<PAGE>
THE RIVERFRONT
STOCK APPRECIATION FUND
ANNUAL REPORT
SEPTEMBER 30, 1995
Dear Shareholders:
After a slow start, the 12 months through September 30, 1995, proved to be an
excellent period for stock investors as major market indexes continued to hit
new highs. The Riverfront Stock Appreciation Fund gained 25.12% during the
period, compared to a 29.7% gain for the Standard & Poor's 500 Stock Index, the
benchmark for the Fund.
The Fund's investment policy is to invest in stocks of companies that seem
likely to deliver superior earnings growth, with an emphasis on small and mid-
sized companies. In fact, during the past five years the average annual earnings
growth rate of the companies whose shares were owned by the Fund was roughly
35%.
OPPORTUNITIES IN TECHNOLOGY
During the recent 12-month period, many stocks in the technology sector
exhibited strong earnings growth potential. The Fund's technology holdings
typically accounted for 20% to 25% of its portfolio -- with that percentage
going as high as 37%, as stock prices rose.
The Fund's technology investments included shares of companies such as Bay
Network and Cisco Systems, which make computer networks and networking products
to address corporate communications needs and to improve business productivity.
Other technology holdings that helped the Fund's performance included Informix,
which makes software to manage databases, and U.S. Robotics, which manufactures
modems.
RAPID GROWTH IN FINANCIAL SERVICES
Other industries also offered significant opportunities to buy shares of fast-
growing firms at reasonable prices. For example, the financial services sector
benefited from the strong economy and falling interest rates, which increased
demand for loans. The Fund seized the opportunity to invest in regional banks
such as the Bank of Boston, which was a good performer. In addition, the stock
and bond markets' strong gains buoyed results at brokerage firms such as Charles
Schwab, which also was among the Fund's holdings.
<PAGE>
In addition, despite a generally poor environment for retail firms, some
speciality retailers offered good opportunities for the Fund. Companies such as
CompUSA, a speciality computer store whose shares were owned by the Fund,
continue to take market share away from department stores and other retail
outlets. Likewise, some discounters have gained ground. As a result, the Fund
benefited from its investments in companies such as Men's Wearhouse, which sells
discounted men's clothing.
NEW FUND, SAME STRATEGY
Effective September 29, 1995, the MIM Stock Appreciation Fund was combined with
the MIM Stock Fund to become The Riverfront Stock Appreciation Fund. The new
Fund will continue to operate under the same portfolio manager and pursue the
same growth-oriented strategy as the MIM Stock Appreciation Fund.
We will continue to seek out shares of rapidly growing companies in industries
such as technology and health care, as well as other areas that look promising.
Such an approach requires a willingness to ride out volatile periods in the
market. But we believe that our strategy has the potential to deliver solid
returns for long-term investors.
If you have any questions about your investment in The Riverfront Stock
Appreciation Fund or require a prospectus, please call us at 1-800-424-2295.
Sincerely,
/s/ Stephen G. Mintos /s/ Martin Weisberg
Stephen G. Mintos Martin Weisberg
Chairman Portfolio Manager
The Riverfront Funds, Inc.
November 19, 1995
THE RIVERFRONT FUNDS ARE NOT FDIC INSURED AND ARE NOT OBLIGATIONS OR DEPOSITS
OF, OR ENDORSED OR GUARANTEED BY, THE PROVIDENT BANK OR ITS AFFILIATES.
INVESTMENT PRODUCTS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF
PRINCIPAL.
<PAGE>
The Riverfront Funds, Inc.
Stock Appreciation Fund
September 30, 1995
[GRAPH APPEARS HERE]
The graph that appears above represents a comparison between a $10,000
investment made on July 27, 1987 in shares of the Riverfront Stock Appreciation
Fund, in the S&P 500 Index, and in the NASDAQ Composite Index. The chart
indicates that $10,000 invested on July 27, 1987 in fund shares would have been
worth $22,640 on September 30, 1995 as opposed to $23,721 and $23,993 had
$10,000 been invested in the S&P 500 Index and in the NASDAQ Composite Index,
respectively. Further, average annual total return of the Riverfront Stock
Appreciation Fund was 25.12%, 22.21%, and 10.48% for the one-year, five-year,
and since inception periods.
The preceding graphs reflect total return assuming a $10,000 initial investment
in the fund as compared to a broad-based market index for the same period.
Performances are based upon historical results and are not intended to indicate
future performance.
<PAGE>
THE RIVERFRONT FUNDS, INC.
Statement of Assets and Liabilities
September 30, 1995
<TABLE>
<CAPTION>
Stock
Appreciation
Fund
----------------
<S> <C>
Assets
Portfolio securities @ market value
(includes Short-Term Investments) $ 40,633,005
Cash 45,696
Financial Reserves Fund 2,782,209
Dividends and Interest receivable 31,873
Receivable from brokers for investments sold 999,251
Prepaid expenses and other assets 7,874
----------------
Total Assets 44,499,908
----------------
Liabilities
Dividends payable 17,723
Accrued expenses 1,587
Accrued audit & legal fees 26,020
----------------
Total Liabilities 45,330
----------------
Net Assets 44,454,578
Net Assets consist of:
Paid in capital 35,265,902
Net unrealized appreciation from investments 9,188,676
----------------
Net Assets $ 44,454,578
================
Outstanding units of beneficial interest (shares) 4,445,453
================
Net asset value - redemption and offering price $ 10.00
================
</TABLE>
See notes to financial statements.
<PAGE>
THE RIVERFRONT FUNDS, INC.
Statement of Operations
For the period ended September 30, 1995
<TABLE>
<CAPTION>
Stock
Appreciation
Fund
----------------
<S> <C>
Investment Income
Income
Interest $ 368,293
Dividends 384,381
----------
Total Income 752,674
----------
Expenses
Management fees 439,627
Custodial fees 24,666
Legal fees 36,163
Distribution fees 279,882
Servicing fees 99,958
Transfer agent fees 75,871
Legal & accounting fees 24,281
Blue sky fees 18,296
Board of directors fees 2,779
Other 43,421
----------
Total Expenses 1,044,944
----------
Net Investment Loss (292,270)
----------
Realized and Unrealized Gains on Investments
Net realized gains on investments 3,024,858
Change in unrealized appreciation 5,538,265
----------
Net gain on investments 8,563,123
----------
Net increase in net assets resulting from operations $8,270,853
=========
</TABLE>
See notes to financial statements.
<PAGE>
THE RIVERFRONT FUNDS, INC.
Statements of Changes in Net Assets
For the period ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
Stock Appreciation Fund
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets -
Operations:
Net investment loss $ (292,270) $ (725,732)
Net realized gain on investments 3,024,858 715,333
Change in unrealized appreciation 5,538,265 (8,468,657)
------------ ------------
Net increase in net assets resulting from operations 8,270,853 (8,479,056)
------------ ------------
Dividends to shareholders from:
Net realized gain on investments (1,166,721) (1,869,901)
In excess of net realized gain (1,566,848)
------------ ------------
Total dividends (1,166,721) (3,436,749)
------------ ------------
Capital Share Transactions:
(Notes 4 and 5) (10,529,141) 463,566
------------ ------------
Total Increase (Decrease) (3,425,009) (11,452,239)
Net Assets Beginning of the Year 47,879,587 59,331,826
------------ ------------
Net Assets End of the Year $ 44,454,578 $ 47,879,587
============ ============
</TABLE>
See notes to financial statements.
<PAGE>
THE RIVERFRONT FUNDS, INC.
The Riverfront Stock Appreciation Fund
Portfolio of Investments
09/30/95
<TABLE>
<CAPTION>
Units Description Value
<C> <S> <C>
COMMON STOCK - 90.06%
Automobile-Mfg - 0.42%
3,000 Ford Motor Co. 93,375
2,000 General Motors Corp. 93,750
-----------
187,125
Banks-Super Regional - 2.94%
15,000 Bank Of Boston Corp 714,375
14,000 Corestates Financial Corp 512,750
2,500 Norwest Corp. 81,875
-----------
1,309,000
Beverages-Soft Drinks - 0.23%
2,000 Pepsico Inc. 102,000
-----------
Bldg-Heavy Const - 0.17%
2,000 Stone & Webster Inc. 75,500
-----------
Business Services-Misc - 0.24%
2,000 Reuters Holdings PLC ADR 105,750
-----------
Chemicals-Plastics - 0.29%
2,000 Eastman Chemical Co 128,000
-----------
Chemicals-Specialty - 1.61%
9,000 Hercules Corp. 522,000
3,000 Morton International Inc. 93,000
1,500 W.R. Grace & Co. 100,125
-----------
715,125
</TABLE>
<PAGE>
COMMON STOCK (Continued)
Computer-Integrated Syst - 0.86%
10,000 Oracle Corp. *** 383,750
-----------
Computer-Local Networks - 3.63%
9,000 3Com Corp. *** 409,500
13,500 Bay Networks 720,562
7,000 Cisco Systems Inc. *** 483,000
-----------
1,613,062
Computer-Memory Devices - 1.23%
15,000 Read Rite Corp. 547,500
-----------
Computer-Peripheral Eq - 2.83%
16,000 Adaptec Inc. *** 660,000
7,000 U.S. Robotics Inc. 596,750
-----------
1,256,750
Computer-Services - 2.62%
10,000 H B O & Co 625,000
20,000 National Data Corp 537,500
-----------
1,162,500
Computer-Software - 4.00%
20,000 Acclaim Entertainment Inc. *** 515,000
25,000 Informix Corp. *** 812,500
15,000 Symantec Corp 450,000
-----------
1,777,500
Consumer Products-Misc - 1.00%
7,500 Department 56 Inc. 352,500
4,000 Jostens Inc. 94,000
-----------
446,500
Diversified Operations - 0.23%
1,500 Lockheed Martin Corp. 100,687
-----------
<PAGE>
COMMON STOCK (Continued)
Elec-Parts Distributors - 0.59%
1,500 Arrow Electronics Inc. *** 81,562
3,500 Avnet 179,813
-----------
261,375
Elec-Semiconductors - 4.45%
15,000 Analog Devices Inc. *** 519,375
7,000 Cypress Semiconductor *** 269,500
14,000 Linear Technology Corp. 581,000
2,500 Motorola Inc. 191,250
3,000 National Semiconductor Corp. 82,875
10,000 Photronics Inc. 335,000
-----------
1,979,000
Finance-Consumer Loans - 2.18%
9,000 Household International 558,000
15,000 Olympic Financial Ltd 410,625
-----------
968,625
Finance-Investment Bkrs - 3.63%
3,000 Merrill Lynch & Co. Inc. 187,500
20,000 Raymond James Financial Inc. 435,000
20,000 Schwab (Charles) Corp. 560,000
16,875 Waterhouse Investment Services 430,312
-----------
1,612,812
Finance-Mrgt&Rel Svc - 0.27%
2,000 Green Tree Financial Corp. 122,000
-----------
Finance-Savings & Loan - 1.63%
15,000 Coast Savings Financial 393,750
20,000 Glendale Federal Svgs Bank 330,000
-----------
723,750
Instruments-Scientific - 1.04%
10,000 Helix Technology Corp. 462,500
-----------
<PAGE>
COMMON STOCK (Continued)
Insurance-Diversified - 0.24%
2,000 Travelers Inc. 106,250
-----------
Insurance-Prop/Cas/Titl - 1.74%
3,354 Allstate Corp. 119,067
7,500 Berkley W.R. Corp 340,313
2,000 Cna Financial Corp 212,000
2,500 Providian Corp 103,750
-----------
775,130
Leisure-Gaming - 2.02%
10,000 Grand Casino 406,250
15,000 Mirage Resorts, Inc. 493,125
-----------
899,375
Leisure-Photo Equip/Rel - 0.18%
2,000 Polaroid Corp. 79,500
-----------
Leisure-Toys/Games/Hobby - 0.23%
3,500 Mattel Inc. 103,250
-----------
Medical-Biomed/Genetics - 1.35%
12,000 Amgen Inc. *** 598,500
-----------
Medical-Drug/Diversified - 0.25%
1,500 Bristol Myers Squibb Co. 109,312
-----------
Medical-Drug - 1.36%
3,000 Glaxo Holdings Plc Adr 72,375
9,500 Merck & Co. Inc. 532,000
-----------
604,375
Medical-Hlth Maint Org - 1.10%
10,000 United Healthcare Corp. 488,750
-----------
<PAGE>
COMMON STOCK (Continued)
Medical-Hospitals - 1.09%
10,000 Columbia/Hca Healthcare Corp. 486,250
-----------
Medical-Instruments - 2.95%
15,000 Idexx Laboratories Inc *** 558,750
14,000 Medtronic Inc. 752,500
-----------
1,311,250
Medical-Outpnt/Hm Care - 1.15%
20,000 Healthsouth Rehabil. Corp. *** 510,000
-----------
Medical-Products - 1.92%
20,000 Boston Scientific Corp. 852,500
-----------
Medical-Whsle Drg/Sund - 0.55%
10,000 Gulf South Medical Supply 246,250
-----------
Medical/Dental-Supplies - 4.32%
20,000 Amsco Intl Inc. 397,500
15,000 Mentor Corp. 682,500
20,000 Steris Corp. *** 842,500
-----------
1,922,500
Metal Ores-Non Ferrous - 0.22%
3,000 Alcan Aluminium Ltd 97,125
-----------
Office-Equip & Automatn - 0.83%
15,000 In Focus Systems Inc. 369,375
-----------
Oil & Gas-Field Services - 1.04%
15,000 B. J. Services Co. 378,750
2,000 Halliburton Co. 83,500
-----------
462,250
<PAGE>
COMMON STOCK (Continued)
Oil & Gas-Intl Integrated - 0.34%
1,500 Mobil Corp. 149,437
-----------
Paper & Paper Products - 1.13%
7,500 Willamette Industries 500,625
-----------
Retail-Apparel/Shoe - 3.54%
15,000 Jones Apparel Group Inc. 534,375
15,000 Just For Feet 461,250
16,000 Mens Wearhouse Inc. 576,000
-----------
1,571,625
Retail-Consumer Elect - 1.28%
18,000 Circuit City Stores Inc. 569,250
-----------
Retail-Department Stores - 0.44%
3,000 Federated Department Stores New 85,125
2,500 May Department Stores Co. 109,375
-----------
194,500
Retail-Mail Order & Direct - 1.18%
15,000 Cuc International *** 523,125
-----------
Retail-Major Chains - 0.33%
2,000 Sears Roebuck & Co. 73,750
3,000 Wal-Mart Stores Inc. 74,625
-----------
148,375
Retail-Misc/Diversified - 1.46%
13,000 Sunglass Hut Intl Inc 650,000
-----------
<PAGE>
COMMON STOCK (Continued)
Retail-Restaurants - 7.05%
20,000 Apple South Inc. 455,000
22,500 Daka International Inc 736,875
20,000 Landrys Seafood Restaurant 360,000
14,000 Lone Star Steakhouse 574,000
2,500 McDonalds Corp 95,625
12,500 Papa John's Intl Inc. 562,500
6,500 Starbucks Corp. 246,188
5,000 Wendy's International Inc. 105,625
-----------
3,135,813
Retail/Whlse Computers - 1.93%
20,000 Compusa Inc 860,000
-----------
Retail/Whlse Office Supl - 2.25%
15,000 Corp Express 365,625
22,500 Staples Inc. *** 635,625
-----------
1,001,250
Shoes & Rel Apparel - 1.50%
6,000 Nike Inc. Cl B 666,750
-----------
Soap & Clng Preparatns - 0.24%
1,500 Clorox Co. 107,063
-----------
Telecommunications-Equip - 2.91%
10,000 Andrew Corp. *** 611,250
20,000 Applied Innovation Inc. *** 325,000
20,000 Eis Internatonal 357,500
-----------
1,293,750
Telecommunications-Svcs - 2.55%
12,500 Active Voice Corp 354,688
25,000 U.S. Long Distance Corp 376,563
12,500 Worldcom Inc. 401,563
-----------
1,132,814
<PAGE>
COMMON STOCK (Continued)
Textile-Apparel Mfg - 2.05%
15,000 Donkenny Inc. 421,875
10,000 St. John Knits Inc. 487,500
-----------
909,375
Tobacco - 0.28%
1,500 Philip Morris Companies Inc. 125,250
-----------
Transportation-Svcs - 0.97%
15,000 U.S. Delivery System Inc 431,250
-----------
COM. PAPER - 1.35%
Commercial Paper - 1.35%
300,000 Heller Financial Inc
5.74% due 10-05-95 300,000
300,000 Household Fin Corp
5.72% due 10-06-95 300,000
-----------
600,000
TOTAL INVESTMENTS
(Identified costs $31,444,329) $40,633,005
CASH - 6.36% 2,827,905
OTHER ASSETS
LESS LIABILITIES - 2.23% 993,668
-----------
TOTAL RIVERFRONT STOCK
APPRECIATION FUND - 100.00% $44,454,578
===========
*** Non-income producing securities.
<PAGE>
THE RIVERFRONT FUNDS, INC.
Stock Appreciation Fund
Financial Highlights
<TABLE>
<CAPTION>
For the period ended September 30,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 8.25 $10.18 $ 7.98 $ 7.70 $ 4.64
------ ------ ------ ------ ------
Investment Activities
Net investment income (0.07) (0.12) (0.17) (0.08) (0.11)
Net realized and unrealized gains
(losses) on securities 2.14 (1.26) 2.57 1.41 3.17
------ ------ ------ ------ ------
Total from Investment Activities 2.07 (1.38) 2.40 1.33 3.06
------ ------ ------ ------ ------
Distributions
From net investment income
From net realized gains (0.32) (0.55) (0.20) (1.05)
Returns of capital
------ ------ ------ ------ ------
Total Distributions (0.32) (0.55) (0.20) (1.05)
------ ------ ------ ------ ------
Net Asset Value, End of Period $10.00 $ 8.25 $10.18 $ 7.98 $ 7.70
====== ====== ====== ====== ======
Total Return 25.12 % (13.91)% 30.61 % 16.69 % 66.04 %
Net Assets, End of Period ($ Millions) 44.50 47.88 59.33 28.75 9.60
Ratio of expenses to average net assets 2.61 % 2.44 % 2.47 % 2.70 % 2.89 %
Ratio of net loss to average net assets (0.73)% (1.35)% (1.85)% (1.00)% (1.72)%
Portfolio Turnover Rate 197 % 254 % 216 % 288 % 240 %
------ ------ ------ ------ ------
</TABLE>
The per share data above have been restated to reflect the impact of the change
of the net asset value of the Stock Appreciation Fund on September 30, 1995
from $17.34 to $10.00.
See notes to financial statements.
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS
Year Ended September 30, 1995
Note 1 - Significant Accounting Policies
- ----------------------------------------
The Riverfront Stock Appreciation Fund (the "Fund") is a series of shares of The
Riverfront Funds, Inc. (the "Company"). The Company was incorporated in
Maryland on March 27, 1990. The Company is an open-end management investment
company which currently issues six series of shares of capital stock. The
following is a summary of significant accounting policies consistently followed
by the Fund in preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A. Securities Trading and Valuation
Securities transactions are accounted for on the trade date (i.e. the date
the order to buy or sell is executed).
Current values for the Fund's securities are determined as follows:
(1) Securities that are traded on a national securities exchange or the
over-the-counter National Market System (NMS) are valued on the basis of
the last sales price on the exchange where primarily traded or NMS prior to
the time of the valuation, provided that a sale has occurred and that this
price reflects current market value according to procedures established by
the Board of Directors;
(2) Securities traded in the over-the-counter market, other than NMS, for
which market quotations are readily available, or in the event no sale has
occurred under (1) above, are valued at the mean of the bid and asked
prices at the time of valuation;
(3) Short-term instruments which are purchased with maturities of sixty
days or less are valued at amortized cost (original purchase cost as
adjusted for amortization of premium or accretion of discount) which, when
combined with accrued interest, approximates market; short-term instruments
maturing in more than sixty days when purchased which are held on the
sixtieth day prior to maturity are valued at amortized cost (market value
on the sixtieth day adjusted for amortization of premium of accretion of
discount) which, when combined with accrued interest, approximates market;
and which in either case reflects fair value as determined by the Board of
Directors;
(4) Short-term money market instruments having maturities of more than
sixty days for which market quotations are readily available are valued at
current market value; where market quotations are not available, such
instruments are valued at fair value as determined by the Board of
Directors; and
continued
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Year Ended September 30, 1995
(5) The following are valued at prices deemed in good faith to be fair
under procedures established by the Board of Directors: (a) securities,
including restricted securities, for which complete quotations are not
readily available, (b) listed securities or those on NMS if, in the
Company's opinion, the last sales price does not reflect a current market
value or if no sale occurred, and (c) other assets.
B. Income Taxes
The Fund is treated as a separate entity for federal income tax purposes and
intends to qualify as a "regulated investment company" under the Internal
Revenue Code for so long as such qualification is in the best interest of its
shareholders. The Fund contemplates declaring as dividends 100% of its
investment company taxable income (before deduction of dividends paid). The Fund
intends to declare and distribute to its shareholders dividends from net
investment income monthly and to distribute all net realized long-term capital
gains at least annually.
C. Securities Gains or Losses and Investment Income
Gain or loss on the sale of portfolio securities is determined on the identified
cost basis. Interest income is recorded on the accrual basis and includes the
amortization of bond discount and premium. Dividend income from securities held
will be recorded on the ex-date of the dividend.
D. Fund Expenses
The Fund bears the following expenses relating to its operations: organizational
expenses, taxes, interest, any brokerage fees and commissions, fees and expenses
of the Directors of the Company, Commission fees, state securities qualification
fees and expenses, costs of preparing and printing prospectuses for regulatory
purposes and for distribution to the Fund's current shareholders outside
auditing and legal expenses, advisory and administration fees, fees and out-of-
pocket expenses of the Custodian and transfer agency, costs for independent
pricing services, certain insurance premiums, costs of maintenance of the
Company's existence, costs of shareholders' and directors' reports and meetings,
distribution expenses incurred pursuant to the Distribution Plans, servicing
fees incurred pursuant to the Services Plan, and any extraordinary expenses
incurred in the Fund's operations.
Note 2 - Investment Advisory, Administrative, and Distribution Agreements
- -------------------------------------------------------------------------
Investment advisory services are provided by The Provident Bank, One East Fourth
Street, Cincinnati, Ohio 45202 ("Provident") pursuant to the Investment Advisory
Agreement dated August 1, 1994, as amended as of July 6, 1995 (with respect to
the Stock Appreciation Fund) (the "Investment Advisory Agreement").
continued
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Year Ended September 30, 1995
For the services provided and expenses assumed pursuant to the Investment
Advisory Agreement, the Fund pay Provident a fee, computed daily and paid
monthly, at an annaul rate calculated as a percentage of the average daily net
assets of the Fund. The annual rate for the Fund is as follows: eighty one-
hundredths of one percent (0.80%). Provident may periodically voluntarily
reduce all or a portion of its advisory fee with respect to the Fund to increase
the net income of the Fund available for distribution as dividends.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services serves as
administrator (the "Administrator") to the Fund pursuant to the Administration
Agreement dated February 1, 1994, as amended as of July 6, 1995 (the
"Administration Agreement").
The Administrator receives a fee from the Fund for its services as Administrator
and expenses assumed pursuant to the Administration Agreement, calculated daily
and paid periodically, equal to a fee calculated at the annual rate of 0.20% of
the Fund's average daily net assets. The Administrator may voluntarily reduce
all or a portion of its fee with respect to the Fund in order to increase the
net income of the Fund available for distribution as dividends.
BISYS Fund Services serves as distributor to the Fund pursuant to the
Distribution Agreement dated February 1, 1994, as amended July 6, 1995 (the
"Distribution Agreement").
The Fund has adopted a Distribution and Shareholder Service Plan and Agreement
relating to its Investor A class of shares (the "Investor A Plan") pursuant to
Rule 12b-1 under the 1940 Act. The Fund has also adopted a Distribution and
Shareholder Service Plan and Agreement pursuant to Rule 12b-1 under the 1940 Act
relating to its Investor B Class of Shares (the "Investor B Plan").
Rule 12b-1 regulates circumstances under which an investment company may bear
expenses associated with the distribution of its shares. The Fund adopted both
its Investor A Plan and Investor B Plan prior to the public offering of its
shares of that class. The Investor A Plan provides that the Fund may incur
certain expenses which may not exceed a maximum amount up to 0.25% of such
Fund's average daily net asset value of its Investor A Shares for any fiscal
year occurring after the inception of that Investor A Plan.
The Investor B Plan authorizes the Fund to make payments to the Distributor in
an amount not in excess, on an annual basis, of 1.00% of the average daily net
asset value of the Investor B Shares of the Fund. Pursuant to the Investor B
Plan, the Fund is authorized to pay or reimburse the 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 the Fund
(the "Distribution Fee") and (b) a service fee in an amount not to exceed on an
annual basis 0.25% of the average daily net asset value of the Investor B shares
of such Fund (the "Service Fee").
continued
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Year Ended September 30, 1995
Note 3 - Custodian and Transfer Agent
- -------------------------------------
In addition to serving as investment adviser, Provident has entered into and
Amended and Restated Custodian, Fund Accounting and Recordkeeping Agreement with
the Company to provide custody and certain fund accounting services to the Fund.
Under the Amended and Restated Custodian, Fund Accounting and Recordkeeping
Agreement dated as of August 1, 1994, as amended July 6, 1995, Provident
receives an annual fee from the Fund, computed daily and paid monthly, at an
annual rate of 0.15%, of the average daily net assets of the Fund.
Under the Master Transfer and Recordkeeping Agreement, Provident receives from
the Fund for its Investor A shares a fee, computed daily and paid monthly at the
annual rate of 0.04% of the average daily net assets of that Fund's Investor A
shares. With respect to the Fund's Investor B shares, Provident receives from
the Fund a $20,000 annual fee plus $23 per Investor B shareholder account,
certain other fees for IRAs and payroll deduction plans, and out-of-pocket
expenses. Pursuant to a Sub-Transfer Agency Agreement dated as of January 1,
1995, as amended July 6, 1995, between Provident and BISYS Fund Services Ohio,
Inc., an affiliate of the Distributor ("BISYS"). BISYS provides sub-transfer
agency services for the Investor B shares of the Fund. For such services, BISYS
receives from Provident an annual fee of $20,000, $23 per Investor B shareholder
account and certain other fixed fees and out-of-pocket expenses.
Note 4 - Acquisition of MIM Stock Appreciation Fund and MIM stock Growth Fund
- ------------------------------------------------------------------------------
On September 30, 1995, Riverfront Stock Appreciation Fund acquired all the net
assets of the MIM Stock Appreciation Fund and MIM Stock Growth Fund pursuant to
a plan of reorganization and liquidation approved by the MIM shareholder on
September 27, 1995. The acquisition was accomplished by a tax free exchange of
Riverfront Stock Appreciation Fund shares for the net assets of the MIM Stock
Appreciation Fund and MIM Stock Growth Fund. The combined net assets immediately
after the acquisition amounted to $44,454,578.
continued
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Year Ended September 30, 1995
Note 5 - Capital Share Transactions
- -----------------------------------
As of September 30, 1995, the Company has authorized 3,000,000,000 shares of
$.001 par value capital stock, of which 125,000,000 are designated Investor A
Shares of the Fund and 125,000,000 are designated Investor B Shares of the Fund.
The Board of Directors of the Company is authorized to divide the Company's
capital stock into unlimited shares and classes. The shares of the Stock
Appreciation portfolio are offered in two separate classes: Investor A shares
and Investor B shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
Shares
---------
<S> <C>
Shares sold - Investor A 0
Shares issued in connection with
acquisition of MIM Stock Appreciation
Fund - Investor A 4,445,453
Shares redeemed - Investor A 0
---------
Net increase 4,445,453
</TABLE>
Note 6 - Purchases and Sales of Portfolio Investments
- -----------------------------------------------------
For the year ended September 30, 1995, aggregate purchases and sales of
portfolio securities were as follows in the Fund.
<TABLE>
<CAPTION>
Purchases Sales
------------ ------------
<S> <C> <C>
Investment securities $ 78,947,212 $ 88,169,661
Short-term investments 129,517,000 136,217,000
Treasury obligations 4,940,216 7,950,000
</TABLE>
Note 7 - Related Party Transactions
- -----------------------------------
For the year ended September 30, 1995, the Fund had yet to pay any fees to
related parties.
continued
<PAGE>
RIVERFRONT STOCK APPRECIATION FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
Year Ended September 30, 1995
Note 8 - Financial Instrument Disclosures
- -----------------------------------------
There are no reportable financial instruments which have any off-balance sheet
risk at September 30, 1995.
Note 9 - Securities Transactions
- --------------------------------
For federal income tax purposes, the cost of investments owned at September 30,
1995 was the same as identified cost.
As of September 30, 1995, the composition of unrealized appreciation (the excess
of value over tax cost) and depreciation (the excess of tax cost over value) was
as follows:
Appreciation Depreciation Net Appreciation
------------ ------------ ----------------
$9,680,634 ($491,958) $9,188,676
<PAGE>
INDEPENDENT AUDITOR'S REPORT
----------------------------
To The Shareholders and Board of Directors
The Riverfront Stock Appreciation Fund:
We have audited the accompanying statement of assets and liabilities of the
Riverfront Stock Appreciation Fund (a series of The Riverfront Funds, Inc.),
including the schedule of portfolio investments, as of September 30, 1995, and
the related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended, and
financial highlights for each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Fund's 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. Our procedures included confirmation of securities owned as of
September 30, 1995, by correspondence with the custodian and brokers. An audit
also included 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 the
Riverfront Stock Appreciation Fund of The Riverfront Funds, Inc. as of September
30, 1995, the results of its operations for the year then ended, the changes in
its net assets for each of the two years in the period then ended, and the
financial highlights for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
McCurdy & Associates CPA's, Inc.
Westlake, Ohio 44145
October 11, 1995
