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ANNUAL
REPORT
December 31, 1996
The Riverfront Income Equity Funds
The Riverfront Flexible Growth Fund
The Riverfront Stock Appreciation Fund
The Riverfront U.S. Government Income Fund
The Riverfront Ohio Tax-Free Bond Fund
The Riverfront U.S. Government Securities Money Market Fund
[Logo of Riverfront Funds]
R I V E R F R O N T
F U N D S
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Table of Contents The Riverfront Funds
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Message From Your Chairman.................................................. 2
Message From Your Investment Adviser........................................ 4
Performance Reviews......................................................... 5
Report of Independent Accountants........................................... 17
Statements of Assets and Liabilities........................................ 18
Statements of Operations.................................................... 20
Statements of Changes in Net Assets......................................... 22
Schedules of Portfolio Investments.......................................... 24
Notes to Financial Statements............................................... 36
Financial Highlights........................................................ 47
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Message From The Chairman The Riverfront Funds
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Dear Shareholders:
We're pleased to report that the year ended December 31, 1996, was a strong one
for the financial markets and for The Riverfront Funds, Inc. During the period,
the equity market continued to soar, and few sectors of the market failed to
participate in the advance. While the ride was somewhat rockier for bonds, when
all was said and done, the fixed-income markets also posted positive returns
for the year.
Throughout the period, investors also continued to deposit record amounts in
mutual funds. We're pleased to report that many chose to invest in our family
of funds.
THE LARGE COMPANY SELECT FUND LAUNCHES
We're also pleased to announce that on January 2, 1997, the portfolio
securities of two common trust funds managed by The Provident Bank for trust
clients were acquired by a new series of The Riverfront Funds, Inc., which was
then opened to all investors. The new series, The Riverfront Large Company
Select Fund, will invest in larger-capitalization companies, including some of
the largest and best known names in the country and around the world.
Moreover, all or a portion of the assets of the different series of the Fund
will be managed by a team of professional investment managers at The Provident
Bank. As a result, we're optimistic about the prospects for the Fund. For more
information, or for a prospectus of the Fund and any series, please call us at
1-800-424-2295. Please read the prospectus carefully before investing.
THE STOCK APPRECIATION FUND TIGHTENS FOCUS
The launch of The Riverfront Large Company Select Fund has given us the
opportunity to restructure The Riverfront Stock Appreciation Fund. Expected to
be renamed The Riverfront Small Company Select Fund during 1997, this fund
invests primarily in small- and mid-capitalization companies with potential for
growth: companies whose performance is tracked against the Russell 2000 Index
rather than the Standard and Poor's 500 Index. Here, too, if you'd like more
information about this series, or any of the Riverfront series, please feel
free to call us.
NEW ADVISERS FOR THE INCOME EQUITY FUND AND THE FLEXIBLE GROWTH FUND
We are also pleased to announce that, as of January 2, 1997, The Provident Bank
became an active Investment Adviser for a portion of the assets of The
Riverfront Income Equity Fund. Previously the Fund was managed primarily by a
Sub-Adviser; now, the Bank will share responsibility for investment policy and
selection with a team of investment management professionals at DePrince, Race
& Zollo, the above mentioned Sub-Adviser to the Fund assigned to manage the
remaining assets of such series. Also, as of January 2, 1997, The Provident
Bank assumed responsibility of Investment Adviser for The Riverfront Flexible
Growth Fund, which also changed its name to The Riverfront Balanced Fund as of
such date.
IN CLOSING. . .
We urge you to read the following report closely. In it, you will find a
detailed discussion of the performance of each of the Riverfront Funds during
the year ended December 31, 1996.
2
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Message From The Chairman, continued The Riverfront Funds
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Finally, we thank you for your continued confidence in us. We look forward to
providing you with the investment management you expect and to serve your needs
now and in the future. As always, if you would like a prospectus, have any
questions, or require any assistance, please don't hesitate to call us at
1-800-424-2295.
Sincerely,
/s/ Stephen G. Mintos
Stephen G. Mintos
Chairman
The Riverfront Funds, Inc.
This report is authorized for distribution only when preceded or accompanied by
a prospectus. Read the prospectus carefully before investing or sending money.
The Riverfront Funds are distributed by BISYS Fund Services.
THE RIVERFRONT FUNDS ARE NOT FDIC INSURED AND ARE NOT
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, THE PROVIDENT BANK OR ITS AFFILIATES OR BY ANY
GOVERNMENTAL AGENCY. INVESTMENT PRODUCTS INVOLVE
INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
3
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Message From The Investment Adviser The Riverfront Funds
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Dear Shareholders:
1996 was another year of solid performance in the equity markets. This came on
the heels of 1995's exceptional performance. In the past two years, the broad
stock market as measured by the S&P 500 stock index increased by 70%. Clients
want to know if this torrid pace will continue.
Unfortunately, the investment managers at Provident Bank do not have a crystal
ball to gaze into the future. Investment results have a tendency to return to
the mean when measured over long periods of time. My advice is to enjoy the
ride while it lasts. We are cautious on the overall stock market due to
fundamental valuation measures. Dividend yields are at historic lows. Price-to-
book ratios are currently high. Price-to-earnings ratios are near the top
decile of this historic range even though corporate earnings have been very
strong.
Over long periods of time, equity investments in large companies have returned
10.7% while small companies have returned 12.6%. The source of this information
is Ibbotson Associates who have been studying the returns available of
different sectors of the capital markets since 1976. Their analysis covers over
70 years of data beginning in 1926.
LET'S LOOK BACK TO THE BEGINNING OF 1996
Consensus thinking about the direction of the economy was extremely volatile in
1996, much like the performance of the financial markets. At the beginning of
the year, investors were disconcerted by the shutdown of the government, the
potential default of Treasury bonds, and the possibility of recession and
deflation. As the second quarter began, signs that the economy was picking up
steam appeared. Opinion shifted 180 degrees virtually overnight. Investors
focused on every aspect of the economy's unexpected strength and looked for
evidence that inflation was rising.
Very little appeared. In fact, as the year wore on, indications were that the
economy was, in fact, slowing somewhat rather than accelerating. Nonetheless, a
consensus opinion about where the economy was going did not appear. As 1996
drew to a close, roughly half of investors were nervously anticipating
accelerated growth, while the other half were expecting a slowdown.
THE DIRECTION FOR 1997 IS UNCERTAIN
Moreover, there is evidence to support both positions. Underpinning the view
that a stronger economy is just around the corner is the fact that capital
spending is strong and likely to continue. After three years of record-breaking
corporate profits, companies have cash on hand to continue purchasing
productivity tools and upgrading facilities. In addition, the European and
Asian economies are expected to grow at a healthy rate which will bolster the
sales of U.S. multinationals, in the year ahead.
At the same time, however, there is evidence indicating that consumer spending,
which accounts for approximately two thirds of all economic activity, is
slowing. Consumer debt and bankruptcies are now hitting record levels. Housing
starts and home sales are weak. Auto sales are backing off, as well.
Inflationary pressures, too, though hardly intense, are present. Oil prices are
stubbornly high, and natural gas prices are rising. In addition, unemployment
is historically low, and wage growth is starting to accelerate. In short,
inflationary pressures are not entirely absent.
JUST RIGHT, FOR NOW
Only time will tell which camp is right. At the moment, it appears that the GDP
(Gross Domestic Product: a measure of economic activity) is growing at a rate
of 2% to 2.5%, which is consistent with a stable and low inflation. This figure
is well in line with Chairman Greenspan's non-inflationary growth targets.
Given this, the Federal Reserve has little reason to adjust monetary policy at
the moment. Consequently, we do not anticipate a dramatic increase in activity
in the months ahead, nor do we expect the economy to slip into a recession. Of
course, no one can accurately or precisely predict the future, but looking at
the big picture, we believe that a year of moderate growth with modest
inflation lies ahead.
OUR RECOMMENDATION
Most investors are best served by following a disciplined approach to
investing. The value-oriented style espoused by Provident's investment
management team has worked well for our clients.
4
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Message From The Investment Adviser, continued The Riverfront Funds
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Rather than chasing returns achieved in the past, we encourage you to look
forward. Time has a tendency to smooth out the peaks and troughs in the stock
market. Most long-term investors can afford the year-to-year fluctuations that
come from investing in stocks. Our recommendation is quite simple: Pick an
approach to investing that lets you sleep well at night.
A TOUGH ACT TO FOLLOW
Fixed-income performance significantly lagged the performance of equities last
year. Investors in long-bond portfolios actually lost money in 1996. We are
pleased that our defensive posture provided positive returns to our clients.
While the returns were small, investors should not forget that they buy fixed
securities to meet their income needs, as well as to balance the variability of
equity investments.
The slow-growth, low inflation environment we are forecasting should prove to
be favorable for fixed-income securities. Barring any major event or
disruption, we expect the long bond to trade within a moderate range (6.25% to
7.25%) throughout the year.
The road for equity investors, however, may be a bit bumpier in the year ahead
in light of last year's spectacular gains. Year-over-year earnings growth is
expected to slow. Profit margins are likely to be squeezed in coming months,
and disappointments may be treated very harshly.
At the same time, we believe that investors have overlooked some sectors that
offer some excellent values. To this end, we continue to focus on REITs (Real
Estate Investment Trusts), small companies with strong growth prospects, and
agricultural companies. In addition, we believe that selective capital
equipment and technology stocks will continue to do well despite possible
short-term disappointments. Moreover, we would view any pullbacks as a buying
opportunity.
Sincerely,
/s/ Gary W. Queen
Gary W. Queen
Senior Managing Director
Capital Management Group
The Provident Bank
February 24, 1997
5
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Performance Reviews The Riverfront Funds
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THE RIVERFRONT INCOME EQUITY FUND
Focused on companies likely to deliver superior earnings growth, the Fund had a
good year particularly in light of the fact that dividend and capitalization
requirements prevented us from investing in many of the stocks that led the
market higher throughout the period. For the year ended December 31, 1996, the
Fund posted a total return of 19.88% (Investor A shares)*, compared to 22.96%
for its benchmark, the S&P 500.
VALUE HOLDS ITS VALUE
Investor sentiment rotated rapidly throughout the period. While value-oriented
stocks were seldom in the spotlight, they were, nonetheless, very strong
performers when the market focused on their particular sector. Consequently, in
the first half of the year, financial stocks made a substantial contribution to
performance. In the second half, we saw the value of our holdings in consumer
stocks like Kimberley Clark, CPC and Unilever climb dramatically.
In fact, over the course of the year, many of these stocks hit our price
targets. As a result, these holdings were sold to lock-in profits. Assets were
then reinvested in companies we believe are still overlooked and undervalued by
the market and are poised to reward their investors. As a result, during the
period, several medium-sized utility companies (all low-cost producers well-
equipped to survive in a deregulated environment) were added to the portfolio.
We also added to established positions in Dana Corp., Volvo and JC Penney.
CONSOLIDATION OPPORTUNITIES ABOUND
While we expect the year ahead to be challenging, we believe it will be a good
one for value-oriented stocks. Having already been beaten down for one reason
or another, expectations are low. Consequently, such stocks involve less
downside risk than many of the market's favorites of the past year. The above-
average dividend yield of these stocks should also provide support in the event
of any correction in the marketplace.
Moreover, given their current valuations, many of the names in the portfolio
are very attractive on a takeover basis. In particular, several of our utility
holdings are prime consolidation candidates. As a result, we believe the Fund
is well positioned for the year ahead.
As of December 31, 1996, the Fund's top five holdings were AMP Corp. (2.4%),
Baxter International (2.2%), ITT Industries (2.2%), Dana Corp. (2.1%) and Amoco
Corp. (2.1%).
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*The return, with the maximum sales charge of 4.50%, was 14.52% for the period.
Income Equity Fund
Value of a $10,000 Investment
Investor A S&P
Shares 500 Index
10/8/92 10,000 10,000
12/31/92 10,875 10,503
12/31/93 12,192 11,545
12/31/94 12,568 11,713
12/31/95 16,521 16,137
12/31/96 19,805 19,842
Average Annual Total Return
Since
Inception
1 Year (10/8/92)
Investor A Shares (No Load) 19.88% 17.52%
6
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Performance Reviews, continued The Riverfront Funds
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Income Equity Fund
Value of a $10,000 Investment
Income S&P
Equity 500 Index
10/8/92 9,551 10,000
12/31/92 10,387 10,503
12/31/93 11,645 11,545
12/31/94 12,004 11,713
12/31/95 15,779 16,137
12/31/96 18,916 19,842
Average Annual Total Return
Since
Inception
1 Year (10/8/92)
Investor A Shares* 14.52% 16.25%
*Reflects 4.50% sales charge.
Income Equity Fund
Value of a $10,000 Investment
Investor B S&P
Shares 500 Index
10/8/92 9,600 10,000
12/31/92 10,475 10,503
12/31/93 11,792 11,545
12/31/94 12,168 11,713
12/31/95 15,947 16,137
12/31/96 19,242 19,842
Average Annual Total Return
Since
Inception
1 Year (10/8/92)
Investor B Shares** 15.67% 16.72%
**Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of The Riverfront Funds will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost. Performance
of Investor B Shares for periods prior to the initial offering, January 1995,
represents performance for Investor A Shares and is restated to reflect
applicable contingent deferred sales charges. Investor B Shares are subject to
distribution and service fees, which would have reduced performance. The
maximum Contingent Deferred Sales Charge for the Investor B Shares is 4.00%.
The returns set forth reflect the waiver of certain advisory or administrative
fees. Without the waiver of fees total return may have been lower.
The Standard & Poor's 500 Stock Index is an unmanaged index considered to be
representative of the stock market as a whole. The index does not reflect the
deduction of expenses associated with a mutual fund, such as investment-
management and fund-accounting fees. The performance of The Riverfront Income
Equity Fund reflects the deduction of fees for these value-added services.
7
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Performance Reviews, continued The Riverfront Funds
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THE RIVERFRONT FLEXIBLE GROWTH FUND
(Renamed the Balanced Fund in January 1997)
The Fund allocates its holdings among stocks, bonds and money market
instruments in an effort to deliver an optimal mix of growth and current
income. This diversified approach helps protect shareholders from potential
losses when one market sector suffers a temporary setback.
The Fund had a total return of 5.76% (Investor A Shares)* for the 12 months
ended December 31, 1996. That compared to a return of 22.96% for the Standard &
Poor's 500 Stock Index, 4.05% for the Lehman Brothers Intermediate Government-
Corporate Bond Index and 13.01% for the Lipper Balanced Average the Fund's
primary benchmarks.
WEIGHTED FOR A CORRECTION
Early in February, our indicators suggested that the market was entering a
high-risk level as the market continued to rise. Moreover, rather than
strengthening, bonds weakened as investors worried about the direction of
interest rates. As a result, we moved to position the Fund more defensively,
and this strategy paid off when the second half of the year kicked off with a
sharp decline in stock prices.
In addition to providing the Fund with the cushion it needed in a more volatile
environment, our defensive positioning also provided us with the flexibility
needed to capitalize on many attractive opportunities the decline created. As a
result, our exposure in equities increased to 55% with the addition of Chase,
Fannie Mae, DuPont and several other large-capitalization stocks.
The bond market also firmed in the second half of the year as expectations
dissipated that the Fed would move to increase rates. As a result, holdings
here made a solid contribution to performance. Nonetheless, the Fund's
defensive weighting and longer bond portfolio early in the period impacted
performance for the year overall.
PORTFOLIO POSITIONING
As of December 31, 1996, approximately 51.9% of the portfolio was invested in
stocks, 38.5% was invested in bonds, and 9.6% in cash and cash equivalents.
As of the same date, the top five equity holdings in the Fund's porfolio were
E.I. Dupont deNemours & Co. (3.1%), Philip Morris (2.3%), Case Corp. (2.1%),
Bristol Myers (2.1%) and CIA Telecomunicacion Chile (1.9%). The fixed-income
portion of the portfolio was invested primarily in U.S. treasury securities.
The average maturity of these holdings was approximately 4.5 years; the average
credit quality of the portfolio not invested in U.S. Treasury securities was
AAA.
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*The return, with the maximum sales charge of 4.50%, was 0.96% for the period.
Flexible Growth Fund
Value of a $10,000 Investment
Investor A S&P Lehman Blended Lipper
Shares 500 Index Int. Govt. 50% S&P Balance
50% LB
9/1/94 10,000 10,000 10,000 10,000 10,000
12/31/94 9,473 9,800 9,896 9,737 9,739
12/31/95 11,446 13,475 11,413 12,143 12,161
12/31/96 12,674 16,569 11,875 14,146 13,744
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor A Shares (No Load) 5.76% 10.69%
8
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Performance Reviews, continued The Riverfront Funds
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Flexible Growth Fund
Value of a $10,000 Investment
Investor A S&P Lehman Blended Lipper
Shares 500 Index Brothers 50% S&P Balance
9/1/94 9,551 10,000 10,000 10,000 10,000
12/31/94 9,473 9,800 9,896 9,737 9,739
12/31/95 11,446 13,475 11,413 12,143 12,161
12/31/96 12,095 16,569 11,875 14,140 13,744
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor A Shares* 0.96% 8.53%
*Reflects 4.50% sales charge.
Flexible Growth Fund
Value of a $10,000 Investment
Investor B S&P Lehman Blended Lipper
Shares 500 Index Brothers 50% S&P Balance
9/1/94 9,600 10,000 10,000 10,000 10,000
12/31/94 9,526 9,800 9,896 9,737 9,739
12/31/95 11,554 13,475 11,413 12,143 12,161
12/31/96 12,184 16,569 11,875 14,140 13,744
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor B Shares** 1.27% 8.83%
**Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of The Riverfront Funds will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost. Performance
of Investor B Shares for periods prior to the initial offering, January 1995,
represents performance for Investor A Shares and is restated to reflect
applicable contingent deferred sales charges. Investor B Shares are subject to
distribution and service fees, which would have reduced performance. The
maximum Contingent Deferred Sales Charge for the Investor B Shares is 4.00%.
The returns set forth reflect the waiver of certain advisory or administrative
fees. Without the waiver of fees total return may have been lower.
The Standard & Poor's 500 Stock Index the Lehman Brothers Intermediate
Government/Corporate Bond Index are considered to be representative of the
stock and bond markets, respectively. They are unmanaged and do not reflect the
deduction of expenses associated with a mutual fund, such as investment-
management and fund-accounting fees. The Lipper Balanced Average is a composite
of 522 funds in the Lipper Balanced category. The performance of The Riverfront
Flexible Growth Fund reflects the deduction of fees for these value-added
services.
The Riverfront Flexible Growth Fund is also being measured against a benchmark
of blended indices which represent 50% of the S&P Index and 50% of the Lehman
Brothers Intermediate Government/Corporate Bond Index. These indices do no
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Fund's performance reflects
the deduction of fees for these value-added services.
9
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Performance Reviews, continued The Riverfront Funds
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THE RIVERFRONT STOCK APPRECIATION FUND
(To be Renamed Small Company Select Fund in 1997)
The Fund continued to focus on stocks of small and mid-sized companies likely
to deliver superior earnings growth. For the year ended December 31, 1996, it
posted a total return of 10.17% (Investor A Shares)*, compared to 22.96% for
the S&P 500, 20.66% for the NASDAQ Composite Index and 16.49% for the Russell
2000, the fund's primary benchmarks.
SENTIMENT FAVORED LARGE CAPS
With the stock market hitting new highs on almost a weekly basis throughout the
period, investors sought reassurance by moving into well-established, well-
known names. Moreover, several sectors, most notable among them the technology
sector, suffered as investors sold to lock-in the spectacular gains of the past
year. As a result, while most small and mid-sized companies posted gains that
in any other year would be more than respectable, they lagged market averages
for the year.
POSITIONED FOR GROWTH IN 1997
In the year ahead, we expect to see low growth, low inflation, lower profits
and much smaller gains in stock prices than we saw in 1996. Historically, in
slower economies, investors seeking growth have turned to small-cap stocks, and
today, those stocks, having lagged the market over the past year, are very
attractively priced versus the larger caps.
Consequently, in recent months, we redoubled our efforts to seek out
opportunities in the small-cap sector of the market. As the year drew to a
close, the Fund was realigned with this outlook in mind. Exposures in
technology, a sector that has experienced simply spectacular growth over the
past three years, were reduced in an effort to reduce risk and volatility.
Positions in the health-care and financial sectors, two areas that we believe
are poised to reward investors, were added to the portfolio. REITs (Real Estate
Investment Trusts) were also added. Currently undervalued and less volatile
than the average stock, REITs offer investors a large dividend yield and solid
growth potential.
As a result of these efforts, the Fund is now well positioned to weather the
slower growth economy and stock market we see ahead. As of December 31, 1996,
the Fund's top five holdings were: Microsoft (3.4%), Jones Apparel Group
(2.9%), Dell Computers (2.3%), Cisco Systems (2.0%) and United States Filter
Corp. (2.0%).
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*The return, with the maximum sales charge of 4.50%, was 5.19% for the period.
Stock Appreciation Fund
Value of a $10,000 Investment
Investor A S&P NASDAQ Russell
Shares 500 Index Comp. 2000
7/23/87 10,000 10,000 10,000 10,000
12/31/87 7,886 8,027 7,728 7,391
12/31/88 7,718 9,339 8,919 9,231
12/31/89 8,977 12,255 10,636 10,730
12/31/90 9,442 11,871 8,742 8,637
12/31/91 16,710 15,433 13,712 12,615
12/31/92 17,682 16,580 15,830 14,939
12/31/93 19,525 18,228 18,166 17,776
12/31/94 17,487 18,462 17,584 17,439
12/31/95 22,365 25,315 24,604 22,399
12/31/96 24,465 31,127 29,686 26,092
Average Annual Total Return
Since
Inception
1 Year 5 Year (7/23/87)
Investor A Shares (No Load) 10.17% 8.08% 10.01%
10
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Performance Reviews, continued The Riverfront Funds
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Stock Appreciation Fund
Value of a $10,000 Investment
Investor A S&P NASDAQ Russell
Shares 500 Index Comp. 2000
7/23/87 9,548 10,000 10,000 10,000
12/31/87 7,530 8,027 7,728 7,391
12/31/88 7,369 9,339 8,919 9,231
12/31/89 8,572 12,255 10,636 10,730
12/31/90 9,015 11,871 8,742 8,637
12/31/91 15,955 15,433 13,712 12,615
12/31/92 16,883 16,580 15,830 14,939
12/31/93 18,642 18,228 18,168 17,776
12/31/94 16,697 18,462 17,584 17,439
12/31/95 21,357 25,315 24,604 22,399
12/31/96 23,527 31,127 29,686 26,092
Average Annual Total Return
Since
Inception
1 Year 5 Year (7/23/87)
Investor A Shares* 5.19% 7.08% 9.47%
*Reflects 4.50% sales charge.
Stock Appreciation Fund
Value of a $10,000 Investment
Investor B S&P NASDAQ Russell
Shares 500 Index Comp. 2000
7/23/87 9,600 10,000 10,000 10,000
12/31/87 7,572 8,027 7,728 7,391
12/31/88 7,413 9,339 8,919 9,231
12/31/89 8,630 12,255 10,636 10,730
12/31/90 9,168 11,871 8,742 8,637
12/31/91 16,510 15,433 13,712 12,615
12/31/92 17,582 16,580 15,830 14,939
12/31/93 19,525 18,228 18,168 17,776
12/31/94 17,487 18,462 17,584 17,439
12/31/95 22,436 25,315 24,604 22,399
12/31/96 24,465 31,127 29,686 26,092
Average Annual Total Return
Since
Inception
1 Year 5 Year (7/23/87)
Investor B Shares** 5.10% 7.78% 9.93%
**Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of The Riverfront Funds will fluctuate so, that the shares,
when redeemed, may be worth more or less than their original cost. Performance
of Investor B Shares for periods prior to the initial offering, October 1995,
represents performance for Investor A Shares and is restated to reflect
applicable contingent deferred sales charges. Investor B Shares are subject to
distribution and service fees, which would have reduced performance. The return
includes the performance history of the MIM Stock Appreciation Fund and
excludes that of the MIM Stock Growth Fund prior to acquisition. The maximum
Contingent Deferred Sales Charge for the Investor B shares is 4.00%. The
returns set forth reflect the waiver of certain advisory or administrative
fees. Without the waiver of fees total return may have been lower.
Until recently, the Fund had invested in stocks of mid-sized and large
companies. As a result, the Standard & Poor's 500 Stock Index and the NASDAQ
Composite Index had been an appropriate performance benchmark, since they are a
broad measure of the U.S. Stock market as a whole. However, the Fund's
performance is now being compared to the Russell 2000 Index to better reflect
the Fund's new focus of domestically traded common stocks of small to mid-sized
companies. The indices do not reflect the deduction of expenses associated with
a mutual fund, such as investment-management and fund-accounting fees. The
performance of The Riverfront Stock Appreciation Fund reflects the deduction of
fees for these value-added services.
11
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Performance Reviews, continued The Riverfront Funds
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THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
During a period that was disappointing at best for most bond investors, the
Fund returned 2.51% (Investor A Shares)* for the twelve months ended December
31, 1996. For the same period, its benchmarks, the Lehman Brothers Intermediate
Government/Corporate Bond Index, the Lehman Brothers Government//Mortgage Bond
Index and the Lipper Intermediate Government Bond Average, returned 4.05%,
5.35% and 2.91% respectively.
Stronger-than-expected growth and increasing wage pressures led investors to
believe that Federal Reserve action was imminent throughout much of the period.
Nonetheless, the Fed stuck to its guns and maintained its neutrality. As a
result, after peaking at 7.2% in July, the long bond had backed down into the
6.35% range by fall and the bond markets rallied in October and November. Year-
end nervousness, however, limited the gains.
A DIVERSIFIED, CONSERVATIVE APPROACH
Given the environment, the Fund was positioned conservatively throughout the
period. Seeking to enhance yield, exposures in government-agency securities
were decreased in favor of corporate bonds and Treasury securities, and
holdings in both sectors made solid contributions to performance. Nonetheless,
due to our caution, the Fund slightly underperformed its benchmark indices.
Given how rapidly and radically investor sentiment shifted throughout the year,
we believe caution was well warranted. Moreover, until the direction of the
economy and interest rates grows clearer, we will continue to approach the
markets cautiously.
At the end of the period, the average maturity of the portfolio's holdings was
6.1 years. Approximately 43% of the portfolio's assets were invested in U.S.
government agency securities, 28% in corporate bonds and 12% in Treasury
securities and 13% in Agency CMOs. The remainder was held in cash and cash
equivalents. The average credit quality of the holdings was AA.
- -------
*The return, with the maximum sales charge of 4.50%, was -2.12% for the period.
U.S. Government Income Fund
Value of a $10,000 Investment
Investor A Lehman Lehman Lipper
Shares Govern. Int. Gov. Intermed.
10/1/92 10,000 10,000 10,000 10,000
12/31/92 9,869 10,028 9,964 10,090
12/31/93 10,597 10,958 10,840 10,966
12/31/94 10,106 10,656 10,631 10,560
12/31/95 11,644 12,554 12,261 12,204
12/31/96 11,937 13,226 12,758 12,559
Average Annual Total Return
Since
Inception
1 Year (10/1/92)
Investor A Shares (No Load) 2.51% 4.25%
12
<PAGE>
- --------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds
- --------------------------------------------------------------------------------
U.S. Government Income Fund
Value of a $10,000 Investment
Investor A Lehman Lehman Lipper
Shares Govern. Int. Gov. Intermed.
10/1/92 9,551 10,000 10,000 10,000
12/31/92 9,426 10,028 9,964 10,090
12/31/93 10,122 10,958 10,840 10,966
12/31/94 9,653 10,656 10,631 10,560
12/31/95 11,121 12,554 12,261 12,204
12/31/96 11,401 13,226 12,758 12,559
Average Annual Total Return
Since
Inception
1 Year (10/1/92)
Investor A Shares* -2.12% 3.13%
*Reflects 4.50% sales charge.
U.S. Government Income Fund
Value of a $10,000 Investment
Investor B Lehman Lehman Lipper
Shares Govern. Int. Gov. Intermed.
10/1/92 9,600 10,000 10,000 10,000
12/31/92 9,479 10,028 9,964 10,090
12/31/93 10,201 10,958 10,840 10,966
12/31/94 9,749 10,656 10,631 10,560
12/31/95 11,217 12,554 12,261 12,204
12/31/96 11,515 13,226 12,758 12,559
Average Annual Total Return
Since
Inception
1 Year (10/1/92)
Investor B Shares** -2.17% 3.37%
**Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of The Riverfront Funds will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost. Performance
of Investor B Shares for periods prior to the initial offering in January 1995,
represents performance for Investor A Shares and is restated to reflect
applicable contingent-deferred sales charges. Investor B Shares are subject to
distribution and service fees, which would have reduced performance. The
maximum Contingent Deferred Sales Charge for the Investor B shares is 4.00%.
The returns set forth reflect the waiver of certain advisory or administrative
fees. Without the waiver of fees total return may have been lower.
The Fund's performance is measured against two indices considered to be
representative of mortgage-backed government bonds and intermediate-term bonds,
the Lehman Brothers Government/Mortgage Bond Index and the Lehman Brothers
Intermediate Government/Corporate Bond Index, respectively. The indices do not
reflect the deduction of expenses associated with a mutual fund, such as
investment management fees. The Fund's performance reflects the deduction of
these value-added services.
13
<PAGE>
- --------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds
- --------------------------------------------------------------------------------
THE RIVERFRONT OHIO TAX-FREE BOND FUND
Much like the taxable markets, the tax-free markets were somewhat jumpy
throughout the year as investors reacted to reports on economic growth, the
direction of interest rates, election year tax reform proposals and the fiscal
viability of various municipalities. Across the country, however, demand for
high-quality securities remained strong. Ohio securities, with their stringent
and strictly enforced quality requirements, were among the most sought-after
issues. As a result, supply in the Ohio municipal market was tight, which
dampened volatility.
At the same time, however, the lack of bonds available in the marketplace made
it extremely difficult to respond to changes in the environment. Maturities
were adjusted whenever the opportunity to do so without compromising quality,
arose but often it was impossible to move as quickly or as dramatically as we
might have liked. For the year ended December 31, 1996, the Fund produced a
total return of 2.95% (Investor A Shares)*.
DEMAND TO GROW
With municipalities under intense pressure from constituents to cut borrowing
dramatically, the number of issues available is unlikely to increase
significantly in the near future. Moreover, demand for high-quality issues,
already strong, can be expected to increase as the baby-boomer generation moves
closer to retirement. As a result, we expect the years ahead to be good ones
for the municipal markets in general and very good ones, indeed, for high-
quality muni markets like Ohio.
Given the environment, we expect to make no major changes in the allocation or
maturity structure of the portfolio in the near future. As of December 31,
1996, the Fund held approximately 53 issues. While all of these holdings were
rated A or better, approximately 65% were rated AAA. The average maturity of
the portfolio's holdings was 9.78 years.
- -------
*The return, with the maximum sales charge of 4.50%, was -1.72% for the period.
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Investor A Lehman
Shares Brother
8/1/94 10,000 10,000
12/31/94 9,953 9,727
12/31/95 11,044 11,424
12/31/96 11,370 11,955
Average Annual Total Return
Since
Inception
1 Year (8/1/94)
Investor A Shares (No Load) 2.95% 5.45%
14
<PAGE>
- --------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds
- --------------------------------------------------------------------------------
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Investor A Lehman
Shares Int. Muni.
8/1/94 9,551 10,000
12/31/94 9,506 9,727
12/31/95 10,548 11,424
12/31/96 10,859 11,955
Average Annual Total Return
Since
Inception
1 Year (8/1/94)
Investor A Shares* -1.72% 3.47%
*Reflects 4.50% sales charge.
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Investor B Lehman
Shares Int. Muni.
8/1/94 9,600 10,000
12/31/94 9,580 9,727
12/31/95 10,558 11,424
12/31/96 10,801 11,955
Average Annual Total Return
Since
Inception
1 Year (8/1/94)
Investor B Shares** -1.76% 3.23%
*Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of The Riverfront Funds will fluctuate, so that the shares,
when redeemed, may be worth more or less than their original cost. Performance
of Investor B Shares for periods prior to the initial offering, January 1995,
represents performance for Investor A Shares and is restated to reflect
applicable contingent-deferred sales charges. Investor B Shares are subject to
distribution and service fees, which would have reduced performance. The
maximum Contingent Deferred Sales Charge for the Investor B shares is 4.00%.
The returns set forth reflect the waiver of certain advisory or administrative
fees. Without the waiver of fees total return may have been lower.
The performance of The Riverfront Ohio Tax-Free Bond Fund is measured against
the Lehman Brothers Intermediate Municipal Bond Fund Index, an unmanaged index
generally representative of the performance of the municipal bond fund market
nationwide. The index does not reflect the deduction of expenses associated
with a mutual fund, such as investment-management fees. The Fund's performance
reflects the deduction of these value-added services.
15
<PAGE>
- --------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds
- --------------------------------------------------------------------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
Historically, high levels of economic growth have pushed inflation rates
dramatically higher, so spurts of economic growth throughout the year ended
December 31, 1996 made, the money markets edgy. Each new report or statistic
increased expectations that the Federal Reserve would move to increase interest
rates. But the Federal Reserve held fast to its policy of neutrality. As a
result, while the market was choppy at times, interest rates traded in a
relatively narrow range throughout the period.
Flexibility was the key to success in such an environment. Consequently,
maturities were shortened, falling from 29 days as the year began, to 27 days
in June and then, in December, to 25 days. Moreover, in an effort to further
cushion the Fund against sudden shifts in rates, assets were invested in a
widely diversified range of securities, including high-grade commercial paper,
with different maturity dates. As a result, the Fund performed in line with
other funds of this type throughout the period.
Given the Fund's overriding objective, preservation of capital, we expect to
maintain our laddered approach to the markets in the months ahead, in an effort
to reduce exposure to sudden shifts in interest rates. Nor do we expect to make
any major or significant changes in allocation.
U.S. Government Securities Money Market Fund
Value of a $10,000 Investment
U.S. 30-Day
T-Bill U.S. Government
10/1/92 10,000 10,000
12/31/92 10,052 10,085
12/31/93 10,343 10,374
12/31/94 10,747 10,766
12/31/95 11,348 11,361
12/31/96 11,939 11,916
Average Annual Total Return
Since
Inception
1 Year (10/1/92)
U.S. Government Securities
Money Market Fund 4.89% 4.21%
Although The Riverfront U.S. Government Securities Money Market Fund seeks to
maintain a stable net asset value of $1.00, there is no assurance that it will
be able to do so. An investment in the Fund is neither insured nor guaranteed
by the U.S. Government. The returns set forth reflect the waiver of certain
advisory or administrative fees. Without the waiver of fees total return may
have been lower.
The U.S. Treasury Bills index is considered to be representative of the T-bill
market respectively. The index is unmanaged and does not reflect the deduction
of expenses associated with a mutual fund, such as investment-management and
fund-accounting fees. The performance of The Riverfront U.S. Government
Securities Money Market Fund reflects the deduction of fees for these value-
added services.
16
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
To the Shareholders and Directors
The Riverfront Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments of The Riverfront Funds, Inc.
(comprising, respectively, U.S. Government Securities Money Market Fund, U.S.
Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, Flexible
Growth Fund, and Stock Appreciation Fund) as of December 31, 1996, the related
statements of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended of the U.S.
Government Securities Money Market Fund, U.S. Government Income Fund, Income
Equity Fund, Ohio Tax-Free Bond Fund, and Flexible Growth Fund, and from
October 1, 1995 to December 31, 1995 of the Stock Appreciation Fund, and
financial highlights for each of the two years ended December 31, 1996 of the
U.S. Government Securities Money Market Fund, U.S. Government Income Fund,
Income Equity Fund, Ohio Tax-Free Bond Fund, and Flexible Growth Fund and for
the year ended December 31, 1996 and the period October 1, 1995 to December 31,
1995 of the Stock Appreciation Fund. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial statements and financial highlights of the
Stock Appreciation Fund for the periods and years ended prior to October 1,
1995, were audited by other auditors whose report dated October 11, 1995,
expressed an unqualified opinion on those statements and financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Riverfront Funds, Inc. at
December 31, 1996, the results of their operations, the changes in their net
assets and the financial highlights for the respective periods ended December
31, 1996 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 20, 1997
17
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$128,546,762; $34,345,949; and
$77,468,431, respectively)...... $128,546,762 $34,599,514 $81,452,789
Repurchase agreements (Cost
$53,295,000; $0; and $0,
respectively)................... 53,295,000
------------ ----------- -----------
TOTAL INVESTMENTS............... 181,841,762 34,599,514 81,452,789
Interest and dividends
receivable...................... 53,298 424,677 244,834
Receivable for capital shares
issued.......................... 71 44,285
Receivable from brokers for
investments sold................ 83,107
Prepaid expenses and other
assets.......................... 1,426 26,993 19,622
------------ ----------- -----------
TOTAL ASSETS.................... 181,896,486 35,051,255 81,844,637
------------ ----------- -----------
LIABILITIES:
Dividends payable............... 708,084 412
Payable for capital shares
redeemed........................ 7,558 11,492
Payable to brokers for
investments purchased........... 690,245
Accrued expenses and other
payables:
Investment advisory fees....... 21,577 11,883 60,830
Administration fees............ 28,769 5,943 12,986
12b-1 fees (Investor A)........ 4,314 12,172
12b-1 fees (Investor B)........ 1,100 6,300
Registration and filing fees... 35,059 6,289 12,246
Transfer agent fees............ 6,368 3,345 999
Audit and legal fees........... 42,052 9,117 14,209
Printing fees.................. 26,134 7,306 12,863
Other.......................... 11,184 3,155 10,271
------------ ----------- -----------
TOTAL LIABILITIES............... 879,227 60,422 844,613
------------ ----------- -----------
NET ASSETS:
Capital......................... 181,019,549 36,562,678 74,654,539
Undistributed (distributions in
excess of) net investment income
(loss).......................... 30,029
Net unrealized apppreciation on
investments..................... 253,565 3,984,358
Accumulated undistributed net
realized gains (losses) on
investment transactions......... (2,290) (1,855,439) 2,361,127
------------ ----------- -----------
NET ASSETS..................... $181,017,259 $34,990,833 $81,000,024
============ =========== ===========
Net Assets
Investor A Shares.............. $181,017,259 $33,694,340 $73,368,104
Investor B Shares.............. NA 1,296,493 7,631,920
------------ ----------- -----------
Total........................ $181,017,259 $34,990,833 $81,000,024
============ =========== ===========
Shares of capital stock
Investor A Shares.............. 181,019,549 3,571,637 6,154,052
Investor B Shares.............. NA 121,807 627,857
------------ ----------- -----------
Total........................ 181,019,549 3,693,444 6,781,909
============ =========== ===========
Net asset value
Investor A Shares--redemption
price per share............... $ 1.00 $ 9.43 $ 11.92
Investor B Shares--offering
price per share*.............. NA 10.64 12.16
============ =========== ===========
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 $ 9.87 $ 12.48
============ =========== ===========
</TABLE>
- -------
(a) Offering price and redemption price are the same for the U.S. Government
Securities Money Market Fund.
* Redemption price of Investor B shares varies based on length of time shares
are held.
NA Not applicable
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
Statements of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE GROWTH STOCK APPRECIATION
BOND FUND FUND FUND
------------- --------------- ------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$11,126,979; $18,999,696; and
$26,843,438, respectively)... $11,577,458 $21,053,295 $32,286,516
Cash......................... 1,912
Interest and dividends
receivable................... 70,747 116,765 5,883
Receivable for capital shares
issued....................... 50,000 44,095 1,086
Receivable from brokers for
investments sold............. 171,819
Unamortized organization
costs........................ 11,408
Prepaid expenses and other
assets....................... 729 24,321 8,546
----------- ----------- -----------
TOTAL ASSETS................. 11,700,846 21,238,476 32,485,258
----------- ----------- -----------
LIABILITIES:
Cash Overdraft............... 364,681
Payable for capital shares
redeemed..................... 28,247 226
Payable to brokers for
investments purchased........ 503,806
Accrued expenses and other
payables:
Investment advisory fees.... 3,935 14,917 21,791
Administration fees......... 1,964 3,728 5,448
12b-1 fees (Investor A)..... 2,413 1,460 6,663
12b-1 fees (Investor B)..... 807 8,469 568
Transfer agent fees......... 2,933 5,235 3,798
Audit and legal fees........ 3,723 5,259 8,709
Printing fees............... 3,000 5,394 7,579
Custodian fees.............. 1,377 2,797 4,086
Organizational fees......... 3,456 983
Other....................... 214 2,828 8,247
----------- ----------- -----------
TOTAL LIABILITIES............ 23,822 443,998 570,921
----------- ----------- -----------
NET ASSETS:
Capital...................... 11,222,517 18,891,988 24,464,920
Undistributed (distributions
in excess of) net investment
income (loss)................ 6,757 2,553 (29,793)
Net unrealized appreciation
on investments............... 450,479 2,053,599 5,443,078
Accumulated undistributed net
realized gains (losses) on
investment transactions...... (2,729) (153,662) 2,036,132
----------- ----------- -----------
NET ASSETS.................. $11,677,024 $20,794,478 $31,914,337
=========== =========== ===========
Net Assets
Investor A Shares........... $10,693,087 $10,786,341 $31,227,057
Investor B Shares........... 983,937 10,008,137 687,280
----------- ----------- -----------
Total..................... $11,677,024 $20,794,478 $31,914,337
=========== =========== ===========
Shares of capital stock
Investor A Shares........... 1,027,469 922,900 3,312,660
Investor B Shares........... 92,478 831,165 70,378
----------- ----------- -----------
Total..................... 1,119,947 1,754,065 3,383,038
=========== =========== ===========
Net asset value
Investor A Shares--
redemption price per share. $ 10.41 $ 11.69 $ 9.43
Investor B Shares--offering
price per share*........... 10.64 12.04 9.77
=========== =========== ===========
Maximum Sales Charge
(Investor A)................. 4.50% 4.50% 4.50%
=========== =========== ===========
Maximum Offering Price per
share (100%/(100%-Maximum
Sales Charge) of net asset
value adjusted to nearest
cent) (Investor A)........... $ 10.90 $ 12.24 $ 9.87
=========== =========== ===========
</TABLE>
- -------
*Redemption price of Investor B shares varies based on length of time shares
are held.
See Notes to Financial Statements.
19
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the year ended December 31, 1996
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................. $9,283,151 $ 2,350,114 $ 150,338
Dividend income.................. 2,293,321
---------- ----------- -----------
TOTAL INCOME..................... 9,283,151 2,350,114 2,443,659
---------- ----------- -----------
EXPENSES:
Investment advisory fees......... 259,214 143,483 688,484
Administration fees.............. 345,611 71,742 144,850
12b-1 fees (Investor A).......... 432,174 86,548 168,345
12b-1 fees (Investor B).......... 12,436 51,209
Custodian and accounting fees.... 86,401 35,870 108,638
Audit and legal fees............. 102,687 20,450 51,060
Directors' fees and expenses..... 17,526 3,033 7,296
Transfer agent fees.............. 79,137 38,891 58,165
Registration and filing fees..... 53,745 10,751 42,059
Printing costs................... 51,497 10,848 25,038
Other............................ 18,711 4,545 31,108
---------- ----------- -----------
TOTAL EXPENSES................... 1,446,703 438,597 1,376,252
Less: Fee waivers and expense (432,174) (30,720) (66,860)
reimbursements................
---------- ----------- -----------
Net Expenses................. 1,014,529 407,877 1,309,392
---------- ----------- -----------
Net Investment Income............ 8,268,622 1,942,237 1,134,267
---------- ----------- -----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS
Net realized gains from 90,347 13,473,952
investment transactions..........
Net change in unrealized (1,183,269) (1,397,638)
appreciation (depreciation) from
investments......................
---------- ----------- -----------
Net realized/unrealized gains (1,092,922) 12,076,314
(losses) from investments........
---------- ----------- -----------
Change in net assets resulting $8,268,622 $ 849,315 $13,210,581
from operations..................
========== =========== ===========
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the year ended December 31, 1996
<TABLE>
<CAPTION>
OHIO FLEXIBLE STOCK
TAX-FREE GROWTH APPRECIATION
BOND FUND FUND FUND
--------- ---------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income............................ $ 605,629 $ 662,585 $ 151,227
Dividend income............................ 268,337 91,741
--------- ---------- -----------
TOTAL INCOME............................... 605,629 930,922 242,968
--------- ---------- -----------
EXPENSES:
Investment advisory fees................... 56,870 183,256 294,183
Administration fees........................ 22,744 40,688 73,546
12b-1 fees (Investor A).................... 26,681 30,170 90,637
12b-1 fees (Investor B).................... 7,017 82,801 5,182
Custodian and accounting fees.............. 15,923 30,516 55,160
Audit and legal fees....................... 6,894 11,351 30,631
Organization costs......................... 9,282 3,032 36,823
Directors' fees and expenses............... 1,178 2,077 4,093
Transfer agent fees........................ 26,007 44,600 38,988
Registration and filing fees............... 4,000 4,979 34,935
Printing costs............................. 3,745 15,967 36,655
Other...................................... 1,748 7,596 4,612
--------- ---------- -----------
TOTAL EXPENSES............................. 182,089 457,033 705,445
Less: fee waivers and expense (11,373) (40,649)
reimbursements..........................
--------- ---------- -----------
Net Expenses........................... 170,716 416,384 705,445
--------- ---------- -----------
Net Investment Income (Loss)............... 434,913 514,538 (462,477)
--------- ---------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) FROM
INVESTMENTS
Net realized gains (losses) from investment (2,919) (153,623) 5,645,154
transactions...............................
Net change in unrealized appreciation (107,900) 853,589 (1,674,745)
(depreciation) from investments............
--------- ---------- -----------
Net realized/unrealized gains (losses) from (110,819) 699,966 3,970,409
investments................................
--------- ---------- -----------
Change in net assets resulting from $ 324,094 $1,214,504 $ 3,507,932
operations.................................
========= ========== ===========
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Statement 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,
1996 1995 1996 1995 1996 1995
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 8,268,622 $ 7,906,286 $ 1,942,237 $ 2,067,824 $ 1,134,267 $ 1,082,073
Net realized gains
(losses) from
investment
transactions.......... (1,415) 90,347 (517,451) 13,473,952 6,655,045
Net change in
unrealized
appreciation
(depreciation) from
investments........... (1,183,269) 3,520,908 (1,397,638) 5,311,784
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
resulting from
operations ............ 8,268,622 7,904,871 849,315 5,071,281 13,210,581 13,048,902
------------- ------------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income................ (8,268,622) (7,906,286) (1,865,718) (2,032,120) (1,089,197) (1,065,510)
In excess of net
investment income..... (11,775) (6,742)
From net realized gains
from investments...... (10,109,545) (6,293,075)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment
income................ (56,824) (22,977) (45,070) (16,563)
In excess of net
investment income..... (1,105) (105)
From net realized gains
from investments...... (941,583) (222,170)
In excess of net
realized gains........ (94,220)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from shareholder
distributions.......... (8,268,622) (7,906,286) (1,922,542) (2,055,097) (12,292,495) (7,604,165)
------------- ------------- ----------- ----------- ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 413,837,358 331,872,719 2,867,087 5,670,500 12,638,065 12,155,416
Proceeds from shares
issued in
connection with
acquisition........... 4,865,634 9,727,219
Dividends reinvested... 2,193,920 1,518,099 486,495 578,837 12,143,803 8,648,647
Cost of shares
redeemed.............. (392,509,518) (330,133,820) (5,090,697) (4,185,229) (8,378,319) (7,262,834)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from capital
transactions........... 23,521,760 8,122,632 (1,737,115) 2,064,108 16,403,549 23,268,448
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets.... 23,521,760 8,121,217 (2,810,342) 5,080,292 17,321,635 28,713,185
NET ASSETS:
Beginning of period.... 157,495,499 149,374,282 37,801,175 32,720,883 63,678,389 34,965,204
------------- ------------- ----------- ----------- ------------ -----------
End of period.......... $ 181,017,259 $ 157,495,499 $34,990,833 $37,801,175 $ 81,000,024 $63,678,389
============= ============= =========== =========== ============ ===========
SHARE TRANSACTIONS:
Issued................. 413,837,358 331,872,719 299,041 592,903 997,947 1,069,857
Issued in connection
with acquisition...... 4,865,634 793,942
Reinvested............. 2,193,920 1,518,099 51,049 61,636 1,001,471 764,131
Redeemed............... (392,509,518) (330,133,820) (534,677) (444,444) (656,491) (634,159)
------------- ------------- ----------- ----------- ------------ -----------
Change in shares........ 23,521,760 8,122,632 (184,587) 210,095 1,342,927 1,993,771
============= ============= =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND FLEXIBLE GROWTH FUND STOCK APPRECIATION FUND
-------------------------- -------------------------- -----------------------------------------
PERIOD FROM PERIOD FROM
OCTOBER 1, OCTOBER 1,
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 1995 THROUGH 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1996 1995 1996 1995 1996 1995 (A) 1995 (B)
------------ ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income
(loss)............... $ 434,913 $ 419,775 $ 514,538 $ 275,589 $ (462,477) $ (51,131) $ (292,270)
Net realized gains
(losses) from
investment
transactions......... (2,919) 8,848 (153,623) 131,879 5,645,154 1,556,383 3,024,858
Net change in
unrealized
appreciation
(depreciation) from
investments.......... (107,900) 713,315 853,589 1,230,202 (1,674,745) (2,070,853) 5,538,265
----------- ----------- ----------- ----------- ------------ ----------- -----------
Change in net assets
resulting
from operations....... 324,094 1,141,938 1,214,504 1,637,670 3,507,932 (565,601) 8,270,853
----------- ----------- ----------- ----------- ------------ ----------- -----------
DISTRIBUTIONS TO INVESTOR A
SHAREHOLDERS:
From net investment
income............... (412,215) (401,164) (346,017) (202,502) (1,166,721)
In excess of net
investment income.... (1,775) (289)
From net realized
gains from
investments.......... (85,787) (3,106,226) (1,556,383)
Tax return of capital. (6,824)
DISTRIBUTIONS TO INVESTOR B
SHAREHOLDERS:
From net investment
income............... (21,400) (13,152) (168,520) (63,921)
In excess of net
investment income.... (1,028)
From net realized
gains from
investments.......... (43,216) (65,866))
----------- ----------- ----------- ----------- ------------ ----------- -----------
Change in net assets
from shareholder
distributions......... (433,615) (414,316) (517,340) (395,426) (3,172,381) (1,563,207) (1,166,721)
----------- ----------- ----------- ----------- ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 632,048 895,943 11,628,310 11,076,750 3,709,128 810,508
Dividends reinvested.. 26,194 18,208 546,821 334,888 2,969,201 1,542,781
Cost of shares
redeemed............. (588,738) (114,312) (6,534,711) (906,216) (16,166,715) (3,611,887)
----------- ----------- ----------- ----------- ------------ ----------- -----------
Change in net assets
from capital
transactions.......... 69,504 799,839 5,640,420 10,505,422 (9,488,386) (1,258,598) (10,529,141)
----------- ----------- ----------- ----------- ------------ ----------- -----------
Change in net assets... (40,017) 1,527,461 6,337,584 11,747,666 (9,152,835) (3,387,406) (3,425,009)
NET ASSETS:
Beginning of period... 11,717,041 10,189,580 14,456,894 2,709,228 41,067,172 44,454,578 47,879,587
----------- ----------- ----------- ----------- ------------ ----------- -----------
End of period......... $11,677,024 $11,717,041 $20,794,478 $14,456,894 $ 31,914,337 $41,067,172 $44,454,578
=========== =========== =========== =========== ============ =========== ===========
SHARE TRANSACTIONS:
Issued................ 59,532 87,181 1,017,399 1,035,102 373,503 83,381
Reinvested............ 2,490 1,760 47,842 30,561 315,294 164,279
Redeemed.............. (55,955) (11,223) (571,147) (82,394) (1,628,669) (370,208)
----------- ----------- ----------- ----------- ------------ ----------- -----------
Change in shares....... 6,067 77,718 494,094 983,269 (939,872) (122,548)
=========== =========== =========== =========== ============ =========== ===========
</TABLE>
- -------
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
(b) Represents statements of changes in net assets for the MIM Stock
Appreciation Fund. Audited by other auditors.
See Notes to Financial Statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
U.S. Government Securities Money Market Fund
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (44.4%):
Federal Farm Credit Bank:
$ 2,000,000 Discount Note, 1/6/97.............................. $ 1,998,549
1,340,000 Discount Note, 1/10/97............................. 1,338,255
3,000,000 Discount Note, 1/27/97............................. 2,988,690
1,000,000 Discount Note, 3/6/97.............................. 990,720
2,000,000 Discount Note, 3/21/97............................. 1,976,783
Federal Home Loan Bank:
10,000,000 Discount Note, 1/2/97.............................. 9,998,194
4,000,000 Discount Note, 1/9/97.............................. 3,995,333
2,000,000 Discount Note, 1/16/97............................. 1,995,483
3,000,000 Discount Note, 1/27/97............................. 2,988,560
Federal Home Loan Mortgage Corp.:
5,000,000 Discount Note, 1/3/97.............................. 4,998,520
1,000,000 Discount Note, 1/6/97.............................. 999,257
2,000,000 Discount Note, 1/15/97............................. 1,995,854
1,630,000 Discount Note, 1/23/97............................. 1,624,810
5,000,000 Discount Note, 1/31/97............................. 4,978,033
2,433,000 Discount Note, 2/5/97.............................. 2,420,676
2,000,000 Discount Note, 2/6/97.............................. 1,989,480
2,000,000 Discount Note, 2/21/97............................. 1,985,153
2,000,000 Discount Note, 2/24/97............................. 1,984,310
Federal National Mortgage Assoc.:
3,000,000 Discount Note, 1/7/97.............................. 2,997,370
2,000,000 4.38%, 1/21/97..................................... 1,998,794
1,000,000 Discount Note, 1/28/97............................. 996,070
2,840,000 Discount Note, 2/6/97.............................. 2,824,664
3,000,000 Discount Note, 2/7/97.............................. 2,983,874
2,000,000 Discount Note, 2/11/97............................. 1,988,156
2,000,000 Discount Note, 2/14/97............................. 1,987,167
4,000,000 Discount Note, 2/20/97............................. 3,970,778
2,000,000 Discount Note, 2,26,97............................. 1,983,729
4,000,000 Discount Note, 3/27/97............................. 3,949,378
2,000,000 5.36%*, 9/2/97..................................... 2,000,000
1,500,000 5.43%*, 9/12/97.................................... 1,499,541
------------
Total U.S. Government Agencies 80,426,181
COMMERCIAL PAPER (26.6%):
Aerospace/Defense (3.9%):
3,000,000 International Lease Finance Corp., Discount Note,
1/7/97............................................ 2,997,350
4,000,000 International Lease Finance Corp., Discount Note,
1/23/97........................................... 3,987,044
------------
6,984,394
------------
Banking (6.2%):
6,300,000 Bank One Corp.,
Discount Note, 1/10/97............................ 6,291,652
5,000,000 Bankers Trust,
Discount Note, 3/3/97............................. 4,955,606
------------
11,247,258
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Building Materials (1.7%):
$ 3,000,000 Sherwin-Williams Co.,
Discount Note, 1/6/97............................. $ 2,997,788
------------
Entertainment (3.3%):
4,000,000 Walt Disney,
Discount Note, 1/15/97............................ 3,991,802
2,000,000 Walt Disney,
Discount Note, 2/18/97............................ 1,985,920
------------
5,977,722
------------
Financial Services (6.6%):
4,000,000 Merrill Lynch,
Discount Note, 1/22/97............................ 3,987,563
3,000,000 Merrill Lynch,
Discount Note, 2/5/97............................. 2,984,425
5,000,000 Safeco Corp.,
Discount Note, 2/14/97............................ 4,967,489
------------
11,939,477
------------
Pharmaceuticals (3.3%):
5,000,000 Glaxo Wellcome PLC,
Discount Note, 1/24/97............................ 4,963,070
1,000,000 Glaxo Wellcome PLC,
Discount Note, 1/27/97............................ 996,172
------------
5,979,242
------------
Tobacco (1.6%):
3,000,000 Philip Morris Co., Inc.,
Discount Note, 1/13/97............................ 2,994,700
------------
Total Commercial Paper 48,120,581
------------
REPURCHASE AGREEMENTS (29.4%):
18,295,000 Dean Witter, 6.45%, 1/2/97, (Collateralized by
various U.S. Treasury and U.S. Government Agency
Securities, 6.09%-11.00%, 1/15/97-8/1/29, market
value--$18,561,852)............................... 18,295,000
35,000,000 Prudential Funding Corp., 6.45%, 1/2/97,
(Collateralized by various U.S. Government Agency
Securities, 6.00%-9.50%, 3/15/07-12/20/26, market
value--$35,480,423)............................... 35,000,000
------------
Total Repurchase Agreements 53,295,000
------------
Total (Cost--$181,841,762)(a) $181,841,762
============
</TABLE>
- -------
The percentages indicated are based on net assets of $181,017,259.
* Adjustable Rate Mortgage.
(a) Cost and value for federal income tax reporting purposes are the same.
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
U.S. Government Income Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS (26.1%):
Banking (7.0%):
$1,000,000 MBNA Master Credit Card Trust,
6.05%, 11/15/02...................................... $ 995,190
500,000 Mellon Capital, 7.72% 12/1/26......................... 489,375
1,000,000 Midland Bank PLC, (HSBC),
6.95%, 3/15/11....................................... 978,750
-----------
2,463,315
-----------
Financial Services (16.2%):
1,000,000 Boatmen's Auto Trust, 6.75% 1/15/03................... 1,011,830
1,000,000 Chase Manhattan Corp., 8.50%, 2/15/02................. 1,078,750
1,000,000 First Chicago Master Trust, Series L, Class A 1994
7.15%, 4/15/01....................................... 1,025,480
500,000 Ford Motor Credit Corp.,
6.25%, 12/8/05....................................... 473,750
500,000 Grand Metropolitian Investment Co., 7.45%, 4/15/35.... 522,500
500,000 Lehman Brothers Holdings,
8.50%, 5/1/07........................................ 538,750
1,000,000 Premier Auto Trust, 6.85% 5/22/99, Series 1994-4...... 1,012,488
-----------
5,663,548
-----------
Telecommunication (2.9%):
1,000,000 U.S. West Capital Corp.,
6.31%, 11/1/05....................................... 993,750
-----------
Total Corporate Bonds 9,120,613
-----------
U.S. GOVERNMENT AGENCIES (56.0%):
Federal Home Loan Bank:
1,000,000 5.60%, 7/24/97........................................ 1,000,160
500,000 8.07%, 2/27/02........................................ 507,900
875,000 6.38%, 4/29/03........................................ 850,351
690,000 9.50% 2/25/04......................................... 804,160
Federal Home Loan Mortgage Corp.:
1,000,000 Discount Note, 1/2/97................................. 999,700
1,000,000 6.55%, 1/4/00......................................... 1,008,360
500,000 7.50%, 3/15/15........................................ 504,030
1,000,000 6.00%, 1/15/18........................................ 991,660
1,000,000 7.20%, 6/15/18........................................ 1,004,840
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- --------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc.:
$1,000,000 5.33%, 6/26/98..................................... $ 990,470
500,000 9.05%, 4/10/00..................................... 540,150
1,310,278 6.00%, 2/1/03...................................... 1,281,413
625,000 6.38%, 6/25/03..................................... 610,300
625,000 6.05%, 6/30/03..................................... 610,144
351,767 6.75%, 8/25/04,
Series 1992-152 Class H........................... 351,281
1,050,000 8.50%, 2/1/05...................................... 1,103,214
1,000,000 7.00%, 9/25/05,
Series 1992-1110 Class G.......................... 1,007,830
749,864 7.00%, 9/25/19..................................... 748,627
Government National Mortgage Assoc.:
712,881 8.00%, 5/15/03..................................... 726,647
Private Export Funding Corp.:
1,000,000 6.24%, 5/15/02..................................... 995,000
Student Loan Marketing Assoc.:
1,000,000 6.05%, 9/14/00..................................... 991,410
959,177 5.54%*, 10/25/04................................... 959,753
Tennessee Valley Authority:
1,000,000 6.24%, 7/15/45..................................... 1,000,000
-----------
Total U.S. Government Agencies 19,587,400
-----------
U.S. TREASURY NOTES (11.5%):
1,000,000 6.00%, 11/30/97.................................... 1,002,290
2,000,000 5.88%, 3/31/99..................................... 1,997,900
1,000,000 6.63% 7/31/01...................................... 1,015,630
-----------
Total U.S. Treasury Notes 4,015,820
-----------
YANKEE DOLLAR BONDS (1.1%):
365,000 Montreal Urban Community,
9.13%, 3/15/01.................................... 395,569
-----------
Total Yankee Dollar Bonds 395,569
-----------
INVESTMENT COMPANIES (4.2%):
1,480,112 Dreyfus Treasury Prime Fund........................ 1,480,112
-----------
Total Investment Companies 1,480,112
-----------
Total (Cost--$34,345,949)(a) $34,599,514
===========
</TABLE>
- -------
Percentages indicated are based on net assets of $34,990,833.
* Variable Rate.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation..................................... $ 424,863
Unrealized depreciation..................................... (171,298)
---------
Net unrealized appreciation................................. $ 253,565
=========
</TABLE>
See Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK (97.2%):
Apparel (0.7%):
33,000 Intimate Brands, Inc................................... $ 561,000
-----------
Automobile (0.8%):
28,200 Volvo AB-ADR........................................... 613,350
-----------
Auto Parts (5.1%):
18,400 Briggs & Stratton Corp................................. 809,600
53,600 Dana Corp.............................................. 1,748,700
49,100 Echlin, Inc............................................ 1,552,788
-----------
4,111,088
-----------
Banks (4.3%):
46,600 Central Fidelity Banks, Inc............................ 1,199,950
38,400 Crestar Financial Corp................................. 1,428,000
14,900 First American Corp.--Tennessee........................ 858,612
-----------
3,486,562
-----------
Broadcast/Radio, TV (0.0%):
1,500 U.S. West Media Group, Inc. (b)........................ 27,750
-----------
Chemicals (5.7%):
18,500 Akzo Nobel N.V. ADR.................................... 1,248,750
3,500 E. I. du Pont deNemours & Co........................... 330,312
111,700 Ethyl Corp............................................. 1,075,113
26,500 Lawter International, Inc.............................. 334,562
3,000 PPG Industries, Inc.................................... 168,375
47,200 Witco Corp............................................. 1,439,600
-----------
4,596,712
-----------
Confections & Beverages (1.2%):
29,000 Cadbury Schweppes PLC-ADR.............................. 989,625
-----------
Consumer Products (1.7%):
52,100 Stanley Works.......................................... 1,406,700
-----------
Cosmetics (2.1%):
37,100 International Flavors & Fragrances, Inc................ 1,669,500
-----------
Department Stores (4.8%):
35,600 May Department Stores Co............................... 1,664,300
8,000 Mercantile Stores Co., Inc............................. 395,000
34,900 J.C. Penney Co., Inc................................... 1,701,375
3,000 Sears Roebuck & Co..................................... 138,375
-----------
3,899,050
-----------
Electrical (4.2%):
51,000 AMP, Inc............................................... 1,957,125
33,400 Thomas & Betts Corp.................................... 1,482,125
-----------
3,439,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Electronics (3.7%):
44,600 National Service Industries, Inc....................... $ 1,666,925
33,800 Phillips Electronics N.V............................... 1,352,000
-----------
3,018,925
-----------
Engineering & Construction (1.5%):
32,000 Foster Wheeler Corp.................................... 1,188,000
-----------
Financial Services (4.1%):
52,900 H & R Block, Inc....................................... 1,534,100
71,500 ITT Industries, Inc.................................... 1,751,750
-----------
3,285,850
-----------
Food Processing (0.2%):
9,500 Tasty Baking Co........................................ 130,625
-----------
Forest Products (3.9%):
38,600 International Paper Co................................. 1,558,475
15,500 Rayonier, Inc.......................................... 594,813
20,900 Union Camp Corp........................................ 997,975
-----------
3,151,263
-----------
Grocery Stores (0.7%):
11,500 Giant Food--Class A.................................... 396,750
5,000 Winn-Dixie Stores, Inc................................. 158,125
-----------
554,875
-----------
Health Products/Care (2.0%):
56,700 Bard (C. R.), Inc...................................... 1,587,600
-----------
Household Products/Wares (1.1%):
1,500 Colgate-Palmolive Co................................... 138,375
32,100 Rubbermaid, Inc........................................ 730,275
-----------
868,650
-----------
Insurance (1.6%):
1,500 American International Group, Inc...................... 162,375
11,100 ITT Hartford Group, Inc................................ 749,250
7,300 Lincoln National Corp.................................. 383,250
-----------
1,294,875
-----------
Manufacturing (0.3%):
3,500 Minnesota Mining & Manufacturing Co.................... 290,062
-----------
Medical Supplies (0.2%):
3,000 Becton Dickinson & Co.................................. 130,125
-----------
Medical Products (2.2%):
43,800 Baxter International................................... 1,795,800
-----------
Metal Fabricate/Hardware (1.4%):
25,100 Timken Co.............................................. 1,151,462
-----------
</TABLE>
Continued
26
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Metals (3.8%):
27,700 Reynolds Metals Co..................................... $ 1,561,588
33,200 Tenneco, Inc. (b)...................................... 1,498,150
-----------
3,059,738
-----------
Mining (1.4%):
37,500 Freeport-McMoRan Copper & Gold, Inc.................... 1,120,313
-----------
Office Equipment & Supplies (1.9%):
23,000 Harris Corp............................................ 1,578,375
-----------
Oil & Gas Producers (4.3%):
21,600 Amoco Corp............................................. 1,741,500
11,300 LG&E Energy Corp....................................... 276,850
12,200 Mobil Corp............................................. 1,491,450
-----------
3,509,800
-----------
Oil--Domestic (1.6%):
53,800 Sun Company, Inc....................................... 1,311,375
-----------
Oil--International (0.4%):
5,000 Chevron Corp........................................... 325,000
-----------
Packaged Food (1.0%):
38,000 Lance, Inc............................................. 684,000
2,500 Sara Lee Corp.......................................... 93,125
-----------
777,125
-----------
Packaging & Container (1.0%):
14,900 Temple-Inland, Inc..................................... 806,462
-----------
Paper (2.9%):
19,900 Consolidated Papers, Inc............................... 977,587
46,600 Westvaco Corp.......................................... 1,339,750
-----------
2,317,337
-----------
Pharmaceuticals (2.2%):
3,000 Abbott Laboratories.................................... 152,250
42,100 Pharmacia & Upjohn, Inc................................ 1,668,212
-----------
1,820,462
-----------
Photography (0.3%):
3,500 Eastman Kodak Co....................................... 280,875
-----------
Printing & Publishing (3.3%):
34,100 Dow Jones & Co., Inc................................... 1,155,137
33,300 McGraw-Hill Cos., Inc.................................. 1,535,963
-----------
2,691,100
-----------
Real Estate (0.1%):
3,200 New Plan Realty Trust.................................. 81,200
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Savings & Loans (0.5%):
9,700 First Commerce Corp.................................... $ 377,087
-----------
Steel (0.5%):
17,000 Allegheny Teledyne, Inc................................ 391,000
-----------
Telecommunications (4.0%):
47,200 Alltel Corp............................................ 1,480,900
24,500 Federal Signal Corp.................................... 633,937
48,400 Frontier Corp.......................................... 1,095,050
-----------
3,209,887
-----------
Textiles (1.1%):
81,100 Shaw Industries, Inc................................... 952,925
-----------
Tobacco (0.3%):
5,000 American Brands, Inc................................... 248,125
-----------
Tools (1.4%):
32,500 Snap-On, Inc........................................... 1,157,813
-----------
Transportation--Airlines (1.3%):
36,700 KLM Royal Dutch Air Lines N.V.......................... 1,023,013
-----------
Transportation--Rail (1.5%):
38,400 Illinois Central Corp.................................. 1,228,800
-----------
Utilities--Electric (4.9%):
33,200 Central & South West Corp.............................. 850,750
26,500 Chilgener S.A., ADR.................................... 553,188
24,200 CINergy Corp........................................... 807,675
10,800 DPL, Inc............................................... 264,600
14,500 Illinova Corp.......................................... 398,750
1,000 KU Energy Corp......................................... 30,000
9,600 Scana Corp............................................. 256,800
27,200 Western Resources, Inc................................. 839,800
-----------
4,001,563
-----------
Utilities--Gas (0.7%):
19,000 Brooklyn Union Gas Co.................................. 572,375
-----------
Utilities--Telecommunications (3.3%):
26,200 GTE Corp............................................... 1,188,825
36,300 Southern New England Telecommunications Corp........... 1,411,163
1,500 U S West Communications Group.......................... 48,375
-----------
2,648,363
-----------
Total Common Stock 78,738,812
-----------
</TABLE>
Continued
27
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
CORPORATE BONDS (0.8%):
100,000 Hasbro, Inc., 6.00%, 11/15/98.......................... $ 135,500
50,000 Liebert Corp., 8.00%, 11/15/10......................... 182,125
100,000 Pennzoil Co., 6.50%, 1/15/03........................... 154,000
50,000 South Carolina National Corp., 6.50%, 5/15/01.......... 147,375
-----------
Total Corporate Bonds 619,000
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (2.6%):
1,930,357 Dreyfus Treasury Prime Fund............................ $ 1,930,357
164,620 Federated Short Term Government Fund................... 164,620
-----------
Total Investment Companies 2,094,977
-----------
Total (Cost--$77,468,431)(a)...................................... $81,452,789
===========
</TABLE>
- -------
Percentages indicated are based on net assets of $81,000,024.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $ 5,615,970
Unrealized depreciation................................... (1,631,612)
-----------
Net unrealized appreciation............................... $ 3,984,358
===========
</TABLE>
(b) Non-income producing security.
ADR--American Depository Receipt
NV--Naamloze Vennootschap (Dutch Corporation)
PLC--Public Limited Company (British)
See Notes to Financial Statements.
28
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
OHIO MUNICIPAL BONDS (91.7%):
$100,000 Aurora City School District, 5.40%, 12/1/06............ $ 104,375
200,000 Beavercreek Local School District, GO, 5.30%, 12/1/08.. 203,500
100,000 Bowling Green City School District, GO, 5.70%, 12/1/11. 101,500
230,000 Butler County Hospital Facilities, 6.00%, 11/15/10, 242,650
Callable 5/15/04 @ 101.................................
200,000 Butler County Sewer System Revenue, 5.40%, 12/1/09..... 204,250
250,000 Butler County Sewer System Revenue, Series B, 6.20%, 264,375
12/1/09................................................
250,000 Canton Waterworks System, GO, 5.75%, 12/1/10........... 259,375
100,000 Chillicothe Water System Revenue, 5.10%, 12/1/05....... 101,500
250,000 Cincinnati, GO, 5.25%, 12/1/01......................... 259,375
250,000 Clermont County Waterworks Revenue, 6.63%, 12/1/16..... 278,437
100,000 Cleveland, GO, 5.38%, 9/1/09........................... 101,000
250,000 Columbus, GO, 5.50%, 5/15/08, Callable 5/15/06 @ 102... 258,750
200,000 Columbus, GO, 5.65%, 6/15/11........................... 205,500
250,000 Columbus Sewer Revenue, 6.13%, 6/1/03.................. 271,250
100,000 Delaware County, GO, 5.60%, 12/1/10.................... 101,000
100,000 Dover Municipal Electric System Revenue, 5.35%, 103,375
12/1/06................................................
250,000 Franklin County Hospital Revenue, 5.25%, 6/1/08........ 250,937
250,000 Franklin County Hospital Revenue, Refunding, Riverside 256,875
United Methodist, Series A, 5.30%, 5/15/02.............
250,000 Fremont, GO, 5.45%, 12/15/07........................... 258,125
250,000 Gahanna, GO, 5.85%, 6/1/08............................. 263,750
170,000 Hamilton County Sewer System Unrefunded, Series A, 183,812
6.40%, 12/1/04.........................................
80,000 Hamilton County Sewer Systems, Series A, 6.40%, 87,500
12/1/04................................................
250,000 Hamilton County, Building Improvement & Refunding, 262,187
Museum Center, GO, 5.75%, 12/1/00......................
250,000 Hilliard School District, GO, 5.35%, 12/1/04........... 257,500
250,000 Kings Local School District, GO, 5.75%, 12/1/10........ 258,125
100,000 Lake County Human Services Building, GO, 5.70%, 101,000
12/1/15................................................
250,000 Lakota Local School District, 6.00%, 12/1/07, Callable 262,187
12/1/02 @101...........................................
250,000 Mahoning County, GO, 5.60%, 12/1/02.................... 263,437
250,000 Mahoning County, GO, 5.70%, 12/1/08.................... 261,250
100,000 Marysville Exempt Village School District, GO, 5.30%, 100,875
12/1/09................................................
200,000 Mason City School Disctrict, GO, 5.20%, 12/1/08........ 201,250
250,000 Middletown Capital Facilities Improvement, 5.60%, 256,875
12/1/05................................................
100,000 Montgomery County, GO, 5.40%, 9/1/09................... 100,375
250,000 Olentangy Local School District, GO, Series A, 5.70%, 265,312
12/1/05................................................
100,000 Solon, GO, 5.25%, 12/1/07.............................. 101,875
100,000 State, GO, 5.60%, 8/1/02............................... 105,250
250,000 State Building Authority, 5.70%, 9/1/01................ 263,438
250,000 State Building Authority, 6.00%, 10/1/07............... 267,188
245,000 State Building Authority, 6.13%, 10/1/09............... 260,925
95,000 State Building Authority, 6.25%, 6/1/11................ 99,156
250,000 State Elementary & Secondary Capital Facilities, 5.45%, 257,500
6/1/99.................................................
200,000 State Public Facilities Commission, Higher Education 205,500
Capital Facilities, Series II-A, 5.20%, 5/1/05.........
250,000 State Public Facilities Commission, Higher Education 265,938
Capital Facilities, Series II-B, 5.70% 11/1/03.........
250,000 State Public Facilities Commission, Parks & 255,313
Recreations, Series II-A, 5.25%, 6/1/06................
250,000 State Water Development Authority Revenue, 5.75%, 265,625
6/1/03.................................................
</TABLE>
Continued
29
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
$250,000 State Water Development Authority Revenue, 5.75%, $ 266,563
12/1/05, Callable 12/1/02 @ 102........................
150,000 State Water Development Authority, 5.70%, 12/1/11...... 153,750
100,000 Summit County, 5.45%, 12/1/10.......................... 101,250
250,000 University of Cincinnati, Series R3, 5.80%, 6/1/04..... 263,438
250,000 Warren County Waterworks, 5.75%, 12/1/09............... 257,188
100,000 West Clermont Local School District, 5.55%, 12/1/06.... 104,500
250,000 Woodridge Local School District, GO, 5.75%, 12/1/07, 263,750
Callable 12/1/04 @ 102.................................
-----------
Total Ohio Municipal Bonds 10,709,731
-----------
INVESTMENT COMPANIES (7.4%):
425,000 Dreyfus Municipal Money Market Fund.................... 425,000
442,727 Goldman Tax Free Fund.................................. 442,727
-----------
Total Investment Companies 867,727
-----------
Total (Cost--$11,126,979)(a) $11,577,458
===========
</TABLE>
- -------
Percentages indicated are based on net assets of $11,677,024.
(a)Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $450,479
Unrealized depreciation....................................... 0
--------
Net unrealized appreciation................................... $450,479
========
</TABLE>
GO--General Obligation
See Notes to Financial Statements.
30
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Flexible Growth Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- -------------------------------------------------------- ----------
<C> <S> <C>
COMMON STOCK (52.6%):
Aerospace (1.8%):
4,200 Lockheed Martin Corp.................................... $ 384,300
----------
Agricultural Machinery (2.1%):
8,000 Case Corp............................................... 436,000
----------
Apparel (1.4%):
8,000 Jones Apparel Group (b)................................. 299,000
----------
Banks (0.9%):
2,000 Chase Manhattan Corp.................................... 178,500
----------
Building Materials (1.0%):
4,000 Texas Industries, Inc................................... 202,500
----------
Chemicals (3.2%):
7,000 E. I. du Pont de Nemours & Co........................... 660,625
----------
Confections & Beverages (1.2%):
4,000 Anheuser-Busch Cos., Inc................................ 160,000
2,000 Hershey Foods Corp...................................... 87,500
----------
247,500
----------
Computers & Software ( 4.4%):
4,000 Compaq Computer Corp. (b)............................... 297,500
3,000 Intel Corp.............................................. 392,812
5,600 Seagate Technology, Inc. (b)............................ 221,200
----------
911,512
----------
Finance--Mortgage Loan/Banker (1.3%):
7,000 Federal National Mortgage Assoc......................... 263,375
----------
Forest Products (0.9%):
4,500 International Paper Co.................................. 181,688
----------
Grocery (1.3%):
6,000 Kroger Co............................................... 279,000
----------
Household Products/Wares (1.6%):
3,000 Procter & Gamble Co..................................... 322,875
----------
Industrial Machinery (1.2%):
3,400 Caterpillar, Inc........................................ 255,850
----------
Metals (1.6%):
15,500 Placer Dome, Inc........................................ 337,125
----------
Mining (2.7%):
12,000 Barrick Gold Corp....................................... 345,000
14,000 Santa Fe Pacific Gold Corp.............................. 215,250
----------
560,250
----------
Oil & Gas Producers (2.6%):
2,500 British Petroleum PLC, ADR.............................. 353,438
2,000 Texaco, Inc............................................. 196,250
----------
549,688
----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Oil--Domestic (3.7%):
8,000 Panenergy Corp......................................... $ 360,000
16,000 YPF Sociedad Anonima-Sponsored ADR..................... 404,000
-----------
764,000
-----------
Oil--International (1.1%):
2,300 Exxon Corp............................................. 225,400
-----------
Pharmaceuticals (2.9%):
3,000 Amgen, Inc. (b)........................................ 163,125
4,000 Bristol-Myers Squibb Co................................ 435,000
-----------
598,125
-----------
Photography (1.5%):
4,000 Eastman Kodak Co....................................... 321,000
-----------
Printing & Publishing (1.6%):
9,000 New York Times Co--Class A............................. 342,000
-----------
Real Estate (3.3%):
4,000 Healthcare Properties Investment, Inc.................. 140,000
17,000 Health & Retirement Properties Trust................... 329,375
7,000 Public Storage, Inc.................................... 217,000
-----------
686,375
-----------
Retail (0.6%):
3,000 Walgreen Co............................................ 120,000
-----------
Tobacco (2.3%):
4,300 Philip Morris Cos., Inc................................ 485,900
-----------
Telecommunications (5.4%):
6,500 Ameritech Corp......................................... 394,062
4,000 CIA Telecomunicacion Chile, ADR........................ 404,500
4,000 Telecom of New Zealand, ADR............................ 324,000
-----------
1,122,562
-----------
Utilities--Electric (1.0%):
4,500 Duke Power Co.......................................... 208,125
-----------
Total Common Stock 10,943,275
-----------
U.S. GOVERNMENT AGENCIES (10.5%):
Federal Home Loan Bank:
100,000 5.97%, 12/14/98........................................ 99,668
200,000 6.11%, 1/18/01......................................... 195,964
300,000 6.04%, 2/14/01......................................... 293,100
-----------
588,732
-----------
Federal National Mortgage Assoc.:
300,000 6.95%, 11/06........................................... 296,430
-----------
Government National Mortgage Assoc.:
503,671 7.50%, 9/15/26......................................... 798,778
798,530 7.50%, 9/15/26......................................... 503,826
-----------
1,302,604
-----------
Total U.S. Government Agencies 2,187,766
-----------
</TABLE>
Continued
31
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Flexible Growth Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY BILLS (4.8%):
1,000,000 Discount Note, 3/6/97.................................. $ 991,020
-----------
U.S. TREASURY NOTES (23.7%):
500,000 6.07%, 8/31/98......................................... 502,250
700,000 6.25%, 5/31/00......................................... 702,919
3,100,000 6.88%, 5/15/06......................................... 3,193,651
500,000 6.53%, 7/15/06......................................... 519,380
-----------
Total U.S. Treasury Notes 4,918,200
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
INVESTMENT COMPANIES (9.7%):
1,896,034 Dreyfus Treasury Prime Fund............................ $ 1,896,034
8,000 Southern Africa Fund, Inc.............................. 117,000
-----------
Total Investment Companies 2,013,034
-----------
Total (Cost--$18,999,696)(a) $21,053,295
===========
</TABLE>
- -------
The percentages indicated are based on net assets of $20,794,478.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $2,252,044
Unrealized depreciation.................................... (198,445)
----------
Net unrealized appreciation................................ $2,053,599
==========
</TABLE>
(b) Non-income producing security.
ADR--American Depository Receipt
See Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK (90.2%):
Apparel (6.4%):
2,400 Gymboree Corp. (b)..................................... $ 54,900
6,250 Intimate Brands, Inc................................... 106,250
25,000 Jones Apparel Group (b)................................ 934,375
15,000 Nautica Enterprises, Inc. (b).......................... 378,750
12,000 TJX Cos., Inc.......................................... 568,500
-----------
2,042,775
-----------
Automobile & Parts (1.0%):
15,000 Gentex Corp. (b)....................................... 301,875
2,500 Simpson Industries, Inc................................ 27,227
-----------
329,102
-----------
Banks (0.7%):
2,000 Colonial BancGroup, Inc................................ 80,000
4,700 Sterling Bancorp....................................... 69,325
2,100 Vermont Financial Services Corp........................ 74,550
-----------
223,875
-----------
Beer, Wine & Distilled Beverages (0.2%):
2,200 Boston Beer Co., Inc. (b).............................. 22,550
3,800 Pete's Brewing Co. (b)................................. 30,400
-----------
52,950
-----------
Building & Construction (0.1%):
2,000 Drew Industries, Inc. (b).............................. 44,000
-----------
Building--Mobile Home (1.9%):
22,000 Coachmen Industries, Inc............................... 624,250
-----------
Building Materials (0.5%):
3,000 Medusa Corp............................................ 103,125
1,500 National Service Industries, Inc....................... 56,062
-----------
159,187
Chemicals (0.7%):
14,500 CFC International (b).................................. 163,125
4,000 Lawter International, Inc.............................. 50,500
-----------
213,625
-----------
Commercial Services (2.4%):
8,500 Paychex, Inc........................................... 437,219
12,000 Service Corp. International............................ 336,000
-----------
773,219
-----------
Computer, Software & Services (18.8%):
8,000 3 Com Corp. (b)........................................ 587,000
2,000 Broderbund Software, Inc. (b).......................... 59,500
10,000 Cisco Systems, Inc. (b)................................ 636,250
7,500 Compuware Corp. (b).................................... 375,937
10,000 Comverse Technology, Inc. (b).......................... 378,125
14,000 Dell Computer Corp. (b)................................ 743,750
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Computer, Software & Services, continued:
8,000 Gateway 2000, Inc. (b)................................. $ 428,500
13,200 Microsoft Corp. (b).................................... 1,090,650
13,000 Oracle Corp. (b)....................................... 542,750
9,000 Parametric Technology Corp. (b)........................ 462,375
20,000 Structural Dynamics Research Corp. (b)................. 400,000
10,000 Sun Microsystems, Inc. (b)............................. 256,875
3,300 The Learning Co. (b)................................... 47,438
-----------
6,009,150
-----------
Data Processing (1.0%):
7,500 National Data Corp..................................... 326,250
-----------
Department Stores (2.4%):
15,000 Dollar Tree Stores, Inc. (b)........................... 573,750
5,000 Kohl's Corp. (b)....................................... 196,250
-----------
770,000
-----------
Direct Marketing (0.9%):
5,000 Catalina Marketing Corp. (b)........................... 275,625
-----------
Electronics (2.1%):
5,000 ADFlex Solutions, Inc. (b)............................. 51,250
10,000 Micron Technology, Inc................................. 291,250
20,000 S 3, Inc. (b).......................................... 325,000
-----------
667,500
-----------
Environmental Control (4.3%):
12,000 United Waste Systems, Inc. (b)......................... 412,500
10,200 USA Waste Services, Inc. (b)........................... 325,125
20,000 U.S. Filter Corp. (b).................................. 635,000
-----------
1,372,625
-----------
Financial Services (1.2%):
10,000 Green Tree Financial Corp.............................. 386,250
-----------
Firearms & Ammunition (0.2%):
4,000 Sturm Ruger & Co. Inc.................................. 77,500
-----------
Home Improvement (1.3%):
20,000 Eagle Hardware & Garden, Inc. (b)...................... 415,000
-----------
Hotel/Motel (1.8%):
8,000 Renaissance Hotel Group N.V. (b)....................... 188,000
200 HFS, Inc. (b).......................................... 11,950
15,000 Hilton Hotels Corp..................................... 391,875
-----------
591,825
-----------
Human Resources (2.0%):
16,600 Alternative Resources, Inc. (b)........................ 288,425
4,000 Olsten Corp............................................ 60,500
15,000 Employee Solutions, Inc. (b)........................... 307,500
-----------
656,425
-----------
</TABLE>
Continued
33
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Industrial Machinery (2.2%):
4,000 AGCO Corp.............................................. $ 114,500
17,500 Cincinnati Milacron, Inc............................... 382,812
3,500 Greenfield Industries, Inc............................. 107,187
3,400 Lincoln Electric Co.--Class A.......................... 102,850
-----------
707,349
-----------
Instruments--Scientific (0.8%):
6,600 Millipore Corp......................................... 273,075
-----------
Insurance (1.2%):
6,000 Progressive Corp....................................... 404,250
-----------
Manufacturing (0.3%):
5,000 Optical Coating Laboratories, Inc...................... 53,750
2,500 Westinghouse Air Brake Co.............................. 31,563
-----------
85,313
-----------
Medical--Transportation (0.2%):
1,850 American Medical Response, Inc. (b).................... 60,125
-----------
Medical--Information Systems (0.2%):
4,600 PHAMIS, Inc. (b)....................................... 59,225
-----------
Medical--Instruments/Products (2.9%):
10,000 Boston Scientific Corp. (b)............................ 600,000
3,000 CNS, Inc. (b).......................................... 43,125
12,200 Physio-Control International Corp. (b)................. 274,500
-----------
917,625
-----------
Mining (1.6%):
10,000 Barrick Gold Corp...................................... 287,500
5,000 Newmont Gold Co........................................ 218,750
-----------
506,250
-----------
Minerals (0.3%):
12,500 Uranium Resources, Inc. (b)............................ 98,438
-----------
Motorcycle (1.5%):
10,000 Harley-Davidson, Inc................................... 470,000
-----------
Oil Equipment, Wells & Services (8.2%):
12,000 ENSCO International, Inc. (b).......................... 582,000
30,000 Global Marine, Inc. (b)................................ 618,750
7,500 Nuevo Energy Co. (b)................................... 390,000
11,000 Ranger Oil Ltd......................................... 108,625
20,000 Reading & Bates Corp. (b).............................. 530,000
5,000 Transocean Offshore, Inc............................... 313,125
4,000 Tuboscope Vetco International Corp. (b)................ 62,000
-----------
2,604,500
-----------
Pharmaceuticals (1.1%):
10,000 Jones Medical Industries, Inc.......................... 366,250
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Power Conversion--Supply Equipment (0.9%):
10,000 American Power Conversion (b).......................... $ 272,500
-----------
Printing & Publishing (0.2%):
2,650 World Color Press, Inc. (b)............................ 51,012
-----------
Recreational Equipment (0.9%):
10,000 Callaway Golf Co....................................... 287,500
-----------
Recreational Vehicles (0.4%):
5,000 Polaris Industries Inc................................. 118,750
-----------
Restaurant (2.3%):
3,000 Bob Evans Farms........................................ 40,500
10,000 Dave & Buster's, Inc. (b).............................. 201,250
10,000 Landry's Seafood Restaurants, Inc. (b)................. 213,750
4,000 Rock Bottom Restaurants, Inc. (b)...................... 41,500
11,000 Wendy's International, Inc............................. 225,500
-----------
722,500
-----------
Retail (4.3%):
5,000 Best Buy Co, Inc. (b).................................. 53,125
22,000 PETsMART, Inc. (b)..................................... 481,250
7,000 Sunglass Hut International (b)......................... 50,750
10,000 Tiffany & Co........................................... 366,250
15,000 Tech Data Corp. (b).................................... 410,625
-----------
1,362,000
-----------
Savings & Loans (1.5%):
7,000 Astoria Financial Corp................................. 258,125
5,000 Charter One Financial, Inc............................. 210,000
-----------
468,125
-----------
Sporting Goods (0.9%):
12,600 Cannondale Corp. (b)................................... 283,500
-----------
Steel (2.1%):
10,000 Carpenter Technology Corp.............................. 366,250
16,400 Worthington Industries, Inc............................ 297,250
-----------
663,500
-----------
Textiles (0.7%):
10,000 Mohawk Industries, Inc. (b)............................ 220,000
-----------
Telecommunications (2.9%):
8,000 Aspect Telecommunications Corp. (b).................... 508,000
5,900 Federal Signal Corp.................................... 152,663
12,500 LCI International, Inc. (b)............................ 268,750
-----------
929,413
-----------
Tools (1.0%):
10,500 Black & Decker Corp.................................... 316,312
-----------
</TABLE>
Continued
34
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Tobacco (0.4%):
5,000 Dimon, Inc............................................. $ 115,625
-----------
Utilities--Electric (1.3%):
9,000 Commonwealth Energy System Cos......................... 211,500
4,900 Oklahoma Gas & Electric................................ 204,575
-----------
416,075
-----------
Total Common Stock 28,790,345
-----------
CORPORATE BONDS (1.3%):
Cosmetics & Toiletries (1.3%):
22,500 NBTY, Inc. (b)......................................... 427,500
-----------
Total Corporate Bonds 427,500
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
---------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (3.1%):
Federal National Mortgage Assoc.:
$1,000,000 Discount Note, 1/2/97................................. $ 999,700
-----------
Total U.S. Government Agencies 999,700
-----------
INVESTMENT COMPANIES (6.5%):
826,595 Dreyfus Treasury Prime Fund........................... 826,595
1,242,376 Federated U.S. Treasury Services #125................. 1,242,376
-----------
Total Investment Companies 2,068,971
-----------
Total (Cost--$26,843,438)(a) $32,286,516
===========
</TABLE>
- -------
The percentages indicated are based on net assets of $31,914,337.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $5,885,080
Unrealized depreciation.................................... (442,002)
----------
Net unrealized appreciation................................ $5,443,078
==========
</TABLE>
(b) Non-income producing security.
See Notes to Financial Statements.
35
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
corporation on March 27, 1990, and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Fund is authorized to issue six series of shares of
capital stock, representing interests in different portfolios of securities
as follows: The Riverfront U.S. Government Securities Money Market Fund, The
Riverfront U.S. Government Income Fund, The Riverfront Income Equity Fund,
The Riverfront Ohio Tax-Free Bond Fund, The Riverfront Flexible Growth Fund
and The Riverfront Stock Appreciation Fund (each, a "Portfolio"; and
collectively, the "Portfolios").
The investment objective of the U.S. Government Securities Money Market Fund
is to seek current income from U.S. Government short-term securities while
preserving capital and maintaining liquidity. The investment objective of the
U.S. Government Income Fund is to seek a high level of current income,
consistent with preservation of capital, by investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities. The investment objective of the Income Equity Fund is to
seek a high level of investment income through investment primarily in
income-producing equity securities of U.S. issuers. The investment objective
of the Ohio Tax-Free Bond Fund is to seek income exempt from federal and Ohio
state income taxes and preservation of capital. The investment objective of
the Flexible Growth Fund is to seek long-term growth of capital with some
current income as a secondary objective. The investment objective of the
Stock Appreciation Fund is to seek capital growth.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001 per share. Sales of shares of the Portfolios may be made to customers
of The Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, the Income Equity Fund, the Ohio Tax-Free
Bond Fund, the Flexible Growth Fund and the Stock Appreciation Fund
(collectively, "the variable net asset value funds") each offers two share
classes: Investor A Shares and Investor B Shares. The U.S. Government
Securities Money Market Fund (the "money market fund") offers only the
Investor A Shares. Investor A Shares of the variable net asset value funds
are subject to initial sales charges imposed at the time of purchase, in
accordance with the Portfolios' prospectus. Certain redemptions of the
Investor B Shares of the variable net asset value funds made within six years
of purchase are subject to varying contingent deferred sales charges in
accordance with the Portfolios' prospectus. Each share class has identical
rights and privileges, except with respect to distribution and services (12b-
1) fees paid by each share class, voting rights on matters affecting a single
share class, and the exchange privileges of each share class.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the money market fund are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the
maturity of the security. In addition, the money market
Continued
36
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
fund may not (a) purchase any instrument with a remaining maturity greater
than 397 days unless such investment is subject to a demand feature, or (b)
maintain a dollar-weighted-average portfolio maturity which exceeds 90
days.
Investments in common and preferred stocks, corporate bonds, commercial
paper and U.S. Government securities of the variable net asset value funds
are valued at their market values determined on the basis of the mean of
the latest available bid and asked quotations or closing sale prices on the
principal exchange (closing sales prices on the over-the-counter National
Market System) in which such securities are normally traded. Municipal
bonds are valued by using market quotations or independent services that
use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Short-term investments maturing in 60 days or less are
valued at amortized cost, which approximates market value. Investments in
investment companies are valued at their net asset values as reported by
such investment companies. Other securities for which quotations are not
readily available are valued at their fair value as determined in good
faith by the investment adviser under the supervision of the Fund's Board
of Directors. The differences between the cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined on an
identified cost basis.
REPURCHASE AGREEMENTS:
The Portfolios may acquire repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser or the Portfolio's sub-investment adviser deems
creditworthy under guidelines approved by the Board of Directors, subject
to the seller's agreement to repurchase such securities at a mutually
agreed-upon date and price. The repurchase price generally equals the price
paid by each Portfolio plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. The seller, under a repurchase agreement, is required
to maintain the value of collateral held pursuant to the agreement at not
less than the repurchase price (including accrued interest). Securities
subject to repurchase agreements are held by each Portfolio's custodian or
another qualified custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by the Portfolios
under the 1940 Act.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and paid monthly for the variable net asset value funds.
Distributable net realized capital gains, if any, are declared and
distributed at least annually. Any taxable distributions declared in
December and paid in the following fiscal year will be taxable to
shareholders in the year declared.
Income distributions and capital gain distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles. Timing differences relating to shareholder
distributions are reflected in the components of net assets and permanent
book and tax basis differences relating to shareholder
Continued
37
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
distributions have been reclassified to capital. These differences are due
primarily to differing treatments for dollar roll transactions, the
deferral of certain losses and expiring capital loss carryforwards.
FEDERAL INCOME TAXES:
It is the policy of the Funds to comply with all requirements of the
Internal Revenue Code (the "code") applicable to regulated investment
companies and to distribute substantially all of their taxable income to
their shareholders. The Portfolios have met the requirements of the Code
applicable to regulated investment companies for the year ended December
31, 1996, therefore, no federal tax provision was required.
EXPENSE ALLOCATIONS:
Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses of the Fund are
prorated to the Portfolios, generally on the basis of relative net assets.
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1996 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Income Fund........................ $ 17,096,653 $ 21,823,848
Income Equity Fund................................. $118,606,552 $115,043,248
Ohio Tax-Free Bond Fund............................ $ 607,267 $ 716,491
Flexible Growth Fund............................... $ 21,993,742 $ 17,772,833
Stock Appreciation Fund............................ $ 54,802,922 $ 76,115,297
</TABLE>
Continued
38
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES
MONEY MARKET FUND U.S. GOVERNMENT INCOME FUND
---------------------------- -----------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 413,837,358 $ 331,872,719 $ 2,494,252 $ 4,352,572
Proceeds from shares
issued in connection
with acquisition..... 4,865,634
Dividends reinvested.. 2,193,920 1,518,099 440,531 569,125
Shares redeemed....... (392,509,518) (330,133,820) (4,741,047) (4,089,227)
------------- ------------- ------------- -------------
Change in net assets
from Investor A share
transactions......... $ 23,521,760 $ 8,122,632 $ (1,806,264) $ 832,470
============= ============= ============= =============
Investor B Shares:
Proceeds from shares
issued............... $ 372,835 $ 1,317,928
Dividends reinvested.. 45,964 9,712
Shares redeemed....... (349,650) (96,002)
------------- -------------
Change in net assets
from Investor B share
transactions......... $ 69,149 $ 1,231,638
============= =============
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 413,837,358 331,872,719 264,167 469,561
Issued in connection
with acquisition..... 4,865,634
Reinvested............ 2,193,920 1,518,099 46,735 60,733
Redeemed.............. (392,509,518) (330,133,820) (502,013) (435,482)
============= ============= ============= =============
Change in Investor A
Shares............... 23,521,760 8,122,632 (191,111) 94,812
============= ============= ============= =============
Investor B Shares:
Issued................ 34,874 123,342
Reinvested............ 4,314 903
Redeemed.............. (32,664) (8,962)
------------- -------------
Change in Investor B
Shares............... 6,524 115,283
============= =============
</TABLE>
Continued
39
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
INCOME EQUITY FUND OHIO TAX-FREE FUND
-------------------------- -------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued................ $ 8,709,609 $ 9,389,602 $ 39,457 $ 297,450
Proceeds from shares
issued in connection
with acquisition...... 9,727,219
Dividends reinvested... 10,845,880 8,635,353 6,134 8,453
Shares redeemed........ (7,958,218) (7,219,484) (340,435) (109,278)
----------- ----------- --------- ---------
Change in net assets
from Investor A share
transactions.......... $11,597,271 $20,532,690 $(294,844) $ 196,625
=========== =========== ========= =========
Investor B Shares:
Proceeds from shares
issued................ $ 3,928,456 $ 2,765,814 $ 592,591 $ 598,493
Dividends reinvested... 1,297,923 13,294 20,060 9,755
Shares redeemed........ (420,101) (43,350) (248,303) (5,034)
----------- ----------- --------- ---------
Change in net assets
from Investor B share
transactions.......... $ 4,806,278 $ 2,735,758 $ 364,348 $ 603,214
=========== =========== ========= =========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................. 680,679 828,287 3,737 29,259
Issued in connection
with acquisition...... 793,942
Reinvested............. 898,119 763,006 593 833
Redeemed............... (624,637) (630,554) (32,383) (10,732)
----------- ----------- --------- ---------
Change in Investor A
Shares................ 954,161 1,754,681 (28,053) 19,360
=========== =========== ========= =========
Investor B Shares:
Issued................. 317,268 241,570 55,795 57,922
Reinvested............. 103,352 1,125 1,897 927
Redeemed............... (31,854) (3,605) (23,572) (491)
----------- ----------- --------- ---------
Change in Investor B
Shares................ 388,766 239,090 34,120 58,358
=========== =========== ========= =========
</TABLE>
Continued
40
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND STOCK APPRECIATION FUND
-------------------------- --------------------------
OCTOBER 1,
YEAR ENDED YEAR ENDED YEAR ENDED 1995 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1996 1995 (A)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 5,979,948 $6,257,968 $ 3,225,171 $ 738,522
Dividends reinvested.. 318,997 282,271 2,903,615 1,542,781
Shares redeemed....... (5,316,451) (717,635) (16,060,775) (3,611,887)
----------- ---------- ------------ -----------
Change in net assets
from Investor A share
transactions......... $ 982,494 $5,822,604 $ (9,931,989) $(1,330,584)
=========== ========== ============ ===========
Investor B Shares:
Proceeds from shares
issued............... $ 5,648,362 $4,818,782 $ 483,957 $ 71,986
Dividends reinvested.. 227,824 52,617 65,586
Shares redeemed....... (1,218,260) (188,581) (105,940)
----------- ---------- ------------ -----------
Change in net assets
from Investor B share
transactions......... $ 4,657,926 $4,682,818 $ 443,603 $ 71,986
=========== ========== ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 531,651 593,056 307,057 76,082
Reinvested............ 28,295 25,863 308,567 164,279
Redeemed.............. (466,939) (65,727) (1,618,575) (370,208)
----------- ---------- ------------ -----------
Change in Investor A
Shares............... 93,007 553,192 (1,002,951) (129,847)
=========== ========== ============ ===========
Investor B Shares:
Issued................ 485,748 442,046 66,446 7,299
Reinvested............ 19,547 4,698 6,727
Redeemed.............. (104,208) (16,667) (10,094)
----------- ---------- ------------ -----------
Change in Investor B
Shares............... 401,087 430,077 63,079 7,299
=========== ========== ============ ===========
</TABLE>
- -------
(a) Period from date acquired by Riverfront Stock Appreciation Fund.
Continued
41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
5. RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment of
the assets of the U.S. Government Securities Money Market Fund, the U.S.
Government Income Fund, the Ohio Tax-Free Bond Fund and the Stock
Appreciation Fund. Under the terms of the Investment Advisory Agreement,
Provident is entitled to receive fees based on a percentage of the average
net assets of each Portfolio.
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into Sub-Investment Advisory Agreements with DePrince,
Race & Zollo, Inc. ("DRZ"), for the Income Equity Fund and with James
Investment Research, Inc. ("JIR") for the Flexible Growth Fund. DRZ and JIR
provide investment advice to and supervise the investment program of the
Income Equity Fund and the Flexible Growth Fund, respectively. Under the
terms of the Sub-Investment Advisory Agreements, JIR receives from Provident
fees calculated at 0.50% of the average daily net assets of the Flexible
Growth Fund, and DRZ receives from Provident fees calculated at 0.50% of
average daily net assets up to $55 million of the Income Equity Fund and
0.55% of average daily net assets above $55 million for this Portfolio.
SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders was held on December 30, 1996. At the
Meeting, shareholders voted (i) on an Amendment to the Investment Advisory
Agreement between the Fund and Provident to permit Provident to manage
directly that portion of the Income Equity Fund's portfolio allocated to it
by the Fund's Board of Directors; (ii) to approve the amendment to the Sub-
Investment Advisory Agreement between Provident and DRZ with respect to the
Income Equity Fund to clarify that DRZ will manage directly that portion of
the Income Equity Fund's portfolio allocated to it by the Fund's Board of
Directors; (iii) to approve an Amendment to the Investment Advisory
Arrangements for the Flexible Growth Fund with respect to the management of
its portfolio such that Provident will become the sole manager of the
Flexible Growth Fund's portfolio; (iv) to amend the Articles of Incorporation
of the Fund to reclassify (change the name of) the currently issued and
outstanding shares of The Flexible Growth Fund as shares of The Riverfront
Balanced Fund.
The results of all matters voted on by shareholders at the Special Meeting
held on December 30, 1996 were as follows:
A. Approval of Amendments to the Investment Advisory Agreement between
the Fund and Provident for the Income Equity Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
2,891,190 25,646 65,981
</TABLE>
B. Approval of the Amendment to the Sub-Investment Advisory Agreement
between Provident and DRZ for the Income Equity Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
2,849,578 33,459 99,780
</TABLE>
Continued
42
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
C. Approval of an Amendment to the Investment Advisory Arrangements
concerning the appointment of Provident as the sole manager of the
Flexible Growth Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
1,710,471 15,186 25,864
</TABLE>
D. Approval of the Amendment to the Articles of Incorporation of the Fund
with respect to the Flexible Growth Fund.
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
--- ------- -------
<S> <C> <C>
1,714,185 11,546 25,790
</TABLE>
All changes are to become effective January 1, 1997.
In addition to serving as Investment Adviser, Provident serves as custodian
and fund accountant to the Portfolios. Under the terms of the Custodian, Fund
Accounting and Recordkeeping Agreement, Provident is entitled to receive fees
based on a percentage of the average daily net assets of each Portfolio.
During the year ended December 31, 1996, Provident Securities & Investment
Company ("PSI"), an affiliate of Provident which is a registered broker
dealer, executed transactions to purchase and sell portfolio investments on
behalf of the Fund. The Fund paid PSI approximately $90,000 that has been
included in investments at cost, as commissions for such transactions.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are affiliated,
serves the Fund as administrator, principal underwriter and distributor. Such
officers and director are paid no fees directly by the Portfolios for serving
as officers and as director of the Fund. Under the terms of the
Administration Agreement, BISYS' fees are computed at 0.20% of the average
daily net assets of each Portfolio.
Provident also serves as transfer agent and shareholder servicing agent to
the Fund and BISYS Ohio serves as sub-transfer agent for the Investor B
Shares. Under the terms of the Master Transfer and Record keeping Agreement,
Provident is entitled to receive fees based on the number of shareholders of
each Portfolio and certain out-of-pocket expenses. Under the terms of the
Shareholder Servicing Agreement, Provident may receive a fee computed daily
at an annual rate of up to 0.25% of the average daily net assets of certain
shares of each Portfolio. This fee may be used to reimburse BISYS or other
providers of record keeping and/or administrative support services. As of
December 31, 1996, there were no shareholder servicing agreements entered
into on behalf of any of the Portfolios.
The Fund has adopted an Investor A Distribution and Shareholder Service Plan
and Agreement ("Investor A Plan") and an Investor B Distribution and
Shareholder Services Plan and Agreement ("Investor B Plan"), each in
accordance with Rule 12b-1 under the 1940 Act. Pursuant to the Investor A
Plan, each Portfolio is authorized to pay or reimburse BISYS, as distributor
of Investor A Shares, a periodic amount, calculated at an annual rate not to
exceed 0.25% of the average daily net asset value of Investor A Shares of
each Portfolio.
Continued
43
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
Pursuant to the Investor B Plan, each variable net asset value fund is
authorized to pay or reimburse BISYS, as distributor of Investor B Shares,
(a) a distribution fee in an amount not to exceed, on an annual basis, 0.75%
of the average daily net asset value of Investor B Shares of that Portfolio
and (b) a service fee in an amount not to exceed 0.25% of the average daily
net asset value of Investor B Shares of that Portfolio. These fees may be
used by BISYS to pay banks, broker dealers and other institutions, including
Provident, or to reimburse BISYS or its affiliates, to finance any activity
which is principally intended to result in the sale of shares or to
compensate for providing shareholder services.
For the year ended December 31, 1996, BISYS received $675,842 from
commissions on sales of capital shares, of which $634,802 was reallowed to
brokers affiliated with Provident.
Provident and certain of its affiliates own shares of Portfolios of the Fund.
As of December 31, 1996, the aggregate value of capital shares owned by
Provident and its affiliates were as follows (amounts in thousands):
<TABLE>
<S> <C>
U.S. Government Securities Money Market............................. $121,952
U.S. Government Income Fund......................................... $ 8,930
Income Equity Fund.................................................. $ 12,002
Ohio Tax-Free Bond Fund............................................. $ 10,567
Flexible Growth Fund................................................ $ 4,054
Stock Appreciation Fund............................................. $ 589
</TABLE>
Fees may be voluntarily reduced or reimbursed to assist the Portfolios in
maintaining competitive expense ratios. Information regarding these
transactions is as follows for the year ended December 31, 1996:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- --------
<S> <C> <C> <C>
INVESTMENT ADVISER FEES:
Annual fee before voluntary fee
reductions
(percentage of average net
assets)........................... 0.15% 0.40% 0.95%
Voluntary fee reductions........... NA NA $ 36,661
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)........................ 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions
(percentage of average net
assets)........................... 0.25% 0.25% 0.25%
Voluntary fee reductions........... $432,174 $30,720 $ 30,199
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)........................ NA 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES...... $ 86,401 $35,870 $108,638
TRANSFER AGENT FEES................ $ 79,137 $38,891 $ 58,165
</TABLE>
Continued
44
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
5. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO TAX-FREE FLEXIBLE STOCK
BOND FUND GROWTH FUND APPRECIATION FUND
------------- ----------- -----------------
<S> <C> <C> <C>
INVESTMENT ADVISER FEES:
Annual fee before voluntary fee
reductions
(percentage of average net
assets)......................... 0.50% 0.90% 0.80%
Voluntary fee reductions......... $11,373 $28,720 NA
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)...................... 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions
(percentage of average net
assets)......................... 0.25% 0.25% 0.25%
Voluntary fee reductions......... NA $11,929 NA
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)...................... 1.00% 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES.... $15,923 $30,516 $55,160
TRANSFER AGENT FEES.............. $26,007 $44,600 $38,988
</TABLE>
NA--Not applicable
6. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Riverfront Funds, Inc. designated the following eligible distributions
for the dividends received deduction for corporations for the taxable year
ended December 31, 1996:
<TABLE>
<CAPTION>
STOCK INCOME FLEXIBLE
APPRECIATION EQUITY GROWTH
------------ ---------- --------
<S> <C> <C> <C>
Dividend Income.............................. $36,453 $2,153,446 $227,745
</TABLE>
7. EXEMPT-INTEREST INCOME DESIGNATION (UNAUDITED):
The Riverfront Funds, Inc. designates the following exempt-interest income
for the Ohio Tax-Free Bond Fund for the taxable year ended December 31, 1996:
<TABLE>
<S> <C>
Exempt-interest distributions....................................... $433,425
Exempt-interest distribution per share.............................. $ 0.387
</TABLE>
The percentage break-down of the exempt-interest by state for the Ohio Tax-
Free Bond Fund's taxable year ended December 31, 1996 was as follows:
<TABLE>
<S> <C>
Ohio..................................................................... 100%
----
100%
====
</TABLE>
Continued
45
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1996
8. FEDERAL INCOME TAXES:
For federal income tax purposes, the following Portfolios have capital loss
carryforwards as of December 31, 1996, which are available to offset future
capital gains, if any:
<TABLE>
<CAPTION>
EXPIRES AMOUNT
------- ----------
<S> <C> <C>
U.S. Government Securities Money Market Fund.............. 2002 $ 875
U.S. Government Securities Money Market Fund.............. 2003 $ 1,415
U.S. Government Income Fund............................... 2002 $1,348,718
U.S. Government Income Fund............................... 2003 $ 516,479
Flexible Growth Fund...................................... 2004 $ 153,639
</TABLE>
9. CAPITAL GAINS DISTRIBUTIONS (UNAUDITED):
The Fund declared and distributed capital gains to shareholders in the
following amounts per share for the taxable year ended December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM SHORT-TERM
--------- ----------
<S> <C> <C>
Income Equity Fund....................................... 0.6894 1.2127
Stock Appreciation Fund.................................. 0.8897 0.1448
</TABLE>
46
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
----------------------------------------------------
OCTOBER 1,
YEARS ENDED DECEMBER 31, 1992 TO
-------------------------------------- DECEMBER 31,
1996 1995 1994 (D) 1993(D) 1992 (A)(D)
-------- -------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- -------
Investment Activities
Net investment income... 0.046 0.050 0.04 0.03 0.01
-------- -------- -------- -------- -------
Distributions
Net investment income... (0.046) (0.050) (0.04) (0.03) (0.01)
-------- -------- -------- -------- -------
NET ASSET VALUE,
END OF PERIOD........... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== =======
Total Return............. 4.89% 5.52% 3.78% 2.90% 0.80%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $181,017 $157,495 $149,374 $133,207 $37,083
period (000).............
Ratio of expenses to 0.59% 0.58% 0.51% 0.32% 0.01%(c)
average net assets.......
Ratio of net investment 4.78% 5.34% 3.70% 2.85% 3.09%(c)
income to average net
assets...................
Ratio of expenses to 0.84% 0.83% 0.80% 0.42% 0.68%(c)
average net assets*......
Ratio of net investment 4.53% 5.09% 3.41% 2.75% 2.42%(c)
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)Period from commencement of operations.
(b)Not annualized.
(c)Annualized.
(d)Audited by other auditors.
See Notes to Financial Statements.
47
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
---------------------------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31, DECEMBER 31, -------------------------------------
1996 1995 1995 (A) 1994 (F) 1993 (F) 1992 (B)(F)
------------------------ ------------ ------------ -------- -------- -----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 9.71 $10.95 $ 8.92 $10.00 $ 9.91 $ 9.76 $ 10.00
------- ------ ------- ------ ------- ------- -------
Investment Activities
Net investment income... 0.52 0.49 0.54 0.43 0.54 0.51 0.10
Net realized and
unrealized gains
(losses)
from investments...... (0.29) (0.31) 0.79 0.94 (0.99) 0.20 (0.23)
------- ------ ------- ------ ------- ------- -------
Total from Investment 0.23 0.18 1.33 1.37 (0.45) 0.71 (0.13)
Activities..............
------- ------ ------- ------ ------- ------- -------
Distributions
Net investment income... (0.51) (0.49) (0.54) (0.42) (0.54) (0.50) (0.10)
In excess of net (0.06) (0.01)
investment income.......
------- ------ ------- ------ ------- ------- -------
Total Distributions..... (0.51) (0.49) (0.54) (0.42) (0.54) (0.56) (0.11)
------- ------ ------- ------ ------- ------- -------
NET ASSET VALUE,
END OF PERIOD........... $ 9.43 $10.64 $ 9.71 $10.95 $ 8.92 $ 9.91 $ 9.76
======= ====== ======= ====== ======= ======= =======
Total Return (excludes 2.51% 1.72% 15.22% 13.96%(e) (4.64)% 7.38% (1.31)%
sales/redemption charge).
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $33,694 $1,296 $36,538 $1,263 $32,721 $30,078 $24,588
period (000).............
Ratio of expenses to 1.11% 1.96% 1.09% 1.90%(c) 0.86% 0.65% 0.66%
average net assets.......
Ratio of net investment 5.45% 4.59% 5.74% 4.80%(c) 5.78% 5.05% 4.00%
income to
average net assets......
Ratio of expenses to 1.20% 1.96% 1.18% 1.90%(c) 1.14% 1.08% 1.06%
average net assets*......
Ratio of net investment 5.36% 4.59% 5.65% 4.80%(c) 5.49% 4.62% 3.60%
income to
average net assets*.....
Portfolio Turnover....... 53%(d) 53%(d) 75%(d) 75%(d) 83%(d) 220%(d) 117%(d)
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a)Period from commencement of operations.
(b)Investment operations and sales of shares to the public began on October 1,
1992.
(c)Annualized.
(d)Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f)Audited by other auditors.
See Notes to Financial Statements.
48
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
INCOME EQUITY FUND
---------------------------------------------------------------------------------------------
JANUARY 17,
YEAR ENDED YEAR ENDED 1995 TO YEARS ENDED DECEMBER 31,
DECEMBER 31, DECEMBER 31 DECEMBER 31, -------------------------------------
1996 1995 1995 (A) 1994 (F) 1993 (F) 1992 (B)(F)
------------------------ ----------- ------------ -------- -------- -----------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 11.70 $ 11.85 $ 10.15 $10.00 $ 10.63 $ 10.78 $ 10.00
------- ------- ------- ------ ------- ------- -------
Investment Activities
Net investment income... 0.21 0.12 0.27 0.13 0.32 0.28 0.08
Net realized and 2.12 2.21 2.89 2.78 1.01 0.80
unrealized gains from
investments.............
------- ------- ------- ------ ------- ------- -------
Total from Investment 2.33 2.33 3.16 2.91 0.32 1.29 0.88
Activities..............
------- ------- ------- ------ ------- ------- -------
Distributions
Net investment income... (0.21) (0.12) (0.27) (0.13) (0.31) (0.27) (0.08)
In excess of net (0.03) (0.01)
investment income.......
Net realized gains...... (1.90) (1.90) (1.34) (0.93) (0.49) (1.14)
In excess of net (0.01)
realized gains..........
------- ------- ------- ------ ------- ------- -------
Total Distributions..... (2.11) (2.02) (1.61) (1.06) (0.80) (1.44) (0.10)
------- ------- ------- ------ ------- ------- -------
NET ASSET VALUE,
END OF PERIOD........... $ 11.92 $ 12.16 $ 11.70 $11.85 $ 10.15 $ 10.63 $ 10.78
======= ======= ======= ====== ======= ======= =======
Total Return (excludes 19.88% 19.67% 31.45% 29.28%(e) 3.08% 12.11% 8.74%
sales/redemption charge).
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $73,368 $ 7,632 $60,845 $2,833 $34,965 $24,387 $12,262
period (000).............
Ratio of expenses to 1.76% 2.48% 1.49% 2.46%(c) 1.30% 1.47% 1.48%
average net assets.......
Ratio of net investment 1.62% 0.88% 2.27% 1.12%(c) 2.93% 2.55% 3.16%
income to average net
assets...................
Ratio of expenses to 1.85% 2.54% 1.74% 2.51%(c) 1.58% 1.64% 2.02%
average net assets*......
Ratio of net investment 1.53% 0.82% 2.02% 1.07%(c) 2.65% 2.38% 2.62%
income to average net
assets*..................
Portfolio Turnover....... 166%(d) 166%(d) 180%(d) 180%(d) 119%(d) 145%(d) 12%(d)
Average commission rate $0.0541 $0.0541
paid (h).................
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a)Period from commencement of operations.
(b)Investment operations and sales of shares to the public began on October 1,
1992.
(c)Annualized.
(d)Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(e) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(f)Audited by other auditors.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
49
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
----------------------------------------------------------------------
JANUARY 17, FROM AUGUST 1,
YEAR ENDED YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (A) 1994 (A)(E)
------------------------ ------------ ------------ --------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
------- ------ ------- ------ -------
Investment Activities
Net investment income.. 0.40 0.32 0.39 0.27 0.12
Net realized and (0.10) (0.09) 0.67 0.73 (0.17)
unrealized gains
(losses) from
investments............
------- ------ ------- ------ -------
Total from Investment 0.30 0.23 1.06 1.00 (0.05)
Activities.............
------- ------ ------- ------ -------
Distributions
Net investment income.. (0.40) (0.32) (0.38) (0.27) (0.12)
------- ------ ------- ------ -------
NET ASSET VALUE,
END OF PERIOD.......... $ 10.41 $10.64 $ 10.51 $10.73 $ 9.83
======= ====== ======= ====== =======
Total Return (excludes 2.95% 2.21% 10.96% 10.10%(d) (0.47)%(d)
sales/redemption
charge).................
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $10,693 $ 984 $11,091 $ 626 $10,190
period (000)............
Ratio of expenses to 1.45% 2.25% 1.49% 2.27%(c) 1.08%(c)
average net assets......
Ratio of net investment 3.87% 3.07% 3.77% 3.01%(c) 2.92%(c)
income to average net
assets..................
Ratio of expenses to 1.55% 2.36% 1.64% 2.41%(c) 1.44%(c)
average net assets*.....
Ratio of net investment 3.77% 2.96% 3.62% 2.87%(c) 2.56%(c)
income to average net
assets*.................
Portfolio Turnover...... 6%(b) 6%(b) 34%(b) 34%(b) 29%(b)
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a)Period from commencement of operations.
(b)Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c)Annualized.
(d)Not annualized.
(e)Audited by other auditors.
See Notes to Financial Statements.
50
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
FLEXIBLE GROWTH FUND
-------------------------------------------------------------------------
JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED YEAR ENDED 1995 TO 1994 THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1995 (A) 1994 (A)(F)
------------------------ ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------ ------ ------
Investment Activities
Net investment income.. 0.31 0.26 0.35 0.25 0.10
Net realized and 0.33 0.34 1.66 1.79 (0.18)
unrealized gains
(losses) from
investments............
------- ------- ------ ------ ------
Total from Investment 0.64 0.60 2.01 2.04 (0.08)
Activities.............
------- ------- ------ ------ ------
Distributions
Net investment income.. (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains..... 0 0 (0.10) (0.10)
------- ------- ------ ------ ------
Total Distributions.... (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.......... $ 11.69 $ 12.04 $11.36 $11.70 $ 9.79
======= ======= ====== ====== ======
Total Return (excludes 5.76% 5.27% 20.83% 20.53%(c) (0.82)%(e)
sales/redemption
charge).................
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $10,786 $10,008 $9,427 $5,030 $2,709
period (000)............
Ratio of expenses to 1.70% 2.54% 1.28% 2.04%(d) 1.48%(d)
average net assets......
Ratio of net investment 2.87% 2.03% 3.48% 2.69%(d) 4.01%(d)
income to average net
assets..................
Ratio of expenses to 1.94% 2.68% 1.67% 2.84%(d) 4.61%(d)
average net assets*.....
Ratio of net investment 2.63% 1.89% 3.09% 1.89%(d) 0.88%(d)
income to average net
assets*.................
Portfolio Turnover...... 98%(b) 98%(b) 13%(b) 13%(b) 1%(b)
Average commission rate $0.0891 $0.0891
paid (g)................
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a)Period from commencement of operations.
(b)Portfolio turnover is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(c) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(d)Annualized.
(e)Not Annualized.
(f)Audited by other auditors.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
51
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
----------------------------------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
YEAR ENDED 1995 THROUGH 1995 THROUGH YEARS ENDED SEPEMBER 30,
DECEMBER 31, DECEMBER 31, DECEMBER 31, --------------------------------------------
1996 1995 (B) 1995 (A)(B) 1995 (F) 1994 (F) 1993 (F) 1992 (F)
------------------------ --------------- --------------- -------- -------- -------- --------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 9.50 $ 9.91 $ 10.00 $10.00 $ 8.25 $ 10.18 $ 7.98 $ 7.70
------- ------- ------- ------ ------- ------- ------- -------
Investment Activities
Net investment income... (0.14) (0.15) (0.01) (0.01) (0.07) (0.12) (0.17) (0.08)
Net realized and
unrealized gains
(losses) from
investments............ 1.10 1.04 (0.12) (0.08) 2.14 (1.26) 2.57 1.41
------- ------- ------- ------ ------- ------- ------- -------
Total from Investment
Activities.............. 0.96 0.89 (0.13) (0.09) 2.07 (1.38) 2.40 1.33
------- ------- ------- ------ ------- ------- ------- -------
Distributions
Net realized gains...... (1.03) (1.03) (0.37) (0.32) (0.55) (0.20) (1.05)
------- ------- ------- ------ ------- ------- ------- -------
NET ASSET VALUE,
END OF PERIOD........... $ 9.43 $ 9.77 $ 9.50 $ 9.91 $ 10.00 $ 8.25 $ 10.18 $ 7.98
======= ======= ======= ====== ======= ======= ======= =======
Total Return
(excludes
sales/redemption
charge)................. 10.17% 9.05% (1.20)%(c) (0.90)%(c) 25.12% (13.91)% 30.61% 16.69%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)............. $31,227 $ 687 $40,995 $ 72 $44,500 $47,880 $59,330 $28,750
Ratio of expenses to
average net assets....... 1.91% 2.64% 1.76%(d) 2.30%(d) 2.61% 2.44% 2.47% 2.70%
Ratio of net investment
income
to average net assets... (1.25)% (2.01)% (0.49)%(d) (1.69)%(d) (0.73)% (1.35)% (1.85)% (1.00)%
Ratio of expenses to
average net assets*...... 1.91% 2.64% 1.77%(d) 2.39%(d) (g) (g) (g) (g)
Ratio of net investment
income
to average net assets*.. (1.25)% (2.01)% (0.50)%(d) (1.78)%(d) (g) (g) (g) (g)
Portfolio Turnover....... 162%(e) 162%(e) 46%(e) 46%(e) 197% 254% 216% 288%
Average commission rate
paid (h)................. $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 is calculated on the basis of the Portfolio as a whole
without distinguishing between the classes of shares issued.
(f)Audited by other auditors.
(g)There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the fund
as a whole without distinguishing between the classes of shares issued.
See Notes to Financial Statements.
52
<PAGE>
The Riverfront Funds, Inc.
INVESTMENT ADVISER
The Provident Bank
One East Fourth Street
Cincinnati, Ohio 45202
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
FOR ADDITIONAL INFORMATION CALL:
The Provident Bank
Mutual Fund Services
1-800-424-2295
2/97
