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FRONTEGRA
FUNDS
SEMI-ANNUAL REPORT
Frontegra Opportunity 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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Statements 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:
April 30 marked the halfway point in the Opportunity Fund's fiscal year. After
posting strong relative results in 1997, Fund performance has trailed the
benchmark early this year. The Fund returned 7.11% for the last six months,
trailing the benchmark Russell 2000 Index return of 11.88%. The net asset value
closed the period at $34.50 per share.
In light of recent results, it is important to note that we expect to experience
periods of short-term underperformance relative to the benchmark given our value
discipline. However, over the long-term, we believe that our rigorous, value-
oriented approach will provide outstanding results for investors.
Over the last six months, the bull market in equities continued after a modest
pullback in October of last year. The strong performance in the domestic markets
was particularly impressive given the weakness in Asia and its potential impact
on earnings of U.S. companies. The market was buoyed by the combination of
slightly lower interest rates and continued strong cash flow into mutual funds.
The Opportunity Fund benefited from its overweight in consumer durable stocks.
With the economy strong and optimism high, consumers spent money on big ticket
items (e.g., automobiles and appliances) which helped propel the stocks in this
sector. The Fund's underweight in technology stocks helped modestly late in
1997, but has had a negative impact on performance thus far in 1998, as
technology stocks have been market leaders.
We continue to find the most value in stocks concentrated in a few sectors of
the market. These sectors include consumer durables, producer manufacturing, and
materials and processing. The exposure to the materials and processing sector is
anchored by a number of cement companies, two of which - Giant Cement and Lone
Star Industries - are among the top ten holdings of the Fund. Demand continues
to be strong in the cement industry, and we are still years away from any
additional supply.
Again, we believe the portfolio is well positioned to take advantage of
opportunities in the small cap market. The portfolio continues to focus on
companies with low valuations, industry leading products, conservative capital
structures and superior cash generating abilities.
In closing, we appreciate your support as shareholders. We will continue to
strive to produce outstanding long-term results.
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 RUSSELL 2000 LIPPER SMALL-CAP
OPPORTUNITY FUND INDEX FUND INDEX
---------------- ------------ ----------------
7/31/97 100,000.00 100,000.00 100,000.00
10/31/97 107,399.99 104,952.07 103,476.87
1/31/98 104,867.60 104,423.59 100,618.05
4/30/98 115,037.59 117,415.26 114,054.52
Portfolio Total Return
FOR THE PERIOD ENDED 4/30/98
- ------------------------------------
SINCE COMMENCEMENT 15.04%
- ------------------------------------
This chart assumes an initial gross investment of $100,000 made on 7/31/97.
Returns shown include the reinvestment of all distributions. 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 Lipper Small-Cap Fund Index includes the 30 largest funds which, by
prospectus or portfolio practice, limit their investments to companies on the
basis of the size of the company.
The Russell 2000 Index is comprised of the smallest 2000 companies 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 Opportunity Fund
SCHEDULE OF INVESTMENTS
April 30, 1998 (Unaudited)
Number of Shares Value
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COMMON STOCKS 98.6%
Commercial Services 4.1%
6,800 Banta Corp. $ 217,600
4,700 Lawson Products, Inc. 118,675
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336,275
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Consumer Durables 8.0%
9,750 CLARCOR Inc. 218,766
6,500 Department 56, Inc.<F1> 233,594
4,700 Harman International Industries, Inc. 202,100
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654,460
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Consumer Services 6.1%
6,700 Carmike Cinemas, Inc.<F1> 203,094
8,900 Jones Intercable, Inc. - Class A<F1> 179,113
5,600 Lone Star Steakhouse & Saloon, Inc.<F1> 119,000
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501,207
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Electronic Technology 8.9%
7,900 Allen Telecom Inc.<F1> 126,894
11,400 Auspex Systems, Inc.<F1> 82,650
6,100 BancTec, Inc.<F1> 133,056
4,900 Electroglas, Inc.<F1> 82,687
5,700 Kemet Corp.<F1> 102,600
6,600 Periphonics Corp.<F1> 76,725
4,300 SpeedFam International, Inc.<F1> 124,700
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729,312
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Energy Minerals 4.7%
6,900 Mitchell Energy & Development Corp. 174,225
20,300 Santa Fe Energy Resources, Inc.<F1> 209,344
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383,569
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Finance 3.0%
11,700 First Bell Bancorp, Inc. 244,237
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Health Technology 4.4%
11,700 Haemonetics Corp.<F1> 207,675
8,300 Lunar Corp.<F1> 155,625
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363,300
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See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity Fund
SCHEDULE OF INVESTMENTS (continued)
April 30, 1998 (Unaudited)
Number of Shares Value
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Industrial Services 5.8%
18,100 Dames & Moore, Inc. $ 231,906
7,300 Jacobs Engineering Group Inc.<F1> 243,637
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475,543
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Non-Energy Materials 11.0%
8,500 AK Steel Holding Corp. 178,500
9,100 Giant Cement Holding, Inc.<F1> 257,075
3,300 Lone Star Industries, Inc. 272,663
6,700 Quanex Corp. 196,394
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904,632
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Process Industries 4.2%
5,650 Ferro Corp. 162,791
8,600 Furon Co. 180,062
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342,853
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Producer Manufacturing 17.5%
9,100 Global Industrial Technologies, Inc.<F1> 163,231
15,200 Griffon Corp.<F1> 203,300
8,200 Holophane Corp.<F1> 225,500
9,900 Juno Lighting, Inc. 214,088
10,000 Northwest Pipe Co.<F1> 220,000
5,900 Standex International Corp. 179,581
5,800 Wolverine Tube, Inc.<F1> 228,375
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1,434,075
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Retail 1.9%
18,400 Homebase, Inc.<F1> 154,100
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Real Estate Investment Trusts 13.8%
6,700 Amli Residential Properties Trust 153,681
8,700 Asset Investors Corp. 156,600
6,400 Colonial Properties Trust 190,000
7,700 Great Lakes REIT, Inc. 141,006
6,500 Sovran Self Storage, Inc. 179,969
6,800 Storage Trust Realty 164,900
11,500 Winston Hotels, Inc. 143,031
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1,129,187
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See notes to financial statements.
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FRONTEGRA
FUNDS
Number of Shares Value
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Technology Services 2.7%
3,000 CellStar Corp.<F1> $ 97,875
9,500 Pioneer-Standard Electronics, Inc. 119,344
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217,219
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Transportation 2.5%
12,900 Arnold Industries, Inc. 206,400
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TOTAL COMMON STOCKS
(cost $7,662,353) 8,076,369
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Principal Amount
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SHORT-TERM INVESTMENT 1.3%
$108,855 UMB Bank Money Market Fiduciary 108,855
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TOTAL SHORT-TERM INVESTMENT
(cost $108,855) 108,855
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TOTAL INVESTMENTS 99.9%
(cost $7,771,208) 8,185,224
Cash and Other Assets, less Liabilities 0.1% 3,041
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NET ASSETS 100.00% $8,188,265
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<F1> Non-income producing
See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity Fund
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1998 (Unaudited)
ASSETS:
Investments at value (cost $7,771,208) $8,185,224
Interest and dividends receivable 6,705
Receivable from adviser 89,817
Deferred organizational costs, net 34,338
Other assets 5,300
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Total assets 8,321,384
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LIABILITIES:
Accrued investment advisory fee 25,457
Accrued expenses 12,035
Payable to adviser - expenses 95,627
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Total liabilities 133,119
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NET ASSETS $8,188,265
==========
NET ASSETS CONSIST OF:
Paid in capital $7,512,208
Undistributed net investment income 38,555
Accumulated net realized gains on investments 223,486
Net unrealized appreciation on investments 414,016
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NET ASSETS $8,188,265
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CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 237,349
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $34.50
======
See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity Fund
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1998 (Unaudited)
INVESTMENT INCOME:
Dividends $ 61,868
Interest 3,861
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65,729
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EXPENSES:
Fund administration and accounting fees 29,295
Investment advisory fees 23,661
Federal and state registration fees 6,962
Shareholder servicing 6,404
Legal fees 6,074
Reports to shareholders 4,695
Audit fees 4,178
Amortization of organizational costs 4,006
Custody fees 3,091
Insurance 918
Pricing 781
Director's fees and expenses 467
Other 200
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Total expenses before waiver and reimbursements 90,732
Waiver and reimbursements of expenses by adviser (57,971)
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Net expenses 32,761
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NET INVESTMENT INCOME 32,968
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS:
Net realized gains on investments 223,117
Change in net unrealized appreciation on investments 307,697
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NET GAINS ON INVESTMENTS 530,814
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 563,782
=========
See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity Fund
STATEMENTS OF CHANGES IN NET ASSETS
(Unaudited)
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997<F1>
---------------- --------------------
OPERATIONS:
Net investment income $ 32,968 $ 7,206
Net realized gains (losses)
on investments 223,117 (1,205)
Change in net unrealized appreciation
on investments 307,697 106,319
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Net increase in net assets resulting
from operations 563,782 112,320
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DISTRIBUTIONS PAID FROM:
Net investment income (2,500) -
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CAPITAL SHARE TRANSACTIONS:
Shares sold 1,724,815 5,787,348
Shares issued to holders in
reinvestment of distributions 2,500 -
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Net increase 1,727,315 5,787,348
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TOTAL INCREASE IN NET ASSETS 2,288,597 5,899,668
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NET ASSETS:
Beginning of period 5,899,668 -
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End of period (includes
undistributed net investment
income of $38,555 and
$8,034, respectively) $8,188,265 $5,899,668
========== ==========
<F1> Commenced operations on July 31, 1997
See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity Fund
FINANCIAL HIGHLIGHTS
(Unaudited)
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997<F1>
---------------- --------------------
NET ASSET VALUE, BEGINNING OF PERIOD $32.22 $30.00
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.13 0.04
Net realized and unrealized gain
on investments 2.16 2.18
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TOTAL INCOME FROM INVESTMENT OPERATIONS 2.29 2.22
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LESS DISTRIBUTIONS:
From net investment income (0.01) -
------ ------
TOTAL DISTRIBUTIONS (0.01) -
------ ------
NET ASSET VALUE, END OF PERIOD $34.50 $32.22
====== ======
TOTAL RETURN<F2> 7.11% 7.40%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $8,188 $5,900
Ratio of expenses to average net
assets<F3><F4> 0.90% 0.90%
Ratio of net investment income to
average net assets<F3><F4> 0.91% 2.61%
Portfolio turnover rate<F2> 30% 9%
<F1> Commenced operations on July 31, 1997
<F2> Not annualized
<F3> Net of waivers and reimbursements by Adviser. Without waiver and
reimbursements of expenses, the ratio of expenses to average net assets
would have been 2.49% and 12.02%, and the ratio of net investment income to
average net assets would have been (0.68)% and (8.51)% for the six months
ended April 30, 1998 and the period July 31, 1997 to October 31, 1997,
respectively.
<F4> Annualized
See notes to financial statements.
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FRONTEGRA
FUNDS
Frontegra Opportunity 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 Opportunity Fund (the "Fund"), the
Frontegra Total Return Bond Fund and the Frontegra Growth Fund. The Fund
commenced operations on July 31, 1997. 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.
(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 or net realized gains may differ from the characterization for
federal income tax purposes due
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FRONTEGRA
FUND S
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. Accordingly, at April 30,
1998, reclassifications were recorded to increase undistributed net
investment income by $53, increase accumulated net realized gains on
investments by $1,574 and decrease paid in capital by $1,627.
(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 0.65% 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 0.90% of the Fund's average daily net
assets.
(4)CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
SIX MONTHS PERIOD ENDED
ENDED APRIL 30, 1998 OCTOBER 31, 1997<F1>
-------------------- --------------------
Shares sold 54,171 183,102
Shares issued to
holders in reinvestment
of distributions 76 _
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54,247 183,102
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<F1> Commenced operations on July 31, 1997
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FRONTEGRA
FUNDS
Frontegra Opportunity 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 six months ended April 30, 1998, are
summarized below:
Purchases $3,895,284
Sales $2,143,800
At April 30, 1998, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $7,767,038
were as follows:
Appreciation $703,353
Depreciation (285,167)
---------
Net appreciation on investments $418,186
=========
FRONTEGRA FUNDS, INC.
c/o Sunstone Investor Services, LLC
P.O. Box 2142, Milwaukee, Wisconsin 53201-2142
FR-410-6980
