ASSETS:
Capital 11,153,013 13,247,718 33,949,349
Undistributed net investment income 5,459 9,166
Net unrealized appreciation from investments 558,379 1,200,010 7,117,823
Accumulated undistributed net realized gains from
investment transactions 190
----------- ----------- -----------
Net Assets $11,717,041 $14,456,894 $41,067,172
=========== =========== ===========
Net Assets
Investor A Shares $11,090,807 $ 9,426,863 $40,994,847
Investor B Shares 626,234 5,030,031 72,325
----------- ----------- -----------
Total $11,717,041 $14,456,894 $41,067,172
=========== =========== ===========
Shares of capital stock
Investor A Shares 1,055,522 829,894 4,315,611
Investor B Shares 58,358 430,077 7,299
----------- ----------- -----------
Total 1,113,880 1,259,971 4,322,910
=========== =========== ===========
Net asset value
Investor A Shares--redemption price per share $ 10.51 11.36 9.50
Investor B Shares--offering price per share* 10.73 11.70 9.91
=========== =========== ===========
Maximum Sales Charge (Investor A) 4.50% 4.50% 4.50%
=========== =========== ===========
Maximum Offering Price (100%/(100%--Maximum Sales Charge) of net
asset value adjusted to nearest cent) per share (Investor A) $ 11.01 $ 11.90 9.95
=========== =========== ===========
Investments, at cost $11,092,335 $13,611,629 $33,882,327
=========== =========== ===========
<FN>
* Redemption price of Investor B Shares varies based on length of time shares
are held.
</TABLE>
See notes to financial statements.
B-94
<PAGE> 167
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF ASSETS AND LIABILITIES
December 31, 1995
<TABLE>
<CAPTION>
U.S. Government
Securities Money U.S. Government Income Equity
Market Fund Income Fund Fund
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 8,763,797 $ 2,465,709 $ 111,565
Dividend income 1,705,653
------------ ------------ ------------
Total Income 8,763,797 2,465,709 1,817,218
------------ ------------ ------------
EXPENSES:
Investment advisory fees 221,912 144,461 407,229
Administration fees 296,225 72,231 96,796
12b-1 fees (Investor A) 369,910 89,106 117,603
12b-1 fees (Investor B) 4,833 14,271
Custodian and accounting fees 73,973 36,115 72,596
Audit and legal fees 133,254 29,458 59,767
Trustees' fees and expenses 16,050 3,364 4,765
Transfer agent fees 59,257 37,402 42,860
Registration and filing fees 13,235 4,600 7,802
Printing costs 26,680 6,282 11,066
Other 16,925 3,827 4,406
Expenses voluntarily reduced (369,910) (33,246) (41,897)
------------ ------------ ------------
Total expenses before reimbursement by investment
adviser 857,511 398,433 797,264
Reimbursement of expenses by investment adviser (548) (62,119)
------------ ------------ ------------
Total Expenses 857,511 397,885 735,145
------------ ------------ ------------
Net Investment Income 7,906,286 2,067,824 1,082,073
------------ ------------ ------------
REALIZED/UNREALIZED GAINS (LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from investment transactions (1,415) (517,451) 6,655,045
Net change in unrealized appreciation from investments 3,520,908 5,311,784
------------ ------------ ------------
Net realized/unrealized gains (losses) from investments (1,415) 3,003,457 11,966,829
------------ ------------ ------------
Change in net assets resulting from operations $ 7,904,871 $ 5,071,281 $ 13,048,902
============ ============ ============
</TABLE>
See notes to financial statements.
B-95
<PAGE> 168
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31, 1995
<TABLE>
<CAPTION>
Flexible Stock Stock
Ohio Tax-Free Growth Appreciation Appreciation
Bond Fund Fund Fund (a) Fund (b)
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income $ 590,027 $ 311,142 $ 93,734 $ 368,293
Dividend income 91,106 39,950 384,381
----------- ---------- ---------- ----------
Total Income 590,027 402,248 133,684 752,674
----------- ---------- ---------- ----------
EXPENSES:
Investment advisory fees 56,114 76,231 83,982 439,627
Administration fees 22,439 16,888 20,771
12b-1 fees (Investor A) 26,953 15,101 26,239 279,882
12b-1 fees (Investor B) 4,410 24,218 21
Custodian and accounting fees 15,708 12,666 15,578 48,947
Audit and legal fees 18,656 10,249 8,306 36,163
Organization costs 8,823 4,078 6,704
Trustees' fees and expenses 1,096 365 2,005 2,779
Transfer agent fees 25,445 22,857 9,834 75,871
Registration and filing fees 4,266 5,423 6,303 18,296
Printing costs 1,776 13,439 5,080
Other 1,043 441 1,173 143,379
Expenses voluntarily reduced (15,933) (31,119) (1,181)
----------- ---------- ---------- ----------
Total expenses before reimbursement by
investment adviser 170,796 170,837 184,815 1,044,944
Reimbursement of expenses by investment
adviser (544) (44,178)
----------- ---------- ---------- ----------
Total Expenses 170,252 126,659 184,815 1,044,944
----------- ---------- ---------- ----------
Net Investment Income (Loss) 419,775 275,589 (51,131) (292,270)
----------- ---------- ---------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS:
Net realized gains from investment transactions 8,848 131,879 1,556,383 3,024,858
Net change in unrealized appreciation (depreciation)
from investments 713,315 1,230,202 (2,070,853) 5,538,265
----------- ---------- ---------- ----------
Net realized/unrealized gains (losses) from investments 722,163 1,362,081 (514,470) 8,563,123
----------- ---------- ---------- ----------
Change in net assets resulting from operations $ 1,141,938 $1,637,670 $ (565,601) $8,270,853
=========== ========== ========== ==========
<FN>
- --------
(a) Period from October 1, 1995 (date acquired by Riverfront Stock Appreciation
Fund) through December 31, 1995.
(b) Represents statement of operations for the MIM Stock Appreciation Fund for
the year ended September 30, 1995 (prior fiscal year end). Audited by other
auditors.
</TABLE>
See notes to financial statements.
B-96
<PAGE> 169
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
U.S. Government Securities U.S. Government Income Equity
Money Market Fund Income Fund Fund
---------------------------- --------------------------- --------------------------
Year ended Year ended Year ended Year ended Year ended Year ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 (a) 1995 1994 (a) 1995 1994 (a)
------------- ------------ ------------ ----------- ----------- ------------
FROM INVESTMENT ACTIVITIES:
<S> <C> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income $7,906,286 $5,452,996 $ 2,067,824 $ 1,797,395 $ 1,082,073 $ 936,433
Net realized gains (losses) from
investment transactions (1,415) (875) (517,451) (1,525,031) 6,655,045 1,673,314
Net change in unrealized appreciation
(depreciation) from investments 3,520,908 (1,773,015) 5,311,784 (1,806,498)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets resulting from
operations 7,904,871 5,452,121 5,071,281 (1,500,651) 13,048,902 803,249
------------ ------------ ----------- ----------- ----------- -----------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment income (7,906,286) (5,452,996) (2,032,120) (1,797,395) (1,065,510) (936,243)
In excess of net investment income (3,474) (6,742)
From net realized gains from
investments (6,293,075) (1,694,627)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment income (22,977) (16,563)
In excess of net investment income (105)
From net realized gains from
investments (222,170)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets from shareholder
distributions (7,906,286) (5,452,996) (2,055,097) (1,800,869) (7,604,165) (2,630,870)
------------ ------------ ----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued 331,872,719 252,936,958 5,670,500 7,849,466 12,155,416 13,962,314
Proceeds from shares issued in
connection with acquisition 4,865,634 9,727,219
Dividends reinvested 1,518,099 569,500 578,837 333,435 8,648,647 900,398
Cost of shares redeemed (330,133,820) (237,338,519) (4,185,229) (2,238,879) (7,262,834) (2,457,054)
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets from capital
transactions 8,122,632 16,167,939 2,064,108 5,944,022 23,268,448 12,405,658
------------ ------------ ----------- ----------- ----------- -----------
Change in net assets 8,121,217 16,167,064 5,080,292 2,642,502 28,713,185 10,578,037
NET ASSETS:
Beginning of period 149,374,282 133,207,218 32,720,883 30,078,381 34,965,204 24,387,167
------------ ------------ ----------- ----------- ----------- -----------
End of period $ 157,495,499 $ 149,374,282 $ 37,801,175 $ 32,720,883 $63,678,389 $34,965,204
============ ============ =========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued 331,872,719 252,936,958 592,903 838,911 1,069,857 1,295,899
Issued in connection with
acquisition 4,865,634 793,942
Reinvested 1,518,099 569,500 61,636 36,232 764,131 84,342
Redeemed (330,133,820) (237,338,519) (444,444) (243,620) (634,159) (230,101)
------------ ------------ ----------- ----------- ----------- -----------
Change in shares 8,122,632 16,167,939 210,095 631,523 1,993,771 1,150,140
============ ============ =========== =========== =========== ===========
</TABLE>
[FN]
- --------
(a) Audited by other auditors
See notes to financial statements.
B-97
<PAGE> 170
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Ohio Tax-Free Bond Fund Flexible Growth Fund
----------------------------------------- ------------------------------------
Period Period
Year ended from August 1, Year ended from September 1,
December 31, 1994 through December 31, 1994 through
1995 December 31, 1994 (a) 1995 December 31, 1994(a)
------------ -------------------- ------------ --------------------
<S> <C> <C> <C> <C>
From Investment Activities:
Operations:
Net investment income $ 419,775 $ 121,843 $ 275,589 $ 22,610
Net realized gains (losses) from investment
transactions 8,848 (8,658) 131,879 (2,876)
Net change in unrealized appreciation
(depreciation) from investments 713,315 (154,936) 1,230,202 (30,192)
------------ ------------ ----------- -----------
Change in net assets resulting from operations 1,141,938 (41,751) 1,637,670 (10,458)
------------ ------------ ----------- -----------
Distributions to Investor A Shareholders:
From net investment income (401,164) (123,784) (202,502) (27,057)
From net realized gains from investments (85,787)
Distributions to Investor B Shareholders:
From net investment income (13,152) (63,921)
From net realized gains from investments (43,216)
------------ ------------ ----------- -----------
Change in net assets from shareholder
distributions (414,316) (123,784) (395,426) (27,057)
------------ ------------ ----------- -----------
Capital Transactions:
Proceeds from shares issued 895,943 10,355,088 11,076,750 2,833,344
Dividends reinvested 18,208 27 334,888 13,957
Cost of shares redeemed (114,312) (906,216) (100,558)
------------ ------------ ----------- -----------
Change in net assets from capital transactions 799,839 10,355,115 10,505,422 2,746,743
------------ ------------ ----------- -----------
Change in net assets 1,527,461 10,189,580 11,747,666 2,709,228
Net Assets:
Beginning of period 10,189,580 2,709,228
------------ ------------ ----------- -----------
End of period $ 11,717,041 $ 10,189,580 $14,456,894 $ 2,709,228
============ ============ =========== ===========
Share Transactions:
Issued 87,181 1,036,159 1,035,102 285,468
Reinvested 1,760 3 30,561 1,408
Redeemed (11,223) (82,394) (10,174)
------------ ------------ ----------- -----------
Change in shares 77,718 1,036,162 983,269 276,702
============ ============ =========== ===========
<FN>
(a) Period from commencement of operations. Audited by other auditors.
</TABLE>
See notes to financial statements.
B-98
<PAGE> 171
THE RIVERFRONT FUNDS, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Stock Appreciation Fund
-----------------------------------------------------------------------
Period Period Period
from October 1, from October 1, from October 1,
1995 through 1994 through 1993 through
December 31, 1995 (a) September 30, 1995(b) September 30, 1994 (b)
--------------------- --------------------- ----------------------
<S> <C> <C>
From Investment Activities:
Operations:
Net investment loss $ (51,131) $ (292,270) (725,732)
Net realized gains from investment transactions 1,556,383 3,024,858 715,333
Net change in unrealized appreciation (depreciation)
from investments (2,070,853) 5,538,265 (8,468,657)
------------ ---------------- ------------
Change in net assets resulting from operations (565,601) 8,270,853 (8,479,056)
------------ ---------------- ------------
Distributions to Investor A Shareholders:
From net investment income (1,166,721) (1,869,901)
From net realized gains from investments (1,556,383) (1,566,848)
Tax return of capital (6,824)
------------ ---------------- ------------
Change in net assets from shareholder distributions (1,563,207) (1,166,721) (3,436,749)
------------ ---------------- ------------
Capital Transactions:
Proceeds from shares issued 810,508
Dividends reinvested 1,542,781
Cost of shares redeemed (3,611,887)
------------ ---------------- ------------
Change in net assets from capital transactions (1,258,598) (10,529,141) 463,566
------------ ---------------- ------------
Change in net assets (3,387,406) (3,425,009) (11,452,239)
Net Assets:
Beginning of period 44,454,578 47,879,587 59,331,826
------------ ---------------- ------------
End of period $ 41,067,172 $ 44,454,578 $ 47,879,587
============ ================ ============
Share Transactions:
Issued 83,381
Reinvested 164,279
Redeemed (370,208)
------------ ---------------- ------------
Change in shares (122,548)
============ ================ ============
<FN>
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
(b) Represents statements of changes in net assets for the MIM Stock
Appreciation Fund. Audited by other auditors.
</TABLE>
See notes to financial statements.
B-99
<PAGE> 172
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Schedule of Portfolio Investments
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- --------------- ------------------------------ -------------
<S> <C>
U.S. Government Agencies (35.2%):
Federal Farm Credit Bank:
3,000,000 Discount Note, 1/19/96 $ 2,991,585
3,000,000 Discount Note, 2/21/96 2,976,540
Federal Home Loan Mortgage Corp.:
7,825,000 Discount Note, 1/2/96 7,823,783
2,000,000 Discount Note, 2/26/96 1,982,764
3,000,000 Discount Note, 4/1/96 2,959,050
Federal National Mortgage Assoc.:
100,000 9.35%, 2/12/96 100,306
5,000,000 Discount Note, 1/3/96 4,998,447
6,000,000 Discount Note, 1/5/96 5,996,270
3,000,000 Discount Note, 1/16/96 2,993,025
6,770,000 Discount Note, 2/2/96 6,736,575
3,000,000 Discount Note, 2/22/96 2,975,714
3,000,000 Discount Note, 3/8/96 2,969,515
3,000,000 Discount Note, 3/14/96 2,966,846
4,000,000 Discount Note, 3/28/96 3,948,573
World Bank:
3,000,000 Discount Note, 3/4/96 2,971,020
-------------
Total U.S. Government Agencies 55,390,013
-------------
Commercial Paper (27.7%):
British Commercial Paper (4.4%):
4,000,000 Glaxo PLC, Discount Note,
1/23/96 3,986,067
3,000,000 Hanson PLC, Discount
Note, 3/6/96 2,969,829
-------------
6,955,896
-------------
Energy (1.9%):
3,000,000 Mid American Energy Co.,
Discount Note, 3/26/96 2,960,688
-------------
Financial Services (5.6%):
2,000,000 International Lease Finance
Corp., Discount Note,
2/23/96 1,983,393
4,000,000 Merrill Lynch, Discount
Note, 1/17/96 3,989,867
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ----------------- --------------------------- -------------
<S> <C>
Commercial Paper, continued:
Financial Services, continued:
3,000,000 Merrill Lynch, Discount
Note, 2/29/96 $ 2,972,172
----------
8,945,432
----------
German Commercial Paper (2.5%):
4,000,000 Daimler--Benz North
America Corp., Discount
Note, 1/30/96 3,981,601
----------
Japanese Commercial Paper (4.4%):
3,000,000 Mitsubishi Corp., Discount
Note, 3/15/96 2,965,343
4,000,000 Mitsui & Co., Discount
Note, 4/17/96 3,934,611
----------
6,899,954
----------
Manufacturing (1.9%):
3,000,000 Case Equipment Corp.,
Discount Note, 1/12/96 2,994,729
----------
Pharmaceutical (1.9%):
3,000,000 Allergan Co., Discount
Note, 1/9/96 2,996,173
----------
Telecommunication (5.1%):
4,000,000 AT&T Corp., Discount
Note, 1/23/96 3,986,067
4,000,000 MCI Communications
Corp., Discount Note,
2/20/96 3,968,612
----------
7,954,679
----------
Total Commercial Paper 43,689,152
----------
Total Investments 99,079,165
----------
</TABLE>
Continued
B-100
<PAGE> 173
THE RIVERFRONT FUNDS, INC.
U.S. Government Securities Money Market Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ------------ --------------------- ---------
<S> <C> <C>
Repurchase Agreements (37.5%):
24,137,000 Dean Witter, 5.70%, dated
12/29/95, due 1/2/96
(Collateralized by
various U.S. Government
Agency Securities,
0.00%-7.99%, 2/6/95-
6/1/24, market value-
$24,619,742) $ 24,137,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL Security Amortized
AMOUNT Description Cost
- ------------ --------------------- ---------
<S> <C>
Repurchase Agreements, continued:
35,000,000 Prudential, 5.83%, dated
12/29/95, due 1/2/96
(Collateralized by
various U.S. Treasury
and U.S. Government
Agency Securities,
0.00%-8.50%, 5/15/04-
12/1/25, market value--
$35,700,146) $ 35,000,000
-------------
Total Repurchase Agreements 59,137,000
-------------
Total (Cost--$158,216,165)(a) $158,216,165
=============
<FN>
- ----------
Percentages indicated are based on net assets of $157,495,499.
(a) Cost for federal income tax and financial reporting purposes are the same.
</TABLE>
See notes to financial statements.
B-101
<PAGE> 174
THE RIVERFRONT FUNDS, INC.
U.S. Government Securities Money Market Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
Corporate Bonds (25.0%):
Automotive (1.3%):
500,000 Ford Motor Credit Corp.,
6.25%, 12/8/05 $ 498,125
---------
Financial (18.3%):
1,000,000 Chemical Bank, 8.50%,
2/15/02 1,126,250
1,000,000 Chemical Master Credit Card
Trust I, 6.23%, 6/15/03,
Series 1995-2 1,018,680
1,000,000 Comerica, Inc., 7.25%,
8/1/07 1,060,000
1,000,000 First Chicago Master Trust II,
Series 1994L, 7.15%,
4/15/01 1,055,260
500,000 Grand Metropolitan
Investment, 7.45%,
4/15/35 548,750
500,000 Lehman Brothers Holdings,
7.13%, 9/15/03 513,125
500,000 Lehman Brothers Holdings,
8.50%, 5/1/07 562,500
1,000,000 MBNA Master Credit Card
Trust, 6.05%, 11/15/02 1,012,010
---------
6,896,575
---------
Telecommunication (2.7%):
1,000,000 U.S. West Capital Corp.,
6.31%, 11/1/05 1,020,000
---------
Tobacco (2.7%):
1,000,000 Philip Morris Cos., Inc.,
7.50%, 3/15/97 1,021,250
---------
Total Corporate Bonds 9,435,950
---------
U.S. GOVERNMENT AGENCIES (62.2%):
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97 1,004,240
500,000 8.07%, 2/27/02 534,675
875,000 6.38%, 4/29/03 883,470
</TABLE>
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
U.S. Government Agencies, continued:
Federal Home Loan Mortgage Corp.:
1,000,000 6.55%, 1/4/00 $ 1,032,760
500,000 6.33%, 2/16/00 500,430
1,000,000 6.78%, 3/28/01 1,002,220
1,000,000 7.68%, 5/23/01 1,034,610
1,000,000 7.35%, 5/16/05 1,055,430
500,000 7.50%, 3/15/15 508,105
1,000,000 7.00%, 10/15/17 1,019,230
1,000,000 6.00%, 1/15/18 1,003,930
1,000,000 7.20%, 6/15/18 1,016,100
1,250,000 5.85%, 1/25/19 1,231,675
Federal National Mortgage Association:
1,000,000 5.33%, 6/26/98 995,160
500,000 9.05%, 4/10/00 564,235
625,000 6.38%, 6/25/03 630,481
625,000 6.05%, 6/30/03 637,400
888,146 6.75%, 8/25/04 888,769
1,050,000 8.50%, 2/1/05 1,144,332
1,000,000 7.00%, 9/25/05 1,014,200
1,000,000 7.00%, 9/25/19 1,009,700
600,000 9.50%, 11/10/20 639,966
Government National Mortgage Association:
885,6378.00%, 5/15/23
Pool #351752 921,355
Student Loan Marketing Association:
1,000,0006.05%, 9/14/00 1,019,500
1,000,0007.20%, 11/9/00 1,066,250
Tennessee Valley Authority:
1,050,0007.88%, 9/15/01 1,147,125
----------
Total U.S. Government Agencies 23,505,348
----------
U.S. TREASURY BONDS (2.6%):
410,0006.50%, 4/30/99 425,039
500,0007.25%, 5/15/04 555,215
----------
Total U.S. Treasury Bonds 980,254
----------
</TABLE>
Continued
B-102
<PAGE> 175
THE RIVERFRONT FUNDS, INC.
U.S. Government Income Fund
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Shares or
Principal Security Market
Amount Description Value
--------- ---------------- ------------
<S> <C>
U.S. TREASURY NOTES (5.5%):
500,0005.88%, 3/31/99 $ 508,870
250,0005.88%, 2/15/04 255,242
1,000,0006.50%, 5/15/05 1,064,190
250,006.25%, 8/15/23 257,170
-----------
Total U.S. Treasury Notes 2,085,472
-----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community,
9.13%, 3/15/01 414,275
-----------
Total Yankee Dollar Bonds 414,275
-----------
Shares or
Principal Security Market
Amount Description Value
------ ---------------- ------------
Investment Companies (2.3%):
884,394 Dreyfus Treasury Prime
Fund $ 884,394
-----------
Total Investment Companies 884,394
-----------
Total (Cost--$35,868,859)(a) $37,305,693
===========
<FN>
- -------------
Percentages indicated are based on net assets of $37,801,175
(a) Represents cost for the federal income tax purposes and differs value by net
unrealized appreciation of securities as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Unrealized appreciation $1,459,613
Unrealized depreciation (22,779)
----------
Net unrealized appreciation $1,436,834
==========
</TABLE>
See notes to financial statements.
B-103
<PAGE> 176
THE RIVERFRONT FUNDS, INC.
U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (97.0%):
Aerospace-Aircraft (0.8%):
800 B.F. Goodrich Co. $ 54,500
3,000 Raytheon Co. 141,750
2,000 Rockwell International Corp. 105,750
2,000 United Technologies Corp. 189,750
------------
491,750
------------
Apparel (2.2%):
51,700 Intimate Brands, Inc. 775,500
11,600 V F Corp. 611,900
------------
1,387,400
------------
Automobile & Parts (2.2%):
15,100 Eaton Corp. 809,737
800 Genuine Parts Co. 32,800
7,100 TRW, Inc. 550,250
------------
1,392,787
------------
Banks (8.9%):
11,500 AmSouth Bancorporation 464,313
12,000 Bank of Boston Corp. 555,000
5,500 BayBanks, Inc. 540,375
23,100 Central Fidelity Banks, Inc. 739,200
12,400 Crestar Financial Corp. 733,150
11,500 First American Corp. 544,812
1,000 First Virginia Banks, Inc. 41,750
24,200 Jefferson Bankshares, Inc. 490,050
30,100 Magna Group, Inc. 714,875
27,600 Summit Bancorp 869,400
------------
5,692,925
------------
Building Materials (2.0%):
37,200 Masco Corp. 1,167,150
2,000 Sherwin Williams Co. 81,500
------------
1,248,650
------------
Chemicals (7.9%):
11,700 Betz Laboratories, Inc. 479,700
42,300 Crompton & Knowles Corp. 560,475
900 Dexter Corp. 21,263
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Chemicals, continued:
3,500 E.I. du Pont deNemours &
Co. $ 244,563
91,400 Ethyl Corp. 1,142,500
2,000 Great Lakes Chemical Corp. 144,000
26,500 Lawter International, Inc. 308,062
17,500 Nalco Chemical Co. 527,187
3,000 PPG Industries, Inc. 137,250
11,000 Rohm & Haas Co. 708,125
25,600 Witco Corp. 748,800
------------
5,021,925
------------
Chemicals & Drugs (0.2%):
1,600 Bristol Myers Squibb Co. 137,400
------------
Consumer Products (1.3%):
23,000 Corning, Inc. 736,000
2,000 Gillette Co. 104,250
------------
840,250
------------
Cosmetics (0.2%):
2,000 International Flavors 96,000
------------
Commercial Services (2.5%):
20,300 Kelly Services, Inc.-Class A 563,325
47,500 Ogden Corp. 1,015,312
------------
1,578,637
------------
Department Stores (4.1%):
27,600 May Department Stores Co. 1,166,100
16,600 Mercantile Stores Co., Inc. 767,750
11,800 J.C. Penney Co. 561,975
3,000 Sears Roebuck & Co. 117,000
------------
2,612,825
------------
Electrical (2.3%):
6,000 AMP, Inc. 230,250
15,100 Thomas & Betts Corp. 1,113,625
1,500 WW Grainger, Inc. 99,375
------------
1,443,250
------------
</TABLE>
Continued
B-104
<PAGE> 177
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Electronics (2.7%):
4,000 General Electric Co. $ 288,000
39,800 General Signal Corp. 1,288,525
3,000 Loral Corp. 106,125
1,500 National Service Industries,
Inc. 48,563
-----------
1,731,213
-----------
Energy & Oil (0.2%):
1,000 British Petroleum, PLC-ADR 102,125
-----------
Financial Services (2.6%):
39,700 ITT Industries, Inc. 952,800
5,500 J.P. Morgan & Co. 441,375
4,000 Norwest Corp. 132,000
2,000 Student Loan Marketing
Assoc. 131,750
-----------
1,657,925
-----------
Food Processing (0.8%):
15,100 Dean Foods Co. 415,250
9,500 Tasty Baking Co. 115,188
-----------
530,438
-----------
Foreign (2.2%):
90,500 Hanson Trust, PLC 1,380,125
-----------
Holding Company (1.7%):
7,800 Unilever N.V. 1,097,850
-----------
Household Products/Wares (1.1%):
8,600 Colgate-Palmolive Co. 604,150
1,000 Procter & Gamble Co. 83,000
-----------
687,150
-----------
Industrial Machinery (2.0%):
29,400 Cooper Industries, Inc. 1,080,450
7,900 Goulds Pumps, Inc. 197,500
-----------
1,277,950
-----------
Insurance (5.3%):
2,781 Allstate Corp. 114,369
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Insurance, continued:
13,800 American Financial Group $ 422,625
26,400 American General Corp. 920,700
1,500 American International Group 138,750
22,500 ITT Hartford Group, Inc.(b) 1,088,437
15,500 Torchmark Corp. 701,375
-----------
3,386,256
-----------
Manufacturing--Miscellaneous (0.4%):
3,500 Minnesota Mining &
Manufacturing Co. 231,875
-----------
Medical Services & Supplies (0.2%):
1,500 Becton Dickinson & Co. 112,500
-----------
Metals (1.4%):
15,500 Reynolds Metals Co. 877,687
-----------
Oil--International (0.5%):
5,000 Chevron Corp. 262,500
1,000 Exxon Corp. 80,125
-----------
342,625
-----------
Oil Equipment, Wells & Services (1.7%):
45,100 Dresser Industries, Inc. 1,099,312
-----------
Oil & Gas Production (10.4%):
10,800 Amoco Corp. 776,250
19,200 Ashland, Inc. 674,400
9,800 Atlantic Richfield Co. 1,085,350
50,400 Occidental Petroleum Corp. 1,077,300
34,000 Repsol, S.A.-ADR 1,117,750
42,800 USX-Marathon Group 834,600
38,500 Unocal Corp. 1,121,312
-----------
6,686,962
-----------
Packaged Food (3.9%):
4,500 Flower's Industries, Inc. 54,563
11,800 General Mills, Inc. 681,450
39,400 Grand Metropolitan, PLC-
ADR 1,132,750
33,000 Lance, Inc. 540,375
</TABLE>
Continued
B-105
<PAGE> 178
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Packaged Food, continued:
2,500 Sara Lee Corp. $ 79,688
------------
2,488,826
------------
Pharmaceuticals (4.2%):
3,000 Abbott Laboratories 125,250
9,000 Merck & Co., Inc. 591,750
3,000 Pfizer, Inc. 189,000
6,000 Schering-Plough 328,500
14,600 Warner-Lambert Co. 1,418,025
------------
2,652,525
------------
Photography (0.6%):
5,500 Eastman Kodak Co. 368,500
------------
Pipelines (2.1%):
27,500 Tenneco, Inc. 1,364,687
------------
Printing & Publishing (1.8%):
17,900 Dun & Bradstreet Corp. 1,159,025
------------
Real Estate Investment Trusts (0.2%):
3,000 Federal Realty Investment
Trust 68,250
3,200 New Plan Realty Trust 70,000
------------
138,250
------------
Restaurants (0.1%):
1,800 Luby's Cafeterias, Inc. 40,050
------------
Retail (0.4%):
5,000 Winn Dixie Stores, Inc. 184,375
5,000 Woolworth Corp. 65,000
------------
249,375
------------
Savings & Loan (0.9%):
30,000 Roosevelt Financial Group,
Inc. 581,250
------------
Tobacco (1.2%):
5,000 American Brands, Inc. 223,125
5,000 Philip Morris Cos., Inc. 452,500
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Tobacco, continued:
1,300 UST, Inc. $ 43,388
------------
719,013
------------
Tools (0.6%):
4,000 Illinois Tool Works 236,000
3,600 Snap-On, Inc. 162,900
------------
398,900
------------
Transportation (1.1%):
5,800 Canadian National Railway
Co.(b) 87,000
2,500 Illinois Central Corp. 95,938
2,500 Norfolk Southern Corp. 198,438
13,500 Ryder System, Inc. 334,125
------------
715,501
------------
Utilities--Electric (4.2%):
27,191 Cinergy Corp. 832,724
1,000 KU Energy Corp. 30,000
22,000 Peco Energy Co. 662,750
18,300 Public Services Enterprise
Group 560,437
14,400 Texas Utilities Co. 592,200
------------
2,678,111
------------
Utilities--Gas (0.1%):
1,500 Consolidated Natural Gas Co. 68,063
1,000 Washington Gas & Light Co. 20,500
------------
88,563
------------
Utilities--Telecommunications (7.8%):
17,600 ALLTEL Corp. 519,200
46,800 Frontier Corp. 1,404,000
15,600 GTE Corp. 686,400
1,200 Pacific Telesis Group 40,350
30,200 Southern New England
Telecommunications Corp. 1,200,450
26,400 Sprint Corp. 1,052,700
</TABLE>
Continued
B-106
<PAGE> 179
THE RIVERFRONT FUNDS, INC.
INCOME EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Utilities--Telecommunications, continued:
1,500 US West, Inc. $ 53,625
------------
4,956,725
------------
Total Common Stocks 61,745,093
------------
CONVERTIBLE CORPORATE BONDS (1.9%):
Financial (0.4%):
50,000 Chubb Capital Corp., 6.00%,
5/15/98 57,250
50,000 Cincinnati Financial Corp.,
5.50%, 5/1/02 69,500
50,000 South Carolina National Corp.,
6.50%, 5/15/01 118,375
------------
245,125
------------
Industrial (0.3%):
50,000 Hazleton Labs, 6.50%,
5/15/06 123,250
50,000 Liebert Corp., 8.00%,
11/15/10 145,500
------------
268,750
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS, CONTINUED:
Manufacturing (0.2%):
100,000 Allegheny Ludlum Corp.,
5.88%, 3/15/02 $ 103,625
------------
Oil & Gas--Domestic (0.2%):
100,000 Pennzoil Co., 6.50%, 1/15/03 128,500
------------
Restaurant (0.1%):
85,000 Cooker Restaurant, 6.75%,
10/1/02 68,000
------------
Retail (0.5%):
300,000 Federated Department Stores,
5.00%, 10/1/03 300,375
------------
Toys (0.2%):
100,000 Hasbro, Inc., 6.00%,
11/15/98 110,500
------------
Total Convertible Corporate Bonds 1,224,875
------------
Total (Cost--$57,587,972)(a) $62,969,968
============
</TABLE>
- ----------------
Percentages indicated are based on net assets of $63,678,389.
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of $96,134. Cost for federal income tax purposes differs from value by net
unrealized appreciation of securities as follows:
Unrealized appreciation $ 6,388,955
Unrealized depreciation (1,103,093)
-----------
Net unrealized appreciation $ 5,285,862
===========
(b) Represents non-income producing securities.
See notes to financial statements.
B-107
<PAGE> 180
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
OHIO MUNICIPAL BONDS (93.3%):
100,000 Aurora, City School District, 5.40%, 12/1/06 $ 105,000
100,000 Bowling Green, City School District, 5.70%, 12/1/11 102,375
230,000 Butler County, Hospital Facilities, 6.00%, 11/15/10, Callable 5/15/04 240,925
250,000 Butler County, Sewer System Revenue, Series B, 6.20%, 12/1/09 265,937
250,000 Canton, Waterworks System, 5.75%, 12/1/10 262,187
100,000 Chillicothe, Water System Revenue, 5.10%, 12/1/05 101,625
200,000 Cincinnati, GO, 4.50%, 12/1/97 202,250
250,000 Cincinnati, GO, 5.25%, 12/1/01 262,813
250,000 Clermont County, Waterworks Revenue, 6.63%, 12/1/16 284,062
250,000 Columbus, GO, 5.90%, 1/1/01 267,812
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 263,125
250,000 Columbus, Sewer Revenue, 6.13%, 6/1/03 277,812
250,000 Columbus, Sewer Revenue, 8.00%, 6/1/08 259,275
200,000 Columbus, GO, 5.65%, 6/15/11 207,750
100,000 Delaware County, GO, 5.60%, 12/1/10 102,625
100,000 Dover, Municipal Electric System Revenue, 5.35%, 12/1/06 104,125
250,000 Franklin County, Hospital Revenue, Riverside United Methodist-A, 5.30%, 5/15/02 257,813
250,000 Franklin County, Hospital Revenue, 5.25%, 6/1/08 250,938
250,000 Fremont, GO, 5.45%, 12/15/07 259,688
250,000 Gahanna, GO, 5.85%, 6/1/08 267,812
250,000 Hamilton County, Building Improvement & Refunding Museum Center, 5.75%,
12/1/00 265,625
80,000 Hamilton County, Sewer Systems, Series A, 6.40%, 12/1/04 89,100
170,000 Hamilton County, Sewer System Unrefunded, Series A, 6.40%, 12/1/04 188,488
250,000 Hilliard, School District, 5.35%, 12/1/04 261,875
250,000 Kings Local School District, 5.75%, 12/1/10 260,625
100,000 Lake County, Human Services Building, GO, 5.70%, 12/1/15 103,500
250,000 Lakota, Local School District, 6.00%, 12/1/07, Callable 12/1/02 265,313
250,000 Mahoning County, 5.60%, 12/1/02 265,938
250,000 Mahoning County, GO, 5.70%, 12/1/08 263,125
100,000 Marysville, School District, 5.30%, 12/1/09 101,250
200,000 Mason, City School District, GO, 5.20%, 12/1/08 203,750
250,000 Middletown, Capital Facilities Improvement Refunding, 5.60%, 12/1/05 261,250
100,000 Montgomery County, 5.40%, 9/1/09 101,625
250,000 State Building Authority, 5.70%, 9/1/01 265,938
250,000 State Building Authority, 6.00%, 10/1/07 271,250
</TABLE>
Continued
B-108
<PAGE> 181
THE RIVERFRONT FUNDS, INC.
OHIO TAX-FREE BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
OHIO MUNICIPAL BONDS, CONTINUED:
245,000 State Building Authority, 6.13%, 10/1/09 $ 265,825
95,000 State Building Authority, 6.25%, 6/1/11 100,106
100,000 State, GO, 5.60%, 8/1/02 107,000
250,000 State Public Facilities Commission, Higher Education Capital Facilities-Series II-B,
5.70%, 11/1/03 268,437
200,000 State Public Facilities Commission, Higher Education Capital Facilities-Series II-A,
5.20%, 5/1/05 206,500
250,000 State Public Facilities Commission, Park & Recreations Facilities, Series II-A, 5.25%,
6/1/06 255,000
250,000 State Special Obligation, 5.45%, 6/1/99 260,625
250,000 State Water Development Authority Revenue, 5.75%, 6/1/03 266,875
250,000 State Water Development Authority Revenue, 5.75%, 12/1/05, Callable 12/1/02 265,937
150,000 State Water Development Authority Revenue, 5.70%, 12/1/11 155,063
250,000 Olentangy Local School District-Series A, 5.70%, 12/1/05 270,312
100,000 Solon, GO, 5.25%, 12/1/07 102,375
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04 267,500
250,000 Warren County, Waterworks Revenue, 5.75%, 12/1/09 259,688
100,000 West Clermont, Local School District, 5.55%, 12/1/06 105,250
250,000 Woodridge, Local School District, 5.75%, 12/1/07, Callable 12/1/04 265,625
------------
Total Ohio Municipal Bonds 10,936,719
------------
INVESTMENT COMPANIES (6.1%):
375,000 Dreyfus Municipal Money Market Fund 375,000
338,995 Goldman Tax-Free Fund 338,995
------------
Total Investment Companies 713,995
------------
Total (Cost--$11,092,335)(a) $11,650,714
============
</TABLE>
- ------------
Percentages indicated are based on net assets of $11,717,041.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 562,460
Unrealized depreciation (4,081)
-----------
Net unrealized appreciation $ 558,379
===========
GO--General Obligation
See notes to financial statements.
B-109
<PAGE> 182
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (45.1%):
Aerospace--Aircraft (1.8%):
2,200 Lockheed Martin Corp. $ 173,800
1,900 Watkin-Johnson Co. 83,125
-----------
256,925
-----------
Banks (1.2%):
2,500 Citicorp 168,125
-----------
Beverages (0.9%):
2,000 Anheuser-Busch Cos., Inc. 133,750
-----------
Chemicals & Drugs (3.6%):
4,000 Bristol Myers Squibb Co. 343,500
2,500 E.I. du Pont deNemours &
Co. 174,687
-----------
518,187
-----------
Computers & Software (2.2%):
2,000 Compaq Computer Corp.(b) 96,000
4,800 Seagate Technology, Inc.(b) 228,000
-----------
324,000
-----------
Electronics (2.9%):
3,500 Arrow Electronics, Inc.(b) 150,937
2,000 Tektronix, Inc. 98,250
3,200 Texas Instruments, Inc. 165,600
-----------
414,787
-----------
Energy--Oil (2.1%):
2,000 British Petroleum PLC-ADR 204,250
1,300 Exxon Corp. 104,163
-----------
308,413
-----------
Food Processing (3.0%):
4,400 Archer Daniels Midland Co. 79,200
4,500 H.J. Heinz Co. 149,062
4,000 IBP, Inc. 202,000
-----------
430,262
-----------
Forest Products (0.5%):
2,000 International Paper Co. 75,750
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -----------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Grocery (1.6%):
6,000 Kroger Co.(b) $ 225,000
------------
Household Products/Wares (1.3%):
2,700 Clorox Co. 193,388
------------
Insurance--Fire & Casualty (1.5%):
3,000 Transatlantic Holdings, Inc. 220,125
------------
Leisure Time (0.8%):
5,000 Brunswick Corp. 120,000
------------
Manufacturing (0.8%):
4,000 TRINOVA Corp. 114,500
------------
Metals (1.3%):
8,000 Placer Dome, Inc. 193,000
------------
Mining (2.5%):
5,000 Barrick Gold Corp. 131,875
4,000 Homestake Mining Co. 62,500
14,000 Santa Fe Pacific Gold
Corp.(b) 169,750
------------
364,125
------------
Natural Gas (3.6%):
3,500 Enron Corp. 133,438
6,000 Pacific Enterprises 169,500
8,000 Panhandle Eastern Corp. 223,000
------------
525,938
------------
Oil & Gas Producers (2.3%):
1,200 Mobil Corp. 134,400
9,000 YPF Sociedad Anonima-
Sponsored-ADR 194,625
------------
329,025
------------
Retail (1.9%):
6,000 Walgreen Co. 179,250
3,000 Albertson's, Inc. 98,625
------------
277,875
------------
</TABLE>
Continued
B-110
<PAGE> 183
THE RIVERFRONT FUNDS, INC.
FLEXIBLE GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------------
<S> <C>
COMMON STOCKS, CONTINUED:
Tobacco (2.1%):
3,300 Philip Morris Cos., Inc. $ 298,650
-----------
Utilities--Electric (4.0%):
3,000 Chilgener S.A.-ADR(b) 75,000
7,000 Consolidated Edison of New
York 224,000
3,500 Duke Power Co. 165,812
1,900 Northern States Power Co. 93,338
-----------
558,150
-----------
Utilities--Telecommunications (3.2%):
4,500 Ameritech Corp. 265,500
5,000 Telefonica De Argentina-
ADR(b) 136,250
2,000 Telefonos De Mexico, S.A.-
ADR 63,750
-----------
465,500
-----------
Total Common Stocks 6,515,475
-----------
U.S. GOVERNMENT AGENCIES (3.5%):
Federal Home Loan Bank:
100,000 5.97%, 12/14/98 100,076
400,000 5.78%, 1/8/99 400,000
-----------
Total U.S. Government Agencies 500,076
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS (8.1%):
1,200,000 5/30/96 $ 1,174,752
------------
U.S. TREASURY BONDS (28.3%):
2,250,000 6.25%, 2/15/03 2,348,032
950,000 7.25%, 5/15/04 1,054,909
550,000 8.13%, 8/15/19 691,251
------------
Total U.S. Treasury Bonds 4,094,192
------------
U.S. TREASURY NOTES (15.1%):
300,000 7.50%, 1/31/96 300,567
300,000 6.88%, 4/30/97 306,372
700,000 6.50%, 5/15/97 711,914
200,000 6.25%, 5/31/00 206,774
400,000 7.25%, 5/15/16 456,508
200,000 6.25%, 8/15/23 205,736
------------
Total U.S. Treasury Notes 2,187,871
------------
U.S. TREASURY STRIPS (1.0%):
460,000 2/15/15 145,273
------------
INVESTMENT COMPANIES (1.3%):
194,000 Dreyfus Treasury Prime
Fund 194,000
------------
Total Investment Companies 194,000
------------
Total (Cost--$13,611,629)(a) $14,811,639
============
</TABLE>
- --------------
Percentages indicated are based on net assets of $14,456,894.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 1,256,995
Unrealized depreciation (56,985)
-----------
Net unrealized appreciation $ 1,200,010
===========
(b) Represents non-income producing securities.
See notes to financial statements.
B-111
<PAGE> 184
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- -------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (91.0%):
Aerospace--Aircraft (0.3%):
1,500 Lockheed Martin Corp. $ 118,500
------------
Apparel (7.6%):
30,000 Donnkenny, Inc.(b) 543,750
15,000 Jones Apparel Group(b) 590,625
24,000 The Men's Wearhouse,
Inc.(b) 618,000
12,000 Nike, Inc.-Class B 835,500
10,000 St. John's Knits, Inc. 531,250
------------
3,119,125
------------
Banks (3.2%):
15,000 Bank of Boston Corp. 693,750
14,000 Corestates Financial Corp. 530,250
2,500 Norwest Corp. 82,500
------------
1,306,500
------------
Beverages (0.3%):
2,000 PepsiCo, Inc. 111,750
------------
Brokerage (2.9%):
20,000 Raymond James Financial,
Inc. 422,500
10,000 Charles Schwab Corp. 201,250
5,000 Donaldson Lufkin & Jenrette 156,250
16,875 Waterhouse Investor Services,
Inc. 417,656
------------
1,197,656
------------
Chemicals (0.9%):
10,000 Union Carbide Holding
Corp. 375,000
------------
Commercial Services (3.1%):
12,500 Checkpoint Systems, Inc.(b) 467,187
15,000 CUC International, Inc.(b) 511,875
10,000 Franklin Quest Co.(b) 195,000
2,000 Reuters Holdings-PLC ADR 110,250
------------
1,284,312
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Computer Services (3.1%):
10,000 HBO & Co. $ 766,250
20,000 National Data Corp. 495,000
------------
1,261,250
------------
Computers & Peripherals (3.0%):
15,000 Gateway 2000, Inc.(b) 367,500
10,000 Read-Rite Corp.(b) 232,500
7,000 U.S. Robotics Corp.(b) 614,250
------------
1,214,250
------------
Computers & Software (16.7%):
12,500 Active Voice Corp.(b) 343,750
20,250 Bay Networks, Inc.(b) 832,780
10,000 Cisco Systems, Inc.(b) 746,250
12,000 Cognos, Inc.(b) 535,500
10,000 Dialogic Corp.(b) 385,000
20,000 Global Village
Communication, Inc.(b) 387,500
12,300 In Focus Systems, Inc.(b) 444,338
7,000 Microsoft Corp.(b) 614,250
10,000 Oracle Corp.(b) 423,750
15,000 Quarterdeck Corp.(b) 412,500
10,000 Seagate Technology, Inc.(b) 475,000
10,000 Sybase, Inc.(b) 360,000
13,500 Synopsys, Inc.(b) 513,000
9,000 3 Com Corp.(b) 419,625
------------
6,893,243
------------
Construction (1.7%):
10,000 Centex Corp. 347,500
14,900 Toll Brothers, Inc.(b) 342,700
------------
690,200
------------
Drugs (3.4%):
10,000 Amgen, Inc.(b) 593,750
1,500 Bristol Myers Squibb Co. 128,813
10,000 Glaxo Holdings-ADR 282,500
</TABLE>
Continued
B-112
<PAGE> 185
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- --------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Drugs, continued:
6,000 Merck & Co., Inc. $ 394,500
------------
1,399,563
------------
Electronics (4.4%):
15,000 Alliance Semiconductor
Corp.(b) 174,375
15,000 Analog Devices, Inc.(b) 530,625
14,000 Linear Technology Corp. 549,500
14,000 Maxim Integrated Products,
Inc.(b) 539,000
------------
1,793,500
------------
Environmental Control (0.7%):
11,400 Imco Recycling, Inc. 279,300
------------
Financial Services (3.6%):
10,000 Aames Financial Corp. 278,750
12,000 Green Tree Financial Corp. 316,500
27,500 The Money Store, Inc. 429,688
20,000 Olympic Financial Ltd.(b) 325,000
10 Transport Holdings, Inc.-
Class A(b) 408
2,000 Travelers Group, Inc. 125,750
------------
1,476,096
------------
Food Services (3.1%):
19,000 Daka International, Inc.(b) 522,500
20,000 Starbucks Corp.(b) 420,000
15,000 Wendy's International, Inc. 318,750
------------
1,261,250
------------
Healthcare Services (8.1%):
12,500 Columbia HCA Healthcare
Corp. 634,375
20,000 HEALTHSOUTH Corp.(b) 582,500
10,000 Integrated Health Services,
Inc. 250,000
22,000 Maxicare Health Plans,
Inc.(b) 591,250
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Healthcare Services, continued:
7,000 Pacificare Health Systems,
Inc. Class B(b) $ 609,000
10,000 United Healthcare Corp. 655,000
-----------
3,322,125
-----------
Household Products/Wares (0.3%):
1,500 Clorox Co. 107,438
-----------
Insurance (2.8%):
7,354 Allstate Corp. 302,433
10,000 W.R. Berkley Corp. 537,500
2,000 CNA Financial Corp.(b) 227,000
2,500 Providian Corp. 101,875
-----------
1,168,808
-----------
Medical Supplies & Services (9.1%):
20,000 Amsco International, Inc.(b) 297,500
15,000 Boston Scientific Corp.(b) 735,000
15,000 Idexx Laboratories, Inc.(b) 705,000
14,000 Medtronic, Inc. 782,250
25,000 Mentor Corp. 575,000
20,000 Steris Corp.(b) 645,000
-----------
3,739,750
-----------
Oil Equipment, Wells & Services (1.2%):
2,000 Halliburton Co. 101,250
12,500 Tidewater, Inc. 393,750
-----------
495,000
-----------
Retail-Office Supplies (2.7%):
15,000 Corporate Express, Inc.(b) 451,875
15,000 Officemax, Inc.(b) 335,625
12,500 Staples, Inc.(b) 304,688
-----------
1,092,188
-----------
Retail-Specialty (2.5%):
26,000 Sunglass Hut International(b) 617,500
10,000 Fastenal Co. 422,500
-----------
1,040,000
-----------
</TABLE>
Continued
B-113
<PAGE> 186
THE RIVERFRONT FUNDS, INC.
STOCK APPRECIATION FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
DECEMBER 31, 1995
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ---------------------------------------------------------
<S> <C> <C>
COMMON STOCKS, CONTINUED:
Savings & Loan (2.1%):
15,000 Coast Savings Financial,
Inc.(b) $ 519,375
20,000 Glendale Federal Bank(b) 350,000
-----------
869,375
-----------
Telecommunications (3.0%):
10,000 Aspect Telecommunications
Corp.(b) 335,000
12,500 DSC Communications
Corp.(b) 460,937
12,500 Worldcom, Inc.(b) 440,625
-----------
1,236,562
-----------
Textiles (0.9%):
15,000 G&K Services, Inc.-Class A 382,500
-----------
Tobacco (0.3%):
1,500 Philip Morris Cos., Inc. 135,750
-----------
Total Common Stocks 37,370,991
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
- ----------------------------------------------------------
<S> <C> <C>
INVESTMENT COMPANIES (5.0%):
2,050,000 Dreyfus Treasury Prime
Fund $ 2,050,000
-----------
Total Investment Companies 2,050,000
-----------
Total Investments 39,420,991
-----------
REPURCHASE AGREEMENTS (3.8%):
1,579,159 Provident, 5.50%, dated
12/29/95, due 1/2/96
(Collateralized
by 4,604,823 Federal
National Mortgage Association,
6.24%, 2/25/23, market
value--$4,596,189)(c) 579,159
-----------
Total Repurchase Agreements 1,579,159
-----------
Total (Cost--$33,882,327)(a) $41,000,150
===========
</TABLE>
- --------------
Percentages indicated are based on net assets of $41,067,172.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 8,076,748
Unrealized depreciation (958,925)
-----------
Net unrealized appreciation $ 7,117,823
===========
(b) Represents non-income producing securities.
(c) Provident Bank and The Riverfront Funds, Inc. are affiliated parties.
See notes to financial statements.
B-114
<PAGE> 187
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
Corporation on March 27, 1990, and is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. The Fund is authorized to issue six series
of shares of capital stock, representing interests in different portfolios
of securities as follows: The Riverfront U.S. Government Securities Money
Market Fund, The Riverfront U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Ohio Tax-Free Bond Fund, The Riverfront
Flexible Growth Fund and The Riverfront Stock Appreciation Fund (each, a
"Portfolio"; and collectively, the "Portfolios"). During the year, the
Fund acquired all six of the investment portfolios of MIM Mutual Funds,
Inc. and combined them with three of the Fund's Portfolios including the
newly created Stock Appreciation Fund.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$0.001. Sales of shares of the Portfolios may be made to customers of The
Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, the Income Equity Fund, the Ohio Tax-Free
Bond Fund, the Flexible Growth Fund and the Stock Appreciation Fund
(collectively, "the variable net asset value funds") each offers two share
classes: Investor A Shares and Investor B Shares. The U.S. Government
Securities Money Market Fund (the "money market fund") offers only
Investor A Shares. Investor A shares of the variable net asset value funds
are subject to initial sales charges imposed at the time of purchase, in
accordance with the Portfolios' prospectuses. Certain redemptions of
Investor B shares of the variable net asset value funds made within six
years of purchase are subject to varying contingent deferred sales charges
in accordance with the Portfolios' prospectuses. Each share class has
identical rights and privileges, except with respect to distribution and
services (12b-1) fees paid by each share class, voting rights on matters
affecting a single share class, and the exchange privileges of each share
class.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles.
SECURITIES VALUATION:
Investments of the money market fund are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the
maturity of the security. In addition, the money market fund may not (a)
purchase any instrument with a remaining maturity greater than 397 days
unless such investment is subject to a demand feature, or (b) maintain a
dollar-weighted-average portfolio maturity which exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, municipal
securities, commercial paper and U.S. Government securities of the
variable net asset value funds are valued at their market values
determined on the basis of the mean of the latest available bid and asked
quotations on the principal exchange
Continued
B-115
<PAGE> 188
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
(closing sales prices if the over-the-counter National Market System) in
which such securities are normally traded. Short-term investments maturing
in 60 days or less are valued at amortized cost which, combined with
accrued interest, approximates market value. Investments in investment
companies are valued at their net asset values as reported by such
investment companies. Other securities for which quotations are not
readily available are valued at their fair value by the investment adviser
under the supervision of the Fund's Board of Directors. The differences
between the cost and market values of investments held by the variable net
asset value funds are reflected as either unrealized appreciation or
depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined by
comparing the identified cost of the security lot sold with the net sales
proceeds.
REPURCHASE AGREEMENTS:
The Portfolios may acquire repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser, or the Portfolio's sub-investment adviser deems
creditworthy under guidelines approved by the Board of Directors, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the
price paid by each Portfolio plus interest negotiated on the basis of
current short-term rates, which may be more or less than the rate on the
underlying portfolio securities. The seller, under a repurchase agreement,
is required to maintain the value of collateral held pursuant to the
agreement at not less than the repurchase price (including accrued
interest). Securities subject to repurchase agreements are held by each
Portfolio's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered
to be loans by the Portfolios under the 1940 Act.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Any taxable distributions declared in
December and paid in the following fiscal year will be taxable to
shareholders in the year declared.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Timing differences relating to shareholder
distributions are reflected in the components of net assets and permanent
book and tax basis differences relating to shareholder distributions have
been reclassified to additional paid-in capital. These differences are
primarily due to differing treatments for dollar roll transactions,
deferral of certain losses and expiring capital loss carryforwards.
Continued
B-116
<PAGE> 189
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
FEDERAL INCOME TAXES:
It is the policy of each Portfolio to qualify or continue to qualify as a
regulated investment company by complying with the provisions available to
certain investment companies, as defined in applicable sections of the
Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, Federal income taxes.
ESTIMATES:
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of income and expenses for the period. Actual results could differ
from those estimates.
3. REORGANIZATION
On June 26, 1995, the Fund entered into an Agreement and Plan of
Reorganization and Liquidation (the "Plan") with MIM Mutual Funds, Inc.
("MIM"), a Maryland corporation. Pursuant to the Plan, the money market
fund acquired all or substantially all of the assets of the Money Market
Fund of MIM and the Income Equity Fund acquired all or substantially all
of the assets of each of the Bond Income Fund, AFA Equity Income Fund and
Stock Income Fund of MIM (collectively, the "Acquired Funds"), in exchange
for the assumption of such Acquired Funds' stated liabilities and a number
of full and fractional Investor A shares of the Money Market Fund or the
Income Equity Fund, having an aggregate net asset value equal to such
Acquired Funds' net assets (the "Reorganization"). Additionally, the MIM
Stock Appreciation Fund and MIM Stock Growth Fund were acquired by the
newly created Riverfront Stock Appreciation Fund. At a Special Meeting,
held September 27, 1995, the shareholders of MIM approved the
Reorganization which took effect September 30, 1995. The following is a
summary of shares outstanding, net asset value per share and unrealized
appreciation immediately before and after the Reorganization:
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
------------------------------ --------------------
Riverfront Riverfront
MIM U.S. Government U.S. Government
Money Market Securities Money Securities Money
Fund Market Fund Market Fund
------------ ---------------- ----------------
<S> <C> <C> <C>
Shares 4,865,634 139,885,336 144,750,970
Net Assets $4,865,634 $139,883,045 $144,748,679
Net Asset Value $1.00 $1.00 $1.00
</TABLE>
<TABLE>
<CAPTION>
Before Reorganization After Reorganization
------------------------------------------------------------------ --------------------
MIM Bond MIM Stock MIM AFA Equity Riverfront Income Riverfront Income
Income Fund Income Fund Income Fund Equity Fund Equity Fund
----------- ------------ -------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
Shares 175,098 555,565 66,038 4,174,301 4,968,243
Net Assets $1,911,667 $7,001,927 $813,625 $51,090,349 $60,817,568
Net Asset Value: $10.92* $12.60* $12.32*
Investor A Shares $12.25 $12.25
Investor B Shares $12.00 $12.00
Unrealized Appreciation $ 254,298 $1,425,640 $ 70,$83 $ 2,235,485 $ 3,985,706
</TABLE>
--------
* Prior to the reorganization, MIM offered only one class of shares of
each Acquired Fund.
Continued
B-117
<PAGE> 190
THE RIVERFRON FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
DECEMBER 31, 1995
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. Government Securities U.S. Government
Money Market Fund Income Fund Income Equity Fund
----------------------------- ----------------------------- ----------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, December 31, December 31, December 31, December 31, December 31,
1995 1994 (a) 1995 1994 (a) 1995 1994 (a)
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares issued $ 331,872,719 $ 252,936,958 $ 4,352,572 $ 7,849,466 $ 9,389,60 $13,962,314
Proceeds from shares issued
in connection with
acquisition 4,865,634 9,727,219
Dividends reinvested 1,518,099 569,500 569,125 333,435 8,635,353 900,398
Cost of shares redeemed (330,133,820) (237,338,519) (4,089,227) (2,238,879) (7,219,484) (2,457,054)
------------- ------------- ----------- ----------- ----------- -----------
Change in net assets from
Investor A share
transactions $ 8,122,632 $ 16,167,939 $ 832,470 $ 5,944,022 $20,532,690 $12,405,658
============= ============= =========== =========== =========== ===========
INVESTOR B SHARES:
Proceeds from shares issued $ 1,317,928 $ 2,765,814
Dividends reinvested 9,712 13,294
Cost of shares redeemed (96,002) (43,350)
----------- -----------
Change in net assets from
Investor B share
transactions $ 1,231,638 $ 2,735,758
=========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued 331,872,719 252,936,958 469,561 838,911 828,287 1,295,899
Issued in connection with
acquisition 4,865,634 793,942
Reinvested 1,518,099 569,500 60,733 36,232 763,006 84,342
Redeemed (330,133,820) (237,338,519) (435,482) (243,620) (630,554) (230,101)
------------- ------------- ----------- ----------- ----------- -----------
Change in Investor A Shares 8,122,632 16,167,939 94,812 631,523 1,754,681 1,150,140
============= ============= =========== =========== =========== ===========
INVESTOR B SHARES:
Issued 123,342 241,570
Reinvested 903 1,125
Redeemed (8,962) (3,605)
---------- ----------
Change in Investor B Shares 115,283 239,090
=========== ===========
</TABLE>
--------
(a) Audited by other auditors.
Continued
B-118
<PAGE> 191
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Flexible Growth Stock Appreciation
Ohio Tax-Free Bond Fund Fund Fund
----------------------------- ----------------------------- ------------------
Period from Period from
August 1, 1994 August 1, 1994
Year Ended through Year Ended through October 1, 1995
December 31, December 31, December 31, December 31, December 31,
1995 1994(a) 1995 1994(a) 1995(b)
------------ -------------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
INVESTOR A SHARES:
Proceeds from shares issued $297,450 $10,355,0088 $6,257,968 $2,833,344 $ 738,522
Dividends reinvested 8,453 27 282,271 13,957 1,542,781
Cost of shares redeemed (109,278) (717,635) (100,558) (3,611,887)
-------- ------------ ---------- ---------- -----------
Change in net assets from Investor A
share transactions $196,625 $10,355,115 $5,822,604 $2,746,743 $(1,330,584)
======== ============ ========== ========== ===========
INVESTOR B SHARES:
Proceeds from shares issued $598,493 $4,818,782 $ 71,986
Dividends reinvested 9,755 52,617
Cost of shares redeemed (5,034) (188,581)
-------- ---------- -----------
Change in net assets from Investor B
share transactions $603,214 $4,682,818 $ 71,986
======== ========== ===========
SHARE TRANSACTIONS:
INVESTOR A SHARES:
Issued 29,259 1,036,159 593,056 285,468 76,082
Reinvested 833 3 25,863 1,408 164,279
Redeemed (10,732) (65,727) - (10,174) (370,208)
-------- ------------ ---------- ---------- -----------
Change in Investor A Shares 19,360 1,036,162 553,192 276,702 (129,847)
======== ============ ========== ========== ===========
INVESTOR B SHARES:
Issued 57,922 442,046 7,299
Reinvested 927 4,698
Redeemed (491) (16,667)
-------- ---------- -----------
Change in Investor B Shares 58,358 430,077 7,299
======== ========== ===========
</TABLE>
--------
(a) Period from commencement of operations. Audited by other auditors.
(b) Period from date acquired by Riverfront Stock Appreciation Fund.
5. RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment
of the assets of the U.S. Government Securities Money Market Fund, the
U.S. Government Income Fund, the Ohio Tax-Free Bond Fund and the Stock
Appreciation Fund. Under the terms of the Investment Advisory Agreement,
Provident is entitled to receive fees based on a percentage of the average
net assets of each Portfolio.
At meetings held on May 19, 1995 and June 26, 1995, the Board of Directors
of the Fund approved an increase from 0.75% to 0.95% in the investment
advisory fee paid to Provident by the Income Equity Fund. In addition, the
Board approved a new sub-investment advisory agreement between Provident
and DePrince, Race & Zollo, Inc. on behalf of the Income Equity Fund which
also increased the sub-investment advisory fees paid by Provident to the
new sub-investment adviser. At a Special Meeting, held July 31, 1995, the
Continued
B-119
<PAGE> 192
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
shareholders of the Income Equity Fund approved the proposed amendments to
the investment advisory agreement to increase the investment advisory fees
and to enter into the agreement with the new sub-investment adviser. The
amendments took effect August 15, 1995.
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into Sub-Investment Advisory Agreements with
DePrince, Race & Zollo, Inc. ("DePrince"), for the Income Equity Fund and
with James Investment Research ("JIR") for the Flexible Growth Fund.
DePrince and JIR provide investment advice to and supervise the investment
program of the Income Equity Fund and the Flexible Growth Fund,
respectively. Under the terms of the Sub-Investment Advisory Agreements,
JIR receives from Provident fees calculated at 0.50% of the average daily
net assets of the Flexible Growth Fund, and DePrince receives from
Provident fees calculated at 0.50% of average daily net assets up to $55
million and 0.55% of average daily net assets up to $75 million of the
Income Equity Fund.
In addition to serving as Investment Adviser, Provident serves as
custodian and fund accountant to the Portfolios. Under the terms of the
Custodian, Fund Accounting and Recordkeeping Agreement, Provident is
entitled to receive fees based on a percentage of the average daily net
assets of each Portfolio.
During the year ended December 31, 1995, Provident Securities Investor,
Inc. ("PSI"), an affiliate of Provident which is a registered broker
dealer, executed transactions to purchase and sell portfolio investments
on behalf of the Fund. The Fund paid PSI approximately $85,000 that has
been included in investments at cost, as commissions for such
transactions.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio limited partnership, and BISYS Fund Services Ohio, Inc.
("BISYS Ohio") are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are
affiliated, serves the Fund as Administrator, principal underwriter and
distributor. Such officers and director are paid no fees directly by the
Portfolios for serving as officers and as director of the Fund. Under the
terms of the Administration Agreement, BISYS' fees are computed at 0.20%
of the average daily net assets of each Portfolio.
Provident also serves as Transfer Agent and Shareholder Servicing Agent to
the Fund, and BISYS Ohio serves as Sub-Transfer Agent for the Investor B
Shares. Under the terms of the Master Transfer and Record-keeping
Agreement, Provident is entitled to receive fees based on the number of
shareholders of each Portfolio and certain out-of-pocket expenses. Under
the terms of the Shareholder Servicing Agreement, Provident may receive a
fee computed daily at an annual rate of up to 0.25% of the average daily
net assets of certain shares of each Portfolio. This fee may be used to
reimburse BISYS or other providers of Record keeping and/or administrative
support services. As of December 31, 1995, there were no shareholder
servicing agreements entered into on behalf of any of the Portfolios.
The Fund has adopted an Investor A Distribution and Shareholder Service
Plan ("Investor A Plan") and an Investor B Distribution and Shareholder
Service Plan ("Investor B Plan"), each in accordance with Rule 12b-1 under
the Investment Company Act of 1940. Pursuant to the Investor A Plan, each
Portfolio is
Continued
B-120
<PAGE> 193
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
authorized to pay or reimburse BISYS, as distributor of Investor A shares,
a periodic amount, calculated at an annual rate not to exceed 0.25% of the
average daily net assets of Investor A Shares of each Portfolio. Pursuant
to the Investor B Plan, each variable net asset value fund is authorized
to pay or reimburse BISYS, as distributor of Investor B shares, (a) a
distribution fee in an amount not to exceed, on an annual basis, 0.75% of
the average daily net assets of Investor B shares of that Portfolio and
(b) a service fee in an amount not to exceed 0.25% of the average daily
net asset value of Investor B Shares of that Portfolio. These fees may be
used by BISYS to pay banks, broker dealers and other institutions,
including Provident, DePrince and JIR, or to reimburse BISYS or its
affiliates, to finance any activity which is principally intended to
result in the sale of shares or to compensate for providing shareholder
services. For the year ended December 31, 1995, BISYS received $214,820
from commissions on sales of capital shares, of which $190,064 was
reallowed to dealers of the Fund's shares including $186,048 to affiliates
of the Fund.
Provident and certain of its affiliates own shares of Portfolios of the
Fund. As of December 31, 1995, the aggregate values of Capital shares owned
by Provident and its affiliates were as follows (amounts in thousands):
<TABLE>
<S> <C>
U.S. Government Income Fund $31,623
Income Equity Fund 5,273
Ohio Tax-Free Bond Fund 10,510
Flexible Growth Fund 2,055
</TABLE>
Fees may be voluntarily reduced or reimbursed to assist the Portfolios in
maintaining competitive expense ratios.
Information regarding these transactions is as follows for the year ended
December 31, 1995:
<TABLE>
<CAPTION>
U.S. Government Income
Securities Money U.S. Government Equity
Market Fund Income Fund Fund
---------------- --------------- -------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions (percentage of
average daily net assets) 0.15% 0.40% 0.95%
Voluntary fee reductions $11,516
12b-1 FEES (INVESTOR A):
Voluntary fee reductions $369,910 $33,246 $30,381
CUSTODIAN AND ACCOUNTING FEES: $ 73,973 $36,115 $72,596
TRANSFER AGENT FEES: $ 59,257 $37,402 $42,860
REIMBURSED FEES: $ 548 $62,119
</TABLE>
Continued
B-121
<PAGE> 194
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
<TABLE>
<CAPTION>
Ohio Tax-Free Flexible Stock Appreciation
Bond Fund Growth Fund Fund (a)
------------- ----------- ------------------
<S> <C> <C> <C>
INVESTMENT ADVISORY FEES:
Annual fee before voluntary fee reductions
(percentage of average daily net assets) 0.50% 0.90% 0.80%
Voluntary fee reductions $11,234 $25,567 $ 900
12b-1 FEES (INVESTOR A):
Voluntary fee reductions $ 4,699 $ 5,552 $ 281
CUSTODIAN AND ACCOUNTING FEES: $15,708 $12,666 $15,578
TRANSFER AGENT FEES: $25,445 $22,857 $ 9,834
REIMBURSED FEES: $ 544 $44,178
</TABLE>
--------
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) through December 31, 1995.
6. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------- -----------
<S> <C> <C>
U.S. Government Income Fund $26,035,286 $23,842,104
Income Equity Fund 90,884,221 83,829,266
Ohio Tax-Free Bond Fund 6,043,089 3,396,960
Flexible Growth Fund 10,928,467 891,684
Stock Appreciation Fund 23,560,396(a) 17,024,763(a)
</TABLE>
--------
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) to December 31, 1995.
7. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Portfolios have capital loss
carryforwards as of December 31, 1995, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
Expires Amount
------- ----------
<S> <C> <C>
U.S. Government Securities Money Market Fund...... 2002 $ 875
U.S. Government Securities Money Market Fund...... 2003 $ 1,415
U.S. Government Income Fund....................... 2002 $1,393,386
U.S. Government Income Fund....................... 2003 $ 513,952
Ohio Tax-Free Bond Fund........................... 2002 $ 8,658
</TABLE>
Continued
B-122
<PAGE> 195
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
8. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Fund designated the following eligible distributions for the dividends
1995:
<TABLE>
<CAPTION>
Income Flexible
Equity Fund Growth Fund
----------- -----------
<S> <C> <C>
Dividend Income $1,590,886 $89,366
Dividend Income Per Share--Investor A Shares $ 0.235 $ 0.075
Dividend Income Per Share--Investor B Shares $ 0.113 $ 0.054
</TABLE>
9. EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Fund designated the following exempt-interest income for the Ohio
Tax-Free Bond Fund for the year ended December 31, 1995:
<TABLE>
<CAPTION>
Investor A Share Investor B Shares
---------------- -----------------
<S> <C> <C>
Exempt-interest distributions $395,917 $12,980
Exempt-interest distribution per share $ 0.376 $ 0.267
</TABLE>
The percentage break-down of the exempt-interest by state for the Ohio
Tax-Free Bond Fund for the year ended December 31, 1995 was as follows:
<TABLE>
<S> <C>
Florida 0.9%
Georgia 0.5%
Louisiana 1.5%
Ohio 94.6%
Tennessee 0.6%
Texas 1.9%
-----
100.0%
</TABLE>
10. CAPITAL GAIN DISTRIBUTIONS (UNAUDITED)
The Fund declared and distributed capital gains to shareholders in the
following amounts per share for the taxable year ended December 31, 1995:
<TABLE>
<CAPTION>
Long-term Short-term
<S> <C> <C>
Income Equity Fund 0.1210 1.2140
Flexible Growth Fund 0.0162 0.0885
Stock Appreciation Fund(a) 0.0585 0.3158
</TABLE>
(a) For the period from October 1, 1995 (date acquired by Riverfront Stock
Appreciation Fund) through December 31, 1995.
B-123
<PAGE> 196
THE RIVERFRONT FUNDS, INC.
NOTES TO FINANCIAL STATEMENTS, CONTINUED
December 31, 1995
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. Government Securities Money Market Fund
October 1,
Years ended December 31, 1992 to
-------------------------------------- December 31,
1995 1994 (d) 1993 (d) 1992 (a)(d)
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES
Net investment income 0.05 0.04 0.03 0.01
---------- ---------- ---------- ----------
Total from Investment Activities 0.05 0.04 0.03 0.01
---------- ---------- ---------- ----------
DISTRIBUTIONS
Net investment income (0.05) (0.04) (0.03) (0.01)
Total Distributions (0.05) (0.04) (0.03) (0.01)
---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total Return 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $ 157,495 $ 149,374 $ 133,207 $ 37,083
Ratio of expenses to average net assets 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income to average net assets 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net assets* 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income to average net assets* 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Portfolio. If
such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
See notes to financial statements.
B-124
<PAGE> 197
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
--------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1995 1995(a) 1994(f) 1993(f) 1992(b)(f) 1991(f)
------------ ------------ --------- --------- ---------- -------
INVESTOR A INVESTOR B
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.92 $10.00 $ 9.91 $ 9.76 $ 10.00 $10.00
------- ------ ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income 0.54 0.43 0.54 0.51 0.10 0.73
Net realized and unrealized gains (losses) from
investments 0.79 0.94 (0.99) 0.20 (0.23)
------- ------ ------- ------- ------- ------
Total from Investment Activities 1.33 1.37 (0.45) 0.71 (0.13) 0.73
------- ------ ------- ------- ------- ------
DISTRIBUTIONS
Net investment income (0.54) (0.42) (0.54) (0.50) (0.10) (0.73)
In excess of net investment income (0.06) (0.01)
------- ------ ------- ------- ------- ------
Total Distributions (0.54) (0.42) (0.54) (0.56) (0.11) (0.73)
------- ------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 9.71 $10.95 $ 8.92 $ 9.91 $ 9.76 $10.00
======= ====== ======= ======= ======= ======
Total Return (excludes sales charge) 15.22% 13.96%(e) (4.64)% 7.38% (1.31)% NA
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $36,538 $1,263 $32,721 $30,078 $24,588 $ 33
Ratio of expenses to average net assets 1.09% 1.90%(c) 0.86% 0.65% 0.66% 0.00%
Ratio of net investment income to average net assets 5.74% 4.80%(c) 5.78% 5.05% 4.00% 7.34%
Ratio of expenses to average net assets* 1.18% 1.90%(c) 1.14% 1.08% 1.06%
Ratio of net investment income to average net assets* 5.65% 4.80%(c) 5.49% 4.62% 3.60%
Portfolio Turnover 75%(d) 75%(d) 83% 220% 117% 0%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition,
the manager or investment adviser reimbursed expenses to the Portfolio.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on
October 1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
See notes to financial statements.
B-125
<PAGE> 198
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INCOME EQUITY FUND
--------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, -----------------------------------------
1995 1995(a) 1994(f) 1993(f) 1992(b)(f) 1991(f)
------------ ------------ --------- -------- ---------- -------
INVESTOR A INVESTOR B
------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.15 $10.00 $ 10.63 $ 10.78 $ 10.00 $10.00
------- ------ ------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income 0.27 0.13 0.32 0.28 0.08 0.73
Net realized and unrealized gains from investments 2.89 2.78 1.01 0.80
------- ------ ------- ------- ------- ------
Total from Investment Activities 3.16 2.91 0.32 1.29 0.88 0.73
------- ------ ------- ------- ------- ------
DISTRIBUTIONS
Net investment income (0.27) (0.13) (0.31) (0.27) (0.08) (0.73)
In excess of net investment income (0.03) (0.01)
Net realized gains (1.34) (0.93) (0.49) (1.14)
In excess of net realized gains (0.01)
Total Distributions (1.61) (1.06) (0.80) (1.44) (0.10) (0.73)
------- ------ ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 11.70 $11.85 $ 10.15 $ 10.63 $ 10.78 $10.00
======= ====== ======= ======= ======= ======
Total Return (excludes sales charge) 31.45% 29.28%(e) 3.08% 12.11% 8.74% NA
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000) $60,845 $2,833 $34,965 $24,387 $12,262 $ 43
Ratio of expenses to average net assets 1.49% 2.46%(c) 1.30% 1.47% 1.48% 0.00%
Ratio of net investment income to average net assets 2.27% 1.12%(c) 2.93% 2.55% 3.16% 7.34%
Ratio of expenses to average net assets* 1.74% 2.51%(c) 1.58% 1.64% 2.02%
Ratio of net investment income to average net assets* 2.02% 1.07%(c) 2.65% 2.38% 2.62%
Portfolio Turnover 180%(d) 180%(d) 119% 145% 12% 0%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition,
the manager or investment adviser reimbursed expenses to the Portfolio.
If such voluntary fee reductions and expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on
October 1, 1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
See notes to financial statements.
B-126
<PAGE> 199
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND
------------------------------------------------ ----------------------------------------------------
JANUARY 17, FROM AUGUST 1, JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED 1995 TO 1994 THROUGH YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1995(a) 1994(a)(f) 1995 1995(a) 1994(a)(f)
------------ ------------ -------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.83 $10.00 $ 10.00 $ 9.79 $10.00 $10.00
------- ------ ------- ------ ------ ------
INVESTMENT ACTIVITIES
Net investment income 0.39 0.27 0.12 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments 0.67 0.73 (0.17) 1.66 1.79 (0.18)
------- ------ ------- ------ ------ ------
Total from Investment
Activities 1.06 1.00 (0.05) 2.01 2.04 (0.08)
------- ------ ------- ------ ------ ------
DISTRIBUTIONS
Net investment income (0.38) (0.27) (0.12) (0.34) (0.24) (0.13)
Net realized gains (0.10) (0.10)
------- ------ ------- ------ ------ ------
Total Distributions (0.38) (0.27) (0.12) (0.44) (0.34) (0.13)
------- ------ ------- ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 10.51 $10.73 $ 9.83 $11.36 $11.70 $ 9.79
======= ====== ======= ====== ====== ======
Total Return (excludes
sales charge) 10.96% 10.10%(e) (0.47)%(e) 20.83% 20.53%(c) (0.82)%(e)
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000) $11,091 $ 626 $10,190 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets 1.49% 2.27%(d) 1.08%(d) 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets 3.77% 3.01%(d) 2.92%(d) 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets* 1.64% 2.41%(d) 1.44%(d) 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets* 3.62% 2.87%(d) 2.56%(d) 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover 34%(b) 34%(b) 29% 13%(b) 13%(b) 1%
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. In addition, the
manager or investment adviser reimbursed expenses to the Portfolios. If
such voluntary fee reductions and expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
(f) Audited by other auditors.
See notes to financial statements.
B-127
<PAGE> 200
THE RIVERFRONT FUNDS, INC.
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
1995 THROUGH 1995 THROUGH
DECEMBER 31, DECEMBER 31, YEARS ENDED SEPTEMBER 30,
--------------- --------------- ----------------------------------------------------
1995(b) 1995(a)(b) 1995(f) 1994(f) 1993(f) 1992(f) 1991(f)
--------------- --------------- --------- --------- --------- --------- --------
INVESTOR A INVESTOR B
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.00 $10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64
------- ------ ------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment loss (0.01) (0.01) (0.07) (0.12) (0.17) (0.08) (0.11)
Net realized and unrealized gains
(losses) from investments..... (0.12) (0.08) 2.14 (1.26) 2.57 1.41 3.17
------- ------ ------- ------- ------- ------- -------
Total from Investment Activities (0.13) (0.09) 2.07 (1.38) 2.40 1.33 3.06
------- ------ ------- ------- ------- ------- -------
DISTRIBUTIONS
Net realized gains (0.37) (0.32) (0.55) (0.20) (1.05)
------- ------ ------- ------- ------- ------- -------
Total Distributions (0.37) (0.32) (0.55) (0.20) (1.05)
------- ------ ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 9.50 $ 9.91 $ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
======= ====== ======= ======= ======= ======= =======
Total Return (excludes sales charge) (1.20)%(c) (0.90)%(c) 25.12% (13.91)% 30.61% 16.69% 66.04%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period (000) $40,995 $ 72 $44,500 $47,880 $59,330 $28,750 $9,600
Ratio of expenses to average net assets 1.76%(d) 2.30%(d) 2.61% 2.44% 2.47% 2.70% 2.89%
Ratio of net investment income to
average net assets (0.49)%(d) (1.69)%(d) (0.73)% (1.35)% (1.85)% (1.00)% (1.72)%
Ratio of expenses to average net
assets* 1.77%(d) 2.39%(d)
Ratio of net investment income to
average net assets* (0.50)%(d) (1.78)%(d)
Portfolio turnover 46%(e) 46%(e) 197% 254% 216% 288% 240%
</TABLE>
* During the period, certain fees were voluntarily reduced. In addition,
the investment adviser reimbursed expenses to the Portfolios. If such
voluntary fee reductions and expense reimbursements had not occurred, the
ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for periods prior to September 30, 1995 represent
the performance of the MIM Stock Appreciation Fund. The per share data
for the periods prior to September 30, 1995 have been restated to reflect
the impact of the change of the net asset value of the Stock Appreciation
Fund on September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
See notes to financial statements.
B-128
<PAGE> 201
APPENDIX
The nationally recognized statistical rating organizations
(individually, an "NRSRO") that may be utilized by the Fund with regard to
portfolio investments for the Funds including Moody's Investors Service, Inc.
("Moody's"), Standard & Poor's Corporation ("S&P"), Duff & Phelps, Inc.
("Duff"), Fitch Investors Service, Inc. ("Fitch"), IBCA Limited and its
affiliate, IBCA Inc. (collectively, "IBCA"), and Thomson BankWatch, Inc.
("Thomson"). Set forth below is a description of the relevant ratings of each
such NRSRO. The NRSROs that may be utilized by the Fund and the description of
each NRSRO's ratings is as of the date of this Statement of Additional
Information, and may subsequently change.
Long-Term Debt Ratings (may be assigned, for example, to corporate and municipal
bonds)
Description of the six highest long-term debt ratings by Moody's
(Moody's applies numerical modifiers (1, 2, and 3) in each rating category to
indicate the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but
A-1
<PAGE> 202
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba Bonds which are rate Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Description of the six highest long-term debt ratings by S&P (S&P may
apply a plus (+) or minus (-) to a particular rating classification to show
relative standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P.
Capacity to pay interest and repay principal is extremely
strong.
AA Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only
in small degree.
A Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated circumstances.
BBB Debt rated BBB is regarded as having an adequate capacity to
pay interest and repay principal. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
BB Bonds which are rated BB have less near-term vulnerability to
default than other speculative issues. However, they face
major ongoing uncertainties or exposure to adverse business,
financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt
subordinated to
A-2
<PAGE> 203
senior debt that is assigned an actual or implied BBB
rating.
B Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and
principal repayments. Adverse business, financial, or
economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BB or
BB- rating.
Description of six highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible
being only slightly more than for risk-free U.S. Treasury
debt.
AA+ High credit quality. Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
A- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
BBB Debt has below average protection factors but is still
considered sufficient for prudent investment. However, there
is considerable variability in risk during economic cycles.
Description of the six highest long-term debt ratings by Fitch (plus or
minus signs are used with a rating symbol to indicate the relative position of
the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "[-]+."
A Bonds considered to be investment grade and of high
credit quality. The obligor's ability to pay interest
and repay principal is considered to be strong, but may
A-3
<PAGE> 204
be more vulnerable to adverse changes in economic conditions
and circumstances than bonds with higher ratings.
BBB Bonds rated BBB are considered to be investment grade and
of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse
impact on these bonds, and therefore, impair timely
payment. The likelihood that the ratings for these bonds
will fall below investment grade is higher than for bonds
with higher ratings.
BB Bonds rated BB are considered speculative. The obligor's
ability to pay interest and repay principal may be affected
over time by adverse economic changes. However, business and
financial alternatives can be identified which could assist
the obligor in satisfying its debt service requirements.
B Bonds rated B are considered highly speculative. While bonds
in this class are currently meeting debt service requirements,
the probability of continued timely payments of principal and
interest reflects the obligor's limited margin of safety and
the need for reasonable business and economic activity
throughout the life of the issue.
IBCA's description of its six highest long-term debt ratings:
AAA Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial such that adverse changes in
business, economic or financial conditions are unlikely to
increase investment risk significantly.
AA Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal
and interest is substantial. Adverse changes in business,
economic, or financial conditions may increase investment risk
albeit not very significantly.
A Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest
is strong, although adverse changes in business, economic or
financial conditions may lead to increased investment risk.
BBB Obligations for which there is currently a low
expectation of investment risk. Capacity for timely
repayment of principal and interest is adequate, although
A-4
<PAGE> 205
adverse changes in business, economic, or financial conditions
are more likely to lead to increased investment risk than for
obligations in other categories.
BB Obligations for which there is a possibility of investment
risk developing. Capacity for timely repayment of principal
and interest exists, but is susceptible over time to adverse
changes in business, economic, or financial conditions.
B Obligations for which investment risk exists. Timely repayment
of principal and interest is not sufficiently protected
against adverse changes in business, economic or financial
conditions.
Thomson's description of its six highest long-term debt ratings
(Thomson may include a plus (+) or minus (-) designation to indicated where
within the respective category the issue is placed):
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB The lowest investment grade category and indicates an
acceptable capacity to repay principal and interest. Issues
rated BBB are, however, more vulnerable to adverse
developments (both internal and external) than obligations
with higher ratings.
BB While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for
lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated
issues. Adverse developments could well negatively affect the
payment of interest and principal on a timely basis.
A-5
<PAGE> 206
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions)
have a superior capacity for repayment of senior
short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by many of the
following characteristics:
- Leading market positions in well-established
industries.
- High rates of return on funds employed.
- Conservative capitalization structures with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of fixed
financial charges and high internal cash
generation.
- Well-established access to a range of
financial markets and assured sources of
alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions)
have a strong capacity for repayment of senior
short-term debt obligations. This will normally be
evidenced by many of the characteristics cited
above but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics,
while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is
maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions)
have an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and
profitability may result in changes in the level of
debt protection measurements and may require
relatively high financial leverage. Adequate
liquidity is maintained.
A-6
<PAGE> 207
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a
plus sign (+).
A-2 Capacity for timely payment on issues with this
designation is satisfactory. However, the relative
degree of safety is not as high as for issues designated
"A-1."
A-3 Issues carrying this designation have adequate capacity for
timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Duff's description of its three highest short-term debt ratings (Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating
category):
Duff 1+ Highest certainty of timely payment. Short-term
liquidity, including internal operating factors
and/or access to alternative sources of funds, is
outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
Duff 1 Very high certainty of timely payment. Liquidity
factors are excellent and supported by good
fundamental protection factors. Risk factors are
minor.
Duff 1- High certainty of timely payment. Liquidity
factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
Duff 2 Good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing
funding needs may enlarge total financing
requirements, access to capital markets is good. Risk
factors are small.
Duff 3 Satisfactory liquidity and other protection factors
qualify issue as to investment grade. Risk factors
are larger and subject to more variation.
Nevertheless, timely payment is expected.
Fitch's description of its three highest short-term debt ratings:
A-7
<PAGE> 208
F-1+ Exceptionally Strong Credit Quality. Issues assigned
this rating are regarded as having the strongest degree
of assurance for timely payment.
F-1 Very Strong Credit Quality. Issues assigned this rating
reflect an assurance of timely payment only slightly less in
degree than issues rated F-1+.
F-2 Good Credit Quality. Issues assigned this rating have a
satisfactory degree of assurance for timely payment, but the
margin of safety is not as great as for issues assigned F-1+
or F-1 ratings.
F-3 Fair Credit Quality. Issues assigned this rating have
characteristics suggesting that the degree of assurance for
timely payment is adequate, however, near-term adverse changes
could cause these securities to be rate d below investment
grade.
IBCA's description of its three highest short-term debt ratings:
A+ Obligations supported by the highest capacity for timely
repayment.
A1 Obligations supported by a very strong capacity for timely
repayment.
A2 Obligations supported by a strong capacity for timely
repayment, although such capacity may be susceptible to
adverse changes in business, economic or financial conditions.
Thomson's description of its three highest short-term ratings:
TBW-1 The highest category; indicates a very high degree of
likelihood that principal and interest will be paid
on a timely basis.
TBW-2 The second highest category; while the degree of
safety regarding timely repayment of principal and
interest is strong, the relative degree of safety is
not as high as for issues rated "TBW-1".
TBW-3 The lowest investment grade category; indicates that
while more susceptible to adverse developments (both
internal and external) than obligations with higher
ratings, capacity to service principal and interest
in a timely fashion is considered adequate.
A-8
<PAGE> 209
Municipal Obligations Ratings
The following summarizes the three highest ratings used by Moody's for
state and municipal short-term obligations. Obligations bearing MIG-1 or VMIG-1
designations are of the best quality, enjoying strong protection by established
cash flows, superior liquidity support or demonstrated broad-based access to the
market for refinancing. Obligations rated MIG-2 or VMIG-2 denote high quality
with ample margins of protection although not so large as in the preceding
rating group. Obligations bearing MIG-3 or VMIG-3 denote favorable quality. All
security elements are accounted for but there is lacking the undeniable strength
of the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
S&P SP-1, SP-2, and SP-3 municipal note ratings (the three highest
ratings assigned) are described as follows:
"SP-1": Very strong or strong capacity to pay principal and
interest. Those issues determined to possess overwhelming
safety characteristics will be given a plus (+) designation.
"SP-2": Satisfactory capacity to pay principal and
interest.
"SP-3": Speculative capacity to pay principal and
interest.
The following summarizes the four highest ratings used by Moody's for
state and municipal bonds:
"Aaa": Bonds judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change,
such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
"Aa": Bonds judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which
make the long-term risks appear somewhat larger than in Aaa
securities.
A-9
<PAGE> 210
"A": Bonds which possess many favorable investment
attributes and are to be considered as upper medium-grade
obligations. Factors giving security to principal and
interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment
sometime in the future.
"Baa": Bonds which are considered as medium grade obligations,
i.e, they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for
the present but certain protective elements may be lacking or
may be characteristically unreliable over any great length of
time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
The following summarizes the four highest ratings used by S&P for state
and municipal bonds:
"AAA": Debt which has the highest rating assigned by
S&P. Capacity to pay interest and repay principal is
extremely strong.
"AA": Debt which has a very strong capacity to pay
interest and repay principal and differs from the highest
rated issues only in small degree.
"A": Debt which has a strong capacity to pay interest
and repay principal although it is somewhat more
susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher
rated categories.
"BBB": Debt which has adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
to pay interest and repay principal for debt in this category
then in higher rated categories.
A-10
