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Annual
Report
December 31, 1997
The Riverfront Income Equity Fund
The Riverfront Balanced Fund
The Riverfront Large Company Select 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
[RIVERFRONT LOGO]
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, Inc.
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Message From Your Chairman.................................................. 2
Message From Your Investment Adviser........................................ 3
Performance Reviews......................................................... 6
Report of Independent Accounts.............................................. 19
Statements of Assets and Liabilities........................................ 20
Statements of Operations.................................................... 22
Statements of Changes in Net Assets......................................... 24
Schedules of Portfolio Investments.......................................... 26
Notes to Financial Statements............................................... 41
Financial Highlights........................................................ 52
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Message From The Chairman The Riverfront Funds, Inc.
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Dear Shareholders:
We at Riverfront Funds are pleased to report that the year ended December 31,
1997, proved to be another successful year for the financial markets and that
Riverfront Funds again shared in that success. The year closed on a dramatic
note overseas, as world attention turned to the crisis in the Asian markets.
In fortunate contrast, positive factors in the U.S. economy outweighed the
downturns. Low interest rates led to strong purchases, and consumer sentiment
reached all-time highs. This overall confidence was perhaps best expressed in
the U.S. stock market, which again posted record gains.
The positive results of this activity were also realized in mutual funds.
Assets flowed into mutual funds during the period, and we are pleased to
report that The Riverfront Funds were the choice of many investors.
RESTRUCTURING BEGUN IN THE STOCK APPRECIATION FUND
We are also pleased to report that the previously announced transition in The
Riverfront Stock Appreciation Fund portfolio was initiated in 1997. The Fund
now invests primarily in small- and mid-capitalization companies with strong
growth potential. The Standard and Poor's 600 Index, the NASDAQ Composite
Index and the Russell 2000 Index are the benchmarks by which these companies
are tracked. For a prospectus or for further information about this Fund, or
any of the Riverfront Funds, please call us at 1-800-424-2295. Please read the
prospectus carefully before investing.
THE LARGE COMPANY SELECT FUND OFF TO A WINNING START
The period also saw the launch of The Large Company Select Fund on January 2,
1997. On that date a new series of The Riverfront Funds, Inc. acquired the
portfolio securities of two common trust funds managed by The Provident Bank
for trust clients. The new Fund, under The Large Company Select Fund title,
was then opened to all investors. This Fund invests primarily in companies
with larger capitalizations, companies with exceptional management and sound
financial positions. Again, if you would like more information about this
Fund, or any of the Riverfront Funds, please feel free to call us.
IN CONCLUSION
We ask that you give special attention to the following report. Contained in
this report, you will find a detailed performance review of each of the
Riverfront Funds for the year ended December 31, 1997.
In closing, we appreciate the confidence you have placed in us throughout the
past year and look forward to your continued support in the future. We intend
to sustain that confidence through quality investment management and superior
shareholder servicing. We want to hear from our shareholders. You can reach us
at 1-800-424-2295 if you would like a prospectus, have any questions or need
any assistance. We can be reached at the above toll-free number from 9:00 a.m.
until 5:00 p.m., Eastern Time. Please do not hesitate to call.
Best regards,
/s/ Steven G. Mintos
Steven 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 POSSIBLE LOSS OF PRINCIPAL.
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Message From The Investment Adviser The Riverfront Funds, Inc.
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Dear Shareholders,
Throughout 1997 and particularly in the fourth quarter, the U.S. stock market
faced many difficult global issues. The crisis in Asia developed as many
countries realized the consequences of their economic policies. As a result,
markets plunged around the world, with some Asian markets dropping 25%-30%.
These problems also spurred, on October 27, a 554 point decline in the Dow
Jones Industrial Average, setting a record for the largest single-day point
drop. Saddam Hussein once again threatened the international balance of peace
by not allowing the United Nations access to alleged chemical weapons storage
sites, nearly prompting a military response. The U.S. market recovered as
investors viewed the market drop as an overreaction and they remained
optimistic about corporate profits as bailouts were structured for the Asian
currencies.
Investors wrestled with the direction of the U.S. economy in 1997. Third-
quarter earnings announcements were reasonably strong but were quickly
overshadowed by international issues. Economic reports showed a very strong
domestic economy with subdued inflation. The market faltered as technology
stocks, market leaders for much of the year, led the above-mentioned decline
due to international concerns and warnings from companies such as Intel and
Oracle of lower profits. Consolidation in the financial services industry
continued with large banks acquiring smaller banks and brokerage firms. We
also saw what is considered to be just the beginning of consolidation in the
telecommunications industry with the merger of MCI and Worldcom.
Small company stocks continued to lag large companies in the fourth quarter.
The Russell 2000 Index lost -3.39% in the fourth quarter but gained 22.24% for
the year. The S&P 500 gained 2.87% in the last quarter, for a 33.36% gain for
the year. Bonds, per the Lehman Intermediate Government/Corporate Index,
gained 2.14% in the last three months and 7.87% for 1997. The total returns
for the last three months and 1997 are listed below:
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THREE-MONTH TWELVE-MONTH
PERIOD ENDED PERIOD ENDED
DEC 31, 1997 DEC 31, 1997
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Large Company Stocks (S&P 500)........................ 2.87% 33.36%
Small Company Stocks (Russell 2000)................... (3.39)% 22.24%
Bonds (Lehman Interm. Gov't/Corp)..................... 2.14% 7.87%
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The last three years have been extraordinary, as there had previously never
been a time when the stock market returned 20% plus in three consecutive
years. Has the market gone too far? What can we expect in 1998?
OUTLOOK
The primary focus of investors as we move into 1998 is what will be the long-
lasting effect of the Asian crisis on the U.S. economy and on corporate
profits. With the strength of the dollar, exports from the U.S. become more
expensive and hence less attractive to foreign buyers. This means that
multinational companies that derive a significant portion of their earnings
from the Asia-Pacific region could suffer from decreased demand. We do not
expect much of a negative impact on most U.S. companies; however, lingering
concerns or a broadening of the problems could hinder the market.
Even as the economies around the world suffer, the U.S. economy remains very
strong. Growth is moderate, and inflation nonexistent. The Federal Reserve
Board is keeping a close watch on the pace of growth to be sure inflationary
pressures do not appear. If the economy continues at the current pace, then
there is a risk that the Fed will raise interest rates to fight off inflation.
On the other hand, if the Asian crisis slows demand for U.S. products abroad
and the domestic economy slows, then an interest rate cut by the Fed is the
most likely scenario. In our opinion, the probability of a Fed easing (i.e.,
cut in interest rates) is greater given the current fundamentals.
3
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Message From The Investment Adviser, continued The Riverfront Funds, Inc.
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We still believe the long-term trends of industry consolidation, increased
global trade and increased worker productivity should continue to keep
inflation at bay and benefit corporate profits and the U.S. stock market.
Companies are still spending very heavily in technology to cut costs out of
production processes. Going forward, this will continue to be a consolidation
driver in the financial services and telecommunications industries as large
companies benefit from economies of scale. It is the realization of
significant cost savings and increasing global trade that has kept prices
stable in the U.S. As all of the economies of the world become more
intertwined, competition becomes fierce. Companies are not able to raise
prices because another company with a similar product is able to keep a lower
price and steal market share.
SUMMARY
All of this paints an ambiguous picture of the U.S. markets. Our view is that
the problems in Asia are not fully realized and could cause increased market
volatility throughout 1998. Also, growth in corporate earnings will not be as
strong as in the past few years. These two factors lead us to be cautious over
the next six months to a year. We do not see another 20% plus year for the
stock market, but over the long term, stocks are still the favored investment
vehicle for growth.
As for income, with the economy showing signs of slowing, inflation remaining
subdued, and the balanced budget agreement reducing the supply of Treasuries,
bonds offer attractive real value to investors (after inflation). The yield
curve is flat, and the increase in yield from the short end to the long end is
small. Therefore, we recommend investors purchase high-quality, intermediate
term bonds.
Sincerely,
/s/ Gary W. Queen
Gary W. Queen
Senior Managing Director
Capital Management Group
Provident Bank
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Performance Reviews The Riverfront Funds, Inc.
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THE RIVERFRONT INCOME EQUITY FUND
Big-cap stocks resumed their dominance over small caps and finished the year
with a commanding lead over their smaller cap peers. Nifty Fifty-type stocks,
which are the larger stocks in the S&P 500 with above-average price-to-
earnings ratios, accounted for more than 44% of the return for the year
outperforming their more value-oriented peers. The top quintile of the S&P 500
by capitalization was the only one to outperform the market, with the lowest
quintile underperforming by over 30%, proving that super-large caps were still
the place to be in 1997. Adhering to the yield and valuation requirements of
our discipline, the Fund's exposure to the larger cap names remains minimal.
The Fund has an average weighted market cap of $7.5 billion, versus the S&P
500 average weighted market cap of $55 billion. Given the lofty valuations of
the larger cap stocks and their exposure to the tumult in Asia, we believe
smaller cap stocks will lead the market in 1998.
During the year 1997 Financials, Consumer Staples, Health Care and Technology
were the biggest contributors to the market's performance. These four sectors
accounted for nearly 65% of the S&P 500 gain. Our bottom up stock selection,
which focuses on yield, valuation and fundamental catalysts, has precluded us
from participating heavily in these industries.
Stocks that contributed to performance during the year included American Home
Products, Armstrong World, Hubbel, H&R Block, Crestar, AG Edwards, Wells
Fargo, Trans America, Dow Jones, Stanley Works, First Commerce, The Limited,
Wallace Computer Services, Imperial Chemical, ITT Industries, Aeroquip-
Vickers, General Signal, CPC International, AMP, Central Fidelity Banks,
Dresser Industries and Mapco.
Execution of our bottom-up stock selection, which focuses on yield, valuations
and fundamental catalysts, leads to a diverse portfolio. As of December 31,
1997, our top holdings include General Signal, Pharmacia & Upjohn, Rubbermaid,
Echlin, H&R Block, BF Goodrich, Kimberly Clark, Fort James, Crown Cork & Seal
and Harris Corp/1/.
Heading into 1998, the Fund is overweighted in Basic Industry, primarily due
to our positions in paper and packaging stocks such as Consolidated Paper,
Union Camp, Westvaco, Crown Cork and Seal, and Tenneco. The portfolio's
overweighted Energy exposure is dominated by gas companies. With market forces
speeding deregulation in the electric industry, we anticipate several more
mergers between electric and gas companies. Given this convergence trend, we
own gas companies that are uniquely positioned in the industry, such as
Peoples Energy, Nicor, National Fuel Gas and Atlanta Gas & Light. The Fund's
holdings in non-regional Bell Operating Companies, which include Southern New
England, Alltel, Frontier Corp and GTE, are all attractive takeover targets in
a rapidly consolidating industry and are experiencing improving fundamentals.
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/1/The Fund's composition is subject to change.
Income Equity Fund
Value of a $10,000 Investment
Label A B
Investor A Share S&P 500
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
12/31/97 25,389 26,459
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/8/92)
Investor A Shares (No Load) 28.20% 18.48% 19.48%
6
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Performance Reviews, continued The Riverfront Funds, Inc.
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Income Equity Fund
Value of a $10,000 Investment
Label A B
Investor A Shares S&P 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
12/31/97 24,250 26,459
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/8/92)
Investor A Shares 22.48% 17.41% 18.44%
* Reflects 4.50% sales charge.
Income Equity Fund
Value of a $10,000 Investment
Label A B
Investor B Shares S&P 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 16,247 16,137
12/31/96 19,442 19,842
12/31/97 24,625 26,459
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/8/92)
Investor B Shares 23.23% 17.65% 18.78%
** Reflects applicable contingent deferred sales cahrge.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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, presents 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 would 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, Inc.
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THE RIVERFRONT BALANCED FUND
The Fund seeks to provide long-term growth with a secondary focus on income by
investing in a diversified portfolio of stocks, bonds and money market
instruments. This conservatively managed fund had 64% of its net assets in
equities, 32% in fixed-income securities and 4% in cash equivalents as of
December 31, 1997./1/
The Fund performed well in 1997, posting a one-year return for the year ended
12/31/97 of 16.77% (Investor A shares),* assuming no front-end load. The
Lipper Balanced average returned 18.94%. Relative to other balanced funds the
Fund continues to have a lower exposure to stocks, but we feel that investing
64% of the Fund's assets in stocks is an appropriate level for a balanced
fund.
The structure of the portfolio is similar to a combination of the Riverfront
Large Company Select Fund and the Riverfront U.S. Government Income Fund.
As of December 31, 1997, the top five holdings in the Fund's equity portfolio
were Merck (2.5% of the net assets of the Fund), Procter & Gamble (2.3%),
Cincinnati Bell (2.2%), Cisco Systems (2.1%) and BankBoston (2.1%).
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*The return, with the maximum sales charge of 4.50%, was 11.53% for the
period.
/1/The Fund's composition is subject to change.
Balanced Fund
Value of a $10,000 Investment
Label A B C D E
Investor A S&P 500 Lehman Blended Lipper
Share Index Int. Gov 50% S&P Balance
(No Load)
9/1/94 10,000 10,000 10,000 10,000 10,000
12/31/94 9,918 9,800 9,898 9,737 9,739
12/31/95 11,984 13,475 11,413 12,143 12,161
12/31/96 12,674 16,569 11,875 14,146 13,744
12/31/97 14,800 22,095 12,792 17,063 16,355
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor A Shares (No Load) 16.77% 12.47%
8
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Performance Reviews, continued The Riverfront Funds, Inc.
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Balanced Fund
Value of a $10,000 Investment
Label A B C D E
Investor S&P 500 Lehman Blended Lipper
A Share Index Int. Gov 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 11,448 13,475 11,413 12,143 12,161
12/31/96 12,105 16,569 11,875 14,146 13,744
12/31/97 14,135 22,095 12,792 17,063 16,355
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor A Shares* 11.53% 10.93%
* Reflects 4.50% sales charge.
Balanced Fund
Value of a $10,000 Investment
Label A B C D E
Investor S&P 500 Lehman Blended Lipper
B Share Index Int. Gov 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 14,146 13,744
12/31/97 14,274 22,095 12,792 17,063 16,355
Average Annual Total Return
Since
Inception
1 Year (9/1/94)
Investor B Shares** 11.82% 11.25%
** Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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, presents 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 would have
been lower.
The Standard & Poor's 500 Stock Index and 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 performance of The Riverfront
Balanced Fund reflects the deduction of fees for these value-added services.
The Lipper Balanced Average is a composite of 522 funds in the Lipper Balanced
category.
The Riverfront Balanced Fund is also being measured against a benchmark of
blended indices that represent 50% of the S&P 500 Index and 50% of the Lehman
Brothers Intermediate Government/Corporate Bond Index.
9
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Performance Reviews, continued The Riverfront Funds, Inc.
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THE RIVERFRONT LARGE COMPANY SELECT FUND
The Fund invests primarily in larger-capitalization companies, many of which
are among the largest and best-known names in the country and around the
world. The Fund's managers seek to purchase stocks of companies that have
strong management teams, proven and consistent earnings records, sustainable
profitability and exciting prospects for the future.
The performance of the Fund has been excellent for the last year. In 1997, the
Fund had a one-year return of 27.93% for the year ended 12/31/97 (Investor A
shares),* while a group of like funds, the Lipper Growth & Income Average,
returned 26.99%. The Fund's performance over the last three and five years has
been equally impressive. Over the last three years, the annualized return was
28.16%, versus 26.48% for the Lipper Growth & Income Average; over the last
five years the compound annual return was 17.58% versus 17.53% for the Lipper
Growth & Income Average*.
Larger-capitalization stocks continued to lead the market throughout 1997. For
example, the three largest companies in the United States, General Electric
(3.3% of the Fund's average net assets), Coca-Cola (2.1%) and Microsoft
(2.2%), saw their stock prices gain 50.6%, 27.8% and 56.4%, respectively.
These three companies are among the top fifteen holdings of the Fund. All but
three of the fifty largest companies in the United States saw double-digit
gains in their stock prices. An excellent economic environment (low inflation,
declining interest rates and strong growth in Gross Domestic Product) allowed
large U.S. companies to achieve strong earnings growth.
The Fund's strongest performers in 1997 included Compaq Computer (gaining
89.9%), Pfizer (up 81.3%), Travelers (up 79.4%), Wal-Mart Stores (rising
74.5%) and Mellon Bank (gaining 74.4%).
Our outlook for 1998 has been tempered by events in Asia, but we are confident
that large U.S. companies that are competitive on the global stage will
continue to provide investors with strong investment returns. We believe that
the Fund is well positioned, and we continue to focus on attractive long-term
investment opportunities.
As of December 31, 1997, the top five holdings in the Fund's portfolio were
Intel (3.4% of the net assets of the Fund), General Electric (3.3%), Pfizer
(2.8%), Cisco Systems (2.7%) and Deere & Co. (2.7%)./1/
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*The return, with the maximum sales charge of 4.50%, was 22.19% for the one-
year average annual return, 27.34% for the three-year average annual total
return and 17.37% for the five-year average annual total return for the period
ended 12/31/97.
/1/The Fund's composition is subject to change.
Large Company Select Fund
Value of a $10,000 Investment
Label A B
Investor A (No Load) Lipper G&I
8/30/86 10,000 10,000
12/31/86 9,570 9,533
12/31/87 9,960 9,732
12/31/88 11,050 11,318
12/31/89 14,280 13,993
12/31/90 13,390 13,338
12/31/91 16,510 17,181
12/31/92 17,670 18,794
12/31/93 19,010 21,237
12/31/94 19,150 21,074
12/31/95 25,910 27,484
12/31/96 32,220 33,123
12/31/97 41,219 42,106
Average Annual Total Return
Since
Inception
1 Year 5 Year 10 Year (8/30/86)
Investor A Shares (No Load) 27.93% 18.46% 15.26% 13.29%
10
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Performance Reviews, continued The Riverfront Funds, Inc.
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Large Company Select Fund
Value of a $10,000 Investment
Label A B
Investor A (No Load) Lipper G&I
8/30/86 9,600 10,000
12/31/86 9,187 9,533
12/31/87 9,582 9,732
12/31/88 10,608 11,318
12/31/89 13,632 13,993
12/31/90 12,854 13,338
12/31/91 15,849 17,181
12/31/92 16,963 18,794
12/31/93 18,250 21,237
12/31/94 18,384 21,074
12/31/95 24,874 27,484
12/31/96 30,931 33,123
12/31/97 39,364 42,106
Average Annual Total Return
Since
Inception
1 Year 5 Year 10 Year (8/30/86)
Investor A Shares* 22.19% 17.38% 14.72% 12.83%
* Reflects 4.50% sales charge.
Large Company Select Fund
Value of a $10,000 Investment
Label A B
Investor B Lipper G&I
8/30/86 10,000 10,000
12/31/86 9,542 9,533
12/31/87 9,859 9,732
12/31/88 10,859 11,318
12/31/89 13,853 13,993
12/31/90 12,963 13,338
12/31/91 15,870 17,181
12/31/92 16,858 18,794
12/31/93 17,994 21,237
12/31/94 17,996 21,074
12/31/95 24,170 27,484
12/31/96 29,832 33,123
12/31/97 37,879 42,106
Average Annual Total Return
Since
Inception
1 Year 5 Year 10 Year (8/30/86)
Investor B Shares** 22.97% 17.37% 14.41% 12.45%
** Reflects applicable contingent deferred sales charge.
The quoted performance of this Fund ("Mutual Fund") includes performance of
certain collective fund ("Commingled") accounts advised by Provident Bank, for
periods dating back to 8/30/86 and prior to the Mutual Fund's commencement of
operations on 1/2/97, as adjusted to reflect the expenses associated with the
Mutual Fund. The Commingled accounts were not registered with the Securities
and Exchange Commission and, therefore, were not subject to the investment
restrictions imposed by law in registered mutual funds. If the Commingled
accounts had been registered, the Commingled accounts' performance may have
been adversely affected.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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 1997, 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 would have
been lower.
The Lipper Growth & Income Average is an unmanaged index considered to be
representative of the average of the Growth & Income category of funds.
11
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Performance Reviews, continued The Riverfront Funds, Inc.
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THE RIVERFRONT STOCK APPRECIATION FUND
The Fund focuses on stocks of small and mid-sized companies trading at
attractive valuations and potential to deliver superior earnings growth. For
the year ended December 31, 1997, it posted a total return of 18.79% (Investor
A Shares),* compared to 22.36% for the Russell 2000, the fund's primary
benchmark.
The stock market, as measured by the S&P 500, accomplished a feat never before
matched in history by posting a third straight year of 20% plus gains. Once
again, the large-caps led the way as investors continued to place money in
well-established, well- known names. The large capitalized companies continued
to post strong, steady earnings growth which has led to investors bidding up
their prices. The small-caps lagged the market-leaders, making the relative
valuations of the small caps more attractive. As a result, we believe many
small names are well positioned for a good 1998.
The primary concern on everyone's mind today is the impact on our markets of
the turmoil in Asia. Those most likely to suffer include the multi-nationals
who rely on sales to the Far East and domestic companies that compete directly
with Asian exports to this country, as their Asian competitors may slash
prices to unload excess inventories. A slowdown in the U.S. economy or in the
earnings growth rates of U.S. companies that compete with Asian firms could
cause a significant pullback in the share prices of American companies. The
impact should not be as severe for small and midsize companies that operate
and compete primarily in the U.S. and the rest of North America.
As we look ahead, we see an American economy of slowing growth and continued
low inflation, and an increasing probability of slowing earnings growth due to
sales and competitive pressures from Asia. This has led us to continue to
search for value in the smaller company sectors that may be insulated from
Asia. This led to a realignment at year-end that we believe has positioned the
Fund well for 1998. The current top ten holdings in the Fund had average
earnings growth in 1997 of 40.3% on average revenue growth of 43.1%, and had
an average return on equity of 20.07%. They trade at an average price- to-
earnings ratio of 19.7 times. As of December 31, 1997, the top five holdings
in the Fund were Jones Apparel Group (3.1% of the net assets of the Fund),
NBTY (2.9%), Colonial Bancgroup (2.7%), Cincinnati Bell (2.4%) and LCI
International (2.4%)./1/
- -------
*The return, with the maximum sales charge of 4.50%, was 13.50% for the one
year ended 12/31/97.
/1/Fund composition is subject to change.
Stock Appreciation Fund
Value of a $10,000 Investment
Label A D
Investor
A Share Russell
7/23/87 10,000 10,000
12/31/87 7,886 7,391
12/31/88 7,718 9,231
12/31/89 8,977 10,730
12/31/90 9,442 8,637
12/31/91 16,710 12,615
12/31/92 17,682 14,939
12/31/93 19,525 17,776
12/31/94 17,487 17,439
12/31/95 22,365 22,399
12/31/96 24,461 26,092
12/31/97 29,272 31,929
Average Annual Total Return
Since
Inception
1 Year 5 Year 10 Year (7/23/87)
Investor A Shares (No Load) 18.79% 10.61% 14.01% 10.82%
12
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
Stock Appreciation Fund
Value of a $10,000 Investment
Label A D
Investor
A Share Russell
7/23/87 9,548 10,000
12/31/87 7,530 7,391
12/31/88 7,369 9,231
12/31/89 8,572 10,730
12/31/90 9,015 8,637
12/31/91 15,955 12,615
12/31/92 16,883 14,939
12/31/93 18,642 17,776
12/31/94 16,697 17,439
12/31/95 21,354 22,399
12/31/96 23,527 26,092
12/31/97 27,948 31,929
Average Annual Total Return
Since
Inception
1 Year 5 year 10 Years (7/23/87)
Investor A Shares* 13.50% 9.60% 13.48% 10.33%
* Reflects 4.50% sales charge.
Stock Appreciation Fund
Value of a $10,000 Investment
Label A D
Investor Russell
A Share 2000
7/23/87 10,000 10,000
12/31/87 7,886 7,391
12/31/88 7,718 9,231
12/31/89 8,977 10,730
12/31/90 9,442 8,637
12/31/91 16,710 12,615
12/31/92 17,682 14,939
12/31/93 19,525 17,776
12/31/94 17,487 17,439
12/31/95 22,436 22,399
12/31/96 24,465 26,092
12/31/97 28,835 31,929
Average Annual Total Return
Since
Inception
1 Year 5 year 10 Years (7/23/87)
Investor B Shares** 13.97% 10.00% 13.84% 10.66%
** Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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, presents 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 would have
been lower.
The Russell 2000 is an unmanaged index considered to be representative of the
small- to mid-sized stock market. 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 Stock Appreciation Fund
reflects the deduction of fees for these value-added services.
13
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
THE RIVERFRONT U.S. GOVERNMENT INCOME FUND
The bond market turned in a strong performance in 1997, driven by tamer
inflation and the financial crisis in Asia. Raw material prices actually fell
in 1997, while consumer prices barely inched up. A strong dollar and excess
capacity kept a lid on producer prices. Productivity gains mitigated the
effects of increased labor cost. These favorable trends are likely to continue
in 1998.
The unfortunate events in Asia sent investors running for cover. These
investors found a safe haven in U.S. Treasury securities. A large part of the
gains in the bond market are attributable to events in Asia. It will probably
take Asia all of 1998 to work through its problems, if not longer. Therefore,
investors are likely to seek out the safety and liquidity of the U.S. Treasury
market.
The Fund continues to focus on high-quality assets with limited interest rate
risk. The Fund's total return for the one-year period ended 12/31/97 was
6.94%.*
- -------
*The return, with the maximum sales charge of 4.50%, was 2.17% for the one
year period ended 12/31/97.
U.S. Government Income Fund
Value of a $10,000 Investment
Label A B C D
Investor Lehman Lehman Lipper
A Share 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 10,587 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 13,228 12,758 12,559
12/31/97 12,765 14,488 13,743 13,574
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/1/92)
Investor A Shares (No Load) 6.94% 5.28% 4.77%
14
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
U.S. Government Income Fund
Value of a $10,000 Investment
Label A B C D
Investor Lehman Lehman Lipper
A Share 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
12/31/97 12,192 14,488 13,743 13,574
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/1/92)
Investor A Shares* 2.17% 4.31% 3.86%
* Reflects 4.50% sales charge.
U.S. Government Income Fund
Value of a $10,000 Investment
Label A B C D
Investor Lehman Lehman Lipper
B Share 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 10,060 10,958 10,840 10,966
12/31/94 10,106 10,656 10,631 10,560
12/31/95 11,152 12,554 12,261 12,204
12/31/96 11,171 13,226 12,758 12,559
12/31/97 12,233 14,488 13,743 13,574
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/1/92)
Investor B Shares** 2.07% 4.38% 4.07%
** Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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, presents 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 would 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 and fund accounting fees. The Fund's
performance reflects the deduction of these value-added services.
15
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
THE RIVERFRONT OHIO TAX-FREE BOND FUND
The 1997 Asian crisis led to a significant drop in yields in the Treasury
market. The Ohio tax-free market lagged the Treasury market, as taxable rates
dropped dramatically at the latter half of the year. The flight to quality
that led to the drop in rates was spurred on by foreign buyers in the taxable
market that did not translate over into the municipal market to the same
degree. Additionally, the Treasury market formed an extremely flat yield curve
of around 50 basis points from two to 30 years. The municipal market, with its
call risk, remained at a much steeper yield curve as 1997 concluded. The Fund
ended 1997 with a one-year total return of 4.27% ( Investor A shares).*
Looking at 1998, the extremely vibrant U.S. economy coupled with lower
interest rates should spur additional issuance of municipal bonds in the
coming year. With interest rates hovering near a three-year low, many
municipalities will use this opportunity to refinance debt. Within the Ohio
market, we anticipate the passage of school reform legislation, which should
spur an increase in school construction and, therefore, municipal bond
issuance by Ohio school districts. With that in mind, we expect the spread
between Treasuries and municipals to remain at wider levels than in the past
year. This should help the flow of assets to municipal funds to remain strong
throughout 1998. One strong plus for the municipal market is the increase in
tax revenues to municipalities in 1997 from the growing economy. This has
enhanced the credit quality of municipals in general, and we do not anticipate
any credit quality concerns in 1998.
Given the environment, we expect to make no major changes in the allocation or
maturity structure of the Fund in the near future. The average maturity of the
Fund's holdings was 6 years.
- -------
*The return, with the maximum sales charge of 4.5%, was -0.35% for the one
year period ended 12/31/97.
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Label A B
Investor A Shares Lehman Brothers
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
12/31/97 11,856 12,718
Average Annual Total Return
Since
Inception
1 Year (10/1/94)
Investor A Shares (No Load) 4.27% 5.10%
16
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Label A B
Investor A Shares Lehman Brothers
8/1/94 9,551 10,000
12/31/94 9,906 9,727
12/31/95 10,548 11,424
12/31/96 10,859 11,955
12/31/97 11,330 12,718
Average Annual Total Return
Since
Inception
1 Year (8/1/94)
Investor A Shares* -0.35% 3.72%
* Reflects 4.50% sales charge.
Ohio Tax-Free Bond Fund
Value of a $10,000 Investment
Label A B
Investor A Shares Lehman Brothers
8/1/94 10,000 10,000
12/31/94 9,953 9,727
12/31/95 10,958 11,424
12/31/96 11,201 11,955
12/31/97 11,288 12,718
Average Annual Total Return
- ----------------------------------------------
Since
Inception
1 Year (8/1/94)
- ----------------------------------------------
Investor B Shares** -0.21% 3.60%
** Reflects applicable contingent deferred sales charge.
Past performance is not predictive of future results. Investment return and
principal value of the Riverfront variable net asset 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, presents 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 would 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 and fund accounting fees.
The Fund's performance reflects the deduction of these value-added services.
17
<PAGE>
- -------------------------------------------------------------------------------
Performance Reviews, continued The Riverfront Funds, Inc.
- -------------------------------------------------------------------------------
THE RIVERFRONT U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
During 1997 the Asian crisis lead to a flight to quality in the U.S. Treasury
market. The influx of foreign investment in the Treasury market forced prices
up, causing a decrease in rates that resulted in a direct impact on money
market securities. With the Federal Reserve observing from the sidelines, it
does not appear likely that there will be an ease in rates. On this premise,
we do not anticipate a drop below 5%. With pressure on interest rates, there
is currently a flat yield curve with respect to money market instruments.
Flexibility is the key to success in such an environment. Consequently,
maturities were shortened, falling from 43 days in August to 34 days by year-
end. 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 varying 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. We do not expect
to make any significant changes in allocation.
U.S. Government Securities Money Market Fund
Value of a $10,000 Investment
Label A B
U.S. 30-Day T-bill U.S. Government
10/1/92 10,000 10,000
12/31/92 10,052 10,081
12/31/93 10,343 10,374
12/31/94 10,747 10,766
12/31/95 11,348 11,361
12/31/96 10,939 11,916
12/31/97 12,566 12,514
Average Annual Total Return
Since
Inception
1 Year 5 Year (10/8/92)
U.S. Government Securities
Money Market Fund 5.02% 4.42% 4.36%
Although The Riverfront U.S. Government Securities Money Market Fund seeks to
maintain a stable net asset value of $1.00 per share, 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 returns would have been lower. The 7-day yield for the Fund as of
12/31/97 was 5.01%.
The U.S. Treasury Bill Index is considered to be representative of the T-bill
market. 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.
18
<PAGE>
- --------------------------------------------------------------------------------
Report of Independent Auditors
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
To the Shareholders and Directors
The Riverfront Funds, Inc.
We have audited the accompanying statements of assets and liabilities,
including the schedules of portfolio investments of The Riverfront Funds, Inc.
(comprising, respectively, U.S. Government Securities Money Market Fund, U.S.
Government Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, Balanced
Fund, Stock Appreciation Fund, and Large Company Select Fund) as of December
31, 1997, the related statements of operations for the year then ended of the
U.S. Government Securities Money Market Fund, U.S. Government Income Fund,
Income Equity Fund, Ohio Tax-Free Bond Fund, Balanced Fund, and Stock
Appreciation Fund and for the period January 2, 1997 to December 31, 1997 for
the Large Company Select Fund and the statements of changes in net assets for
each of the two years in the period then ended of the U.S. Government
Securities Money Market Fund, U.S. Government Income Fund, Income Equity Fund,
Ohio Tax-Free Bond Fund, Balanced Fund, and Stock Appreciation Fund, and for
the period January 2, 1997 to December 31, 1997 of the Large Company Select
Fund, and the financial highlights for each of the three years in the period
then ended of the U.S. Government Securities Money Market Fund, U.S. Government
Income Fund, Income Equity Fund, Ohio Tax-Free Bond Fund, and Balanced Fund,
and for the two years ended December 31, 1997 and for the period October 1,
1995 to December 31, 1995 of the Stock Appreciation Fund, and for the period
January 2, 1997 to December 31, 1997 of the Large Company Select Fund. These
financial statements and financial highlights are the responsibility of the
Funds' management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1997, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Riverfront Funds, Inc. at
December 31, 1997, the results of their operations, the changes in their net
assets and the financial highlights for the respective periods ended December
31, 1997 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 13, 1998
19
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- ------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Cost
$111,358,087; $49,153,218; and
$96,679,453, respectively)..... $111,358,087 $49,741,917 $101,416,249
Repurchase agreements (Cost
$31,408,000; $0; and $0,
respectively).................. 31,408,000 -- --
------------ ----------- ------------
TOTAL INVESTMENTS............... 142,766,087 49,741,917 101,416,249
Cash............................ 439 -- --
Interest and dividends
receivable..................... 484,466 631,997 283,533
Receivable for capital shares
issued......................... -- 76 104,504
Receivable for investments sold. -- -- 468,154
Prepaid expenses and other
assets......................... 10,642 5,482 21,273
------------ ----------- ------------
TOTAL ASSETS.................... 143,261,634 50,379,472 102,293,713
------------ ----------- ------------
LIABILITIES:
Dividends payable............... 615,066 412 --
Payable for capital shares
redeemed....................... -- -- 1,534
Payable for investments
purchased...................... -- -- 743,993
Accrued expenses and other
payables:
Investment advisory fees....... 18,229 17,134 80,325
Administration fees............ 3,812 1,381 2,621
Custodian and accounting fees.. 5,937 6,420 13,363
12b-1 fees (Investor A)........ 12,152 8,022 12,562
12b-1 fees (Investor B)........ -- 1,115 14,485
Transfer agent fees............ -- 3,841 1,626
Audit and legal fees........... 36,872 11,007 19,414
Other.......................... 809 3,712 --
------------ ----------- ------------
TOTAL LIABILITIES............... 692,877 53,044 889,923
------------ ----------- ------------
NET ASSETS:
Capital......................... 142,572,510 50,806,345 95,815,203
Accumulated undistributed
(distributions in excess of)
net investment income.......... -- -- 534
Net unrealized appreciation/
depreciation on investments.... -- 588,699 4,736,796
Accumulated undistributed net
realized gains (losses) on
investment transactions........ (3,753) (1,068,616) 851,257
------------ ----------- ------------
NET ASSETS..................... $142,568,757 $50,326,428 $101,403,790
============ =========== ============
Net Assets
Investor A Shares.............. $142,568,757 $49,017,391 $ 83,840,700
Investor B Shares.............. NA 1,309,037 17,563,090
------------ ----------- ------------
Total........................ $142,568,757 $50,326,428 $101,403,790
============ =========== ============
Shares of capital stock
Investor A Shares.............. 142,572,510 5,168,697 7,175,136
Investor B Shares.............. NA 122,570 1,466,214
------------ ----------- ------------
Total........................ 142,572,510 5,291,267 8,641,350
============ =========== ============
Net asset value
Investor A Shares--redemption
price per share............... $ 1.00 $ 9.48 $ 11.68
Investor B Shares--offering
price per share*.............. NA 10.68 11.98
============ =========== ============
Maximum Sales Charge (Investor
A)............................. NA 4.50% 4.50%
============ =========== ============
Maximum Offering Price per share
(100%/(100%--Maximum Sales
Charge) of net asset value
adjusted to nearest cent)
(Investor A) (a)............... $ 1.00 $ 9.93 $ 12.23
============ =========== ============
</TABLE>
- -------
(a) Offering price and redemption price are the same for the U.S. Government
Securities Money Market Fund.
* Redemption price of Investor B shares varies based on length of time shares
are held.
NA Not applicable
See Notes to Financial Statements.
20
<PAGE>
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
<TABLE>
<CAPTION>
STOCK LARGE COMPANY
OHIO TAX-FREE BALANCED APPRECIATION SELECT
BOND FUND FUND FUND FUND
------------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $3,289,469;
$18,057,693;
$18,089,347; and
$20,020,952,
respectively)........... $3,512,105 $20,982,175 $22,127,696 $36,027,913
Interest and dividends
receivable.............. 34,701 97,044 11,588 46,735
Receivable for capital
shares issued........... -- 8,434 481 37,836
Receivable for
investments sold........ -- -- 5,138,936 --
Unamortized organization
costs................... -- -- -- 4,944
Prepaid expenses and
other assets............ 8,385 7,734 -- 6,576
---------- ----------- ----------- -----------
TOTAL ASSETS............. 3,555,191 21,095,387 27,278,701 36,124,004
---------- ----------- ----------- -----------
LIABILITIES:
Payable for capital
shares redeemed......... -- 7,725 1,540 --
Payable for investments
purchased............... -- -- 1,650,192 --
Accrued expenses and
other payables:
Investment advisory
fees................... 1,317 14,221 17,129 24,009
Administration fees..... 102 562 668 943
Custodian and
accounting fees........ 1,303 3,390 3,860 5,481
12b-1 fees (Investor
A)..................... 749 1,039 5,263 6,075
12b-1 fees (Investor
B)..................... 1,007 9,622 1,051 1,900
Transfer agent fees..... 1,751 3,738 7,541 1,832
Audit and legal fees.... 2,589 3,995 5,489 6,067
Other................... 198 5,247 8,389 108
---------- ----------- ----------- -----------
TOTAL LIABILITIES........ 9,016 49,539 1,701,122 46,415
---------- ----------- ----------- -----------
NET ASSETS:
Capital.................. 3,178,243 17,990,174 18,568,291 20,059,805
Accumulated undistributed
net investment income
(loss).................. 93,730 3,979 (2,194) --
Net unrealized
appreciation/
depreciation on
investments............. 222,636 2,924,482 4,038,349 16,006,961
Accumulated undistributed
net realized gains
(losses) on investment
transactions............ 51,566 127,213 2,973,133 10,823
---------- ----------- ----------- -----------
NET ASSETS.............. $3,546,175 $21,045,848 $25,577,579 $36,077,589
========== =========== =========== ===========
Net Assets
Investor A Shares....... $2,410,683 $ 9,562,897 $24,312,196 $33,613,506
Investor B Shares....... 1,135,492 11,482,951 1,265,383 2,464,083
---------- ----------- ----------- -----------
Total................. $3,546,175 $21,045,848 $25,577,579 $36,077,589
========== =========== =========== ===========
Shares of capital stock
Investor A Shares....... 268,544 777,175 2,651,012 2,964,154
Investor B Shares....... 123,530 903,237 133,340 218,535
---------- ----------- ----------- -----------
Total................. 392,074 1,680,412 2,784,352 3,182,689
========== =========== =========== ===========
Net asset value
Investor A Shares--
redemption price per
share.................. $ 8.98 $ 12.30 $ 9.17 $ 11.34
Investor B Shares--
offering price per
share*................. 9.19 12.71 9.49 11.28
========== =========== =========== ===========
Maximum Sales Charge
(Investor A)............ 4.50% 4.50% 4.50% 4.50%
========== =========== =========== ===========
Maximum Offering Price
per share (100%/(100%--
Maximum Sales Charge)
of net asset value
adjusted to nearest
cent) (Investor A)...... $ 9.40 $ 12.88 $ 9.60 $ 11.87
========== =========== =========== ===========
</TABLE>
- -------
*Redemption price of Investor B shares varies based on length of time shares
are held.
See Notes to Financial Statements.
21
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT INCOME
SECURITIES MONEY INCOME EQUITY
MARKET FUND FUND FUND
---------------- --------------- -----------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................... $8,966,454 $3,195,536 $ 114,843
Dividend income................... -- 85,440 2,688,652
---------- ---------- -----------
TOTAL INCOME...................... 8,966,454 3,280,976 2,803,495
---------- ---------- -----------
EXPENSES:
Investment advisory fees.......... 242,900 200,909 898,800
Administration fees............... 323,868 100,455 189,223
12b-1 fees (Investor A)........... 404,830 122,072 202,966
12b-1 fees (Investor B)........... -- 13,985 134,238
Custodian and accounting fees..... 81,531 55,655 144,048
Audit and legal fees.............. 77,217 32,257 65,211
Directors' fees and expenses...... 9,635 3,922 5,554
Transfer agent fees............... 33,896 50,879 96,037
Registration and filing fees...... 9,072 8,076 2,324
Printing costs.................... 79,667 19,245 48,278
Other............................. 14,832 4,530 18,091
---------- ---------- -----------
GROSS EXPENSES.................... 1,277,448 611,985 1,804,770
Less: Fee waivers............... (242,899) (29,297) (41,154)
---------- ---------- -----------
Net Expenses.................. 1,034,549 582,688 1,763,616
---------- ---------- -----------
Net Investment Income............. 7,931,905 2,698,288 1,039,879
---------- ---------- -----------
REALIZED/UNREALIZED GAINS (LOSSES)
FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions.......... (1,463) 781,702 21,576,605
Net change in unrealized
appreciation/depreciation from
investments...................... -- (56,510) 752,438
---------- ---------- -----------
Net realized/unrealized gains
(losses) from investments........ (1,463) 725,192 22,329,043
---------- ---------- -----------
Change in net assets resulting
from operations.................. $7,930,442 $3,423,480 $23,368,922
========== ========== ===========
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
Statements of Operations
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
OHIO STOCK LARGE
TAX-FREE BALANCED APPRECIATION COMPANY
BOND FUND FUND FUND SELECT FUND*
--------- ---------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income................. $ 436,799 $ 520,993 $ 84,507 $ 67,812
Dividend income................. 15,627 233,985 365,157 461,398
--------- ---------- ----------- ----------
TOTAL INCOME.................... 452,426 754,978 449,664 529,210
--------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees........ 40,980 185,950 214,758 251,705
Administration fees............. 16,689 41,323 53,690 62,927
12b-1 fees (Investor A)......... 17,534 24,764 64,711 76,802
12b-1 fees (Investor B)......... 11,823 107,557 9,604 7,423
Custodian and accounting fees... 13,711 33,160 42,139 49,119
Audit and legal fees............ 9,985 20,656 15,518 21,646
Organization costs.............. -- 56 14,394 3,872
Directors' fees and expenses.... 594 1,235 1,556 2,026
Transfer agent fees............. 39,534 61,796 118,492 41,424
Registration and filing fees.... 4,199 6,474 15,908 7,294
Printing costs.................. 3,513 11,766 19,283 10,459
Other........................... 727 13,622 2,748 2,445
--------- ---------- ----------- ----------
GROSS EXPENSES.................. 159,289 508,359 572,801 537,142
Less: Fee waivers............. (8,196) (31,340) -- --
Less: Expense reimbursements.. (23,066) -- -- --
--------- ---------- ----------- ----------
Net Expenses................ 128,027 477,019 572,801 537,142
--------- ---------- ----------- ----------
Net Investment Income (Loss).... 324,399 277,959 (123,137) (7,932)
--------- ---------- ----------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) FROM INVESTMENTS:
Net realized gains (losses) from
investment transactions........ 656,758 1,983,851 5,867,571 4,033,588
Net change in unrealized
appreciation/depreciation from
investments.................... (692,569) 870,883 (1,404,729) 3,414,575
--------- ---------- ----------- ----------
Net realized/unrealized gains
(losses) from investments...... (35,811) 2,854,734 4,462,842 7,448,163
--------- ---------- ----------- ----------
Change in net assets resulting
from operations................ $ 288,588 $3,132,693 $ 4,339,705 $7,440,231
========= ========== =========== ==========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
See Notes to Financial Statements.
23
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT U.S. GOVERNMENT
SECURITIES MONEY MARKET INCOME INCOME EQUITY
FUND FUND FUND
---------------------------- -------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
------------- ------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 7,931,905 $ 8,268,622 $ 2,698,288 $ 1,942,237 $ 1,039,879 $ 1,134,267
Net realized gains
(losses) from
investment
transactions.......... (1,463) -- 781,702 90,347 21,576,605 13,473,952
Net change in
unrealized
appreciation/
depreciation from
investments........... -- -- (56,510) (1,183,269) 752,438 (1,397,638)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
resulting from
operations............. 7,930,442 8,268,622 3,423,480 849,315 23,368,922 13,210,581
------------- ------------- ----------- ----------- ------------ -----------
DISTRIBUTIONS TO
INVESTOR A SHAREHOLDERS:
From net investment
income................ (7,931,905) (8,268,622) (2,663,877) (1,865,718) (981,986) (1,089,197)
In excess of net
investment income..... -- -- (412,137) -- -- (11,775)
From net realized gains
from investments...... -- -- -- -- (19,246,795) (10,109,545)
DISTRIBUTIONS TO
INVESTOR B SHAREHOLDERS:
From net investment
income................ -- -- (64,440) (56,824) (57,359) (45,070)
In excess of net
investment income..... -- -- (11,526) -- -- (1,105)
From net realized gains
from investments...... -- -- -- -- (3,879,842) (941,583)
In excess of net
realized gains........ -- -- -- -- -- (94,220)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from shareholder
distributions.......... (7,931,905) (8,268,622) (3,151,980) (1,922,542) (24,165,982) (12,292,495)
------------- ------------- ----------- ----------- ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................ 374,303,813 413,837,358 4,236,017 2,867,087 15,853,924 12,638,065
Proceeds from shares
issued in connection
with common trust fund
acquisition........... -- -- 16,606,766 -- -- --
Dividends reinvested... 2,327,411 2,193,920 506,586 486,495 23,523,261 12,143,803
Cost of shares
redeemed.............. (415,078,263) (392,509,518) (6,285,274) (5,090,697) (18,176,359) (8,378,319)
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets
from capital
transactions........... (38,447,039) 23,521,760 15,064,095 (1,737,115) 21,200,826 16,403,549
------------- ------------- ----------- ----------- ------------ -----------
Change in net assets.... (38,448,502) 23,521,760 15,335,595 (2,810,342) 20,403,766 17,321,635
NET ASSETS:
Beginning of period.... 181,017,259 157,495,499 34,990,833 37,801,175 81,000,024 63,678,389
------------- ------------- ----------- ----------- ------------ -----------
End of period.......... $ 142,568,757 $ 181,017,259 $50,326,428 $34,990,833 $101,403,790 $81,000,024
============= ============= =========== =========== ============ ===========
SHARE TRANSACTIONS:
Issued................. 374,303,813 413,837,358 448,161 299,041 1,186,068 997,947
Issued in connection
with common trust fund
acquisition........... -- -- 1,761,057 -- -- --
Reinvested............. 2,327,411 2,193,920 53,203 51,049 1,989,492 1,001,471
Redeemed............... (415,078,263) (392,509,518) (664,598) (534,677) (1,316,119) (656,491)
------------- ------------- ----------- ----------- ------------ -----------
Change in shares........ (38,447,039) 23,521,760 1,597,823 (184,587) 1,859,441 1,342,927
============= ============= =========== =========== ============ ===========
</TABLE>
See Notes to Financial Statements.
24
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK LARGE
APPRECIATION COMPANY
OHIO TAX-FREE BOND FUND BALANCED FUND FUND SELECT FUND
-------------------------- -------------------------- -------------------------- -------------
FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996 1997*
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income
(loss).............. $ 324,399 $ 434,913 $ 277,959 $ 514,538 $ (123,137) $ (462,477) $ (7,932)
Net realized gains
(losses) from
investment
transactions......... 656,758 (2,919) 1,983,851 (153,623) 5,867,571 5,645,154 4,033,588
Net change in
unrealized
appreciation/depreciation
from investments..... (692,569) (107,900) 870,883 853,589 (1,404,729) (1,674,745) 3,414,575
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
resulting from
operations............ 288,588 324,094 3,132,693 1,214,504 4,339,705 3,507,932 7,440,231
------------ ----------- ----------- ----------- ------------ ------------ -----------
DISTRIBUTIONS TO
INVESTOR A
SHAREHOLDERS:
From net investment
income............... (200,793) (412,215) (180,288) (346,017) -- -- --
In excess of net
investment income.... (113,570) -- -- (1,775) -- (289) --
From net realized
gains from
investments.......... (446,337) -- (786,461) -- (4,562,955) (3,106,226) (3,675,987)
From tax return of
capital.............. (32,451) -- -- -- -- -- (76,753)
DISTRIBUTIONS TO
INVESTOR B
SHAREHOLDERS:
From net investment
income............... (36,634) (21,400) (99,558) (168,520) -- -- --
In excess of net
investment income.... (8,728) -- -- (1,028) -- -- --
From net realized
gains from
investments.......... (156,126) -- (913,202) -- (216,879) (65,866) (270,025)
From tax return of
capital.............. (2,494) -- -- -- -- -- --
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
from shareholder
distributions......... (997,133) (433,615) (1,979,509) (517,340) (4,779,834) (3,172,381) (4,022,765)
------------ ----------- ----------- ----------- ------------ ------------ -----------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued............... 516,123 632,048 2,623,393 11,628,310 3,536,148 3,709,128 4,882,547
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 11,399,841 -- -- -- -- -- 27,813,338
Dividends reinvested.. 201,688 26,194 1,948,716 546,821 4,580,891 2,969,201 3,939,671
Cost of shares
redeemed............. (19,539,956) (588,738) (5,473,923) (6,534,711) (14,013,668) (16,166,715) (3,975,433)
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets
from capital
transactions.......... (7,422,304) 69,504 (901,814) 5,640,420 (5,896,629) (9,488,386) 32,660,123
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in net assets... (8,130,849) (40,017) 251,370 6,337,584 (6,336,758) (9,152,835) 36,077,589
NET ASSETS:
Beginning of period... 11,677,024 11,717,041 20,794,478 14,456,894 31,914,337 41,067,172 --
------------ ----------- ----------- ----------- ------------ ------------ -----------
End of period......... $ 3,546,175 $11,677,024 $21,045,848 $20,794,478 $ 25,577,579 $ 31,914,337 $36,077,589
============ =========== =========== =========== ============ ============ ===========
SHARE TRANSACTIONS:
Issued................ 49,102 59,532 207,417 1,017,399 359,468 373,503 403,509
Issued in connection
with common trust
fund acquisition..... 1,097,194 -- -- -- -- -- 2,781,335
Reinvested............ 20,948 2,490 156,705 47,842 490,460 315,294 353,440
Redeemed.............. (1,895,117) (55,955) (437,775) (571,147) (1,448,614) (1,628,669) (355,595)
------------ ----------- ----------- ----------- ------------ ------------ -----------
Change in shares....... (727,873) 6,067 (73,653) 494,094 (598,686) (939,872) 3,182,689
============ =========== =========== =========== ============ ============ ===========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
See Notes to Financial Statements.
25
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Securities Money Market Fund
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER (31.8%)
Agriculture (1.8%)
$ 2,500,000 Cargill, Inc., Discount Note, 1/9/98............... $ 2,496,894
------------
Automotive (1.4%)
2,000,000 Ford Motor Co., Discount Note, 1/7/98.............. 1,998,137
------------
Banks (2.8%)
4,000,000 Bankers Trust, Discount Note, 4/6/98............... 3,941,628
------------
Brokerage Services (8.0%)
4,000,000 Merrill Lynch & Co., Inc., Discount Note, 1/5/98... 3,997,531
1,500,000 Merrill Lynch & Co., Inc., Discount Note, 3/27/98.. 1,479,813
2,000,000 Morgan Stanley, Dean Witter Discover & Co.,
Discount Note, 1/23/98............................ 1,993,033
4,000,000 Morgan Stanley, Dean Witter Discover & Co.,
Discount Note, 2/13/98............................ 3,972,432
------------
11,442,809
------------
Financial Services (9.1%)
2,000,000 Associates Corp., N.A., Discount Note, 3/23/98..... 1,975,340
2,900,000 General Electric Capital Corp., Discount Note,
1/21/98........................................... 2,890,834
500,000 General Electric Capital Corp., Discount Note,
2/2/98............................................ 497,533
1,000,000 General Electric Capital Corp., Discount Note,
2/5/98............................................ 994,604
1,500,000 General Electric Capital Corp., Discount Note,
3/13/98........................................... 1,483,315
1,750,000 IBM Credit Corp., Discount Note, 1/16/98........... 1,745,858
1,500,000 Sunbelt-Dix, Inc., Discount Note, 1/6/98........... 1,498,829
2,000,000 Sunbelt-Dix, Inc., Discount Note, 1/20/98.......... 1,994,089
------------
13,080,402
------------
Food Distributors, Supermarkets & Wholesalers (2.4%)
1,500,000 Winn Dixie Stores, Inc., Discount Note, 1/13/98.... 1,497,215
2,000,000 Winn Dixie Stores, Inc., Discount Note, 2/10/98.... 1,987,400
------------
3,484,615
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
COMMERCIAL PAPER, CONTINUED:
Manufacturing--Consumer Goods (2.1%)
$ 3,000,000 Eaton Corp., Discount Note, 2/9/98................. $ 2,981,172
------------
Pharmaceuticals (4.2%)
1,000,000 Glaxo Wellcome PLC, Discount Note, 1/12/98......... 998,298
1,500,000 Glaxo Wellcome PLC, Discount Note, 1/16/98......... 1,496,456
3,500,000 Glaxo Wellcome PLC, Discount Note, 1/27/98......... 3,485,895
------------
5,980,649
------------
Total Commercial Paper (Amortized Cost $45,406,306) 45,406,306
------------
REPURCHASE AGREEMENTS (22.0%)
16,408,000 Dean Witter, 6.70%, 1/2/98, (Collateralized by
$16,277,000 various U.S. Treasury and U.S.
Government Agency Securities, 0.00%-9.38%, 1/2/98-
10/17/16, market value--$16,736,802).............. 16,408,000
15,000,000 Merrill Lynch, 6.50%, 1/2/98, (Collateralized by
$56,704,342 various U.S Government Agency
Securities, 6.95%-8.00%, 7/1/15-7/1/20, market
value--$15,300,307)............................... 15,000,000
------------
Total Repurchase Agreements
(Cost $31,408,000) 31,408,000
------------
U.S. GOVERNMENT AGENCIES (46.3%)
Federal Agricultural Mortgage Corp. (1.4%)
2,000,000 Discount Note, 1/6/98.............................. 1,998,478
------------
Federal Farm Credit Bank (4.9%)
2,000,000 5.50%, 1/2/98...................................... 2,000,000
3,000,000 5.65%, 2/2/98...................................... 3,000,000
2,000,000 5.55%, 3/2/98...................................... 2,000,000
------------
7,000,000
------------
Federal Home Loan Bank (2.1%)
3,000,000 Discount Note, 1/5/98.............................. 2,998,197
------------
Federal Home Loan Mortgage Corp. (5.2%)
2,500,000 Discount Note, 1/2/98.............................. 2,499,625
3,000,000 Discount Note, 2/17/98............................. 2,978,419
2,000,000 5.84%, 4/8/98...................................... 1,999,063
------------
7,477,107
------------
</TABLE>
Continued
26
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Securities Money Market Fund
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ----------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc. (30.7%)
$ 1,000,000 4.01%*, 1/6/98....................................... $ 999,785
1,100,000 6.06%*, 1/8/98....................................... 1,100,064
4,000,000 Discount Note, 1/9/98................................ 3,995,119
3,000,000 Discount Note, 1/15/98............................... 2,993,677
2,000,000 Discount Note, 1/16/98............................... 1,995,442
3,000,000 Discount Note, 1/20/98............................... 2,991,418
4,000,000 Discount Note, 1/21/98............................... 3,987,856
3,000,000 Discount Note, 2/5/98................................ 2,984,046
3,000,000 Discount Note, 2/13/98............................... 2,980,363
1,500,000 4.50%*, 2/25/98...................................... 1,497,549
4,000,000 5.71%, 3/18/98, MTN.................................. 3,998,474
2,190,000 8.15%, 5/11/98....................................... 2,208,916
3,000,000 5.63%, 8/14/98, MTN.................................. 2,996,760
2,000,000 Series 98-AA, 5.54%, 3/12/98......................... 2,000,000
2,000,000 Series 98-AC, 5.74%, 6/9/98.......................... 2,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
$ 2,000,000 Series 98-Y, 5.52%, 1/15/98........................ $ 2,000,000
3,000,000 Series 98-Z, 5.63%, 2/12/98........................ 3,000,000
------------
43,729,469
------------
Student Loan Marketing Assoc. (1.1%)
1,500,000 5.73%*, 1/6/98..................................... 1,499,597
------------
Tennessee Valley Authority (0.9%)
1,250,000 5.13%, 3/4/98, Continuously callable @ 100......... 1,248,933
------------
Total U.S. Government Agencies (Amortized Cost $65,951,781) 65,951,781
------------
Total Investments (Amortized Cost $142,766,087) (a)--100.1% 142,766,087
Liabilities in excess of other assets (0.1)% (197,330)
------------
Total Net Assets--100.0% $142,568,757
============
</TABLE>
- -------
(a) Cost and value for federal income tax and financial reporting purposes are
the same.
* Variable Rate. Rate presented represents rate in effect at December 31, 1997.
Maturity date reflects the next rate change date.
MTN--Medium Term Note.
PLC--Public Liability Co.
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Income Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMERCIAL PAPER (1.0%)
Financial Services (1.0%)
500,000 Sunbelt-Dix. Inc., Discount Note, 1/27/98............. $ 497,967
-----------
Total Commercial Paper (Cost $497,967) 497,967
-----------
CORPORATE BONDS (27.0%)
Banks (7.2%)
600,000 Chase Capital I, Series A, 7.67%, 12/1/26, Callable
12/1/06 @ 103.84, Guaranteed by Chase Manhattan
Corp................................................. 621,000
500,000 Mellon Capital I, 7.72%, 12/1/26, Callable 12/1/06 @
103.86, Guaranteed by Mellon Bank Corp............... 518,125
1,000,000 Midland Bank PLC (HSBC), 6.95%, 3/15/11............... 1,026,250
1,461,382 PNC Mortgage Securities Corp., Series 1997-3, Class
2A3, 7.50%, 5/25/27 CMO.............................. 1,474,271
-----------
3,639,646
-----------
Computers & Peripherals (2.0%)
1,000,000 International Business Machines Corp., 6.22%, 8/1/27,
Putable 8/1/04 @ 100................................. 1,012,500
-----------
Financial Services (9.3%)
200,000 American Express Master Trust, Series 1994-1, Class A,
7.15%, 8/15/99 ABS................................... 201,556
200,000 Associates Corp., N.A., 5.25%, 3/30/00................ 196,500
1,000,000 Boatmen's Auto Trust, Series 1996-A, Class A3, 6.75%,
1/15/03 ABS.......................................... 1,019,800
345,000 Discover Card Trust, Series 1992-B, Class A, 6.80%,
6/16/00 ABS.......................................... 344,762
500,000 Ford Motor Credit Co., 6.25%, 12/8/05................. 493,125
1,000,000 Premier Auto Trust, Series 1994-4, Class CTFS, 6.85%,
5/2/99 ABS........................................... 1,007,340
650,000 Security Pacific Acceptance Corp., Series 1995-1,
Class A2, 6.70%, 4/10/20 ABS......................... 655,824
430,424 The Money Store Home Equity Trust, Series 1995-A,
Class A2, 7.93%, 2/15/14 ABS......................... 432,202
250,000 Toyota Motor Credit Corp., 7.13%, 9/26/06, Callable
9/26/99 @ 100, MTN................................... 264,063
-----------
4,615,172
-----------
Food Processing & Packaging (1.1%)
500,000 McCormick & Co., Inc., 8.95%, 7/1/01.................. 542,500
-----------
Office Equipment & Supplies (Non-Computer Related) (2.9%)
1,455,000 Pitney Bowes Credit Corp., 6.63%, 6/1/02.............. 1,484,100
-----------
Oil & Gas Exploration, Production & Services (1.0%)
500,000 Kerr-McGee Corp., 6.63%, 10/15/07..................... 514,375
-----------
Oil & Gas Transmission (0.7%)
356,000 Trans-Canada Pipelines Ltd., 6.77%, 4/30/01, MTN...... 363,565
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
CORPORATE BONDS, CONTINUED:
Steel (0.4%)
200,000 Worthington Industries, Inc., 7.13%, 5/15/06.......... $ 210,000
-----------
Telecommunications (2.0%)
1,000,000 U.S. West Capital Funding, Inc., 6.31%, 11/1/05,
Putable 11/1/00 @ 100................................ 1,005,000
-----------
Utilities--Electric & Gas (0.4%)
200,000 Oklahoma Gas & Electric Co., 6.25%, 10/15/00.......... 201,000
-----------
Total Corporate Bonds (Cost $13,409,547) 13,587,858
-----------
U.S. GOVERNMENT AGENCIES (48.9%)
Federal Home Loan Bank (5.9%)
300,000 5.88%*, 5/26/98, Series BR98.......................... 299,970
1,000,000 5.95%, 3/5/01, Series ID01, Callable 3/5/98 @ 100..... 997,180
875,000 6.38%, 4/29/03, Series A-03, Callable 4/29/98 @ 100... 874,816
690,000 9.50%, 2/25/04........................................ 810,895
-----------
2,982,861
-----------
Federal Home Loan Mortgage Corp. (5.3%)
300,000 Discount Note, 1/14/98................................ 299,427
1,226,320 6.00%, 12/1/99, Gold Pool #M80147..................... 1,216,436
700,000 6.80%, 9/18/02, Continuously Callable @ 100, (Called
2/4/98).............................................. 699,930
225,000 6.20%, 4/15/03........................................ 227,108
242,742 7.50%, 3/15/15, Series 1262, Class F CMO.............. 243,048
-----------
2,685,949
-----------
Federal National Mortgage Assoc. (28.3%)
500,000 9.05%, 4/10/00........................................ 533,715
1,500,000 6.45%, 4/12/01, Series 01-M, Callable 4/12/99 @ 100... 1,505,490
1,000,000 6.71%, 3/13/02, Callable 3/13/00 @ 100, MTN........... 1,011,330
1,500,000 6.54%, 10/8/02, Callable 10/8/98 @ 100, MTN........... 1,497,900
1,039,823 6.00%, 2/1/03, Pool #335463........................... 1,029,882
1,221,329 6.00%, 5/1/03, Pool #347156........................... 1,208,566
625,000 6.38%, 6/25/03, Continuously Callable @ 100, MTN...... 623,844
1,000,000 6.38%, 7/8/03, Continuously Callable @ 100 (Called
2/13/98), MTN........................................ 998,130
300,000 6.85%, 4/5/04......................................... 313,362
1,000,000 7.00%, 9/25/05, Series 1992-110, Class G CMO.......... 1,006,030
1,000,000 7.55%, 3/27/07, Series 07-B, Callable 3/27/00 @ 100... 1,029,370
912,341 7.50%, 3/17/14, Series 1997-39, Class A CMO........... 922,404
</TABLE>
Continued
28
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
U.S. Government Income Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES, CONTINUED:
Federal National Mortgage Assoc., continued:
515,675 7.00%, 9/25/19, Series 1991-155, Class PE CMO......... $ 517,696
2,000,000 6.50%, 8/18/20, Series 1997-57, Class PM CMO.......... 2,018,672
-----------
14,216,391
-----------
Government National Mortgage Assoc. (1.3%)
618,267 8.00%, 5/15/23, Pool #351752.......................... 639,789
-----------
Private Export Funding Corp. (2.0%)
1,000,000 6.24%, 5/15/02, Series VV, Guaranteed by Export-Import
Bank of The United States............................ 1,008,750
-----------
Student Loan Marketing Assoc. (3.5%)
1,000,000 6.05%, 9/14/00........................................ 1,004,070
762,235 5.92%*, 10/25/04, Series 1996-3, Class A1 ABS......... 761,549
-----------
1,765,619
-----------
Tennessee Valley Authority (2.6%)
1,250,000 6.24%, 7/15/45, Series B, Callable 7/15/20 @ 100,
Putable 7/15/01 @ 100................................ 1,290,625
-----------
Total U.S. Government Agencies (Cost $24,365,654) 24,589,984
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
U.S. TREASURY BONDS (2.0%)
1,000,000 6.25%, 8/15/23......................................... $ 1,029,140
-----------
Total U.S. Treasury Bonds (Cost $977,561) 1,029,140
-----------
U.S. TREASURY NOTES (17.9%)
1,000,000 5.88%, 3/31/99......................................... 1,002,680
4,000,000 6.50%, 5/31/01......................................... 4,093,960
1,000,000 6.38%, 9/30/01......................................... 1,020,330
1,000,000 6.25%, 8/31/02......................................... 1,020,300
850,000 6.25%, 2/15/03......................................... 869,134
950,000 7.00%, 7/15/06......................................... 1,025,259
-----------
Total U.S. Treasury Notes (Cost $8,897,184) 9,031,663
-----------
INVESTMENT COMPANIES (2.0%)
169,434 Dreyfus Treasury Prime Fund............................ 169,434
835,871 Federated U.S. Treasury Services Fund.................. 835,871
-----------
Total Investment Companies (Cost $1,005,305) 1,005,305
-----------
Total Investments (Cost $49,153,218) (a)--98.8% 49,741,917
Other assets in excess of liabilities 1.2% 584,511
-----------
Total Net Assets--100.0% $50,326,428
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation...................................... $669,355
Unrealized depreciation...................................... (80,656)
--------
Net unrealized appreciation.................................. $588,699
========
</TABLE>
*Variable Rate.
ABS--Asset Backed Security
CMO--Collateralized Mortgage Obligation
MTN--Medium Term Note
PLC--Public Liability Co.
See Notes to Financial Statements.
29
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS (99.3%)
Aerospace/Defense (2.1%)
48,200 B.F. Goodrich Co...................................... $ 1,997,288
1,900 Boeing Co............................................. 92,981
------------
2,090,269
------------
Aluminum (1.4%)
23,700 Reynolds Metal Co..................................... 1,422,000
------------
Automotive (0.1%)
3,000 Ford Motor Co......................................... 146,063
------------
Automotive Parts (3.6%)
3,100 Dana Corp............................................. 147,250
56,000 Echlin, Inc........................................... 2,026,500
28,300 TRW, Inc.............................................. 1,510,513
------------
3,684,263
------------
Banks (3.1%)
1,750 BankAmerica Corp...................................... 127,750
2,050 BankBoston Corp....................................... 192,572
23,100 Crestar Financial Corp................................ 1,316,699
10,700 Magna Group, Inc...................................... 489,525
3,000 Wells Fargo & Co...................................... 1,018,313
------------
3,144,859
------------
Beverages (2.0%)
10,700 Brown-Forman Corp., Class B........................... 591,175
44,100 Seagram Co. Ltd....................................... 1,424,981
------------
2,016,156
------------
Brokerage Services (0.8%)
19,750 Edwards (A.G.), Inc................................... 785,063
------------
Building Materials (1.5%)
20,100 Armstrong World Industries, Inc....................... 1,502,475
------------
Chemicals--General (3.3%)
30,300 Hercules, Inc......................................... 1,516,894
31,850 PPG Industries, Inc................................... 1,819,431
------------
3,336,325
------------
Chemicals--Specialty (2.2%)
23,200 Eastman Chemical Co................................... 1,381,850
49,900 Engelhard Corp........................................ 867,013
------------
2,248,863
------------
Computers & Peripherals (0.1%)
750 Cisco Systems, Inc.(b)................................ 41,813
770 Compaq Computer Corp.................................. 43,456
------------
85,269
------------
Consumer Goods & Services (3.1%)
20,500 Newell Co............................................. 871,250
1,600 Procter & Gamble Co................................... 127,700
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Consumer Goods & Services, continued:
85,400 Rubbermaid, Inc....................................... $ 2,135,000
------------
3,133,950
------------
Containers & Packaging (2.1%)
41,900 Crown Cork & Seal Co., Inc............................ 2,100,238
------------
Cosmetics & Toiletries (1.9%)
38,200 International Flavors & Fragrances, Inc............... 1,967,300
------------
Diversified (2.7%)
1,800 General Electric Co................................... 132,075
13,500 National Service Industries, Inc...................... 669,094
47,800 Tenneco, Inc.......................................... 1,888,100
------------
2,689,269
------------
Electrical Equipment (4.3%)
2,200 Emerson Electric Co................................... 124,163
25,500 Hubbell, Inc., Class B................................ 1,257,469
31,200 Johnson Controls, Inc................................. 1,489,800
30,900 Tecumseh Products Co., Class A........................ 1,506,374
------------
4,377,806
------------
Electronic & Electrical--General (7.6%)
57,900 General Signal Corp................................... 2,442,655
44,200 Harris Corp........................................... 2,027,675
27,900 Honeywell, Inc........................................ 1,911,150
28,900 Thomas & Betts Corp................................... 1,365,525
------------
7,747,005
------------
Financial Services (1.9%)
3,600 Federal National Mortgage Assoc....................... 205,425
16,100 TransAmerica Corp..................................... 1,714,650
------------
1,920,075
------------
Food Distributors, Supermarkets & Wholesalers (2.2%)
56,300 Food Lion, Inc., Class A.............................. 475,031
45,300 Giant Food, Inc., Class A............................. 1,526,044
5,000 Winn-Dixie Stores, Inc................................ 218,438
------------
2,219,513
------------
Forest Products--Lumber & Paper (9.0%)
27,900 Consolidated Papers, Inc.............................. 1,489,163
51,100 Fort James Corp....................................... 1,954,574
11,600 International Paper Co................................ 500,250
39,800 Kimberly-Clark Corp................................... 1,962,637
13,800 Rayonier, Inc......................................... 587,363
17,600 Temple-Inland, Inc.................................... 920,700
18,800 Union Camp Corp....................................... 1,009,325
20,000 Westvaco Corp......................................... 628,750
------------
9,052,762
------------
</TABLE>
Continued
30
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Heavy Machinery (0.2%)
2,650 Deere & Co............................................ $ 154,528
------------
Industrial Goods & Services (1.9%)
57,200 Federal Signal Corp................................... 1,236,950
16,200 Harsco Corp........................................... 698,625
------------
1,935,575
------------
Insurance (1.4%)
42,500 TIG Holdings, Inc..................................... 1,410,469
------------
Leisure--Recreation, Gaming (1.0%)
33,200 Brunswick Corp........................................ 1,006,375
------------
Manufacturing--Miscellaneous (1.9%)
93,200 Pall Corp............................................. 1,928,075
------------
Medical Supplies (2.7%)
47,500 Bard (C.R.), Inc...................................... 1,487,344
1,750 Johnson & Johnson..................................... 115,281
30,500 Mallinckrodt, Inc..................................... 1,159,000
------------
2,761,625
------------
Metals--Nonferrous (0.2%)
6,900 Oregon Metallurgical Corp. (b)........................ 230,288
------------
Mining (0.2%)
2,000 Potash Corp. of Saskatchewan, Inc..................... 166,000
------------
Oil & Gas Exploration, Production & Services (5.9%)
28,700 Kerr McGee Corp....................................... 1,817,068
46,000 Mitchell Energy & Development, Class A................ 1,351,250
9,600 Mitchell Energy & Development, Class B................ 279,600
14,600 National Fuel Gas Co.................................. 710,838
15,900 Sonat, Inc............................................ 727,425
34,400 Ultramar Diamond Shamrock Corp........................ 1,096,500
------------
5,982,681
------------
Oil--Integrated Companies (2.8%)
1,750 Amoco Corp............................................ 148,969
6,000 Atlantic Richfield Co................................. 480,750
1,800 Exxon Corp............................................ 110,138
7,800 Mobil Corp............................................ 563,063
2,300 Royal Dutch Petroleum Co.--New York Shares............ 124,631
26,300 Texaco, Inc........................................... 1,430,062
------------
2,857,613
------------
Pharmaceuticals (4.3%)
25,500 American Home Products Corp........................... 1,950,750
1,500 Bristol-Myers Squibb Co............................... 141,938
1,200 Merck & Co., Inc...................................... 127,500
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Pharmaceuticals, continued:
59,500 Pharmacia & Upjohn, Inc............................... $ 2,179,187
------------
4,399,375
------------
Precision Instruments & Related (1.0%)
36,800 Flowserve Corp........................................ 1,028,100
------------
Publishing (0.1%)
2,000 McGraw-Hill Cos., Inc................................. 148,000
------------
Railroads (1.7%)
50,300 Illinois Central Corp................................. 1,713,344
------------
Real Estate Investment Trusts (0.7%)
18,900 FelCor Suite Hotels, Inc.............................. 670,950
------------
Retail--Department Stores (1.9%)
15,400 J.C. Penney Co........................................ 928,813
15,600 Mercantile Stores Co., Inc............................ 949,650
------------
1,878,463
------------
Retail--Specialty Stores (0.1%)
5,700 Intimate Brands, Inc.................................. 137,156
------------
Semiconductors (0.0%)
600 Intel Corp............................................ 42,150
------------
Steel (2.6%)
35,000 Allegheny Teledyne, Inc............................... 905,625
60,000 British Steel PLC-Sponsored ADR....................... 1,286,250
4,500 Carpenter Technology Corp............................. 216,281
12,100 Worthington Industries, Inc........................... 199,650
------------
2,607,806
------------
Tax Return Preparation (1.9%)
42,900 H&R Block, Inc........................................ 1,922,456
------------
Tobacco & Tobacco Products (0.3%)
5,000 Fortune Brands, Inc................................... 185,312
2,300 Philip Morris Cos., Inc............................... 104,219
------------
289,531
------------
Utilities--Electric (2.2%)
6,250 CINergy Corp.......................................... 239,453
15,300 DPL, Inc.............................................. 439,875
7,300 KU Energy Corp........................................ 286,525
17,500 PacifiCorp............................................ 477,968
16,600 Potomac Electric Power................................ 428,488
13,200 SCANA Corp............................................ 395,175
------------
2,267,484
------------
Utilities--Electric & Gas (0.9%)
28,800 LG&E Energy Corp...................................... 665,946
4,900 OGE Energy Corp....................................... 267,969
------------
933,915
------------
</TABLE>
Continued
31
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Income Equity Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Utilities--Natural Gas (2.5%)
36,000 AGL Resources, Inc.................................... $ 735,750
17,100 NICOR, Inc............................................ 721,406
26,800 People's Energy Corp.................................. 1,055,250
------------
2,512,406
------------
Utilities--Telecommunications (5.9%)
33,800 Alltel Corp........................................... 1,387,913
10,800 Cincinnati Bell, Inc.................................. 334,800
38,900 Frontier Corp......................................... 936,031
33,500 GTE Corp.............................................. 1,750,374
32,000 Southern New England Telecommunications Corp.......... 1,610,000
------------
6,019,118
------------
Total Common Stocks (Cost $95,936,210) 100,673,006
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- ------------
<C> <S> <C>
INVESTMENT COMPANIES (0.7%)
18,888 Dreyfus Treasury Prime Fund.......................... $ 18,888
724,355 Federated U.S. Treasury Services Fund................ 724,355
------------
Total Investment Companies (Cost $743,243) 743,243
------------
Total Investments (Cost $96,679,453) (a)--100.0% 101,416,249
Liabilities in excess of other assets 0.0% (12,459)
------------
Total Net Assets--100.0% $101,403,790
============
</TABLE>
- -------
(a) Represents cost for financial reporting purposes and differs from cost
basis for federal income tax purposes by the amount of losses recognized
for financial reporting purposes in excess of federal income tax reporting
of approximately $214,353. Cost for federal income tax purposes differs
from value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $ 7,422,288
Unrealized depreciation................................... (2,899,845)
-----------
Net unrealized appreciation............................... $ 4,522,443
===========
</TABLE>
(b) Represents non-income producing securities.
See Notes to Financial Statements.
32
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ----------
<C> <S> <C>
MUNICIPAL BONDS (93.8%)
Indiana (3.1%)
100,000 Columbus, Multi-School Building Corp., 7.15%, 1/15/02,
Pre-Refunded 1/15/01 @ 102............................ $ 110,250
----------
Ohio (85.1%)
130,000 Butler County, Hospital Facilities Revenue, Middletown
Regional Hospital Project, 6.00%, 11/15/10,
Callable 5/15/04 @ 101, FGIC.......................... 140,238
150,000 Clermont County, Hospital Facilities Revenue, Mercy
Health System, 6.38%, 9/1/01, AMBAC................... 161,063
100,000 Clermont County, Waterworks Revenue, 6.63%, 12/1/16,
Pre-Refunded 12/1/01 @ 102, AMBAC..................... 110,750
250,000 Columbus, Sewer Revenue, 6.13%, 6/1/03, Callable 6/1/02
@ 102................................................. 275,312
175,000 Edgewood, City School District, GO, 6.30%, 12/1/02,
Callable 12/1/01 @ 102, FGIC.......................... 191,406
100,000 Franklin County, Hospital Revenue, Children's Hospital
Project, Series A, GO, 6.40%, 11/1/06,
Pre-Refunded 11/1/01 @ 102............................ 109,625
155,000 Hamilton County, Sewer System Revenue, Series A, 6.40%,
12/1/03, Callable 6/1/01 @ 102........................ 168,756
100,000 Mentor, GO, 5.25%, 12/1/09, Callable 12/1/06 @ 102..... 104,625
100,000 Montgomery County, Issue I, Series A, Limited GO,
6.55%, 9/1/06, Pre-Refunded 9/1/01
@ 100................................................. 108,000
160,000 Olentangy Local School District, Series A, GO, 5.70%,
12/1/05, Callable 12/1/04 @ 102....................... 174,200
100,000 Springboro City School District, GO, 6.60%, 12/1/02,
Pre-Refunded 12/1/01 @ 102............................ 110,500
95,000 State Building Authority, State Facilities, James
Rhodes Project, 6.25%, 6/1/11, Callable 6/1/01 @ 102,
MBIA-IBC.............................................. 101,650
100,000 State Building Authority, State Transportation
Facilities, Series A, 7.00%, 9/1/07, Callable 9/1/00 @
102, MBIA............................................. 108,875
155,000 State Housing Finance Agency, Single Family Mortgage
Revenue, Series D, 6.80%, 9/1/05, Callable 9/1/01 @
102,
GNMA Coll............................................. 165,463
100,000 State Public Facilities Commission, Higher Education
Capital Facilities, Series II-B, 4.50%, 11/1/05....... 100,750
100,000 State Public Facilities Commission, Higher Education
Public Facilities, Series II-B, 4.50%, 11/1/08,
Callable 11/1/07 @ 100................................ 99,500
175,000 State Public Facilities Commission, Higher Educational
Facilities, Series B, 6.50%, 12/1/02,
Pre-Refunded 12/1/99 @ 102, AMBAC..................... 186,375
160,000 State Water Development Authority Revenue, 5.75%,
6/1/03, Callable 12/1/02 @ 102, MBIA.................. 171,600
200,000 University of Cincinnati, General Receipts, Series I-1,
6.95%, 6/1/00, Pre-Refunded 6/1/99
@ 102................................................. 212,000
200,000 University of Toledo, 7.00%, 6/1/03, Pre-Refunded
6/1/00 @ 102, MBIA.................................... 217,250
----------
3,017,938
----------
Oregon (5.6%)
185,000 Tri-County Metropolitan Transportation District, Light
Rail Extension, Series A, GO, 5.70%, 7/1/04,
Callable 7/1/02 @ 101................................. 198,875
----------
Total Municipal Bonds (Cost $3,104,427) 3,327,063
----------
</TABLE>
Continued
33
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Ohio Tax-Free Bond Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------- ----------
INVESTMENT COMPANIES (5.2%)
<C> <S> <C>
100,000 Dreyfus Municipal Money Market Fund................. $ 100,000
85,042 Federated Tax Free Money Market Fund................ 85,042
----------
Total Investment Companies (Cost $185,042) 185,042
----------
Total Investments (Cost $3,289,469) (a)--99.0% 3,512,105
Other assets in excess of liabilities 1.0% 34,070
----------
Total Net Assets--100.0% $3,546,175
==========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation....................................... $222,636
Unrealized depreciation....................................... 0
--------
Net unrealized appreciation................................... $222,636
========
</TABLE>
AMBAC--Insured by AMBAC Indemnity Corp.
FGIC--Insured by Financial Guaranty Insurance Corp.
GNMA--Government National Mortgage Assoc.
GO--General Obligation.
MBIA--Insured by Municipal Bond Insurance Assoc.
See Notes to Financial Statements.
34
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Balanced Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (64.0%)
Aerospace/Defense (0.8%)
3,400 Boeing Co.............................................. $ 166,388
-----------
Apparel/Footwear (0.8%)
4,100 Nike, Inc., Class B.................................... 160,925
-----------
Automotive (1.0%)
4,350 Ford Motor Co.......................................... 211,791
-----------
Banks (4.3%)
4,600 BankBoston Corp........................................ 432,112
1,500 Chase Manhattan Corp................................... 164,250
2,650 J.P. Morgan & Co....................................... 299,118
-----------
895,480
-----------
Beverages (2.3%)
4,000 Anheuser-Busch Cos., Inc............................... 176,000
4,600 Coca-Cola Co........................................... 306,475
-----------
482,475
-----------
Chemicals--General (0.9%)
3,000 E.I. du Pont de Nemours & Co........................... 180,188
-----------
Chemicals--Specialty (0.7%)
3,500 Praxair, Inc........................................... 157,500
-----------
Computers & Peripherals (6.0%)
8,000 Cisco Systems, Inc.(b)................................. 445,999
7,000 Compaq Computer Corp................................... 395,062
2,400 Hewlett-Packard Co..................................... 150,000
7,500 Sun Microsystems, Inc.(b).............................. 299,063
-----------
1,290,124
-----------
Consumer Goods & Services (2.3%)
6,000 Procter & Gamble Co.................................... 478,875
-----------
Cosmetics & Toiletries (2.7%)
4,400 Avon Products, Inc..................................... 270,050
3,000 Gillette Co............................................ 301,313
-----------
571,363
-----------
Diversified (2.0%)
5,600 General Electric Co.................................... 410,900
-----------
Financial Services (4.5%)
7,000 Federal National Mortgage Assoc........................ 399,437
3,200 FINOVA Group, Inc...................................... 159,000
2,750 SLM Holding Corp....................................... 382,593
-----------
941,030
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Heavy Machinery (2.7%)
3,400 Caterpillar, Inc....................................... $ 165,113
6,800 Deere & Co............................................. 396,525
-----------
561,638
-----------
Hotels & Motels (1.3%)
12,000 Mirage Resorts, Inc.(b)................................ 273,000
-----------
Insurance (2.0%)
10,050 SunAmerica, Inc........................................ 429,638
-----------
Medical Supplies (0.9%)
2,800 Johnson & Johnson...................................... 184,450
-----------
Newspapers (0.9%)
2,800 New York Times Co., Class A............................ 185,150
-----------
Oil--Integrated Companies (5.6%)
4,600 Amoco Corp............................................. 391,574
3,500 British Petroleum PLC, ADR............................. 278,906
4,600 Exxon Corp............................................. 281,463
4,000 Texaco, Inc............................................ 217,500
-----------
1,169,443
-----------
Pharmaceuticals (5.8%)
4,000 Bristol-Myers Squibb Co................................ 378,500
4,900 Merck & Co., Inc....................................... 520,624
4,600 Pfizer, Inc............................................ 342,988
-----------
1,242,112
-----------
Real Estate Investment Trusts (1.6%)
17,000 Health & Retirement Property Trust..................... 340,000
-----------
Restaurants (1.4%)
12,150 Wendy's International, Inc............................. 292,359
-----------
Rubber & Rubber Products (0.8%)
2,550 Goodyear Tire & Rubber Co.............................. 162,244
-----------
Semiconductors (1.7%)
5,000 Intel Corp............................................. 351,250
-----------
Software & Computer Services (2.1%)
3,150 Computer Associates International, Inc................. 166,556
2,150 Microsoft Corp.(b)..................................... 277,888
-----------
444,444
-----------
Steel (0.6%)
8,000 Worthington Industries, Inc............................ 132,000
-----------
Telecommunications (1.0%)
5,500 Ericsson (L.M.) Telefonaktiebolaget, Sponsored ADR..... 205,219
-----------
</TABLE>
Continued
35
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Balanced Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------ -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Tobacco & Tobacco Products (0.8%)
3,900 Philip Morris Cos., Inc............................... $ 176,719
-----------
Tools & Hardware Manufacturing (1.0%)
5,400 Black & Decker Corp................................... 210,938
-----------
Utilities--Electric (2.3%)
6,000 CINergy Corp.......................................... 229,875
4,500 Duke Energy Corp...................................... 249,188
-----------
479,063
-----------
Utilities--Telecommunications (3.2%)
14,600 Cincinnati Bell, Inc.................................. 452,600
4,300 GTE Corp.............................................. 224,675
-----------
677,275
-----------
Total Common Stocks (Cost $10,610,807) 13,463,981
-----------
CORPORATE BONDS (6.6%)
Banks (2.0%)
400,000 Chase Capital I, Series A, 7.67%, 12/1/26, Callable
12/1/06 @ 103.84, Guaranteed by Chase Manhattan
Corp................................................. 414,000
-----------
Brokerage Services (0.8%)
163,000 Merrill Lynch & Co., Inc., 9.00%, 5/1/98.............. 164,566
-----------
Financial Services (2.9%)
615,000 Green Tree Financial Corp., Series 1997-6, Class A3,
6.32%, 1/15/29 ABS................................... 616,901
-----------
Retail--Department Stores (0.9%)
200,000 Sears Roebuck & Co., Series 7, 5.82%, 2/22/99 MTN..... 199,500
-----------
Total Corporate Bonds (Cost $1,384,366) 1,394,967
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (7.2%)
Federal Home Loan Bank (1.4%)
300,000 6.04%, 2/14/01, Callable 2/14/98 @ 100................. $ 298,884
-----------
Federal Home Loan Mortgage Corp. (1.9%)
410,000 5.69% 11/29/00, Continuously Callable @ 100............ 406,946
-----------
Federal National Mortgage Assoc. (3.9%)
500,000 6.89%, 7/12/04, Callable 7/12/00 @ 100, MTN............ 505,380
300,000 6.95%, 11/13/06, Callable 11/13/01 @ 100............... 306,750
-----------
812,130
-----------
Total U.S. Government Agencies (Cost $1,505,941) 1,517,960
-----------
U.S. TREASURY NOTES (18.2%)
1,000,000 5.75%, 12/31/98........................................ 1,001,520
700,000 6.25%, 5/31/00......................................... 708,512
300,000 6.25%, 10/31/01........................................ 304,956
300,000 6.38%, 8/15/02......................................... 307,668
1,000,000 5.88%, 9/30/02......................................... 1,005,220
500,000 5.75%, 8/15/03......................................... 500,115
-----------
Total U.S. Treasury Notes (Cost $3,779,303) 3,827,991
-----------
INVESTMENT COMPANIES (3.7%)
777,276 Federated U.S. Treasury Services Fund.................. 777,276
-----------
Total Investment Companies (Cost $777,276) 777,276
-----------
Total Investments (Cost $18,057,693)(a)--99.7% 20,982,175
Other assets in excess of liabilities 0.3% 63,673
-----------
Total Net Assets--100.0% $21,045,848
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $3,102,778
Unrealized depreciation.................................... (178,296)
----------
Net unrealized appreciation................................ $2,924,482
==========
</TABLE>
(b) Represents non-income producing securities.
ABS--Asset Backed Security
ADR--American Depositary Receipt
MTN--Medium Term Note
PLC--Public Liability Co.
See Notes to Financial Statements.
36
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (85.1%)
Advertising (1.3%)
7,000 Catalina Marketing Corp. (b)........................... $ 323,750
-----------
Aerospace/Defense (1.8%)
17,500 BE Aerospace, Inc. (b)................................. 468,125
-----------
Apparel/Footwear (3.1%)
18,600 Jones Apparel Group, Inc. (b).......................... 799,800
-----------
Automotive Parts (2.1%)
16,000 Gentex Corp. (b)....................................... 430,000
10,000 Simpson Industries, Inc................................ 117,500
-----------
547,500
-----------
Banks (7.3%)
20,000 Colonial BancGroup, Inc................................ 688,750
10,920 HUBCO, Inc............................................. 427,245
17,000 Sterling Bancorp....................................... 408,000
12,000 Vermont Financial Services Corp........................ 333,000
-----------
1,856,995
-----------
Building Materials (0.7%)
4,500 Medusa Corp............................................ 188,156
-----------
Chemicals--General (1.5%)
33,000 CFC International, Inc. (b)............................ 387,750
-----------
Chemicals--Specialty (0.6%)
6,000 Cabot Corp............................................. 165,750
-----------
Commercial Services (2.9%)
10,000 Alternative Resources Corp. (b)........................ 230,625
10,000 Healthcare Compare Corp. (b) (c)....................... 511,250
-----------
741,875
-----------
Computers & Peripherals (1.3%)
3,200 Adaptec, Inc. (b)...................................... 118,800
2,000 Complete Business Solutions, Inc. (b).................. 87,000
3,500 Comverse Technology, Inc. (b).......................... 136,500
-----------
342,300
-----------
Cosmetics & Toiletries (1.5%)
15,000 Nature's Sunshine Products, Inc........................ 390,000
-----------
Electronic & Electrical--General (5.3%)
15,000 ADFlex Solutions, Inc. (b)............................. 241,875
18,000 American Power Conversion Corp. (b).................... 425,250
15,000 Chicago Miniature Lamp, Inc. (b)....................... 506,250
10,000 Nimbus CD International, Inc. (b)...................... 107,500
5,000 Optical Coating Laboratory, Inc........................ 68,750
-----------
1,349,625
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Environmental Control (1.6%)
13,400 U.S. Filter Corp. (b).................................. $ 401,163
-----------
Financial Services (1.5%)
7,000 Astoria Financial Corp................................. 390,250
-----------
Heavy Machinery (2.0%)
8,000 AGCO Corp.............................................. 234,000
19,250 JLG Industries, Inc.................................... 271,906
-----------
505,906
-----------
Hotels & Motels (0.9%)
6,500 MGM Grand, Inc. (b).................................... 234,406
-----------
Industrial Goods & Services (0.7%)
7,900 Federal Signal Corp.................................... 170,838
-----------
Insurance (1.0%)
4,000 Life Re Corp........................................... 260,750
-----------
Leisure--Recreation, Gaming (3.2%)
12,000 Callaway Golf Co....................................... 342,750
22,000 Cannondale Corp. (b)................................... 478,500
-----------
821,250
-----------
Manufactured Housing (1.2%)
9,000 National R.V. Holdings, Inc. (b)....................... 295,875
-----------
Medical Supplies (3.5%)
11,000 STERIS Corp. (b)....................................... 530,750
12,000 U.S. Surgical Corp..................................... 351,750
-----------
882,500
-----------
Metals--Fabrication (0.3%)
2,200 Wolverine Tube, Inc. (b)............................... 68,200
-----------
Oilfield Services & Equipment (2.2%)
23,350 Tuboscope, Inc. (b).................................... 561,859
-----------
Pharmaceuticals (4.1%)
8,000 Jones Medical Industries, Inc.......................... 306,000
22,000 NBTY, Inc. (b)......................................... 734,250
-----------
1,040,250
-----------
Precision Instruments & Related (0.9%)
6,600 Millipore Corp......................................... 223,988
-----------
Printing & Publishing (0.6%)
5,000 Multi-Color Corp. (b).................................. 31,875
5,000 World Color Press, Inc. (b)............................ 132,813
-----------
164,688
-----------
</TABLE>
Continued
37
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Stock Appreciation Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Real Estate Investment Trusts (14.4%)
4,200 American Health Properties, Inc........................ $ 115,763
4,200 Amli Residential Properties Trust...................... 93,450
3,200 CarrAmerica Realty Corp................................ 101,400
2,800 Chelsea GCA Realty, Inc................................ 106,925
20,000 Duke Realty Investments, Inc........................... 484,999
3,500 Essex Property Trust, Inc.............................. 122,500
2,700 FelCor Suite Hotels, Inc............................... 95,850
8,000 Health & Retirement Property Trust..................... 159,999
2,800 Health Care Property Investors, Inc.................... 105,875
2,900 Highwoods Properties, Inc.............................. 107,844
10,000 Jameson Inns, Inc...................................... 116,875
4,000 JP Realty, Inc......................................... 103,750
3,000 Mack-Cali Realty Corp.................................. 123,000
4,500 Manufactured Home Communities, Inc..................... 121,500
8,000 National Golf Properties, Inc.......................... 262,499
3,000 OMEGA Healthcare Investors, Inc........................ 115,875
5,000 Pacific Gulf Properties, Inc........................... 118,750
3,000 Realty Income Corp..................................... 76,313
4,400 Reckson Associates Realty Corp......................... 111,650
4,200 Security Capital Pacific Trust......................... 101,850
3,300 Shurgard Storage Centers, Inc. Class A................. 95,700
3,200 Sovran Self Storage, Inc............................... 103,800
4,450 Storage Trust Realty................................... 117,091
8,500 Summit Properties, Inc................................. 179,562
5,000 Tanger Factory Outlet Centers, Inc..................... 152,813
3,400 Urban Shopping Centers, Inc............................ 118,575
6,000 Walden Residential Properties, Inc..................... 153,000
-----------
3,667,208
-----------
Restaurants (3.1%)
6,000 Papa John's International, Inc. (b).................... 209,250
24,000 Wendy's International, Inc............................. 577,500
-----------
786,750
-----------
Software & Computer Services (1.6%)
5,000 National Data Corp..................................... 180,625
10,000 Structural Dynamics Research Corp. (b)................. 225,000
-----------
405,625
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Steel (2.7%)
9,000 Carpenter Technology Corp.............................. $ 432,563
16,400 Worthington Industries, Inc............................ 270,600
-----------
703,163
-----------
Telecommunications (1.3%)
16,000 Aspect Telecommunications Corp. (b).................... 334,000
-----------
Tobacco & Tobacco Products (0.5%)
5,000 DIMON, Inc............................................. 131,250
-----------
Tools & Hardware Manufacturing (1.2%)
8,000 Black & Decker Corp.................................... 312,500
-----------
Utilities--Telecommunications (4.8%)
20,000 Cincinnati Bell, Inc................................... 620,000
20,000 LCI International, Inc. (b)............................ 615,000
-----------
1,235,000
-----------
Wholesale Distribution (2.4%)
16,000 Tech Data Corp. (b).................................... 622,000
-----------
Total Common Stocks (Cost $17,743,856) 21,781,045
-----------
WARRANTS (0.0%)
Real Estate Investment Trusts (0.0%)
221 Security Capital Group, expire
9/19/98 (b)........................................... 1,160
-----------
Total Warrants (Cost $0) 1,160
-----------
INVESTMENT COMPANIES (1.4%)
19,744 Dreyfus Treasury Prime Fund............................ 19,744
325,747 Federated U.S. Treasury Services Fund.................. 325,747
-----------
Total Investment Companies (Cost $345,491) 345,491
-----------
Total Investments (Cost $18,089,347) (a)--86.5% 22,127,696
Other assets in excess of liabilities 13.5% 3,449,883
-----------
Total Net Assets--100.0% $25,577,579
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.................................... $4,517,684
Unrealized depreciation.................................... (479,335)
----------
Net unrealized appreciation................................ $4,038,349
==========
</TABLE>
(b) Represents non-income producing securities.
(c) Name changed to First Health Group Corp. 1/2/98.
See Notes to Financial Statements.
38
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Large Company Select Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (94.0%)
Aerospace/Defense (1.8%)
13,600 Boeing Co.............................................. $ 665,550
-----------
Apparel/Footwear (1.5%)
5,500 Jones Apparel Group, Inc. (b).......................... 236,500
7,500 Nike, Inc., Class B.................................... 294,375
-----------
530,875
-----------
Automotive (1.9%)
14,150 Ford Motor Co.......................................... 688,928
-----------
Banks (4.1%)
6,900 BankAmerica Corp....................................... 503,700
5,400 BankBoston Corp........................................ 507,263
5,200 KeyCorp................................................ 368,225
1,600 Mellon Bank Corp....................................... 97,000
-----------
1,476,188
-----------
Beverages (2.7%)
11,600 Coca-Cola Co........................................... 772,850
6,000 PepsiCo, Inc........................................... 218,625
-----------
991,475
-----------
Chemicals--Specialty (1.2%)
10,000 Praxair, Inc........................................... 450,000
-----------
Commercial Services (0.5%)
2,800 Federal Express Corp. (b).............................. 170,975
-----------
Computers & Peripherals (9.2%)
17,775 Cisco Systems, Inc. (b)................................ 990,955
13,500 Compaq Computer Corp................................... 761,906
10,000 Hewlett-Packard Co..................................... 625,000
2,700 International Business Machines Corp................... 282,319
9,500 Quantum Corp. (b)...................................... 190,594
12,000 Sun Microsystems, Inc. (b)............................. 478,500
-----------
3,329,274
-----------
Consumer Goods & Services (2.6%)
11,600 Procter & Gamble Co.................................... 925,825
-----------
Cosmetics & Toiletries (3.4%)
4,900 Avon Products, Inc..................................... 300,738
9,200 Gillette Co............................................ 924,025
-----------
1,224,763
-----------
Diversified (3.3%)
16,100 General Electric Co.................................... 1,181,338
-----------
Electrical Equipment (1.0%)
6,200 Emerson Electric Co.................................... 349,913
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Entertainment (1.5%)
5,600 The Walt Disney Co..................................... $ 554,750
-----------
Financial Services (7.6%)
8,000 American Express Co.................................... 714,000
15,200 Federal National Mortgage Assoc........................ 867,349
5,200 FINOVA Group, Inc...................................... 258,375
2,900 SLM Holding Corp....................................... 403,463
8,998 Travelers Group, Inc................................... 484,767
-----------
2,727,954
-----------
Food Processing & Packaging (2.3%)
7,800 CPC International, Inc. (c)............................ 840,450
-----------
Heavy Machinery (3.6%)
6,000 Caterpillar, Inc....................................... 291,375
17,000 Deere & Co............................................. 991,313
-----------
1,282,688
-----------
Hotels & Motels (1.1%)
18,200 Mirage Resorts, Inc. (b)............................... 414,050
-----------
Insurance (4.9%)
6,600 American International Group, Inc...................... 717,749
3,200 Chubb Corp............................................. 242,000
4,800 Marsh & McLennan Cos., Inc............................. 357,900
10,650 SunAmerica, Inc........................................ 455,288
-----------
1,772,937
-----------
Medical Supplies (0.9%)
5,000 Johnson & Johnson...................................... 329,375
-----------
Mining (0.9%)
4,000 Potash Corp. of Saskatchewan, Inc...................... 332,000
-----------
Newspapers (1.4%)
8,000 Gannett Co., Inc....................................... 494,500
-----------
Oil--Integrated Companies (6.0%)
3,100 Amoco Corp............................................. 263,888
11,600 Exxon Corp............................................. 709,774
7,200 Mobil Corp............................................. 519,750
12,400 Royal Dutch Petroleum Co.--New York Shares............. 671,925
-----------
2,165,337
-----------
Oilfield Services & Equipment (2.2%)
9,800 Schlumberger, Ltd...................................... 788,900
-----------
Pharmaceuticals (6.9%)
6,100 Bristol-Myers Squibb Co................................ 577,213
</TABLE>
Continued
39
<PAGE>
- --------------------------------------------------------------------------------
Schedule of Portfolio Investments, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
Large Company Select Fund
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Pharmaceuticals, continued
8,300 Merck & Co., Inc....................................... $ 881,875
13,700 Pfizer, Inc............................................ 1,021,505
-----------
2,480,593
-----------
Real Estate Investment Trusts (2.1%)
19,000 Duke Realty Investments, Inc........................... 460,750
6,000 Equity Residential Properties Trust.................... 303,375
-----------
764,125
-----------
Restaurants (2.2%)
32,325 Wendy's International, Inc............................. 777,820
-----------
Retail (0.7%)
6,600 Wal-Mart Stores, Inc................................... 260,288
-----------
Rubber & Rubber Products (2.0%)
11,100 Goodyear Tire & Rubber Co.............................. 706,238
-----------
Semiconductors (3.4%)
17,500 Intel Corp............................................. 1,229,375
-----------
Software & Computer Services (4.0%)
12,000 Computer Associates International, Inc................. 634,500
6,200 Microsoft Corp. (b).................................... 801,350
-----------
1,435,850
-----------
Steel (0.9%)
3,000 Carpenter Technology Corp.............................. 144,188
10,250 Worthington Industries, Inc............................ 169,125
-----------
313,313
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCK, CONTINUED:
Telecommunications (2.1%)
14,000 Ericsson (L.M.) Telefonaktiebolaget, Sponsored ADR..... $ 522,375
3,000 Lucent Technologies, Inc............................... 239,625
-----------
762,000
-----------
Tobacco & Tobacco Products (1.0%)
7,800 Philip Morris Cos., Inc................................ 353,438
-----------
Tools & Hardware Manufacturing (0.4%)
4,000 Black & Decker Corp.................................... 156,250
-----------
Utilities--Telecommunications (2.7%)
31,800 Cincinnati Bell, Inc................................... 985,800
-----------
Total Common Stocks (Cost $17,906,174) 33,913,135
-----------
INVESTMENT COMPANIES (5.9%)
1,263,213 Dreyfus Treasury Prime Fund............................ 1,263,213
851,565 Federated U.S. Treasury Services Fund.................. 851,565
-----------
Total Investment Companies (Cost $2,114,778) 2,114,778
-----------
Total Investments (Cost $20,020,952) (a)--99.9% 36,027,913
Other assets in excess of liabilities 0.1% 49,676
-----------
Total Net Assets--100.0% $36,077,589
===========
</TABLE>
- -------
(a) Cost for federal income tax purposes differs from value by net unrealized
appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation................................... $16,403,931
Unrealized depreciation................................... (396,970)
-----------
Net unrealized appreciation............................... $16,006,961
===========
</TABLE>
(b) Represents non-income producing securities.
(c) Name changed to BestFoods 1/2/98.
See Notes to Financial Statements.
40
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
1. ORGANIZATION:
The Riverfront Funds, Inc. (the "Fund"), was organized as a Maryland
corporation on March 27, 1990, and is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company. The Fund is authorized to issue seven series of shares of
capital stock, representing interests in different portfolios of securities
as follows: The Riverfront U.S. Government Securities Money Market Fund, The
Riverfront U.S. Government Income Fund, The Riverfront Income Equity Fund,
The Riverfront Ohio Tax-Free Bond Fund, The Riverfront Balanced Fund
(formerly the Riverfront Flexible Growth Fund), The Riverfront Stock
Appreciation Fund and The Riverfront Large Company Select Fund (each, a
"Portfolio"; and collectively, the "Portfolios").
The investment objective of the U.S. Government Securities Money Market Fund
is to seek current income from U.S. Government short-term securities while
preserving capital and maintaining liquidity. The investment objective of the
U.S. Government Income Fund is to seek a high level of current income,
consistent with preservation of capital, by investing primarily in securities
issued or guaranteed by the U.S. Government, its agencies and
instrumentalities and in high quality fixed rate and adjustable rate
mortgaged back securities and other asset-backed securities. The investment
objective of the Income Equity Fund is to seek a high level of investment
income, with capital appreciation as a secondary objective, through
investment primarily in income-producing equity securities of U.S. issuers.
The investment objective of the Ohio Tax-Free Bond Fund is to seek income
exempt from federal and Ohio state income taxes and preservation of capital.
The investment objective of the Balanced Fund is to seek long-term growth of
capital with some current income as a secondary objective. The investment
objective of the Stock Appreciation Fund is to seek capital growth. The
investment objective of the Large Company Select Fund is to seek long term
growth of capital with some current income as a secondary objective.
The Fund is authorized to issue 3,000,000,000 shares with a par value of
$.001 per share. Sales of shares of the Portfolios may be made to customers
of The Provident Bank ("Provident") and its affiliates, to all accounts of
correspondent banks of Provident and to the general public.
The U.S. Government Income Fund, The Income Equity Fund, The Ohio Tax-Free
Bond Fund, The Balanced Fund, The Stock Appreciation Fund and The Large
Company Select Fund (collectively, "the variable net asset value funds") each
offer two share classes: Investor A Shares and Investor B Shares. The U.S.
Government Securities Money Market Fund (the "money market fund") offers only
the Investor A Shares. Investor A Shares of the variable net asset value
funds are subject to initial sales charges imposed at the time of purchase,
in accordance with the Portfolios' prospectus. Certain redemptions of the
Investor B Shares of the variable net asset value funds made within six years
of purchase are subject to varying contingent deferred sales charges in
accordance with the Portfolios' prospectus. Each share class has identical
rights and privileges, except with respect to (i) distribution and
shareholder services (12b-1) fees paid by each share class, (ii) voting
rights on matters specifically affecting a single share class, (iii) and the
exchange privileges.
2. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by the
Portfolios in preparation of their financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
Continued
41
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
financial statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments of the money market fund are valued at amortized cost. Under
the amortized cost method, discount or premium is amortized on a constant
basis to the maturity of the security. In addition, the money market fund
may not (a) purchase any instrument with a remaining maturity greater than
397 days unless such investment is subject to an appropriate demand
feature, or (b) maintain a dollar-weighted-average portfolio maturity which
exceeds 90 days.
Investments in common and preferred stocks, corporate bonds, commercial
paper and U.S. Government securities of the variable net asset value funds
are valued at their market values determined on the basis of the mean of
the latest available bid and asked quotations or closing sale prices on the
principal exchange (closing sales prices on the over-the-counter National
Market System) in which such securities are normally traded. Municipal
bonds are valued by using market quotations or independent services that
use prices provided by market makers or estimates of market values obtained
from yield data relating to instruments or securities with similar
characteristics. Short-term investments maturing in 60 days or less are
valued at amortized cost, which approximates market value. Investments in
investment companies are valued at their net asset values as reported by
such investment companies. Other securities for which quotations are not
readily available are valued at their fair value as determined in good
faith by Provident, as the investment adviser, or by the sub-investment
advisor, as the case may be, under the supervision of the Fund's Board of
Directors. The differences between the cost and market values of
investments held by the variable net asset value funds are reflected as
either unrealized appreciation or depreciation.
SECURITY TRANSACTIONS AND RELATED INCOME:
Security transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the
accrual basis and includes, where applicable, the pro rata amortization of
premium or discount. Dividend income is recorded on the ex-dividend date.
Realized gains or losses from sales of securities are determined on an
identified cost basis.
REPURCHASE AGREEMENTS:
The Portfolios may enter into repurchase agreements from financial
institutions such as banks and broker dealers which Provident, as
investment adviser or the Portfolio's sub-investment adviser, as
applicable, deems creditworthy under guidelines approved by the Fund's
Board of Directors, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price
generally equals the price paid by each Portfolio plus interest negotiated
on the basis of current short-term rates, which may be more or less than
the rate on the underlying portfolio securities. The seller, under a
repurchase agreement, is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price (including
accrued interest). Securities subject to repurchase agreements are held by
each Portfolio's custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to
be loans by the Portfolios under the 1940 Act.
Continued
42
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared daily and paid monthly
for the money market fund. Dividends from net investment income are
declared and generally paid monthly for each variable net asset value fund
with the exception of the Stock Appreciation Fund which declares and pays
any dividends semi annually.
Distributable net realized capital gains, if any, are declared and
distributed at least annually for each of the Portfolios. Any taxable
distributions declared in December and paid in the following fiscal year
will be taxable to shareholders in the year declared.
The amounts of dividends from net investment income and of distributions
from net realized gains are determined in accordance with federal income
tax regulations which may differ from generally accepted accounting
principles. These "book/tax" differences are either considered temporary or
permanent in nature. To the extent these differences are permanent in
nature, such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not
require reclassification. Dividends and distributions to shareholders which
exceed net investment income and net realized capital gains for financial
reporting purposes are reported as dividends in excess of net investment
income or distributions in excess of net realized gains. To the extent they
exceed net investment income and net realized gains for tax purposes, they
are reported as distributions of capital.
As of December 31, 1997, the following reclassifications have been made to
increase (decrease) the following components of net assets with offsetting
adjustments made to paid-in capital:
<TABLE>
<CAPTION>
ACCUMULATED
UNDISTRIBUTED ACCUMULATED NET
NET INVESTMENT REALIZED GAINS
INCOME ON INVESTMENTS
-------------- ---------------
<S> <C> <C>
U.S. Government Income Fund.................... $423,663 $ 5,121
Income Equity Fund............................. $ -- $ 40,162
Ohio Tax-Free Fund............................. $157,244 $ --
Balanced Fund.................................. $ 3,313 $ (3,313)
Stock Appreciation Fund........................ $150,736 $(150,736)
Large Company Select Fund...................... $ 84,685 $ (76,753)
</TABLE>
FEDERAL INCOME TAXES:
It is the policy of each Portfolio to qualify as a regulated investment
company by complying with the provisions available to certain investment
companies, as defined in the Internal Revenue Code of 1986, as amended, and
to make distributions of net investment income and net realized capital
gains sufficient to relieve it from all, or substantially all, Federal
income taxes.
EXPENSE ALLOCATIONS:
Expenses that are directly related to one of the Portfolios are charged
directly to that Portfolio. Other operating expenses of the Fund are
prorated to the Portfolios, generally on the basis of relative net assets.
Fees paid under a Portfolio's shareholder servicing or distribution plans
are borne by the specific class of shares to which they apply.
Continued
43
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
3. PURCHASES AND SALES OF SECURITIES:
Purchases and sales of securities (excluding short-term securities) for the
year ended December 31, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
U.S. Government Income Fund........................ $ 41,906,699 $ 32,091,752
Income Equity Fund................................. $145,292,462 $146,249,889
Ohio Tax-Free Bond Fund............................ $ 301,373 $ 17,617,471
Balanced Fund...................................... $ 19,491,370 $ 20,305,049
Stock Appreciation Fund............................ $ 16,980,604 $ 28,878,942
Large Company Select Fund.......................... $ 11,725,461 $ 12,289,867
</TABLE>
4. CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND INCOME EQUITY FUND
----------------------------- --------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 3,965,162 $ 2,494,252 $ 7,333,378 $ 8,709,609
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 16,606,766 -- -- --
Dividends reinvested.. 447,813 440,531 19,742,254 10,845,880
Shares redeemed....... (5,969,304) (4,741,047) (16,662,273) (7,958,218)
------------- ------------- ------------ -----------
Change in net assets
from Investor A share
transactions......... $ 15,050,437 $ (1,806,264) $ 10,413,359 $11,597,271
============= ============= ============ ===========
Investor B Shares:
Proceeds from shares
issued............... $ 270,855 $ 372,835 $ 8,520,546 $ 3,928,456
Dividends reinvested.. 58,773 45,964 3,781,007 1,297,923
Shares redeemed....... (315,970) (349,650) (1,514,086) (420,101)
------------- ------------- ------------ -----------
Change in net assets
from Investor B share
transactions......... $ 13,658 $ 69,149 $ 10,787,467 $ 4,806,278
============= ============= ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 423,205 264,167 552,976 680,679
Issued in connection
with common trust
fund acquisition..... 1,761,057 -- -- --
Reinvested............ 47,635 46,735 1,674,497 898,119
Redeemed.............. (634,837) (502,013) (1,206,389) (624,637)
------------- ------------- ------------ -----------
Change in Investor A
Shares............... 1,597,060 (191,111) 1,021,084 954,161
============= ============= ============ ===========
Investor B Shares:
Issued................ 24,956 34,874 633,092 317,268
Reinvested............ 5,568 4,314 314,995 103,352
Redeemed.............. (29,761) (32,664) (109,730) (31,854)
------------- ------------- ------------ -----------
Change in Investor B
Shares............... 763 6,524 838,357 388,766
============= ============= ============ ===========
</TABLE>
Continued
44
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO TAX-FREE FUND BALANCED FUND
-------------------------- --------------------------
<S> <C> <C> <C> <C>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares
issued............... $ 119,446 $ 39,457 $ 1,140,421 $ 5,979,948
Proceeds from shares
issued in connection
with common trust
fund acquisition..... 11,399,841 -- -- --
Dividends reinvested.. 20,138 6,134 969,400 318,997
Shares redeemed....... (19,309,599) (340,435) (3,919,227) (5,316,451)
------------ ------------ ------------ ------------
Change in net assets
from Investor A share
transactions......... $ (7,770,174) $ (294,844) $ (1,809,406) $ 982,494
============ ============ ============ ============
Investor B Shares:
Proceeds from shares
issued............... $ 396,677 $ 592,591 $ 1,482,972 $ 5,648,362
Dividends reinvested.. 181,550 20,060 979,316 227,824
Shares redeemed....... (230,357) (248,303) (1,554,696) (1,218,260)
------------ ------------ ------------ ------------
Change in net assets
from Investor B share
transactions......... $ 347,870 $ 364,348 $ 907,592 $ 4,657,926
============ ============ ============ ============
SHARE TRANSACTIONS:
Investor A Shares:
Issued................ 14,309 3,737 91,585 531,651
Issued in connection
with common trust
fund acquisition..... 1,097,194 -- -- --
Reinvested............ 2,125 593 79,188 28,295
Redeemed.............. (1,872,553) (32,383) (316,498) (466,939)
------------ ------------ ------------ ------------
Change in Investor A
Shares............... (758,925) (28,053) (145,725) 93,007
============ ============ ============ ============
Investor B Shares:
Issued................ 34,793 55,795 115,832 485,748
Reinvested............ 18,823 1,897 77,517 19,547
Redeemed.............. (22,564) (23,572) (121,277) (104,208)
------------ ------------ ------------ ------------
Change in Investor B
Shares............... 31,052 34,120 72,072 401,087
============ ============ ============ ============
</TABLE>
Continued
45
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
4. CAPITAL SHARE TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
LARGE COMPANY
STOCK APPRECIATION FUND SELECT FUND
-------------------------- -------------
YEAR ENDED YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997*
------------ ------------ -------------
<S> <C> <C> <C>
CAPITAL TRANSACTIONS:
Investor A Shares:
Proceeds from shares issued........ $ 3,009,538 $ 3,225,171 $ 2,486,334
Proceeds from shares issued in
connection with common
trust fund acquisition............ -- -- 27,813,338
Dividends reinvested............... 4,366,182 2,903,615 3,676,075
Shares redeemed.................... (13,898,332) (16,060,775) (3,937,879)
------------ ------------ -----------
Change in net assets from Investor
A share transactions.............. $ (6,522,612) $ (9,931,989) $30,037,868
============ ============ ===========
Investor B Shares:
Proceeds from shares issued........ $ 526,610 $ 483,957 $ 2,396,213
Dividends reinvested............... 214,709 65,586 263,596
Shares redeemed.................... (115,336) (105,940) (37,554)
------------ ------------ -----------
Change in net assets from Investor
B share transactions.............. $ 625,983 $ 443,603 $ 2,622,255
============ ============ ===========
SHARE TRANSACTIONS:
Investor A Shares:
Issued............................. 307,000 307,057 205,316
Issued in connection with common
trust fund acquisition............ -- -- 2,781,335
Reinvested......................... 468,165 308,567 329,693
Redeemed........................... (1,436,813) (1,618,575) (352,190)
------------ ------------ -----------
Change in Investor A Shares........ (661,648) (1,002,951) 2,964,154
============ ============ ===========
Investor B Shares:
Issued............................. 52,468 66,446 198,193
Reinvested......................... 22,295 6,727 23,747
Redeemed........................... (11,801) (10,094) (3,405)
------------ ------------ -----------
Change in Investor B Shares........ 62,962 63,079 218,535
============ ============ ===========
</TABLE>
- -------
* For the period January 2, 1997 (commencement of operations) through December
31, 1997.
5. RELATED PARTY TRANSACTIONS
Provident has entered into an Investment Advisory Agreement with the Fund
whereby Provident supervises and manages the investment and reinvestment of
the assets of the U.S. Government Securities Money Market Fund, the U.S.
Government Income Fund, the Income Equity Fund, the Ohio Tax-Free Bond Fund,
the Balanced Fund, the Stock Appreciation Fund and the Large Company Select
Fund. Under the terms of the Investment Advisory Agreement, Provident is
entitled to receive fees based on a percentage of the average net assets of
each Portfolio.
Continued
46
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
Pursuant to the terms of the Investment Advisory Agreement with the Fund,
Provident has entered into a Sub-Investment Advisory Agreement with DePrince,
Race & Zollo, Inc. ("DRZ") for the Income Equity Fund. DRZ provides
investment advice to and supervises the investment program of that portion of
the assets of the Income Equity Fund allocated to DRZ by the Fund's Board of
Directors. Under the terms of the Sub-Investment Advisory Agreements, DRZ
receives from Provident fees calculated at 0.50% of average daily net assets
up to $55 million of the Income Equity Fund managed by DRZ and 0.55% of
average daily net assets above $55 million for this Portfolio managed by DRZ.
In addition to serving as Investment Adviser, Provident serves as custodian
and fund accountant to the Portfolios. Under the terms of the Custodian, Fund
Accounting and Recordkeeping Agreement, Provident is entitled to receive fees
based on a percentage of the average daily net assets of each Portfolio.
During the year ended December 31, 1997, Provident Securities & Investment
Company ("PSI"), an affiliate of Provident which is a registered broker
dealer, executed transactions to purchase and sell portfolio investments on
an agency basis on behalf of the Fund. The Fund paid PSI approximately
$92,057 that has been included in investments at cost, as commissions for
such transactions.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS")
is an Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS
Ohio"), and BISYS are subsidiaries of the BISYS Group, Inc.
BISYS, with whom certain officers and a director of the Fund are affiliated,
serves the Fund as administrator, principal underwriter and distributor. Such
officers and the director are paid no fees directly by the Portfolios for
serving as officers and as director of the Fund. Under the terms of the
Administration Agreement, BISYS' fees are computed at 0.20% of the average
daily net assets of each Portfolio.
Provident also serves as transfer agent and shareholder servicing agent to
the Fund. BISYS Ohio served as sub-transfer agent for the Investor B Shares
through March 24, 1997. On March 25, 1997, Provident became the Transfer
Agent for all shares of the Fund. Under the terms of the Master Transfer and
Record keeping Agreement, Provident is entitled to receive fees based on the
number of shareholders of each Portfolio and certain out- of-pocket expenses.
Under the terms of the Shareholder Services Plan, each Portfolio is
authorized to pay compensation to banks and other financial institutions,
including Provident and BISYS or other providers for record keeping and/or
administrative support services. As of December 31, 1997, there were no
shareholder servicing agreements entered into on behalf of any of the
Portfolios.
The Fund has adopted an Investor A Distribution and Shareholder Service Plan
and Agreement ("Investor A Plan") and an Investor B Distribution and
Shareholder Services Plan and Agreement ("Investor B Plan"), each in
accordance with Rule 12b-1 under the 1940 Act. Pursuant to the Investor A
Plan, each Portfolio is authorized to pay or reimburse BISYS, as distributor
of Investor A Shares, a periodic amount, calculated at an annual rate not to
exceed 0.25% of the average daily net asset value of Investor A Shares of
each Portfolio. Pursuant to the Investor B Plan, each variable net asset
value fund is authorized to pay or reimburse BISYS, as distributor of
Investor B Shares, (a) a distribution fee in an amount not to exceed, on an
annual basis, 0.75% of the average daily net asset value of Investor B Shares
of that Portfolio and (b) a service fee in an amount not to exceed 0.25% of
the average daily net asset value of Investor B Shares of that Portfolio.
These fees may be used by BISYS to pay banks, broker dealers and other
Continued
47
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
institutions, including Provident, or to reimburse BISYS or its affiliates,
to finance any activity which is principally intended to result in the sale
of shares or to compensate for providing shareholder services.
For the year ended December 31, 1997, BISYS received $279,254 from
commissions on sales of capital shares, of which $386 was reallowed to
brokers affiliated with Provident.
Provident and certain of its affiliates own shares in the U.S. Government
Income Fund. As of December 31, 1997, Provident owns $23,842,765 or 47% of
the Portfolio.
Fees may be voluntarily reduced or reimbursed to assist the Portfolios in
maintaining competitive expense ratios. Information regarding these
transactions is as follows for the year ended December 31, 1997:
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME
SECURITIES MONEY U.S. GOVERNMENT EQUITY
MARKET FUND INCOME FUND FUND
---------------- --------------- --------
<S> <C> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee
reductions
(percentage of average net
assets).......................... 0.15% 0.40% 0.95%
Voluntary fee reductions.......... NA NA NA
ADMINISTRATION FEES:
Annual fee (percentage of average
net assets)...................... 0.20% 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee
reductions
(percentage of average net
assets).......................... 0.25% 0.25% 0.25%
Voluntary fee reductions.......... $242,899 $29,297 $ 41,154
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average
net assets)...................... NA 1.00% 1.00%
Custodian and Accounting Fees:.... $ 81,531 $55,655 $144,048
Transfer Agent Fees:.............. $ 33,896 $50,879 $ 96,037
</TABLE>
Continued
48
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
5. RELATED PARTY TRANSACTIONS, CONTINUED:
<TABLE>
<CAPTION>
OHIO
TAX-FREE BALANCED
BOND FUND FUND
--------- --------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee reductions (percentage of
average net assets)...................................... 0.50% 0.90%
Voluntary fee reductions.................................. $ 8,196 $20,662
ADMINISTRATION FEES:
Annual fee (percentage of average net assets)............. 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee reductions (percentage of
average net assets)...................................... 0.25% 0.25%
Voluntary fee reductions.................................. NA $10,678
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets)............. 1.00% 1.00%
CUSTODIAN AND ACCOUNTING FEES:............................ $13,711 $33,160
TRANSFER AGENT FEES:...................................... $39,534 $61,796
EXPENSE REIMBURSEMENTS:................................... $23,066 NA
</TABLE>
<TABLE>
<CAPTION>
STOCK
APPRECIATION LARGE COMPANY
FUND SELECT FUND
------------ -------------
<S> <C> <C>
INVESTMENT ADVISOR FEES:
Annual fee before voluntary fee reductions
(percentage of average net assets)............... 0.80% 0.80%
ADMINISTRATION FEES:
Annual fee (percentage of average net assets)..... 0.20% 0.20%
12B-1 FEES (INVESTOR A):
Annual fee before voluntary fee reductions
(percentage of average net assets)............... 0.25% 0.25%
12B-1 FEES (INVESTOR B):
Annual fee (percentage of average net assets)..... 100% 1.00%
CUSTODIAN AND ACCOUNTING FEES:.................... $42,139 $49,119
TRANSFER AGENT FEES:.............................. $118,492 $41,424
Expense reimbursements............................ NA NA
</TABLE>
NA--Not applicable
6. ACQUISITION OF COMMON TRUST FUNDS A, B, C, F-1 AND G
On January 2, 1997, the Large Company Select Fund issued Investor A shares in
a tax free conversion to acquire the assets and liabilities, including
distributions payable of $26,562, of the Common Trust A and Common Trust G of
The Provident Bank. The following is a summary of Investor A shares issued,
net assets acquired, net asset value per share and unrealized appreciation as
of the date acquired:
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 2,781
Net assets acquired (000)'s.......................................... $27,813
Net asset value...................................................... $ 10.00
Unrealized appreciation (000)'s...................................... $12,592
Net assets of mutual fund before acquisition......................... $ 0
</TABLE>
Continued
49
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
6. ACQUISITION OF COMMON TRUST FUNDS A, B, C, F-1 AND G, CONTINUED:
On January 9, 1997, the Ohio Tax Free Fund issued Investor A shares in a tax
free conversion to acquire the assets and liabilities, including
distributions payable of $15,577, of the Common Trust Fund B of The Provident
Bank. The following is a summary of Investor A shares issued, net assets
acquired, net asset value per share and unrealized appreciation as of the
date acquired.
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 1,097
Net assets acquired (000)'s.......................................... $11,400
Net asset value...................................................... $ 10.39
Unrealized appreciation (000)'s...................................... $ 465
Net assets of mutual fund before acquisition......................... $11,624
</TABLE>
On January 23, 1997, the U.S. Government Income Fund issued Investor A shares
in a tax free conversion to acquire the assets and liabilities, including
distributions payable of $26,148, of the Common Trust Fund C and Common Trust
Fund F-1 of The Provident Bank. The following is a summary of Investor A
shares issued, net assets acquired, net asset value per share and unrealized
appreciation as of the date acquired.
<TABLE>
<S> <C>
Investor A Shares (000)'s............................................ 1,761
Net assets acquired (000)'s.......................................... $16,607
Net asset value...................................................... $ 9.43
Unrealized appreciation (000)'s...................................... $ 392
Net assets of mutual fund before acquisition......................... $34,983
</TABLE>
7. SUBSEQUENT EVENTS
The Company has entered into an Agreement and Plan of Reorganization and
Liquidation, dated as of March 21, 1997 (the "Plan"), with The Riverfront
Funds, an Ohio business trust (the "Trust"), whereby each Fund of the Company
will become a separate series of an Ohio business trust rather than a
separate series of a Maryland corporation (the "Conversion").
The Conversion is subject to certain regulatory approvals and to approval by
the shareholders of the Funds as a special Shareholder Meeting which has been
adjourned to seek further proxies and is currently expected to be held in the
first quarter of 1998. If the shareholders approve the Conversion and the
necessary regulatory approval is obtained, it is expected that the Conversion
will take place.
8. ELIGIBLE DISTRIBUTIONS (UNAUDITED):
The Riverfront Funds designates the following percentage of distributions
eligible for the dividends received deductions for the following funds:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
Income Equity Fund................................................. 12.79%
Balanced Fund...................................................... 39.26%
Stock Appreciation Fund............................................ 10.60%
</TABLE>
Continued
50
<PAGE>
- --------------------------------------------------------------------------------
Notes to Financial Statements, continued
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc. December 31, 1997
9. EXEMPT-INTEREST INCOME DESIGNATIONS (UNAUDITED):
The Riverfront Funds designate the following exempt-interest dividends for
the taxable year ended December 31, 1997:
<TABLE>
<CAPTION>
TAX-
EXEMPT
DISTRIBUTION
------------
<S> <C>
Ohio Tax-Free Bond Fund......................................... $312,690
</TABLE>
10. FEDERAL INCOME TAX INFORMATION (UNAUDITED):
The accompanying table details distributions from mid-term and long-term
capital gains for the following Portfolios for the period ended December 31,
1997:
<TABLE>
<CAPTION>
MID-TERM LONG-TERM
28% 20%
---------- ----------
<S> <C> <C>
Income Equity Fund..................................... $3,522,442 $3,052,514
Ohio Tax-Free Fund..................................... $ 377,842 $ 219,421
Balanced Fund.......................................... $1,065,887 $ 486,992
Stock Appreciation Fund................................ $2,032,827 $ 291,201
Large Company Select Fund.............................. $2,117,560 $1,905,205
</TABLE>
At December 31, 1997, the following Portfolios have capital loss
carryforwards for tax purposes which are available to offset future capital
gains, if any:
<TABLE>
<CAPTION>
CAPITAL LOSS
CARRYFORWARD EXPIRES
------------ -------
<S> <C> <C>
U.S. Government Securities Money Market Fund............. $ 875 2002
U.S. Government Securities Money Market Fund............. $ 1,415 2003
U.S. Government Securities Money Market Fund............. $ 31 2005
U.S. Government Income Fund.............................. $552,136 2002
U.S. Government Income Fund.............................. $516,479 2003
</TABLE>
Under current tax law, capital losses realized October 31 may be deferred and
treated as occurring on the first day of the following fiscal year. The
following deferred losses will be treated as arising on the first day of the
fiscal year ended December 31, 1998:
<TABLE>
<CAPTION>
POST-OCTOBER
CAPITAL LOSSES
--------------
<S> <C>
U.S. Government Securities Money Market Fund................... $ 1,432
Income Equity Fund............................................. $119,866
</TABLE>
Continued
51
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT SECURITIES MONEY MARKET FUND
------------------------------------------------
YEARS ENDED DECEMBER 31,
------------------------------------------------
1997 1996 1995 1994 (A) 1993 (A)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- -------- --------
Investment Activities
Net investment income... 0.049 0.046 0.050 0.040 0.030
-------- -------- -------- -------- --------
Distributions
Net investment income... (0.049) (0.046) (0.050) (0.040) (0.030)
-------- -------- -------- -------- --------
NET ASSET VALUE,
END OF PERIOD........... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======== ========
Total Return............. 5.02% 4.89% 5.52% 3.78% 2.90%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of $142,569 $181,017 $157,495 $149,374 $133,207
period (000)............
Ratio of expenses to 0.64% 0.59% 0.58% 0.51% 0.32%
average net assets......
Ratio of net investment 4.90% 4.78% 5.34% 3.70% 2.85%
income to average net
assets..................
Ratio of expenses to 0.79% 0.84% 0.83% 0.80% 0.42%
average net assets*.....
Ratio of net investment 4.75% 4.53% 5.09% 3.41% 2.75%
income to average net
assets*.................
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a)Audited by other auditors.
See Notes to Financial Statements.
52
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
U.S. GOVERNMENT INCOME FUND
------------------------------------------------------------------------------------------
JANUARY 17, YEARS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO DECEMBER 31,
------------------------------------------- DECEMBER 31, DECEMBER 31, -------------------
1997 1996 1995 1995 (A) 1994 (E) 1993 (E)
--------------------- --------------------- ------------ ------------ -------- --------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.43 $10.64 $ 9.71 $10.95 $ 8.92 $10.00 $ 9.91 $ 9.76
------- ------ ------- ------ ------- ------ ------- -------
Investment Activities
Net investment income.. 0.49 0.48 0.52 0.49 0.54 0.43 0.54 0.51
Net realized and
unrealized gains
(losses) from
investments........... 0.14 0.14 (0.29) (0.31) 0.79 0.94 (0.99) 0.20
------- ------ ------- ------ ------- ------ ------- -------
Total from Investment
Activities............ 0.63 0.62 0.23 0.18 1.33 1.37 (0.45) 0.71
------- ------ ------- ------ ------- ------ ------- -------
Distributions
Net investment income.. (0.50) (0.49) (0.51) (0.49) (0.54) (0.42) (0.54) (0.50)
In excess of net
investment income..... (0.08) (0.09) -- -- -- -- -- (0.06)
------- ------ ------- ------ ------- ------ ------- -------
Total Distributions.... (0.58) (0.58) (0.51) (0.49) (0.54) (0.42) (0.54) (0.56)
------- ------ ------- ------ ------- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD.......... $ 9.48 $10.68 $ 9.43 $10.64 $ 9.71 $10.95 $ 8.92 $ 9.91
======= ====== ======= ====== ======= ====== ======= =======
Total Return (excludes
sales/redemption
charge)................ 6.94% 6.07% 2.51% 1.72% 15.22% 13.96%(d) (4.64)% 7.38%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $49,017 $1,309 $33,694 $1,296 $36,538 $1,263 $32,721 $30,078
Ratio of expenses to
average net assets..... 1.14% 1.95% 1.11% 1.96% 1.09% 1.90%(b) 0.86% 0.65%
Ratio of net investment
income to average net
assets................. 5.40% 4.56% 5.45% 4.59% 5.74% 4.80%(b) 5.78% 5.05%
Ratio of expenses to
average net assets*.... 1.20% 1.95% 1.20% 1.96% 1.18% 1.90%(b) 1.14% 1.08%
Ratio of net investment
income to average net
assets*................ 5.34% 4.56% 5.36% 4.59% 5.65% 4.80%(b) 5.49% 4.62%
Portfolio turnover rate
(c).................... 71% 71% 53% 53% 75% 75% 83% 220%
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(e) Audited by other auditors.
See Notes to Financial Statements.
53
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
INCOME EQUITY FUND
----------------------------------------------------------------------------------------
JANUARY 17, YEARS ENDED
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO DECEMBER 31,
------------------------------------------- DECEMBER 31 DECEMBER 31, ------------------
1997 1996 1995 1995 (A) 1994 (E) 1993 (E)
--------------------- --------------------- ----------- ------------ -------- --------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.92 $ 12.16 $ 11.70 $ 11.85 $ 10.15 $10.00 $ 10.63 $ 10.78
------- ------- ------- ------- ------- ------ ------- -------
Investment Activities
Net investment income.. 0.16 0.06 0.21 0.12 0.27 0.13 0.32 0.28
Net realized and
unrealized gains
from investments...... 3.11 3.17 2.12 2.21 2.89 2.78 -- 1.01
------- ------- ------- ------- ------- ------ ------- -------
Total from Investment
Activities............ 3.27 3.23 2.33 2.33 3.16 2.91 0.32 1.29
------- ------- ------- ------- ------- ------ ------- -------
Distributions
Net investment income.. (0.16) (0.06) (0.21) (0.12) (0.27) (0.13) (0.31) (0.27)
In excess of net
investment income..... -- -- -- -- -- -- -- (0.03)
Net realized gains..... (3.35) (3.35) (1.90) (1.90) (1.34) (0.93) (0.49) (1.14)
------- ------- ------- ------- ------- ------ ------- -------
Total Distributions.... (3.51) (3.41) (2.11) (2.02) (1.61) (1.06) (0.80) (1.44)
------- ------- ------- ------- ------- ------ ------- -------
NET ASSET VALUE,
END OF PERIOD.......... $ 11.68 $ 11.98 $ 11.92 $ 12.16 $ 11.70 $11.85 $ 10.15 $ 10.63
======= ======= ======= ======= ======= ====== ======= =======
Total Return (excludes
sales/redemption
charge)................ 28.20% 27.19% 19.88% 19.67% 31.45% 29.28%(d) 3.08% 12.11%
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $83,841 $17,563 $73,368 $ 7,632 $60,845 $2,833 $34,965 $24,387
Ratio of expenses to
average net assets..... 1.75% 2.55% 1.76% 2.48% 1.49% 2.46%(b) 1.30% 1.47%
Ratio of net investment
income to
average net assets..... 1.21% 0.40% 1.62% 0.88% 2.27% 1.12%(b) 2.93% 2.55%
Ratio of expenses to
average net assets*.... 1.80% 2.55% 1.85% 2.54% 1.74% 2.51%(b) 1.58% 1.64%
Ratio of net investment
income to
average net assets*.... 1.16% 0.40% 1.53% 0.82% 2.02% 1.07%(b) 2.65% 2.38%
Portfolio turnover rate
(c).................... 157% 157% 166% 166% 180% 180% 119% 145%
Average commission rate
paid (f)............... $0.0544 $0.0544 $0.0541 $0.0541
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Annualized.
(c) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(d) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(e) Audited by other auditors.
(f) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
54
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
OHIO TAX-FREE BOND FUND
-------------------------------------------------------------------------------------
JANUARY 17, FROM AUGUST 1,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO 1994 THROUGH
------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995 (A) 1994 (A)(E)
--------------------- --------------------- ------------ ------------ --------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $10.41 $10.64 $ 10.51 $10.73 $ 9.83 $10.00 $ 10.00
------ ------ ------- ------ ------- ------ -------
Investment Activities
Net investment income.. 0.42** 0.35** 0.40 0.32 0.39 0.27 0.12
Net realized and
unrealized gains
(losses) from
investments........... -- (0.02) (0.10) (0.09) 0.67 0.73 (0.17)
------ ------ ------- ------ ------- ------ -------
Total from Investment
Activities............ 0.42 0.33 0.30 0.23 1.06 1.00 (0.05)
------ ------ ------- ------ ------- ------ -------
Distributions
Net investment income.. (0.38) (0.31) (0.40) (0.32) (0.38) (0.27) (0.12)
In excess of net
investment income..... (0.09) (0.09) -- -- -- -- --
Net realized gains..... (1.35) (1.35) -- -- -- -- --
Tax return of capital.. (0.03) (0.03) -- -- -- -- --
------ ------ ------- ------ ------- ------ -------
Total Distributions.... (1.85) (1.78) (0.40) (0.32) (0.38) (0.27) (0.12)
------ ------ ------- ------ ------- ------ -------
NET ASSET VALUE,
END OF PERIOD.......... $ 8.98 $ 9.19 $ 10.41 $10.64 $ 10.51 $10.73 $ 9.83
====== ====== ======= ====== ======= ====== =======
Total Return (excludes
sales/redemption
charge)................ 4.27% 3.24% 2.95% 2.21% 10.96% 10.10%(b) (0.47)%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $2,411 $1,135 $10,693 $ 984 $11,091 $ 626 $10,190
Ratio of expenses to
average net assets..... 1.34% 2.14% 1.45% 2.25% 1.49% 2.27%(c) 1.08%(c)
Ratio of net investment
income to
average net assets..... 4.19% 3.39% 3.87% 3.07% 3.77% 3.01%(c) 2.92%(c)
Ratio of expenses to
average net assets*.... 1.96% 2.77% 1.55% 2.36% 1.64% 2.41%(c) 1.44%(c)
Ratio of net investment
income to
average net assets*.... 3.57% 2.76% 3.77% 2.96% 3.62% 2.87%(c) 2.56%(c)
Portfolio turnover rate
(d).................... 4% 4% 6% 6% 34% 34% 29%
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
** Calculated using average shares outstanding throughout the year.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(e) Audited by other auditors.
See Notes to Financial Statements.
55
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
BALANCED FUND
----------------------------------------------------------------------------------------
JANUARY 17, FROM SEPTEMBER 1,
YEAR ENDED DECEMBER 31, YEAR ENDED 1995 TO 1994 THROUGH
------------------------------------------- DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1995 1995 (A) 1994 (A)(F)
--------------------- --------------------- ------------ ------------ -----------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 11.69 $ 12.04 $ 11.36 $ 11.70 $ 9.79 $10.00 $10.00
------- ------- ------- ------- ------ ------ ------
Investment Activities
Net investment income.. 0.23 0.12 0.31 0.26 0.35 0.25 0.10
Net realized and
unrealized gains
(losses) from
investments........... 1.71 1.77 0.33 0.34 1.66 1.79 (0.18)
------- ------- ------- ------- ------ ------ ------
Total from Investment
Activities............. 1.94 1.89 0.64 0.60 2.01 2.04 (0.08)
------- ------- ------- ------- ------ ------ ------
Distributions
Net investment income.. (0.23) (0.12) (0.31) (0.26) (0.34) (0.24) (0.13)
Net realized gains..... (1.10) (1.10) -- -- (0.10) (0.10) --
------- ------- ------- ------- ------ ------ ------
Total Distributions.... (1.33) (1.22) (0.31) (0.26) (0.44) (0.34) (0.13)
------- ------- ------- ------- ------ ------ ------
NET ASSET VALUE,
END OF PERIOD.......... $ 12.30 $ 12.71 $ 11.69 $ 12.04 $11.36 $11.70 $ 9.79
======= ======= ======= ======= ====== ====== ======
Total Return (excludes
sales/redemption
charge)................ 16.77% 15.82% 5.76% 5.27% 20.83% 20.53%(b) (0.82)%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $ 9,563 $11,483 $10,786 $10,008 $9,427 $5,030 $2,709
Ratio of expenses to
average net assets..... 1.86% 2.72% 1.70% 2.54% 1.28% 2.04%(d) 1.48%(d)
Ratio of net investment
income to average net
assets................. 1.80% 0.93% 2.87% 2.03% 3.48% 2.69%(d) 4.01%(d)
Ratio of expenses to
average net assets*.... 2.07% 2.82% 1.94% 2.68% 1.67% 2.84%(d) 4.61%(d)
Ratio of net investment
income to average net
assets*................ 1.59% 0.83% 2.63% 1.89% 3.09% 1.89%(d) 0.88%(d)
Portfolio turnover rate
(e).................... 102% 102% 98% 98% 13% 13% 1%
Average commission rate
paid (g)............... $0.0627 $0.0627 $0.0891 $0.0891
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Represents total return for the Investor A Shares from January 1, 1995 to
January 16, 1995 plus the total return for the Investor B Shares from
January 17, 1995 to December 31, 1995.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
56
<PAGE>
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[This Page Intentionally Left Blank]
57
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
------------------------------------------------------------------------------------
FROM OCTOBER 1, FROM OCTOBER 1,
YEAR ENDED DECEMBER 31, 1995 THROUGH 1995 THROUGH
------------------------------------------------- DECEMBER 31, DECEMBER 31,
1997 1996 1995 (B) 1995 (A)(B)
----------------------- ----------------------- --------------- ---------------
INVESTOR A INVESTOR B INVESTOR A INVESTOR B INVESTOR A INVESTOR B
---------- ---------- ---------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.43 $ 9.77 $ 9.50 $ 9.91 $ 10.00 $10.00
------- ------- ------- ------- ------- ------
Investment Activities
Net investment loss.... (0.04) (0.08) (0.14) (0.15) (0.01) (0.01)
Net realized and
unrealized gains
(losses) from
investments........... 1.75 1.77 1.10 1.04 (0.12) (0.08)
------- ------- ------- ------- ------- ------
Total from Investment
Activities............ 1.71 1.69 0.96 0.89 (0.13) (0.09)
------- ------- ------- ------- ------- ------
Distributions
Net realized gains..... (1.97) (1.97) (1.03) (1.03) (0.37) --
------- ------- ------- ------- ------- ------
NET ASSET VALUE,
END OF PERIOD.......... $ 9.17 $ 9.49 $ 9.43 $ 9.77 $ 9.50 $ 9.91
======= ======= ======= ======= ======= ======
Total Return (excludes
sales/redemption
charge)................ 18.79% 17.86% 10.17% 9.05% (1.20)%(c) (0.90)%(c)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets at end of
period (000)........... $24,312 $ 1,265 $31,227 $ 687 $40,995 $ 72
Ratio of expenses to
average net assets..... 2.11% 2.86% 1.91% 2.64% 1.76%(d) 2.30%(d)
Ratio of net investment
loss to average net
assets................. (0.43)% (1.20)% (1.25)% (2.01)% (0.49)%(d) (1.69)%(d)
Ratio of expenses to
average net assets*.... (g) (g) (g) (g) 1.77%(d) 2.39%(d)
Ratio of net investment
loss to average net
assets*................ (g) (g) (g) (g) (0.50)%(d) (1.78)%(d)
Portfolio turnover rate
(e).................... 67% 67% 162% 162% 46% 46%
Average commission rate
paid (h)............... $0.0601 $0.0601 $0.0597 $0.0597
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or expense reimbursements had not
occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) As of September 30, 1995, the Stock Appreciation Fund acquired all of the
assets of the MIM Stock Appreciation Fund and the MIM Stock Growth Fund.
Financial highlights for periods prior to September 30, 1995 represent the
performance of the MIM Stock Appreciation Fund. The per share data for the
periods prior to September 30, 1995 have been restated to reflect the
impact of the change of net asset value of the Stock Appreciation Fund on
September 30, 1995 from $17.34 to $10.00.
(c) Not annualized.
(d) Annualized.
(e) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(f) Audited by other auditors.
(g) There were no waivers or reimbursements during the period.
(h) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued. Disclosure is not required for periods ending prior to September 1,
1996.
See Notes to Financial Statements.
58
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
STOCK APPRECIATION FUND
--------------------------------
YEARS ENDED SEPTEMBER 30,
--------------------------------
1995 (F) 1994 (F) 1993 (F)
-------- -------- --------
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD....................... $ 8.25 $ 10.18 $ 7.98
------- ------- -------
Investment Activities
Net investment loss....................... (0.07) (0.12) (0.17)
Net realized and unrealized gains
(losses) from investments................ 2.14 (1.26) 2.57
------- ------- -------
Total from Investment Activities.......... 2.07 (1.38) 2.40
------- ------- -------
Distributions
Net realized gains........................ (0.32) (0.55) (0.20)
------- ------- -------
NET ASSET VALUE,
END OF PERIOD............................. $ 10.00 $ 8.25 $ 10.18
======= ======= =======
Total Return (excludes sales/redemption
charge)................................... 25.12% (13.91)% 30.61%
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).......... $44,500 $47,880 $59,330
Ratio of expenses to average net assets.... 2.61% 2.44% 2.47%
Ratio of net investment loss to average net (0.73)% (1.35)% (1.85)%
assets....................................
Ratio of expenses to average net assets*... (g) (g) (g)
Ratio of net investment loss to average net (g) (g) (g)
assets*...................................
Portfolio turnover rate (e)................ 197% 254% 216%
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
The Riverfront Funds, Inc.
<TABLE>
<CAPTION>
LARGE COMPANY
SELECT FUND
------------------------
FROM JANUARY 2, 1997
THROUGH DECEMBER 31,
1997 (A)
------------------------
INVESTOR A INVESTOR B
---------- ----------
<S> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD............................... $ 10.00 $ 10.00
------- -------
Investment Activities
Net investment income (loss)...................... -- (0.04)
Net realized and unrealized gains (losses) from
investments...................................... 2.77 2.72
------- -------
Total from Investment Activities.................. 2.77 2.68
------- -------
Distributions
Net realized gains................................ (1.40) (1.40)
Tax return of capital............................. (0.03) --
------- -------
Total Distributions............................... (1.43) (1.40)
------- -------
NET ASSET VALUE,
END OF PERIOD..................................... $ 11.34 $ 11.28
======= =======
Total Return (excludes sales/redemption charge).... 27.93%(b) 26.97%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets at end of period (000).................. $33,614 $ 2,464
Ratio of expenses to average net assets............ 1.69%(c) 2.47%(c)
Ratio of net investment income (loss) to average 0.00%(c) (1.10)%(c)
net assets........................................
Ratio of expenses to average net assets............ (f) (f)
Ratio of net investment income to average net (f) (f)
assets............................................
Portfolio turnover rate (d)........................ 39% 39%
Average commission rate paid (e)................... $0.0960 $0.0960
</TABLE>
- -------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover rate is calculated on the basis of the Portfolio as a
whole without distinguishing between the classes of shares issued.
(e) Represents the dollar amount of commissions paid on portfolio transactions
divided by the total number of portfolio shares purchased and sold for
which commissions were charged and is calculated on the basis of the
portfolio as a whole without distinguishing between the classes of shares
issued.
(f) There were no waivers or reimbursements during the period.
See Notes to Financial Statements.
60
<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
2/98
