FRONTEGRA TOTAL RETURN BOND FUND
SEMI-ANNUAL REPORT (UNAUDITED)
APRIL 30, 1997
FRONTEGRA TOTAL RETURN BOND FUND
Schedule of Investments
April 30, 1997 (Unaudited)
Principal
Amount Value
--------- -----
ASSET-BACKED SECURITIES 20.46%
$150,000 Charming Shoppes, Inc. Master Trust, 7.00%, 4/15/99 $ 149,974
145,017 Green Tree Recreational, 96-A-A1, 5.55%, 2/15/18 139,559
250,000 Green Tree, 95-7-A5, 6.95%, 11/25/26 243,015
200,000 Green Tree, 95-9-193, 6.20%, 1/15/27 196,526
200,000 Green Tree Financial Corp., 7.70%, 10/15/27 198,089
231,644 J.P. Morgan Commercial Mortgage
Finance Corp., 6.47%, 3/25/05 224,798
250,000 Lehman FHA Title I Loan Trust, 7.11%, 10/25/09 250,030
134,773 Mego Mortgage FHA Title I Loan Trust,
7.275%, 2/25/18 133,937
350,000 Prudential Home Mortgage Securities,
7.00%, 2/25/00 349,108
272,098 Resolution Trust Corp., 6.92%, 5/25/19 264,757
185,049 Resolution Trust Corp., 9.00%, 9/25/28 190,308
250,000 Security Pacific Acceptance Corp., 7.45%, 9/15/12 252,179
200,000 Structured Asset Securities Corp., 5.94%, 2/25/28 193,614
150,000 World Financial Network Credit Card
Master Trust, 6.95%, 5/15/06 150,724
---------
Total Asset-Backed Securities
(cost $3,007,266) 2,936,618
---------
CORPORATE BONDS 22.20%
AIRLINE 3.06%
400,000 Delta Air Lines, Inc., 9.75%, 6/1/03 439,000
---------
COMMUNICATIONS 1.38%
200,000 Tele-Communications, Inc., 6.58%, 2/15/06 198,742
---------
DIVERSIFIED 1.39%
200,000 Philip Morris Cos., Inc., 6.95%, 6/1/06 199,250
---------
See notes to financial statements.
Principal
Amount Value
--------- -----
CORPORATE BONDS (continued) 22.20%
MUNICIPAL 1.02%
$150,000 Province of Quebec, 5.67%, 2/27/26 $ 147,029
---------
OIL & GAS 2.42%
200,000 PDV America, Inc., 7.875%, 8/1/03 197,500
150,000 Transcontinental Gas Pipe Line Corp.,
7.08%, 7/15/26 150,563
---------
348,063
---------
PUBLISHING 2.25%
300,000 News America Holdings, Inc., 8.50%,
2/23/25 322,500
---------
SERVICES 2.42%
199,198 Federal Express Corp., 7.85%, 1/30/15 200,941
150,000 Federal Express Corp., 7.84%, 1/30/18 146,812
---------
347,753
---------
TELEPHONE 1.42%
200,000 MCI Communications Corp., 7.125%, 6/15/27 204,000
---------
UTILITIES 5.77%
150,000 Commonwealth Edison Co., MBIA, 8.25%, 10/1/06 159,375
200,000 Hydro-Quebec, 8.05%, 7/7/24 212,750
200,000 North Atlantic Energy Corp., 9.05%, 6/1/02 198,750
250,000 Sithe/Independence Funding, 8.50%, 6/30/07 257,812
---------
828,687
---------
WASTE MANAGEMENT 1.06%
150,000 WMX Technologies, Inc., 7.10%, 8/1/26 151,500
---------
Total Corporate Bonds
(cost $3,250,379) 3,186,524
---------
See notes to financial statements.
Principal
Amount Value
--------- -----
U.S. GOVERNMENT AGENCIES 13.56%
$515,000 FHLMC - GNMA, Series 20H, 5.50%, 10/25/23 $424,165
350,000 FHLMC - GNMA, Series 20L, 5.50%, 10/25/23 272,690
246,951 FNMA, Pool 73339, 6.18%, 1/1/03 239,774
292,285 FNMA, Pool 160098, 7.91%, 3/1/04 297,765
225,000 FNMA, Series 91-26G, 8.00%, 4/25/06 229,080
85,000 FNMA, Series 94-3PL, 5.50%, 1/25/24 70,090
100,710 GNMA, Pool 36629, 9.50%, 10/15/09 108,389
292,425 GNMHB, Pool 331001, 8.25%, 7/15/07 304,396
---------
Total U.S. Government Agencies
(cost $1,978,193) 1,946,349
---------
U.S. TREASURY OBLIGATIONS 39.50%
U.S. TREASURY BONDS 13.64%
425,000 7.50%, 11/15/16 445,298
1,670,000 6.25%, 8/15/23 1,511,717
---------
1,957,015
---------
U.S. TREASURY NOTES 25.86%
150,000 5.875%, 1/31/99 149,162
1,000,000 6.625%, 7/31/01 1,003,080
1,480,000 5.75%, 8/15/03 1,413,533
215,000 6.50%, 8/15/05 211,734
950,000 6.50%, 10/15/06 933,603
---------
3,711,112
---------
Total U.S. Treasury Obligations
(cost $5,794,026) 5,668,127
---------
SHORT-TERM INVESTMENTS 3.88%
556,902 UMB Bank Money Market Fiduciary 556,902
---------
Total Short-term Investments
(cost $556,902) 556,902
---------
Total Investments 99.61%
(cost $14,586,766) 14,294,520
Cash and Other Assets,
less Liabilities 0.39% 55,663
---------
NET ASSETS 100.00% $14,350,183
===========
See notes to financial statements.
FRONTEGRA TOTAL RETURN BOND FUND
Statement of Assets and Liabilities
April 30, 1997 (Unaudited)
ASSETS:
Investments at value (cost $14,586,766) $14,294,520
Interest receivable 180,482
Receivable for investments sold 95,372
Receivable from adviser 66,242
Deferred organization costs 39,651
Other assets 8,577
-----------
Total Assets 14,684,844
-----------
LIABILITIES:
Payable for investments purchased 202,551
Accrued expenses 35,486
Accrued investment advisory fee 22,999
Payable to adviser - expenses 73,625
-----------
Total Liabilities 334,661
-----------
NET ASSETS $14,350,183
===========
NET ASSETS CONSIST OF:
Capital stock $14,640,638
Undistributed net investment income 77,278
Accumulated net realized loss on investments (75,487)
Net unrealized depreciation on investments (292,246)
-----------
NET ASSETS $14,350,183
===========
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 488,318
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $29.39
======
See notes to financial statements.
FRONTEGRA TOTAL RETURN BOND FUND
Statement of Operations
For the Period Ended April 30, 1997 <F1> (Unaudited)
INVESTMENT INCOME:
Interest $381,821
--------
381,821
--------
EXPENSES:
Fund administration and accounting fees 27,959
Investment advisory fees 22,999
Federal and state registration fees 8,276
Legal fees 6,927
Shareholder servicing 6,374
Custody fees 4,399
Reports to shareholders 4,156
Amortization of organizational costs 3,728
Insurance 3,336
Pricing 3,084
Audit fees 2,540
Director's fees and expenses 923
Other 289
--------
Total expenses before waiver and reimbursements 94,990
Waiver and reimbursements of expenses by adviser (66,241)
--------
Net expenses 28,749
--------
NET INVESTMENT INCOME 353,072
--------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (75,487)
Change in unrealized appreciation/depreciation on investments (292,246)
--------
Net loss on investments (367,733)
--------
NET DECREASE IN NET ASSETS RESULTING
FROM OPERATIONS ($14,661)
========
<F1> Commenced operations on November 25, 1996
See notes to financial statements.
FRONTEGRA TOTAL RETURN BOND FUND
Statement of Changes in Net Assets
For the Period Ended April 30, 1997 <F2> (Unaudited)
OPERATIONS:
Net investment income $ 353,072
Net realized loss on investments (75,487)
Change in unrealized depreciation on investments (292,246)
----------
Net decrease in net assets resulting from operations (14,661)
----------
DISTRIBUTIONS PAID FROM:
Net investment income (275,794)
----------
Net decrease in net assets resulting from distributions paid (275,794)
----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 14,270,223
Shares issued to holders in reinvestment of distributions 270,415
Shares redeemed -
----------
Net increase in net assets resulting from
capital share transactions 14,540,638
----------
TOTAL INCREASE IN NET ASSETS 14,250,183
NET ASSETS:
Beginning of period 100,000
-----------
End of period $14,350,183
===========
<F2> Commenced operations on November 25, 1996
See notes to financial statements.
FRONTEGRA TOTAL RETURN BOND FUND
Financial Highlights
For the Period Ended April 30, 1997 <F3> (Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD
$ 30.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.74
Net realized and unrealized loss on investments (0.77)
-------
TOTAL INCOME FROM INVESTMENT OPERATIONS (0.03)
-------
LESS DISTRIBUTIONS:
From net investment income (0.58)
-------
TOTAL DISTRIBUTIONS (0.58)
-------
NET ASSET VALUE, END OF PERIOD $29.39
=======
TOTAL RETURN <F4> (-0.07%)
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $14,350
Ratio of expenses to average net assets <F5><F6> 0.50%
Ratio of net investment income to average net assets <F5><F6> 6.18%
Portfolio turnover rate <F4> 47%
<F3> Commenced operations on November 25, 1996
<F4> Not annualized
<F5> Net of waivers and reimbursements by Frontegra. Without waivers and
reimbursements of expenses, the ratio of expenses to average net assets
would have been 1.66% and the ratio of net investment income to average
net assets would have been 5.02% for the period November 25, 1996 to
April 30, 1997.
<F6> Annualized
See notes to financial statements.
Frontegra Total Return Bond Fund
Notes to Financial Statements (Unaudited)
April 30, 1997
(1) Organization
------------
Frontegra Funds, Inc. ("Frontegra") was incorporated on May 24, 1996 as a
Maryland corporation and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end management investment
company issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. The only series
which has commenced operations is the Total Return Bond Fund (the
"Fund"). The Fund issued and sold 3,333 shares of common stock ("initial
shares") of which 1,667 shares were sold to Frontegra Asset Management,
Inc. (the "Adviser") and 1,666 shares were sold to Reams Asset Management
Company, LLC (the "Sub-Adviser") at $30 per share on September 30, 1996.
The Fund commenced operations on November 25, 1996. Costs incurred by the
Fund in connection with its organization, registration and the initial
public offering of shares have been deferred and will be amortized over the
period of benefit, but not to exceed five years from the date upon which
the Fund commenced its investment activities. If any of the original
shares of the Fund purchased by the Adviser or Sub-Adviser are redeemed by
any holder thereof prior to the end of the amortization period, the
redemption proceeds will be reduced by the pro rata share of the
unamortized costs as of the date of redemption. The pro rata share by which
the proceeds are reduced will be derived by dividing the number of original
shares of the Fund being redeemed by the total number of original shares
outstanding at the time of redemption.
(2) Significant Accounting Policies
-------------------------------
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
(a) Investment Valuation
Debt securities (other than short-term instruments) are valued at bid
prices furnished by a pricing service. Debt instruments maturing
within 60 days or less when purchased are valued by the amortized cost
method. Any securities for which market quotations are not readily
available are valued at their fair value as determined in good faith
by the Sub-Adviser pursuant to guidelines established by the Board of
Directors.
(b) Federal Income and Excise Taxes
The Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute
substantially all investment company net taxable income and net
capital gains to shareholders in a manner which results in no tax cost
to the Fund. Therefore, no federal income or excise tax provision is
required.
(c) Distributions to Shareholders
Dividends from net investment income are usually declared and paid
quarterly. Distributions of net realized gains, if any, will be
declared at least annually. Distributions to shareholders are recorded
on the ex-dividend date. The character of distributions made during
the year from net investment income or net realized gain may differ
from the characterization for federal income tax purposes due to
differences in the recognition of income, expense and gain items
for financial statement and tax purposes. Where appropriate,
reclassifications between net asset accounts are made for such
differences that are permanent in nature.
(d) Other
Investment transactions are accounted for on the trade date. The Fund
determines the gain or loss realized from investment transactions by
comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis. The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results
could differ from those estimates.
(3) Investment Adviser
------------------
The Fund has an agreement with the Adviser with whom certain officers and
directors of the Fund are affiliated, to furnish investment advisory
services to the Fund. Under the terms of this agreement, the Fund will pay
the Adviser a monthly fee at the annual rate of 0.40% of the Fund's average
daily net assets. The Adviser has agreed to voluntarily waive its
management fee and/or reimburse the Fund's operating expenses (exclusive of
brokerage, interest, taxes and extraordinary expenses) to ensure that the
Fund's operating expenses do not exceed 0.50% of the Fund's average daily
net assets for the Fund's first twelve months of operations.
(4) Sub-Adviser
-----------
The Adviser has entered into an agreement with the Sub-Adviser to serve as
the Fund's portfolio manager, subject to the Adviser's supervision. Under
the terms of the agreement, the Sub-Adviser is compensated by the Adviser
at 0.20% of average daily net assets of the Fund. For initial investments
of over $15 million, the Adviser will compensate the Sub-Adviser an extra
0.10% on the average daily net assets of such investments (excluding
defined contribution or 401(k) investments).
(5) Capital Share Transactions
--------------------------
Transactions in shares of the Fund were as follows:
Period Ended
April 30, 1997 <F7>
--------------
Shares sold 475,691
Shares issued to holders in
reinvestment of distributions 9,294
Shares redeemed -
--------
484,985
<F7> Commenced operations on November 25, 1996
(6) Investment Transactions
-----------------------
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government securities, for the Fund for the period
November 25, 1996 to April 30, 1997, are summarized below:
Purchases $9,585,925
Sales $1,315,873
Purchases and sales of U.S. government securities were $10,520,143
and $4,679,985, respectively.
At April 30, 1997, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $14,607,885
were as follows:
Appreciation $ 22,822
Depreciation (336,187)
-------
Net depreciation on investments $(313,365)
=======
This financial statement is submitted for the general information of the
shareholders of the Fund. It is not authorized for distribution to prospective
investors unless preceded or accompanied by an effective prospectus.
