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FRONTEGRA FUNDS
SEMI-ANNUAL REPORT
Frontegra Growth Fund
FRONTEGRA ASSET MANAGEMENT, INC.
April 30, 1998
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FRONTEGRA FUNDS
TABLE OF CONTENTS
Shareholder Letter 1
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Investment Highlights 2
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Schedule of Investments 3
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Statement of Assets and Liabilities 6
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Statement of Operations 7
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Statement of Changes in Net Assets 8
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Financial Highlights 9
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Notes to Financial Statements 10
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This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
accompanied or preceded by an effective prospectus for the Fund. The Prospectus
includes more complete information about management fees and expenses,
investment objectives, risks and operating policies of the Fund. Please read the
Prospectus carefully.
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FRONTEGRA FUNDS
DEAR FELLOW SHAREHOLDERS:
We are pleased to provide the first shareholder report for the Frontegra Growth
Fund. This initial semi-annual report for the Fund covers the six-week period
from the Fund's inception through April 30, 1998. We are very excited about the
launch of the Growth Fund and appreciate your confidence as early shareholders.
The initial investments by the Fund were made on March 19, 1998, in a
diversified portfolio of 55 growth companies selected in accordance with our
investment philosophy. Our objective is to purchase companies with strong growth
prospects that are uniquely able to maintain above average earnings growth rates
due to their superior competitive positions. Historically, firms with
sustainable competitive advantages have produced long-term returns that
systematically exceed the returns of the overall market.
One of our largest holdings, First Data Corp., exemplifies our approach to
investing. First Data is the market leader in providing information processing
services to the credit card industry. The company's services have both aided and
benefited from the explosive growth in credit card usage. First Data is
positioned to grow earnings per share at 12% to 15% over the next five years due
to the continued proliferation of credit cards and the growing dependence on
electronic commerce.
Another company, Mattel Corp., is a top ten holding in the Fund and further
emphasizes our preference for owning businesses with dominant competitive
positions. Mattel is the market leader in children's toys with a well
diversified product portfolio consisting of Barbie, Sesame Street, Disney, Hot
Wheels and Matchbox, as well as alliances with Intel to produce "smart toys" and
the NBA to produce action figures. The company has grown earnings at over 15%
per year over the past ten years, and we anticipate that the growth will
continue as Mattel benefits from the globalization of their brands.
These two stocks are indicative of the types of companies we favor: ones with
sustainable competitive advantage, strong secular growth prospects and dominant
market positions. Our approach is predicated on the belief that owning premier
growth companies at fair prices will result in superior long-term performance.
Again, we appreciate your support and confidence as early shareholders in the
Fund and look forward to a long and prosperous relationship.
Sincerely,
/s/Thomas J. Holmberg, Jr. /s/William D. Forsyth, III
Thomas J. Holmberg, Jr. William D. Forsyth, III
Co-President Co-President
May 15, 1998
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FRONTEGRA FUNDS
INVESTMENT HIGHLIGHTS
GROWTH OF A $100,000 INVESTMENT
FRONTEGRA S&P 500 RUSSELL 1000
GROWTH FUND STOCK INDEX GROWTH INDEX
----------- ----------- ------------
3/18/98 100,000.00 100,000.00 100,000.00
3/31/98 101,100.00 101,523.00 101,409.00
4/30/98 99,200.00 102,544.32 102,451.48
Portfolio Total Return
FOR THE PERIOD ENDED 4/30/98
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SINCE COMMENCEMENT (0.80)%
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This chart assumes an initial gross investment of $100,000 made on 3/18/98. Past
performance is not predictive of future results. Investment return and principal
value will fluctuate so that shares, when redeemed, may be worth more or less
than the original cost. In the absence of existing fee waivers, total return
would be reduced.
The S&P 500 Stock Index includes 500 common stocks, most of which are listed on
the New York Stock Exchange. The Index is a market capitalization-weighted index
representing approximately two-thirds of the total market value of all domestic
common stocks.
The Russell 1000 Growth Index is comprised of those securities in the Russell
1000 Index which have higher price-to-book ratios and higher forecasted growth
values. The Russell 1000 Index is comprised of the 1000 largest securities in
the Russell 3000 Index. The Russell 3000 Index is comprised of the 3000 largest
U.S. companies based on market capitalization.
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FRONTEGRA FUNDS
Frontegra Growth Fund
SCHEDULE OF INVESTMENTS
April 30, 1998 (Unaudited)
Number of Shares Value
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COMMON STOCKS 98.8%
Basic Materials 4.4%
145 Avery Dennison Corp. $ 7,594
465 Owens-Illinois, Inc.<F1> 18,397
210 Sigma-Aldrich Corp. 8,374
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34,365
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Capital Goods & Construction 1.5%
185 Precision Castparts Corp. 11,493
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Consumer Durables 1.9%
250 Masco Corp. 14,500
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Consumer Staples 16.2%
165 Anheuser-Busch Companies, Inc. 7,559
550 Archer-Daniels-Midland Co. 11,825
95 Colgate-Palmolive Co. 8,520
470 ConAgra, Inc. 13,718
470 Dial Corp. (The) 11,456
110 Estee Lauder Companies, Inc. (The) 7,308
115 Fortune Brands, Inc. 4,241
210 H.J. Heinz Co. 11,445
455 Interstate Bakeries Corp. 14,418
220 Kroger Co.<F1> 9,212
175 PepsiCo, Inc. 6,945
335 Rubbermaid, Inc. 9,589
250 Safeway, Inc.<F1> 9,563
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125,799
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Energy 2.2%
80 British Petroleum Company plc 7,560
115 Schlumberger Ltd. 9,531
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17,091
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See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998 (Unaudited)
Number of Shares Value
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Financial 10.3%
120 AFLAC Inc. $ 7,800
330 Ambac Financial Group, Inc. 18,707
60 American International Group, Inc. 7,894
60 Chase Manhattan Corp. 8,314
130 Fannie Mae 7,784
175 Providian Financial Corp. 10,533
310 Travelers Group, Inc. 18,968
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80,000
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Healthcare 18.7%
245 Abbott Laboratories 17,916
440 Amgen, Inc.<F1> 26,235
290 Baxter International Inc. 16,077
220 Bristol-Meyers Squibb Co. 23,292
75 Gilead Sciences, Inc.<F1> 2,850
85 Human Genome Sciences, Inc.<F1> 3,092
90 IDEC Pharmaceuticals Corp.<F1> 3,240
165 Inhale Therapeutic Systems<F1> 4,620
165 Johnson & Johnson 11,777
315 Ligand Pharmaceuticals, Inc.<F1> 4,567
195 Merck & Co., Inc. 23,497
235 Quorum Health Group, Inc.<F1> 7,549
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144,712
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Information Services & Software 6.1%
190 Computer Sciences Corp.<F1> 10,022
850 First Data Corp. 28,794
95 Microsoft Corp.<F1> 8,562
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47,378
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Leisure & Entertainment 11.4%
420 International Game Technology 11,681
360 Liberty Media Group<F1> 11,948
655 Marriott International, Inc. 21,615
645 Mattel, Inc. 24,712
570 Tele-Communications, Inc.<F1> 18,383
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88,339
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See notes to financial statements.
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FRONTEGRA FUNDS
Number of Shares Value
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Multi-Sector Companies 5.9%
270 General Electric Co. $ 22,984
845 U.S. Industries, Inc. 22,921
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45,905
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Retailing & Restaurants 7.8%
160 CVS Corp. 11,800
910 Cendant Corp.<F1> 22,750
180 Dayton Hudson Corp. 15,716
245 Service Corp. International 10,106
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60,372
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Technology 9.8%
345 Bay Networks, Inc.<F1> 8,086
605 Electronics for Imaging, Inc.<F1> 12,402
210 Hewlett-Packard Co. 15,816
125 Intel Corp. 10,101
75 International Business Machines Corp. 8,691
180 Xerox Corp. 20,430
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75,526
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Telecommunications 2.6%
395 MCI Communications Corp. 19,873
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TOTAL COMMON STOCKS
(cost $773,201) 765,353
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Principal Amount
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SHORT-TERM INVESTMENT 1.5%
$11,715 UMB Bank Money Market Fiduciary 11,715
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TOTAL SHORT-TERM INVESTMENT
(cost $11,715) 11,715
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TOTAL INVESTMENTS 100.3%
(cost $784,916) 777,068
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Liabilities, Less Cash and Other Assets (0.3%) (2,675)
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NET ASSETS 100.00% $774,393
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<F1> Non-income producing
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
ASSETS:
Investments at value (cost $784,916) $777,068
Interest and dividends receivable 663
Receivable from adviser 15,626
Other assets 2,385
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Total assets 795,742
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LIABILITIES:
Payable for investments purchased 2,928
Accrued expenses 8,817
Accrued investment advisory fee 410
Payable to adviser - expenses 9,194
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Total liabilities 21,349
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NET ASSETS $774,393
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NET ASSETS CONSIST OF:
Paid in capital $781,520
Undistributed net investment income 445
Accumulated net realized gains on investments 276
Net unrealized depreciation on investments (7,848)
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NET ASSETS $774,393
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CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 78,040
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $9.92
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See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENT OF OPERATIONS
For the Period Ended April 30, 1998<F1> (Unaudited)
INVESTMENT INCOME:
Dividends $ 414
Interest 441
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855
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EXPENSES:
Fund administration and accounting fees 6,775
Shareholder servicing 2,517
Reports to shareholders 1,837
Legal fees 1,530
Audit fees 1,148
Federal and state registration fees 1,089
Custody fees 447
Investment advisory fees 410
Pricing 203
Director's fees and expenses 64
Other 17
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Total expenses before waiver and reimbursements 16,037
Waiver and reimbursements of expenses by adviser (15,627)
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Net expenses 410
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NET INVESTMENT INCOME 445
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REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains on investments 276
Change in net unrealized depreciation on investments (7,848)
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NET LOSSES ON INVESTMENTS (7,572)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(7,127)
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<F1> Commenced operations on March 18, 1998
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
For the Period Ended April 30, 1998<F1> (Unaudited)
OPERATIONS:
Net investment income $ 445
Net realized gains on investments 276
Change in net unrealized depreciation on investments (7,848)
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Net decrease in net assets resulting from operations (7,127)
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CAPITAL SHARE TRANSACTIONS:
Shares sold 781,520
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Net increase 781,520
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TOTAL INCREASE IN NET ASSETS 774,393
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NET ASSETS:
Beginning of period -
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End of period (includes undistributed net
investment income of $445) $774,393
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<F1> Commenced operations on March 18, 1998
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
FINANCIAL HIGHLIGHTS
For the Period Ended April 30, 1998<F1> (Unaudited)
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
LOSS FROM INVESTMENT OPERATIONS:
Net investment income 0.01
Net realized and unrealized losses on investments (0.09)
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TOTAL LOSS FROM INVESTMENT OPERATIONS (0.08)
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NET ASSET VALUE, END OF PERIOD $ 9.92
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TOTAL RETURN<F2> (0.80)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $774
Ratio of expenses to average net assets<F3><F4> 0.80%
Ratio of net investment income to average net assets<F3><F4> 0.87%
Portfolio turnover rate<F2> 9%
<F1> Commenced operations on March 18, 1998
<F2> Not annualized
<F3> Net of waiver and reimbursements by Adviser. Without waiver and
reimbursements of expenses, the ratio of expenses to average net assets
would have been 31.30%, and the ratio of net investment income to average
net assets would have been (29.63)% for the period March 18, 1998 to April
30, 1998.
<F4> Annualized
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Growth Fund
NOTES TO FINANCIAL STATEMENTS
April 30, 1998 (Unaudited)
(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. Frontegra
consists of three series: the Frontegra Growth Fund (the "Fund"), the
Frontegra Total Return Bond Fund and the Frontegra Opportunity Fund. The
Fund commenced operations on March 18, 1998.
(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
Securities (other than short-term instruments) for which market
quotations are readily available are valued at the last trade price on
the national securities exchange on which such securities are primarily
traded. Securities for which there were no transactions on a given day
or securities not listed on a national securities exchange are valued at
the most recent bid prices. Securities 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 Taxes
No federal income tax provision has been made since 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.
(c) Distributions to Shareholders
Dividends from net investment income and distributions of net realized
gains, if any, will be declared and paid 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
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FRONTEGRA FUNDS
or net realized gains 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 Frontegra Asset Management, Inc. (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 0.80% 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 0.80% of the Fund's average daily net assets.
(4)CAPITAL SHARE TRANSACTIONS
Since the Fund commenced operations on March 18, 1998, 78,040 shares of the
Fund were sold. There were no shares issued to holders in reinvestment of
distributions or shares redeemed.
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FRONTEGRA FUNDS
Frontegra Growth Fund
NOTES TO FINANCIAL STATEMENTS (continued)
April 30, 1998 (Unaudited)
(5)INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments for the Fund for the period March 18, 1998 to April 30, 1998 are
summarized below:
Purchases $808,595
Sales $35,670
At April 30, 1998, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $784,916, were
as follows:
Appreciation $ 16,655
Depreciation (24,503)
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Net depreciation on investments $(7,848)
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FRONTEGRA FUNDS, INC.
c/o Sunstone Investor Services, LLC
P.O. Box 2142, Milwaukee, Wisconsin 53201-2142
FR-410-598G
