(LOGO)
FRONTEGRA FUNDS
ANNUAL REPORT
Frontegra Total Return Bond Fund
FRONTEGRA ASSET MANAGEMENT, INC.
---------
October 31, 1998
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FRONTEGRA FUNDS
TABLE OF CONTENTS
Shareholder Letter 1
- ------------------------------------------------------------
Investment Highlights 2
- ------------------------------------------------------------
Schedule of Investments 3
- ------------------------------------------------------------
Statement of Assets and Liabilities 7
- ------------------------------------------------------------
Statement of Operations 8
- ------------------------------------------------------------
Statements of Changes in Net Assets 9
- ------------------------------------------------------------
Financial Highlights 10
- ------------------------------------------------------------
Notes to Financial Statements 11
- ------------------------------------------------------------
Report of Independent Auditors 14
- ------------------------------------------------------------
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:
On October 31, we concluded what proved to be a very interesting year in the
fixed income markets. The year started with a great deal of turbulence in Asia
and several emerging markets and finished with a flight to quality and general
lack of liquidity in most fixed income sectors outside of U.S. Treasuries. In
the midst of this difficult environment, the Total Return Bond Fund held up
relatively well, returning 7.79% after fees. This compares to a 9.34% return for
the benchmark, Lehman Brothers Aggregate Bond Index. At October 31, the NAV
stood at $31.38 per share.
PORTFOLIO REVIEW
As we pointed out in the Semi-Annual Report dated April 30, the first six months
of our fiscal year were characterized by tight yield spreads, a relatively flat
yield curve and turmoil in the Asian markets. As a result, we positioned the
portfolio with a higher than average Treasury position and a bulleted yield
curve structure. While our Treasury position added value with investors' flight
to quality, the yield curve strategy added only a modest amount to performance.
The flight to quality also had a negative impact on the portfolio as Treasury
bond yields dropped to the lowest level in recent memory. In the most recent
three months, five-year Treasury yields fell from 5.5% to a low of 4.0%. We did
not take advantage of this drop in rates since we already viewed the market as
somewhat overvalued. By year-end, however, our duration position began to add
value as Treasury bond prices retreated. This is consistent with our approach,
as we have occasionally been early in our duration moves, but over time these
moves have eventually added value.
PORTFOLIO STRATEGY
As Treasury yields fell recently, spreads between Treasuries and most sectors
(corporates, mortgages, etc.) widened significantly. While this environment has
been negative for fixed income investors, it has laid the foundation for
excellent return opportunities going forward. Consequently, we have repositioned
the portfolio by shifting the portfolio from Treasury bonds into corporate and
mortgage-backed bonds, where excellent opportunities are available.
As yields have dropped, we have continued to decrease the portfolio's exposure
to the market from a duration standpoint. With ten-year Treasury yields at 4.6%
and our long-term estimate of inflation at 2.5%, we calculate a "real" interest
rate of 2.1%, which is well below our neutral range of 3.0% to 3.5%. Therefore,
portfolio duration stands at 3.6, signaling a somewhat bearish posture with
respect to interest rates. Moreover, while we expect the Federal Reserve to
continue to reduce rates with the global economy weakening, we do not expect
longer-term bond yields to decline. These actions imply a steepening of the
yield curve, so we continue to manage a bulleted portfolio with the cash flows
concentrated in the middle of the yield curve.
SUMMARY
It has been some time since we have seen the amount of opportunity we currently
are able to find in the fixed income markets. We have actively repositioned the
portfolio to take advantage of these opportunities and are very excited about
the prospects for the Fund. As always, we appreciate your continued support of
the Frontegra Total Return Bond Fund.
Sincerely,
<TABLE>
<CAPTION>
<C> <C> <C> <C>
/s/ Mark M. Egan /s/ Robert A. Crider /s/ Thomas J. Holmberg /s/ William D. Forsyth
Mark M. Egan Robert A. Crider Thomas J. Holmberg William D. Forsyth
Portfolio Manager Portfolio Manager Co-President Co-President
Reams Asset Management Co. Reams Asset Management Co. Frontegra Funds Frontegra Funds
</TABLE>
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FRONTEGRA FUNDS
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
FRONTEGRA LEHMAN BROTHERS
TOTAL RETURN BOND FUND AGGREGATE BOND INDEX
---------------------- --------------------
11/25/96 $100,000 $100,000
1/31/97 $99,407 $99,850
4/30/97 $99,926 $100,471
7/31/97 $105,090 $105,392
10/31/97 $107,128 $107,573
1/31/98 $109,524 $110,558
4/30/98 $110,422 $111,434
7/31/98 $112,387 $113,687
10/31/98 $115,478 $117,617
- -----------------------------
Portfolio Total Return
FOR THE PERIOD ENDED 10/31/98
- -----------------------------
ONE YEAR 7.79%
AVERAGE ANNUAL
SINCE COMMENCEMENT 7.74%
- -----------------------------
This chart assumes an initial gross investment of $100,000 made on 11/25/96
(commencement of operations). 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 Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated
investment grade or higher by Moody's Investors Service, Standard & Poor's
Corporation, or Fitch IBCA, Inc., in that order. All issues have at least one
year to maturity and an outstanding par value of at least $100 million. Price,
coupon, paydown and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value-weighted inclusive of accrued
interest.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS
October 31, 1998
Principal Amount Value
- ---------------------------------------------------------------------------
ASSET-BACKED SECURITIES 15.7%
$397,668 Capco America Securitization Corp., 5.86%, 12/15/07 $392,999
900,000 Capita Equip Receivables Trust
SRS97-1, 6.19%, 2/15/02 919,728
909,263 Chase Commercial Mortgage Securities Corp.
97-2 A1, 6.45%, 12/19/29 919,492
1,000,000 Citibank Credit Card Master Trust, 0%, 2/7/03 889,370
500,000 Ford Credit Auto Loan Master Trust, 5.50%, 2/15/03 508,020
250,000 Green Tree 95-7-A5, 6.95%, 11/25/26 259,725
167,933 Green Tree 95-9-193, 6.20%, 1/15/27 172,045
200,000 Green Tree 96-7-MI, 7.70%, 10/15/27 228,108
62,020 Green Tree Recreational 96-A-A1, 5.55%, 2/15/18 62,866
520,053 J.P. Morgan 1996-C2, 6.47%, 3/25/05 536,877
350,000 Lehman Trust 96-2-A3, 7.11%, 10/25/09 357,102
85,595 Mego 1996-2-A2, 7.275%, 2/25/18 88,753
107,190 Pru. Mtg. 1993-5-A4, 7.00%, 2/25/00 107,472
170,960 RTC 1991-6-A1, 6.92%, 5/25/19 172,063
117,263 RTC 1991-6-C1, 9.00%, 9/25/28 122,773
212,698 Sec. Pac. 1992-3-A3, 7.45%, 9/15/12 221,097
68,383 SASCO 1996-CFL-A-1C, 5.94%, 2/25/28 68,888
1,500,000 World Financial 1996-B, 6.95%, 4/15/06 1,592,790
---------
TOTAL ASSET-BACKED SECURITIES
(cost $7,449,342) 7,620,168
---------
CORPORATE BONDS 53.0%
Airlines 4.7%
634,883 America West Airlines, Inc., 7.33%, 7/2/08 700,086
500,000 Continental Airlines 98-1, 6.648%, 9/15/17 498,710
400,000 Delta Air Lines, Inc., 9.375%, 6/1/03 464,800
519,210 Delta Air Lines, Inc., 9.75%, 9/11/07 586,577
---------
2,250,173
---------
Communications 1.1%
500,000 MCI WorldCom, 6.125%, 4/15/02 508,260
---------
Diversified 0.7%
350,000 Raychem Corp., 7.20%, 10/15/08 348,855
---------
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998
Principal Amount Value
- ---------------------------------------------------------------------------
Engines - Internal Combustion 1.0%
$500,000 Cummins Engine, 6.25%, 3/1/03 $ 504,720
---------
Fertilizers 1.0%
500,000 IMC Global Inc., 6.625%, 10/15/01 496,490
---------
Financial 4.0%
300,000 Associates Corp. NA, 5.75%, 11/1/03 302,742
500,000 Household Finance Corp., 5.875%, 9/25/04 502,295
1,068,336 Midland Funding Corp., 10.33%, 7/23/02 1,133,771
---------
1,938,808
---------
Food Products 1.8%
400,000 ConAgra Inc., 5.50%, 10/15/02 396,636
500,000 Dole Foods, 6.375%, 10/1/05 490,380
---------
887,016
---------
Forest Products & Paper 1.7%
800,000 Boise Cascade Corp., 7.48%, 6/15/05 832,112
---------
Lodging 2.0%
1,000,000 Hilton Hotels Corp., 7.00%, 7/15/04 970,900
---------
Oil & Gas 5.1%
500,000 Occidental Petroleum, 6.40%, 4/1/03 511,605
613,000 Oryx Energy Corp., 10.00%, 4/1/01 670,322
500,000 PDV America, Inc., 7.75%, 8/1/00 484,655
850,000 PDV America, Inc., 7.875%, 8/1/03 796,926
---------
2,463,508
---------
Services 5.1%
236,067 Federal Express Corp., 8.04%, 11/22/07 265,204
336,238 Federal Express Corp., 7.85%, 1/30/15 372,677
150,000 Federal Express Corp., 7.84%, 1/30/18 163,210
1,250,000 Loewen Group International, Inc., 7.50%, 4/15/01 990,625
500,000 Service Corporation International, 6.30%, 3/15/03 519,935
150,000 Service Corporation International, 7.00%, 6/1/15 159,903
---------
2,471,554
---------
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998
Principal Amount Value
- ---------------------------------------------------------------------------
Transportation 1.0%
$ 500,000 JB Hunt Transport Services, 7.00%, 9/15/04 $ 501,875
---------
Utilities 17.6%
1,000,000 Atlantic City Electric, 6.46%, 4/1/02 1,044,220
400,000 Cleveland Electric Illuminating Co. (The),
7.85%, 7/30/02 431,184
500,000 Cleveland Electric Illuminating Co. (The),
7.67%, 7/1/04 545,005
250,000 Cogentrix Energy, 8.10%, 3/15/04 250,000
150,000 Commonwealth Edison Co., MBIA, 8.25%, 10/1/06 172,042
500,000 Korea Electric Power Corp., 6.75%, 8/1/27 383,675
500,000 Niagara Mohawk Power Corp., 7.25%, 10/1/02 509,615
400,000 Niagara Mohawk Power Corp., 7.375%, 8/1/03 417,496
600,000 Niagara Mohawk Power Corp., 8.00%, 6/1/04 647,826
896,000 North Atlantic Energy Corp., 9.05%, 6/1/02 917,110
250,000 Sithe/Independence Funding, 8.50%, 6/30/07 285,608
200,000 Sithe/Independence Funding, 9.00%, 12/30/13 247,050
500,000 Texas Utilities, 6.75%, 3/1/03 527,780
1,000,000 Utilicorp United Inc., 6.70%, 10/15/06 1,044,620
1,000,000 Utilicorp United Inc. (AMBAC Insured),
6.875%, 10/1/04 1,106,880
---------
8,530,111
---------
Waste Management 2.0%
500,000 WMX Technologies, Inc., 6.65%, 5/15/05 524,335
400,000 WMX Technologies, Inc., 7.10%, 8/1/26 427,584
---------
951,919
---------
Yankee Bonds 4.2%
429,278 Brazil C-Bond, 8.00%, 4/15/14 267,225
1,250,000 Republic of Argentina, Floating Rate,
8.726%, 4/10/05 1,087,500
710,000 Republic of Korea, 8.875%, 4/15/08 654,734
---------
2,009,459
---------
TOTAL CORPORATE BONDS
(cost $25,631,191) 25,665,760
---------
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
October 31, 1998
Principal Amount Value
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCIES 18.1%
$ 515,000 FHLMC - GNMA, Series 20H, 5.50%, 10/25/23 $ 454,776
350,000 FHLMC - GNMA, Series 20L, 5.50%, 10/25/23 322,679
2,000,000 FHLMC Gold Giant TBA, 5.50%, 11/19/13 1,976,875
5,000,000 FNMA TBA, 6.5%, Nov./ 30yr 4,939,062
242,908 FNMA, Pool 73339, 6.18%, 1/1/03 248,828
287,738 FNMA, Pool 160098, 7.91%, 3/1/04 307,698
145,856 FNMA, Series 91-26G, 8.00%, 4/25/06 149,861
85,000 FNMA, Series 94-3PL, 5.50%, 1/25/24 82,515
81,041 GNMA, Pool 36629, 9.50%, 10/15/09 87,423
203,978 GNMHB, Pool 331001, 8.25%, 7/15/07 214,241
---------
TOTAL U.S. GOVERNMENT AGENCIES
(cost $8,758,402) 8,783,958
---------
U.S. TREASURY OBLIGATIONS 8.5%
U.S. Treasury Bonds 2.6%
1,000,000 7.50%, 11/15/16 1,246,130
---------
U.S. Treasury Notes 5.9%
850,000 5.875%, 8/31/99 859,928
550,000 6.25%, 5/31/00 566,154
470,000 5.75%, 10/31/00 482,981
900,000 5.75%, 8/15/03 953,667
---------
2,862,730
---------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $3,906,537) 4,108,860
---------
SHORT-TERM INVESTMENT 18.7%
9,050,441 UMB Bank Money Market Fiduciary 9,050,441
---------
TOTAL SHORT-TERM INVESTMENT
(cost $9,050,441) 9,050,441
---------
TOTAL INVESTMENTS 114.0%
(cost $54,795,913) 55,229,187
----------
Liabilities and Other Assets (14.0%) (6,772,438)
----------
NET ASSETS 100.0% $48,456,749
==========
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
ASSETS:
Investments at value (cost $54,795,913) $55,229,187
Interest receivable 506,996
Receivable from adviser 10,933
Deferred organizational costs 26,459
Other assets 7,625
-----------
Total assets 55,781,200
-----------
LIABILITIES:
Payable for investments purchased 7,282,071
Accrued investment advisory fee 16,442
Accrued expenses 25,938
-----------
Total liabilities 7,324,451
-----------
NET ASSETS $48,456,749
===========
NET ASSETS CONSIST OF:
Paid in capital $46,707,038
Accumulated net investment income 241,806
Accumulated net realized gains on investments 1,074,631
Net unrealized appreciation on investments 433,274
-----------
NET ASSETS $48,456,749
===========
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 1,544,252
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $31.38
======
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1998
INVESTMENT INCOME:
Interest $ 2,928,651
---------
EXPENSES:
Investment advisory fees 186,149
Fund administration and accounting fees 81,440
Shareholder servicing 20,108
Legal fees 14,689
Pricing 11,786
Audit fees 10,634
Amortization of organizational costs 8,818
Federal and state registration fees 7,875
Custody fees 7,532
Insurance 6,500
Reports to shareholders 6,340
Directors' fees and related expenses 840
Other 680
---------
Total expenses before waiver 363,391
Waiver of expenses by adviser (130,881)
---------
Net expenses 232,510
---------
NET INVESTMENT INCOME 2,696,141
---------
REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investments 1,082,198
Change in unrealized appreciation/depreciation on investments (226,487)
---------
NET GAINS (LOSSES) ON INVESTMENTS 855,711
---------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $3,551,852
=========
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997<F1>
---------------- ---------------------
OPERATIONS:
Net investment income $ 2,696,141 $ 1,106,085
Net realized gains (losses) on investments 1,082,198 60,778
Change in net unrealized
appreciation/depreciation
on investments (226,487) 659,761
----------- -----------
Net increase (decrease) in net
assets resulting
from operations 3,551,852 1,826,624
----------- -----------
DISTRIBUTIONS PAID FROM:
Net investment income (2,634,499) (917,864)
Net realized gains on investments (83,976) _
----------- -----------
Net decrease in net assets resulting
from distributions paid (2,718,475) (917,864)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Shares sold 11,881,429 37,210,071
Shares issued to holders in
reinvestment of distributions 2,687,931 904,999
Shares redeemed (6,041,766) (28,052)
----------- -----------
Net increase in net assets resulting from
capital share transactions 8,527,594 38,087,018
----------- -----------
TOTAL INCREASE IN NET ASSETS 9,360,971 38,995,778
----------- -----------
NET ASSETS:
Beginning of period 39,095,778 100,000
----------- -----------
End of period (includes undistributed net
investment income of $241,806 and
$183,488, respectively) $48,456,749 $39,095,778
=========== ===========
<F1> Commenced operations on November 25, 1996
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
FINANCIAL HIGHLIGHTS
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997<F1>
---------------- ---------------------
NET ASSET VALUE, BEGINNING OF PERIOD $30.85 $30.00
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income 1.75 1.37
Net realized and unrealized gains
(losses) on investments 0.59 0.70
------- -------
TOTAL INCOME (LOSS) FROM INVESTMENT OPERATIONS 2.34 2.07
------- -------
LESS DISTRIBUTIONS PAID:
From net investment income (1.75) (1.22)
From net realized gains on investments (0.06) _
------- -------
TOTAL DISTRIBUTIONS PAID (1.81) (1.22)
------- -------
NET ASSET VALUE, END OF PERIOD $31.38 $30.85
======= =======
TOTAL RETURN<F2> 7.79% 7.13%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (in thousands) $48,457 $39,096
Ratio of expenses to average net assets<F3><F4> 0.50% 0.50%
Ratio of net investment income to
average net assets<F3> <F4> 5.79% 6.02%
Portfolio turnover rate<F2> 131% 202%
<F1> Commenced operations on November 25, 1996
<F2> Not annualized for periods less than a full year
<F3> Net of waivers and reimbursements by Adviser. Without waivers and
reimbursements of expenses, the ratio of expenses to average net assets
would have been 0.78% and 1.27%, and the ratio of net investment income to
average net assets would have been 5.51% and 5.25% for the year ended
October 31, 1998 and the period ended October 31, 1997, respectively.
<F4> Annualized
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
(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 diversified 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 Total Return Bond Fund
(the "Fund"), the Frontegra Opportunity Fund and the Frontegra Growth Fund.
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.
(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, unless actual sale prices are
available. 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 Reams Asset Management Co., LLC
(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.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
(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 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
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 October 31,
1998, reclassifications were recorded to decrease accumulated net
investment income by $3,324, increase accumulated net realized gains
on investments by $7,246 and decrease paid in capital by $3,922.
(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.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
October 31, 1998
(4) CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
YEAR ENDED PERIOD ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997<F1>
---------------- ---------------------
Shares sold 385,190 1,234,460
Shares issued to holders in
reinvestment of distributions 86,889 30,340
Shares redeemed (195,049) (911)
--------- ----------
277,030 1,263,889
========= ==========
<F1> Commenced operations on November 25, 1996
(5) INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government securities, for the Fund for the year ended
October 31, 1998, are summarized below:
Purchases $24,564,089
Sales $12,654,396
Purchases and sales of U.S. government securities were $41,921,951 and
$45,382,123, respectively.
At October 31, 1998, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $54,805,458
were as follows:
Appreciation $1,174,794
Depreciation (751,065)
----------
Net appreciation on investments $423,729
==========
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
REPORT OF INDEPENDENT AUDITORS
October 31, 1998
To the Board of Directors and Shareholders of the Frontegra Funds,
Inc./Frontegra Total Return Bond Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of the Frontegra Total Return Bond Fund (the
"Fund") as of October 31, 1998, the related statement of operations, the
statements of changes in net assets and the financial highlights for the fiscal
periods indicated therein. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on the 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
October 31, 1998, 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 the
Frontegra Total Return Bond Fund at October 31, 1998, and the results of its
operations, the changes in its net assets and the financial highlights for the
fiscal periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young, LLP
Chicago, Illinois
November 30, 1998
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FRONTEGRA FUNDS, INC.
c/o Sunstone Investor Services, LLC
P.O. Box 2142, Milwaukee, Wisconsin 53201-2142
FB-410-1298
