<PAGE> 1
As filed with the Securities and Exchange Commission
April 29, 1998
1933 Act Registration No. 33-34154
1940 Act File No. 811-6082
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE [x]
SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 25 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 26 [x]
THE RIVERFRONT FUNDS, INC.
(formerly known as The Trust Advisory
Group of Funds, Inc.)
(Exact name of Registrant as specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number,
including Area Code: (614) 470-8000
Charles L. Booth
3435 Stelzer Road
Columbus, Ohio 43219
---------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering:
Immediately upon effectiveness
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to paragraph (b)
[x] on April 30, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on (date) pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE> 2
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered:
Shares of Common Stock, $.001 par value per share
<PAGE> 3
CROSS-REFERENCE SHEET
---------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
THE RIVERFRONT BALANCED FUND
Six Funds of
The Riverfront Funds, Inc.
Cross-Reference Sheet pursuant to Rule 481 under the Securities Act of 1933.
<TABLE>
<CAPTION>
Item Number in
Part A of Form N-1A Prospectus Caption
- ------------------- ------------------
<S> <C>
1 Cover Page
2 Fee Table
3 Financial Highlights; Performance Data
and Advertising
4 Cover Page; The Company and its Funds;
The Funds' Investment Objectives and
Policies
5 Management and Expenses; Additional
Information
5A Not Applicable
6 The Company and its Funds; Dividends
and Taxes; Company Shares; Pricing Shares
7 How to Buy Shares; Shareholder Services
8 How to Redeem Shares; How to Buy Shares
9 Not Applicable
</TABLE>
<PAGE> 4
THE RIVERFRONT FUNDS, INC.
THE RIVERFRONT U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND
THE RIVERFRONT U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT INCOME EQUITY FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY
SELECT FUND
THE RIVERFRONT BALANCED FUND
PROSPECTUS APRIL 30, 1998
The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company which currently issues six 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 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
Financial Group, Inc. ("PFG"). Provident, directly or through a sub-investment
adviser with respect to The Riverfront Income Equity Fund, serves as investment
adviser to each of the Funds.
SHARES OF THE FUNDS ARE NOT DEPOSITS OF, OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, PROVIDENT, PFG OR ANY OF THEIR AFFILIATES, AND ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD
OR ANY OTHER AGENCY. AN INVESTMENT IN A FUND INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE VALUE OF THE RIVERFRONT U.S.
GOVERNMENT INCOME FUND, THE RIVERFRONT INCOME EQUITY 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
This prospectus relates to each of the Funds and sets forth concisely
information that a prospective investor should know about each Fund before
investing. Investors should read and retain this prospectus for future
reference.
<PAGE> 5
Additional information about the Company and the Funds is contained in a
Statement of Additional Information and Appendix thereto dated as of the date
hereof, which has been filed with the Securities and Exchange Commission (the
"Commission") and is incorporated by reference into this prospectus. For a free
copy of the Statement of Additional Information, or for other information about
the Company and the Funds, write to the address or call the telephone number
listed above.
The Company is designed to enable investors to pursue financial goals through
a choice of the following Funds:
-- THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND (the "Money
Market Fund") seeks current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity. The dollar weighted average
maturity of the Money Market Fund will not exceed 90 days.
-- THE RIVERFRONT U.S. GOVERNMENT INCOME FUND (the "Income Fund") seeks a high
level of current income, consistent with preservation of capital, by investing
primarily in securities issued or guaranteed by the U.S. Government, its
agencies and instrumentalities, and in high quality fixed rate and adjustable
rate mortgage-backed securities and other asset-backed securities. The Income
Fund intends to invest in securities with dollar-weighted average durations of
between three and seven years. The dollar-weighted average life of the Income
Fund's securities is expected to be in the range of four to ten years.
-- THE RIVERFRONT INCOME EQUITY FUND (the "Income Equity Fund") seeks a high
level of investment income, with capital appreciation as a secondary objective,
through investment primarily in income-producing equity securities of U.S.
issuers. To provide investment advisory services to the Income Equity Fund,
Provident has entered into a sub-investment advisory agreement with DePrince,
Race & Zollo, Inc., Orlando, Florida.
-- THE RIVERFRONT 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 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, other than the Money Market Fund, offers two classes of shares.
This prospectus describes the one class of shares of the Money Market Fund
- --Investor A shares, and the two classes of shares of each of the other Funds --
Investor A shares and Investor B shares.
2
<PAGE> 6
<TABLE>
<CAPTION>
Table of Contents Page
<S> <C>
Prospectus Summary.................... 4
Fee Table............................. 7
Financial Highlights.................. 10
The Company and Its Funds............. 20
The Funds' Investment Objectives and
Policies.......................... 20
Investment Restrictions............... 35
Pricing Shares........................ 38
How To Buy Shares..................... 39
Sales Charges......................... 41
Reduced Sales Charges -- Investor A
Shares............................ 42
Contingent Deferred Sales Charge --
Investor B Shares................. 44
Other Purchase Information............ 47
Exchanges............................. 47
How To Redeem Shares.................. 48
Shareholder Services.................. 51
Dividends and Taxes................... 51
Management and Expenses............... 53
Performance Data and Advertising...... 59
Company Shares........................ 60
Additional Information................ 61
</TABLE>
3
<PAGE> 7
PROSPECTUS SUMMARY
<TABLE>
<S> <C>
Shares Offered....................... Investor A shares of capital stock, $0.001 par value, of the
Money Market Fund, and Investor A and Investor B shares of
capital stock, $0.001 par value, of the Income Fund, the
Income Equity Fund, the Stock Appreciation Fund, the Large
Company Fund and the Balanced Fund, six separate series
(collectively, the "Funds") of The Riverfront Funds, Inc., a
Maryland corporation (the "Company").
Offering Price....................... The public offering price of the INVESTOR A SHARES of the
Money Market Fund is equal to the net asset value per share.
The public offering price of INVESTOR A SHARES of each of
the other Funds is equal to the net asset value per share
plus a sales charge equal to 4.50% of the public offering
price (4.71% of the net amount invested), reduced on
investments of $100,000 or more (See "Sales Charges --
Investor A Shares"). Under certain circumstances, the sales
charge may be eliminated (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 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 Fund is a diversified series of the Company, an
open-end, management investment company.
Investment Objectives................ For the MONEY MARKET FUND, current income from U.S.
Government short-term securities while preserving capital
and maintaining liquidity.
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.
</TABLE>
4
<PAGE> 8
<TABLE>
<S> <C>
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 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, 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. Government, 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
securities and other asset-backed securities which are
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities 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.
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.
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
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
Investment Techniques." As with other mutual funds, there
can be no assurance that any of the Funds will achieve its
investment objective or objectives. The Funds, to the extent
set forth under "Risk Factors and Investment Techniques,"
may engage in the following practices: the use of repurchase
and reverse repurchase agreements, entering into options and
futures transactions, the lending of portfolio securities,
the purchase of securities on a when-issued or
delayed-delivery basis and investing in warrants, foreign
securities and derivatives.
Investment Adviser................... The Provident Bank ("Provident").
Sub-Investment Adviser............... DePrince, Race & Zollo, Inc. ("DRZ"), with respect to the
Income Equity Fund.
Dividends............................ For the Money Market Fund, dividends from net income are
declared daily and generally paid monthly. For the Stock
Appreciation Fund, dividends from net income, if any, are
declared and generally paid semi-annually. For each of the
other Funds, dividends from net income are declared and
generally paid monthly. Net realized capital gains are
distributed at least annually.
Distributor.......................... BISYS Fund Services Limited Partnership (the "Distributor").
</TABLE>
6
<PAGE> 10
FEE TABLE
The purpose of the fee table is to assist investors in understanding the costs
and expenses that an investor in a Fund will bear directly or indirectly. Such
costs and expenses do not include any fees charged by Provident or any of its
affiliates to its customers' accounts which may have invested in shares of the
Funds. For more complete descriptions of the various costs and expenses, see the
following sections of this prospectus: "Company Management and Expenses," "How
to Buy Shares," "Sales Charges," "Reduced Sales Charges -- Investor A Shares"
and "Distribution Plans."
INVESTOR A SHARES
<TABLE>
<CAPTION>
MONEY INCOME STOCK LARGE
MARKET INCOME EQUITY APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ ------ ------------ ------- --------
<S> <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)
ANNUAL FUND EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS)
Investment Advisory Fees After Voluntary Fee
Reduction................................... .15% .40% .95% .80% .80% .80%(2)
12b-1 Fees After Voluntary Fee Reduction...... .10(3) .19(3) .22(3) .25 .25 .19(3)
Other Expenses................................ .39 .55 .58 1.06 .64 .87
--- ---- ---- ---- ---- ----
Total Fund Operating Expenses After Voluntary
Fee Reductions.............................. .64% 1.14% 1.75% 2.11% 1.69% 1.86%
=== ==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) The sales charge applied to purchases of Investor A shares declines as the
amount invested increases. In addition, all or a portion of the sales charge
may be waived by the Distributor on certain sales of Investor A shares. See
"Sales Charges -- Investor A Shares" and "Reduced Sales Charges -- Investor
A Shares."
(2) Provident agreed with the Company to reduce voluntarily the amount of its
investment advisory fee with respect to the Balanced Fund for the fiscal
year ended December 31, 1997 and the fiscal year ending December 31, 1998.
Absent such voluntary fee reduction, Investment Advisory Fees for the fiscal
year ended December 31, 1997, would have been 0.90% for the Balanced Fund.
(3) 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, Income Equity and Balanced Funds, for
the fiscal year ended December 31, 1997, and the fiscal year ending December
31, 1998. Absent such voluntary fee reduction, 12b-1 Fees for such Funds
would have been .25%.
7
<PAGE> 11
INVESTOR B SHARES
<TABLE>
<CAPTION>
INCOME STOCK LARGE
INCOME EQUITY APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND
------ ------ ------------ ------- --------
<S> <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%
ANNUAL FUND EXPENSES (AS A PERCENTAGE OF AVERAGE
NET ASSETS)
Investment Advisory Fees After Voluntary Fee
Reduction..................................... .40% .95% .80% .80% .80%(2)
12b-1 Fees...................................... 1.00 1.00 1.00 1.00 1.00
Other Expenses.................................. .55 .60 1.06 .67 .92
---- ---- ---- ---- ----
Total Fund Operating Expenses After Voluntary
Fee Reduction................................. 1.95%% 2.55% 2.86% 2.47% 2.72%
==== ==== ==== ==== ====
</TABLE>
- ---------------
(1) A contingent deferred sales load ranging from 4% to 1% is charged with
respect to Investor B shares redeemed within the first six years after
purchase. See "Contingent Deferred Sales Charge -- Investor B Shares" below.
(2) Provident agreed with the Company to reduce voluntarily the amount of its
investment advisory fee with respect to the Balanced Fund for the fiscal
year ended December 31, 1997 and the fiscal year ending December 31, 1998.
Absent such voluntary fee reduction, Investment Advisory Fees for the fiscal
year ended December 31, 1997, would have been .90% for the Balanced Fund.
EXAMPLE(4) -- INVESTOR A SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
MONEY INCOME STOCK LARGE
MARKET INCOME EQUITY APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND FUND
------ ------ ------ ------------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
One Year............................. $ 7 $ 56 $ 62 $ 65 $ 61 $ 63
Three Years.......................... $20 $ 80 $ 98 $108 $ 96 $101
Five Years........................... $36 $105 $136 $153 $133 $141
Ten Years............................ $80 $177 $242 $278 $236 $253
</TABLE>
8
<PAGE> 12
EXAMPLE(4) -- INVESTOR B SHARES
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each period:
<TABLE>
<CAPTION>
INCOME STOCK LARGE
INCOME EQUITY APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND
------ ------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
One Year............................. $ 60 $ 66 $ 69 $ 65 $ 68
Three Years.......................... $101 $119 $129 $117 $124
Five Years........................... $125 $156 $171 $152 $164
Ten Years............................ $206 $269 $300 $261 $284
</TABLE>
You would pay the following expenses on the same investment, assuming no
redemption:
<TABLE>
<CAPTION>
INCOME STOCK LARGE
INCOME EQUITY APPRECIATION COMPANY BALANCED
FUND FUND FUND FUND FUND
------ ------ ------------ ------- --------
<S> <C> <C> <C> <C> <C>
One Year............................. $ 20 $ 26 $ 29 $ 25 $ 28
Three Years.......................... $ 61 $ 79 $ 89 $ 77 $ 84
Five Years........................... $105 $136 $151 $132 $144
Ten Years............................ $206 $269 $300 $261 $284
</TABLE>
- ---------------
(4) The Commission requires use of a 5% annual return figure for purposes of the
examples. Actual return for a Fund may be greater or less than 5%.
AMOUNTS SHOWN IN THE EXAMPLES ABOVE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES; ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN. As a result of the payment of sales loads and Rule 12b-1
fees, long-term shareholders may pay more than the maximum front-end sales
charge permitted by the Rules of the National Association of Securities Dealers,
Inc. (the "NASD"). The NASD has adopted rules which generally limit the
aggregate of any sales charges paid and payments under a Fund's Investor A and
Investor B Distribution Plans to 6.25% of total new gross sales, plus interest.
A Fund would stop accruing payments under a Distribution Plan if, to the extent,
and for as long as, such limit would otherwise be exceeded.
9
<PAGE> 13
The information set forth in the foregoing Fee Tables and examples relates
to the Investor A and Investor B Shares (except with respect to the Money Market
Fund, which only has Investor A shares) of the Funds. The two classes of shares
are subject to the same expenses except that the level of Rule 12b-1 fees and
certain other class specific expenses paid by the holders of Investor A shares
and Investor B shares differs.
FINANCIAL HIGHLIGHTS
The Money Market Fund, the Income Fund, the Income Equity Fund, the Stock
Appreciation Fund, the Large Company Fund and the Balanced Fund (formerly known
as The Riverfront Flexible Growth Fund) are each a separate fund of the Company.
The financial highlights of each of the Funds appear in the following Financial
Highlights tables. Ernst & Young LLP, independent auditors, audited the
financial highlights of each of these Funds for the fiscal years ended December
31, 1997, 1996 and 1995, except that, with respect to the Stock Appreciation
Fund, Ernst & Young LLP audited the financial highlights for the three-month
period ended December 31, 1995. Other auditors audited the financial highlights
of each of the Funds for all of the other time periods in the Financial
Highlights tables.
The financial statements of the Funds and the report issued by Ernst &
Young LLP on these financial statements appear in the Statement of Additional
Information. Shareholders and prospective investors may obtain the Statement of
Additional Information upon request.
As of September 30, 1995, the 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 of the Stock Appreciation Fund for each of the
fiscal years ended September 30, 1995, 1994, 1993, 1992, 1991, 1990, 1989 and
1988 have been audited by other auditors and, except for September 30, 1995 (the
effective date of the Reorganization), reflect the operations of the MIM Stock
Appreciation Fund prior to the Reorganization.
On July 29, 1994, the shareholders of the Company approved the
reclassification of the Funds' then outstanding shares into Investor A shares.
Such reclassification was effective as of August 1, 1994.
10
<PAGE> 14
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
INVESTOR A SHARES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, OCTOBER 1, 1992
----------------------------------------- TO DECEMBER 31,
1997 1996 1995 1994(D) 1993(D) 1992(a)(d)
---- ---- ---- ------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Investment Activities
Net Investment Income................ 0.049 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- -------- -------
Total from Investment
Activities......................... 0.049 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- -------- -------
Distributions
Net Investment Income................ (0.049) (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- -------- -------
Total Distributions.................. (0.049) (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD....... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ======== =======
TOTAL RETURN......................... 5.02% 4.89% 5.52% 3.78% 2.90% 0.80%(b)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)...... $142,569 $181,017 $157,495 $149,374 $133,207 $37,083
Ratio of expenses to average net
assets............................. 0.64% 0.59% 0.58% 0.51% 0.32% 0.01%(c)
Ratio of net investment income to
average net assets................. 4.90% 4.78% 5.34% 3.70% 2.85% 3.09%(c)
Ratio of expenses to average net
assets*............................ 0.79% 0.84% 0.83% 0.80% 0.42% 0.68%(c)
Ratio of net investment income to
average net assets*................ 4.75% 4.53% 5.09% 3.41% 2.75% 2.42%(c)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Audited by other auditors.
11
<PAGE> 15
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO
------------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995(a)
----------------------- ----------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD........... $ 9.43 $ 10.64 $ 9.71 $ 10.95 $ 8.92 $ 10.00
Investment Activities
Net investment income........... 0.49 0.48 0.52 0.49 0.54 0.43
Net realized and unrealized
gains (losses) from
investments................... 0.14 0.14 (0.29) (0.31) 0.79 0.94
------- ------- ------- ------- ------- -------
Total from Investment
Activities.................... 0.63 0.62 0.23 0.18 1.33 1.37
------- ------- ------- ------- ------- -------
Distributions
Net investment income........... (0.50) (0.49) (0.51) (0.49) (0.54) (0.42)
In excess of net investment
income........................ (0.08) (0.09) -0- -0- -0- -0-
------- ------- ------- ------- ------- -------
Total Distributions............. (0.58) (0.58) (0.51) (0.49) (0.54) (0.42)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD........................ $ 9.48 $ 10.68 $ 9.43 $ 10.64 $ 9.71 $ 10.95
======= ======= ======= ======= ======= =======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)...... 6.94% 6.07% 2.51% 1.72% 15.22% 13.96%(e)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period
(000)......................... $49,017 $ 1,309 $33,694 $ 1,296 $36,538 $ 1,263
Ratio of expenses to average net
assets........................ 1.14% 1.95% 1.11% 1.96% 1.09% 1.90%(c)
Ratio of net investment income
to average net assets......... 5.40% 4.56% 5.45% 4.59% 5.74% 4.80%(c)
Ratio of expenses to average net
assets*....................... 1.20% 1.95% 1.20% 1.96% 1.18% 1.90%(c)
Ratio of net investment income
to average net assets*........ 5.34% 4.56% 5.36% 4.59% 5.65% 4.80%(c)
Portfolio turnover.............. 71%(d) 71%(d) 53%(d) 53%(d) 75%(d) 75%(d)
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
12
<PAGE> 16
<TABLE>
<CAPTION>
AUGUST 9, 1990
YEARS ENDED DECEMBER 31, 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>
13
<PAGE> 17
THE RIVERFRONT INCOME EQUITY FUND
<TABLE>
<CAPTION>
JANUARY 17,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO
---------------------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995(a)
-------------------------- -------------------------- ------------ ------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.............................. $ 11.92 $ 12.16 $ 11.70 $ 11.85 $ 10.15 $10.00
Investment Activities
Net investment income................. 0.16 0.06 0.21 0.12 0.27 0.13
Net realized and unrealized gains from
investments......................... 3.11 3.17 2.12 2.21 2.89 2.78
------- ------- ------- ------- ------- ------
Total from Investment Activities...... 3.27 3.23 2.33 2.33 3.16 2.91
------- ------- ------- ------- ------- ------
Distributions
Net investment income................. (0.16) (0.06) (0.21) (0.12) (0.27) (0.13)
In excess of net investment income.... -0- -0- -0- -0- -0- -0-
Net realized gains.................... (3.35) (3.35) (1.90) (1.90) (1.34) (0.93)
In excess of net realized gains....... -0- -0- -0- -0- -0- -0-
------- ------- ------- ------- ------- ------
Total Distributions................... (3.51) (3.41) (2.11) (2.02) (1.61) (1.06)
------- ------- ------- ------- ------- ------
NET ASSET VALUE, END OF PERIOD........ $ 11.68 $ 11.98 $ 11.92 $ 12.16 $ 11.70 $11.85
======= ======= ======= ======= ======= ======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)............ 28.20% 27.19% 19.88% 19.67% 31.45% 29.28%(e)
ANNUALIZED RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (000)..... $83,841 $17,563 $73,368 $ 7,632 $60,845 $2,833
Ratio of expenses to average net
assets.............................. 1.75% 2.55% 1.76% 2.48% 1.49% 2.46%(c)
Ratio of net investment income to
average net assets.................. 1.21% 0.40% 1.62% 0.88% 2.27% 1.12%(c)
Ratio of expenses to average net
assets*............................. 1.80% 2.55% 1.85% 2.54% 1.74% 2.51%(c)
Ratio of net investment income to
average net assets*................. 1.16% 0.40% 1.53% 0.82% 2.02% 1.07%(c)
Portfolio turnover.................... 157%(d) 157%(d) 166%(d) 166%(d) 180%(d) 180%(d)
Average commission rate paid(g)....... $0.0544 $0.0544 $0.0541 $0.0541 -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operation.
(b) Investment operations and sales of shares to the public began on October 1,
1992.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(f) Audited by other auditors.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
Disclosure is not required for periods ending prior to September 1, 1996.
14
<PAGE> 18
<TABLE>
<CAPTION>
AUGUST 9,
YEARS ENDED DECEMBER 31, 1990 TO
------------------------------------------------- DECEMBER 31,
1994(F) 1993(F) 1992(B)(F) 1991(F) 1990(a)(f)
------- ------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C>
$ 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>
15
<PAGE> 19
THE RIVERFRONT STOCK APPRECIATION FUND
<TABLE>
<CAPTION>
FROM OCTOBER 1, FROM OCTOBER 1,
YEAR ENDED DECEMBER 31, 1995 THROUGH 1995 THROUGH
--------------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995(B) 1995(A)(B)
----------------------- ------------------------- --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 9.43 $ 9.77 $ 9.50 $ 9.91 $ 10.00 $ 10.00
Investment Activities
Net investment loss............. (0.04) (0.08) (0.14) (0.15) (0.01) (0.01)
Net realized and unrealized
gains (losses) from
investments.................... 1.75 1.77 1.10 1.04 (0.12) (0.08)
------- ------- ------- ------- ------- -------
Total from Investment
Activities..................... 1.71 1.69 .96 0.89 (0.13) (0.09)
------- ------- ------- ------- ------- -------
Distributions
Net investment income........... -0- -0- -0- -0- -0- -0-
Net realized gains.............. (1.97) (1.97) (1.03) (1.03) (0.37) -0-
Returns of capital.............. -0- -0- -0- -0- -0- -0-
------- ------- ------- ------- ------- -------
Total Distributions............. (1.97) (1.97) -0- (1.03) (0.37) -0-
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD......................... $ 9.17 $ 9.49 $ 9.43 $ 9.77 $ 9.50 $ 9.91
======= ======= ======= ======= ======= =======
TOTAL RETURN (EXCLUDING
SALES/REDEMPTION CHARGE)....... 18.79% 17.86% 10.17% 9.05% (1.20)%(c) (0.90)%(c)
ANNUALIZED RATIOS/
SUPPLEMENTAL DATA:
Net assets at end of period
(000s)......................... $24,312 $ 1,265 $31,227 $ 687 $40,995 $ 72
Ratio of expenses to average net
assets......................... 2.11% 2.86% 1.91% 2.64% 1.76% (d) 2.30% (d)
Ratio of net investment income
to average net assets.......... (0.43)% (1.20)% (1.25)% (2.01)% (0.49)%(d) (1.69)%(d)
Ratio of expenses to average net
assets*........................ (g) (g) (g) (g) 1.77% (d) 2.39% (d)
Ratio of net investment income
to average net assets*......... (g) (g) (g) (g) (0.50)%(d) (1.78)%(d)
Portfolio turnover.............. 67%(e) 67%(e) 162%(e) 162%(e) 46% (e) 46% (e)
Average commission rate
paid(h)........................ $0.0601 $0.0601 $0.0597 $0.0597 -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed. If
such voluntary fee reductions and/or expense reimbursements had not occurred,
the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the 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.
16
<PAGE> 20
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------
1995(F) 1994(F) 1993(F) 1992(F) 1991(F) 1990(F) 1989(F) 1988(F)
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55 $ 5.81
(0.07) (0.12) (0.17) (0.08) (0.11) (0.01) 0.11 0.02
2.14 (1.26) 2.57 1.41 3.17 (0.21) 0.31 (1.26)
------- ------- ------- ------- ------ ------ ------ ------
2.07 (1.38) 2.40 1.33 3.06 (0.22) 0.42 (1.24)
------- ------- ------- ------- ------ ------ ------ ------
-0- -0- -0- -0- -0- -0- (0.11) (0.01)
(0.32) (0.55) (0.20) (1.05) -0- -0- -0- -0-
-0- -0- -0- -0- -0- (0.01) -0- (0.01)
------- ------- ------- ------- ------ ------ ------ ------
(0.32) (0.55) (0.20) (1.05) -0- (0.01) (0.11) (0.02)
------- ------- ------- ------- ------ ------ ------ ------
$ 10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70 $ 4.64 $ 4.86 $ 4.55
======= ======= ======= ======= ====== ====== ====== ======
25.12% (13.91)% 30.61% 16.69% 66.04% (4.44)% 9.41% (21.29)%
$44,500 $47,880 $59,330 $28,750 $9,600 $4,310 $1,420 $1,990
2.61% 2.44% 2.47% 2.70% 2.89% 2.76% 3.07% 2.82%
(0.73)% (1.35)% (1.85)% (1.00)% (1.72)% (0.62)% 2.25% 0.43%
(g) (g) (g) (g) (g) (g) (g) (g)
(g) (g) (g) (g) (g) (g) (g) (g)
197% 254% 216% 288% 240% 185% 71% 207%
-- -- -- -- -- -- -- --
</TABLE>
- ---------------
(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.
Disclosure is not required for periods ending prior to September 1, 1996.
17
<PAGE> 21
THE RIVERFRONT BALANCED FUND
<TABLE>
<CAPTION>
YEAR JANUARY 17,
YEAR ENDED DECEMBER 31, ENDED 1995 TO FROM
--------------------------------------------------- DECEMBER 31, DECEMBER 31, SEPTEMBER 1,
1997 1996 1995 1995(A) 1994 THROUGH
----------------------- ------------------------- ---------- ---------- DECEMBER 31,
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B 1994(A)(F)
---------- ---------- ---------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................... $ 11.69 $ 12.04 $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------- ------- ------ ------ ------
Investment Activities
Net investment income.............. 0.23 0.12 0.31 0.26 0.35 0.25 0.10
Net realized and unrealized gains
(losses) from investments........ 1.71 1.77 0.33 0.34 1.66 1.79 (0.18)
------- ------- ------- ------- ------ ------ ------
Total from Investment Activities... 1.94 1.89 0.64 0.60 2.01 2.04 (0.08)
------- ------- ------- ------- ------ ------ ------
Distributions
Net investment income.............. (0.23) (0.12) (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains................. (1.10) (1.10) -- -- (0.10) (0.10) --
------- ------- ------- ------- ------ ------ ------
Total Distributions................ (1.33) (1.22) (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------- ------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD..... $ 12.30 $ 12.71 $ 11.69 $ 12.04 $11.36 $11.70 $ 9.79
======= ======= ======= ======= ====== ====== ======
TOTAL RETURN (EXCLUDES SALES/
REDEMPTION CHARGE)............... 16.77% 15.82% 5.76% 5.27% 20.83% 20.53%(c) (0.82)%(e)
ANNUALIZED RATIOS/ SUPPLEMENTARY
DATA:
Net Assets at end of period
(000)............................ $ 9,563 $11,483 $10,786 $10,008 $9,427 $5,030 $2,709
Ratio of expenses to average net
assets........................... 1.86% 2.72% 1.70% 2.54% 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment income to
average net assets............... 1.80% 0.93% 2.87% 2.03% 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to average net
assets*.......................... 2.07% 2.82% 1.94% 2.68% 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment income to
average net assets*.............. 1.59% 0.83% 2.63% 1.89% 3.09% 1.89%(d) 0.88%(d)
Portfolio Turnover................. 102%(b) 102%(b) 98%(b) 98%(b) 13%(b) 13%(b) 1%
Average commission rate paid(g).... $0.0627 $0.0627 $0.0891 $0.0891 -- -- --
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B shares from
January 17, 1995 to December 31, 1995.
(d) Annualized.
(e) Not annualized.
(f) Audited by other auditors.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of shares purchased and sold for which
commissions were charged and is calculated on the basis of the Fund as a
whole without distinguishing between the classes of shares issued.
Disclosure is not required for periods ending prior to September 1, 1996.
18
<PAGE> 22
THE RIVERFRONT LARGE COMPANY SELECT FUND
<TABLE>
<CAPTION>
FROM JANUARY 2, 1997
THROUGH DECEMBER 31,
1997 (A)
-------------------------
INVESTOR A INVESTOR B
---------- ----------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................ $ 10.00 $ 10.00
Investment Activities
Net investment income (loss)................................ -- (0.04)
Net realized and unrealized gains (losses) from
investments............................................... 2.77 2.72
------- -------
Total from Investment Activities............................ 2.77 2.68
------- -------
Distributions
Net realized gains.......................................... (1.40) (1.40)
Tax return of capital....................................... (0.03) --
------- -------
Total Distributions......................................... (1.43) (1.40)
------- -------
NET ASSET VALUE, END OF PERIOD.............................. $ 11.34 $ 11.28
======= =======
Total Return (excludes sales/redemption charge)............. 27.93%(b) 26.97%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000)........................... $33,614 $ 2,464
Ratios of expenses to average net assets.................... 1.69%(c) 2.47%(c)
Ratio of net investment income (loss) to average net
assets.................................................... 0.00%(c) (1.10)%(c)
Ratio of expenses to average net assets..................... (f) (f)
Ratio of net investment income to average net assets........ (f) (f)
Portfolio turnover rate (d)................................. 39% 39%
Average commission rate paid (e)............................ $0.0960 $0.0960
</TABLE>
- ---------------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for which
commissions were charged and is calculated on the basis of the portfolio as
a whole without distinguishing between the classes of shares issued.
(f) There were no waivers or reimbursements during the period.
19
<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
six series of shares of capital stock (individually a "Fund" and collectively
the "Funds"). Each Fund of the Company is 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
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
20
<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-
21
<PAGE> 25
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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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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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 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 condi-
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tions, 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."
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 ELIGI-
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BLE INVESTMENTS" for cash management purposes and up to 100% of the Large
Company Fund's assets may be invested in such Short-Term Securities for
defensive purposes, when, in Provident's opinion, market conditions warrant.
The Large Company Fund may also invest in securities issued by other
investment companies, as described more fully below, and is authorized to engage
in options and futures transactions, including the writing of covered put and
call options, the purchase of call and put options on individual stocks, equity
indices and equity index futures contracts, engage in equity index futures
contracts, enter into reverse repurchase agreements and when-issued, delayed
delivery and forward commitment transactions and lend securities to
broker-dealers and financial institutions. The Large Company Fund presently does
not intend to enter into options or futures transactions. For expanded
descriptions of these investment techniques, see below under "RISK FACTORS AND
INVESTMENT TECHNIQUES" section of this prospectus and the "INVESTMENT OBJECTIVES
AND POLICIES -- Additional Information on Portfolio Instruments" section in the
Company's Statement of Additional Information.
THE RIVERFRONT BALANCED FUND
INVESTMENT OBJECTIVES AND POLICIES
The Balanced Fund seeks, as its primary investment objective, long-term growth
of capital with some current income as a secondary objective. The Balanced Fund
intends to invest based on combined considerations of risk, income and capital
enhancement.
PRINCIPAL INVESTMENTS
Under normal market conditions, the Balanced Fund will invest in common
stocks, preferred stocks, fixed income securities and securities convertible
into common stocks (i.e., warrants, rights, convertible preferred stock, fixed
rate preferred stock and convertible fixed-income securities). Under normal
market conditions, the Balanced Fund expects that at least 25% of its total
assets will be invested in fixed income senior securities. The proportion of the
Balanced Fund's portfolio that is invested in equity securities versus fixed
income securities may vary greatly depending upon Provident's judgment of market
conditions.
The common and preferred stocks and securities convertible into common stocks
selected for the Balanced Fund will be those that Provident believes will
contribute to the Balanced Fund's objective of providing long-term growth of
capital. The Balanced Fund will invest in common and preferred stocks and
securities convertible into common stocks of domestic issuers and foreign
issuers (subject to the limitations described below), with market
capitalizations of not less than $50 million and which are traded either in
established over-the-counter markets or on national exchanges.
The Balanced Fund's fixed income securities consist of high grade corporate
debt securities rated at the time of purchase in one of the four highest rating
categories assigned by an appropriate NRSRO, or if unrated, are deemed by
Provident to be of comparable quality to those so rated, and securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities. Such
U.S. Government securities consist of U.S. 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 as-
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<PAGE> 32
signed by the NRSROs, see "RISK FACTORS AND INVESTMENT TECHNIQUES" below.
OTHER ELIGIBLE INVESTMENTS
The Balanced Fund may also invest up to 25% of its total assets in Short-Term
Securities for cash management purposes. However, when in Provident's opinion,
market conditions warrant, Provident may invest up to 100% of the Balanced
Fund's assets for temporary defensive purposes in such Short-Term Securities.
For more information regarding such securities, see "INVESTMENT OBJECTIVES AND
POLICIES -- Additional Information on Portfolio Instruments" in the Company's
Statement of Additional Information.
Subject to the limitations described below, the Balanced Fund may invest in
securities issued by other investment companies which Provident believes will
contribute to the Balanced Fund's investment objectives and in money market
mutual funds for cash management purposes.
The Balanced Fund may also invest up to 20% of its total assets in foreign
securities directly and through the purchase of sponsored and unsponsored ADRs.
RISK FACTORS AND INVESTMENT TECHNIQUES
The risk inherent in investing in the Income Fund, the Income Equity 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 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
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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.
Medium Grade Debt Securities. As described above, the Income Equity 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 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
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the 1940 Act. For further information about reverse repurchase agreements, see
"INVESTMENT OBJECTIVE AND POLICIES -- Additional Information on Portfolio
Instruments -- Reverse Repurchase Agreements" in the Company's Statement of
Additional Information.
Except as otherwise disclosed to the shareholders of the Funds, the Company
will not acquire portfolio securities issued by, make savings deposits in, or
enter into repurchase or reverse repurchase agreements with Provident, the
Distributor, or their affiliates, and will not give preference to Provident's
correspondents with respect to such transactions, securities, savings deposits,
repurchase agreements, and reverse repurchase agreements.
Foreign Securities. The Balanced Fund, the Income Equity Fund, the Large
Company Fund and the Stock Appreciation Fund may each invest in foreign
securities, either directly or through ADRs. Investment in foreign securities,
including ADRs, is subject to special risks, such as future adverse political
and economic developments, possible seizure, nationalization, or expropriation
of foreign investments, less stringent disclosure requirements, the possible
establishment of exchange controls or taxation at the source, or the adoption of
other foreign governmental restrictions. In addition, securities markets in
foreign countries may be structured differently from and may not be as liquid as
the U.S. markets. Where purchases of foreign securities are made in foreign
currencies, a Fund may incur currency conversion costs and may be affected
favorably or unfavorably by changes in the value of foreign currencies against
the U.S. dollar.
REITS. The Large Company Fund and the Stock Appreciation Fund may invest in
REITS. REITs pool investors' funds for investment primarily in commercial real
estate properties. Investment in REITs may subject a Fund to certain risks.
REITs may be affected by changes in the value of the underlying property owned
by the trusts. REITs are dependent upon specialized management skill, may not be
diversified and are subject to the risks of financing projects. REITs are also
subject to heavy cash flow dependency, defaults by borrowers, self liquidation
and the 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
eligible securities. This collateral will be valued daily by Provident or DRZ,
as the case may be. Should the market value of the loaned securities increase,
the borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest received on such securities. Loans are subject to termination by the
Fund or the borrower at any time. While a Fund does not have the right to vote
securities on loan, each Fund intends to terminate the loan and regain the right
to vote if that is considered important with respect to the investment. In the
event the borrower would default in its obligations, the Fund bears the
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risk of delay in recovery of the portfolio securities and the loss of rights in
the collateral. The Funds will enter into loan agreements only with
broker-dealers, banks, or other institutions that Provident or DRZ, as the case
may be, has determined are creditworthy under guidelines established by the
Company's Board of Directors.
When-Issued or Delayed-Delivery
Purchases. Each of the Funds, other than the Stock Appreciation Fund, may
purchase securities on a when-issued or delayed-delivery basis. These
transactions are arrangements in which a Fund purchases securities with payment
and delivery scheduled for a future time. A Fund will engage in when-issued and
delayed-delivery transactions only for the purpose of acquiring portfolio
securities consistent with and in furtherance of its investment objectives and
policies, not for investment leverage, although such transactions represent a
form of leveraging. When-issued securities are securities purchased for delivery
beyond the normal settlement date at a stated price and yield and thereby
involve a risk that the yield obtained in the transaction will be less than
those 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
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<PAGE> 36
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity. Provident will seek to manage these risks (and potential
benefits) by investing in a variety of such securities and through hedging
techniques.
Although the extent of prepayments on a pool of mortgage loans depends on
various economic and other factors, as a general rule prepayments on fixed rate
mortgage loans will increase during a period of declining interest rates.
Accordingly, amounts available for reinvestment by the Income Fund are likely to
be greater during a period of declining interest rates and, as a result, likely
to be reinvested at lower interest rates than during a period of rising interest
rates. Asset-backed securities, although less likely to experience the same
prepayment rates as mortgage-backed securities, may respond to certain of the
same factors influencing prepayments, while at other times different factors,
such as changes in credit use and payment patterns resulting from social, legal
and economic factors, will predominate. Mortgage-backed securities and
asset-backed securities generally decrease in value as a result of increases in
interest rates and may benefit less than other fixed income securities from
declining interest rates because of the risk of prepayment.
There are certain risks associated specifically with CMOs. CMOs issued by
private entities are not U.S. government securities and are not guaranteed by
any government agency, although the securities underlying a CMO may be subject
to a guarantee. Therefore, if the collateral securing the CMO, as well as any
third party credit support or guarantees, is insufficient to make payment, the
holder could sustain a loss. However, as stated above, the Income Fund will
invest only in CMOs which are rated in one of the three highest rating
categories by an NRSRO or, if unrated, are determined to be of comparable
quality. Also, a number of different factors, including the extent of prepayment
of principal of the Mortgage Assets, affect the availability of cash for
principal payments by the CMO issuer on any payment date and, accordingly,
affect the timing of principal payments on each CMO class.
Asset-backed securities involve certain risks that are not posed by
mortgage-backed 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
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<PAGE> 37
(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 underlying 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
each of the other Funds for the year ended December 31, 1997, see "FINANCIAL
HIGHLIGHTS" above. The portfolio turnover rate for a Fund may vary greatly from
year to year as
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<PAGE> 38
well as within a particular year, and may also be affected by cash requirements
for redemptions of shares. A high portfolio turnover will generally result in
higher brokerage commissions and other transaction costs, which would be borne
directly by the Fund, as well as additional realized gain/losses to its
shareholders.
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions and policies relating to the
investment of their respective assets. These restrictions and policies are
fundamental and may not be changed with respect to a Fund without the approval
of the holders of a majority of such Fund's outstanding voting securities.
Unless otherwise stated, all references to a Fund's assets are in terms of
current market value.
The Money Market Fund may not:
1. Purchase any security (other than obligations issued or guaranteed by the
U.S. government, its agencies or instrumentalities) of any issuer if as a result
more than 5% of its total assets would be invested in securities of the issuer;
2. Purchase securities on margin, except that it may obtain such short-term
credit as may be necessary for the clearance of purchases and sales of
securities;
3. Borrow money, except that the Money Market Fund may borrow money from banks
for temporary or emergency purposes in aggregate amounts up to one-third of the
value of the Money Market Fund's net assets; provided that while borrowings from
banks exceed 5% of the Money Market Fund's net assets, any such borrowings will
be repaid before additional investments are made;
4. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
5. Issue senior securities; the purchase or sale of securities on a "when
issued" basis is not deemed to be the issuance of a senior security;
6. Make loans, except that the Money Market Fund may purchase or hold debt
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
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<PAGE> 39
market value of the aggregate holdings of the Fund in the securities of
companies in such industry exceeds 25% of the Fund's total assets. However, an
industry concentration in excess of such percentage limitation is permitted if
it occurs incidentally as a result of changes in the market value of portfolio
securities;
3. Acquire the outstanding voting securities of any one issuer if, immediately
after and as a result of such investment, the current market value of the
holdings of the Fund in the securities of such issuer exceeds 10% of the market
value of such issuer's outstanding voting securities;
4. Borrow money, which includes entering into reverse repurchase agreements,
except that each Fund may enter into reverse repurchase agreements or borrow
money from banks for temporary or emergency purposes in aggregate amounts up to
one-third of the value of the Fund's net assets; provided that while borrowings
from banks exceed 5% of a Fund's net assets, any such borrowings and reverse
repurchase agreements will be repaid before additional investments are made;
5. Pledge more than 15% of its net assets to secure indebtedness; the purchase
or sale of securities on a "when issued" basis is not deemed to be a pledge of
assets;
6. Invest more than 15% of the value of the Fund's net assets in restricted or
illiquid securities or instruments including, but not limited to, securities for
which there are no readily available market quotations, dealer (OTC) options,
assets used to cover dealer options written by the Fund or repurchase agreements
that mature in more than 7 days; and
7. Lend more than 30% in value of the Fund's securities to brokers, dealers or
other financial organizations. All such loans will be collateralized by cash or
U.S. government obligations that are maintained at all times in an amount equal
to at least 102% of the current value of the loaned securities.
With respect to investment restrictions 1 and 3, the percentage limits stated
therein apply to 75% of each Fund's total assets.
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
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<PAGE> 40
banks or enter into reverse repurchase agreements for temporary purposes in
amounts up to one-third of its total assets at the time of such borrowing, and
except as permitted pursuant to appropriate exemptions from the 1940 Act. The
Fund will not purchase securities while its borrowings (including reverse
repurchase agreements) exceed 5% of its total assets.
4. Make loans, except that the Fund may purchase or hold debt instruments and
lend portfolio securities in accordance with its investment objective and
policies, make time deposits with financial institutions, and enter into
repurchase agreements.
The Balanced Fund may not:
1. Purchase securities of any one issuer, other than obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities, if,
immediately after such purchase, more than 5% of the value of the Balanced
Fund's total assets would be invested in such issuer, or the Balanced Fund would
hold more than 10% of any class of securities of the issuer, except that up to
25% of the value of the Balanced Fund's total assets may be invested without
regard to such limitations. There is no limit to the percentage of assets that
may be invested in U.S. Treasury bills, notes, or other obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities.
2. Purchase any securities which would cause more than 25% of the value of the
Balanced Fund's total assets at the time of purchase to be invested in
securities of one or more issuers conducting their principal business activities
in the same industry, provided that (a) there is no limitation with respect to
obligations issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured by obligations of the U.S.
Government or its agencies or instrumentalities; (b) wholly owned finance
companies will be considered to be in the industries of their parents if their
activities are primarily related to financing the activities of their parents;
and (c) utilities will be divided according to their services. For examples,
gas, gas transmission, electric and gas, electric, and telephone will each be
considered a separate industry.
3. Borrow money or issue senior securities, except that the Balanced Fund may
borrow from banks or enter into reverse repurchase agreements or dollar roll
agreements for temporary purposes in amounts up to one-third of the value of its
total assets at the time of such borrowing, and except as permitted pursuant to
appropriate exemptions from the 1940 Act.
4. Make loans, except that the Balanced Fund may purchase or hold debt
instruments 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.
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<PAGE> 41
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, Martin Luther King Jr.'s Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share for a particular class of each Fund is determined by
valuing each Fund's assets allocable to such class, subtracting its liabilities
allocable to such class and any liabilities charged directly to that class and
dividing the result by the number of its shares of that class outstanding.
The Directors have determined that the best method currently available for
valuing the Money Market Fund's investments is amortized cost, which means that
the investments are valued at their acquisition costs (as adjusted for
amortization of premium or discount) rather than at current market values.
Calculations are made to compare the value of the Money Market Fund's
investments valued at amortized cost with market values. Market valuations are
obtained by using actual quotations provided by market makers, estimates of
market value, or values obtained from yield data relating to classes of money
market instruments published by reputable sources at the mean between the bid
and asked prices for the instruments. If a deviation of 1/2 of 1% or more were
to occur between the Money Market Fund's net asset value per share calculated by
reference to market values and the Money Market Fund's $1.00 per share net asset
value, or if there were any other deviation which the Board of Directors
believed would result in a material dilution to shareholders or purchasers, the
Board of Directors would promptly consider what action, if any, should be
initiated.
Since the net income of the Money Market Fund is declared as a dividend each
time net income is determined, the net asset value per share remains at $1.00
per share immediately after each dividend declaration. If for any reason there
is a net loss, the loss will be first offset pro rata against dividends accrued
during the month in each shareholder account. To the extent that such a net loss
would exceed such accrued dividends, the Money Market Fund will reduce the
number of its outstanding shares by having each shareholder contribute to
capital his pro rata portion of the total number of shares required to be
cancelled in order to maintain a net asset value of $1.00. EACH SHAREHOLDER WILL
BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION IN THESE CIRCUMSTANCES BY HIS
INVESTMENT IN THE MONEY MARKET FUND.
With respect to each of the other Funds, portfolio securities, the principal
market for which is a securities exchange or the over-the-counter National
Market System ("NMS"), are valued at the closing sale price on that exchange or
NMS or, in the absence of any sales, at the mean of the bid and asked price on
such exchange or NMS. Other securities and instruments for which market
quotations are not readily available are valued at fair value, as determined in
good faith by the Board of 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
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<PAGE> 42
with respect to transactions in such securities, quotations from dealers, market
transactions in comparable securities and various relationships between
securities in determining value.
HOW TO BUY SHARES
Shares of the Funds are offered on each day on which the Exchange is open for
business.
THE MONEY MARKET FUND
There is no sales charge when an investor purchases shares of the Money Market
Fund. Purchase payments are fully invested. Broker-dealers (other than the
Distributor) through whom shares are purchased may charge fees for their
services. Orders for the purchase of the Money Market Fund's shares become
effective after good funds become available to the Money Market Fund. If a
purchase order in proper form is received prior to 12:00 Noon (Eastern time) and
payment in Federal funds is received by the close of the Federal funds wire on
the day the purchase order is received, dividends will accrue starting that day.
If a purchase order is received after 12:00 Noon (Eastern time) and payment in
Federal funds is received by the close of the Federal funds wire on the day the
purchase order is received, the order will be effected that day as of the close
of business of the Company, but dividends will not begin to accrue until the
following business day. The Money Market Fund's shares are sold at the offering
price which is the net asset value per share next computed after the Company
receives the purchase order. The net asset value for the 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
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<PAGE> 43
charge on a Premier Advantage checking account will be waived.
Shares may be purchased through the Distributor. The Distributor is located at
3435 Stelzer Road, Columbus, Ohio 43219. Shares also may be purchased through
other broker-dealers, including broker-dealers affiliated with the Company,
Provident and the Distributor. In the case of an order for the purchase of
shares placed through a broker-dealer, the applicable public offering price will
be the net asset value as so determined, plus any applicable sales charge, but
only if the broker-dealer receives the order prior to the Valuation Time for
that day and transmits it to the Distributor prior to the Valuation Time for
that day. The broker-dealer is responsible for transmitting such orders
promptly. If the broker-dealer fails to do so, the investor's right to that
day's closing price must be settled between the investor and the broker-dealer.
If the broker-dealer receives the order after the Valuation Time for that day,
the price will be based on the net asset value determined as of the Valuation
Time for the next business day.
Shares may also be purchased through procedures established by the Distributor
in connection with the requirements of qualified accounts maintained by or on
behalf of certain persons ("Customers") by Provident or its correspondent or
affiliated banks (collectively, the "Banks").
Shares of a Fund sold to the Banks acting in a fiduciary, advisory, custodial
(other than for IRAs), agency, or other similar capacity on behalf of Customers
will normally be held of record by the Banks. With respect to shares of the
Funds so sold, it is the responsibility of the particular Bank to transmit
purchase or redemption orders to the Distributor and to deliver Federal funds
for purchase on a timely basis. Beneficial ownership of shares will be recorded
by the Banks and reflected in the account statements provided by the Banks to
Customers. A Bank will exercise voting authority for those shares for which it
is granted authority by the Customer.
In addition, an account for the purchase of shares of a Fund may be opened by
mailing to the Company, c/o The Provident Bank, Mutual Fund Services, P.O. Box
14967, Cincinnati, Ohio 45250-0967, a completed account application and a check
made payable to the appropriate Fund for $1,000 or more. An account may also be
opened by contacting The Provident Bank, Mutual Fund Services, at
1-800-424-2295, to obtain the number of an account to which wire or electronic
funds transfer ("EFT") can be made and by sending in a completed account
application. Subsequent investments in a Fund in the minimum amount of $100 may
be made by check, by wiring Federal funds or by an EFT.
If payment is made by Federal funds wire with respect to any Fund, other than
the 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
num-
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<PAGE> 44
ber which Provident has assigned to the investor and wire the Federal Funds to:
The Provident Bank/Cincinnati
ABA: 042000424
Mutual Fund Services
Account 0895-261
for further credit to:
________ Fund
of The Riverfront Funds
Account Number ____________
Account Name ____________
The 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 of securities that are permissible investments for that Fund as
described in this Prospectus. For further information about this form of
payment, contact Provident. In connection with an in-kind securities payment, a
Fund will require, among other things, that the securities be valued on the day
of purchase in accordance with the pricing methods used by the Fund and that the
Fund receive satisfactory assurances that it will have good and marketable title
to the securities received by it; that the securities be in proper form for
transfer to the Fund; and that adequate information be provided concerning the
basis and other tax matters relating to the securities.
SALES CHARGES
INVESTOR A SHARES
There is a sales charge imposed at the time of purchase of each Fund's
Investor A shares (other than the Money Market Fund) which is a percentage of
the offering price. The sales charge is paid to the Distributor which in turn
may reallow all or a portion of the sales charge to other broker-dealers. The
applicable sales charges are as follows:
SALES CHARGE SCHEDULE
<TABLE>
<CAPTION>
CONCESSION
AS A % TO DEALERS
AS A % OF OF NET AS A % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED* PRICE
------------------ --------- --------- ----------
<S> <C> <C> <C>
Under $100,000......... 4.50% 4.71% 4.00%
$100,000--$249,999..... 3.50% 3.63% 3.00%
$250,000--$499,999..... 2.50% 2.56% 2.00%
$500,000--$999,999..... 1.50% 1.52% 1.00%
$1,000,000 and over.... 0.0% 0.0% 0.0%
</TABLE>
- ------------
* Rounded to the nearest one-hundredth percent.
The Sales Charge Schedule is applicable to (1) purchases of Investor A shares
of the Income, Income Equity, 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
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<PAGE> 45
incorporated or not, provided the organization has been in existence for at
least six months and has some purpose other than the purchase of redeemable
securities of a registered investment company at a discount. In order to qualify
for a lower sales charge, all orders from an organized group will have to be
placed through a single investment dealer or other firm and identified as
originating from a qualifying Purchaser.
INVESTOR B SHARES
Investor B shares may only be purchased in amounts of less than $250,000.
There is no sales charge imposed upon purchases of Investor B shares, but
investors may be subject to a contingent deferred sales charge ranging from 4%
to 1% when Investor B shares are redeemed within the first six years after
purchase. See "CONTINGENT DEFERRED SALES CHARGE -- Investor B Shares" below. The
Money Market Fund does not offer Investor B shares.
GENERAL
Upon written notice to dealers with whom it has dealer agreements, the
Distributor may reallow up to the full applicable sales charge. Dealers to whom
more than 90% of the entire sales charge is reallowed may be deemed to be
underwriters as that term is defined under the Securities Act of 1933.
The Distributor, at its expense, will also provide additional compensation to
dealers in connection with sales of Shares of any of the Funds. Such
compensation will include financial assistance to dealers in connection with
conferences, sales or training programs for their employees, seminars for the
public, advertising campaigns regarding one or more Funds of the 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 & Investment Company, an affiliate of Provident ("PSI"),
will pay additional consideration to dealers not to exceed 4.0% of the offering
price per share on all sales of Investor B shares as an expense of PSI for which
PSI will be reimbursed by the Distributor under the Investor B Plan 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:
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<PAGE> 46
CONCURRENT PURCHASES
For purposes of qualifying for a reduced sales charge, a Purchaser may combine
concurrent direct purchases of a Fund's Investor A shares sold with a sales load
and Investor A shares of any other Load Portfolio.
RIGHTS OF ACCUMULATION
In calculating the sales charge applicable to current purchases of a Fund's
Investor A shares, a Purchaser is entitled to accumulate current purchases with
the current value of previously purchased Investor A shares of a Load Portfolio
and which are still held by the Purchaser. As an example, if a Purchaser held
Investor A shares of the Income Fund valued at $100,000 in aggregate and
purchased an additional $5,000 of Investor A shares of the Income Fund, the
sales charge for the $5,000 purchase would be 3.50% as indicated in the Sales
Charge Schedule applicable to a $105,000 purchase. The Distributor must be
notified at the time of purchase that a Purchaser is entitled to a reduced sales
charge which will be granted subject to confirmation of the Purchaser's
holdings. Rights of Accumulation may be modified or discontinued at any time.
LETTER OF INTENT
A Purchaser may qualify for a reduced sales charge on a purchase of Investor A
shares of a Load Portfolio alone or in combination with purchases of Investor A
shares of any of the other Load Portfolios by completing the Letter of Intent
section of the application. By doing so, the Purchaser agrees to invest within a
thirteen-month period a specified amount which, if invested at one time, would
qualify for a reduced sales charge. Each purchase will be made at a public
offering price applicable to a single transaction in the dollar amount specified
on the application, as described herein, after receipt of the Letter of Intent
by the Distributor. The Letter of Intent does not obligate the Purchaser to
purchase, nor the Company to sell, the amount indicated.
The Letter of Intent may be back-dated up to ninety days so that any
investments made in any of the Load Portfolios during the preceding ninety day
period, valued at the Purchaser's cost, can be applied toward fulfillment of the
Letter of Intent. However, there will be no refund of sales charges already paid
during the ninety-day period. No retroactive adjustment will be made if
purchases exceed the amount specified in the Letter of Intent. Income and
capital gains distributions taken in additional shares will not apply toward
completion of the Letter of Intent.
Out of the initial purchase (or subsequent purchases, if necessary), 5% of the
dollar amount specified on the application will be held in escrow by Provident
in the form of Investor A shares registered in the Purchaser's name. The
escrowed Investor A shares will not be available for redemption, transfer or
encumbrance by the Purchaser until the Letter of Intent is completed or the
higher sales charge is paid. All income and capital gains distributions on
escrowed Investor A shares will be paid to the Purchaser.
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
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<PAGE> 47
difference in sales charge, Provident, as transfer agent (the "Transfer Agent"),
will redeem an appropriate number of the escrowed Investor A shares in order to
realize such difference. Investor A shares remaining after any such redemption
will be released by the Transfer Agent. Any redemptions made by the Purchaser
during the thirteen-month period will be subtracted from the amount of the
purchases for purposes of determining whether the Letter of Intent has been
completed. In the event of a total redemption of the account prior to completion
of the Letter of Intent, the additional sales charge due will be deducted from
the proceeds of the redemption and the balance will be forwarded to the
Purchaser.
By signing the application, the Purchaser irrevocably constitutes and appoints
the Transfer Agent its attorney to surrender for redemption any or all escrowed
shares with full power of substitution. The Purchaser or his dealer must inform
the Distributor or the Transfer Agent that a Letter of Intent is in effect each
time a purchase is made.
WAIVER OF SALES CHARGES
Investor A shares may also be sold, to the extent permitted by applicable law,
at net asset value without the imposition of an initial sales charge to: (1)
personal trust, employee benefit, agency and custodial (other than IRA) clients
of Provident; (2) employees, officers and directors of Provident, the
Distributor, and their spouses; (3) broker/ dealers purchasing shares for their
own accounts; (4) all affiliates of Provident, including American Financial
Group, Inc., and any officers, directors or employees thereof, and their
spouses; (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.
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<PAGE> 48
<TABLE>
<CAPTION>
YEAR OF REDEMPTION CONTINGENT DEFERRED
AFTER PURCHASE SALES CHARGE
------------------ -------------------
<S> <C>
First.......................... 4%
Second......................... 4%
Third.......................... 4%
Fourth......................... 3%
Fifth.......................... 2%
Sixth.......................... 1%
Seventh and following.......... 0%
</TABLE>
Solely for purposes of determining whether a year has elapsed from the time of
purchase of any Investor B shares, all purchases during a month will be
aggregated and deemed to have been made on the last day of the month. In
determining whether a contingent deferred sales charge is applicable to a
redemption, the calculation will be made in the manner that results in the
lowest possible charge being assessed. In this regard, it will be assumed that
the redemption is first of shares acquired pursuant to reinvestment of dividends
or distributions and then from the earliest purchase of shares.
For example, assume an investor purchased 100 Investor B shares with a net
asset value of $10 per share (i.e., at an aggregate net asset value of $1,000)
and in the eleventh month after purchase, the net asset value per share is $12
and, during such time, the investor has acquired five additional Investor B
shares through dividend reinvestment. If the investor makes an initial
redemption of 50 Investor B shares (producing proceeds of $600), five of such
shares will not be subject to the charge because of dividend reinvestment. With
respect to the remaining 45 Investor B shares being redeemed, the charge will be
applied only to the original cost of $10 per share and not to the increase in
net asset value of $2 per share. Therefore, $450 of the $600 redemption proceeds
will be subject to the charge of 4% ($18.00).
The contingent deferred sales charge is waived on redemptions of Investor B
shares (i) following the death or disability (as defined in the Code) of a
shareholder, (ii) to the extent that the redemption represents a minimum
required distribution from an IRA or a Custodial Account under Code Section
403(b)(7) to a shareholder who has
reached age 70 1/2, and (iii) to the extent the redemption represents the
minimum distribution from retirement plans under Code Section 401(a) where such
redemption is necessary to make distributions to plan participants.
FACTORS TO CONSIDER WHEN SELECTING INVESTOR A SHARES OR INVESTOR B SHARES
Before purchasing Investor A shares or Investor B shares of a Fund, investors
should consider whether, during the anticipated life of their investment in a
Fund, the accumulated Rule 12b-1 fee and potential contingent deferred sales
charges on Investor B shares prior to conversion (as described below) would be
less than the initial sales charge and accumulated Rule 12b-1 fee on Investor A
shares purchased at the same time, and to what extent such differential would be
offset by the higher yield of Investor A shares. In this regard, to the extent
that the sales charge for the Investor A shares is waived or reduced by one of
the methods described above or the investment is $100,000 or more, investments
in Investor A shares become more desirable. The Company will refuse all purchase
orders for Investor B shares of over $250,000.
Although Investor A shares are subject to a Rule 12b-1 fee, they are not
subject to the higher Rule 12b-1 fee applicable to Investor B shares. For this
reason, Investor A shares can be expected to pay correspondingly higher
dividends per share. However, because initial sales charges are deducted at the
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<PAGE> 49
time of purchase, purchasers of Investor A shares who do not qualify for waivers
of or reductions in the initial sales charge would have less of their purchase
price initially invested in the Fund than purchasers of Investor B shares.
As described above, purchasers of Investor B shares will have more of their
initial purchase price invested. Any positive investment return on this
additional invested amount would partially or wholly offset the expected higher
annual expenses borne by Investor B shares. Because a Fund's future returns
cannot be predicted, there can be no assurance that this will be the case.
Investors in Investor B shares would, however, own shares that are subject to
higher annual expenses and, for a six-year period, such shares would be subject
to a contingent deferred sales charge ranging from 4.00% to 1.00% upon
redemption. Investors expecting to redeem during this six-year period should
compare the cost of the contingent deferred sales charge plus the aggregate
annual Investor B shares' Rule 12b-1 fees to the cost of the initial sales
charge and Rule 12b-1 fee on the Investor A shares. Over time, the expense of
the annual Rule 12b-1 fee on the Investor B shares may equal or exceed the
initial sales charge and annual Rule 12b-1 fee applicable to Investor A shares.
For example, if net asset value remains constant and assuming no waiving of any
Rule 12b-1 fees, the aggregate Rule 12b-1 fee with respect to Investor B shares
of a Fund would equal or exceed the initial sales charge and aggregate Rule
12b-1 fee of Investor A shares approximately seven years after the purchase. In
order to reduce such fees of investors that hold Investor B shares for seven
years or more, Investor B shares will be automatically converted to Investor A
shares, as described below, at the end of an eight-year period. This example
assumes that the initial purchase of Investor A shares would be subject to the
maximum initial sales charge of 4.50%. This example does not take into account
the time value of money which reduces the impact of the Investor B shares' Rule
12b-1 fee on the investment, the benefit of having the additional initial
purchase price invested during the period before it is effectively paid out as a
Rule 12b-1 fee, fluctuations in net asset value, any waiver of Rule 12b-1 fees
or the effect of different performance assumptions.
If a shareholder who owns both Investor A shares and Investor B shares redeems
less than his or her entire investment, then shares will be redeemed in the
following order: (a) any Investor B shares that are not subject to a contingent
deferred sales charge; (b) Investor A shares; and (c) Investor B shares subject
to a contingent deferred sales charge, unless shareholder has made a specific
election otherwise.
CONVERSION FEATURE
Investor B shares which have been outstanding for eight years after the end of
the month in which the shares were initially purchased will automatically
convert to Investor A shares and, consequently, will no longer be subject to the
higher Rule 12b-1 fee. Such conversion will be on the basis of the relative net
asset values of the two classes, without the imposition of any sales charge or
other charge except that the Rule 12b-1 fee applicable to Investor A shares
shall thereafter be applied to such converted shares. Such investors will then
benefit from the lower Rule 12b-1 fee of Investor A shares. Because the per
share net asset value of the Investor A shares may be higher than that of the
Investor B shares at the time of conversion, a Shareholder may receive fewer
Investor A shares than the number of Investor B shares converted, although the
dollar
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<PAGE> 50
value will be the same. Reinvestments of dividends and distributions in Investor
B shares will not be considered a new purchase for purposes of the conversion
feature and will convert to Investor A shares in the same proportion as the
number of the shareholder's Investor B shares converting to Investor A shares
bears to the shareholder's total Investor B shares not acquired through
dividends and distributions.
If a shareholder effects one or more exchanges among Investor B shares of the
Funds during the eight-year period, the holding period for shares so exchanged
will be counted toward such period.
OTHER PURCHASE INFORMATION
SYSTEMATIC INVESTMENT PLAN
Shareholders may also arrange for systematic monthly or quarterly investments
in their accounts. Once proper authorization has been given, a shareholder's
bank account will be debited on the date specified to purchase shares in a Fund.
A confirmation will be received from the Transfer Agent for every transaction.
INDIVIDUAL RETIREMENT ACCOUNTS
Provident offers tax-advantaged Individual Retirement Accounts ("IRAs") for
which the Money Market Fund, the Income Fund, the 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 45250-0967.
Investment in shares of any 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 a tax
exempt fund would be appropriate.
EXCHANGES
If a shareholder has obtained the appropriate prospectus, he or she may
exchange Investor A or Investor B shares of a Fund for shares of the same class
of any of the other Funds on the basis of their respective net asset values by
calling toll free 1-800-424-2295 or by writing The Provident Bank, c/o Mutual
Fund Services, P.O. Box 14967, Cincinnati, Ohio 45250-0967. Subject to the
qualifications and limitations described below under "How to Redeem Shares --
Telephone," neither the 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
47
<PAGE> 51
shares were acquired (i.e., last in, first out). Effective July 1, 1998,
exchanges of Investor B shares of a Fund for shares of the Money Market Fund
will no longer be permitted.
Orders to exchange Investor A or Investor B shares of a Fund for shares of the
Money Market Fund will be executed by redeeming the shares of the Fund and
purchasing Investor A shares of the Money Market Fund at the net asset value of
such shares next determined after the proceeds from such redemption become
available, which may be up to seven days after such redemption. In all other
cases, orders for exchanges received by the Company prior to the close of
business on any day the Company is open for business will be executed at the
respective net asset values determined as of the close of business that day.
Orders for exchanges received after the close of business will be executed at
the respective net asset values next determined after the close of the next
business day.
An excessive number of exchanges may be disadvantageous to the Company.
Therefore the Company, in addition to its right to reject any exchange, reserves
the right to terminate the exchange privilege of any shareholder who makes more
than five exchanges of shares of the 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 45250-0967. A shareholder's signature(s) on the
written order must be guaranteed as described below. In order to redeem by
telephone, shareholders must have completed the authorization in their account
applications. Proceeds for shares redeemed on telephonic order will be deposited
by wire or EFT only to the bank account designated in the account application.
The redemption value is the net asset value per share, less any applicable
contingent deferred sales charge, and may be more or less than the shareholder's
cost of the Fund's shares depending upon changes in the value of the Fund's
securities between purchase and redemption. The 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
48
<PAGE> 52
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 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
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<PAGE> 53
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 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.
Investor B Shares -- If an account has a value of at least $10,000 in Investor
B shares of a Fund, a shareholder may arrange for regular monthly or quarterly
withdrawal payments. Each payment must be at least $100 and may be as much as
.833% per month or 2.5% per quarter of the total net asset value of the Fund's
Investor B shares in the account when the Automatic Withdrawal Plan is opened.
The contingent deferred sales charge on such withdrawal payments will be waived.
General -- Excessive withdrawals may decrease or deplete the value of an
account. Purchases of additional shares, including use of the Systematic
Investment Plan, concurrent with withdrawals may be disadvantageous to certain
shareholders because of tax liabilities and sales charges.
CHECKWRITING
If requested on your account application, the Money Market Fund will establish
a checking account for you with Provident. Checks may be drawn for $250 or more
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
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<PAGE> 54
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 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. The Stock Appreciation Fund intends to declare and
distribute to its shareholders dividends from net investment income, if any,
semi-annually. Each of the other Funds intends to declare and distribute to its
shareholders dividends from net investment income monthly. Each Fund intends to
declare and distribute all net realized mid-term and long-term capital gains. if
any, annually as capital gains dividends.
Each Fund's net investment income available for distribution to the holders of
Investor A shares and Investor B shares (if any) will be reduced by the amount
of Rule 12b-1 fees payable under the respective Plan and certain other class
specific expenses paid by the respective class.
Unless the 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
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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
Each of the Funds is treated as a separate entity for federal income tax
purposes and intends to qualify as a "regulated investment company" under the
Code for so long as such qualification is in the best interest of that Fund's
shareholders. Qualification as a regulated investment company under the Code
requires, among other things, that the regulated investment company distribute
to its shareholders at least 90% of its investment company taxable income and
90% of its interest income excludable from gross income under Section 103(a) of
the Code. Each Fund contemplates declaring as dividends all or substantially all
of such Fund's investment company taxable income and its exempt income (before
deduction of dividends paid).
A non-deductible 4% excise tax is imposed on regulated investment companies
that do not distribute in each calendar year (regardless of whether they
otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. If
distributions during a calendar year were less than the required amount, a Fund
would be subject to a nondeductible excise tax equal to 4% of the deficiency.
It is expected that each Fund will distribute annually to shareholders all or
substantially all of the Fund's net ordinary income and net recognized capital
gains, if any, and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal income
tax purposes, even if paid in additional shares of the Fund and not in cash. The
dividends-received deduction for corporations will apply to the aggregate of
such ordinary income distributions in the same proportion as the aggregate
dividends eligible for the dividends received deduction, if any, received by the
Fund bear to its gross income.
Distribution by a Fund of the excess of net mid-term or net long-term capital
gain over net short-term capital loss is taxable to shareholders as mid-term or
long-term capital gain, respectively, in the year in which it is received,
regardless of how long the shareholder has held the shares. Such distributions
are not eligible for the dividends-received deduction.
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
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date will have the effect of reducing the per share net asset value of the
shares by the amount of the dividends or distributions. All or a portion of such
dividends or distributions, although in effect a return of capital, is subject
to tax.
The foregoing is intended only as a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders. Potential
investors in a Fund are urged to consult their tax advisers concerning the
application of federal, state and local taxes as such laws and regulations
affect their own tax situations.
The Transfer Agent will inform shareholders at least annually of the amount
and nature of such income and capital gains.
MANAGEMENT AND EXPENSES
BOARD OF 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 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 Financial Group, Inc. ("PFG"), a bank
holding company located in Cincinnati, Ohio with approximately $7.1 billion in
consolidated assets as of December 31, 1997. Through offices in Ohio and
Kentucky, PFG and its subsidiaries provide a broad range of financial services
to individuals and businesses. Under the Investment Advisory Agreement with the
Company, for services rendered and expenses assumed as investment adviser,
Provident receives annually a fee (1) from the Money Market Fund equal to .15%
of the Money Market Fund's average net assets; (2) from the Income Fund equal to
.40% of the Income Fund's average net assets; (3) from the Income Equity Fund
equal to .95% of the Income Equity Fund's average net assets; (4) from the Stock
Appreciation Fund equal to .80% of the Stock Appreciation Fund's average net
assets; (5) from the Large Company Fund equal to .80% of the Large Company
Fund's average net assets; and (6) from the Balanced Fund equal to .90% of the
Balanced Fund's average net assets. Provident may periodically voluntarily
reduce all or a portion of its advisory fee with respect to a Fund to increase
the net income of that Fund available for distribution as dividends. The
voluntary fee reduction will cause the yield of that Fund to be 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 compa-
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nies, but Provident believes the fees to be fair and reasonable.
Provident uses a team approach and disciplined investment strategy in
providing investment advisory services to all its accounts, including the Funds.
As of November 15, 1996, Provident adopted a team approach with respect to each
of the Funds in order to take advantage of the experience of its entire
portfolio management team. Provident's investment staff consists of seven
individuals. All Funds are reviewed on a regular basis by Provident's Investment
Policy Committee to ensure they are invested in accordance with the Funds' and
Provident's investment policies.
Pursuant to the terms of its Investment Advisory Agreement with the 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 $2.3
billion. Pursuant to the terms of such Sub-Investment Advisory Agreement, DRZ
was retained by Provident to manage the day-to-day investment and reinvestment
of that portion of the assets of the Income Equity Fund allocated to DRZ by the
Company's Board of Directors. The remainder of the Income Equity Fund's assets
are managed on a day-to-day basis by Provident. The amount of the assets of the
Income Equity Fund to be allocated between DRZ and Provident from time to time
is subject to the discretion of the Company's Board of Directors. Currently
approximately $5.7 million of the Income Equity Fund's assets are managed
directly by Provident. The remainder of the Income Equity Fund's assets are
managed by DRZ up to approximately $75 million (exclusive of capital
appreciation or depreciation and reinvested dividends). Any assets in excess of
such $75 million limit would be managed directly by Provident. Both DRZ's and
Provident's day-to-day management of the Income Equity Fund's portfolio is
subject to the direction and control of the 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 will 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
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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 each Fund.
Under the Master Transfer and Recordkeeping Agreement, the Funds pay Provident
the following fees for such services. The Money Market Fund pays a minimum
annual fee of $24,000 for the first 500 shareholder accounts. For shareholder
accounts of the Money Market Fund in excess of 500, the Money Market Fund pays
an additional annual fee of $24 for each open shareholder account and $12 for
each closed shareholder account. The Stock Appreciation Fund pays a minimum
annual fee of $36,000 for the first 750 shareholder accounts. For shareholder
accounts of the Stock Appreciation Fund in excess of 750, the Stock Appreciation
Fund pays an additional annual fee of $18 for each open shareholder account and
$9 for each closed shareholder account. All other Funds pay a minimum annual fee
of $40,000 for the first 750 shareholder accounts and, for shareholder accounts
of that Fund in excess of 750, an additional annual fee of $20 for each open
shareholder account and $10 for each closed shareholder account.
CUSTODIAN AND FUND ACCOUNTANT
The Provident Bank (the "Custodian") also serves as custodian for and provides
certain fund accounting services to each of the Funds. Pursuant to the
Custodian, Fund Accounting and Recordkeeping Agreement with the 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; and .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.
ADMINISTRATOR AND DISTRIBUTOR
The Distributor, located at 3435 Stelzer Road, Columbus, Ohio 43219, is the
administrator for each Fund, and also acts as the Funds' principal underwriter
(the "Administrator" or the "Distributor," as the context indicates).
The Administrator generally assists in all aspects of a Fund's administration
and operation. For expenses assumed and services provided as administrator
pursuant to its administration agreement with the Company, the Administrator
receives a fee from each Fund, computed daily and paid periodically, at an
annual rate of 0.20% of such Fund's average daily net assets. The Administrator
may periodically voluntarily reduce all or a portion of its administration fee
with respect to a Fund to increase the net income of that Fund available for
distribution as dividends. The voluntary fee reduction will cause the yield of
the Fund to be higher than it would otherwise be in the absence of such a
reduction.
The Distributor acts as agent for the Funds in the distribution of their
shares and, in that capacity, solicits orders for the sale of shares,
advertises, and pays the cost of that advertising, office space and its
personnel involved in such activities. The Distributor receives no compensation
under its Distribution Agreement with the Company, but may retain some or all of
any sales charge imposed upon the shares and may receive compensation under the
Distribution Plans described below.
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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 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 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
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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.
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
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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 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
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Funds as well as in advising their other clients.
PERFORMANCE DATA AND ADVERTISING
From time to time the Money Market Fund may advertise "yield" and "effective
yield," and the other Funds may advertise "total return" and/or "current yield."
Such figures are based on historical earnings and are not intended to indicate
future performance. The yield of the Money Market Fund refers to the income
generated by the Money Market Fund over a seven-day period (which period will be
stated in the advertisement). This income is then annualized. That is, the
amount of income generated by the Money Market Fund during that week is assumed
to be generated each week over a 52-week period and is shown as a percentage.
The effective yield is calculated similarly but, when annualized, the income
earned from the Money Market Fund is assumed to be reinvested. The effective
yield will be slightly higher than the yield because of the compounding effect
of this assumed reinvestment. Average annual total return refers to a Fund's
average annual compounded rates of return over specified periods determined by
comparing the initial amount invested to the ending redeemable value of that
amount. The resulting equation assumes reinvestment of all dividends and
distributions and deduction of any sales charge and all recurring charges, if
any, applicable to all shareholder accounts. Performance of a Fund may also be
presented excluding the effect of a sales charge, if any.
Current yield quotations for the Funds, other than the Money Market Fund,
represent the yield on an investment for a stated 30-day period computed by
dividing net investment income earned per share during the base period by the
maximum offering price per share on the last day of the base period.
The Large Company Fund has been initially funded by the transfer of all of the
assets of two corresponding common trust funds managed by Provident (the
"CIFs"). Because the management of the Large Company Fund is substantially the
same as the CIFs, the quoted performance of such Fund includes the performance
of the CIFs for the periods prior to the effectiveness of the 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, 1997, 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
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gains or losses, although the Funds may also present a distribution rate
excluding the effect of capital gains. The distribution rate differs from the
yield, because it includes capital gains which are often non-recurring in
nature, whereas yield does not include such items. Distribution rates may also
be presented excluding the effect of a sales charge, if any.
Standardized yield and total return quotations will be computed separately for
Investor A and Investor B shares. Because of differences in the fees and/or
expenses borne by Investor A and Investor B shares of the Funds, the net yield
and total return on Investor A shares can be expected, at any given time, to
differ from the net yield and total return on Investor B shares for the same
period.
COMPANY SHARES
The Company presently offers six series of shares of capital stock, par value
$.001 per share (the "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 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.
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As of April 20, 1998, 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, Balanced and Large
Company Funds and therefore may be presumed to control each of these Funds
within the meaning of the 1940 Act.
ADDITIONAL INFORMATION
Except as otherwise stated in this prospectus or required by law, the 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
APRIL 30, 1998 U.S. GOVERNMENT
INCOME FUND
THE RIVERFRONT
INCOME EQUITY
FUND
THE RIVERFRONT
STOCK APPRECIATION
FUND
THE RIVERFRONT
LARGE COMPANY
SELECT 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> 68
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 BALANCED FUND
THE RIVERFRONT STOCK APPRECIATION FUND
THE RIVERFRONT LARGE COMPANY SELECT FUND
April 30, 1998
This Statement of Additional Information is not a prospectus but
relates to, and should be read in conjunction with, the prospectus (the
"Prospectus") of The Riverfront U.S. Government Securities Money Market Fund
(the "Money Market Fund"), The Riverfront U.S. Government Income Fund (the
"Income Fund"), The Riverfront Income Equity Fund (the "Income Equity 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 Stock Appreciation Fund, the Large
Company 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 six series or portfolios of The Riverfront Funds, Inc. (the
"Company"). 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.
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TABLE OF CONTENTS
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<TABLE>
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Page
<S> <C>
THE COMPANY AND ITS FUNDS....................................................................................B - 1
INVESTMENT OBJECTIVES AND POLICIES...........................................................................B - 2
DIVIDENDS AND TAXES..........................................................................................B - 16
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................................................B - 20
VALUATION OF SECURITIES......................................................................................B - 20
DIRECTORS AND OFFICERS.......................................................................................B - 23
MANAGEMENT OF THE FUNDS......................................................................................B - 24
SECURITIES TRANSACTIONS......................................................................................B - 30
ADMINISTRATOR................................................................................................B - 34
DISTRIBUTOR..................................................................................................B - 36
DISTRIBUTION PLANS...........................................................................................B - 37
CAPITAL STOCK................................................................................................B - 39
STANDARDIZED TOTAL RETURN AND YIELD QUOTATIONS...............................................................B - 40
ADDITIONAL INFORMATION.......................................................................................B - 45
FINANCIAL STATEMENTS.........................................................................................B - 48
APPENDIX ....................................................................................................A - 1
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THE COMPANY AND ITS FUNDS
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The Riverfront Funds, Inc. (the "Company") is an open-end management
investment company, commonly known as a mutual fund, which currently issues six
series of shares of capital stock which are described in this Statement of
Additional Information (the "Funds"). Each Fund of the Company is diversified.
The Company was incorporated in Maryland on March 27, 1990. The
Provident Bank ("Provident") serves as investment adviser, either directly or
through a sub-adviser, to each Fund, and BISYS Fund Services Limited Partnership
(the "Distributor") serves as Administrator and Distributor. Provident also
serves as custodian and transfer agent for each of the Funds, and provides
certain fund accounting and record keeping services for the Company. DePrince,
Race & Zollo, Inc. ("DRZ") serves as the sub-adviser to the Income Equity Fund.
As of September 30, 1995, pursuant to an Agreement and Plan of
Reorganization and Liquidation with MIM Mutual Funds, Inc. ("MIM"), the Company
acquired all of the assets and liabilities of MIM as follows: (a) the Money
Market Fund acquired all of the assets and liabilities of the MIM Money Market
Fund; (b) the Income Equity Fund acquired all of the assets and liabilities of
the MIM Bond Income Fund, the MIM Stock Income Fund and the AFA Equity Income
Fund; and (c) the 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 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 of the Stock
Appreciation Fund included in this Statement of Additional Information prior to
September 30, 1995, relates to the operations of the MIM Stock Appreciation Fund
prior to the Reorganization.
The essential information about the Company and its Funds is contained
in the Prospectus. This Statement of Additional Information provides additional
information about the Company and each of the Funds that may be of interest to
investors.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of the Funds.
Capitalized terms not defined herein are
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defined in the Prospectus. No investment in shares of a Fund should be made
without first reading such Fund's Prospectus.
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INVESTMENT OBJECTIVES AND POLICIES
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THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
The Riverfront U.S. Government Securities Money Market Fund (the "Money
Market Fund") seeks current income from U.S. Government short-term securities
while preserving capital and maintaining liquidity.
The Money Market Fund is designed for investors who wish to keep
temporary cash balances in a fund invested in short-term securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
The Riverfront U.S. Government Income Fund (the "Income Fund") seeks a
high level of current income, consistent with preservation of capital, by
investing primarily in securities issued or guaranteed by the U.S. Government,
its agencies and instrumentalities and in high quality fixed rate and adjustable
rate mortgage-backed securities and other asset-backed securities. The Income
Fund intends to invest in securities with dollar-weighted average durations of
between three and seven years. The dollar-weighted average life of the Income
Fund's securities is expected to be in the range of four to ten years.
The Income Fund is designed for investors seeking to provide for
near-term income needs by investing in a fund which seeks to provide higher
returns than those offered by certificates of deposits or U.S. Government money
market funds.
THE RIVERFRONT INCOME EQUITY FUND
The Riverfront Income Equity Fund (the "Income Equity Fund") seeks a
high level of investment income, with capital appreciation as a secondary
objective, through investment primarily in income-producing equity securities of
U.S. issuers. To provide investment advisory services to the Income Equity Fund,
Provident has entered into a sub-investment advisory agreement with DRZ.
The Income Equity Fund is designed for investors seeking to invest for
retirement, educational and other long-term needs.
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THE RIVERFRONT STOCK APPRECIATION FUND
The Riverfront Stock Appreciation Fund (the "Stock Appreciation Fund")
seeks capital growth.
The Stock Appreciation Fund is designed for investors seeking growth of
capital.
THE RIVERFRONT LARGE COMPANY SELECT FUND
The Riverfront Large Company Select Fund (the "Large Company Fund")
seeks long-term growth of capital with current income as a secondary objective.
The Large Company Fund is designed for investors seeking long-term
growth of capital with some current income.
THE RIVERFRONT BALANCED FUND
The Riverfront Balanced Fund (the "Balanced Fund") seeks long-term
growth of capital with some current income as a secondary objective.
The Balanced Fund is designed for investors seeking to invest in a fund
which generates long-term growth of capital with some current income.
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 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
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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 Balanced 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 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 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 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
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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 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.
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 liquid
securities equal to the amount of the commitment in a separate account.
Normally, the Fund's custodian will set aside portfolio securities to satisfy
the purchase commitment, and in such a case, the Fund may be required
subsequently to place additional assets in the separate account in order to
assure that the value of the account remains equal to the amount of the Fund's
commitment. It may be expected that the Fund's net assets will fluctuate to a
greater degree when it sets aside portfolio securities to cover such purchase
commitments than when it sets aside cash. In addition, because a Fund will set
aside cash or high quality liquid debt securities to satisfy its purchase
commitments in the manner described above, such Fund's liquidity and the ability
of Provident or DRZ, as the case may be, to manage it might be affected in the
event its commitments to purchase "when-issued" securities ever exceeded 25% of
its total assets. Under normal market conditions, however, a Fund's commitment
to purchase "when-issued" or "delayed-delivery" securities will not exceed 25%
of its total assets.
When a Fund engages in "when-issued" transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may cause the
Fund to incur a loss or miss an opportunity to obtain a price considered to be
advantageous. Such Funds will engage in "when-issued" delivery transactions only
for the purpose of acquiring portfolio securities consistent with the Funds'
investment objectives and policies and not for investment leverage.
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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 Prospectus, each of
the Funds, other than the Money Market Fund, may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with that
Fund's investment restrictions. Pursuant to such agreements, a Fund would sell
portfolio securities to financial institutions such as banks and broker-dealers
and agree to repurchase the securities at a mutually agreed-upon date and price.
Each Fund intends to enter into reverse repurchase agreements only to avoid
otherwise selling securities during unfavorable market conditions to meet
redemptions. At the time a Fund enters into a reverse repurchase agreement, it
will place in a segregated custodial account assets such as U.S. Government
securities or other liquid securities consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently continually monitor the account to ensure that
such equivalent value is maintained at all times. Reverse repurchase agreements
involve the risk that the market value of the securities sold by a
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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 the same time they
tend to limit any potential gain which might result from an increase in the
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.
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WRITING COVERED CALL AND PUT OPTIONS. Each of the Income, Income
Equity, Stock Appreciation, Large Company and Balanced Funds may write covered
call and covered put options on securities or on futures contracts regarding
securities, in which the particular Fund may invest, in an effort to realize
additional income. A put option gives the purchaser the right to sell the
underlying security at the stated exercise price at any time prior to the
expiration date of the option, regardless of the market price of the security. A
call option gives the purchaser of the option the right to buy, and a writer the
obligation to sell, the underlying security at the stated exercise price at any
time prior to the expiration of the option, regardless of the market price of
the security. The premium paid to the writer is consideration for undertaking
the obligations under the option contract. Put and call options purchased by a
Fund will be valued at the last sale price, or in the absence of such a price,
at the mean between the bid and asked price. Such options will be listed on
national securities or futures exchanges or will be available in the
over-the-counter market through pricing reports of broker-dealers. A Fund may
write covered call options as a means of seeking to enhance its income through
the receipt of premiums in instances in which the adviser determines that the
underlying securities or futures contracts are not likely to increase in value
above the exercise price. A Fund also may seek to earn additional income through
the receipt of premiums by writing put options. Covered call options give the
purchaser the right, for a stated period, to buy the underlying securities from
a Fund at a stated price, while put options give the purchaser the right, for a
stated period, to sell the underlying securities to a Fund at a stated price. By
writing a call option, a Fund limits its opportunity to profit from any increase
in the market value of the underlying security above the exercise price of the
option; by writing a put option, a Fund assumes the risk that it may be required
to purchase the underlying security at a price in excess of its then current
market value.
When a Fund writes an option, an amount equal to the net premium (the
premium less the commission) received by the Fund is included in the liability
section of the Fund's statement of assets and liabilities as a deferred credit.
The amount of the deferred credit will be subsequently marked-to-market to
reflect the current value of the option written. The current value of the traded
option is the last sale price or, in the absence of a sale, the mean between the
closing bid and asked prices. If an option expires on the stipulated expiration
date or if the Fund enters 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.
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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.
OPTIONS AND FUTURES STRATEGIES. In addition, each of the Income, Income
Equity, 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
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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 option is "in-the-money" (i.e., where the value of
the underlying instrument exceeds, in the case of a call option, or is less
than, in the case of a put option, the exercise price of the option) at the time
the option is exercised. Frequently, rather than taking or making delivery of
the underlying instrument through the process of exercising the option, listed
options are closed by entering into offsetting purchase or sale transactions
that do not result in ownership of the new option. A Fund's ability to close out
its position as a purchaser or seller of a put or call option is dependent in
part, upon the liquidity of the option market. In addition, the hours of trading
for listed options may not coincide with the hours during which the underlying
financial instruments are traded. To the extent that the option markets close
before the markets for the underlying financial instruments, significant price
and rate movements can take place in the underlying markets that cannot be
reflected in the option markets.
All options written by a Fund must be "covered" (e.g., the Fund must
own the securities or futures contract subject to a call option or must meet the
asset segregation requirements) as long as the option is outstanding. Even
though a Fund will receive the option premium to help protect it against loss, a
call option written by a Fund exposes the Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require the Fund to hold a security or
instrument which it might otherwise have sold. With respect to put options
written by a Fund, such Fund will place liquid securities in a segregated
account to cover its obligations under such put option and will monitor the
value of the assets in such account and its obligations under the put option
daily.
FUTURES CONTRACTS. Each of the Income, Income Equity, 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
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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 securities included in a particular equity index. No payment is
made for the index or securities when the Fund buys an equity index futures
contract and neither the index nor any securities are delivered when the Fund
sells an equity index futures contract. Instead, the Fund makes a deposit of
"initial margin" equal to a percentage of the value of the futures contract.
Payment or delivery is made upon the closing out of the futures position or the
expiration of the equity index futures contract. Equity index futures contracts
will be used only as a hedge against anticipated changes in the level of stock
prices.
The Income Fund may purchase or sell futures contracts based upon fixed
income securities, commonly referred to as "interest rate futures contracts." An
interest rate futures contract is an agreement by the Fund to buy or sell, by a
specified date and at a specified price, the market value of fixed income
securities included in a particular fixed income index. As with the futures
contracts, no payment is made for securities when the Fund buys an interest rate
futures contract and no securities are delivered when the Fund sells an interest
rate futures contract; instead, the Fund makes an initial margin deposit and
payment or delivery is made upon the closing out of the futures position or the
expiration of the interest rate futures contract. Interest rate futures
contracts will be used only as a hedge against anticipated changes in the level
of interest rates.
In general, the value of futures contracts sold by a Fund to offset
declines in its portfolio securities will not exceed the total market value of
the portfolio securities to be hedged, and futures contracts purchased by the
Fund will be covered by a segregated account consisting of cash or liquid
securities in an amount equal to the total market value of such futures
contracts, less the initial margin deposited therefor.
When selling futures contracts short, when buying futures contracts and
when writing put options, a Fund will be required to segregate in a separate
account cash and/or liquid securities in an amount sufficient to meets its
obligations. When writing call options, a Fund will be required to own the
financial instrument or futures contract underlying the option or segregate cash
and/or liquid securities in an amount sufficient to meet its obligations under
written calls.
B - 12
<PAGE> 81
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, through the purchase of such contracts, can
attempt to secure better rates or prices for the Fund than might later be
available in the market when it effects anticipated purchases.
The acquisition of put and call options on futures contracts will,
respectively, give a Fund the right (but not the obligation), for a specified
price, to sell or to purchase the underlying futures contract, upon exercise of
the option, at any time during the option period.
Futures transactions involve brokerage costs and require a Fund to
segregate liquid assets, such as cash, U.S. Government securities or other
liquid securities, to cover its performance under such contracts. A Fund may
lose the expected benefit of futures transactions if interest rates or
securities prices move in an unanticipated manner. Such unanticipated changes
may also result in poorer overall performance than if the Fund had not entered
into any futures transactions. In addition, the value of a Fund's futures
positions may not prove to be perfectly or even highly correlated with the value
of its portfolio securities, limiting the Fund's ability to hedge effectively
against interest rate and/or market risk and giving rise to additional risks.
There is no assurance of liquidity in the secondary market for purposes of
closing out futures positions.
REGULATORY RESTRICTIONS. To the extent required to comply with
Securities and Exchange Commission Release No. IC-10666, when purchasing a
futures contract or writing a put option, a Fund will maintain in a segregated
account cash or liquid securities equal to the value of such contracts.
To the extent required to comply with Commodity Futures Trading
Commission Regulation 4.5 and thereby avoid being classified as a "commodity
pool operator," a Fund will not enter into a futures contract or purchase an
option thereon if immediately thereafter the initial margin deposits for futures
contracts held by such Fund plus premiums paid by it for open options on futures
would exceed 5% of the liquidation value of such Fund's total assets after
taking into account unrealized profits and unrealized losses on any contracts
entered into. Such Fund will not engage in transactions in futures contracts or
options thereon for speculation, but only to attempt to hedge against
B - 13
<PAGE> 82
changes in market conditions affecting the values of securities which such Fund
holds or intends to purchase.
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 Prospectus,
the Money Market Fund may not:
1. Invest more than 5% of its total assets in securities of any company
having a record, together with its predecessors, of less than three years of
continuous operation;
2. Make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or of securities which, without payment of any further consideration,
are convertible into or exchangeable for securities of the same issue as, and
equal in amount to, the securities sold short; and
3. Underwrite securities of other issuers, except that the Money Market
Fund may purchase securities from the issuer or others and dispose of such
securities in a manner consistent with its investment objective.
Each of the Income Fund and the Income Equity Fund may not:
1. Invest in securities of an issuer (other than an agency or
instrumentality of the U.S. Government) which, together with any predecessor of
the issuer, has been in operation for less than three years if, immediately
after and as a result of such investment, more than 5% of the value of the
Fund's total assets would then be invested in the securities of such issuer; and
2. Invest more than 10% of the value of the Fund's net assets in fixed
time deposits which are non-negotiable and/or which impose a penalty for early
withdrawal and which have maturities of more than 7 days.
Finally, each of the 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;
B - 14
<PAGE> 83
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,
the Stock Appreciation Fund, the Large Company fund and the Balanced Fund have
adopted the following additional restrictions, which may be changed by the Board
of Directors without the vote of that Fund's shareholders:
1. Engage in any short sales, except to the extent disclosed
in the current Prospectus of the Fund;
2. 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);
3. Purchase securities of other investment companies, except (a) in
connection with a merger, consolidation, acquisition or reorganization, and (b)
to the extent permitted by the 1940 Act or pursuant to any exemptions therefrom;
and
4. Mortgage or hypothecate the Fund's assets in excess of one third of
the Fund's total assets.
If a percentage limit is satisfied at the time of investment or
borrowing, a later increase or decrease resulting from a change in asset value
is not a violation of the limit.
PORTFOLIO TURNOVER
The portfolio turnover rate for each of the Funds is calculated by
dividing the lesser of a Fund's purchases or sales of portfolio securities for
the year by the monthly average value of the portfolio securities. The
calculation excludes all securities whose remaining maturities at the time of
acquisition were one year or less.
Because the Money Market Fund invests entirely in securities with
maturities of less than one year and because the Commission requires such
securities to be excluded from the calculation of
B - 15
<PAGE> 84
portfolio turnover rate, the portfolio turnover rate with respect to the Money
Market Fund is expected to be zero percent for regulatory purposes.
The portfolio turnover rates for each of the Funds (other than the
Money Market Fund) for the two fiscal years ended December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
FUND 12/31/97 12/31/96
---- -------- --------
<S> <C> <C>
Income Fund 71% 53%
Income Equity Fund 157% 166%
Balanced Fund 102% 98%
Stock Appreciation 67%(1) 162%
Fund
Large Company Fund 39%(2) N/A
<FN>
- --------------------
(1) The portfolio turnover rate for the Stock Appreciation Fund decreased
materially for the fiscal year ended December 31, 1997 as a result of a
change in strategy of the management of such Fund.
(2) The Large Company Fund commenced operations January 2, 1997.
</TABLE>
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 or substantially all of any net realized
mid-term or 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 state-
B - 16
<PAGE> 85
ments 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.
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 "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; 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 mid-term or
net long-term capital gain for the taxable year over the net short-term capital
loss, if any, for such year.
A non-deductible 4% excise tax is imposed on regulated investment
companies that do not distribute in each calendar year (regardless of whether
they otherwise have a non-calendar taxable year) an amount equal to 98% of their
ordinary income for the calendar year plus 98% of their capital gain net income
for the one-year period ending on October 31 of such calendar year. The balance
of such income must be distributed during the next calendar year. Dividends
declared in October, November and December in any year and distributed in
January of the following year will be treated as having been paid in the prior
year. If distributions during a calendar year were less than the required
amount, a Fund would be subject to a non-deductible excise tax equal to 4% of
the deficiency.
Although each such Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located, or in
B - 17
<PAGE> 86
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.
It is expected that each Fund will distribute annually to shareholders
all or substantially all of the Fund's net ordinary income and net realized
capital gains and that such distributed net ordinary income and distributed net
realized capital gains will be taxable income to shareholders for federal income
tax purposes, even if paid in additional shares of the Fund and not in cash.
Distribution by a Fund of the excess of net mid-term or net long-term
capital gain over net short-term capital loss is taxable to shareholders as
mid-term or long-term capital gain, respectively, in the year in which it is
received, regardless of how long the shareholder has held the shares. Such
distributions are not eligible for the dividends-received deduction.
Federal taxable income of individuals is subject to graduated tax rates
of 15%, 28%, 31%, 36% and 39.6%. Further, the marginal tax rate may be in excess
of 39.6%, because adjustments reduce or eliminate the benefit of the personal
exemption and itemized deductions for individuals with gross income in excess of
certain threshold amounts.
Long-term capital gains of individuals are subject to a maximum tax
rate of 20% (10% for individuals in the 15% ordinary income tax bracket).
Mid-term capital gains of individuals are subject to tax at the same rates
applicable to ordinary income; however, the tax rate on mid-term capital gains
of individuals cannot exceed 28%. Capital losses may be used to offset capital
gains. In addition, individuals may deduct up to $3,000 of net capital loss each
year to offset ordinary income. Excess net capital loss may be carried forward
to future years. The holding period for mid-term capital gains is more than one
year, but not more than eighteen months; the holding period for long-term
capital gains is more than eighteen months.
Federal taxable income of corporations in excess of $75,000 up to $10
million is subject to a 34% tax rate; however, because the benefit of lower tax
rates on a corporation's taxable income of less than $75,000 is phased out for
corporations with income in excess of $100,000 but lower than $335,000, a
maximum marginal tax rate of 39% may result. Federal taxable income of
corporations in excess of $10 million is subject to a tax rate of 35%. Further,
B - 18
<PAGE> 87
a corporation's federal taxable income in excess of $15 million is subject to an
additional tax equal to 3% of taxable income over $15 million, but not more than
$100,000.
Capital gains of corporations are subject to tax at the same rates
applicable to ordinary income. Capital losses may be used only to offset capital
gains and excess net capital loss may be carried back three years and forward
five years.
Certain corporations are entitled to a 70% dividends received deduction
for distributions from certain domestic corporations. Each Fund will designate
the portion of any distributions which qualify for the 70% dividends received
deduction. The amount so designated may not exceed the amount received by the
Fund for its taxable year that qualifies for the dividends received deduction.
Because all of the Money Market Fund's and Income Fund's net investment income
is expected to be derived from earned interest, it is anticipated that no
distributions from those Funds will qualify for the 70% dividends received
deduction.
Foreign taxes may be imposed on a Fund by foreign countries with
respect to its income from foreign securities, if any. Since less than 50% of
the value of any Fund's total assets at the end of its fiscal year is expected
to be invested in stock or securities of foreign corporations, a Fund will not
be entitled under the Code to pass through to its shareholders their pro rata
share of the foreign taxes paid by the Fund, if any. These taxes will be taken
as a deduction by such Fund.
Each Fund may be required by federal law to withhold and remit to the
U.S. Treasury 31% of taxable dividends, if any, and capital gain distributions
to any shareholder, and the proceeds of redemption or the values of any
exchanges of shares of the Fund, if such shareholder (1) fails to furnish the
Fund with a correct taxpayer identification number, (2) under-reports dividend
or interest income, or (3) fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her Social Security number.
Information set forth in the Prospectus and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of shares of a Fund. No attempt has been made to present a detailed explanation
of the federal income tax treatment of a Fund or its shareholders and this
discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of shares of a Fund are urged to consult their
tax advisers with specific reference to their own tax situation. In addition,
the tax discussion in the Prospectus and this Statement of Additional
Information is based on tax laws and regulations which are in effect on the date
of the Prospectus and this Statement of Additional Information; such laws and
regulations
B - 19
<PAGE> 88
may be changed by legislative or administrative action. As of the date hereof,
several proposals have been introduced by the 105th Congress which, if enacted,
could affect much of the information contained in this section. However, it is
not possible at this time to assess which, if any, of such proposals will be
acted upon and the effect thereof, if any, on this information.
Information as to the federal income tax status of all distributions
will be mailed annually to each shareholder.
FISCAL YEAR
Each Fund's fiscal year ends December 31.
- -------------------------------------------------------------------------------
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.
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.
B - 20
<PAGE> 89
- -------------------------------------------------------------------------------
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 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.
It is the normal practice of the Money Market Fund to hold securities
to maturity and realize par therefor, unless a sale or
B - 21
<PAGE> 90
other disposition is mandated by redemption requirements or other extraordinary
circumstances. Under the amortized cost method of valuation traditionally
employed by institutions for valuation of money market instruments, neither the
amount of daily income nor the net asset value is affected by any unrealized
appreciation or depreciation of the Money Market Fund. In periods of declining
interest rates, the indicated daily yield on shares of the Money Market Fund,
computed by dividing its annualized daily income by the net asset value computed
as above, may tend to be lower than similar computations made by utilizing a
method of valuation based upon market prices and estimates. In periods of rising
interest rates, the daily yield of shares at the value computed as described
above may tend to be higher than a similar computation made by utilizing a
method of calculation based upon market prices and estimates.
Since the net income of the Money Market Fund is declared as a dividend
each time net income is determined, the net asset value per share remains at
$1.00 per share immediately after each dividend declaration. The Money Market
Fund expects to have net income at the time of each dividend determination made
at the close of the Exchange. If for any reason there is a net loss which would
result in the Money Market Fund's not being able to price its shares at $1.00
per share, the Money Market Fund will first offset such amount pro rata against
dividends accrued during the month in each shareholder account. To the extent
that such a net loss would exceed such accrued dividends, the Money Market Fund
will reduce the number of its outstanding shares by having each shareholder
contribute to the Money Market Fund's capital his pro rata portion of the total
number of shares required to be cancelled in order to maintain a net asset value
of $1.00. EACH SHAREHOLDER WILL BE DEEMED TO HAVE AGREED TO SUCH A CONTRIBUTION
IN THESE CIRCUMSTANCES BY HIS INVESTMENT IN THE MONEY MARKET FUND.
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND, THE RIVERFRONT INCOME
EQUITY FUND, THE RIVERFRONT 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;
B - 22
<PAGE> 91
(3) Short-term instruments which are purchased with maturities of sixty
days or less are valued at amortized cost (original purchase cost as adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; short-term instruments maturing in more
than sixty days when purchased which are held on the sixtieth day prior to
maturity are valued at amortized cost (market value on the sixtieth day adjusted
for amortization of premium or accretion of discount) which, when combined with
accrued interest, approximates market; and which in either case reflects fair
value as determined by the Board of Directors;
(4) Short-term money market instruments having maturities of more than
sixty days for which market quotations are readily available are valued at
current market value; where market quotations are not available, such
instruments are valued at fair value as determined by the Board of Directors;
and
(5) The following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Directors: (a) securities,
including restricted securities, for which complete quotations are not readily
available, (b) listed securities or those on NMS if, in the Company's opinion,
the last sales price does not reflect a current market value or if no sale
occurred, and (c) other assets.
- -------------------------------------------------------------------------------
DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
The Directors and officers of the Company are:
J. VIRGIL EARLY, Age 60, Director; Principal in J. Virgil
Early & Associates (business consulting); former Executive Vice President of
Huntington Bankshares, Inc. Mr. Early's business address is J. Virgil Early &
Associates, 11 Bliss Lane, Jekyll Island, Georgia 31527.
*WALTER B. GRIMM, Age 52, Director and President; employee of
BISYS Fund Services Limited Partnership since June, 1992.
WILLIAM M. HIGGINS, Age 54, Director; Senior Vice President
and Director of Sena Weller Rohs Williams Inc. (investment advisory services);
former President and Director of Reynolds DeWitt Advisers, Inc. and former Vice
President of Reynolds DeWitt Securities Co. Mr. Higgins' business address is
Sena Weller Rohs Williams, Inc., 300 Main Street, 4th Fl., Cincinnati, OH 45202.
B - 23
<PAGE> 92
*HARVEY M. SALKIN, PH.D., Age 52, Director; Professor, Case
Western Reserve University; former President and major shareholder
of Mathematical Investing Systems, Inc. Dr. Salkin's business
address is Case Western Reserve University, Department of
Operations Research, 10900 Euclid Avenue, Cleveland, Ohio 44106-
7235.
DONALD C. SIEKMANN, Age 59, Director; retired; former partner
of Arthur Andersen (independent public accountants). Mr. Siekmann's
business address is 425 Walnut Street, Cincinnati, Ohio 45243.
CHARLES L. BOOTH, Age 38, Vice President, employee of BISYS Fund
Services Limited Partnership since April, 1988.
THOMAS E. LINE, Age 29, Treasurer; employee of BISYS Fund Services
Limited Partnership since January, 1997; prior to January, 1997, Senior Audit
Manager for KPMG Peat Marwick LLP (independent public accountants).
C. DAVID BUNSTINE, Age 31, Secretary; employee of BISYS Fund
Services Limited Partnership since December, 1987.
ALAINA V. METZ, Age 31, Assistant Secretary; employee of BISYS Fund
Services Limited Partnership since June, 1995; prior to June, 1995, supervisor
at Alliance Capital Management, L.P. (investment management firm).
*These 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, 1997, 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, 1997. The Company has no pension or retirement
plans.
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation
Aggregate from the Company
Name and Position Compensation from and the Fund
With the Company the Company Complex*
---------------- ----------- --------
<S> <C> <C>
J. Virgil Early, $7,000 $7,000
Director
William M. Higgins, 7,000 7,000
Director
</TABLE>
B - 24
<PAGE> 93
<TABLE>
<S> <C> <C>
Harvey M. Salkin, 7,000 7,000
Director
Donald C. Siekmann, -0- -0-
Director (1)
Stephen G. Mintos, -0- -0-
Director (2)
</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.
(1) Mr. Siekmann did not become a Director of the Company until
February 27, 1998.
(2) Mr. Mintos served as a Director of the Company until January 30, 1998,
when Mr. Grimm was elected to fill such position.
- --------------------------------------------------------------------------------
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 to the Investment Advisory Agreement dated as of August
1, 1994, as amended as of January 1, 1997 (the "Investment Advisory Agreement").
Provident's services as investment adviser are provided through its
Capital Management Group. Provident's Trust and Financial Services Group
currently manages assets of approximately $800 million. The 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, as
of December 31, 1997, provided commercial lending, lease financing, consumer
credit, credit card, discount brokering, data processing, personal loan
financing and trust and asset management services through over 70 branch offices
located in Ohio and Kentucky. Provident is a subsidiary of Provident Financial
Group, Inc., a bank holding company headquartered in Cincinnati, Ohio, with
approximately $7.1 billion in total consolidated assets as of December 31, 1997.
Through its Ohio and Kentucky banking
B - 25
<PAGE> 94
subsidiaries, Provident Financial Group, Inc. provides a wide range
of banking services to individuals and businesses.
Provident's Capital Management Group employs an experienced staff of
professional investment analysts, portfolio managers and traders and uses
several proprietary computer-based systems in conjunction with fundamental
analysis to identify investment opportunities.
Under the Investment Advisory Agreement, Provident has agreed to
provide, either directly or through one or more sub-advisers, investment
advisory services for each of the 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; eighty
one-hundredths of one percent (.80%) for each of the Stock Appreciation Fund and
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 Investment Advisory Agreement, for the fiscal years ended
December 31, 1997, 1996 and 1995, the Funds incurred the following investment
advisory fees:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND 12/31/97 12/31/96 12/31/95
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $ 242,900 $ 259,214 $ 221,912
Income 200,909 143,483 144,461
Income Equity 898,800 688,484 407,229
Stock Appreciation 214,758 294,183 83,982(1)
Balanced 185,950 183,256 76,231
Large Company 251,705(2) N/A N/A
<FN>
- --------------------
(1) Commenced operations on September 30, 1995.
(2) Commenced operations on January 2, 1997.
</TABLE>
B - 26
<PAGE> 95
For the fiscal years ended December 31, 1997, 1996, and 1995, Provident
waived investment advisory fees or reimbursed the Funds for certain expenses in
the following amounts:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
Fund 12/31/97 12/31/96 12/31/95
---- -------- -------- --------
<S> <C> <C> <C>
Money Market -- -- --
Income -- -- $548
Income Equity -- $36,661 73,635
Stock Appreciation -- -- 900
Balanced $20,662 28,720 69,745
Large Company -- N/A(1) N/A(1)
<FN>
- --------------------
(1) Commenced operations on January 2, 1997.
</TABLE>
The Directors of Provident are Allen L. Davis, Jack M. Cook,
Thomas D. Grote, Jr., Philip R. Myers, Joseph A. Pedoto, Sidney A.
Peerless, M.D., Edwin Riley and Joseph A. Steger.
The principal executive officers of Provident are Allen L.
Davis, President and Chief Executive Officer; Philip R. Myers, Senior Executive
Vice President; Robert L. Hoverson, Executive Vice President; John R.
Farrenkopf, Senior Vice President and Chief Financial Officer; and Mark E.
Magee, Senior Vice President, General Counsel and Secretary.
Unless sooner terminated, the Investment Advisory Agreement and the
Sub-Investment Advisory Agreement (as described below) continue in effect as to
a particular Fund for successive one-year periods ending December 31 of each
year if such continuance is approved at least annually by the 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 sub-adviser, on 60 days' prior
written notice from such sub-adviser. Such Agreements also terminate
automatically in the event of any assignment, as defined in the 1940 Act.
B - 27
<PAGE> 96
The Investment Advisory Agreement and the Sub-Investment Advisory
Agreement provide that the respective investment adviser or sub-investment
adviser shall not be liable for any error of judgment or mistake of law or for
any loss suffered by the 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.
SUB-ADVISER
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 (exclusive of capital appreciation and
depreciation and reinvestment of dividends), 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
B - 28
<PAGE> 97
provide mutual funds and other institutional investors with investment
management services. Prior to April 1995, Messrs. DePrince, Race and Zollo were
officers and directors of SunBank Capital Management, N.A., 200 South Orange
Avenue, Orlando, Florida 32801 ("SunBank"), and now serve as the directors and
officers of DRZ.
From August 1, 1994, to August 14, 1995, SunBank served as the
sub-investment adviser to the Income Equity Fund pursuant to a Sub-Investment
Advisory Agreement dated August 1, 1994 (the "SunBank Sub-Advisory Agreement").
Pursuant to the SunBank Sub-Advisory 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.
Pursuant to the terms of the SunBank Sub-Advisory Agreement, for the
period from January 1, 1995, to August 14, 1995, Provident paid $51,630 and
$92,579, respectively, to SunBank in sub-investment advisory fees. For the
fiscal years ended December 31, 1997 and 1996 and for the period from August 15,
1995 to December 31, 1995, Provident paid $470,539, $298,193 and $77,303,
respectively, to DRZ in sub-investment advisory fees.
From August 1, 1994 to December 31, 1996, James Investment Research,
Inc., 1349 Fairground Road, Beavercreek, Ohio 45385 ("JIR"), served as the
sub-investment adviser to the Balanced Fund pursuant to a Sub-Investment
Advisory Agreement dated August 1, 1994 (the "JIR Sub-Advisory Agreement"). For
its services provided and expenses assumed pursuant to the JIR Sub-Advisory
Agreement with Provident, JIR received from Provident a fee, computed daily and
paid monthly, at the annual rate of fifty one-hundredths of one percent (.50%)
of the Balanced Fund's average daily net assets. Pursuant to the terms of the
JIR Sub-Advisory Agreement, for the fiscal years ended December 31, 1996 and
1995, Provident paid JIR a total of $77,267 and $25,332, respectively, in
sub-investment advisory fees.
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 the 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; and .15% for each of the Income
Equity Fund, the Balanced Fund, the Large Company Fund and the Stock
Appreciation
B - 29
<PAGE> 98
Fund. As custodian, Provident is responsible for safeguarding all
securities and cash of the Funds.
The following table sets forth the fees incurred by the Funds for the
custody and fund accounting services provided by Provident for the fiscal years
ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Fiscal Year Ended
December 31,
---------------------
FUND 1997 1996 1995
---- ---- ---- ----
<S> <C> <C> <C>
Money Market $81,531 $86,401 $73,973
Income 55,655 35,870 36,115
Income Equity 144,048 108,638 72,596
Balanced 33,160 30,516 12,666
Stock Appreciation 42,139 55,160 15,578(1)
Large Company 49,119(2) N/A N/A
<FN>
- --------------------------
(1) Commenced operations September 30, 1995.
(2) Commenced operations January 2, 1997.
</TABLE>
Under the Master Transfer and Recordkeeping Agreement dated February
24, 1992, as amended as of March 23, 1997, the Funds pay Provident the following
fees for transfer agency services. The Money Market Fund pays a minimum annual
fee of $24,000 for the first 500 shareholder accounts. For shareholder accounts
of the Money Market Fund in excess of 500, the Money Market Fund pays an
additional annual fee of $24 for each open shareholder account and $12 for each
closed shareholder account. The Stock Appreciation Fund pays a minimum annual
fee of $36,000 for the first 750 shareholder accounts. For shareholder accounts
in excess of 750, the Stock Appreciation Fund pays an additional annual fee of
$18 for each open shareholder account and $9 for each closed shareholder
account. All other Funds pay a minimum annual fee of $40,000 for the first 750
shareholder accounts and, for shareholder accounts in excess of 750, an
additional annual fee of $20 for each open shareholder account and $10 for each
closed shareholder account.
The following table sets forth the total amount of fees incurred by the
Funds with respect to transfer agency and recordkeeping services for the fiscal
years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND 12/31/97 12/31/96 12/31/95
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $33,896 $79,137 $59,257
Income 50,879 38,891 37,402
</TABLE>
B - 30
<PAGE> 99
<TABLE>
<S> <C> <C> <C>
Income Equity 96,037 58,165 42,860
Balanced 61,796 44,600 22,857
Stock Appreciation 118,492 38,988 9,834(1)
Large Company 41,424(2) N/A N/A
<FN>
- -----------------------------
(1) Commenced operations September 30, 1995.
(2) Commenced operations January 2, 1997.
</TABLE>
- -------------------------------------------------------------------------------
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 the price paid or received and any
commissions and other costs paid, the breadth of the market where executed, the
efficiency with which the transaction is effected, the ability to effect the
transaction at all where a large block is involved, the availability of the
broker to stand ready to execute potentially difficult transactions in the
future and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Board of 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 broker-dealers who provide such
brokerage and research services a commission for executing each such Fund's
transactions which is in excess of the amount of commission another broker would
have charged for effecting that transaction if, but only if, the adviser
determines in good faith that such commission was reasonable in relation to the
value of the brokerage and research services provided by such broker viewed in
terms of that particular transaction or in terms of all of the accounts over
which it exercises investment discretion. Any such research and other
statistical and factual information provided by brokers to a 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
B - 31
<PAGE> 100
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.
From time to time DRZ may direct brokerage transactions for the Income
Equity Fund to brokerage firms in return for research services from such firms.
Such research services include performance measurement services, databases
containing financial and other information on companies, news retrieval systems,
stock quote systems, and computer software programs that measure performance,
identify companies on the basis of certain selection criteria, and allocate
trades. For the fiscal year ended December 31, 1997, DRZ directed such
transactions to the following brokers in the following amounts and paid the
following brokerage commissions:
<TABLE>
<CAPTION>
AMOUNT OF BROKERAGE
BROKER TRANSACTION COMMISSIONS
<S> <C> <C>
Alpha Management $ 63,453 $ 1,300
Bear Stearns 1,384,457 1,740
Cantor Fitzgerald 1,484,117 2,385
First Boston Co. 17,739,821 23,356
Merrill Lynch Co. 3,584,547 5,665
Paine Webber Co. 7,752,097 13,128
Robertson, Stephens 11,638,800 18,523
Company
Standard & Poors Co. 762,219 875
----------- -------
TOTAL $44,409,511 $66,972
=========== =======
</TABLE>
In addition, DRZ, on behalf of the Income Equity Fund, in the past has
directed brokerage transactions to certain brokerage firms, including First
Boston Corporation, which participate in a "step-out" program. In such program,
the brokerage firm initiates the trade for the Fund and then steps away from a
portion of that trade and its related commission. Another broker then steps in
to complete the "stepped-out" trade, receives the commission and then refunds a
portion of such commissions to the Income Equity Fund. To date, Provident
Securities & Investment Company, an affiliate of Provident, has been the broker
which has stepped in to complete such trades. For the fiscal year ended December
31, 1997, the total amount of brokerage transactions so directed by DRZ was
$63,479,843, and the total amount of brokerage commissions paid on such
transactions was $97,422.
On behalf of the Stock Appreciation Fund, Provident from time to time
directs brokerage transactions to Autranet (a subsidiary of Donaldson, Lufkin &
Jenrette)
B - 32
<PAGE> 101
in return for fundamental and technical research on equity securities. For the
fiscal year ended December 31, 1997, Provident directed brokerage transactions
to Autranet in the aggregate amount of $2,074,409 and paid in connection
therewith, on behalf of the Stock Appreciation Fund, $3,264 in brokerage
commissions for those transactions.
The Money Market Fund and the Income Fund expect that purchases and
sales of income securities usually will be principal transactions. Income
securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually will be no
brokerage commissions paid by such Fund for such purchases. Purchases from
underwriters will include the underwriting commission or concession, and
purchases from dealers serving as market makers will include a dealer's mark up
or reflect a dealer's mark down. Where transactions are made in the
over-the-counter market, the Fund will deal with primary market makers unless
more favorable prices are otherwise obtainable.
The Income Fund may seek to maximize the rate of return on its
portfolio by engaging in short-term trading consistent with its investment
objective. Trading will occur primarily in anticipation of or in response to
market developments or to take advantage of a market decline (a rise in interest
rates) or to purchase in anticipation of a market rise (a decline in interest
rates) and later sell. In addition, a security may be sold and another purchased
at approximately the same time to take advantage of what Provident believes to
be a temporary disparity in the normal yield relationship between the two
securities. Yield disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement of interest
rates, due to such things as changes in the overall demand for, or supply of,
various types of U.S. government securities and other eligible securities or
changes in the investment objectives of investors. This policy of short-term
trading may result in a higher portfolio turnover and increased expenses.
The Income Equity Fund, the Stock Appreciation Fund, the Large Company
Fund and the Balanced Fund expect that purchases and sales of equity securities
usually will be effected through brokerage transactions for which commissions
will be payable. Purchases from underwriters will include the underwriting
commission or concession, and purchases from dealers serving as market makers
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.
B - 33
<PAGE> 102
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.
The following table sets forth brokerage commissions paid by the Funds
for the past three fiscal years:
<TABLE>
<CAPTION>
For the Year Ended(1)
FUND 12/31/97 12/31/96 12/31/95
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $ -0- $ -0- $ -0-
Income -0- -0- -0-
Income Equity 405,332(2) 304,979(3) 269,007(4)
Balanced 31,075 27,535 15,465
Stock Appreciation 55,999 218,171 446,816(5)
Large Company (6) 49,791 N/A N/A
<FN>
- --------------------
(1) Unless otherwise indicated, no brokerage commissions were paid to an
affiliated broker-dealer.
(2) Of this amount, $92,057 was paid to Provident Securities & Investment
Company, an affiliate of Provident ("PSI"). Such amount does not
reflect any commissions refunded to such Fund as described above. Such
commissions paid to PSI constituted approximately 22.7% of all
brokerage commissions paid by such Fund during the past fiscal year.
Approximately 22.2% of the aggregate dollar amount of brokerage
transactions, as a percentage of such Fund's total brokerage
transactions, were effected through PSI.
(3) Of this amount, $76,751 was paid to PSI.
(4) Of this amount, $67,723 was paid to PSI.
(5) Includes the fiscal year ended September 30, 1995 and the fiscal period
of October 1, 1995, through December 30, 1995.
The amount of brokerage commissions paid by the Stock Appreciation
Fund has decreased substantially from previous fiscal years as a result of such
Fund's decreased portfolio turnover due to a change in the strategy for managing
such Fund.
</TABLE>
B - 34
<PAGE> 103
(5) Commenced operations January 2, 1997.
During the fiscal year ended December 31, 1997, each of the Funds,
other than the Stock Appreciation Fund, held securities of the Company's regular
brokers or dealers, as defined in Rule 10b-1 under the 1940 Act, or their parent
companies, including those of Morgan Stanley Dean Witter Discover & Co., Lehman
Brothers Holdings, Inc., Travelers Insurance, Merrill Lynch & Co., Inc., A.G.
Edwards and Prudential Funding Corp. At December 31, 1997, the Money Market Fund
held approximately $5,500,000 of Merrill Lynch discount notes, a $15,000,000
repurchase agreement with Merrill Lynch, a $16,408,000 repurchase agreement with
Dean Witter and approximately $6,000,000 of Morgan Stanley, Dean Witter Discover
& Co. discount notes. As of such date, the Income Fund held approximately
$335,000 of Discover Card Trust bonds, the Income Equity Fund held approximately
$785,000 of A.G. Edwards common stock, the Large Company Fund held approximately
$485,000 of Travelers Common Stock and the Balanced Fund held approximately
$165,000 of Merrill Lynch & Co., Inc. bonds.
- -------------------------------------------------------------------------------
ADMINISTRATOR
- -------------------------------------------------------------------------------
BISYS Fund Services Limited Partnership 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 Agreement and Sub-Investment Advisory Agreement, as
applicable, and by Provident under the Custodian, Fund Accounting and
Recordkeeping Agreement and under the Master Transfer and Recordkeeping
Agreement). The Administrator is a broker-dealer registered with the Commission,
and is a member of the National Association of Securities Dealers, Inc. The
Administrator provides financial services to institutional clients.
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
SemiAnnual 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
B - 35
<PAGE> 104
per share (calculated using available market quotations or an appropriate
substitute that reflects current market conditions) from the Money Market Fund's
amortized cost price per share; and generally assist in all aspects of the
Company's operations other than those performed by Provident 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, 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, 1999. The Administration
Agreement thereafter shall be renewed automatically for successive two-year
terms, unless written notice not to renew is given by the non-renewing party to
the other party at least 60 days prior to the expiration of the then-current
term. The Administration Agreement is terminable with respect to a particular
Fund only upon mutual agreement of the parties to the Administration Agreement
and for cause (as defined in the Administration Agreement) by the party alleging
cause, on no less than 60 days' written notice by the 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.
The following table sets forth the fees paid by the Funds for
administrative services for the past three fiscal years:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
FUND 12/31/97 12/31/96 12/31/95
---- -------- -------- --------
<S> <C> <C> <C>
Money Market $323,868 $345,611 $296,255
Income 100,455 71,742 72,231
Income Equity 189,223 144,850 96,796
Stock Appreciation 53,690 73,546 20,771(1)
Balanced 41,323 40,688 16,888
</TABLE>
B - 36
<PAGE> 105
<TABLE>
<S> <C> <C> <C>
Large Company 62,927(2) N/A N/A
<FN>
- --------------------
(1) Commenced operations October 1, 1995.
(2) Commenced operations January 2, 1997.
</TABLE>
- -------------------------------------------------------------------------------
DISTRIBUTOR
- -------------------------------------------------------------------------------
The Distributor serves as distributor to the Company and each of the
Funds pursuant to a Distribution Agreement dated February 1, 1994, as amended as
of 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 years ended December 31, 1997, 1996 and 1995,
commissions paid to the Distributor under the Distribution Agreement with
respect to the sale of shares of the Company, after discounts to dealers, were
$279,254, $675,842 and $314,870, respectively. For the fiscal year ended
December 31, 1997, $386 were reallowed by the Distributor to PSI.
- -------------------------------------------------------------------------------
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 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
B - 37
<PAGE> 106
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 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.
B - 38
<PAGE> 107
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.
For the fiscal year ended December 31, 1997, the following amounts were
payable by the Funds 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 $404,830 $242,899 N/A(1)
Income Fund 122,072 29,297 $13,985 $0
Income Equity Fund 202,966 41,154 134,238 0
Stock Appreciation Fund 64,711 0 9,604 0
Balanced Fund 24,764 10,678 107,557 0
Large Company Fund(2) 76,802 0 7,423 0
<FN>
- -----------------------------
(1) The Money Market Fund does not offer Investor B shares and therefore
does not make payments under the Investor B Plan.
(2) Commenced operations January 2, 1997.
</TABLE>
B - 39
<PAGE> 108
- -------------------------------------------------------------------------------
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 issued and outstanding six 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 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 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.
The average annual total returns of each of the Investor A Shares of
the Funds are as follows:
Investor A Shares
B - 40
<PAGE> 109
<TABLE>
<CAPTION>
WITH FRONT-END SALES LOADS*
--------------------------
One Year Five Years Ten Years Inception
Ended Ended Ended to
FUND 12/31/97 12/31/97 12/31/97 12/31/97(1)
---- -------- -------- -------- -----------
<S> <C> <C> <C> <C>
Money Market 5.02% 4.42% N/A 4.36%
Income 2.17% 4.31% N/A 3.86%
Income Equity 22.48% 17.41% N/A 18.44%
Stock 13.50% 9.60% 13.48% 10.33%
Appreciation(2)
Balanced 11.53% N/A N/A 10.93%
</TABLE>
<TABLE>
<CAPTION>
Investor A Shares
WITHOUT FRONT-END SALES LOADS*
-----------------------------
One Year Five Years Ten Years Inception
Ended Ended Ended to
FUND 12/31/97 12/31/97 12/31/97 12/31/97(1)
---- -------- -------- -------- -----------
<S> <C> <C> <C> <C>
Money Market 5.02% 4.42% N/A 4.36%
Income 6.94% 5.28% N/A 4.77%
Income Equity 28.20% 18.48% N/A 19.48%
Stock 18.79% 10.61% 14.01% 10.82%
Appreciation(2)
Balanced 16.77% N/A N/A 12.47%
<FN>
- -------------------------
* Investor A Shares of the Money Market Fund are not subject to a
front-end sales load.
(1) Dates of Inception: Money Market and Income Funds -- 10/1/92; Income
Equity Fund -- 10/8/92; Stock Appreciation Fund -- 7/23/87; and the
Balanced Fund -- 9/1/94.
(2) The performance for the Stock Appreciation Fund includes the
performance of the MIM Stock Appreciation Fund, the Stock Appreciation
Fund's predecessor.
</TABLE>
The average annual total returns of each of the Investor B Shares of
the Funds are as follows:
<TABLE>
<CAPTION>
Investor B Shares
(with Contingent Deferred Sales Load)
FUND ONE YEAR ENDED 12/31/97 INCEPTION TO 12/31/97(3)(4)
---- ----------------------- ---------------------------
<S> <C> <C>
Income 2.07% 4.07%
Income Equity 23.23% 18.78%
Stock Appreciation 13.97% 10.66%
Balanced 11.82% 11.25%
</TABLE>
<TABLE>
<CAPTION>
Investor B Shares
(without Contingent Deferred Sales Load)
Fund One Year Ended 12/31/97 Inception to 12/31/97(3)(4)
- ---- ----------------------- ---------------------------
<S> <C> <C>
Income 6.07% 4.23%
Income Equity 27.17% 16.87%
Stock Appreciation 17.86% 10.66%
Balanced 15.82% 11.95%
</TABLE>
B - 41
<PAGE> 110
- -------------
(3) Dates of Inception -- the Income, Income Equity and Balanced Funds --
1/15/95; and the Stock Appreciation Fund -- 10/1/95.
(4) Includes the total return for the Investor A shares from January 1,
1995 to January 16, 1995.
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 and the Balanced Fund for such periods would have been lower.
For the one year, five year and ten year periods ended December 31,
1997, the average annual total returns for the Large Company Fund including the
CIFs (the predecessors to the Large Company Fund whose returns have been
restated to reflect the estimated fees for the Large Company Fund for the past
fiscal year) are as follows:
<TABLE>
<CAPTION>
INVESTOR A SHARES
WITH FRONT-END SALES LOADS WITHOUT FRONT-END SALES LOADS
ONE YEAR FIVE YEAR TEN YEAR ONE YEAR FIVE YEAR TEN YEAR
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
22.19% 17.38% 14.72% 27.93% 18.46% 15.26%
</TABLE>
<TABLE>
<CAPTION>
INVESTOR B SHARES
WITH CONTINGENT DEFERRED SALES LOADS WITHOUT CONTINGENT DEFERRED SALES LOADS
ONE YEAR FIVE YEAR TEN YEAR ONE YEAR FIVE YEAR TEN YEAR
-------- --------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
22.97% 17.37% 14.41% 26.97% 17.50% 14.30%
</TABLE>
These performance figures for periods prior to January 2, 1997, 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.
For the 30-day period ended December 31, 1997, the yields of the
indicated Funds are as follows:
<TABLE>
<CAPTION>
INVESTOR A SHARES INVESTOR B SHARES
With Front- Without Without Contingent
End Sales Front-End Deferred Sales
LOADS SALES LOADS LOAD
<S> <C> <C> <C>
Income Fund 4.60% 4.82% 4.12%
</TABLE>
B - 42
<PAGE> 111
<TABLE>
<S> <C> <C> <C>
Balanced Fund 1.26% 1.32% 0.41%
Income Equity 0.93% 0.97% 0.04%
Fund
Large Company (0.13)% (0.13)% (0.13)%
Fund
</TABLE>
Without reimbursement of expenses and/or waiver of fees, the current
yields of the Income Fund, the Income Equity Fund and the Balanced Fund for
the same period would have been lower.
SEVEN-DAY YIELD
The yield for the Money Market Fund as it may appear from time to time
in advertisements will be calculated by determining the net change, exclusive of
capital changes (all realized and unrealized gains and losses), in the value of
a hypothetical pre-existing account having a balance of one share at the
beginning of the period, dividing the net change in account value by the value
of the account at the beginning of the base period to obtain the base period
return, multiplying the base period return by (365/7) and carrying the resulting
yield figure to the nearest hundredth of one percent. The determination of net
change in account value will reflect the value of additional shares purchased
with dividends from the original share and dividends declared on both the
original share and any such additional shares and all fees charged to all
shareholder accounts in proportion to the length of the base period and the
Money Market Fund's average account size.
If realized and unrealized gains and losses were included in the yield
calculation, the yield of the Money Market Fund might vary materially from that
reported in advertisements. For the seven-day period ended December 31, 1997,
the current yield of the Money Market Fund was 5.01%.
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 December 31, 1997, the
effective yield of the Money Market Fund was 5.13%.
The yield and effective yield as quoted in such advertisements will not
be based on information as of a date more than fourteen days prior to the date
of their publication. Each yield will vary depending on market conditions and
principal. Each yield also depends on the quality, maturity and type of
instruments held and operating expenses. The advertisements will include, among
other things, the length of the base period and the date of the last day in the
base period used in computing the quotation.
B - 43
<PAGE> 112
DISTRIBUTION RATES
Each of the Income Fund, the Income Equity Fund, the Balanced Fund, the
Stock Appreciation Fund and the Large Company Fund may from time to time
advertise current distribution rates which are calculated in accordance with the
method disclosed in the Prospectus. The following table sets forth the
distribution rates of the Investor A and B Shares for the year ended December
31, 1997.
<TABLE>
<CAPTION>
Investor A Shares
With Front-End Sales Loads Without Front-End Sales Loads
INCLUDES EXCLUDES INCLUDES EXCLUDES
FUND CAPITAL GAINS CAPITAL GAINS CAPITAL GAINS CAPITAL GAINS
- ---- ------------- ------------- ------------- -------------
I<S> <C> <C> <C> <C>
Income 5.87% 5.87% 6.14% 6.14%
Income Equity 28.76% 1.34% 30.11% 1.40%
Balanced 10.29% 1.78% 10.77% 1.86%
Stock Appreciation 20.50% 0% 21.46% 0%
Large Company 11.99% 0.24% 12.55% 0.25%
</TABLE>
<TABLE>
<CAPTION>
Without Contingent Deferred Sales Loads
INCLUDES CAPITAL GAINS EXCLUDES CAPITAL GAINS
FUND
<S> <C> <C>
Income 5.47% 5.47%
Income Equity 28.47% 0.48%
Balanced 10.03% 1.41%
Stock Appreciation 20.74% 0%
Large Company 12.37% 0%
</TABLE>
GENERAL
The yield and total return of any investment are generally a function
of quality and maturity, type of investment and operating expenses. A Fund's
yields and total return will fluctuate from time to time and are not necessarily
representative of future results.
Yield and total return information is useful in reviewing a Fund's
performance, but because yield and total return will fluctuate, such information
may not provide a basis for comparison with bank deposits or other investments
that pay a fixed yield for a stated period of time. An investor's principal is
not guaranteed by the Fund.
From time to time, the Company may include the following types
of information in advertisements, supplemental sales literature and
reports to shareholders: (a) discussions of general economic or
B - 44
<PAGE> 113
financial principles (such as the effects of inflation, the power of compounding
and the benefits of dollar-cost averaging); (b) discussions of general economic
trends; (c) presentations of statistical data to supplement such discussions;
(d) descriptions of past or anticipated portfolio holdings for one or more of
the Funds within the 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
rankings or ratings by recognized rating organizations; and (j) testimonials
describing the experience of persons who have invested in one or more of the
Funds.
ADDITIONAL INFORMATION
PRINCIPAL HOLDERS OF SECURITIES
To the knowledge of the Company, as of April 20, 1998, the persons
listed below owned of record 5% or more of the outstanding shares of the
following Funds:
<TABLE>
<CAPTION>
Name and Address
FUND OF OWNER OF RECORD % OWNERSHIP
- ---- ------------------ -----------
<S> <C> <C>
Money Market, The Provident Bank Trust Department(1)
Investor A Shares P.O. Box 691198
Cincinnati, Ohio 45269-1198 69.19%
BHC Securities, Inc.(2)
One Commerce Square
Philadelphia, Pennsylvania 19103 19.64%
Balanced, BHC Securities, Inc.(2)
Investor A Shares One Commerce Square
Philadelphia, Pennsylvania 19103 59.81%
The Provident Bank(1)
RPO Provident Bancorp
Retirement Plan
One East Fourth Street
Cincinnati, Ohio 45202 15.49%
The Provident Bank as
Trustee FBO Provident Bancorp.
401K Equity(1)
P.O. Box 691198
Cincinnati, Ohio 45269-1198 14.26%
Large Company, Provident Bank Trust Department(1)
Investor A Shares P.O. Box 691198
Cincinnati, Ohio 45269-1198 93.58%
</TABLE>
B - 45
<PAGE> 114
<TABLE>
<CAPTION>
Name and Address
FUND OF OWNER OF RECORD % OWNERSHIP
- ---- ------------------ -----------
<S> <C> <C>
Large Company, The Provident Bank
Investor B Shares Custodian FBO
John W. Coveyou IRA
7931 Gimmick Road
Cincinnati, Ohio 45241 6.08%
Income Equity, The Chase Manhattan Bank as
Investor A Shares Trustee for The General Cable
Corporation
4 Tesseneer Drive
Highland Heights, Kentucky 41076 47.43%
BHC Securities, Inc.(2)
One Commerce Square
Philadelphia, Pennsylvania 19103 29.02%
The Provident Bank(1)
RPO Provident Retirement Plan
P.O. Box 691198
Cincinnati, Ohio 45269-1198 5.24%
Income, The Provident Bank
Investor A Shares One East Fourth Street
Cincinnati, Ohio 45202 51.85%
Provident Bank Trust Department(1)
P.O. Box 691198
Cincinnati, Ohio 45269-1198 38.54%
Income, Fifth Third Bank as Trustee for
Investor B Shares Cincinnati Institute of Fine Arts
P.O. Box 630074
Cincinnati, Ohio 45263 21.24%
<FN>
- --------------------
(1) The designated owner of record may possess on behalf of its
underlying accounts voting or investment power with respect to
these Shares.
(2) BCH Securities, Inc. holds such shares for various underlying
beneficial owners.
</TABLE>
AUDITORS
The financial statements of each of the Funds at and for the fiscal
year ended December 31, 1997, 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
B - 46
<PAGE> 115
such report given on the authority of Ernst & Young LLP as experts in auditing
and accounting.
LEGAL COUNSEL
Baker & Hostetler LLP, 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 - 47
<PAGE> 116
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
The following financial statements relate to each of the Funds and to
The Riverfront Ohio Tax-Free Bond Fund at and for the fiscal year ended December
31, 1997. Effective April 30, 1998, The Riverfront Ohio Tax-Free Bond Fund
ceased operations and was liquidated and dissolved.
B - 48
<PAGE> 117
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
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, Balanced
Fund, Stock Appreciation Fund, and Large Company Select Fund) as of December
31, 1997, the related statements of operations for the year then ended of the
U.S. Government Securities Money Market Fund, U.S. Government Income Fund,
Income Equity Fund, Ohio Tax-Free Bond Fund, Balanced Fund, and Stock
Appreciation Fund and for the period January 2, 1997 to December 31, 1997 for
the Large Company Select Fund and the statements of changes in net assets for
each of the two years in the period then ended of the U.S. Government
Securities Money Market Fund, U.S. Government Income Fund, Income Equity Fund,
Ohio Tax-Free Bond Fund, Balanced Fund, and Stock Appreciation Fund, and for
the period January 2, 1997 to December 31, 1997 of the Large Company Select
Fund, and the financial highlights for each of the three years in the period
then ended of the U.S. Government Securities Money Market Fund, U.S. Government
Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, and Balanced Fund,
and for the two years ended December 31, 1997 and for the period October 1,
1995 to December 31, 1995 of the Stock Appreciation Fund, and for the period
January 2, 1997 to December 31, 1997 of the Large Company Select 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.
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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Riverfront Funds, Inc. at
December 31, 1997, the results of their operations, the changes in their net
assets and the financial highlights for the respective periods ended December
31, 1997 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 13, 1998
B-49
<PAGE> 118
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$111,358,087; $49,153,218; and
$96,679,453, respectively)..... $111,358,087 $49,741,917 $101,416,249
Repurchase agreements (Cost
$31,408,000; $0; and $0,
respectively).................. 31,408,000 -- --
------------ ----------- ------------
TOTAL INVESTMENTS............... 142,766,087 49,741,917 101,416,249
Cash............................ 439 -- --
Interest and dividends
receivable..................... 484,466 631,997 283,533
Receivable for capital shares
issued......................... -- 76 104,504
Receivable for investments sold. -- -- 468,154
Prepaid expenses and other
assets......................... 10,642 5,482 21,273
------------ ----------- ------------
TOTAL ASSETS.................... 143,261,634 50,379,472 102,293,713
------------ ----------- ------------
LIABILITIES:
Dividends payable............... 615,066 412 --
Payable for capital shares
redeemed....................... -- -- 1,534
Payable for investments
purchased...................... -- -- 743,993
Accrued expenses and other
payables:
Investment advisory fees....... 18,229 17,134 80,325
Administration fees............ 3,812 1,381 2,621
Custodian and accounting fees.. 5,937 6,420 13,363
12b-1 fees (Investor A)........ 12,152 8,022 12,562
12b-1 fees (Investor B)........ -- 1,115 14,485
Transfer agent fees............ -- 3,841 1,626
Audit and legal fees........... 36,872 11,007 19,414
Other.......................... 809 3,712 --
------------ ----------- ------------
TOTAL LIABILITIES............... 692,877 53,044 889,923
------------ ----------- ------------
NET ASSETS:
Capital......................... 142,572,510 50,806,345 95,815,203
Accumulated undistributed
(distributions in excess of)
net investment income.......... -- -- 534
Net unrealized appreciation/
depreciation on investments.... -- 588,699 4,736,796
Accumulated undistributed net
realized gains (losses) on
investment transactions........ (3,753) (1,068,616) 851,257
------------ ----------- ------------
NET ASSETS..................... $142,568,757 $50,326,428 $101,403,790
============ =========== ============
Net Assets
Investor A Shares.............. $142,568,757 $49,017,391 $ 83,840,700
Investor B Shares.............. NA 1,309,037 17,563,090
------------ ----------- ------------
Total........................ $142,568,757 $50,326,428 $101,403,790
============ =========== ============
Shares of capital stock
Investor A Shares.............. 142,572,510 5,168,697 7,175,136
Investor B Shares.............. NA 122,570 1,466,214
------------ ----------- ------------
Total........................ 142,572,510 5,291,267 8,641,350
============ =========== ============
Net asset value
Investor A Shares--redemption
price per share............... $ 1.00 $ 9.48 $ 11.68
Investor B Shares--offering
price per share*.............. NA 10.68 11.98
============ =========== ============
Maximum Sales Charge (Investor
A)............................. NA 4.50% 4.50%
============ =========== ============
Maximum Offering Price per share
(100%/(100%--Maximum Sales
Charge) of net asset value
adjusted to nearest cent)
(Investor A) (a)............... $ 1.00 $ 9.93 $ 12.23
============ =========== ============
</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-50
<PAGE> 119
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
<TABLE>
<CAPTION>
STOCK LARGE COMPANY
OHIO TAX-FREE BALANCED APPRECIATION SELECT
BOND FUND FUND FUND FUND
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $3,289,469;
$18,057,693;
$18,089,347; and
$20,020,952,
respectively)........... $3,512,105 $20,982,175 $22,127,696 $36,027,913
Interest and dividends
receivable.............. 34,701 97,044 11,588 46,735
Receivable for capital
shares issued........... -- 8,434 481 37,836
Receivable for
investments sold........ -- -- 5,138,936 --
Unamortized organization
costs................... -- -- -- 4,944
Prepaid expenses and
other assets............ 8,385 7,734 -- 6,576
---------- ----------- ----------- -----------
TOTAL ASSETS............. 3,555,191 21,095,387 27,278,701 36,124,004
---------- ----------- ----------- -----------
LIABILITIES:
Payable for capital
shares redeemed......... -- 7,725 1,540 --
Payable for investments
purchased............... -- -- 1,650,192 --
Accrued expenses and
other payables:
Investment advisory
fees................... 1,317 14,221 17,129 24,009
Administration fees..... 102 562 668 943
Custodian and
accounting fees........ 1,303 3,390 3,860 5,481
12b-1 fees (Investor
A)..................... 749 1,039 5,263 6,075
12b-1 fees (Investor
B)..................... 1,007 9,622 1,051 1,900
Transfer agent fees..... 1,751 3,738 7,541 1,832
Audit and legal fees.... 2,589 3,995 5,489 6,067
Other................... 198 5,247 8,389 108
---------- ----------- ----------- -----------
TOTAL LIABILITIES........ 9,016 49,539 1,701,122 46,415
---------- ----------- ----------- -----------
NET ASSETS:
Capital.................. 3,178,243 17,990,174 18,568,291 20,059,805
Accumulated undistributed
net investment income
(loss).................. 93,730 3,979 (2,194) --
Net unrealized
appreciation/
depreciation on
investments............. 222,636 2,924,482 4,038,349 16,006,961
Accumulated undistributed
net realized gains
(losses) on investment
transactions............ 51,566 127,213 2,973,133 10,823
---------- ----------- ----------- -----------
NET ASSETS.............. $3,546,175 $21,045,848 $25,577,579 $36,077,589
========== =========== =========== ===========
Net Assets
Investor A Shares....... $2,410,683 $ 9,562,897 $24,312,196 $33,613,506
Investor B Shares....... 1,135,492 11,482,951 1,265,383 2,464,083
---------- ----------- ----------- -----------
Total................. $3,546,175 $21,045,848 $25,577,579 $36,077,589
========== =========== =========== ===========
Shares of capital stock
Investor A Shares....... 268,544 777,175 2,651,012 2,964,154
Investor B Shares....... 123,530 903,237 133,340 218,535
---------- ----------- ----------- -----------
Total................. 392,074 1,680,412 2,784,352 3,182,689
========== =========== =========== ===========
Net asset value
Investor A Shares--
redemption price per
share.................. $ 8.98 $ 12.30 $ 9.17 $ 11.34
Investor B Shares--
offering price per
share*................. 9.19 12.71 9.49 11.28
========== =========== =========== ===========
Maximum Sales Charge
(Investor A)............ 4.50% 4.50% 4.50% 4.50%
========== =========== =========== ===========
Maximum Offering Price
per share (100%/(100%--
Maximum Sales Charge)
of net asset value
adjusted to nearest
cent) (Investor A)...... $ 9.40 $ 12.88 $ 9.60 $ 11.87
========== =========== =========== ===========
</TABLE>
- -------
*Redemption price of Investor B shares varies based on length of time shares
are held.
See Notes to Financial Statements.
B-51
<PAGE> 120
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $8,966,454 $3,195,536 $ 114,843
Dividend income................... -- 85,440 2,688,652
---------- ---------- -----------
TOTAL INCOME...................... 8,966,454 3,280,976 2,803,495
---------- ---------- -----------
EXPENSES:
Investment advisory fees.......... 242,900 200,909 898,800
Administration fees............... 323,868 100,455 189,223
12b-1 fees (Investor A)........... 404,830 122,072 202,966
12b-1 fees (Investor B)........... -- 13,985 134,238
Custodian and accounting fees..... 81,531 55,655 144,048
Audit and legal fees.............. 77,217 32,257 65,211
Directors' fees and expenses...... 9,635 3,922 5,554
Transfer agent fees............... 33,896 50,879 96,037
Registration and filing fees...... 9,072 8,076 2,324
Printing costs.................... 79,667 19,245 48,278
Other............................. 14,832 4,530 18,091
---------- ---------- -----------
GROSS EXPENSES.................... 1,277,448 611,985 1,804,770
Less: Fee waivers............... (242,899) (29,297) (41,154)
---------- ---------- -----------
Net Expenses.................. 1,034,549 582,688 1,763,616
---------- ---------- -----------
Net Investment Income............. 7,931,905 2,698,288 1,039,879
---------- ---------- -----------
REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions.......... (1,463) 781,702 21,576,605
Net change in unrealized
appreciation/depreciation from
investments...................... -- (56,510) 752,438
---------- ---------- -----------
Net realized/unrealized gains
(losses) from investments........ (1,463) 725,192 22,329,043
---------- ---------- -----------
Change in net assets resulting
from operations.................. $7,930,442 $3,423,480 $23,368,922
========== ========== ===========
</TABLE>
See Notes to Financial Statements.
B-52
<PAGE> 121
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
OHIO STOCK LARGE
TAX-FREE BALANCED APPRECIATION COMPANY
BOND FUND FUND FUND SELECT FUND*
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................. $ 436,799 $ 520,993 $ 84,507 $ 67,812
Dividend income................. 15,627 233,985 365,157 461,398
--------- ---------- ----------- ----------
TOTAL INCOME.................... 452,426 754,978 449,664 529,210
--------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees........ 40,980 185,950 214,758 251,705
Administration fees............. 16,689 41,323 53,690 62,927
12b-1 fees (Investor A)......... 17,534 24,764 64,711 76,802
12b-1 fees (Investor B)......... 11,823 107,557 9,604 7,423
Custodian and accounting fees... 13,711 33,160 42,139 49,119
Audit and legal fees............ 9,985 20,656 15,518 21,646
Organization costs.............. -- 56 14,394 3,872
Directors' fees and expenses.... 594 1,235 1,556 2,026
Transfer agent fees............. 39,534 61,796 118,492 41,424
Registration and filing fees.... 4,199 6,474 15,908 7,294
Printing costs.................. 3,513 11,766 19,283 10,459
Other........................... 727 13,622 2,748 2,445
--------- ---------- ----------- ----------
GROSS EXPENSES.................. 159,289 508,359 572,801 537,142
Less: Fee waivers............. (8,196) (31,340) -- --
Less: Expense reimbursements.. (23,066) -- -- --
--------- ---------- ----------- ----------
Net Expenses................ 128,027 477,019 572,801 537,142
--------- ---------- ----------- ----------
Net Investment Income (Loss).... 324,399 277,959 (123,137) (7,932)
--------- ---------- ----------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions........ 656,758 1,983,851 5,867,571 4,033,588
Net change in unrealized
appreciation/depreciation from
investments.................... (692,569) 870,883 (1,404,729) 3,414,575
--------- ---------- ----------- ----------
Net realized/unrealized gains
(losses) from investments...... (35,811) 2,854,734 4,462,842 7,448,163
--------- ---------- ----------- ----------
Change in net assets resulting
from operations................ $ 288,588 $3,132,693 $ 4,339,705 $7,440,231
========= ========== =========== ==========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
See Notes to Financial Statements.
B-53
<PAGE> 122
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
SECURITIES MONEY MARKET INCOME INCOME EQUITY
FUND 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,
1997 1996 1997 1996 1997 1996
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 7,931,905 $ 8,268,622 $ 2,698,288 $ 1,942,237 $ 1,039,879 $ 1,134,267
Net realized gains
(losses) from
investment
transactions.......... (1,463) -- 781,702 90,347 21,576,605 13,473,952
Net change in
unrealized
appreciation/
depreciation from
investments........... -- -- (56,510) (1,183,269) 752,438 (1,397,638)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
resulting from
operations............. 7,930,442 8,268,622 3,423,480 849,315 23,368,922 13,210,581
------------- ------------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO
INVESTOR A SHAREHOLDERS:
From net investment
income................ (7,931,905) (8,268,622) (2,663,877) (1,865,718) (981,986) (1,089,197)
In excess of net
investment income..... -- -- (412,137) -- -- (11,775)
From net realized gains
from investments...... -- -- -- -- (19,246,795) (10,109,545)
DISTRIBUTIONS TO
INVESTOR B SHAREHOLDERS:
From net investment
income................ -- -- (64,440) (56,824) (57,359) (45,070)
In excess of net
investment income..... -- -- (11,526) -- -- (1,105)
From net realized gains
from investments...... -- -- -- -- (3,879,842) (941,583)
In excess of net
realized gains........ -- -- -- -- -- (94,220)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from shareholder
distributions.......... (7,931,905) (8,268,622) (3,151,980) (1,922,542) (24,165,982) (12,292,495)
------------- ------------- ----------- ----------- ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 374,303,813 413,837,358 4,236,017 2,867,087 15,853,924 12,638,065
Proceeds from shares
issued in connection
with common trust fund
acquisition........... -- -- 16,606,766 -- -- --
Dividends reinvested... 2,327,411 2,193,920 506,586 486,495 23,523,261 12,143,803
Cost of shares
redeemed.............. (415,078,263) (392,509,518) (6,285,274) (5,090,697) (18,176,359) (8,378,319)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from capital
transactions........... (38,447,039) 23,521,760 15,064,095 (1,737,115) 21,200,826 16,403,549
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets.... (38,448,502) 23,521,760 15,335,595 (2,810,342) 20,403,766 17,321,635
NET ASSETS:
Beginning of period.... 181,017,259 157,495,499 34,990,833 37,801,175 81,000,024 63,678,389
------------- ------------- ----------- ----------- ------------ -----------
End of period.......... $ 142,568,757 $ 181,017,259 $50,326,428 $34,990,833 $101,403,790 $81,000,024
============= ============= =========== =========== ============ ===========
SHARE TRANSACTIONS:
Issued................. 374,303,813 413,837,358 448,161 299,041 1,186,068 997,947
Issued in connection
with common trust fund
acquisition........... -- -- 1,761,057 -- -- --
Reinvested............. 2,327,411 2,193,920 53,203 51,049 1,989,492 1,001,471
Redeemed............... (415,078,263) (392,509,518) (664,598) (534,677) (1,316,119) (656,491)
------------- ------------- ----------- ----------- ------------ -----------
Change in shares........ (38,447,039) 23,521,760 1,597,823 (184,587) 1,859,441 1,342,927
============= ============= =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
B-54
<PAGE> 123
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK LARGE
APPRECIATION COMPANY
OHIO TAX-FREE BOND FUND BALANCED FUND FUND SELECT FUND
-------------------------- -------------------------- -------------------------- -------------
FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996 1997*
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income
(loss).............. $ 324,399 $ 434,913 $ 277,959 $ 514,538 $ (123,137) $ (462,477) $ (7,932)
Net realized gains
(losses) from
investment
transactions......... 656,758 (2,919) 1,983,851 (153,623) 5,867,571 5,645,154 4,033,588
Net change in
unrealized
appreciation/depreciation
from investments..... (692,569) (107,900) 870,883 853,589 (1,404,729) (1,674,745) 3,414,575
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
resulting from
operations............ 288,588 324,094 3,132,693 1,214,504 4,339,705 3,507,932 7,440,231
------------ ----------- ----------- ----------- ------------ ------------ -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income............... (200,793) (412,215) (180,288) (346,017) -- -- --
In excess of net
investment income.... (113,570) -- -- (1,775) -- (289) --
From net realized
gains from
investments.......... (446,337) -- (786,461) -- (4,562,955) (3,106,226) (3,675,987)
From tax return of
capital.............. (32,451) -- -- -- -- -- (76,753)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment
income............... (36,634) (21,400) (99,558) (168,520) -- -- --
In excess of net
investment income.... (8,728) -- -- (1,028) -- -- --
From net realized
gains from
investments.......... (156,126) -- (913,202) -- (216,879) (65,866) (270,025)
From tax return of
capital.............. (2,494) -- -- -- -- -- --
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
from shareholder
distributions......... (997,133) (433,615) (1,979,509) (517,340) (4,779,834) (3,172,381) (4,022,765)
------------ ----------- ----------- ----------- ------------ ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 516,123 632,048 2,623,393 11,628,310 3,536,148 3,709,128 4,882,547
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 11,399,841 -- -- -- -- -- 27,813,338
Dividends reinvested.. 201,688 26,194 1,948,716 546,821 4,580,891 2,969,201 3,939,671
Cost of shares
redeemed............. (19,539,956) (588,738) (5,473,923) (6,534,711) (14,013,668) (16,166,715) (3,975,433)
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
from capital
transactions.......... (7,422,304) 69,504 (901,814) 5,640,420 (5,896,629) (9,488,386) 32,660,123
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets... (8,130,849) (40,017) 251,370 6,337,584 (6,336,758) (9,152,835) 36,077,589
NET ASSETS:
Beginning of period... 11,677,024 11,717,041 20,794,478 14,456,894 31,914,337 41,067,172 --
------------ ----------- ----------- ----------- ------------ ------------ -----------
End of period......... $ 3,546,175 $11,677,024 $21,045,848 $20,794,478 $ 25,577,579 $ 31,914,337 $36,077,589
============ =========== =========== =========== ============ ============ ===========
SHARE TRANSACTIONS:
Issued................ 49,102 59,532 207,417 1,017,399 359,468 373,503 403,509
Issued in connection
with common trust
fund acquisition..... 1,097,194 -- -- -- -- -- 2,781,335
Reinvested............ 20,948 2,490 156,705 47,842 490,460 315,294 353,440
Redeemed.............. (1,895,117) (55,955) (437,775) (571,147) (1,448,614) (1,628,669) (355,595)
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in shares....... (727,873) 6,067 (73,653) 494,094 (598,686) (939,872) 3,182,689
============ =========== =========== =========== ============ ============ ===========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
See Notes to Financial Statements.
B-55
<PAGE> 124
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Securities Money Market Fund
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (31.8%)
Agriculture (1.8%)
$ 2,500,000 Cargill, Inc., Discount Note, 1/9/98............... $ 2,496,894
------------
Automotive (1.4%)
2,000,000 Ford Motor Co., Discount Note, 1/7/98.............. 1,998,137
------------
Banks (2.8%)
4,000,000 Bankers Trust, Discount Note, 4/6/98............... 3,941,628
------------
Brokerage Services (8.0%)
4,000,000 Merrill Lynch & Co., Inc., Discount Note, 1/5/98... 3,997,531
1,500,000 Merrill Lynch & Co., Inc., Discount Note, 3/27/98.. 1,479,813
2,000,000 Morgan Stanley, Dean Witter Discover & Co.,
Discount Note, 1/23/98............................ 1,993,033
4,000,000 Morgan Stanley, Dean Witter Discover & Co.,
Discount Note, 2/13/98............................ 3,972,432
------------
11,442,809
------------
Financial Services (9.1%)
2,000,000 Associates Corp., N.A., Discount Note, 3/23/98..... 1,975,340
2,900,000 General Electric Capital Corp., Discount Note,
1/21/98........................................... 2,890,834
500,000 General Electric Capital Corp., Discount Note,
2/2/98............................................ 497,533
1,000,000 General Electric Capital Corp., Discount Note,
2/5/98............................................ 994,604
1,500,000 General Electric Capital Corp., Discount Note,
3/13/98........................................... 1,483,315
1,750,000 IBM Credit Corp., Discount Note, 1/16/98........... 1,745,858
1,500,000 Sunbelt-Dix, Inc., Discount Note, 1/6/98........... 1,498,829
2,000,000 Sunbelt-Dix, Inc., Discount Note, 1/20/98.......... 1,994,089
------------
13,080,402
------------
Food Distributors, Supermarkets & Wholesalers (2.4%)
1,500,000 Winn Dixie Stores, Inc., Discount Note, 1/13/98.... 1,497,215
2,000,000 Winn Dixie Stores, Inc., Discount Note, 2/10/98.... 1,987,400
------------
3,484,615
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Manufacturing--Consumer Goods (2.1%)
$ 3,000,000 Eaton Corp., Discount Note, 2/9/98................. $ 2,981,172
------------
Pharmaceuticals (4.2%)
1,000,000 Glaxo Wellcome PLC, Discount Note, 1/12/98......... 998,298
1,500,000 Glaxo Wellcome PLC, Discount Note, 1/16/98......... 1,496,456
3,500,000 Glaxo Wellcome PLC, Discount Note, 1/27/98......... 3,485,895
------------
5,980,649
------------
Total Commercial Paper (Amortized Cost $45,406,306) 45,406,306
------------
REPURCHASE AGREEMENTS (22.0%)
16,408,000 Dean Witter, 6.70%, 1/2/98, (Collateralized by
$16,277,000 various U.S. Treasury and U.S.
Government Agency Securities, 0.00%-9.38%, 1/2/98-
10/17/16, market value--$16,736,802).............. 16,408,000
15,000,000 Merrill Lynch, 6.50%, 1/2/98, (Collateralized by
$56,704,342 various U.S Government Agency
Securities, 6.95%-8.00%, 7/1/15-7/1/20, market
value--$15,300,307)............................... 15,000,000
------------
Total Repurchase Agreements
(Cost $31,408,000) 31,408,000
------------
U.S. GOVERNMENT AGENCIES (46.3%)
Federal Agricultural Mortgage Corp. (1.4%)
2,000,000 Discount Note, 1/6/98.............................. 1,998,478
------------
Federal Farm Credit Bank (4.9%)
2,000,000 5.50%, 1/2/98...................................... 2,000,000
3,000,000 5.65%, 2/2/98...................................... 3,000,000
2,000,000 5.55%, 3/2/98...................................... 2,000,000
------------
7,000,000
------------
Federal Home Loan Bank (2.1%)
3,000,000 Discount Note, 1/5/98.............................. 2,998,197
------------
Federal Home Loan Mortgage Corp. (5.2%)
2,500,000 Discount Note, 1/2/98.............................. 2,499,625
3,000,000 Discount Note, 2/17/98............................. 2,978,419
2,000,000 5.84%, 4/8/98...................................... 1,999,063
------------
7,477,107
------------
</TABLE>
Continued
B-56
<PAGE> 125
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Securities Money Market Fund
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ----------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc. (30.7%)
$ 1,000,000 4.01%*, 1/6/98....................................... $ 999,785
1,100,000 6.06%*, 1/8/98....................................... 1,100,064
4,000,000 Discount Note, 1/9/98................................ 3,995,119
3,000,000 Discount Note, 1/15/98............................... 2,993,677
2,000,000 Discount Note, 1/16/98............................... 1,995,442
3,000,000 Discount Note, 1/20/98............................... 2,991,418
4,000,000 Discount Note, 1/21/98............................... 3,987,856
3,000,000 Discount Note, 2/5/98................................ 2,984,046
3,000,000 Discount Note, 2/13/98............................... 2,980,363
1,500,000 4.50%*, 2/25/98...................................... 1,497,549
4,000,000 5.71%, 3/18/98, MTN.................................. 3,998,474
2,190,000 8.15%, 5/11/98....................................... 2,208,916
3,000,000 5.63%, 8/14/98, MTN.................................. 2,996,760
2,000,000 Series 98-AA, 5.54%, 3/12/98......................... 2,000,000
2,000,000 Series 98-AC, 5.74%, 6/9/98.......................... 2,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
$ 2,000,000 Series 98-Y, 5.52%, 1/15/98........................ $ 2,000,000
3,000,000 Series 98-Z, 5.63%, 2/12/98........................ 3,000,000
------------
43,729,469
------------
Student Loan Marketing Assoc. (1.1%)
1,500,000 5.73%*, 1/6/98..................................... 1,499,597
------------
Tennessee Valley Authority (0.9%)
1,250,000 5.13%, 3/4/98, Continuously callable @ 100......... 1,248,933
------------
Total U.S. Government Agencies (Amortized Cost $65,951,781) 65,951,781
------------
Total Investments (Amortized Cost $142,766,087) (a)--100.1% 142,766,087
Liabilities in excess of other assets (0.1)% (197,330)
------------
Total Net Assets--100.0% $142,568,757
============
</TABLE>
- -------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable Rate. Rate presented represents rate in effect at December 31, 1997.
Maturity date reflects the next rate change date.
MTN--Medium Term Note.
PLC--Public Liability Co.
See Notes to Financial Statements.
B-57
<PAGE> 126
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Income Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMERCIAL PAPER (1.0%)
Financial Services (1.0%)
500,000 Sunbelt-Dix. Inc., Discount Note, 1/27/98............. $ 497,967
-----------
Total Commercial Paper (Cost $497,967) 497,967
-----------
CORPORATE BONDS (27.0%)
Banks (7.2%)
600,000 Chase Capital I, Series A, 7.67%, 12/1/26, Callable
12/1/06 @ 103.84, Guaranteed by Chase Manhattan
Corp................................................. 621,000
500,000 Mellon Capital I, 7.72%, 12/1/26, Callable 12/1/06 @
103.86, Guaranteed by Mellon Bank Corp............... 518,125
1,000,000 Midland Bank PLC (HSBC), 6.95%, 3/15/11............... 1,026,250
1,461,382 PNC Mortgage Securities Corp., Series 1997-3, Class
2A3, 7.50%, 5/25/27 CMO.............................. 1,474,271
-----------
3,639,646
-----------
Computers & Peripherals (2.0%)
1,000,000 International Business Machines Corp., 6.22%, 8/1/27,
Putable 8/1/04 @ 100................................. 1,012,500
-----------
Financial Services (9.3%)
200,000 American Express Master Trust, Series 1994-1, Class A,
7.15%, 8/15/99 ABS................................... 201,556
200,000 Associates Corp., N.A., 5.25%, 3/30/00................ 196,500
1,000,000 Boatmen's Auto Trust, Series 1996-A, Class A3, 6.75%,
1/15/03 ABS.......................................... 1,019,800
345,000 Discover Card Trust, Series 1992-B, Class A, 6.80%,
6/16/00 ABS.......................................... 344,762
500,000 Ford Motor Credit Co., 6.25%, 12/8/05................. 493,125
1,000,000 Premier Auto Trust, Series 1994-4, Class CTFS, 6.85%,
5/2/99 ABS........................................... 1,007,340
650,000 Security Pacific Acceptance Corp., Series 1995-1,
Class A2, 6.70%, 4/10/20 ABS......................... 655,824
430,424 The Money Store Home Equity Trust, Series 1995-A,
Class A2, 7.93%, 2/15/14 ABS......................... 432,202
250,000 Toyota Motor Credit Corp., 7.13%, 9/26/06, Callable
9/26/99 @ 100, MTN................................... 264,063
-----------
4,615,172
-----------
Food Processing & Packaging (1.1%)
500,000 McCormick & Co., Inc., 8.95%, 7/1/01.................. 542,500
-----------
Office Equipment & Supplies (Non-Computer Related) (2.9%)
1,455,000 Pitney Bowes Credit Corp., 6.63%, 6/1/02.............. 1,484,100
-----------
Oil & Gas Exploration, Production & Services (1.0%)
500,000 Kerr-McGee Corp., 6.63%, 10/15/07..................... 514,375
-----------
Oil & Gas Transmission (0.7%)
356,000 Trans-Canada Pipelines Ltd., 6.77%, 4/30/01, MTN...... 363,565
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Steel (0.4%)
200,000 Worthington Industries, Inc., 7.13%, 5/15/06.......... $ 210,000
-----------
Telecommunications (2.0%)
1,000,000 U.S. West Capital Funding, Inc., 6.31%, 11/1/05,
Putable 11/1/00 @ 100................................ 1,005,000
-----------
Utilities--Electric & Gas (0.4%)
200,000 Oklahoma Gas & Electric Co., 6.25%, 10/15/00.......... 201,000
-----------
Total Corporate Bonds (Cost $13,409,547) 13,587,858
-----------
U.S. GOVERNMENT AGENCIES (48.9%)
Federal Home Loan Bank (5.9%)
300,000 5.88%*, 5/26/98, Series BR98.......................... 299,970
1,000,000 5.95%, 3/5/01, Series ID01, Callable 3/5/98 @ 100..... 997,180
875,000 6.38%, 4/29/03, Series A-03, Callable 4/29/98 @ 100... 874,816
690,000 9.50%, 2/25/04........................................ 810,895
-----------
2,982,861
-----------
Federal Home Loan Mortgage Corp. (5.3%)
300,000 Discount Note, 1/14/98................................ 299,427
1,226,320 6.00%, 12/1/99, Gold Pool #M80147..................... 1,216,436
700,000 6.80%, 9/18/02, Continuously Callable @ 100, (Called
2/4/98).............................................. 699,930
225,000 6.20%, 4/15/03........................................ 227,108
242,742 7.50%, 3/15/15, Series 1262, Class F CMO.............. 243,048
-----------
2,685,949
-----------
Federal National Mortgage Assoc. (28.3%)
500,000 9.05%, 4/10/00........................................ 533,715
1,500,000 6.45%, 4/12/01, Series 01-M, Callable 4/12/99 @ 100... 1,505,490
1,000,000 6.71%, 3/13/02, Callable 3/13/00 @ 100, MTN........... 1,011,330
1,500,000 6.54%, 10/8/02, Callable 10/8/98 @ 100, MTN........... 1,497,900
1,039,823 6.00%, 2/1/03, Pool #335463........................... 1,029,882
1,221,329 6.00%, 5/1/03, Pool #347156........................... 1,208,566
625,000 6.38%, 6/25/03, Continuously Callable @ 100, MTN...... 623,844
1,000,000 6.38%, 7/8/03, Continuously Callable @ 100 (Called
2/13/98), MTN........................................ 998,130
300,000 6.85%, 4/5/04......................................... 313,362
1,000,000 7.00%, 9/25/05, Series 1992-110, Class G CMO.......... 1,006,030
1,000,000 7.55%, 3/27/07, Series 07-B, Callable 3/27/00 @ 100... 1,029,370
912,341 7.50%, 3/17/14, Series 1997-39, Class A CMO........... 922,404
</TABLE>
Continued
B-58
<PAGE> 127
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Income Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
515,675 7.00%, 9/25/19, Series 1991-155, Class PE CMO......... $ 517,696
2,000,000 6.50%, 8/18/20, Series 1997-57, Class PM CMO.......... 2,018,672
-----------
14,216,391
-----------
Government National Mortgage Assoc. (1.3%)
618,267 8.00%, 5/15/23, Pool #351752.......................... 639,789
-----------
Private Export Funding Corp. (2.0%)
1,000,000 6.24%, 5/15/02, Series VV, Guaranteed by Export-Import
Bank of The United States............................ 1,008,750
-----------
Student Loan Marketing Assoc. (3.5%)
1,000,000 6.05%, 9/14/00........................................ 1,004,070
762,235 5.92%*, 10/25/04, Series 1996-3, Class A1 ABS......... 761,549
-----------
1,765,619
-----------
Tennessee Valley Authority (2.6%)
1,250,000 6.24%, 7/15/45, Series B, Callable 7/15/20 @ 100,
Putable 7/15/01 @ 100................................ 1,290,625
-----------
Total U.S. Government Agencies (Cost $24,365,654) 24,589,984
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY BONDS (2.0%)
1,000,000 6.25%, 8/15/23......................................... $ 1,029,140
-----------
Total U.S. Treasury Bonds (Cost $977,561) 1,029,140
-----------
U.S. TREASURY NOTES (17.9%)
1,000,000 5.88%, 3/31/99......................................... 1,002,680
4,000,000 6.50%, 5/31/01......................................... 4,093,960
1,000,000 6.38%, 9/30/01......................................... 1,020,330
1,000,000 6.25%, 8/31/02......................................... 1,020,300
850,000 6.25%, 2/15/03......................................... 869,134
950,000 7.00%, 7/15/06......................................... 1,025,259
-----------
Total U.S. Treasury Notes (Cost $8,897,184) 9,031,663
-----------
INVESTMENT COMPANIES (2.0%)
169,434 Dreyfus Treasury Prime Fund............................ 169,434
835,871 Federated U.S. Treasury Services Fund.................. 835,871
-----------
Total Investment Companies (Cost $1,005,305) 1,005,305
-----------
Total Investments (Cost $49,153,218) (a)--98.8% 49,741,917
Other assets in excess of liabilities 1.2% 584,511
-----------
Total Net Assets--100.0% $50,326,428
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $669,355
Unrealized depreciation...................................... (80,656)
--------
Net unrealized appreciation.................................. $588,699
========
</TABLE>
*Variable Rate.
ABS--Asset Backed Security
CMO--Collateralized Mortgage Obligation
MTN--Medium Term Note
PLC--Public Liability Co.
See Notes to Financial Statements.
B-59
<PAGE> 128
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.3%)
Aerospace/Defense (2.1%)
48,200 B.F. Goodrich Co...................................... $ 1,997,288
1,900 Boeing Co............................................. 92,981
------------
2,090,269
------------
Aluminum (1.4%)
23,700 Reynolds Metal Co..................................... 1,422,000
------------
Automotive (0.1%)
3,000 Ford Motor Co......................................... 146,063
------------
Automotive Parts (3.6%)
3,100 Dana Corp............................................. 147,250
56,000 Echlin, Inc........................................... 2,026,500
28,300 TRW, Inc.............................................. 1,510,513
------------
3,684,263
------------
Banks (3.1%)
1,750 BankAmerica Corp...................................... 127,750
2,050 BankBoston Corp....................................... 192,572
23,100 Crestar Financial Corp................................ 1,316,699
10,700 Magna Group, Inc...................................... 489,525
3,000 Wells Fargo & Co...................................... 1,018,313
------------
3,144,859
------------
Beverages (2.0%)
10,700 Brown-Forman Corp., Class B........................... 591,175
44,100 Seagram Co. Ltd....................................... 1,424,981
------------
2,016,156
------------
Brokerage Services (0.8%)
19,750 Edwards (A.G.), Inc................................... 785,063
------------
Building Materials (1.5%)
20,100 Armstrong World Industries, Inc....................... 1,502,475
------------
Chemicals--General (3.3%)
30,300 Hercules, Inc......................................... 1,516,894
31,850 PPG Industries, Inc................................... 1,819,431
------------
3,336,325
------------
Chemicals--Specialty (2.2%)
23,200 Eastman Chemical Co................................... 1,381,850
49,900 Engelhard Corp........................................ 867,013
------------
2,248,863
------------
Computers & Peripherals (0.1%)
750 Cisco Systems, Inc.(b)................................ 41,813
770 Compaq Computer Corp.................................. 43,456
------------
85,269
------------
Consumer Goods & Services (3.1%)
20,500 Newell Co............................................. 871,250
1,600 Procter & Gamble Co................................... 127,700
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Consumer Goods & Services, continued:
85,400 Rubbermaid, Inc....................................... $ 2,135,000
------------
3,133,950
------------
Containers & Packaging (2.1%)
41,900 Crown Cork & Seal Co., Inc............................ 2,100,238
------------
Cosmetics & Toiletries (1.9%)
38,200 International Flavors & Fragrances, Inc............... 1,967,300
------------
Diversified (2.7%)
1,800 General Electric Co................................... 132,075
13,500 National Service Industries, Inc...................... 669,094
47,800 Tenneco, Inc.......................................... 1,888,100
------------
2,689,269
------------
Electrical Equipment (4.3%)
2,200 Emerson Electric Co................................... 124,163
25,500 Hubbell, Inc., Class B................................ 1,257,469
31,200 Johnson Controls, Inc................................. 1,489,800
30,900 Tecumseh Products Co., Class A........................ 1,506,374
------------
4,377,806
------------
Electronic & Electrical--General (7.6%)
57,900 General Signal Corp................................... 2,442,655
44,200 Harris Corp........................................... 2,027,675
27,900 Honeywell, Inc........................................ 1,911,150
28,900 Thomas & Betts Corp................................... 1,365,525
------------
7,747,005
------------
Financial Services (1.9%)
3,600 Federal National Mortgage Assoc....................... 205,425
16,100 TransAmerica Corp..................................... 1,714,650
------------
1,920,075
------------
Food Distributors, Supermarkets & Wholesalers (2.2%)
56,300 Food Lion, Inc., Class A.............................. 475,031
45,300 Giant Food, Inc., Class A............................. 1,526,044
5,000 Winn-Dixie Stores, Inc................................ 218,438
------------
2,219,513
------------
Forest Products--Lumber & Paper (9.0%)
27,900 Consolidated Papers, Inc.............................. 1,489,163
51,100 Fort James Corp....................................... 1,954,574
11,600 International Paper Co................................ 500,250
39,800 Kimberly-Clark Corp................................... 1,962,637
13,800 Rayonier, Inc......................................... 587,363
17,600 Temple-Inland, Inc.................................... 920,700
18,800 Union Camp Corp....................................... 1,009,325
20,000 Westvaco Corp......................................... 628,750
------------
9,052,762
------------
</TABLE>
Continued
B-60
<PAGE> 129
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Heavy Machinery (0.2%)
2,650 Deere & Co............................................ $ 154,528
------------
Industrial Goods & Services (1.9%)
57,200 Federal Signal Corp................................... 1,236,950
16,200 Harsco Corp........................................... 698,625
------------
1,935,575
------------
Insurance (1.4%)
42,500 TIG Holdings, Inc..................................... 1,410,469
------------
Leisure--Recreation, Gaming (1.0%)
33,200 Brunswick Corp........................................ 1,006,375
------------
Manufacturing--Miscellaneous (1.9%)
93,200 Pall Corp............................................. 1,928,075
------------
Medical Supplies (2.7%)
47,500 Bard (C.R.), Inc...................................... 1,487,344
1,750 Johnson & Johnson..................................... 115,281
30,500 Mallinckrodt, Inc..................................... 1,159,000
------------
2,761,625
------------
Metals--Nonferrous (0.2%)
6,900 Oregon Metallurgical Corp. (b)........................ 230,288
------------
Mining (0.2%)
2,000 Potash Corp. of Saskatchewan, Inc..................... 166,000
------------
Oil & Gas Exploration, Production & Services (5.9%)
28,700 Kerr McGee Corp....................................... 1,817,068
46,000 Mitchell Energy & Development, Class A................ 1,351,250
9,600 Mitchell Energy & Development, Class B................ 279,600
14,600 National Fuel Gas Co.................................. 710,838
15,900 Sonat, Inc............................................ 727,425
34,400 Ultramar Diamond Shamrock Corp........................ 1,096,500
------------
5,982,681
------------
Oil--Integrated Companies (2.8%)
1,750 Amoco Corp............................................ 148,969
6,000 Atlantic Richfield Co................................. 480,750
1,800 Exxon Corp............................................ 110,138
7,800 Mobil Corp............................................ 563,063
2,300 Royal Dutch Petroleum Co.--New York Shares............ 124,631
26,300 Texaco, Inc........................................... 1,430,062
------------
2,857,613
------------
Pharmaceuticals (4.3%)
25,500 American Home Products Corp........................... 1,950,750
1,500 Bristol-Myers Squibb Co............................... 141,938
1,200 Merck & Co., Inc...................................... 127,500
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Pharmaceuticals, continued:
59,500 Pharmacia & Upjohn, Inc............................... $ 2,179,187
------------
4,399,375
------------
Precision Instruments & Related (1.0%)
36,800 Flowserve Corp........................................ 1,028,100
------------
Publishing (0.1%)
2,000 McGraw-Hill Cos., Inc................................. 148,000
------------
Railroads (1.7%)
50,300 Illinois Central Corp................................. 1,713,344
------------
Real Estate Investment Trusts (0.7%)
18,900 FelCor Suite Hotels, Inc.............................. 670,950
------------
Retail--Department Stores (1.9%)
15,400 J.C. Penney Co........................................ 928,813
15,600 Mercantile Stores Co., Inc............................ 949,650
------------
1,878,463
------------
Retail--Specialty Stores (0.1%)
5,700 Intimate Brands, Inc.................................. 137,156
------------
Semiconductors (0.0%)
600 Intel Corp............................................ 42,150
------------
Steel (2.6%)
35,000 Allegheny Teledyne, Inc............................... 905,625
60,000 British Steel PLC-Sponsored ADR....................... 1,286,250
4,500 Carpenter Technology Corp............................. 216,281
12,100 Worthington Industries, Inc........................... 199,650
------------
2,607,806
------------
Tax Return Preparation (1.9%)
42,900 H&R Block, Inc........................................ 1,922,456
------------
Tobacco & Tobacco Products (0.3%)
5,000 Fortune Brands, Inc................................... 185,312
2,300 Philip Morris Cos., Inc............................... 104,219
------------
289,531
------------
Utilities--Electric (2.2%)
6,250 CINergy Corp.......................................... 239,453
15,300 DPL, Inc.............................................. 439,875
7,300 KU Energy Corp........................................ 286,525
17,500 PacifiCorp............................................ 477,968
16,600 Potomac Electric Power................................ 428,488
13,200 SCANA Corp............................................ 395,175
------------
2,267,484
------------
Utilities--Electric & Gas (0.9%)
28,800 LG&E Energy Corp...................................... 665,946
4,900 OGE Energy Corp....................................... 267,969
------------
933,915
------------
</TABLE>
Continued
B-61
<PAGE> 130
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Natural Gas (2.5%)
36,000 AGL Resources, Inc.................................... $ 735,750
17,100 NICOR, Inc............................................ 721,406
26,800 People's Energy Corp.................................. 1,055,250
------------
2,512,406
------------
Utilities--Telecommunications (5.9%)
33,800 Alltel Corp........................................... 1,387,913
10,800 Cincinnati Bell, Inc.................................. 334,800
38,900 Frontier Corp......................................... 936,031
33,500 GTE Corp.............................................. 1,750,374
32,000 Southern New England Telecommunications Corp.......... 1,610,000
------------
6,019,118
------------
Total Common Stocks (Cost $95,936,210) 100,673,006
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
<C> <S> <C>
INVESTMENT COMPANIES (0.7%)
18,888 Dreyfus Treasury Prime Fund.......................... $ 18,888
724,355 Federated U.S. Treasury Services Fund................ 724,355
------------
Total Investment Companies (Cost $743,243) 743,243
------------
Total Investments (Cost $96,679,453) (a)--100.0% 101,416,249
Liabilities in excess of other assets 0.0% (12,459)
------------
Total Net Assets--100.0% $101,403,790
============
</TABLE>
- -------
(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 approximately $214,353. Cost for federal income tax purposes differs
from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $ 7,422,288
Unrealized depreciation................................... (2,899,845)
-----------
Net unrealized appreciation............................... $ 4,522,443
===========
</TABLE>
(b) Represents non-income producing securities.
See Notes to Financial Statements.
B-62
<PAGE> 131
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<C> <S> <C>
MUNICIPAL BONDS (93.8%)
Indiana (3.1%)
100,000 Columbus, Multi-School Building Corp., 7.15%, 1/15/02,
Pre-Refunded 1/15/01 @ 102............................ $ 110,250
----------
Ohio (85.1%)
130,000 Butler County, Hospital Facilities Revenue, Middletown
Regional Hospital Project, 6.00%, 11/15/10,
Callable 5/15/04 @ 101, FGIC.......................... 140,238
150,000 Clermont County, Hospital Facilities Revenue, Mercy
Health System, 6.38%, 9/1/01, AMBAC................... 161,063
100,000 Clermont County, Waterworks Revenue, 6.63%, 12/1/16,
Pre-Refunded 12/1/01 @ 102, AMBAC..................... 110,750
250,000 Columbus, Sewer Revenue, 6.13%, 6/1/03, Callable 6/1/02
@ 102................................................. 275,312
175,000 Edgewood, City School District, GO, 6.30%, 12/1/02,
Callable 12/1/01 @ 102, FGIC.......................... 191,406
100,000 Franklin County, Hospital Revenue, Children's Hospital
Project, Series A, GO, 6.40%, 11/1/06,
Pre-Refunded 11/1/01 @ 102............................ 109,625
155,000 Hamilton County, Sewer System Revenue, Series A, 6.40%,
12/1/03, Callable 6/1/01 @ 102........................ 168,756
100,000 Mentor, GO, 5.25%, 12/1/09, Callable 12/1/06 @ 102..... 104,625
100,000 Montgomery County, Issue I, Series A, Limited GO,
6.55%, 9/1/06, Pre-Refunded 9/1/01
@ 100................................................. 108,000
160,000 Olentangy Local School District, Series A, GO, 5.70%,
12/1/05, Callable 12/1/04 @ 102....................... 174,200
100,000 Springboro City School District, GO, 6.60%, 12/1/02,
Pre-Refunded 12/1/01 @ 102............................ 110,500
95,000 State Building Authority, State Facilities, James
Rhodes Project, 6.25%, 6/1/11, Callable 6/1/01 @ 102,
MBIA-IBC.............................................. 101,650
100,000 State Building Authority, State Transportation
Facilities, Series A, 7.00%, 9/1/07, Callable 9/1/00 @
102, MBIA............................................. 108,875
155,000 State Housing Finance Agency, Single Family Mortgage
Revenue, Series D, 6.80%, 9/1/05, Callable 9/1/01 @
102,
GNMA Coll............................................. 165,463
100,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-B, 4.50%, 11/1/05....... 100,750
100,000 State Public Facilities Commission, Higher Education
Public Facilities, Series II-B, 4.50%, 11/1/08,
Callable 11/1/07 @ 100................................ 99,500
175,000 State Public Facilities Commission, Higher Educational
Facilities, Series B, 6.50%, 12/1/02,
Pre-Refunded 12/1/99 @ 102, AMBAC..................... 186,375
160,000 State Water Development Authority Revenue, 5.75%,
6/1/03, Callable 12/1/02 @ 102, MBIA.................. 171,600
200,000 University of Cincinnati, General Receipts, Series I-1,
6.95%, 6/1/00, Pre-Refunded 6/1/99
@ 102................................................. 212,000
200,000 University of Toledo, 7.00%, 6/1/03, Pre-Refunded
6/1/00 @ 102, MBIA.................................... 217,250
----------
3,017,938
----------
Oregon (5.6%)
185,000 Tri-County Metropolitan Transportation District, Light
Rail Extension, Series A, GO, 5.70%, 7/1/04,
Callable 7/1/02 @ 101................................. 198,875
----------
Total Municipal Bonds (Cost $3,104,427) 3,327,063
----------
</TABLE>
Continued
B-63
<PAGE> 132
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------- ----------
INVESTMENT COMPANIES (5.2%)
<C> <S> <C>
100,000 Dreyfus Municipal Money Market Fund................. $ 100,000
85,042 Federated Tax Free Money Market Fund................ 85,042
----------
Total Investment Companies (Cost $185,042) 185,042
----------
Total Investments (Cost $3,289,469) (a)--99.0% 3,512,105
Other assets in excess of liabilities 1.0% 34,070
----------
Total Net Assets--100.0% $3,546,175
==========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $222,636
Unrealized depreciation....................................... 0
--------
Net unrealized appreciation................................... $222,636
========
</TABLE>
AMBAC--Insured by AMBAC Indemnity Corp.
FGIC--Insured by Financial Guaranty Insurance Corp.
GNMA--Government National Mortgage Assoc.
GO--General Obligation.
MBIA--Insured by Municipal Bond Insurance Assoc.
See Notes to Financial Statements.
B-64
<PAGE> 133
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Balanced Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (64.0%)
Aerospace/Defense (0.8%)
3,400 Boeing Co.............................................. $ 166,388
-----------
Apparel/Footwear (0.8%)
4,100 Nike, Inc., Class B.................................... 160,925
-----------
Automotive (1.0%)
4,350 Ford Motor Co.......................................... 211,791
-----------
Banks (4.3%)
4,600 BankBoston Corp........................................ 432,112
1,500 Chase Manhattan Corp................................... 164,250
2,650 J.P. Morgan & Co....................................... 299,118
-----------
895,480
-----------
Beverages (2.3%)
4,000 Anheuser-Busch Cos., Inc............................... 176,000
4,600 Coca-Cola Co........................................... 306,475
-----------
482,475
-----------
Chemicals--General (0.9%)
3,000 E.I. du Pont de Nemours & Co........................... 180,188
-----------
Chemicals--Specialty (0.7%)
3,500 Praxair, Inc........................................... 157,500
-----------
Computers & Peripherals (6.0%)
8,000 Cisco Systems, Inc.(b)................................. 445,999
7,000 Compaq Computer Corp................................... 395,062
2,400 Hewlett-Packard Co..................................... 150,000
7,500 Sun Microsystems, Inc.(b).............................. 299,063
-----------
1,290,124
-----------
Consumer Goods & Services (2.3%)
6,000 Procter & Gamble Co.................................... 478,875
-----------
Cosmetics & Toiletries (2.7%)
4,400 Avon Products, Inc..................................... 270,050
3,000 Gillette Co............................................ 301,313
-----------
571,363
-----------
Diversified (2.0%)
5,600 General Electric Co.................................... 410,900
-----------
Financial Services (4.5%)
7,000 Federal National Mortgage Assoc........................ 399,437
3,200 FINOVA Group, Inc...................................... 159,000
2,750 SLM Holding Corp....................................... 382,593
-----------
941,030
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Heavy Machinery (2.7%)
3,400 Caterpillar, Inc....................................... $ 165,113
6,800 Deere & Co............................................. 396,525
-----------
561,638
-----------
Hotels & Motels (1.3%)
12,000 Mirage Resorts, Inc.(b)................................ 273,000
-----------
Insurance (2.0%)
10,050 SunAmerica, Inc........................................ 429,638
-----------
Medical Supplies (0.9%)
2,800 Johnson & Johnson...................................... 184,450
-----------
Newspapers (0.9%)
2,800 New York Times Co., Class A............................ 185,150
-----------
Oil--Integrated Companies (5.6%)
4,600 Amoco Corp............................................. 391,574
3,500 British Petroleum PLC, ADR............................. 278,906
4,600 Exxon Corp............................................. 281,463
4,000 Texaco, Inc............................................ 217,500
-----------
1,169,443
-----------
Pharmaceuticals (5.8%)
4,000 Bristol-Myers Squibb Co................................ 378,500
4,900 Merck & Co., Inc....................................... 520,624
4,600 Pfizer, Inc............................................ 342,988
-----------
1,242,112
-----------
Real Estate Investment Trusts (1.6%)
17,000 Health & Retirement Property Trust..................... 340,000
-----------
Restaurants (1.4%)
12,150 Wendy's International, Inc............................. 292,359
-----------
Rubber & Rubber Products (0.8%)
2,550 Goodyear Tire & Rubber Co.............................. 162,244
-----------
Semiconductors (1.7%)
5,000 Intel Corp............................................. 351,250
-----------
Software & Computer Services (2.1%)
3,150 Computer Associates International, Inc................. 166,556
2,150 Microsoft Corp.(b)..................................... 277,888
-----------
444,444
-----------
Steel (0.6%)
8,000 Worthington Industries, Inc............................ 132,000
-----------
Telecommunications (1.0%)
5,500 Ericsson (L.M.) Telefonaktiebolaget, Sponsored ADR..... 205,219
-----------
</TABLE>
Continued
B-65
<PAGE> 134
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Balanced Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Tobacco & Tobacco Products (0.8%)
3,900 Philip Morris Cos., Inc............................... $ 176,719
-----------
Tools & Hardware Manufacturing (1.0%)
5,400 Black & Decker Corp................................... 210,938
-----------
Utilities--Electric (2.3%)
6,000 CINergy Corp.......................................... 229,875
4,500 Duke Energy Corp...................................... 249,188
-----------
479,063
-----------
Utilities--Telecommunications (3.2%)
14,600 Cincinnati Bell, Inc.................................. 452,600
4,300 GTE Corp.............................................. 224,675
-----------
677,275
-----------
Total Common Stocks (Cost $10,610,807) 13,463,981
-----------
CORPORATE BONDS (6.6%)
Banks (2.0%)
400,000 Chase Capital I, Series A, 7.67%, 12/1/26, Callable
12/1/06 @ 103.84, Guaranteed by Chase Manhattan
Corp................................................. 414,000
-----------
Brokerage Services (0.8%)
163,000 Merrill Lynch & Co., Inc., 9.00%, 5/1/98.............. 164,566
-----------
Financial Services (2.9%)
615,000 Green Tree Financial Corp., Series 1997-6, Class A3,
6.32%, 1/15/29 ABS................................... 616,901
-----------
Retail--Department Stores (0.9%)
200,000 Sears Roebuck & Co., Series 7, 5.82%, 2/22/99 MTN..... 199,500
-----------
Total Corporate Bonds (Cost $1,384,366) 1,394,967
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (7.2%)
Federal Home Loan Bank (1.4%)
300,000 6.04%, 2/14/01, Callable 2/14/98 @ 100................. $ 298,884
-----------
Federal Home Loan Mortgage Corp. (1.9%)
410,000 5.69% 11/29/00, Continuously Callable @ 100............ 406,946
-----------
Federal National Mortgage Assoc. (3.9%)
500,000 6.89%, 7/12/04, Callable 7/12/00 @ 100, MTN............ 505,380
300,000 6.95%, 11/13/06, Callable 11/13/01 @ 100............... 306,750
-----------
812,130
-----------
Total U.S. Government Agencies (Cost $1,505,941) 1,517,960
-----------
U.S. TREASURY NOTES (18.2%)
1,000,000 5.75%, 12/31/98........................................ 1,001,520
700,000 6.25%, 5/31/00......................................... 708,512
300,000 6.25%, 10/31/01........................................ 304,956
300,000 6.38%, 8/15/02......................................... 307,668
1,000,000 5.88%, 9/30/02......................................... 1,005,220
500,000 5.75%, 8/15/03......................................... 500,115
-----------
Total U.S. Treasury Notes (Cost $3,779,303) 3,827,991
-----------
INVESTMENT COMPANIES (3.7%)
777,276 Federated U.S. Treasury Services Fund.................. 777,276
-----------
Total Investment Companies (Cost $777,276) 777,276
-----------
Total Investments (Cost $18,057,693)(a)--99.7% 20,982,175
Other assets in excess of liabilities 0.3% 63,673
-----------
Total Net Assets--100.0% $21,045,848
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $3,102,778
Unrealized depreciation.................................... (178,296)
----------
Net unrealized appreciation................................ $2,924,482
==========
</TABLE>
(b) Represents non-income producing securities.
ABS--Asset Backed Security
ADR--American Depositary Receipt
MTN--Medium Term Note
PLC--Public Liability Co.
See Notes to Financial Statements.
B-66
<PAGE> 135
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (85.1%)
Advertising (1.3%)
7,000 Catalina Marketing Corp. (b)........................... $ 323,750
-----------
Aerospace/Defense (1.8%)
17,500 BE Aerospace, Inc. (b)................................. 468,125
-----------
Apparel/Footwear (3.1%)
18,600 Jones Apparel Group, Inc. (b).......................... 799,800
-----------
Automotive Parts (2.1%)
16,000 Gentex Corp. (b)....................................... 430,000
10,000 Simpson Industries, Inc................................ 117,500
-----------
547,500
-----------
Banks (7.3%)
20,000 Colonial BancGroup, Inc................................ 688,750
10,920 HUBCO, Inc............................................. 427,245
17,000 Sterling Bancorp....................................... 408,000
12,000 Vermont Financial Services Corp........................ 333,000
-----------
1,856,995
-----------
Building Materials (0.7%)
4,500 Medusa Corp............................................ 188,156
-----------
Chemicals--General (1.5%)
33,000 CFC International, Inc. (b)............................ 387,750
-----------
Chemicals--Specialty (0.6%)
6,000 Cabot Corp............................................. 165,750
-----------
Commercial Services (2.9%)
10,000 Alternative Resources Corp. (b)........................ 230,625
10,000 Healthcare Compare Corp. (b) (c)....................... 511,250
-----------
741,875
-----------
Computers & Peripherals (1.3%)
3,200 Adaptec, Inc. (b)...................................... 118,800
2,000 Complete Business Solutions, Inc. (b).................. 87,000
3,500 Comverse Technology, Inc. (b).......................... 136,500
-----------
342,300
-----------
Cosmetics & Toiletries (1.5%)
15,000 Nature's Sunshine Products, Inc........................ 390,000
-----------
Electronic & Electrical--General (5.3%)
15,000 ADFlex Solutions, Inc. (b)............................. 241,875
18,000 American Power Conversion Corp. (b).................... 425,250
15,000 Chicago Miniature Lamp, Inc. (b)....................... 506,250
10,000 Nimbus CD International, Inc. (b)...................... 107,500
5,000 Optical Coating Laboratory, Inc........................ 68,750
-----------
1,349,625
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Environmental Control (1.6%)
13,400 U.S. Filter Corp. (b).................................. $ 401,163
-----------
Financial Services (1.5%)
7,000 Astoria Financial Corp................................. 390,250
-----------
Heavy Machinery (2.0%)
8,000 AGCO Corp.............................................. 234,000
19,250 JLG Industries, Inc.................................... 271,906
-----------
505,906
-----------
Hotels & Motels (0.9%)
6,500 MGM Grand, Inc. (b).................................... 234,406
-----------
Industrial Goods & Services (0.7%)
7,900 Federal Signal Corp.................................... 170,838
-----------
Insurance (1.0%)
4,000 Life Re Corp........................................... 260,750
-----------
Leisure--Recreation, Gaming (3.2%)
12,000 Callaway Golf Co....................................... 342,750
22,000 Cannondale Corp. (b)................................... 478,500
-----------
821,250
-----------
Manufactured Housing (1.2%)
9,000 National R.V. Holdings, Inc. (b)....................... 295,875
-----------
Medical Supplies (3.5%)
11,000 STERIS Corp. (b)....................................... 530,750
12,000 U.S. Surgical Corp..................................... 351,750
-----------
882,500
-----------
Metals--Fabrication (0.3%)
2,200 Wolverine Tube, Inc. (b)............................... 68,200
-----------
Oilfield Services & Equipment (2.2%)
23,350 Tuboscope, Inc. (b).................................... 561,859
-----------
Pharmaceuticals (4.1%)
8,000 Jones Medical Industries, Inc.......................... 306,000
22,000 NBTY, Inc. (b)......................................... 734,250
-----------
1,040,250
-----------
Precision Instruments & Related (0.9%)
6,600 Millipore Corp......................................... 223,988
-----------
Printing & Publishing (0.6%)
5,000 Multi-Color Corp. (b).................................. 31,875
5,000 World Color Press, Inc. (b)............................ 132,813
-----------
164,688
-----------
</TABLE>
Continued
B-67
<PAGE> 136
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Real Estate Investment Trusts (14.4%)
4,200 American Health Properties, Inc........................ $ 115,763
4,200 Amli Residential Properties Trust...................... 93,450
3,200 CarrAmerica Realty Corp................................ 101,400
2,800 Chelsea GCA Realty, Inc................................ 106,925
20,000 Duke Realty Investments, Inc........................... 484,999
3,500 Essex Property Trust, Inc.............................. 122,500
2,700 FelCor Suite Hotels, Inc............................... 95,850
8,000 Health & Retirement Property Trust..................... 159,999
2,800 Health Care Property Investors, Inc.................... 105,875
2,900 Highwoods Properties, Inc.............................. 107,844
10,000 Jameson Inns, Inc...................................... 116,875
4,000 JP Realty, Inc......................................... 103,750
3,000 Mack-Cali Realty Corp.................................. 123,000
4,500 Manufactured Home Communities, Inc..................... 121,500
8,000 National Golf Properties, Inc.......................... 262,499
3,000 OMEGA Healthcare Investors, Inc........................ 115,875
5,000 Pacific Gulf Properties, Inc........................... 118,750
3,000 Realty Income Corp..................................... 76,313
4,400 Reckson Associates Realty Corp......................... 111,650
4,200 Security Capital Pacific Trust......................... 101,850
3,300 Shurgard Storage Centers, Inc. Class A................. 95,700
3,200 Sovran Self Storage, Inc............................... 103,800
4,450 Storage Trust Realty................................... 117,091
8,500 Summit Properties, Inc................................. 179,562
5,000 Tanger Factory Outlet Centers, Inc..................... 152,813
3,400 Urban Shopping Centers, Inc............................ 118,575
6,000 Walden Residential Properties, Inc..................... 153,000
-----------
3,667,208
-----------
Restaurants (3.1%)
6,000 Papa John's International, Inc. (b).................... 209,250
24,000 Wendy's International, Inc............................. 577,500
-----------
786,750
-----------
Software & Computer Services (1.6%)
5,000 National Data Corp..................................... 180,625
10,000 Structural Dynamics Research Corp. (b)................. 225,000
-----------
405,625
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Steel (2.7%)
9,000 Carpenter Technology Corp.............................. $ 432,563
16,400 Worthington Industries, Inc............................ 270,600
-----------
703,163
-----------
Telecommunications (1.3%)
16,000 Aspect Telecommunications Corp. (b).................... 334,000
-----------
Tobacco & Tobacco Products (0.5%)
5,000 DIMON, Inc............................................. 131,250
-----------
Tools & Hardware Manufacturing (1.2%)
8,000 Black & Decker Corp.................................... 312,500
-----------
Utilities--Telecommunications (4.8%)
20,000 Cincinnati Bell, Inc................................... 620,000
20,000 LCI International, Inc. (b)............................ 615,000
-----------
1,235,000
-----------
Wholesale Distribution (2.4%)
16,000 Tech Data Corp. (b).................................... 622,000
-----------
Total Common Stocks (Cost $17,743,856) 21,781,045
-----------
WARRANTS (0.0%)
Real Estate Investment Trusts (0.0%)
221 Security Capital Group, expire
9/19/98 (b)........................................... 1,160
-----------
Total Warrants (Cost $0) 1,160
-----------
INVESTMENT COMPANIES (1.4%)
19,744 Dreyfus Treasury Prime Fund............................ 19,744
325,747 Federated U.S. Treasury Services Fund.................. 325,747
-----------
Total Investment Companies (Cost $345,491) 345,491
-----------
Total Investments (Cost $18,089,347) (a)--86.5% 22,127,696
Other assets in excess of liabilities 13.5% 3,449,883
-----------
Total Net Assets--100.0% $25,577,579
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $4,517,684
Unrealized depreciation.................................... (479,335)
----------
Net unrealized appreciation................................ $4,038,349
==========
</TABLE>
(b) Represents non-income producing securities.
(c) Name changed to First Health Group Corp. 1/2/98.
See Notes to Financial Statements.
B-68
<PAGE> 137
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Large Company Select Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (94.0%)
Aerospace/Defense (1.8%)
13,600 Boeing Co.............................................. $ 665,550
-----------
Apparel/Footwear (1.5%)
5,500 Jones Apparel Group, Inc. (b).......................... 236,500
7,500 Nike, Inc., Class B.................................... 294,375
-----------
530,875
-----------
Automotive (1.9%)
14,150 Ford Motor Co.......................................... 688,928
-----------
Banks (4.1%)
6,900 BankAmerica Corp....................................... 503,700
5,400 BankBoston Corp........................................ 507,263
5,200 KeyCorp................................................ 368,225
1,600 Mellon Bank Corp....................................... 97,000
-----------
1,476,188
-----------
Beverages (2.7%)
11,600 Coca-Cola Co........................................... 772,850
6,000 PepsiCo, Inc........................................... 218,625
-----------
991,475
-----------
Chemicals--Specialty (1.2%)
10,000 Praxair, Inc........................................... 450,000
-----------
Commercial Services (0.5%)
2,800 Federal Express Corp. (b).............................. 170,975
-----------
Computers & Peripherals (9.2%)
17,775 Cisco Systems, Inc. (b)................................ 990,955
13,500 Compaq Computer Corp................................... 761,906
10,000 Hewlett-Packard Co..................................... 625,000
2,700 International Business Machines Corp................... 282,319
9,500 Quantum Corp. (b)...................................... 190,594
12,000 Sun Microsystems, Inc. (b)............................. 478,500
-----------
3,329,274
-----------
Consumer Goods & Services (2.6%)
11,600 Procter & Gamble Co.................................... 925,825
-----------
Cosmetics & Toiletries (3.4%)
4,900 Avon Products, Inc..................................... 300,738
9,200 Gillette Co............................................ 924,025
-----------
1,224,763
-----------
Diversified (3.3%)
16,100 General Electric Co.................................... 1,181,338
-----------
Electrical Equipment (1.0%)
6,200 Emerson Electric Co.................................... 349,913
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Entertainment (1.5%)
5,600 The Walt Disney Co..................................... $ 554,750
-----------
Financial Services (7.6%)
8,000 American Express Co.................................... 714,000
15,200 Federal National Mortgage Assoc........................ 867,349
5,200 FINOVA Group, Inc...................................... 258,375
2,900 SLM Holding Corp....................................... 403,463
8,998 Travelers Group, Inc................................... 484,767
-----------
2,727,954
-----------
Food Processing & Packaging (2.3%)
7,800 CPC International, Inc. (c)............................ 840,450
-----------
Heavy Machinery (3.6%)
6,000 Caterpillar, Inc....................................... 291,375
17,000 Deere & Co............................................. 991,313
-----------
1,282,688
-----------
Hotels & Motels (1.1%)
18,200 Mirage Resorts, Inc. (b)............................... 414,050
-----------
Insurance (4.9%)
6,600 American International Group, Inc...................... 717,749
3,200 Chubb Corp............................................. 242,000
4,800 Marsh & McLennan Cos., Inc............................. 357,900
10,650 SunAmerica, Inc........................................ 455,288
-----------
1,772,937
-----------
Medical Supplies (0.9%)
5,000 Johnson & Johnson...................................... 329,375
-----------
Mining (0.9%)
4,000 Potash Corp. of Saskatchewan, Inc...................... 332,000
-----------
Newspapers (1.4%)
8,000 Gannett Co., Inc....................................... 494,500
-----------
Oil--Integrated Companies (6.0%)
3,100 Amoco Corp............................................. 263,888
11,600 Exxon Corp............................................. 709,774
7,200 Mobil Corp............................................. 519,750
12,400 Royal Dutch Petroleum Co.--New York Shares............. 671,925
-----------
2,165,337
-----------
Oilfield Services & Equipment (2.2%)
9,800 Schlumberger, Ltd...................................... 788,900
-----------
Pharmaceuticals (6.9%)
6,100 Bristol-Myers Squibb Co................................ 577,213
</TABLE>
Continued
B-69
<PAGE> 138
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Large Company Select Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Pharmaceuticals, continued
8,300 Merck & Co., Inc....................................... $ 881,875
13,700 Pfizer, Inc............................................ 1,021,505
-----------
2,480,593
-----------
Real Estate Investment Trusts (2.1%)
19,000 Duke Realty Investments, Inc........................... 460,750
6,000 Equity Residential Properties Trust.................... 303,375
-----------
764,125
-----------
Restaurants (2.2%)
32,325 Wendy's International, Inc............................. 777,820
-----------
Retail (0.7%)
6,600 Wal-Mart Stores, Inc................................... 260,288
-----------
Rubber & Rubber Products (2.0%)
11,100 Goodyear Tire & Rubber Co.............................. 706,238
-----------
Semiconductors (3.4%)
17,500 Intel Corp............................................. 1,229,375
-----------
Software & Computer Services (4.0%)
12,000 Computer Associates International, Inc................. 634,500
6,200 Microsoft Corp. (b).................................... 801,350
-----------
1,435,850
-----------
Steel (0.9%)
3,000 Carpenter Technology Corp.............................. 144,188
10,250 Worthington Industries, Inc............................ 169,125
-----------
313,313
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Telecommunications (2.1%)
14,000 Ericsson (L.M.) Telefonaktiebolaget, Sponsored ADR..... $ 522,375
3,000 Lucent Technologies, Inc............................... 239,625
-----------
762,000
-----------
Tobacco & Tobacco Products (1.0%)
7,800 Philip Morris Cos., Inc................................ 353,438
-----------
Tools & Hardware Manufacturing (0.4%)
4,000 Black & Decker Corp.................................... 156,250
-----------
Utilities--Telecommunications (2.7%)
31,800 Cincinnati Bell, Inc................................... 985,800
-----------
Total Common Stocks (Cost $17,906,174) 33,913,135
-----------
INVESTMENT COMPANIES (5.9%)
1,263,213 Dreyfus Treasury Prime Fund............................ 1,263,213
851,565 Federated U.S. Treasury Services Fund.................. 851,565
-----------
Total Investment Companies (Cost $2,114,778) 2,114,778
-----------
Total Investments (Cost $20,020,952) (a)--99.9% 36,027,913
Other assets in excess of liabilities 0.1% 49,676
-----------
Total Net Assets--100.0% $36,077,589
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $16,403,931
Unrealized depreciation................................... (396,970)
-----------
Net unrealized appreciation............................... $16,006,961
===========
</TABLE>
(b) Represents non-income producing securities.
(c) Name changed to BestFoods 1/2/98.
See Notes to Financial Statements.
B-70
<PAGE> 139
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
corporation on March 27, 1990, and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Fund is authorized to issue seven series of shares of
capital stock, representing interests in different portfolios of securities
as follows: The Riverfront U.S. Government Securities Money Market Fund, The
Riverfront U.S. Government Income Fund, The Riverfront Income Equity Fund,
The Riverfront Ohio Tax-Free Bond Fund, The Riverfront Balanced Fund
(formerly the Riverfront Flexible Growth Fund), The Riverfront Stock
Appreciation Fund and The Riverfront Large Company Select Fund (each, a
"Portfolio"; and collectively, the "Portfolios").
The investment objective of the U.S. Government Securities Money Market Fund
is to seek current income from U.S. Government short-term securities while
preserving capital and maintaining liquidity. The investment objective of the
U.S. Government Income Fund is to seek a high level of current income,
consistent with preservation of capital, by investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and in high quality fixed rate and adjustable rate
mortgaged back securities and other asset-backed securities. The investment
objective of the Income Equity Fund is to seek a high level of investment
income, with capital appreciation as a secondary objective, through
investment primarily in income-producing equity securities of U.S. issuers.
The investment objective of the Ohio Tax-Free Bond Fund is to seek income
exempt from federal and Ohio state income taxes and preservation of capital.
The investment objective of the Balanced Fund is to seek long-term growth of
capital with some current income as a secondary objective. The investment
objective of the Stock Appreciation Fund is to seek capital growth. The
investment objective of the Large Company Select Fund is to seek long term
growth of capital with some current income as a secondary objective.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001 per share. Sales of shares of the Portfolios may be made to customers
of The Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, The Income Equity Fund, The Ohio Tax-Free
Bond Fund, The Balanced Fund, The Stock Appreciation Fund and The Large
Company Select Fund (collectively, "the variable net asset value funds") each
offer two share classes: Investor A Shares and Investor B Shares. The U.S.
Government Securities Money Market Fund (the "money market fund") offers only
the Investor A Shares. Investor A Shares of the variable net asset value
funds are subject to initial sales charges imposed at the time of purchase,
in accordance with the Portfolios' prospectus. Certain redemptions of the
Investor B Shares of the variable net asset value funds made within six years
of purchase are subject to varying contingent deferred sales charges in
accordance with the Portfolios' prospectus. Each share class has identical
rights and privileges, except with respect to (i) distribution and
shareholder services (12b-1) fees paid by each share class, (ii) voting
rights on matters specifically affecting a single share class, (iii) and the
exchange privileges.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Portfolios in preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
Continued
B-71
<PAGE> 140
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the money market fund are valued at amortized cost. Under
the amortized cost method, discount or premium is amortized on a constant
basis to the maturity of the security. In addition, the money market fund
may not (a) purchase any instrument with a remaining maturity greater than
397 days unless such investment is subject to an appropriate demand
feature, or (b) maintain a dollar-weighted-average portfolio maturity which
exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, commercial
paper and U.S. Government securities of the variable net asset value funds
are valued at their market values determined on the basis of the mean of
the latest available bid and asked quotations or closing sale prices on the
principal exchange (closing sales prices on the over-the-counter National
Market System) in which such securities are normally traded. Municipal
bonds are valued by using market quotations or independent services that
use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Short-term investments maturing in 60 days or less are
valued at amortized cost, which approximates market value. Investments in
investment companies are valued at their net asset values as reported by
such investment companies. Other securities for which quotations are not
readily available are valued at their fair value as determined in good
faith by Provident, as the investment adviser, or by the sub-investment
advisor, as the case may be, under the supervision of the Fund's Board of
Directors. The differences between the cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined on an
identified cost basis.
REPURCHASE AGREEMENTS:
The Portfolios may enter into repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser or the Portfolio's sub-investment adviser, as
applicable, deems creditworthy under guidelines approved by the Fund'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
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-72
<PAGE> 141
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and generally paid monthly for each variable net asset value fund
with the exception of the Stock Appreciation Fund which declares and pays
any dividends semi annually.
Distributable net realized capital gains, if any, are declared and
distributed at least annually for each of the Portfolios. Any taxable
distributions declared in December and paid in the following fiscal year
will be taxable to shareholders in the year declared.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require reclassification. Dividends and distributions to shareholders which
exceed net investment income and net realized capital gains for financial
reporting purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized gains. To the extent they
exceed net investment income and net realized gains for tax purposes, they
are reported as distributions of capital.
As of December 31, 1997, the following reclassifications have been made to
increase (decrease) the following components of net assets with offsetting
adjustments made to paid-in capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAINS
INCOME ON INVESTMENTS
-------------- ---------------
<S> <C> <C>
U.S. Government Income Fund.................... $423,663 $ 5,121
Income Equity Fund............................. $ -- $ 40,162
Ohio Tax-Free Fund............................. $157,244 $ --
Balanced Fund.................................. $ 3,313 $ (3,313)
Stock Appreciation Fund........................ $150,736 $(150,736)
Large Company Select Fund...................... $ 84,685 $ (76,753)
</TABLE>
FEDERAL INCOME TAXES:
It is the policy of each Portfolio to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in the Internal Revenue Code of 1986, as amended, 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.
EXPENSE ALLOCATIONS:
Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses of the Fund are
prorated to the Portfolios, generally on the basis of relative net assets.
Fees paid under a Portfolio's shareholder servicing or distribution plans
are borne by the specific class of shares to which they apply.
Continued
B-73
<PAGE> 142
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Income Fund........................ $ 41,906,699 $ 32,091,752
Income Equity Fund................................. $145,292,462 $146,249,889
Ohio Tax-Free Bond Fund............................ $ 301,373 $ 17,617,471
Balanced Fund...................................... $ 19,491,370 $ 20,305,049
Stock Appreciation Fund............................ $ 16,980,604 $ 28,878,942
Large Company Select Fund.......................... $ 11,725,461 $ 12,289,867
</TABLE>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND INCOME EQUITY FUND
----------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 3,965,162 $ 2,494,252 $ 7,333,378 $ 8,709,609
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 16,606,766 -- -- --
Dividends reinvested.. 447,813 440,531 19,742,254 10,845,880
Shares redeemed....... (5,969,304) (4,741,047) (16,662,273) (7,958,218)
------------- ------------- ------------ -----------
Change in net assets
from Investor A share
transactions......... $ 15,050,437 $ (1,806,264) $ 10,413,359 $11,597,271
============= ============= ============ ===========
Investor B Shares:
Proceeds from shares
issued............... $ 270,855 $ 372,835 $ 8,520,546 $ 3,928,456
Dividends reinvested.. 58,773 45,964 3,781,007 1,297,923
Shares redeemed....... (315,970) (349,650) (1,514,086) (420,101)
------------- ------------- ------------ -----------
Change in net assets
from Investor B share
transactions......... $ 13,658 $ 69,149 $ 10,787,467 $ 4,806,278
============= ============= ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 423,205 264,167 552,976 680,679
Issued in connection
with common trust
fund acquisition..... 1,761,057 -- -- --
Reinvested............ 47,635 46,735 1,674,497 898,119
Redeemed.............. (634,837) (502,013) (1,206,389) (624,637)
------------- ------------- ------------ -----------
Change in Investor A
Shares............... 1,597,060 (191,111) 1,021,084 954,161
============= ============= ============ ===========
Investor B Shares:
Issued................ 24,956 34,874 633,092 317,268
Reinvested............ 5,568 4,314 314,995 103,352
Redeemed.............. (29,761) (32,664) (109,730) (31,854)
------------- ------------- ------------ -----------
Change in Investor B
Shares............... 763 6,524 838,357 388,766
============= ============= ============ ===========
</TABLE>
Continued
B-74
<PAGE> 143
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO TAX-FREE FUND BALANCED FUND
-------------------------- --------------------------
<S> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 119,446 $ 39,457 $ 1,140,421 $ 5,979,948
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 11,399,841 -- -- --
Dividends reinvested.. 20,138 6,134 969,400 318,997
Shares redeemed....... (19,309,599) (340,435) (3,919,227) (5,316,451)
------------ ------------ ------------ ------------
Change in net assets
from Investor A share
transactions......... $ (7,770,174) $ (294,844) $ (1,809,406) $ 982,494
============ ============ ============ ============
Investor B Shares:
Proceeds from shares
issued............... $ 396,677 $ 592,591 $ 1,482,972 $ 5,648,362
Dividends reinvested.. 181,550 20,060 979,316 227,824
Shares redeemed....... (230,357) (248,303) (1,554,696) (1,218,260)
------------ ------------ ------------ ------------
Change in net assets
from Investor B share
transactions......... $ 347,870 $ 364,348 $ 907,592 $ 4,657,926
============ ============ ============ ============
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 14,309 3,737 91,585 531,651
Issued in connection
with common trust
fund acquisition..... 1,097,194 -- -- --
Reinvested............ 2,125 593 79,188 28,295
Redeemed.............. (1,872,553) (32,383) (316,498) (466,939)
------------ ------------ ------------ ------------
Change in Investor A
Shares............... (758,925) (28,053) (145,725) 93,007
============ ============ ============ ============
Investor B Shares:
Issued................ 34,793 55,795 115,832 485,748
Reinvested............ 18,823 1,897 77,517 19,547
Redeemed.............. (22,564) (23,572) (121,277) (104,208)
------------ ------------ ------------ ------------
Change in Investor B
Shares............... 31,052 34,120 72,072 401,087
============ ============ ============ ============
</TABLE>
Continued
B-75
<PAGE> 144
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
LARGE COMPANY
STOCK APPRECIATION FUND SELECT FUND
-------------------------- -------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997*
------------ ------------ -------------
<S> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued........ $ 3,009,538 $ 3,225,171 $ 2,486,334
Proceeds from shares issued in
connection with common
trust fund acquisition............ -- -- 27,813,338
Dividends reinvested............... 4,366,182 2,903,615 3,676,075
Shares redeemed.................... (13,898,332) (16,060,775) (3,937,879)
------------ ------------ -----------
Change in net assets from Investor
A share transactions.............. $ (6,522,612) $ (9,931,989) $30,037,868
============ ============ ===========
Investor B Shares:
Proceeds from shares issued........ $ 526,610 $ 483,957 $ 2,396,213
Dividends reinvested............... 214,709 65,586 263,596
Shares redeemed.................... (115,336) (105,940) (37,554)
------------ ------------ -----------
Change in net assets from Investor
B share transactions.............. $ 625,983 $ 443,603 $ 2,622,255
============ ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued............................. 307,000 307,057 205,316
Issued in connection with common
trust fund acquisition............ -- -- 2,781,335
Reinvested......................... 468,165 308,567 329,693
Redeemed........................... (1,436,813) (1,618,575) (352,190)
------------ ------------ -----------
Change in Investor A Shares........ (661,648) (1,002,951) 2,964,154
============ ============ ===========
Investor B Shares:
Issued............................. 52,468 66,446 198,193
Reinvested......................... 22,295 6,727 23,747
Redeemed........................... (11,801) (10,094) (3,405)
------------ ------------ -----------
Change in Investor B Shares........ 62,962 63,079 218,535
============ ============ ===========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
5. RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment of
the assets of the U.S. Government Securities Money Market Fund, the U.S.
Government Income Fund, the Income Equity Fund, the Ohio Tax-Free Bond Fund,
the Balanced Fund, the Stock Appreciation Fund and the Large Company Select
Fund. Under the terms of the Investment Advisory Agreement, Provident is
entitled to receive fees based on a percentage of the average net assets of
each Portfolio.
Continued
B-76
<PAGE> 145
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into a Sub-Investment Advisory Agreement with DePrince,
Race & Zollo, Inc. ("DRZ") for the Income Equity Fund. DRZ provides
investment advice to and supervises the investment program of that portion of
the assets of the Income Equity Fund allocated to DRZ by the Fund's Board of
Directors. Under the terms of the Sub-Investment Advisory Agreements, DRZ
receives from Provident fees calculated at 0.50% of average daily net assets
up to $55 million of the Income Equity Fund managed by DRZ and 0.55% of
average daily net assets above $55 million for this Portfolio managed by DRZ.
In addition to serving as Investment Adviser, Provident serves as custodian
and fund accountant to the Portfolios. Under the terms of the Custodian, Fund
Accounting and Recordkeeping Agreement, Provident is entitled to receive fees
based on a percentage of the average daily net assets of each Portfolio.
During the year ended December 31, 1997, Provident Securities & Investment
Company ("PSI"), an affiliate of Provident which is a registered broker
dealer, executed transactions to purchase and sell portfolio investments on
an agency basis on behalf of the Fund. The Fund paid PSI approximately
$92,057 that has been included in investments at cost, as commissions for
such transactions.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are affiliated,
serves the Fund as administrator, principal underwriter and distributor. Such
officers and the director are paid no fees directly by the Portfolios for
serving as officers and as director of the Fund. Under the terms of the
Administration Agreement, BISYS' fees are computed at 0.20% of the average
daily net assets of each Portfolio.
Provident also serves as transfer agent and shareholder servicing agent to
the Fund. BISYS Ohio served as sub-transfer agent for the Investor B Shares
through March 24, 1997. On March 25, 1997, Provident became the Transfer
Agent for all shares of the Fund. Under the terms of the Master Transfer and
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 Services Plan, each Portfolio is
authorized to pay compensation to banks and other financial institutions,
including Provident and BISYS or other providers for record keeping and/or
administrative support services. As of December 31, 1997, there were no
shareholder servicing agreements entered into on behalf of any of the
Portfolios.
The Fund has adopted an Investor A Distribution and Shareholder Service Plan
and Agreement ("Investor A Plan") and an Investor B Distribution and
Shareholder Services Plan and Agreement ("Investor B Plan"), each in
accordance with Rule 12b-1 under the 1940 Act. Pursuant to the Investor A
Plan, each Portfolio is authorized to pay or reimburse BISYS, as distributor
of Investor A Shares, a periodic amount, calculated at an annual rate not to
exceed 0.25% of the average daily net asset value of Investor A Shares of
each Portfolio. Pursuant to the Investor B Plan, each variable net asset
value fund is authorized to pay or reimburse BISYS, as distributor of
Investor B Shares, (a) a distribution fee in an amount not to exceed, on an
annual basis, 0.75% of the average daily net asset value of Investor B Shares
of that Portfolio and (b) a service fee in an amount not to exceed 0.25% of
the average daily net asset value of Investor B Shares of that Portfolio.
These fees may be used by BISYS to pay banks, broker dealers and other
Continued
B-77
<PAGE> 146
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
institutions, including Provident, or to reimburse BISYS or its affiliates,
to finance any activity which is principally intended to result in the sale
of shares or to compensate for providing shareholder services.
For the year ended December 31, 1997, BISYS received $279,254 from
commissions on sales of capital shares, of which $386 was reallowed to
brokers affiliated with Provident.
Provident and certain of its affiliates own shares in the U.S. Government
Income Fund. As of December 31, 1997, Provident owns $23,842,765 or 47% of
the Portfolio.
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, 1997:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- --------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions
(percentage of average net
assets).......................... 0.15% 0.40% 0.95%
Voluntary fee reductions.......... NA NA NA
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)...................... 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions
(percentage of average net
assets).......................... 0.25% 0.25% 0.25%
Voluntary fee reductions.......... $242,899 $29,297 $ 41,154
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)...................... NA 1.00% 1.00%
Custodian and Accounting Fees:.... $ 81,531 $55,655 $144,048
Transfer Agent Fees:.............. $ 33,896 $50,879 $ 96,037
</TABLE>
Continued
B-78
<PAGE> 147
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO
TAX-FREE BALANCED
BOND FUND FUND
--------- --------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee reductions (percentage of
average net assets)...................................... 0.50% 0.90%
Voluntary fee reductions.................................. $ 8,196 $20,662
ADMINISTRATION FEES:
Annual fee (percentage of average net assets)............. 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee reductions (percentage of
average net assets)...................................... 0.25% 0.25%
Voluntary fee reductions.................................. NA $10,678
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets)............. 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:............................ $13,711 $33,160
TRANSFER AGENT FEES:...................................... $39,534 $61,796
EXPENSE REIMBURSEMENTS:................................... $23,066 NA
</TABLE>
<TABLE>
<CAPTION>
STOCK
APPRECIATION LARGE COMPANY
FUND SELECT FUND
------------ -------------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............... 0.80% 0.80%
ADMINISTRATION FEES:
Annual fee (percentage of average net assets)..... 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee reductions
(percentage of average net assets)............... 0.25% 0.25%
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets)..... 100% 1.00%
CUSTODIAN AND ACCOUNTING FEES:.................... $42,139 $49,119
TRANSFER AGENT FEES:.............................. $118,492 $41,424
Expense reimbursements............................ NA NA
</TABLE>
NA--Not applicable
6. ACQUISITION OF COMMON TRUST FUNDS A, B, C, F-1 AND G
On January 2, 1997, the Large Company Select Fund issued Investor A shares in
a tax free conversion to acquire the assets and liabilities, including
distributions payable of $26,562, of the Common Trust A and Common Trust G of
The Provident Bank. The following is a summary of Investor A shares issued,
net assets acquired, net asset value per share and unrealized appreciation as
of the date acquired:
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 2,781
Net assets acquired (000)'s.......................................... $27,813
Net asset value...................................................... $ 10.00
Unrealized appreciation (000)'s...................................... $12,592
Net assets of mutual fund before acquisition......................... $ 0
</TABLE>
Continued
B-79
<PAGE> 148
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
6. ACQUISITION OF COMMON TRUST FUNDS A, B, C, F-1 AND G, CONTINUED:
On January 9, 1997, the Ohio Tax Free Fund issued Investor A shares in a tax
free conversion to acquire the assets and liabilities, including
distributions payable of $15,577, of the Common Trust Fund B of The Provident
Bank. The following is a summary of Investor A shares issued, net assets
acquired, net asset value per share and unrealized appreciation as of the
date acquired.
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 1,097
Net assets acquired (000)'s.......................................... $11,400
Net asset value...................................................... $ 10.39
Unrealized appreciation (000)'s...................................... $ 465
Net assets of mutual fund before acquisition......................... $11,624
</TABLE>
On January 23, 1997, the U.S. Government Income Fund issued Investor A shares
in a tax free conversion to acquire the assets and liabilities, including
distributions payable of $26,148, of the Common Trust Fund C and Common Trust
Fund F-1 of The Provident Bank. The following is a summary of Investor A
shares issued, net assets acquired, net asset value per share and unrealized
appreciation as of the date acquired.
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 1,761
Net assets acquired (000)'s.......................................... $16,607
Net asset value...................................................... $ 9.43
Unrealized appreciation (000)'s...................................... $ 392
Net assets of mutual fund before acquisition......................... $34,983
</TABLE>
7. SUBSEQUENT EVENTS
The Company has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of March 21, 1997 (the "Plan"), with The Riverfront
Funds, an Ohio business trust (the "Trust"), whereby each Fund of the Company
will become a separate series of an Ohio business trust rather than a
separate series of a Maryland corporation (the "Conversion").
The Conversion is subject to certain regulatory approvals and to approval by
the shareholders of the Funds as a special Shareholder Meeting which has been
adjourned to seek further proxies and is currently expected to be held in the
first quarter of 1998. If the shareholders approve the Conversion and the
necessary regulatory approval is obtained, it is expected that the Conversion
will take place.
8. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Riverfront Funds designates the following percentage of distributions
eligible for the dividends received deductions for the following funds:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
Income Equity Fund................................................. 12.79%
Balanced Fund...................................................... 39.26%
Stock Appreciation Fund............................................ 10.60%
</TABLE>
Continued
B-80
<PAGE> 149
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
9. EXEMPT-INTEREST INCOME DESIGNATIONS (UNAUDITED):
The Riverfront Funds designate the following exempt-interest dividends for
the taxable year ended December 31, 1997:
<TABLE>
<CAPTION>
TAX-
EXEMPT
DISTRIBUTION
------------
<S> <C>
Ohio Tax-Free Bond Fund......................................... $312,690
</TABLE>
10. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The accompanying table details distributions from mid-term and long-term
capital gains for the following Portfolios for the period ended December 31,
1997:
<TABLE>
<CAPTION>
MID-TERM LONG-TERM
28% 20%
---------- ----------
<S> <C> <C>
Income Equity Fund..................................... $3,522,442 $3,052,514
Ohio Tax-Free Fund..................................... $ 377,842 $ 219,421
Balanced Fund.......................................... $1,065,887 $ 486,992
Stock Appreciation Fund................................ $2,032,827 $ 291,201
Large Company Select Fund.............................. $2,117,560 $1,905,205
</TABLE>
At December 31, 1997, the following Portfolios have capital loss
carryforwards for tax purposes which are available to offset future capital
gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYFORWARD EXPIRES
------------ -------
<S> <C> <C>
U.S. Government Securities Money Market Fund............. $ 875 2002
U.S. Government Securities Money Market Fund............. $ 1,415 2003
U.S. Government Securities Money Market Fund............. $ 31 2005
U.S. Government Income Fund.............................. $552,136 2002
U.S. Government Income Fund.............................. $516,479 2003
</TABLE>
Under current tax law, capital losses realized October 31 may be deferred and
treated as occurring on the first day of the following fiscal year. The
following deferred losses will be treated as arising on the first day of the
fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
POST-OCTOBER
CAPITAL LOSSES
--------------
<S> <C>
U.S. Government Securities Money Market Fund................... $ 1,432
Income Equity Fund............................................. $119,866
</TABLE>
Continued
B-81
<PAGE> 150
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 (A) 1993 (A)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income... 0.049 0.046 0.050 0.040 0.030
-------- -------- -------- -------- --------
Distributions
Net investment income... (0.049) (0.046) (0.050) (0.040) (0.030)
-------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return............. 5.02% 4.89% 5.52% 3.78% 2.90%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $142,569 $181,017 $157,495 $149,374 $133,207
period (000)............
Ratio of expenses to 0.64% 0.59% 0.58% 0.51% 0.32%
average net assets......
Ratio of net investment 4.90% 4.78% 5.34% 3.70% 2.85%
income to average net
assets..................
Ratio of expenses to 0.79% 0.84% 0.83% 0.80% 0.42%
average net assets*.....
Ratio of net investment 4.75% 4.53% 5.09% 3.41% 2.75%
income to average net
assets*.................
</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)Audited by other auditors.
See Notes to Financial Statements.
B-82
<PAGE> 151
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
------------------------------------------------------------------------------------------
JANUARY 17, YEARS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO DECEMBER 31,
------------------------------------------- DECEMBER 31, DECEMBER 31, -------------------
1997 1996 1995 1995 (A) 1994 (E) 1993 (E)
--------------------- --------------------- ------------ ------------ -------- --------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.43 $10.64 $ 9.71 $10.95 $ 8.92 $10.00 $ 9.91 $ 9.76
------- ------ ------- ------ ------- ------ ------- -------
Investment Activities
Net investment income.. 0.49 0.48 0.52 0.49 0.54 0.43 0.54 0.51
Net realized and
unrealized gains
(losses) from
investments........... 0.14 0.14 (0.29) (0.31) 0.79 0.94 (0.99) 0.20
------- ------ ------- ------ ------- ------ ------- -------
Total from Investment
Activities............ 0.63 0.62 0.23 0.18 1.33 1.37 (0.45) 0.71
------- ------ ------- ------ ------- ------ ------- -------
Distributions
Net investment income.. (0.50) (0.49) (0.51) (0.49) (0.54) (0.42) (0.54) (0.50)
In excess of net
investment income..... (0.08) (0.09) -- -- -- -- -- (0.06)
------- ------ ------- ------ ------- ------ ------- -------
Total Distributions.... (0.58) (0.58) (0.51) (0.49) (0.54) (0.42) (0.54) (0.56)
------- ------ ------- ------ ------- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD.......... $ 9.48 $10.68 $ 9.43 $10.64 $ 9.71 $10.95 $ 8.92 $ 9.91
======= ====== ======= ====== ======= ====== ======= =======
Total Return (excludes
sales/redemption
charge)................ 6.94% 6.07% 2.51% 1.72% 15.22% 13.96%(d) (4.64)% 7.38%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $49,017 $1,309 $33,694 $1,296 $36,538 $1,263 $32,721 $30,078
Ratio of expenses to
average net assets..... 1.14% 1.95% 1.11% 1.96% 1.09% 1.90%(b) 0.86% 0.65%
Ratio of net investment
income to average net
assets................. 5.40% 4.56% 5.45% 4.59% 5.74% 4.80%(b) 5.78% 5.05%
Ratio of expenses to
average net assets*.... 1.20% 1.95% 1.20% 1.96% 1.18% 1.90%(b) 1.14% 1.08%
Ratio of net investment
income to average net
assets*................ 5.34% 4.56% 5.36% 4.59% 5.65% 4.80%(b) 5.49% 4.62%
Portfolio turnover rate
(c).................... 71% 71% 53% 53% 75% 75% 83% 220%
</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) Annualized.
(c) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(e) Audited by other auditors.
See Notes to Financial Statements.
B-83
<PAGE> 152
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
INCOME EQUITY FUND
----------------------------------------------------------------------------------------
JANUARY 17, YEARS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO DECEMBER 31,
------------------------------------------- DECEMBER 31 DECEMBER 31, ------------------
1997 1996 1995 1995 (A) 1994 (E) 1993 (E)
--------------------- --------------------- ----------- ------------ -------- --------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.92 $ 12.16 $ 11.70 $ 11.85 $ 10.15 $10.00 $ 10.63 $ 10.78
------- ------- ------- ------- ------- ------ ------- -------
Investment Activities
Net investment income.. 0.16 0.06 0.21 0.12 0.27 0.13 0.32 0.28
Net realized and
unrealized gains
from investments...... 3.11 3.17 2.12 2.21 2.89 2.78 -- 1.01
------- ------- ------- ------- ------- ------ ------- -------
Total from Investment
Activities............ 3.27 3.23 2.33 2.33 3.16 2.91 0.32 1.29
------- ------- ------- ------- ------- ------ ------- -------
Distributions
Net investment income.. (0.16) (0.06) (0.21) (0.12) (0.27) (0.13) (0.31) (0.27)
In excess of net
investment income..... -- -- -- -- -- -- -- (0.03)
Net realized gains..... (3.35) (3.35) (1.90) (1.90) (1.34) (0.93) (0.49) (1.14)
------- ------- ------- ------- ------- ------ ------- -------
Total Distributions.... (3.51) (3.41) (2.11) (2.02) (1.61) (1.06) (0.80) (1.44)
------- ------- ------- ------- ------- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD.......... $ 11.68 $ 11.98 $ 11.92 $ 12.16 $ 11.70 $11.85 $ 10.15 $ 10.63
======= ======= ======= ======= ======= ====== ======= =======
Total Return (excludes
sales/redemption
charge)................ 28.20% 27.19% 19.88% 19.67% 31.45% 29.28%(d) 3.08% 12.11%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $83,841 $17,563 $73,368 $ 7,632 $60,845 $2,833 $34,965 $24,387
Ratio of expenses to
average net assets..... 1.75% 2.55% 1.76% 2.48% 1.49% 2.46%(b) 1.30% 1.47%
Ratio of net investment
income to
average net assets..... 1.21% 0.40% 1.62% 0.88% 2.27% 1.12%(b) 2.93% 2.55%
Ratio of expenses to
average net assets*.... 1.80% 2.55% 1.85% 2.54% 1.74% 2.51%(b) 1.58% 1.64%
Ratio of net investment
income to
average net assets*.... 1.16% 0.40% 1.53% 0.82% 2.02% 1.07%(b) 2.65% 2.38%
Portfolio turnover rate
(c).................... 157% 157% 166% 166% 180% 180% 119% 145%
Average commission rate
paid (f)............... $0.0544 $0.0544 $0.0541 $0.0541
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(e) Audited by other auditors.
(f) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
B-84
<PAGE> 153
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
-------------------------------------------------------------------------------------
JANUARY 17, FROM AUGUST 1,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO 1994 THROUGH
------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995 (A) 1994 (A)(E)
--------------------- --------------------- ------------ ------------ --------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.41 $10.64 $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
------ ------ ------- ------ ------- ------ -------
Investment Activities
Net investment income.. 0.42** 0.35** 0.40 0.32 0.39 0.27 0.12
Net realized and
unrealized gains
(losses) from
investments........... -- (0.02) (0.10) (0.09) 0.67 0.73 (0.17)
------ ------ ------- ------ ------- ------ -------
Total from Investment
Activities............ 0.42 0.33 0.30 0.23 1.06 1.00 (0.05)
------ ------ ------- ------ ------- ------ -------
Distributions
Net investment income.. (0.38) (0.31) (0.40) (0.32) (0.38) (0.27) (0.12)
In excess of net
investment income..... (0.09) (0.09) -- -- -- -- --
Net realized gains..... (1.35) (1.35) -- -- -- -- --
Tax return of capital.. (0.03) (0.03) -- -- -- -- --
------ ------ ------- ------ ------- ------ -------
Total Distributions.... (1.85) (1.78) (0.40) (0.32) (0.38) (0.27) (0.12)
------ ------ ------- ------ ------- ------ -------
NET ASSET VALUE,
END OF PERIOD.......... $ 8.98 $ 9.19 $ 10.41 $10.64 $ 10.51 $10.73 $ 9.83
====== ====== ======= ====== ======= ====== =======
Total Return (excludes
sales/redemption
charge)................ 4.27% 3.24% 2.95% 2.21% 10.96% 10.10%(b) (0.47)%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $2,411 $1,135 $10,693 $ 984 $11,091 $ 626 $10,190
Ratio of expenses to
average net assets..... 1.34% 2.14% 1.45% 2.25% 1.49% 2.27%(c) 1.08%(c)
Ratio of net investment
income to
average net assets..... 4.19% 3.39% 3.87% 3.07% 3.77% 3.01%(c) 2.92%(c)
Ratio of expenses to
average net assets*.... 1.96% 2.77% 1.55% 2.36% 1.64% 2.41%(c) 1.44%(c)
Ratio of net investment
income to
average net assets*.... 3.57% 2.76% 3.77% 2.96% 3.62% 2.87%(c) 2.56%(c)
Portfolio turnover rate
(d).................... 4% 4% 6% 6% 34% 34% 29%
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
** Calculated using average shares outstanding throughout the year.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(e) Audited by other auditors.
See Notes to Financial Statements.
B-85
<PAGE> 154
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
BALANCED FUND
----------------------------------------------------------------------------------------
JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO 1994 THROUGH
------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995 (A) 1994 (A)(F)
--------------------- --------------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.69 $ 12.04 $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------- ------- ------ ------ ------
Investment Activities
Net investment income.. 0.23 0.12 0.31 0.26 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments........... 1.71 1.77 0.33 0.34 1.66 1.79 (0.18)
------- ------- ------- ------- ------ ------ ------
Total from Investment
Activities............. 1.94 1.89 0.64 0.60 2.01 2.04 (0.08)
------- ------- ------- ------- ------ ------ ------
Distributions
Net investment income.. (0.23) (0.12) (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains..... (1.10) (1.10) -- -- (0.10) (0.10) --
------- ------- ------- ------- ------ ------ ------
Total Distributions.... (1.33) (1.22) (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------- ------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.......... $ 12.30 $ 12.71 $ 11.69 $ 12.04 $11.36 $11.70 $ 9.79
======= ======= ======= ======= ====== ====== ======
Total Return (excludes
sales/redemption
charge)................ 16.77% 15.82% 5.76% 5.27% 20.83% 20.53%(b) (0.82)%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $ 9,563 $11,483 $10,786 $10,008 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets..... 1.86% 2.72% 1.70% 2.54% 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets................. 1.80% 0.93% 2.87% 2.03% 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets*.... 2.07% 2.82% 1.94% 2.68% 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets*................ 1.59% 0.83% 2.63% 1.89% 3.09% 1.89%(d) 0.88%(d)
Portfolio turnover rate
(e).................... 102% 102% 98% 98% 13% 13% 1%
Average commission rate
paid (g)............... $0.0627 $0.0627 $0.0891 $0.0891
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
B-86
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[This Page Intentionally Left Blank]
B-87
<PAGE> 156
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
YEAR ENDED DECEMBER 31, 1995 THROUGH 1995 THROUGH
------------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 (B) 1995 (A)(B)
----------------------- ----------------------- --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.43 $ 9.77 $ 9.50 $ 9.91 $ 10.00 $10.00
------- ------- ------- ------- ------- ------
Investment Activities
Net investment loss.... (0.04) (0.08) (0.14) (0.15) (0.01) (0.01)
Net realized and
unrealized gains
(losses) from
investments........... 1.75 1.77 1.10 1.04 (0.12) (0.08)
------- ------- ------- ------- ------- ------
Total from Investment
Activities............ 1.71 1.69 0.96 0.89 (0.13) (0.09)
------- ------- ------- ------- ------- ------
Distributions
Net realized gains..... (1.97) (1.97) (1.03) (1.03) (0.37) --
------- ------- ------- ------- ------- ------
NET ASSET VALUE,
END OF PERIOD.......... $ 9.17 $ 9.49 $ 9.43 $ 9.77 $ 9.50 $ 9.91
======= ======= ======= ======= ======= ======
Total Return (excludes
sales/redemption
charge)................ 18.79% 17.86% 10.17% 9.05% (1.20)%(c) (0.90)%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $24,312 $ 1,265 $31,227 $ 687 $40,995 $ 72
Ratio of expenses to
average net assets..... 2.11% 2.86% 1.91% 2.64% 1.76%(d) 2.30%(d)
Ratio of net investment
loss to average net
assets................. (0.43)% (1.20)% (1.25)% (2.01)% (0.49)%(d) (1.69)%(d)
Ratio of expenses to
average net assets*.... (g) (g) (g) (g) 1.77%(d) 2.39%(d)
Ratio of net investment
loss to average net
assets*................ (g) (g) (g) (g) (0.50)%(d) (1.78)%(d)
Portfolio turnover rate
(e).................... 67% 67% 162% 162% 46% 46%
Average commission rate
paid (h)............... $0.0601 $0.0601 $0.0597 $0.0597
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for periods prior to September 30, 1995 represent the
performance of the MIM Stock Appreciation Fund. The per share data for the
periods prior to September 30, 1995 have been restated to reflect the
impact of the change of net asset value of the Stock Appreciation Fund on
September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
B-88
<PAGE> 157
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
--------------------------------
YEARS ENDED SEPTEMBER 30,
--------------------------------
1995 (F) 1994 (F) 1993 (F)
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD....................... $ 8.25 $ 10.18 $ 7.98
------- ------- -------
Investment Activities
Net investment loss....................... (0.07) (0.12) (0.17)
Net realized and unrealized gains
(losses) from investments................ 2.14 (1.26) 2.57
------- ------- -------
Total from Investment Activities.......... 2.07 (1.38) 2.40
------- ------- -------
Distributions
Net realized gains........................ (0.32) (0.55) (0.20)
------- ------- -------
NET ASSET VALUE,
END OF PERIOD............................. $ 10.00 $ 8.25 $ 10.18
======= ======= =======
Total Return (excludes sales/redemption
charge)................................... 25.12% (13.91)% 30.61%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).......... $44,500 $47,880 $59,330
Ratio of expenses to average net assets.... 2.61% 2.44% 2.47%
Ratio of net investment loss to average net (0.73)% (1.35)% (1.85)%
assets....................................
Ratio of expenses to average net assets*... (g) (g) (g)
Ratio of net investment loss to average net (g) (g) (g)
assets*...................................
Portfolio turnover rate (e)................ 197% 254% 216%
</TABLE>
See Notes to Financial Statements.
B-89
<PAGE> 158
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Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
LARGE COMPANY
SELECT FUND
------------------------
FROM JANUARY 2, 1997
THROUGH DECEMBER 31,
1997 (A)
------------------------
INVESTOR A INVESTOR B
---------- ----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............................... $ 10.00 $ 10.00
------- -------
Investment Activities
Net investment income (loss)...................... -- (0.04)
Net realized and unrealized gains (losses) from
investments...................................... 2.77 2.72
------- -------
Total from Investment Activities.................. 2.77 2.68
------- -------
Distributions
Net realized gains................................ (1.40) (1.40)
Tax return of capital............................. (0.03) --
------- -------
Total Distributions............................... (1.43) (1.40)
------- -------
NET ASSET VALUE,
END OF PERIOD..................................... $ 11.34 $ 11.28
======= =======
Total Return (excludes sales/redemption charge).... 27.93%(b) 26.97%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $33,614 $ 2,464
Ratio of expenses to average net assets............ 1.69%(c) 2.47%(c)
Ratio of net investment income (loss) to average 0.00%(c) (1.10)%(c)
net assets........................................
Ratio of expenses to average net assets............ (f) (f)
Ratio of net investment income to average net (f) (f)
assets............................................
Portfolio turnover rate (d)........................ 39% 39%
Average commission rate paid (e)................... $0.0960 $0.0960
</TABLE>
- -------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued.
(f) There were no waivers or reimbursements during the period.
See Notes to Financial Statements.
B-90
<PAGE> 159
- -------------------------------------------------------------------------------
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 IBCA Information
Services, Inc. ("Fitch") 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
bonds)
Description of the six highest long-term debt ratings by Moody's
(Moody's applies numerical modifiers (1, 2, and 3) in each rating category to
indicate the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
Aa Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins or
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risk appear somewhat larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment some time in the future.
Baa Bonds are considered as medium grade obligations, i.e., they are
neither highly protected nor poorly secured. Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
A-1
<PAGE> 160
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 vulner-
ability to default than other speculative issues.
However, they face major ongoing uncertainties or
exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB
rating.
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
A-2
<PAGE> 161
senior debt that is assigned an actual or implied BB or
BB- rating.
Description of the four 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 (Highest credit quality). This rating denotes the lowest
expectation of credit risk. This rating is assigned only in
case of exceptionally strong capacity for timely payment of
financial commitments, a capacity that is highly unlikely to
be adversely affected by foreseeable events.
AA (Very high credit quality). This rating denotes a very low
expectation of credit risk. This rating indicates very strong
capacity for timely payment of financial commitments, a
capacity that is not significantly vulnerable to foreseeable
events.
A (High credit quality). This rating denotes a low expectation
of credit risk. This rating indicates a strong capacity for
timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances
or in economic conditions than is the case for long-term debt
rate "AAA" or "AA."
BBB (Good credit quality). This rating indicates that there is
currently a low expectation of credit risk. The capacity for
timely payment of financial commitments is considered
adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity. The "BBB"
category is the lowest investment-grade category.
A-3
<PAGE> 162
BB (Speculative). This rating indicates that there is a
possibility of credit risk developing, particularly as the
result of adverse economic change over time; however, business
or financial alternatives may be available to allow financial
commitments to be met. Securities rated in the "BB" category
are not investment grade.
B (Highly speculative). This rating indicates that significant
credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met;
however, capacity for continued payment is contingent upon a
sustained, favorable business and economic environment.
Thomson's description of its six highest long-term debt ratings
(Thomson may include a plus (+) or minus (-) designation to indicated where
within the respective category the issue is placed):
AAA The highest category; indicates ability to repay principal and
interest on a timely basis is very high.
AA The second highest category; indicates a superior ability to
repay principal and interest on a timely basis with limited
incremental risk versus issues rated in the highest category.
A The third highest category; indicates the ability to repay
principal and interest is strong. Issues rated "A" could be
more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings.
BBB The lowest investment grade category and indicates an
acceptable capacity to repay principal and interest. Issues
rated BBB are, however, more vulnerable to adverse
developments (both internal and external) than obligations
with higher ratings.
BB While not investment grade, the BB rating suggests that the
likelihood of default is considerably less than for
lower-rated issues. However, there are significant
uncertainties that could affect the ability to adequately
service debt obligations.
B Issues rated B show a higher degree of uncertainty and
therefore greater likelihood of default than higher-rated
issues. Adverse developments could well negatively affect the
payment of interest and principal on a timely basis.
SHORT-TERM DEBT RATINGS (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
A-4
<PAGE> 163
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 profit-
ability may result in changes in the level of debt
protection measurements and may require relatively
high financial leverage. Adequate liquidity is
maintained.
S&P's description of its three highest short-term debt ratings:
A-1 This designation indicates that the degree of safety regarding
timely payment is strong. Those issues determined to have
extremely strong safety characteristics are denoted with a
plus sign (+).
A-5
<PAGE> 164
A-2 Capacity for timely payment on issues with this designa-
tion 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:
F1+ Issues assigned this rating are regarded as having the
strongest capacity for timely payment of financial
commitments; an added "+" denotes any exceptionally strong
credit feature.
F1 Issues assigned this rating are regarded as having a capacity
for timely payment only slightly less than the highest rating,
i.e., F1+.
F2 Issues assigned this rating have a satisfactory capacity
for timely payment of financial commitments, but the
A-6
<PAGE> 165
margin of safety is not as great as it is for issues
assigned ratings of F1+ or F1.
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-7
<PAGE> 166
Registration Statement
of
THE RIVERFRONT FUNDS, INC.
on
Form N-1A
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Included in Part A:
(i) The Riverfront U.S. Government Securities Money Market
Fund
Financial Highlights
(ii) The Riverfront U.S. Government Income Fund
Financial Highlights
(iii) The Riverfront Income Equity Fund
Financial Highlights
(iv) The Riverfront Balanced Fund
Financial Highlights
(v) The Riverfront Stock Appreciation Fund
Financial Highlights
(vi) The Riverfront Large Company Select Fund
Financial Highlights
Included in Part B:
(i) The Riverfront U.S. Government Securities Money Market
Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
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<PAGE> 167
Statement of Operations for the year ended December 31,
1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
Financial Highlights for the years ended December 31,
1997, 1996, 1995, 1994 and 1993
(ii) The Riverfront U.S. Government Income Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
Statement of Operations for the year ended December 31,
1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
Financial Highlights for the years ended December 31, 1997,
1996, 1995, 1994 and 1993 (Investor A Shares) and for the
years ended December 31, 1997 and 1996 and the period from
commencement of operations (January 17, 1995) to December 31,
1995 (Investor B Shares)
(iii) The Riverfront Income Equity Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
Statement of Operations for the year ended December 31,
1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
C-2
<PAGE> 168
Financial Highlights for the years ended December 31, 1997,
1996, 1995, 1994 and 1993 (Investor A Shares) and for the
years ended December 31, 1997 and 1996 and the period from
commencement of operations (January 17, 1995) to December 31,
1995 (Investor B Shares)
(iv) The Riverfront Balanced Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
Statement of Operations for the year ended December 31,
1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
Financial Highlights for the years ended December 31, 1997,
1996 and 1995 and the period from commencement of operations
(September 1, 1994) to December 31, 1994 (Investor A shares)
and for the years ended December 31, 1997 and 1996 and the
period from commencement of operations (January 17, 1995) to
December 31, 1995 (Investor B shares)
(v) The Riverfront Stock Appreciation Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
Statement of Operations for the year ended December 31,
1997
Statements of Changes in Net Assets for the years ended
December 31, 1997 and 1996
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
Financial Highlights for the years ended December 31, 1997 and
1996, the period from the date of acquisition (October 1,
1995) through December 31, 1995, and the years ended September
30, 1995, 1994 and 1993 (Investor A shares) and for the years
ended December 31, 1997 and
C-3
<PAGE> 169
1996 and the period from commencement of operations (October
1, 1995) through December 31, 1995 (Investor B shares)
(vi) The Riverfront Large Company Select Fund
Report of Independent Auditors dated February 13, 1998
Statement of Assets and Liabilities dated December 31,
1997
Statement of Operations for the period from commencement of
operations (January 2, 1997) through December 31, 1997
Statements of Changes in Net Assets for the period from
commencement of operations (January 2, 1997) through December
31, 1997
Schedule of Portfolio Investments dated December 31, 1997
Notes to Financial Statements as of December 31, 1997
Financial Highlights for the period from commencement of
operations (January 2, 1997) through December 31, 1997
(Investor A Shares and Investor B Shares)
(vii) All required financial statements are included in Part B
hereof. All other financial statements and schedules are
inapplicable.
(b) Exhibits
(1)(a) Registrant's Articles of Incorporation is incorporated by
reference to Exhibit (1)(a) of Post-Effective Amendment
No. 16 to Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(b) Amendment No. 1 to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
changed the name of Registrant and its series
designations and increased the authorized common stock of
Registrant is incorporated by reference to Exhibit (1)(b)
of Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(c) Amendment No. 2 to Registrant's Articles of
Incorporation, filed with the State of Maryland, which
changed the series designation of certain portfolios of
Registrant is incorporated by reference to Exhibit (1)(c)
of Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
C-4
<PAGE> 170
(d) Amendment to Registrant's Articles of Incorporation, as filed
with the State of Maryland, which created two new portfolios
and two classes of stock for certain portfolios of Registrant
is incorporated by reference to Exhibit (1)(d) of
Post-Effective Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) filed on April 26, 1996.
(e) Amendment to Registrant's Articles of Incorporation, as filed
with the State of Maryland, which reclassified the shares of a
specific series is incorporated by reference to Exhibit (1)(e)
of Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed
on April 26, 1996.
(f) Articles Supplementary to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
created a new portfolio is incorporated by reference to
Exhibit (1)(f) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154) filed
on April 26, 1996.
(g) Articles Supplementary to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
created a new portfolio, is incorporated by reference to
Exhibit (1)(g) of Post-Effective Amendment No. 17 of
Registrant's Registration Statement (No. 33-34154) filed
on October 18, 1996.
(h) Articles of Amendment to Registrant's Articles of
Incorporation, as filed with the State of Maryland, which
reclassified the shares of a specific series, is incorporated
by reference to Exhibit (1)(h) of Post- Effective Amendment
No. 18 of Registrant's Registration Statement (No. 33-34154)
filed on April 28, 1997.
(2)(a) Registrant's By-Laws are incorporated by reference to
Exhibit (2)(a) of Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154) filed
on April 26, 1996.
(b) Amendment No. 1 to Registrant's Bylaws is incorporated by
reference to Exhibit (2)(b) of Post-Effective Amendment
No. 16 to Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(c) Amendment to Article IV of Registrant's Bylaws as adopted
February 24, 1995 is incorporated by reference to Exhibit
(2)(b) of Post-Effective Amendment No. 16 to Registrant's
Registration Statement (No. 33-34154) filed on April 26,
1996.
(3) Not applicable.
C-5
<PAGE> 171
(4) Certificates for shares are not issued. Articles VI and
VIII of the Articles of Incorporation, which define the
rights of holders of shares, have been filed as Exhibits
(1)(a) through (g) of Registrant's Registration Statement
(No. 33-34154).
(5)(a) Investment Advisory Agreement dated as of August 1, 1994,
as amended as of January 1, 1997, between the Registrant
and The Provident Bank is incorporated by reference to
Exhibit (5)(a) of Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No. 33-34154) filed
on April 28, 1997.
(c) Sub-Investment Advisory Agreement dated as of August 15, 1995,
as amended as of January 1, 1997, between The Provident Bank
and DePrince, Race & Zollo, Inc. is incorporated by reference
to Exhibit (5)(c) of Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No. 33-34154) filed on
April 28, 1997.
(6)(a) Distribution Agreement, dated August 1, 1994, and amended
as of November 17, 1995 and January 1, 1997, between
Registrant and BISYS Fund Services Limited Partnership is
incorporated by reference to Exhibit (6)(a) of
Post-Effective Amendment No. 18 to Registrant's
Registration Statement (No. 33-34154) filed on April 28,
1997.
(b) Form of Dealer Agreement between The Winsbury Company Limited
Partnership and Provident Securities & Investment Company was
filed on September 21, 1995, with Post- Effective Amendment
No. 14 as Exhibit (6)(b) and is incorporated by reference
herein.
(7) Not applicable.
(8) Amended and Restated Custodian, Fund Accounting and
Recordkeeping Agreement dated August 1, 1994, amended as
of January 1, 1997, between the Registrant and The
Provident Bank is incorporated by reference to Exhibit
(8) of Post-Effective Amendment No. 18 to Registrant's
Registration Statement (No. 33-34154) filed on April 28,
1997.
(9)(a) Administration Agreement, dated February 1, 1996, as
amended as of January 1, 1997, between the Registrant and
BISYS Fund Services Limited Partnership is incorporated
by reference to Exhibit (9)(a) of Post-Effective
Amendment No. 18 to Registrant's Registration Statement
(No. 33-34154) filed on April 28, 1997.
C-6
<PAGE> 172
(b) Master Transfer and Recordkeeping Agreement, dated as of
February 24, 1992, as amended as of March 23, 1997, between
the Registrant and The Provident Bank.
(c) Shareholder Services Plan adopted January 6, 1994, as amended
as of June 8, 1994, was filed on November 9, 1994, with
Post-Effective Amendment No. 8 as Exhibit (9)(c) and is
incorporated by reference herein.
(d) Form of Servicing Agreement to Shareholder Services Plan, as
amended, was filed on November 9, 1994, with Post- Effective
Amendment No. 8 as Exhibit (9)(d) and is
incorporated by reference herein.
(f) Agreement and Plan of Reorganization and Liquidation dated as
of June 26, 1995, between the Registrant and MIM Mutual Funds,
Inc. was filed on September 21, 1995, with Post-Effective
Amendment No. 14 as Exhibit (9)(f) and is incorporated by
reference herein.
(10) Opinion of counsel as to the legality of the shares of
The Riverfront Large Company Select Fund was filed as
Exhibit 10 to Post-Effective Amendment No. 17 of
Registrant's Registration Statement (No. 33-34154) filed
on October 18, 1996, and is incorporated herein by
reference. Opinion of counsel as to the legality of the
shares of The Riverfront U.S. Government Securities Money
Market Fund, The Riverfront U.S. Government Income Fund,
The Riverfront Income Equity Fund, The Riverfront Stock
Appreciation Fund and The Riverfront Balanced Fund (f/k/a
The Riverfront Flexible Growth Fund) was filed with
Registrant's Rule 24f-2 Notice on February 25, 1997.
(11) Consent of Ernst & Young LLP, independent auditors.
(12) Not applicable.
(13) A copy of the Subscription Agreement is incorporated by
reference to Exhibit (13) of Registrant's Registration
Statement (No. 33-34154) filed on April 10, 1990.
(14) Not applicable.
(15)(a) Investor A Distribution and Shareholder Service Plan and
Agreement, as amended as of November 17, 1995, was filed on
October 18, 1996, as Exhibit (15)(a) to Post-Effective
Amendment No. 17 of Registrant's Registration Statement (No.
33-34154) and is incorporated herein by reference.
(b) Investor B Distribution and Shareholder Service Plan and
Agreement, as amended as of November 17, 1995, was filed on
October 18, 1996, as Exhibit (15)(b) to Post-Effective
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<PAGE> 173
Amendment No. 17 of Registrant's Registration Statement
(No. 33-34154) and is incorporated herein by reference.
(c) Form of Dealer Agreement between The Winsbury Company Limited
Partnership and Provident Securities & Investment Company was
filed on September 21, 1995, with Post- Effective Amendment
No. 14 as Exhibit (15)(d) and is incorporated by reference
herein.
(16)(a) Computation of Performance Quotations for The Riverfront
U.S. Government Securities Money Market Fund was filed on
June 2, 1994, with Post-Effective Amendment No. 7 as
Exhibit (16) (a) and is incorporated by reference herein.
(b) Computation of Performance Quotations for The Riverfront U.S.
Government Income Fund and The Riverfront Income Equity Fund
was filed on June 2, 1994, with Post-Effective Amendment No. 7
as Exhibit (16)(b) and is incorporated by reference herein.
(d) Computation of Performance Quotations for The Riverfront
Balanced Fund (f/k/a The Riverfront Flexible Growth Fund) was
filed on January 31, 1995, with Post-Effective Amendment No. 9
as Exhibit (16)(d) and is incorporated by reference herein.
(e) Computation of Performance Quotations for The Riverfront Stock
Appreciation Fund was filed on September 21, 1995, with
Post-Effective Amendment No. 14 as Exhibit (16)(e) and is
incorporated by reference herein.
(f) Computation of Performance Quotations for The Riverfront
Large Company Select Fund was filed on October 18, 1996,
as Exhibit (16)(f) to Post-Effective Amendment No. 17 of
Registrant's Registration Statement (No. 33-34154) and is
incorporated herein by reference.
(17) Financial Data Schedules.
(18) None.
(19)(a) Powers of Attorney for J. Virgil Early and William M. Higgins
are incorporated by reference to Exhibit (17) of
Post-Effective Amendment No. 6 to Registrant's Registration
Statement (No. 33-34154) filed on March 1,
1994.
(b) Power of Attorney for Walter B. Grimm is incorporated by
reference to Exhibit (18)(c) of Post-Effective Amendment
No. 10 to Registrant's Registration Statement (No. 33-
34154) filed on April 11, 1995.
C-8
<PAGE> 174
(c) Power of Attorney for Harvey W. Salkin is incorporated by
reference to Exhibit (19)(d) of Post-Effective Amendment No.
16 to Registrant's Registration Statement (No. 33-
34154) filed on April 26, 1996.
(d) Powers of Attorney for Donald C. Siekmann and Thomas E. Line.
(e) Consent of Baker & Hostetler LLP
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
Not Applicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
<TABLE>
<CAPTION>
Number of Record
Holders
AS OF APRIL 20, 1998
---------------------------------
Investor A Investor B
Shares Shares
------ ------
Title Of Series
---------------
<S> <C>
The Riverfront U.S. Government 421 N/A
Securities Money Market Fund, shares of
capital stock, $.001 par value
The Riverfront U.S. Government Income 34 57
Fund, shares of capital stock, $.001
par value
The Riverfront Income Equity Fund, 835 1,269
shares of capital stock, $.001 par
value
The Riverfront Balanced Fund, shares of 36 628
capital stock, $.001 par value
The Riverfront Stock Appreciation Fund, 3,180 143
shares of capital stock, $.001 par
value
The Riverfront Large Company Select 69 287
Fund, shares of capital stock, $.001
par value
</TABLE>
Item 27. INDEMNIFICATION
Provisions relating to the indemnification of the Registrant's
Directors and officers were filed on February 11, 1991, with the Registrant's
Post-Effective Amendment No. 1 and are incorporated by reference herein.
C-9
<PAGE> 175
Item 28. Businesses and Other Connections of Investment Adviser
- -------- ------------------------------------------------------
(a) To the knowledge of Registrant, none of the
officers or directors of The Provident Bank, except
those set forth below, is or has been at any time
during the past two fiscal years engaged in any
other business, profession, vocation or employment.
Set forth below are the names and principal
business addresses of the directors and officers
who are engaged in any other business, profession,
vocation, or employment of a substantial nature.
<TABLE>
<CAPTION>
Position with
Name The Provident Bank Other Business
---- ------------------ --------------
<S> <C> <C>
Jack M. Cook Director President and Chief
Executive Officer of
Health Alliance of
Greater Cincinnati
Thomas D. Grote, Director President, Thomas J.
Jr. Dyer Company
Joseph A. Podoto Director President, JLM
Financial, Inc.
Sidney A. Peerless, Director President of E.N.T.
M.D. Associates; staff
member at several
hospitals in the
Cincinnati area
Edwin Riley Director Managing Director of
Phoenix Investment
Council
Joseph A. Steger, Director President,
Ph.D. University of
Cincinnati
</TABLE>
(b) To the knowledge of Registrant, none of the officers
or directors of DePrince, Race & Zollo, Inc. ("DRZ")
is or has been at any time during the past two
fiscal years engaged in any other business,
profession, vocation or employment.
Item 29. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services Limited Partnership, d/b/a BISYS Fund
Services, acts as administrator and distributor for Registrant. BISYS Fund
Services currently serves as distributor of the following management investment
companies: American Performance Funds, AmSouth Mutual Funds, The ARCH Fund,
Inc., The BB&T Mutual Funds Group, The Coventry Group, The Empire Builder Tax
Free Bond Fund, ESC Strategic Funds, Inc., The Eureka Funds, Inc., Fountain
Square Funds, Hirtle Callaghan Trust, HSBC Family of Funds, The Infinity Mutual
Funds, Inc., INTRUST Funds Trust, The
C-10
<PAGE> 176
Kent Funds, Magna Funds, Meyers Investment Trust, MMA Praxis Mutual Funds,
M.S.D.& T. Funds, Pacific Capital Funds, Parkstone Group of Funds, The Parkstone
Advantage Funds, Pegasus Funds, The Republic Funds Trust, The Republic Advisors
Funds Trust, SBSF Funds, Inc., d/b/a Key Mutual Funds, Sefton Funds, The
Sessions Group, Summit Investment Trust, Variable Insurance Funds, The Victory
Portfolios, The Victory Variable Funds, and Vintage Mutual Funds, Inc.
(b) To the best of Registrant's knowledge, the partners of
BISYS Fund Services are as follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with Offices with
Business Address BISYS Fund Services Registrant
---------------- ------------------- ----------
<S> <C> <C>
The BISYS Group, Inc. Sole Shareholder of None
150 Clove Road BISYS Fund Services,
Little Falls, New Jersey Inc.
07424
BISYS Fund Services, Inc. Sole General Partner None
150 Clove Road
Little Falls, New Jersey
07424
WC Subsidiary Corporation Limited Partner None
150 Clove Road
Little Falls, New Jersey
07424
</TABLE>
(c) None
Item 30. LOCATION OF ACCOUNTS AND RECORDS
(1) BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219 (records relating to its functions as
administrator and distributor).
(2) The Provident Bank, One East Fourth Street,
Cincinnati, Ohio 45202 (records relating to its
functions as investment adviser, manager, custodian,
transfer agent and fund accountant).
(3) DePrince, Race & Zollo, Inc., 201 South Orange
Avenue, Suite 850, Orlando, Florida 32801 (records
relating to its functions as sub-investment adviser
for The Riverfront Income Equity Fund).
(4) Baker & Hostetler LLP, 65 East State Street,
Columbus, Ohio 43215 (Articles of Incorporation,
Bylaws and Minutes).
Item 31. MANAGEMENT SERVICES
C-11
<PAGE> 177
Not applicable.
Item 32. UNDERTAKINGS
None.
C-12
<PAGE> 178
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Columbus, in the State of Ohio, on the 27th day
of April, 1998. Registrant hereby certifies that this Post-Effective Amendment
to Registration Statement meets all of the requirements for effectiveness
pursuant to paragraph (b) of Rule 485 under the Securities Act of 1933.
THE RIVERFRONT FUNDS, INC.
By /s/ Walter B. Grimm
-----------------------
Walter B. Grimm
President and Chairman
of the Board
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
designated on the 27th day of April, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ---------- -----
<S> <C>
/s/ Walter B. Grimm President and Director
- -----------------------------
Walter B. Grimm
/s/*Thomas E. Line Treasurer (Principal Accounting
- -----------------------------
Thomas E. Line and Financial Officer)
/s/* J. Virgil Early Director
- -----------------------------
J. Virgil Early
/s/* William M. Higgins Director
- -----------------------------
William M. Higgins
/s/* Harvey M. Salkin Director
- -----------------------------
Harvey M. Salkin
/s/* Donald C. Siekmann Director
- -----------------------------
Donald C. Siekmann
</TABLE>
*By /s/ Stephen G. Mintos
---------------------------------
Stephen G. Mintos, Attorney-in-Fact
*Stephen G. Mintos, by signing his name hereto, does hereby sign this document
on behalf of each of the above-named Directors and Officer of the Registrant
pursuant to powers of attorney duly executed by such persons.
C-13
<PAGE> 179
Index to Exhibits
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ------------ ----------- ----
<S> <C> <C>
1. (a) The Registrant's Articles of Incorporation was
filed as Exhibit (1)(a) to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) filed on April 26,
1996.
(b) Amendment No. 1 to the Registrant's Articles
of Incorporation was filed as Exhibit (1)(b)
to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(c) Amendment No. 2 to the Registrant's Articles
of Incorporation was filed as Exhibit (1)(c)
to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(d) Amendment to Registrant's Articles of
Incorporation, as filed with the State of
Maryland, which created two new portfolios and
two classes of stock for certain portfolios of
Registrant was filed as Exhibit (1)(d) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(e) Amendment to Registrant's Articles of
Incorporation, as filed with the State of
Maryland, which reclassified the shares of a
specific series was filed as Exhibit (1)(e) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(f) Articles Supplementary to Registrant's
Articles of Incorporation, as filed with the
State of Maryland, which created a new
portfolio was filed as Exhibit (1)(f) to
Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(g) Articles Supplementary to Registrant's Articles of
Incorporation, as filed with the State of Maryland,
which created a new
</TABLE>
C-14
<PAGE> 180
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
portfolio was filed as Exhibit (1)(g) to
Post-Effective Amendment No. 17 to
Registrant's Registration Statement (No.
33-34154) filed on October 18, 1996.
(h) Articles of Amendment to Registrant's Articles
of Incorporation, as filed with the State of
Maryland, which reclassified the shares of a
specific series, was filed as Exhibit (1)(h)
to Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
2. (a) Bylaws of Registrant were filed as Exhibit
(2)(a) to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No.
33-34154) filed on April 26, 1996.
(b) Amendment No. 1 to Registrant's Bylaws was
filed as Exhibit (2)(b) to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) filed on April 26,
1996.
(c) Amendment to Article IV of Registrant's Bylaws as
adopted February 24, 1995, was filed as Exhibit
(2)(c) to Post-Effective Amendment No. 16 to
Registrant's Registration Statement (No. 33-34154)
filed on April 26, 1996.
3. Not applicable.
4. Certificates for shares are not issued. Articles VI
and VIII of the Articles of Incorporation, which
define the rights of holders of shares, have been
filed as Exhibits (1)(a) through (g) of Registrant's
Registration Statement (No. 33-34154).
5. (a) Investment Advisory Agreement dated as of
August 1, 1994, as amended as of January 1,
1997, between Registrant and The Provident
Bank was filed as Exhibit (5)(a) to
Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
</TABLE>
C-15
<PAGE> 181
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(c) Sub-Investment Advisory Agreement dated as of
August 15, 1995, as amended as of January 1,
1997, between The Provident Bank and DePrince,
Race & Zollo, Inc. was filed as Exhibit (5)(c)
to Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
6. (a) Distribution Agreement, dated August 1, 1994,
amended as of November 17, 1995 and January 1,
1997, between Registrant and BISYS Fund
Services Limited Partnership was filed as
Exhibit (6)(a) to Post-Effective Amendment No.
18 to Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
(b) Form of Dealer Agreement between BISYS Fund
Services Limited Partnership and Provident
Securities & Investment Company. Filed as
Exhibit (6)(b) to Registrant's Post-Effective
Amendment No. 14 on September 21, 1995.
7. Not applicable.
8. Amended and Restated Custodian, Fund
Accounting and Recordkeeping Agreement dated
August 1, 1994, as amended as of January 1,
1997, between Registrant and The Provident
Bank was filed as Exhibit (8) to
Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
9. (a) Administration Agreement, dated February 1,
1996, as amended as of January 1, 1997,
between the Registrant and BISYS Fund Services
Limited Partnership was filed as Exhibit
(9)(a) to Post-Effective Amendment No. 18 to
Registrant's Registration Statement (No.
33-34154) filed on April 28, 1997.
(b) Master Transfer and Recordkeeping Agreement, dated as
of February 24, 1992, as amended as of March 23,
1997, between Registrant and The
Provident Bank.
</TABLE>
C-16
<PAGE> 182
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(c) Shareholder Services Plan adopted January 6, 1994, as
amended as of June 8, 1994. Filed as Exhibit (9)(c)
to Registrant's Post-Effective Amendment No. 8 on
November 9, 1994.
(d) Form of Servicing Agreement to Shareholder Services
Plan as amended. Filed as Exhibit (9)(d) to
Registrant's Post-Effective Amendment No. 8 on
November 9, 1994.
(f) Agreement and Plan of Reorganization and
Liquidation dated as of June 26, 1995, between
the Registrant and MIM Mutual Funds, Inc. was
filed as Exhibit (9)(f) to Registrant's Post-
Effective Amendment No. 14 on September 21,
1995.
10. An Opinion of Counsel as to the legality of
the shares of The Riverfront Large Company
Select Fund was filed as Exhibit (10) to
Post-Effective Amendment No. 17 to
Registrant's Registration Statement (No.
33-34154) filed on October 18, 1996. An
Opinion of Counsel as to the legality of the
shares of The Riverfront U.S. Government
Securities Money Market Fund, The Riverfront
U.S. Government Income Fund, The Riverfront
Income Equity Fund, The Riverfront Stock
Appreciation Fund and The Riverfront Balanced
Fund (f/k/a The Riverfront Flexible Growth
Fund) was filed with Registrant's Rule 24f-2
Notice on February 25, 1997.
11. Consent of Ernst & Young LLP, independent
auditors.
12. Not applicable.
13. The Subscription Agreement. Filed as an
Exhibit to Registrant's Registration Statement
on April 10, 1990.
14. Not applicable.
15. (a) Investor A Distribution and Shareholder
Service Plan and Agreement, as amended as of
November 17, 1995, was filed as Exhibit
(15)(a) to Post-Effective Amendment No. 17 to
Registrant's Registration Statement (No.
33-34154) filed on October 18, 1996.
</TABLE>
C-17
<PAGE> 183
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
(b) Investor B Distribution and Shareholder
Service Plan and Agreement, as amended as of
November 17, 1995, was filed as Exhibit
(15)(b) to Post-Effective Amendment No. 17 to
Registrant's Registration Statement (No.
33-34154) filed on October 18, 1996.
(c) Form of Dealer Agreement between BISYS Fund Services
Limited Partnership and Provident Securities &
Investment Company. Filed as Exhibit (15)(d) to
Registrant's Post-Effective Amendment No. 14 on
September 21, 1995.
16. (a) Schedules for the calculation of performance
quotations for The Riverfront U.S. Government
Securities Money Market Fund were filed as
Exhibit (16) (a) to Registrant's
Post-Effective Amendment No. 7 on June 2,
1994.
(b) Schedules for the calculation of performance
quotations for The Riverfront U.S. Government
Income Fund and The Riverfront Income Equity
Fund were filed as Exhibit (16)(b) to
Registrant's Post-Effective Amendment No. 7 on
June 2, 1994.
(d) Schedule for the calculation of performance
quotations for The Riverfront Balanced Fund (f/k/a
The Riverfront Flexible Growth Fund) was filed as
Exhibit (16)(d) to Registrant's Post-Effective
Amendment No. 9 on January 31,
1995.
(e) Schedule for the calculation of performance
quotations for The Riverfront Stock Appreciation Fund
was filed as Exhibit (16)(e) to Registrant's
Post-Effective Amendment No. 14 on September 21,
1995.
(f) Schedule for the calculation of performance
quotations for The Riverfront Large Company Select
Fund was filed as Exhibit (16)(f) to Post-Effective
Amendment No. 17 to Registrant's Registration
Statement (No. 33-34154) filed on October 18, 1996.
17. Financial Data Schedules.
18. None.
</TABLE>
C-18
<PAGE> 184
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Description Page
- ----------- ----------- ----
<S> <C> <C>
19. (a) Powers of Attorney for J. Virgil Early and
William M. Higgins were filed as Exhibit (17)
to Registrant's Post-Effective Amendment No. 6
to Registrant's Registration Statement (No.
33-34154) on March 1, 1994.
(a) Power of Attorney for Walter B. Grimm was
filed as Exhibit (18)(c) to Post-Effective
Amendment No. 10 to Registrant's Registration
Statement (No. 33-34154) on April 11, 1995.
(c) Power of Attorney for Harvey W. Salkin was
filed as Exhibit (19)(d) to Post-Effective
Amendment No. 16 to Registrant's Registration
Statement (No. 33-34154) on April 26, 1996.
(d) Powers of Attorney for Donald C. Siekmann and Thomas
E. Line.
(e) Consent of Baker & Hostetler LLP.
</TABLE>
C-19
<PAGE> 185
As filed with the Securities and Exchange Commission April 29, 1998.
1933 Act Registration No. 33-34154
1940 Act File No. 811-6082
EXHIBITS TO
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Post-Effective Amendment No. 25 [x]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 [x]
Amendment No. 26 [x]
The Riverfront Funds, Inc.
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road
Columbus, Ohio 43219
(Address of Principal Executive Offices)
Registrant's Telephone Number:
(614) 470-8000
C-20
<PAGE> 1
EXHIBIT (9)(b)
MASTER TRANSFER AND RECORDKEEPING AGREEMENT
AGREEMENT made as of the 24th day of February 1992, by and between THE
RIVERFRONT FUNDS, INC. (the "Fund"), having its principal place of business at
One East Fourth Street, Cincinnati, Ohio 45202, and THE PROVIDENT BANK
("Provident") having its principal place of business at One East Fourth Street,
Cincinnati, Ohio 45202.
WITNESSETH THAT
WHEREAS, the Fund desires Provident to perform certain services for the
Fund and each of its Portfolios and Provident is willing to perform such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth, each party agrees as follows:
1. SERVICES - Provident shall perform for the Fund and each Portfolio
of the Fund the services set forth on Exhibit A which is attached hereto and
made a part hereof. Provident shall also perform for each Portfolio of the Fund,
without additional charge, any services which it customarily performs in the
ordinary course of business without additional charge for any investment
companies for which Provident acts as transfer agent, divided disbursing agent
or shareholder servicing and recordkeeping agent.
Provident shall perform such other services in addition to those set
forth in Exhibit A hereto as the Fund shall request in writing. Any of the
services to be performed hereunder, and the manner in which such services are to
be performed, shall be changed only pursuant to a written agreement signed by
the parties hereto.
Provident will undertake no activity which, in its judgment, will
adversely affect the performance of its obligations to the Fund under this
Agreement.
2. FEES - The Fund shall pay Provident for the services set forth in
Section 1 of this Agreement in accordance with and in the manner set forth in
Exhibit B which is attached hereto and made a part hereof.
3. EFFECTIVE DATE - This Agreement shall become effective as of the
date set forth above.
4. TERM - This Agreement shall be in effect until terminated in
accordance with Section 16 hereof.
5. USE OF PROVIDENT'S NAME - The Fund will not use Provident's name in
any sales literature or other material in a manner not approved by Provident in
writing before such use, unless a similar such use was previously approved.
Notwithstanding the foregoing, Provident hereby consents to all uses of
Provident's
<PAGE> 2
name which merely refer in accurate terms to Provident's appointments hereunder
or which are required by the Securities and Exchange Commission or a state
securities commission, and, provided further, that in no case will such approval
be unreasonably withheld or delayed.
6. STANDARD OF CARE - Provident shall at all times use its best efforts
and act in good faith and in a non-negligent manner in performing all services
pursuant to this Agreement.
7. UNCONTROLLABLE EVENTS - Provident shall not be liable for damage,
loss of data, delays or errors occurring by reason of circumstances beyond its
control including, but not limited to, acts of civil or military authority,
national emergencies, fire, flood or catastrophe, acts of God, insurrection,
war, riots or failure of transportation, communication or power supply. However,
Provident shall keep in a separate and safe place additional copies of all
records required to be maintained pursuant to this Agreement or additional tapes
or discs necessary to reproduce all such records. Furthermore, at all times
during this Agreement, Provident shall maintain an arrangement whereby Provident
will have a backup computer facility available for its use in providing the
services required hereunder in the event circumstances beyond Provident's
control result in Provident not being able to process the necessary work at its
principal computer facility. Provident shall, from time to time, upon request
from the Fund provide written evidence and details of its arrangement for
obtaining the use of such a backup computer facility. Provident shall use
reasonable care to minimize the likelihood of all damage, loss of data, delays
and errors resulting from an uncontrollable event, and should such damage, loss
of data, delays or errors occur, Provident shall use its best efforts to
mitigate the effects of such occurrence. Representatives of the Fund shall be
entitled to inspect Provident's premises and operating capabilities within
reasonable business hours and upon reasonable notice to Provident.
8. INDEMNIFICATION - The Fund shall indemnify and hold Provident, its
employees and agents harmless against any losses, claims, damages, judgments,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from (1) transactions which occurred prior to the date Provident began
serving as Transfer Agent to the Fund; (2) action taken or permitted by
Provident in good faith with due care and without negligence in reliance upon
instructions received from the Fund in accordance with Section 9 hereof or with
respect to the Fund, upon the opinion of counsel for the Fund, as to anything
arising in connection with its performance under this Agreement or which arises
out of the Fund's lack of good faith or willful misconduct; (4) the sale of
shares in violation of any requirement of federal or state securities laws; or
(5) any act done or suffered by Provident with respect to the Fund in good faith
with due care and without negligence in connection with its performance under
this
-2-
<PAGE> 3
Agreement in reliance upon any instruction, order, stock certificate or other
instrument reasonably believed by it to be genuine and to bear the genuine
signature of any person or persons authorized to sign, countersign or execute
same, and which complies with all applicable requirements of the Fund's current
prospectus and statement of additional information, this Agreement and
instructions (it being specifically agreed that, for the purpose of this
indemnification, if any instruction received by Provident in accordance with
Section 9 hereof differs from the requirements set forth in the current
prospectus or statement of additional information then, with regard to that
difference, Provident need only comply with such instruction and not the current
prospectus or statement of additional information) and other governing documents
provided to Provident by the Fund. In the event Provident requests the Fund to
indemnify or hold it harmless hereunder, Provident shall use its best efforts to
inform the Fund of the relevant facts concerning the matter in question.
Provident shall use reasonable care to identify and promptly notify the Fund
concerning any matter which Provident believes may result in a claim for
indemnification against the Fund, and shall notify the Fund within seven days of
notice to Provident of the filing of any suit or other legal action or the
institution by a government agency of any administrative action or investigation
against Provident which involves its duties under this Agreement. The Fund shall
have the election of defending Provident against any claim with respect to the
Fund which may be the subject of indemnification or holding harmless hereunder.
In the event the Fund so elects, it will so notify Provident and thereupon the
Fund shall take over defense of the claim and, if so requested by the Fund,
Provident shall incur no further legal or other expenses related thereto for
which it shall be entitled to indemnity or holding harmless hereunder; provided,
however, that nothing herein contained shall prevent Provident from retaining
counsel to defend any claim at Provident's own expense. Except with the prior
written consent of the Fund, Provident shall in no event confess any claim or
make any compromise in any matter in which the Fund will be asked to indemnify
or hold Provident harmless hereunder. Provident shall be without liability to
the Fund with respect to anything done or omitted to be done, in accordance with
the terms of this Agreement or instructions properly received pursuant hereto,
if done in good faith and without negligence or willful or wanton misconduct,
and in no event shall Provident be liable for consequential damages, lost
profits, or other special damages, even if Provident has been informed of the
possibility of such damage or loss by the Fund or by third parties.
Notwithstanding the forgoing, Provident shall be liable to the Fund for any
damage or losses suffered by the Fund as a result of a delay or negligence on
the part of Provident in processing a purchase or liquidation transaction or in
making payment to a shareholder of the Fund; it being agreed that, without in
any way limiting Provident's liability for other transactions hereunder, such
damages shall not be deemed to be consequential or special.
-3-
<PAGE> 4
9. INSTRUCTIONS - Provident shall comply with all instructions issued
by the Fund in the form prescribed below which are permitted or required under
Exhibit A attached hereto. Wherever Provident takes action hereunder pursuant to
instructions from the Fund, Provident shall be entitled to rely upon such
instructions only when such instructions are signed by the President or
Treasurer of the Fund or by an individual designated in writing by the President
or Treasurer as a person authorized to give instructions hereunder. The Fund may
waive the requirement that all instructions be in writing, if such waiver
defines the occurrences not requiring written instruction, indicates the persons
authorized to give such non-written instructions, and is signed by one of the
persons pursuant to the immediately preceding sentence of this Section 9. In the
event Provident obtains the Fund"s written waiver, it may rely on non-written
instructions received pursuant thereto.
10. CONFIDENTIALITY - Provident agrees to treat all records and other
information relative to the Fund and the Fund's shareholders confidentially, and
Provident on behalf of itself and its employees agrees to keep confidential all
such information, except, after prior notification to and approval by the Fund,
which approval shall not be unreasonably withheld and may not be withheld where
Provident may be exposed to civil or criminal contempt proceedings, when
requested to divulge such information by duly constituted authorities or when so
requested by a shareholder of the Fund seeking information about his own or an
appropriately related account.
11. REPORTS - Provident will furnish to the Fund and to properly
authorized auditors, examiners, investment companies, dealers, salesmen,
insurance companies, transfer agents, registrars, investors and others
designated by the Fund in writing, such reports at such times as are prescribed
for each service on Exhibit A attached hereto.
12. RIGHT OF OWNERSHIP - Provident agrees that all records and other
data received, computed, developed, used and/or stored pursuant to this
Agreement are the exclusive property of the Fund and that all such records and
other data will be furnished without additional charge to the Fund in available
machine readable data form immediately upon termination of this Agreement with
respect to the Fund for any reason whatsoever. Furthermore, upon the Fund's
request at any time or times while this Agreement is in effect, Provident shall
deliver to the Fund at the Fund's expense any or all of the data and records
held by Provident pursuant to this Agreement in the form as requested by the
Fund. On the effective date of termination of this Agreement or, if later, on
the date the Fund ceases to use Provident's services, Provident will promptly
return to the Fund any and all records and other data belong to the Fund free of
any claim or retention of rights by Provident.
-4-
<PAGE> 5
13. REDEMPTION OF SHARES - The parties hereto agree that Provident
shall process liquidations, redemptions or repurchases of shares of the Fund, as
the agent for the Fund, in the manner described in the then current prospectus
and statement of additional information for the Fund. Notwithstanding the
foregoing, Provident shall be liable for any losses, damages, claims or expenses
resulting from Provident's failure to obtain the appropriate signature guarantee
with regard to any redemption or transfer processed by Provident unless
Provident is authorized in writing by the Fund to waive such a requirement.
14. SUBCONTRACTING - The Fund may require that Provident or Provident
may, with the prior written consent of the Fund, subcontract with one or more of
its affiliates or other persons to perform all or part of its obligations
hereunder, provided, however, that, notwithstanding any such subcontract,
Provident shall be fully responsible to the Fund hereunder.
15. ASSIGNMENT - This Agreement and the rights and duties hereunder
shall not be assignable by Provident or the Fund except by the specific written
consent of the other party.
16. TERMINATION - This Agreement may be terminated by Provident or not
less than 180 days prior written notice to the Fund on by the Fund on not less
than 90 days prior written notice to Provident. Upon such termination, Provident
will use its best efforts to cooperate and assist in accomplishing a timely,
efficient and accurate conversion to the person or firm which will provide the
services described hereunder. This Agreement may be terminated by the Fund
without the payment of any penalty, forfeiture, compulsory buyout amount or
performance of any other obligation which could deter termination, provided,
however, that for the purpose of this Section any amount due under Section 2 of
this Agreement which is undisputed is not considered a penalty, forfeiture,
compulsory buyout amount or performance of any other obligation which could
deter termination.
This Agreement may be terminated by the Fund after written notice to
Provident by the Fund if there is a material breach or violation of this
Agreement or if Provident fails to perform any of its obligations under this
Agreement and the failure continues for more than thirty (30) days after the
Fund gives notice of the failure to Provident or bankruptcy or insolvency
proceedings of any nature are instituted by or against Provident.
17. INSURANCE - Provident shall maintain throughout the term of this
Agreement a fidelity bond(s) in an amount in excess of the minimum amount
required to be obtained by the Fund pursuant to Rule 17g-1 under the Investment
Company Act of 1940 (the "1940 Act") covering the acts of its officers,
employees or agents in performing any and all of the services required to be
performed hereunder. Provident agrees to promptly notify the Fund in writing
-5-
<PAGE> 6
of any material amendment or cancellation of such bond(s) and Provident shall at
such times as the Fund may request, but at least once each year, notify the Fund
of any claims made pursuant to such bond(s).
18. AMENDMENT - This Agreement may be amended at any time by an
instrument in writing executed by both Provident and the Fund, or each of their
respective successors, provided that any such amendment will conform to the
requirements set forth in the 1940 Act and the rules and regulations thereunder.
19. NOTICE - Any notice shall be sufficiently given when sent by
registered or certified mail to a party at the address of such party set forth
above or at such other address as such party may from time to time specify in
writing to the other party.
20. SECTION HEADINGS - Section headings are included for convenience
only and are not to be used to construe or interpret this Agreement.
21. INTERPRETIVE PROVISIONS - In connection with the operation of this
Agreement, Provident and the Fund may agree from time to time on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their combined opinions be consistent with the general tenor of this Agreement.
Furthermore, Provident and the Fund may agree to add to, delete from or change
the services set forth on Exhibit A to this Agreement. Each such interpretive or
additional provision, and each addition, deletion or change is to be signed by
the parties and annexed hereto, and no such provision, addition, deletion or
change shall contravene any applicable federal or state law or regulation and no
such provision, addition, deletion or change shall be deemed to be an amendment
of any provision of this Agreement with the exception of Exhibit A hereto.
22. GOVERNING LAW - This Agreement shall be governed by and its
provisions shall be construed in accordance with the Laws of the State of Ohio.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
THE PROVIDENT BANK
/s/ Jerry L. Grace
Title: Senior Vice President
THE RIVERFRONT FUNDS, INC.
/s/ Mary L. Hidden
Title: President
-7-
<PAGE> 8
EXHIBIT A - SERVICES
The services provided for in this Agreement shall be performed by
Provident or any agent appointed by Provident pursuant to Section 14 of this
Agreement under the name of The Provident Bank (Provident) and this name or any
similar name or logo will not be used by Provident or its agents for any
purposes other than those related to this Agreement or to any other agreement
which Provident may enter into with the Fund or with companies affiliated with
the Fund.
The offices of Provident shall be open to perform the services pursuant
to this Agreement on all days when the Fund is open to transact business.
Provident will perform all services normally provided to investment
companies such as the Fund and the quality of such services shall be equal to or
better than that provided to the other investment companies serviced by
Provident. With respect to the Fund, by way of illustration, but not limitation,
these services will include:
1. Establishing, maintaining, safeguarding and reporting on
shareholder account information and account histories,
(including registration, name and address recorded in
generally accepted form, dealer, representative, branch,
and territory information, mailing address, distribution
address, various codes and specific information relating
to (if applicable); level payments, letters of intent,
insured redemption plans, account groupings for rights of
accumulation discount processing, and for account group
reporting for plan accounts and other accounts grouped
for master sub-account reporting).
2. Recording and controlling shares outstanding in certificate
("issued") and non certificate ("unissued") form.
3. Maintaining a record for each certificate issued to include
certificate number, account number, issued date, number of
shares, cancelled date or stop date, where appropriate.
4. Reconciling the number of outstanding shares of the Fund on a
daily basis with the Fund and the Fund's custodian, promptly
correcting any differences noted.
5. Establishing and maintaining a trade file on behalf of the
Fund based on trade information furnished to the transfer
agent by the Fund or its distributors.
-1-
<PAGE> 9
6. Accepting and processing direct cash investments however
received and investing such investments promptly in
shareholder accounts.
7. Passing upon the adequacy of documents properly endorsed and
guaranteed submitted by or on behalf of a shareholder to
transfer ownership or redeem shares.
8. Transferring ownership of shares upon the books of each Fund.
9. Redeeming shares and preparing and mailing redemption checks
or wire proceeds as instructed.
10. Preparing and promptly mailing account statements to the
shareholder or such other authorized address and, when
appropriate, as instructed by the Fund, to the dealer or
dealer branch, whenever transaction activity effecting share
balances are posted to the Fund's accounting that is of the
type that should receive such statement.
11. Checking surrendered certificates for stop transfer
instructions.
12. Cancelling certificates surrendered.
13. Issuing certificates as replacements for those cancelled, or
as an original issue of additional shares or upon the
reduction of an equal number of unissued shares.
14. Maintaining and updating a stop transfer file, promptly
placing stop transfer codes upon notification of possible
loss, destruction or disappearance of a certificate. Upon
receipt of proper documentation obtaining necessary insurance
forms and issuing replacement certificates.
15. Balancing outstanding shares of record with the custodian
prior to each distribution and calculating and paying or
reinvesting distributions to shareholders of record and to
open trade receivables and free stock.
16. Processing exchanges of shares of the Fund or Portfolio for
another, calculating proper sales charges and collecting fees
as required.
17. Processing level payment liquidations according to plan
instructions.
18. Reporting to the Fund and its custodian daily the capital
stock activities and dollar amount of transactions.
-2-
<PAGE> 10
19. Promptly answering inquiring from shareholders, dealers, Fund
personnel, and others as requested in accordance with the
terms of this Agreement as to account matters, referring
policy or investment matters to the Fund.
20. Mailing reports and special mailings, as directed by the Fund
to all shareholders or selected holders or dealers.
21. Providing services with regard to the annual or special
meetings of the Fund, including preparation and timely mailing
of proxy material to shareholders of record and others as
directed by the Fund, and receiving, examining and recording
all properly executed proxies and performing such follow-up as
required by the Fund.
22. Providing periodic listings and tallies of shareholder votes
and certifying the final tally.
23. Providing an inspector of elections at the annual or any
special meeting of the Fund.
24. Maintaining tax information for each account, deducting
amounts where required and furnishing to the Fund, its
shareholders, dealers and, when appropriate, regulatory
bodies, the necessary tax information all in compliance with
the various applicable laws.
25. Maintaining records of account and distribution information
for checks and confirmations returned as undeliverable by the
Post Office.
26. Maintaining records and reporting sales information for Blue
Sky reporting purposes.
27. Calculating and processing Fund mergers or stock dividends, as
directed by the Fund.
28. Maintaining all Fund records as outlined in the record and
tape retention schedule delivered by the Fund.
29. Reconciling all investment, distribution and redemption
accounts.
30. Providing for the replacement of uncashed distribution or
redemption checks.
31. Maintaining and safeguarding an inventory of unissued blank
stock certificates, checks and other Fund records.
32. Making available to the Fund and its distributors at their
locations, CRTS which will provide immediate
-3-
<PAGE> 11
electronic access to computerized records maintained for
the Fund.
33. Providing space and such technical expertise as may be
required to enable the Fund and its properly authorized
auditors, examiners and others designated by the Fund in
writing to properly understand and examine all books, records,
computer files, microfilm and other items maintained pursuant
to this Agreement, and to assist as required in such
examination.
34. Mailing prospectuses to existing accounts on receipt of the
first direct investment transaction after a new prospectus has
been issued by the Fund.
35. Mailing cash election notices when required prior to capital
gains distributions.
36. Maintaining information, performing the necessary research and
producing reports required to comply with all applicable state
escheat or abandoned property laws.
With respect to each Portfolio of the Fund, the Transfer Agent will
produce reports as requested by the Fund including but not limited to the
following:
Shareholder Account Confirmation As required
Redemption Checks When redemption
is made
Certificates When requested
Level payment checks On payment cycle
Distribution checks As required
Name and address labels (per As requested
account registration)
Proxy When required
1099 Annually
1042-S Annually
Transaction journals Daily
Record date position control Daily
Daily and (monthly) cash proof Daily
-4-
<PAGE> 12
Daily (monthly) share proof Daily
Daily master control Daily
Blue Sky exception Daily
Blue Sky master list Monthly and whenever
a new permit is issued
by a state
Blue Sky sales reports Cycle as designated
in advance by
distributor
Check register Daily
Account information reports When requested
(Monthly) Cumulative Transaction Monthly
New account list Monthly
Shareholder master list When requested
Sales by State Monthly
Activities statistics Monthly
Distribution journals As required
Proxy tallies and vote listings When requested
Level payment account check Monthly
reconciliation
Dividend account check As required
reconciliation
-5-
<PAGE> 13
EXHIBIT B
Dated: March 23, 1997
THE PROVIDENT BANK
Transfer and Recordkeeping Fee Schedule
ANNUAL ACCOUNT SERVICE FEE - PER FUND
- -------------------------------------
MONEY MARKET FUNDS - $24,000 annual minimum, includes the first 500
accounts.
Open accounts over 500, $24.00 per year per account.
*Closed accounts $12.00 per year per account.
MONTHLY DIVIDEND FUNDS - $40,000 annual minimum, includes the first 750
accounts.
Open accounts over 750, $20.00 per year per account.
*Closed accounts $10.00 per year per account.
ALL OTHERS FUNDS - $36,000 annual minimum, includes the first 750
accounts.
Open accounts over 750, $18.00 per year per account.
*Closed accounts $9.00 per year per account.
Fees are billed on a monthly basis at the rate of 1/12 of the annual fee. A
charge is made for an account in the month that an account opens.
RETIREMENT PLAN ACCOUNTS
- -------------------------
Retirement fees will be charged as follows:
<TABLE>
<CAPTION>
If Paid If Paid by
by Advisor Account
<S> <C> <C>
Setup/Termination $ 5.00 $10.00
Transfer Out $15.00 $30.00
Annual Fee $10.00 $20.00
</TABLE>
FUND SERV/NSCC PROCESSING
- -------------------------
Mutual Fund Transaction - Monthly Charge .70/Item
(Minimum $250 and a Fund Family Maximum of $750)
*CLOSED ACCOUNTS
- -----------------
Accounts are considered closed accounts the month after closing through June of
the following year.
<PAGE> 14
ADDITIONAL SERVICES
- --------------------
Extraordinary services, special reports or customized processing may be subject
to additional fees, which will be quoted upon request.
OUT-OF-POCKET EXPENSES
- ----------------------
The Provident Bank shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to, the expenses set forth.
REIMBURSABLE EXPENSES
- ---------------------
The Provident Bank shall be entitled to be reimbursed for all reasonable
out-of-pocket expenses including, but not limited to the following:
- - Postage and insurance
- - Overnight delivery service
- - Duplicating charges
- - Fax charges
- - Out of country or excessive telephone calls
- - Hardware, software, telephone charges if inquiry access is
requested
- - Supplies
- - Special 800 number
- - Checks or share drafts if a fund has check writing privileges
- - Cash Management Service Charges
-Checks Deposited
-Checks Returned
-Incoming Wire Transfers
-Outgoing Wire Transfers
-ACH Items Received
-ACH Items Originated
-Checks Paid
-Stop Payments
- - Any expense The Provident Bank shall incur at the written
direction of an officer of the Fund
THE PROVIDENT BANK THE RIVERFRONT FUNDS, INC.
By By
---------------------------- ------------------------
(name) (title) (name) (title)
<PAGE> 1
Exhibit 11
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions
"Financial Highlights" in the Prospectus and "Auditors" in the
Statement of Additional Information, and to the use of our report
dated February 13, 1998, with respect to the financial statements
of The Riverfront Funds, Inc. included in Post-Effective Amendment
No. 25 to the Registration Statement (Form N-1A, No. 33-34154).
ERNST & YOUNG LLP
Cincinnati, Ohio
April 23, 1998
<PAGE> 1
Exhibit 19(d)
POWER OF ATTORNEY
Donald C. Siekmann, whose signature appears below, does hereby
constitute and appoint Walter B. Grimm, Stephen G. Mintos and
Charles L. Booth, each individually, his true and lawful attorneys
and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable The
Riverfront Funds, Inc. (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's
Registration Statement on Form N-1A pursuant to said Acts and any
and all amendments thereto (including post-effective amendments),
including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on
behalf of the undersigned as director and/or officer of the Fund
such Registration Statement and any and all such amendments filed
with the Securities and Exchange Commission under any Acts and any
other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue thereof.
Dated: April 22, 1998 /s/ Donald C. Siekmann
------------------------------
Donald C. Siekmann
<PAGE> 2
POWER OF ATTORNEY
-----------------
Thomas E. Line, whose signature appears below, does hereby
constitute and appoint Walter B. Grimm, Stephen G. Mintos and
Charles L. Booth, each individually, his true and lawful attorneys
and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable The
Riverfront Funds, Inc. (the "Fund"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "Acts"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Fund's
Registration Statement on Form N-1A pursuant to said Acts and any
and all amendments thereto (including post-effective amendments),
including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on
behalf of the undersigned as director and/or officer of the Fund
such Registration Statement and any and all such amendments filed
with the Securities and Exchange Commission under any Acts and any
other instruments or documents related thereto, and the undersigned
does hereby ratify and confirm all that said attorneys and agents,
or any of them, shall do or cause to be done by virtue thereof.
Dated: April 27, 1998 /s/ Thomas E. Line
------------------------------
Thomas E. Line
<PAGE> 1
Exhibit 19(e)
CONSENT OF COUNSEL
------------------
We hereby consent to the use of our name and to the references
to our firm under the caption "Legal Counsel" included in or made
a part of the Registration Statement on Form N-1A, File No. 33-
34154, filed under the Securities Act of 1933, as amended, of The
Riverfront Funds, Inc.
BAKER & HOSTETLER LLP
Columbus, Ohio
April 29, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 011
<NAME> THE U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 142,766,087
<INVESTMENTS-AT-VALUE> 142,766,087
<RECEIVABLES> 484,466
<ASSETS-OTHER> 11,081
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 143,261,634
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 692,877
<TOTAL-LIABILITIES> 692,877
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 142,572,510
<SHARES-COMMON-STOCK> 142,572,510
<SHARES-COMMON-PRIOR> 181,019,549
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 3,753
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 142,568,757
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 8,966,454
<OTHER-INCOME> 0
<EXPENSES-NET> 1,034,549
<NET-INVESTMENT-INCOME> 7,931,905
<REALIZED-GAINS-CURRENT> (1,463)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 7,930,442
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,931,905
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 374,303,813
<NUMBER-OF-SHARES-REDEEMED> 415,078,263
<SHARES-REINVESTED> 2,327,411
<NET-CHANGE-IN-ASSETS> (38,448,502)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,290
<GROSS-ADVISORY-FEES> 242,900
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,277,448
<AVERAGE-NET-ASSETS> 161,932,750
<PER-SHARE-NAV-BEGIN> 1,000
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.049
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 021
<NAME> THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 49,153,218
<INVESTMENTS-AT-VALUE> 49,741,917
<RECEIVABLES> 632,073
<ASSETS-OTHER> 5,482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,379,472
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,044
<TOTAL-LIABILITIES> 53,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,806,345
<SHARES-COMMON-STOCK> 5,168,697<F1>
<SHARES-COMMON-PRIOR> 3,571,637<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,068,616)
<ACCUM-APPREC-OR-DEPREC> 588,699
<NET-ASSETS> 50,326,428
<DIVIDEND-INCOME> 85,440
<INTEREST-INCOME> 3,195,536
<OTHER-INCOME> 0
<EXPENSES-NET> 582,688
<NET-INVESTMENT-INCOME> 2,698,288
<REALIZED-GAINS-CURRENT> 781,702
<APPREC-INCREASE-CURRENT> (56,510)
<NET-CHANGE-FROM-OPS> 3,423,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3,076,014<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,209,218
<NUMBER-OF-SHARES-REDEEMED> 664,598
<SHARES-REINVESTED> 53,203
<NET-CHANGE-IN-ASSETS> 15,335,595
<ACCUMULATED-NII-PRIOR> 30,029
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,855,439
<GROSS-ADVISORY-FEES> 200,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 611,985
<AVERAGE-NET-ASSETS> 48,828,671<F1>
<PER-SHARE-NAV-BEGIN> 9.43<F1>
<PER-SHARE-NII> 0.49<F1>
<PER-SHARE-GAIN-APPREC> 0.14<F1>
<PER-SHARE-DIVIDEND> 0.58<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 9.48<F1>
<EXPENSE-RATIO> 1.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 022
<NAME> THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 49,153,218
<INVESTMENTS-AT-VALUE> 49,741,917
<RECEIVABLES> 632,073
<ASSETS-OTHER> 5,482
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 50,379,472
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 53,044
<TOTAL-LIABILITIES> 53,044
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 50,806,345
<SHARES-COMMON-STOCK> 122,570<F1>
<SHARES-COMMON-PRIOR> 121,807<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,068,616)
<ACCUM-APPREC-OR-DEPREC> 588,699
<NET-ASSETS> 50,326,428
<DIVIDEND-INCOME> 85,440
<INTEREST-INCOME> 3,195,536
<OTHER-INCOME> 0
<EXPENSES-NET> 582,688
<NET-INVESTMENT-INCOME> 2,698,288
<REALIZED-GAINS-CURRENT> 781,702
<APPREC-INCREASE-CURRENT> (56,510)
<NET-CHANGE-FROM-OPS> 3,423,480
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 75,966<F1>
<DISTRIBUTIONS-OF-GAINS> 0<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 2,209,218
<NUMBER-OF-SHARES-REDEEMED> 664,598
<SHARES-REINVESTED> 53,203
<NET-CHANGE-IN-ASSETS> 15,335,595
<ACCUMULATED-NII-PRIOR> 30,029
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 1,855,439
<GROSS-ADVISORY-FEES> 200,909
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 611,985
<AVERAGE-NET-ASSETS> 1,398,487<F1>
<PER-SHARE-NAV-BEGIN> 10.64<F1>
<PER-SHARE-NII> 0.48<F1>
<PER-SHARE-GAIN-APPREC> 0.14<F1>
<PER-SHARE-DIVIDEND> 0.58<F1>
<PER-SHARE-DISTRIBUTIONS> 0.00<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 10.68<F1>
<EXPENSE-RATIO> 1.95<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 031
<NAME> THE RIVERFRONT INCOME EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 96,679,453
<INVESTMENTS-AT-VALUE> 101,416,249
<RECEIVABLES> 856,191
<ASSETS-OTHER> 21,273
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102,293,713
<PAYABLE-FOR-SECURITIES> 743,993
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 145,930
<TOTAL-LIABILITIES> 889,923
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 95,815,203
<SHARES-COMMON-STOCK> 7,175,136<F1>
<SHARES-COMMON-PRIOR> 6,154,052<F1>
<ACCUMULATED-NII-CURRENT> 534
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 851,257
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,736,796
<NET-ASSETS> 101,403,790
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<EXPENSES-NET> 1,763,616
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<DISTRIBUTIONS-OTHER> 0<F1>
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<NUMBER-OF-SHARES-REDEEMED> 1,316,119
<SHARES-REINVESTED> 1,989,492
<NET-CHANGE-IN-ASSETS> 20,403,766
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,361,127
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,804,770
<AVERAGE-NET-ASSETS> 81,186,667<F1>
<PER-SHARE-NAV-BEGIN> 11.92<F1>
<PER-SHARE-NII> 0.16<F1>
<PER-SHARE-GAIN-APPREC> 3.11<F1>
<PER-SHARE-DIVIDEND> 0.16<F1>
<PER-SHARE-DISTRIBUTIONS> 3.35<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 11.68<F1>
<EXPENSE-RATIO> 1.75<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 032
<NAME> THE RIVERFRONT INCOME EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 96,679,453
<INVESTMENTS-AT-VALUE> 101,416,249
<RECEIVABLES> 856,191
<ASSETS-OTHER> 21,273
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<TOTAL-ASSETS> 102,293,713
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 889,923
<SENIOR-EQUITY> 0
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<SHARES-COMMON-STOCK> 1,466,214<F1>
<SHARES-COMMON-PRIOR> 627,857<F1>
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 101,403,790
<DIVIDEND-INCOME> 2,688,652
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<OTHER-INCOME> 0
<EXPENSES-NET> 1,763,616
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<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> 3,879,842<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
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<SHARES-REINVESTED> 1,989,492
<NET-CHANGE-IN-ASSETS> 20,403,766
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,361,127
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 1,804,770
<AVERAGE-NET-ASSETS> 13,423,815<F1>
<PER-SHARE-NAV-BEGIN> 12.16<F1>
<PER-SHARE-NII> 0.06<F1>
<PER-SHARE-GAIN-APPREC> 3.17<F1>
<PER-SHARE-DIVIDEND> 0.06<F1>
<PER-SHARE-DISTRIBUTIONS> 3.35<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 11.98<F1>
<EXPENSE-RATIO> 2.55<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS
<SERIES>
<NUMBER> 041
<NAME> THE RIVERFRONT OHIO TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,289,469
<INVESTMENTS-AT-VALUE> 3,512,105
<RECEIVABLES> 34,701
<ASSETS-OTHER> 8,385
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<OTHER-ITEMS-LIABILITIES> 9,016
<TOTAL-LIABILITIES> 9,016
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<PAID-IN-CAPITAL-COMMON> 3,178,243
<SHARES-COMMON-STOCK> 268,544<F1>
<SHARES-COMMON-PRIOR> 1,027,469<F1>
<ACCUMULATED-NII-CURRENT> 93,730
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<ACCUMULATED-NET-GAINS> 51,566
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<ACCUM-APPREC-OR-DEPREC> 222,636
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<DIVIDEND-INCOME> 15,627
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<EXPENSES-NET> 128,027
<NET-INVESTMENT-INCOME> 324,399
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<APPREC-INCREASE-CURRENT> (692,569)
<NET-CHANGE-FROM-OPS> 288,588
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 346,814<F1>
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<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 1,146,296
<NUMBER-OF-SHARES-REDEEMED> 1,895,117
<SHARES-REINVESTED> 20,948
<NET-CHANGE-IN-ASSETS> (8,130,849)
<ACCUMULATED-NII-PRIOR> 6,757
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,729
<GROSS-ADVISORY-FEES> 40,980
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 159,289
<AVERAGE-NET-ASSETS> 7,013,824<F1>
<PER-SHARE-NAV-BEGIN> 10.41<F1>
<PER-SHARE-NII> 0.42<F1>
<PER-SHARE-GAIN-APPREC> 0.00<F1>
<PER-SHARE-DIVIDEND> 0.47<F1>
<PER-SHARE-DISTRIBUTIONS> 1.35<F1>
<RETURNS-OF-CAPITAL> 0.03<F1>
<PER-SHARE-NAV-END> 8.98<F1>
<EXPENSE-RATIO> 1.34<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS
<SERIES>
<NUMBER> 042
<NAME> THE RIVERFRONT OHIO TAX-FREE FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 3,289,469
<INVESTMENTS-AT-VALUE> 3,512,105
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<ASSETS-OTHER> 8,385
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<TOTAL-LIABILITIES> 9,016
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<SHARES-COMMON-STOCK> 123,530<F1>
<SHARES-COMMON-PRIOR> 92,478<F1>
<ACCUMULATED-NII-CURRENT> 93,730
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<ACCUMULATED-NET-GAINS> 51,566
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<NET-ASSETS> 3,546,175
<DIVIDEND-INCOME> 15,627
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<OTHER-INCOME> 0
<EXPENSES-NET> 128,027
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<APPREC-INCREASE-CURRENT> (692,569)
<NET-CHANGE-FROM-OPS> 288,588
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<DISTRIBUTIONS-OF-GAINS> 156,126<F1>
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<NET-CHANGE-IN-ASSETS> (8,130,849)
<ACCUMULATED-NII-PRIOR> 6,757
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 2,729
<GROSS-ADVISORY-FEES> 40,980
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<GROSS-EXPENSE> 159,289
<AVERAGE-NET-ASSETS> 1,182,298<F1>
<PER-SHARE-NAV-BEGIN> 10.64<F1>
<PER-SHARE-NII> 0.35<F1>
<PER-SHARE-GAIN-APPREC> (0.02)<F1>
<PER-SHARE-DIVIDEND> 0.40<F1>
<PER-SHARE-DISTRIBUTIONS> 1.35<F1>
<RETURNS-OF-CAPITAL> 0.03<F1>
<PER-SHARE-NAV-END> 9.19<F1>
<EXPENSE-RATIO> 2.14<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 051
<NAME> THE RIVERFRONT BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 18,057,693
<INVESTMENTS-AT-VALUE> 20,982,175
<RECEIVABLES> 105,478
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<TOTAL-ASSETS> 21,095,387
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<TOTAL-LIABILITIES> 49,539
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<PAID-IN-CAPITAL-COMMON> 17,990,174
<SHARES-COMMON-STOCK> 777,175<F1>
<SHARES-COMMON-PRIOR> 922,900<F1>
<ACCUMULATED-NII-CURRENT> 3,979
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,924,482
<NET-ASSETS> 21,045,848
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<INTEREST-INCOME> 520,993
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<EXPENSES-NET> 477,019
<NET-INVESTMENT-INCOME> 277,959
<REALIZED-GAINS-CURRENT> 1,983,851
<APPREC-INCREASE-CURRENT> 870,883
<NET-CHANGE-FROM-OPS> 3,132,693
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<DISTRIBUTIONS-OF-INCOME> 180,288<F1>
<DISTRIBUTIONS-OF-GAINS> 786,461<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
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<NUMBER-OF-SHARES-REDEEMED> 437,775
<SHARES-REINVESTED> 156,705
<NET-CHANGE-IN-ASSETS> 251,370
<ACCUMULATED-NII-PRIOR> 2,553
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (153,662)
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<AVERAGE-NET-ASSETS> 9,905,678<F1>
<PER-SHARE-NAV-BEGIN> 11.69<F1>
<PER-SHARE-NII> 0.23<F1>
<PER-SHARE-GAIN-APPREC> 1.71<F1>
<PER-SHARE-DIVIDEND> 0.23<F1>
<PER-SHARE-DISTRIBUTIONS> 1.10<F1>
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<PER-SHARE-NAV-END> 12.30<F1>
<EXPENSE-RATIO> 1.86<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 052
<NAME> THE RIVERFRONT BALANCED FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<TOTAL-LIABILITIES> 49,539
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<PAID-IN-CAPITAL-COMMON> 17,990,174
<SHARES-COMMON-STOCK> 903,237<F1>
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<DISTRIBUTIONS-OF-GAINS> 913,202<F1>
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<NUMBER-OF-SHARES-REDEEMED> 437,775
<SHARES-REINVESTED> 156,705
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<ACCUMULATED-NII-PRIOR> 2,553
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (153,662)
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<AVERAGE-NET-ASSETS> 10,755,901<F1>
<PER-SHARE-NAV-BEGIN> 12.04<F1>
<PER-SHARE-NII> 0.12<F1>
<PER-SHARE-GAIN-APPREC> 1.77<F1>
<PER-SHARE-DIVIDEND> 0.12<F1>
<PER-SHARE-DISTRIBUTIONS> 1.10<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 12.71<F1>
<EXPENSE-RATIO> 2.72<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 061
<NAME> THE RIVERFRONT STOCK APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<NET-INVESTMENT-INCOME> (123,137)
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<ACCUMULATED-GAINS-PRIOR> 2,036,132
<OVERDISTRIB-NII-PRIOR> 29,793
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 572,801
<AVERAGE-NET-ASSETS> 25,884,342<F1>
<PER-SHARE-NAV-BEGIN> 9.43<F1>
<PER-SHARE-NII> (0.04)<F1>
<PER-SHARE-GAIN-APPREC> 1.75<F1>
<PER-SHARE-DIVIDEND> 0.00<F1>
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<EXPENSE-RATIO> 2.11<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 062
<NAME> THE RIVERFRONT STOCK APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 9.77<F1>
<PER-SHARE-NII> (0.08)<F1>
<PER-SHARE-GAIN-APPREC> 1.77<F1>
<PER-SHARE-DIVIDEND> 0.00<F1>
<PER-SHARE-DISTRIBUTIONS> 1.97<F1>
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<PER-SHARE-NAV-END> 9.49<F1>
<EXPENSE-RATIO> 2.86<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 071
<NAME> THE RIVERFRONT LARGE COMPANY SELECT FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,020,952
<INVESTMENTS-AT-VALUE> 36,027,913
<RECEIVABLES> 84,571
<ASSETS-OTHER> 11,520
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,124,004
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,415
<TOTAL-LIABILITIES> 46,415
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,059,805
<SHARES-COMMON-STOCK> 2,964,154<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,823
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,006,961
<NET-ASSETS> 36,077,589
<DIVIDEND-INCOME> 461,398
<INTEREST-INCOME> 67,812
<OTHER-INCOME> 0
<EXPENSES-NET> 537,142
<NET-INVESTMENT-INCOME> (7,932)
<REALIZED-GAINS-CURRENT> 4,033,588
<APPREC-INCREASE-CURRENT> 3,414,575
<NET-CHANGE-FROM-OPS> 7,440,231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 76,753<F1>
<DISTRIBUTIONS-OF-GAINS> 3,675,987<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,184,844
<NUMBER-OF-SHARES-REDEEMED> 355,595
<SHARES-REINVESTED> 353,440
<NET-CHANGE-IN-ASSETS> (36,077,589)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 537,142
<AVERAGE-NET-ASSETS> 30,890,118<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> 0.00<F1>
<PER-SHARE-GAIN-APPREC> 2.77<F1>
<PER-SHARE-DIVIDEND> 0.00<F1>
<PER-SHARE-DISTRIBUTIONS> 1.40<F1>
<RETURNS-OF-CAPITAL> 0.03<F1>
<PER-SHARE-NAV-END> 11.34<F1>
<EXPENSE-RATIO> 1.69<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS A SHARES
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000862342
<NAME> THE RIVERFRONT FUNDS INC.
<SERIES>
<NUMBER> 072
<NAME> THE RIVERFRONT LARGE COMPANY SELECT FUND
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-02-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 20,020,952
<INVESTMENTS-AT-VALUE> 36,027,913
<RECEIVABLES> 84,571
<ASSETS-OTHER> 11,520
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 36,124,004
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46,415
<TOTAL-LIABILITIES> 46,415
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,059,805
<SHARES-COMMON-STOCK> 218,535<F1>
<SHARES-COMMON-PRIOR> 0<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 10,823
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 16,006,961
<NET-ASSETS> 36,077,589
<DIVIDEND-INCOME> 461,398
<INTEREST-INCOME> 67,812
<OTHER-INCOME> 0
<EXPENSES-NET> 537,142
<NET-INVESTMENT-INCOME> (7,932)
<REALIZED-GAINS-CURRENT> 4,033,588
<APPREC-INCREASE-CURRENT> 3,414,575
<NET-CHANGE-FROM-OPS> 7,440,231
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0<F1>
<DISTRIBUTIONS-OF-GAINS> 270,025<F1>
<DISTRIBUTIONS-OTHER> 0<F1>
<NUMBER-OF-SHARES-SOLD> 3,184,844
<NUMBER-OF-SHARES-REDEEMED> 355,595
<SHARES-REINVESTED> 353,440
<NET-CHANGE-IN-ASSETS> 36,077,589
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251,705
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 537,142
<AVERAGE-NET-ASSETS> 746,398<F1>
<PER-SHARE-NAV-BEGIN> 10.00<F1>
<PER-SHARE-NII> (0.04)<F1>
<PER-SHARE-GAIN-APPREC> 2.72<F1>
<PER-SHARE-DIVIDEND> 0.00<F1>
<PER-SHARE-DISTRIBUTIONS> 1.40<F1>
<RETURNS-OF-CAPITAL> 0.00<F1>
<PER-SHARE-NAV-END> 11.28<F1>
<EXPENSE-RATIO> 2.47<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>CLASS B SHARES
</FN>
</TABLE>
