As filed with the Securities and Exchange Commission on December 17, 1999
Securities Act Registration No. 333-7305
Investment Company Act Registration No. 811-7685
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9
FRONTEGRA FUNDS, INC.
(Exact Name of Registrant as Specified in Charter)
400 Skokie Blvd.
Suite 500 60062
Northbrook, Illinois (Zip Code)
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(847) 509-9860
William D. Forsyth III
400 Skokie Blvd., Suite 500
Northbrook, Illinois 60062
(Name and Address of Agent for Service)
Copies to:
Carol A. Gehl
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202
It is proposed that this filing will become
effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485.
[X] on December 31, 1999 pursuant to paragraph (b) of Rule 485.
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485.
[ ] 75 days after filing pursuant to paragraph (a)(2) of Rule 485.
[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
PROSPECTUS
December 31, 1999
FRONTEGRA FUNDS, INC.
FRONTEGRA TOTAL RETURN BOND FUND
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-825-2100
The FRONTEGRA TOTAL RETURN BOND FUND (the "Fund")
is a series of FRONTEGRA FUNDS, INC., (the "Company").
The investment objective of the Fund is a high
level of total return, consistent with the preservation
of capital. The Fund invests primarily in a
diversified portfolio of fixed income securities of
varying maturities.
This Prospectus contains information you should
consider before investing in the Fund. Please read it
carefully and keep it for future reference.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
THE FRONTEGRA TOTAL RETURN BOND FUND AT A GLANCE 1
FEES AND EXPENSES OF THE FUND 2
INVESTMENT OBJECTIVE 3
INVESTMENT STRATEGY 3
IMPLEMENTATION OF INVESTMENT OBJECTIVE 4
PRIOR PERFORMANCE OF REAMS 5
FINANCIAL HIGHLIGHTS 7
FUND MANAGEMENT 8
YOUR ACCOUNT 9
EXCHANGE PRIVILEGE 10
VALUATION OF FUND SHARES 10
TAX-SHELTERED RETIREMENT PLANS 11
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT 11
YEAR 2000 ISSUE 12
You should rely only on the information contained in
this Prospectus and in the Statement of Additional
Information ("SAI"), which is available upon request.
The Company has not authorized others to provide
additional information. The Company does not authorize
use of this Prospectus in any state or jurisdiction
where the offering cannot legally be made.
<PAGE>
The Frontegra Total Return Bond Fund at a Glance
* Investment Objective
The Fund's goal, also referred to as its
investment objective, is a high level of total return,
consistent with the preservation of capital.
* Principal Investment Strategy
The Fund seeks to achieve its goal through
investment in a diversified portfolio of fixed income
securities of varying maturities. When making purchase
decisions, the Fund's subadviser, Reams Asset
Management Company, LLC ("Reams"), looks for securities
that it believes are undervalued in the fixed income
market. In addition, Reams generally looks for
securities that have an average life (referred to as
"duration") of between three and seven years based on
market conditions.
Reams uses a two-step process in managing the
Fund. First, Reams evaluates market attractiveness to
establish a measure of the portfolio's duration. Next,
Reams assembles the Fund's portfolio from the best
available values based on analysis by the portfolio
management team.
Although the Fund will invest primarily in
investment grade fixed income securities, the Fund may
invest up to 25% of its net assets in non-investment
grade fixed income securities (junk bonds).
* Risk Factors
The main risks of investing in the Fund are:
- Market Risks: The Fund's investments are subject
to market risk, so that the value of the Fund's
investments may go up or down. If the value of the
Fund's investments goes down, you may lose money. The
share price of the Fund is expected to fluctuate. Your
shares at redemption may be worth more or less than
your initial investment. Market risks associated with
fixed income investments include the possibility that
bond prices in general will decline over short or even
extended periods as interest rates rise.
- Individual Bond Risks: The Fund's investments are
also subject to the risks inherent in individual bond
selections. While fixed income securities normally
fluctuate less in price than stocks, there have been
extended periods of increases in interest rates that
have caused significant declines in fixed income
securities prices.
- Credit Risk: Individual issues of fixed income
securities may also be subject to the credit risk of
the issuer.
* Who Should Invest
The Fund is suitable for long-term investors only
and is not designed as a short-term investment vehicle.
The Fund may be an appropriate investment for you if
you:
- Seek long-term preservation of capital; and
- Want to include a bond fund in your portfolio.
* Performance Bar Chart and Tables
The return information provided in the bar chart
and tables below illustrates how the Fund's
performance can vary, which is one indication of
the risks of investing in the Fund. The
information also provides some indication of the
risks of investing in the Fund by showing how the
Fund's average annual returns compare
<PAGE>
with a broad measure of market performance over the
the past two calendar years. Please keep in mind
that the Fund's past performance does not necessarily
represent how it will perform in the future.
Calendar Year Total Returns(1)
1997 1998
8.59% 8.43%
[bar chart]
Best and Worst Quarterly Performance
Best Quarter Return Worst Quarter Return
3.87% (0.88)%
(3rd quarter, 1998) (1st quarter, 1997)
Average Annual Total Returns
(For the calendar year ended December 31, 1998)
Fund/Index One Year Since Inception (11/25/96)
Total Return 8.43% 7.70%
Bond Fund
Lehman Brothers 8.69% 8.49%
Aggregate Bond
Index(2)
____________
(1) The Fund's year-to-date return through September 30, 1999 was 0.07%.
(2) 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 Investors Service, in that
order. All issues have at least one year to
maturity and an outstanding par value of at least $100
million. The index does not reflect investment
management fees, brokerage commissions and other
expenses associated with investing in fixed income
securities.
Fees and Expenses of the Fund
This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) NONE(1)
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)(2)
Management Fees 0.40%
Distribution (12b-1) Fees NONE
Other Expenses 0.37%
Total Annual Fund Operating Expenses 0.77%
Fee Waiver/Expense Reimbursement(3) 0.345%
Net Expenses 0.425%
____________
(1) The Fund will charge a service fee of $12 for
redemptions effected via wire transfer, and $25 for
checks that do not clear.
(2) Stated as a percentage of the Fund's average
daily net assets.
(3) Pursuant to an expense cap agreement dated
February 26, 1999, as amended August 2 and December 31,
1999, between the Fund's adviser, Frontegra Asset
Management, Inc. ("Frontegra") and the Fund, Frontegra
agreed to waive its management fee and/or reimburse the
Fund's operating expenses to the extent necessary to
ensure that the Fund's total operating expenses do not
<PAGE>
exceed 0.425% of the Fund's average daily net assets.
The expense cap agreement will terminate on December
31, 2000 unless extended by Frontegra and the Fund.
"Other expenses" are presented before any waivers or
reimbursements.
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year,
that the Fund's operating expenses remain the same each
year and that Frontegra's fee waiver/expense
reimbursement discussed above will not continue beyond
the period of the current expense cap agreement, which
will terminate on December 31, 2000. Although your
actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
1 Year $ 43
3 Years $211
5 Years $394
10 Years $922
Investment Objective
The Fund's investment objective is a high level of
total return, consistent with the preservation of
capital. This investment objective may not be changed
without shareholder approval.
Investment Strategy
The Fund will seek, under normal market
conditions, to achieve its investment objective by
investing in a diversified portfolio of fixed income
securities of varying maturities. The Fund will invest
at least 65% of its net assets in bonds. The Fund
considers a bond to be any debt instrument. These
instruments include: short-term fixed income
securities; U.S. government securities; corporate debt
securities, including convertible securities and
corporate commercial paper; mortgage-backed and other
asset-backed securities; structured notes and loan
participations; bank certificates of deposit, fixed
time deposits and bankers' acceptances; repurchase
agreements; obligations of foreign governments or their
subdivisions, agencies and instrumentalities; and
obligations of international agencies or supranational
entities. Although the Fund primarily will invest in
investment grade fixed income securities, the Fund may
invest up to 25% of its assets in fixed income
securities that are rated below investment grade. The
portfolio duration of the Fund will normally fall
between three and seven years based on market
conditions. Duration is a measure of a fixed income
security's average life that reflects the present value
of the security's cash flow, and accordingly is a
measure of price sensitivity to interest rate changes.
For example, if interest rates decline by 1%, the
market value of a portfolio with a duration of five
years would rise by approximately 5%. The longer the
duration, the more susceptible the portfolio will be to
changes in interest rates.
As the Fund's subadviser, Reams attempts to
maximize total return over a long-term horizon through
opportunistic investing in a broad array of eligible
securities. The investment process combines top-down
interest rate management with bottom-up bond selection,
focusing on undervalued issues in the fixed income
market. Reams employs a two-step process in managing
the Fund. The first step is to establish the
portfolio's duration, or interest rate sensitivity.
Reams determines whether the bond market is under- or
over-priced by comparing current real interest rates
(the nominal rate on the ten year bond less Reams'
estimate of inflation) to historical real interest
rates. If the current real rate is higher than
historical norms, the market is considered undervalued
and Reams will manage portfolios with duration greater
than the market duration. If the current real rate is
less than historical norms, the market is considered
overvalued and Reams will run defensive portfolios.
Once Reams has determined an overall market strategy,
the second step is to select the most attractive bonds
for the Fund. The portfolio management team screens
hundreds of issues to determine how each will perform
in various interest-rate environments. The team
constructs these scenarios by considering the outlook
for interest rates, fundamental credit analysis and
option-adjusted spread analysis. The team compares
these investment opportunities and assembles the Fund's
portfolio from the best available values. Reams
constantly monitors the expected returns of the
securities in the Fund versus those available in the
market and of other securities the firm is considering
for purchase. Reams' strategy is to replace securities
that it feels are approaching fair market value with
those that, according to its analysis, are
significantly undervalued.
<PAGE>
Implementation of Investment Objective
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and elsewhere in this
Prospectus.
Fixed Income Securities
The Fund may invest in a wide variety of fixed
income securities. Issuers of fixed income securities
have a contractual obligation to pay interest at a
specified rate on specified dates and to repay
principal on a specified maturity date. Certain
securities (usually intermediate- and long-term bonds)
have provisions that allow the issuer to redeem or
"call" a bond before its maturity. Issuers are most
likely to call such securities during periods of
falling interest rates. As a result, the Fund may be
required to invest the unanticipated proceeds of the
called security at lower interest rates, which may
cause the Fund's income to decline.
Commercial paper generally is considered the
shortest form of fixed income security. Notes whose
original maturities are two years or less are
considered short-term obligations. The term "bond"
generally refers to securities with maturities longer
than two years. Bonds with maturities of three years
or less are considered short-term, bonds with
maturities between three and ten years are considered
intermediate-term, and bonds with maturities greater
than ten years are considered long-term.
Principal Risks. In general, the longer the
maturity of a fixed income security, the higher its
yield and the greater its sensitivity to changes in
interest rates. Conversely, the shorter the maturity,
the lower the yield but the greater the price
stability. The values of fixed income securities also
may be affected by changes in the credit rating or
financial condition of their issuers. Generally, the
lower the credit rating of a security, the higher the
degree of risk as to the payment of interest and return
of principal. To compensate investors for taking on
such increased risk, issuers deemed to be less
creditworthy generally must offer investors higher
interest rates than do issuers with better credit
ratings.
Non-Investment Grade Debt Securities (Junk Bonds)
The Fund may invest up to 25% of its net assets in
junk bonds. Junk bonds, while generally offering
higher yields than investment grade securities with
similar maturities, involve greater risks, including
the possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to
the issuer's capacity to pay interest and repay
principal. Although it is not precluded from doing so,
the Fund generally does not invest in junk bonds rated
below "BB" by Standard & Poor's.
Principal Risks. Junk bond securities tend to be
more sensitive to economic conditions than are higher-
rated securities. As a result, they generally involve
more credit risk than securities in the higher-rated
categories. During an economic downturn or a sustained
period of rising interest rates, highly leveraged
issuers of junk bond securities may experience
financial stress and may not have sufficient revenues
to meet their payment obligations. The risk of loss
due to default by an issuer of these securities is
significantly greater than issuers of higher-rated
securities because such securities are generally
unsecured and are often subordinated to other
creditors. The Fund may have difficulty disposing of
certain junk bond securities because there may be a
thin trading market for such securities. The Fund
anticipates that such securities could be sold only to
a limited number of dealers or institutional investors.
To the extent a secondary trading market does exist, it
is generally not as liquid as the secondary market for
higher-rated securities. Periods of economic
uncertainty generally result in increased volatility in
the market prices of these securities and thus in the
Fund's net asset value.
Mortgage- and Other Asset-Backed Securities
The Fund may invest in mortgage- and other asset-
backed securities. Mortgage-backed securities
represent direct or indirect participation in mortgage
loans secured by real property, and include single- and
multi-class pass-through securities and collateralized
mortgage obligations.
Asset-backed securities have structural
characteristics similar to mortgage-backed securities.
However, the underlying assets are not mortgage loans.
Instead, they include assets such as motor vehicle
installment sales contracts,
<PAGE>
installment loan contracts, home equity loans, leases of
various types of property and receivables from credit card
issuers or other revolving credit arrangements.
Principal Risks. The yield characteristics of
mortgage- and asset-backed securities differ from those
of traditional debt obligations. For example, interest
and principal payments are made more frequently on
mortgage- and asset-backed securities, usually monthly,
and principal may be prepaid at any time. As a result,
if the Fund purchases these securities at a premium, a
prepayment rate that is faster than expected will
reduce yield to maturity, while a prepayment rate that
is slower than expected will increase yield to
maturity. If the Fund purchases these securities at a
discount, a prepayment rate that is faster than
expected will increase yield to maturity, while a
prepayment rate that is slower than expected will
reduce yield to maturity. Accelerated prepayments on
securities purchased at a premium also impose a risk of
loss of principal because the premium may not have been
fully amortized at the time the principal is prepaid in
full. The market for privately issued mortgage- and
asset-backed securities is smaller and less liquid than
the market for government sponsored mortgage-backed
securities.
Portfolio Turnover
A change in the investments held by the Fund is
known as "portfolio turnover." Under normal market
conditions, the Fund anticipates that its annual
portfolio turnover rate will generally not exceed 225%
and is expected to be between 150% and 225%. A
portfolio turnover rate of 100% would occur, for
example, if all of the securities held by the Fund were
replaced within one year. In the event the Fund has a
portfolio turnover rate of 100% or more in any year, it
would result in the payment by the Fund of increased
brokerage costs, which would reduce the Fund's returns.
High portfolio turnover could also result in the
payment by shareholders of increased taxes on realized
investment gains. The Fund's portfolio turnover rate
is included under "Financial Highlights."
Prior Performance of Reams
As noted above, Reams is the Fund's subadviser.
The following table shows the historical composite
performance data for all of Reams' advisory accounts
which have investment objectives, policies, strategies
and risks substantially similar to the Fund, known as
the Reams Fixed Income Composite (the "Composite"), for
the periods indicated. Since its inception on June 1,
1981, the Composite has shown an annual return of
approximately 14.15%. The Composite has not been
subject to the same types of expenses to which the Fund
is subject nor to the diversification requirements,
specific tax restrictions and investment limitations
imposed on the Fund by the Internal Revenue Code of
1986, as amended (the "Code") and the Investment
Company Act of 1940, as amended (the "1940 Act"),
respectively. Consequently, the performance results
for the Composite could have been adversely affected if
the accounts included in the Composite had been
regulated under the federal security and tax laws. The
Composite's expenses are lower than the Fund's
expenses. If the Fund's expenses had been deducted
from the Composite's returns, the returns would be
lower than those shown. The data is provided to
illustrate the past performance of Reams in managing a
substantially similar portfolio as measured against the
Lehman Brothers Aggregate Bond Index and does not
represent the performance of the Fund. You should not
consider this performance data as an indication of the
future performance of the Fund or Reams.
Reams' performance information has been calculated
in accordance with recommended standards of the
Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, accrued
income, if any, and realized and unrealized gains and
losses. All returns reflect the deduction of
investment advisory fees, brokerage commissions and
execution costs paid by the accounts included in the
Composite, without provision for federal or state
income taxes. Cash and cash equivalents are included
in the performance returns. Total return is calculated
monthly in accordance with the time weighted rate of
return method provided for by AIMR standards accounted
for on a trade-date and accrual basis. AIMR standards
for calculation of total return differ from the
standards required by the SEC for calculation of
average annual total return. No leveraged positions
were used. The monthly returns are geometrically
linked to derive an annual total return.
The investment results of the Composite presented
below are Level 1 AIMR compliant, but are not intended
to predict or suggest the future returns of the Fund.
You should be aware that the use of a methodology
different than that used below to calculate performance
could result in different performance data.
<PAGE>
Reams Asset Management Company, LLC
Reams Fixed Income Composite Performance History: 6/1/81 - 9/30/99(1)
Reams Fixed Income
Composite Lehman Brothers
Period Total Return Aggregate Bond Index (2)
9/30/98-9/30/99 2.23% (0.37)%
9/30/94-9/30/99 8.53% 7.84%
9/30/89-9/30/99 8.69% 8.10%
6/1/81(3)-9/30/99 14.15% 10.82%
____________
(1) For the Fund's performance, see the return
information under "The Frontegra Total Return Bond
Fund at a Glance."
(2) 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 Investors
Service, in that order. All issues have at least one
year to maturity and an outstanding par value
of at least $100 million. The index does not reflect
investment management fees, brokerage commissions and
other expenses associated with investing in fixed
income securities.
(3) The Composite commenced operations on June 1, 1981.
Average Annualized Return in Percent: 6/1/81 - 9/30/99
Reams Fixed Income Composite Performance 14.15%
Lehman Brothers Aggregate Bond Index 10.82%
<PAGE>
Financial Highlights
The financial highlights table is intended to help
you understand the Fund's financial performance for the
periods from November 25, 1996 (commencement of
operations) to June 30, 1999. Certain information
reflects financial results for a single Fund share.
The total returns in the table represent the rate that
an investor would have earned (or lost) on an
investment in the Fund for the stated periods (assuming
reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial
statements, is included in the Fund's annual report,
which is available upon request.
<TABLE>
Eight Months November 25, 1996(1)
Ended Year Ended to
June 30, 19992(2) October 31, 1998 October 31, 1997
<S> <C> <C>
Net asset value, beginning of period $31.38 $30.85 $30.00
Income (loss) from investment operations:
Net investment income 1.29 1.75 1.37
Net realized and unrealized gains (losses)
on investments (1.18) 0.59 0.70
Total income from investment operations 0.11 2.34 2.07
Less distributions paid:
From net investment income (1.44) (1.75) (1.22)
From net realized gains on investments (0.71) (0.06) -
Total distributions paid (2.15) (1.81) (1.22)
Net asset value, end of period $29.34 $31.38 $30.85
======= ======= =======
Total return(3) 0.32% 7.79% 7.13%
Supplemental data and ratios:
Net assets, end of period (in thousands) $48,413 $48,457 $39,096
Ratio of expenses to average net
assets(4)(5) 0.50% 0.50% 0.50%
Ratio of net investment income to
average net assets (4)(5) 6.37% 5.79% 6.02%
Portfolio turnover rate(3) 83% 131% 202%
</TABLE>
____________
(1) Commencement of operations.
(2) Effective June 30, 1999, the Company's fiscal
year-end was changed from October 31 to June 30.
(3) Not annualized for periods less than a full year.
(4) Net of waivers and reimbursements by Frontegra.
Without waivers and reimbursements of expenses, the
ratio of expenses to average net assets would have
been 0.82%, 0.78% and 1.27%, and the ratio of net
investment income to average net assets would have
been 6.05%, 5.51% and 5.25% for the periods ended
June 30, 1999, October 31, 1998 and October 31, 1997,
respectively.
(5) Annualized.
<PAGE>
Fund Management
Under the laws of the State of Maryland, the Board
of Directors of the Company (the "Board of Directors")
is responsible for managing the Company's business and
affairs. The Board of Directors also oversees duties
required by applicable state and federal law. The
Company has entered into an investment advisory
agreement with Frontegra dated October 30, 1996, as
amended as of February 1, 1998 and December 31, 1999
(the "Investment Advisory Agreement"), pursuant to
which Frontegra supervises the management of the Fund's
investments and business affairs, subject to the
supervision of the Company's Board of Directors.
Frontegra has entered into a subadvisory agreement with
Reams under which Reams serves as the Fund's portfolio
manager and, subject to Frontegra's supervision,
manages the Fund's portfolio assets. Frontegra
provides office facilities for the Fund and pays the
salaries, fees, and expenses of all officers and
directors of the Fund who are interested persons of
Frontegra.
Adviser. The Fund is managed by Frontegra, which
supervises the management of the Fund's portfolio by
the subadviser and administers the Company's business
affairs. Frontegra was organized in 1996 and is
located at 400 Skokie Boulevard, Suite 500, Northbrook,
Illinois 60062. Mr. William D. Forsyth III and Mr.
Thomas J. Holmberg, Jr. each own 50% of Frontegra.
Under the Investment Advisory Agreement, the Fund
compensates Frontegra at the annual rate of 0.40% of
the Fund's average daily net assets. Pursuant to an
expense cap agreement effective August 2, 1999, as
amended December 31, 1999 between Frontegra and the
Fund, Frontegra agreed to waive its management fee
and/or reimburse the Fund's operating expenses to the
extent necessary to ensure that the Fund's total
operating expenses do not exceed 0.425% of the Fund's
average daily net assets. The term of this expense cap
agreement is 12 months. The expense cap agreement has
the effect of lowering the overall expense ratio for
the Fund and increasing the Fund's overall return to
investors for the time any such amounts are waived
and/or reimbursed.
Subadviser. Reams operated as a corporation
(Reams Asset Management Company, Inc.) from its
founding in 1981 until March 31, 1994, when it became
an Indiana limited liability company (LLC), with no
change in principals, employees or clients. Reams is
located at 227 Washington Street, Columbus, Indiana
47201. Under the subadvisory agreement as amended
August 2, 1999, and with certain exceptions described
herein, Reams is compensated by Frontegra for its
investment advisory services at the annual rate of
0.15% of the Fund's average daily net assets. Under
the subadvisory agreement as in effect for the eight
months ended June 30, 1999, Reams was compensated by
Frontegra for its investment advisory services at the
annual rate of 0.20% of the Fund's average daily net
assets. In recognition of the economies of scale that
will be gained by the Fund and Frontegra, and with the
exception of defined contribution or 401(k) investments
in the Fund, for initial investments of over $15
million Frontegra will compensate Reams an extra 0.10%
of the average daily net assets of such investments.
For the eight months ended June 30, 1999, Reams
received $35,391.55 from Frontegra for its investment
advisory services to the Fund. Reams provides
continuous advice and recommendations concerning the
Fund's investments and is responsible for selecting the
broker/dealers who execute the portfolio transactions.
In executing such transactions, Reams seeks to obtain
the best net results for the Fund. In addition to
providing investment advisory services to the Fund,
Reams serves as investment adviser to pension and
profit-sharing plans, and other institutional
investors. As of December 1, 1999, Reams had
approximately $6 billion under management, which
includes fixed income portfolios totaling approximately
$5.7 billion.
Portfolio Managers. The day-to-day management
responsibilities for the Fund's portfolio are primarily
handled by Reams' portfolio management team. The
portfolio management team has been managed primarily by
Mr. Robert A. Crider and Mr. Mark M. Egan since the Fund's
inception. Mr. Crider has been Senior Vice President,
Fixed Income Management, of Reams since April, 1994 and
was Senior Vice President, Fixed Income Management, of
Reams Asset Management, Inc. from 1981 until March,
1994. Mr. Egan has been Portfolio Manager of Reams
since April 1994 and was Portfolio Manager of Reams
Asset Management Company, Inc. from June 1990 until
March 1994. Mr. Egan was Portfolio Manager of National
Investment Services, until May 1990. The fixed income
portfolio managers implement decisions on a team basis
with respect to the Fund's portfolio structure and
issue selection. Portfolio strategy is reviewed weekly
by the fixed income committee.
Custodian, Transfer Agent and Administrator.
Firstar Bank, N.A. acts as custodian of the Fund's
assets. Firstar Mutual Fund Services, LLC serves as
Transfer Agent for the Fund (the "Transfer Agent") and
as the Fund's administrator. Firstar Bank, N.A. and
Firstar Mutual Fund Services, LLC are affiliated
entities and are collectively referred to in this
Prospectus as "Firstar."
<PAGE>
Your Account
How to Purchase Shares
Shares of the Fund are sold on a continuous basis
at net asset value. The Fund's net asset value is
determined as of the close of trading on the New York
Stock Exchange (the "NYSE") (generally 4:00 p.m.,
Eastern Time) on each day the NYSE is open. Your
purchase price will be the Fund's net asset value next
determined after the Fund receives your request in
proper form. A confirmation indicating the details of
the transaction will be sent to you promptly. Shares
are credited to your account, but certificates are not
issued. However, you will have full shareholder
rights.
The Fund's minimum initial investment is $100,000.
Subsequent investments may be made by mail or wire with
a minimum subsequent investment of $1,000. The Fund
reserves the right to change or waive these minimums at
any time. You will be given at least 30 days' notice
of any increase in the minimum dollar amount of
purchases.
If you purchase shares of the Fund by check and
request the redemption of such shares within 15 days of
the initial purchase, payment of the redemption
proceeds may be delayed for up to seven business days
in order to ensure that the check has cleared. This is
a security precaution only and does not affect your
investment.
Initial Investment - Minimum $100,000
You may purchase shares of the Fund by completing
an application and mailing it along with a check or
money order payable to "Frontegra Funds, Inc." to:
Frontegra Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. For overnight deliveries, please use 615 East
Michigan Street, Third Floor, Milwaukee, WI 53202.
Purchases must be made in U.S. dollars and all checks
must be drawn on a U.S. bank. If your check does not
clear, you will be charged a $25 service fee. You will
also be responsible for any losses suffered by the Fund
as a result. All applications to purchase shares of
the Fund are subject to acceptance by the Company and
are not binding until so accepted. The Company
reserves the right to reject an application in whole or
in part.
Alternatively, you may place an order to purchase
shares of the Fund through a broker-dealer. Broker-
dealers may charge a transaction fee for placing orders
to purchase Fund shares. It is the responsibility of
the broker-dealer to place the order with the Fund on a
timely basis.
In addition, you may purchase shares of the Fund
by wire. To establish a new account by wire transfer,
please call the Transfer Agent at 1-888-825-2100. The
Transfer Agent will assign an account number to you at
that time. Funds should then be wired through the
Federal Reserve System as follows:
Firstar Bank, N.A.
ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC
Account Number 112-952-137
For further credit to Frontegra Funds, Inc.
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
(identify Frontegra Total Return Bond Fund)
The Fund is not responsible for the consequences
of delays resulting from the banking or Federal Reserve
wire system.
Subsequent Investments - Minimum $1,000
You may make additions to your account in amounts
of $1,000 or more by mail or by wire. When making an
additional purchase by mail, enclose a check payable to
"Frontegra Funds, Inc." along with the additional
investment form provided on the lower portion of your
account statement. To make an additional purchase by
wire, please follow the instructions listed above.
<PAGE>
How to Redeem Shares
You may request redemption of part or all of your
Fund shares at any time. The price you receive will be
the net asset value next determined after the Fund
receives your request in proper form. Once your
redemption request is received in proper form, the Fund
normally will mail or wire your redemption proceeds the
next business day and, in any event, no later than
seven business days after receipt of a redemption
request. However, the Fund may hold payment of that
portion of an investment which was made by check which
has not been collected. In addition to the redemption
procedures described below, redemptions may also be
made through broker/dealers who may charge a commission
or other transaction fee.
Written Redemption
To redeem your Fund shares please furnish a
written, unconditional request to: Frontegra Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. For written
redemption requests sent via overnight delivery, please
use 615 East Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202. Your request must (i) be signed
exactly as the shares are registered, including the
signature of each owner and (ii) specify the number of
Fund shares or dollar amount to be redeemed. The
Transfer Agent may request additional documentation
from corporations, executors, administrators, trustees,
guardians, agents or attorneys-in-fact. Redemption
proceeds may be wired to a commercial bank authorized
on your account application. However, you will be
charged a $12 service fee for wire redemptions. If the
dollar amount requested to be redeemed is greater than
the current value of your account, your entire account
balance will be redeemed.
Signature Guarantees
Signature guarantees are required for: (i)
redemption requests mailed or wired to a person other
than the registered owner(s) of the shares, (ii)
redemption requests mailed or wired to other than the
address of record and (iii) redemption requests
submitted within 30 days of an address change. A
signature guarantee may be obtained from any bank,
savings and loan association, credit union, brokerage
firm or other eligible guarantor institution. A notary
public is not an acceptable guarantor.
Account Termination
Your account may be terminated by the Fund on not
less than 30 days' notice if the value of the shares in
the account falls below $10,000. Upon any such
termination, a check for the redemption proceeds will
be sent to the address of record within seven business
days of the redemption.
Exchange Privilege
You may exchange your shares in the Fund for
shares in any other Fund of the Company at any time by
written request. The value of the shares to be
exchanged and the price of the shares being purchased
will be the net asset value next determined after
receipt of instructions for exchange in proper form.
An exchange from one Fund to another is treated the
same as an ordinary sale and purchase for federal
income tax purposes and you will realize a capital gain
or loss. This is not a tax-free exchange. Exchange
requests should be directed to: Frontegra Funds, Inc.,
c/o Firstar Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. For written exchange
requests sent via overnight delivery, please use 615
East Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Exchange requests may be subject to
limitations, including those relating to frequency,
that may be established from time to time to ensure
that the exchanges do not disadvantage the Fund or its
shareholders. The Company reserves the right to modify
or terminate the exchange privilege upon 60 days'
written notice to each shareholder prior to the
modification or termination taking effect.
Valuation of Fund Shares
The price of Fund shares is the Fund's net asset
value, which is calculated using the market price
method of valuation and is determined as of the close
of trading (generally 4:00 p.m. Eastern Time) on each
day the New York Stock Exchange ("NYSE") is open for
business. The Fund does not determine net asset value
on days the NYSE is closed. The NYSE is closed on New
Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday,
<PAGE>
Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. In addition,
if any of these holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday,
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or yearly period.
Tax-Sheltered Retirement Plans
The Company offers through its Custodian, Firstar
Bank, N.A., various qualified retirement plans for
adoption by individuals and employers. Participants in
these plans can accumulate shares of the Fund on a tax-
deferred basis. Please call 1-888-825-2100 for a
current list of the plans offered.
Dividends, Capital Gain Distributions And Tax Treatment
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
are taxable as ordinary income whether reinvested or
received in cash unless you are exempt from taxation or
entitled to a tax deferral. Distributions paid by the
Fund from net realized long-term capital gains, whether
received in cash or reinvested in additional shares,
are taxable as a capital gain unless you are exempt
from taxation or entitled to a tax deferral. The
capital gain holding period is determined by the length
of time the Fund has held the security and not the
length of time you have held shares in the Fund.
Shareholders are informed annually as to the amount and
nature of all dividends and capital gains paid during
the prior year. Such capital gains and dividends may
also be subject to state or local taxes. If you are
not required to pay taxes on your income, you are
generally not required to pay federal income taxes on
the amounts distributed to you.
The Fund will usually distribute dividends
quarterly. The Fund will usually distribute capital
gains annually in December. When a dividend or capital
gain is distributed, the Fund's net asset value
decreases by the amount of the payment. If you
purchase shares shortly before a distribution, you
will, nonetheless, be subject to income taxes on the
distribution, even though the value of your investment
(plus cash received, if any) remains the same. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of income.
All dividends or capital gain distributions will
automatically be reinvested in shares of the Fund at
the then prevailing net asset value unless an investor
specifically requests that either dividends or capital
gains or both be paid in cash. The election to receive
dividends or reinvest them may be changed by writing
to: Frontegra Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. For overnight deliveries, please use 615 East
Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Such notice must be received at least five
business days prior to the record date of any dividend
or capital gain distribution.
If you do not furnish the Fund with your correct
Social Security Number or Taxpayer Identification
Number and/or the Fund receives notification from the
Internal Revenue Service requiring back-up withholding,
the Fund is required by federal law to withhold federal
income tax from your distributions and redemption
proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
adviser.
<PAGE>
Year 2000 Issue
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of Frontegra, Reams
and Firstar. Many computer software systems in use
today cannot properly process date-related information
after December 31, 1999 because of the method by which
dates are encoded and calculated. This failure,
commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of security trades,
pricing and account servicing for the Fund.
Frontegra has made compliance with the Year 2000
Issue a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems.
Frontegra has also been informed that comparable steps
are being taken by Reams. Firstar has represented to
Frontegra that it does not currently anticipate that
the Year 2000 Issue will have a material impact on its
ability to continue to fulfill its duties as a service
provider to the Fund. However, there can be no
assurance that the steps taken by Frontegra, Reams or
Firstar will be sufficient to avoid any adverse impact.
With respect to the companies in which the Fund
invests, the Fund cannot make any assurances as to
their Year 2000 compliance efforts. To the extent the
Fund invests in foreign companies, those companies may
be more likely to be affected by Year 2000 issues. In
the event that one or more of these companies is not
Year 2000 compliant, the Fund's investment in such
companies may be adversely affected.
<PAGE>
DIRECTORS TRANSFER AGENT AND ADMINISTRATOR
William D. Forsyth III Firstar Mutual Fund Services, LLC
Thomas J. Holmberg, Jr. For overnight deliveries, use:
David L. Heald Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
OFFICERS 615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
William D. Forsyth III
Thomas J. Holmberg, Jr. For regular mail deliveries, use:
INVESTMENT ADVISER Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Frontegra Asset Management, Inc. P.O. Box 701
400 Skokie Blvd. Milwaukee, Wisconsin 53201-0701
Suite 500
Northbrook, Illinois 60062 AUDITORS
SUB-ADVISER Ernst & Young LLP
Sears Tower
Reams Asset Management Company, LLC 233 S. Wacker Drive
227 Washington Street Chicago, Illinois 60606-6301
Columbus, Indiana 47201
LEGAL COUNSEL
CUSTODIAN
Godfrey & Kahn, S.C.
Firstar Bank, N.A. 780 N. Water Street
Milwaukee, Wisconsin 53202
Additional information regarding the Company and the
Fund is included in the Statement of Additional
Information ("SAI") which has been filed with the
Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference. Further
information about the Fund's investments is also
available in the Fund's annual and semi-annual reports
to shareholders. The Fund's annual report provides a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its last fiscal year. You may
receive the Fund's SAI, annual reports and semi-annual
reports free of charge, request other information about
the Fund and make shareholder inquiries by contacting
the Company at the address listed on the cover page of
this Prospectus or by calling, toll-free, 1-888-825-2100.
Information about the Fund (including the SAI) can be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-202-942-
8090 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the EDGAR database
on the SEC's Internet site located at
http://www.sec.gov. Alternatively, copies of this
information may be obtained, upon payment of a
duplicating fee, by electronic request to the following
e-mail address: [email protected], or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-0102.
The Company's 1940 Act File Number is 811-7685.
<PAGE>
PROSPECTUS
December 31, 1999
FRONTEGRA FUNDS, INC.
FRONTEGRA OPPORTUNITY FUND
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-825-2100
The FRONTEGRA OPPORTUNITY FUND (the "Fund") is a
series of FRONTEGRA FUNDS, INC., (the "Company").
The investment objective of the Fund is capital
appreciation. The Fund invests primarily in a
diversified portfolio of equity securities of companies
with small market capitalizations.
This Prospectus contains information you should
consider before investing in the Fund. Please read it
carefully and keep it for future reference.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
THE FRONTEGRA OPPORTUNITY FUND AT A GLANCE 1
FEES AND EXPENSES OF THE FUND 2
INVESTMENT OBJECTIVE 3
INVESTMENT STRATEGY 3
IMPLEMENTATION OF INVESTMENT OBJECTIVE 3
PRIOR PERFORMANCE OF REAMS 4
FINANCIAL HIGHLIGHTS 6
FUND MANAGEMENT 6
YOUR ACCOUNT 7
EXCHANGE PRIVILEGE 9
VALUATION OF FUND SHARES 9
TAX-SHELTERED RETIREMENT PLANS 9
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT 10
YEAR 2000 ISSUE 10
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
THIS PROSPECTUS AND IN THE STATEMENT OF ADDITIONAL
INFORMATION ("SAI"), WHICH IS AVAILABLE UPON REQUEST.
THE COMPANY HAS NOT AUTHORIZED OTHERS TO PROVIDE ANY
ADDITIONAL INFORMATION. THE COMPANY DOES NOT AUTHORIZE
USE OF THIS PROSPECTUS IN ANY STATE OR JURISDICTION
WHERE THE OFFERING CANNOT LEGALLY BE MADE.
<PAGE>
The Frontegra Opportunity Fund at a Glance
* Investment Objective
The Fund's goal, also referred to as its
investment objective, is capital appreciation.
* Principal Investment Strategy
The Fund seeks to achieve its goal primarily
through investment in a diversified portfolio of equity
securities of companies with small market
capitalizations. For this purpose, a small
capitalization company would typically have a market
capitalization of $1 billion or less. In constructing
a portfolio for the Fund, the Fund's subadviser, Reams
Asset Management Company LLC ("Reams"), selects
securities with the highest expected rates of return
based on the analysis of its portfolio management team.
Equity securities in which the Fund may invest include
common stocks, preferred stocks, depositary receipts,
warrants to purchase common and preferred stocks and
securities convertible or exchangeable into common or
preferred stocks. Under normal market conditions, the
Fund will invest at least 80% of its assets in these
securities. Under unusual circumstances, as a
temporary defensive technique, the Fund may invest up
to 100% of its total assets in cash and short-term
fixed income securities.
* Risk Factors
The main risks of investing in the Fund are:
- Small Cap Risks: Because the Fund will invest
primarily in small capitalization stocks, which are
more volatile than investments in large companies, you
should expect that the value of the Fund's shares will
be more volatile than the shares of a fund that invests
in medium or large capitalization companies.
- Market Risks: The Fund's investments are subject
to market risk, so that the value of the Fund's
investments may go up or down. If the value of the
Fund's investments goes down, you may lose money. The
share price of the Fund is expected to fluctuate. Your
shares at redemption may be worth more or less than
your initial investment. Market risks associated with
equity investments include the possibility that stock
prices in general will decline over short or even
extended periods.
- Stock Selection Risks: The stocks selected for
inclusion in the Fund's portfolio may decline in value
or not increase in value when the stock market in
general is rising.
* Who Should Invest
The Fund is suitable for long-term investors only
and is not designed as a short-term investment vehicle.
The Fund may be an appropriate investment for you if
you:
- Seek long-term capital appreciation;
- Want to include a small-cap fund in your portfolio; and
- Are willing to accept the risk that your investment may fluctuate.
* Performance Bar Chart and Tables
The return information provided in the bar chart
and tables below illustrates how the Fund's
performance can vary, which is one indication of
the risks of investing in the Fund. The
information also provides some indication of the
risks of investing in the Fund by comparing the
Fund's performance with a broad measure of market
performance over the past calendar year. Please
keep in mind that the Fund's past performance does
not necessarily represent how it will perform in
the future.
<PAGE>
Calendar Year Total Return(1)
1998
(10.13)%
[bar chart]
Best and Worst Quarterly Performance
Best Quarter Return Worst Quarter Return
9.02% (17.39)%
(4th quarter, 1998) (3rd quarter, 1998)
Average Annual Total Returns
(For the calendar year ended December 31, 1998)
Fund/Index One Year Since Inception (7/31/97)
Opportunity Fund (10.13)% (1.91)%
Russell 2000 Index(2) (2.55)% 2.38%
_________________
(1)The Fund's year-to-date return through
September 30, 1999 was 2.80%.
(2)The Russell 2000 Index is an unmanaged index
generally representative of the U.S. market for small
domestic stocks. The index does not reflect investment
management fees, brokerage commissions and other
expenses associated with investing in equity
securities.
Fees and Expenses of the Fund
This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) NONE(1)
Annual Fund Operating Expenses (expenses that are deducted from
Fund assets)(2)
Management Fees 0.65%
Distribution (12b-1) Fees NONE
Other Expenses 0.83%
Total Annual Fund Operating Expenses 1.48%
Fee Waiver/Expense Reimbursement(3) 0.58%
Net Expenses 0.90%
_______________
(1) The Fund will charge a service fee of $12 for
redemptions effected via wire transfer, and $25 for
checks that do not clear.
(2) Stated as a percentage of the Fund's average
daily net assets.
(3) Pursuant to an expense cap agreement dated
February 26, 1999, as amended August 2 and December 31,
1999, between the Fund's adviser, Frontegra Asset
Management, Inc. ("Frontegra") and the Fund, Frontegra
agreed to waive its management fee and/or reimburse the
Fund's operating expenses to the extent necessary to
ensure that the Fund's total operating expenses do not
exceed 0.90% of the Fund's average daily net assets.
This expense cap agreement will terminate on December
31, 2000 unless extended by the Fund and Frontegra.
"Other expenses" are presented before any waivers or
reimbursements.
<PAGE>
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year,
that the Fund's operating expenses remain the same each
year and that Frontegra's fee waiver/expense
reimbursement discussed above will not continue beyond
the period of the current expense cap agreement, which
will terminate on December 31, 2000. Although your
actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
1 Year $ 92
3 Years $ 411
5 Years $ 753
10 Years $1,719
Investment Objective
The Fund's investment objective is capital
appreciation. This investment objective may not be
changed without shareholder approval.
Investment Strategy
Under normal conditions, the Fund will seek to
achieve its investment objective by investing its
assets primarily in equity securities with small market
capitalizations. The Fund will invest at least 80% of
its net assets in equity securities. These securities
include: common stocks; preferred stocks; warrants to
purchase common stocks or preferred stocks; depositary
receipts; and securities convertible into common or
preferred stocks, such as convertible bonds and
debentures rated Baa or higher by Moody's Investors
Service ("Moody's") or BBB or higher by Standard &
Poor's ("S&P"), Duff & Phelps, Inc. ("D&P") or Fitch
Investors Service, Inc. ("Fitch"). At least 65% of the
Fund's total assets will normally be invested in equity
securities of those companies with a market
capitalization of $1 billion or less at the time of the
Fund's investment. In general, investments in small
capitalization companies often involve greater risks
than investments in larger capitalized companies.
In seeking to achieve the Fund's investment
objective, Reams uses a value-oriented discipline.
Reams evaluates the small-cap market by using a number
of valuation criteria, including both current and
historical measures, for ratios comparing price to
earnings, price to book value and price to sales. The
portfolio management team then constructs a focus list
based in part on each company's competitive position,
capital structure, cash flow and management. The team
then determines a target price for the stock, thus
providing a specific expected rate of return. The
approximately 50 securities with the highest expected
rates of return would be among those securities
selected for the Fund's portfolio. Reams constructs a
portfolio using a bottom-up analysis. On average, a
security will be held by the Fund for approximately 12
months. Ultimately, securities will be sold due to the
emergence of superior alternatives. A holding will
become "inferior" if 1) it reaches Reams' target price,
thus lowering its expected rate of return; 2) it
experiences a negative change in fundamentals, also
lowering its expected return; or 3) higher ranking
securities emerge based on their expected rates of
return.
Implementation of Investment Objective
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and elsewhere in this
Prospectus.
Common Stocks and Other Equity Securities
The Fund will invest at least 80% of its net
assets in common stocks and other equity securities.
Other equity securities may include depositary
receipts, preferred stocks, warrants to purchase common
and preferred stocks and securities convertible or
exchangeable into common or preferred stock.
<PAGE>
Principal Risks. Common stocks and other equity
securities generally increase or decrease in value
based on the earnings of a company and on general
industry and market conditions. A fund that invests a
significant amount of its assets in common stocks and
other equity securities is likely to have greater
fluctuations in share price than a fund that invests a
significant portion of its assets in fixed income
securities.
Small Companies
The Fund will normally invest at least 65% of its
total assets in small companies. Small companies have
a market capitalization of $1 billion or less at
purchase.
Principal Risks. While smaller companies may have
the potential for rapid growth, investments in smaller
companies often involve greater risks than investments
in larger, more established companies because smaller
companies may lack the management experience, financial
resources, product diversification and competitive
strengths of larger companies. In addition, in many
instances the securities of smaller companies are
traded only over-the-counter or on a regional
securities exchange, and the frequency and volume of
their trading is substantially less than is typical of
larger companies. Therefore, the securities of smaller
companies may be subject to greater and more abrupt
price fluctuations. When making large sales, the Fund
may have to sell portfolio holdings at discounts from
quoted prices or may have to make a series of small
sales over an extended period of time due to the
trading volume of smaller company securities. An
investment in the Fund may be subject to greater price
fluctuations than an investment in a fund that invests
primarily in larger companies.
Temporary Strategies
The Fund may invest up to 100% of its total assets
in cash and short-term fixed income securities for
temporary defensive purposes in response to adverse
market or economic conditions. To the extent the Fund
engages in any of these temporary strategies, the Fund
may not achieve its investment objective.
Prior Performance of Reams
As noted above, Reams is the Fund's subadviser.
The following table shows the historical composite
performance data for all of Reams' advisory accounts
which have investment objectives, policies, strategies
and risks substantially similar to the Fund, known as
the Reams Small Capitalization Value Equity Composite
(the "Composite"), for the periods indicated. Since
its inception on January 1, 1995, the Composite has
shown an annual return of approximately 15.47%. The
Composite has not been subject to the same types of
expenses to which the Fund is subject nor to the
diversification requirements, specific tax restrictions
and investment limitations imposed on the Fund by the
Internal Revenue Code of 1986, as amended (the "Code"),
and the Investment Company Act of 1940, as amended (the
"1940 Act"), respectively. Consequently, the
performance results for the Composite could have been
adversely affected if the Composite had been regulated
under the federal security and tax laws. The
Composite's expenses are lower than the Fund's
expenses. If the Fund's expenses had been deducted
from the Composite's returns, the returns would be
lower than those shown. The data is provided to
illustrate the past performance of Reams in managing a
substantially similar portfolio as measured against the
Russell 2000 Index and does not represent the
performance of the Fund. You should not consider this
performance data as an indication of the future
performance of the Fund or Reams.
Reams' performance information has been calculated
in accordance with recommended standards of the
Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses. All returns reflect the deduction of
investment advisory fees, brokerage commissions and
execution costs paid by the Composite, without
provision for federal or state income taxes. Cash and
cash equivalents are included in the performance
returns. Total return is calculated monthly in
accordance with the time weighted rate of return method
provided for by AIMR standards accounted for on a trade-
date and accrual basis. AIMR standards for calculation
of total return differ from the standards required by
the SEC for calculation of average annual total return.
No leveraged positions were used. The monthly returns
are geometrically linked to derive an annual total
return.
<PAGE>
The investment results of the Composite presented
below are unaudited and are not intended to predict or
suggest the future returns of the Fund. You should be
aware that the use of a methodology different than that
used below to calculate performance could result in
different performance data.
Reams Asset Management Company, LLC
Reams Small Capitalization Value Equity Composite
Performance History: 1/1/95-9/30/99(1)
Reams Small
Capitalization
Composite Russell 2000
Period Total Return Index (2)
9/30/98-9/30/99 12.54% 19.07%
9/30/96-9/30/99 10.63% 8.70%
1/1/95(3)-9/30/99 15.47% 13.53%
__________
(1) For the Fund's performance, see the return
information under "The Frontegra Opportunity Fund at
a Glance."
(2) The Russell 2000 Index is an unmanaged index
generally representative of the U.S. market for small
domestic stocks. The index does not reflect
investment management fees, brokerage commissions and
other expenses associated with investing in equity
securities.
(3) The Composite commenced operations on January 1, 1995.
Average Annualized Return in Percent: 1/1/95-9/30/99
Reams Small Capitalization Composite Performance 15.47%
Russell 2000 Index 13.53%
<PAGE>
Financial Highlights
The financial highlights table is intended to help
you understand the Fund's financial performance for the
periods from July 31, 1997 (commencement of operations)
to June 30, 1999. Certain information reflects
financial results for a single Fund share. The total
returns in the table represent the rate that an
investor would have earned (or lost) on an investment
in the Fund for the stated periods (assuming
reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial
statements, is included in the Fund's annual report,
which is available upon request.
<TABLE>
Eight Months July 31,1997(1)
Ended Year Ended to
June 30, 1999(2) October 31, 1998 October 31, 1997
<S> <C> <C>
Net asset value, beginning of period $27.93 $32.22 $30.00
Income (loss) from investment operations:
Net investment income 0.07 0.26 0.04
Net realized and unrealized gains
(losses) on investments 4.23 (4.52) 2.18
Total income (loss) from investment
operations 4.30 (4.26) 2.22
Less distributions paid:
From net investment income (0.21) (0.03) -
Total distributions paid (0.21) (0.03) -
Net asset value, end of period $32.02 $27.93 $32.22
======= ======= =======
Total return(3) 15.49% (13.24)% 7.40%
Supplemental data and ratios:
Net assets, end of period (in thousands) $17,211 $6,827 $5,900
Ratio of expenses to average net
assets(4)(5) 0.90% 0.90% 0.90%
Ratio of net investment income to
average net assets(4)(5) 1.00% 0.92% 2.61%
Portfolio turnover rate(3) 38% 54% 9%
</TABLE>
____________
(1) Commencement of operations.
(2) Effective June 30, 1999, the Company changed
its fiscal year-end from October 31 to June 30.
(3) Not annualized for periods less than a full year.
(4) Net of waivers and reimbursements by Frontegra.
Without waivers and reimbursements of expenses, the
ratio of expenses to average net assets would have
been 1.73%, 2.53% and 12.02% and the ratio of net
investment income (loss) to average net assets would
have been 0.17%, (0.71)% and (8.51)% for the periods
ended June 30, 1999, October 31, 1998 and October 31, 1997,
respectively.
(5) Annualized.
Fund Management
Under the laws of the State of Maryland, the Board
of Directors of the Company (the "Board of Directors")
is responsible for managing the Company's business and
affairs. The Board of Directors also oversees duties
required by applicable state and federal law. The
Company has entered into an investment advisory
agreement with Frontegra dated October 30, 1996, as
amended as of February 1, 1998 and December 31, 1999
(the "Investment Advisory Agreement"), pursuant to
which Frontegra supervises the management of the Fund's
investments and business affairs, subject to the
supervision of the Company's Board of Directors.
Frontegra has entered into a subadvisory agreement with
Reams under which Reams serves as the Fund's portfolio
manager and, subject to Frontegra's supervision,
manages the Fund's portfolio assets. Frontegra
provides office facilities for the Fund and pays the
salaries, fees and expenses of all officers and
directors of the Fund who are interested persons of
Frontegra.
<PAGE>
Adviser. The Fund is managed by Frontegra, which
supervises the management of the Fund's portfolio by
the subadviser and administers the Company's business
affairs. Frontegra was organized in 1996 and is
located at 400 Skokie Boulevard, Suite 500, Northbrook,
Illinois 60062. Mr. William D. Forsyth III and Mr.
Thomas J. Holmberg, Jr. each own 50% of Frontegra.
Under the Investment Advisory Agreement, the Fund
compensates Frontegra for its management services at
the annual rate of 0.65% of the Fund's average daily
net assets. Pursuant to an expense cap agreement dated
February 26, 1999, as amended December 31, 1999,
between Frontegra and the Fund, Frontegra agreed to
waive its management fee and/or reimburse the Fund's
operating expenses to the extent necessary to ensure
that the Fund's total operating expenses do not exceed
0.90% of the Fund's average daily net assets. The
expense cap agreement will terminate on December 31,
2000 unless extended by the Fund and Frontegra. The
expense cap agreement has the effect of lowering the
overall expense ratio for the Fund and increasing the
Fund's overall return to investors for the time any
such amounts are waived and/or reimbursed.
Subadviser. Reams operated as a corporation
(Reams Asset Management Company, Inc.) from its
founding in 1981 until March 31, 1994, when it became
an Indiana limited liability company (LLC), with no
change in principals, employees or clients. Reams is
located at 227 Washington Street, Columbus, Indiana
47201. Under the subadvisory agreement, and with
certain exceptions described herein, Reams is
compensated by Frontegra for its investment advisory
services at the annual rate of 0.45% of the Fund's
average daily net assets. In recognition of the
economies of scale that will be gained by the Fund and
Frontegra, and with the exception of defined
contribution or 401(k) investments in the Fund, for
initial investments of over $15 million Frontegra will
compensate Reams an extra 0.10% of the average daily
net assets of such investments. For the eight months
ended June 30, 1999, Reams received $1,677.78 for its
investment advisory services to the Fund. Reams
provides continuous advice and recommendations
concerning the Fund's investments and is responsible
for selecting the broker/dealers who execute the
portfolio transactions. In executing such
transactions, Reams seeks to obtain the best net
results for the Fund. In addition to providing
investment advisory services to the Fund, Reams serves
as investment adviser to pension and profit-sharing
plans, and other institutional investors. As of
December 1, 1999, Reams had approximately $6 billion
under management, which includes equity portfolios
totaling approximately $300 million.
Portfolio Managers. The day-to-day management
responsibilities for the Fund's portfolio are primarily
handled by Reams' portfolio management team. The
portfolio management team has been managed primarily by
Mr. Fred W. Reams and Mr. David R. Milroy. Since
September 1999, Mr. Reams has been the Chairman of
Reams. Mr. Reams was President of Reams from April
1994 until September 1999 and was President of Reams
Asset Management Company, Inc. from its founding in
1981 until March 1994. Mr. Milroy has been Senior Vice
President, Equity Management, of Reams since April
1994, was Vice President and Senior Vice President,
Equity Management, of Reams Asset Management Company,
Inc. from June 1990 until March 1994, and was Portfolio
Manager of Loomis, Sayles & Co. from May 1985 until May
1990. The portfolio management team approves scenarios
established for individual securities submitted by each
analyst and makes the final buy and sell decisions.
Custodian, Transfer Agent and Administrator.
Firstar Bank, N.A. acts as custodian of the Fund's
assets. Firstar Mutual Fund Services, LLC serves as
Transfer Agent for the Fund (the "Transfer Agent") and
as the Fund's administrator. Firstar Bank, N.A. and
Firstar Mutual Fund Services, LLC are affiliated
entities and are collectively referred to in this
Prospectus as "Firstar."
Your Account
How to Purchase Shares
Shares of the Fund are sold on a continuous basis
at net asset value. The Fund's net asset value is
determined as of the close of trading on the New York
Stock Exchange (the "NYSE") (generally 4:00 p.m.,
Eastern Time) on each day the NYSE is open. Your
purchase price will be the Fund's net asset value next
determined after the Fund receives your request in
proper form. A confirmation indicating the details of
the transaction will be sent to you promptly. Shares
are credited to your account, but certificates are not
issued. However, you will have full shareholder
rights.
The Fund's minimum initial investment required is
$100,000. Subsequent investments may be made by mail
or wire with a minimum subsequent investment of $1,000.
The Fund reserves the right to change or waive these
minimums at any time. You will be given at least 30
days' notice of any increase in the minimum dollar
amount of purchases.
<PAGE>
If you purchase shares of the Fund by check and
request the redemption of such shares within 15 days of
the initial purchase, payment of the redemption
proceeds may be delayed for up to seven business days
in order to ensure that the check has cleared. This is
a security precaution only and does not affect your
investment.
Initial Investment - Minimum $100,000
You may purchase shares of the Fund by completing
an application and mailing it along with a check or
money order payable to "Frontegra Funds, Inc." to:
Frontegra Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. For overnight deliveries, please use 615 East
Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Purchases must be made in U.S. dollars and all
checks must be drawn on a U.S. bank. If your check
does not clear, you will be charged a $25 service fee.
You will also be responsible for any losses suffered by
the Fund as a result. All applications to purchase
shares of the Fund are subject to acceptance by the
Company and are not binding until so accepted. The
Company reserves the right to decline an application in
whole or in part.
Alternatively, you may place an order to purchase
shares of the Fund through a broker/dealer.
Broker/dealers may charge a transaction fee for placing
orders to purchase Fund shares. It is the
responsibility of the broker/dealer to place the order
with the Fund on a timely basis.
In addition, you may purchase shares of the Fund
by wire. To establish a new account by wire transfer,
please call the Transfer Agent at 1-888-825-2100. The
Transfer Agent will assign an account number to you at
that time. Funds should then be wired through the
Federal Reserve System as follows:
Firstar Bank, N.A.
ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC
Account Number 112-952-137
For further credit to Frontegra Funds, Inc.
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
(identify Frontegra Opportunity Fund)
The Fund is not responsible for the consequences of
delays resulting from the banking or Federal Reserve
wire system.
Subsequent Investments - Minimum $1,000
You may make additions to your account in amounts
of $1,000 or more by mail or by wire. When making an
additional purchase by mail, enclose a check payable to
"Frontegra Funds, Inc." along with the additional
investment form provided on the lower portion of your
account statement. To make an additional purchase by
wire, please follow the instructions listed above.
How to Redeem Shares
You may request redemption of part or all of your
Fund shares at any time. The price you receive will be
the net asset value next determined after the Fund
receives your request in proper form. Once your
redemption request is received in proper form, the Fund
normally will mail or wire your redemption proceeds the
next business day and, in any event, no later than
seven business days after receipt of a redemption
request. However, the Fund may hold payment of that
portion of an investment which was made by check which
has not been collected. In addition to the redemption
procedures described below, redemptions may also be
made through broker/dealers who may charge a commission
or other transaction fee.
Written Redemption
To redeem your Fund shares please furnish a
written, unconditional request to: Frontegra Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. For written
redemption requests sent via overnight delivery, please
use 615 East Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202.
<PAGE>
The request must (i) be signed
exactly as the shares are registered, including the
signature of each owner and (ii) specify the number of
Fund shares or dollar amount to be redeemed. The
Transfer Agent may request additional documentation
from corporations, executors, administrators, trustees,
guardians, agents or attorneys-in-fact. Redemption
proceeds may be wired to a commercial bank authorized
on your account application. However, you will be
charged a $12 service fee for wire redemptions. If the
dollar amount requested to be redeemed is greater than
the current value of your account, your entire account
balance will be redeemed.
Signature Guarantees
Signature guarantees are required for: (i)
redemption requests mailed or wired to a person other
than the registered owner(s) of the shares, (ii)
redemption requests mailed or wired to other than the
address of record and (iii) redemption requests
submitted within 30 days of an address change. A
signature guarantee may be obtained from any bank,
savings and loan association, credit union, brokerage
firm or other eligible guarantor institution. A notary
public is not an acceptable guarantor.
Account Termination
Your account may be terminated by the Fund on not
less than 30 days' notice if the value of the shares in
the account falls below $10,000. Upon any such
termination, a check for the redemption proceeds will
be sent to the address of record within seven business
days of the redemption.
Exchange Privilege
You may exchange your shares in the Fund for
shares in any other Fund of the Company at any time by
written request. The value of the shares to be
exchanged and the price of the shares being purchased
will be the net asset value next determined after
receipt of instructions for exchange in proper form.
An exchange from one Fund to another is treated the
same as an ordinary sale and purchase for federal
income tax purposes and you will realize a capital gain
or loss. This is not a tax-free exchange. Exchange
requests should be directed to: Frontegra Funds, Inc.,
c/o Firstar Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. For written exchange
requests sent via overnight delivery, please use 615
East Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Exchange requests may be subject to
limitations, including those relating to frequency,
that may be established from time to time to ensure
that the exchanges do not disadvantage the Fund or its
shareholders. The Company reserves the right to modify
or terminate the exchange privilege upon 60 days'
written notice to each shareholder prior to the
modification or termination taking effect.
Valuation of Fund Shares
The price of Fund shares is the Fund's net asset
value, which is calculated using the market price
method of valuation and is determined as of the close
of trading (generally 4:00 p.m. Eastern Time) on each
day the New York Stock Exchange ("NYSE") is open for
business. The Fund does not determine net asset value
on days the NYSE is closed. The NYSE is closed on New
Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. In addition,
if any of these holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday,
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or yearly period.
Tax-Sheltered Retirement Plans
The Company offers through its Custodian, Firstar
Bank, N.A., various qualified retirement plans for
adoption by individuals and employers. Participants in
these plans can accumulate shares of the Fund on a tax-
deferred basis. Please call 1-888-825-2100 for a
current list of the plans offered.
Dividends, Capital Gain Distributions And Tax Treatment
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
are taxable as ordinary income whether reinvested or
received in cash unless you are exempt from taxation or
entitled to a
<PAGE>
tax deferral. Distributions paid by the
Fund from net realized long-term capital gains, whether
received in cash or reinvested in additional shares,
are taxable as a capital gain unless you are exempt
from taxation or entitled to a tax deferral. The
capital gain holding period is determined by the length
of time the Fund has held the security and not the
length of time you have held shares in the Fund.
Shareholders are informed annually as to the amount and
nature of all dividends and capital gains paid during
the prior year. Such capital gains and dividends may
also be subject to state or local taxes. If you are
not required to pay taxes on your income, you are
generally not required to pay federal income taxes on
the amounts distributed to you.
The Fund will distribute dividends and capital
gains at least annually. When a dividend or capital
gain is distributed, the Fund's net asset value
decreases by the amount of the payment. If you
purchase shares shortly before a distribution, you
will, nonetheless, be subject to income taxes on the
distribution, even though the value of your investment
(plus cash received, if any) remains the same. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of capital
gains. All dividends or capital gain distributions
will automatically be reinvested in shares of the Fund
at the then prevailing net asset value unless an
investor specifically requests that either dividends or
capital gains or both be paid in cash. The election to
receive dividends or reinvest them may be changed by
writing to: Frontegra Funds, Inc., c/o Firstar Mutual
Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. For overnight deliveries, please use 615
East Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Such notice must be received at least five
business days prior to the record date of any dividend
or capital gain distribution.
If you do not furnish the Fund with your correct
Social Security Number or Taxpayer Identification
Number and/or the Fund receives notification from the
Internal Revenue Service requiring back-up withholding,
the Fund is required by federal law to withhold federal
income tax from your distributions and redemption
proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
adviser.
Year 2000 Issue
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of Frontegra, Reams
and Firstar. Many computer software systems in use
today cannot properly process date-related information
after December 31, 1999 because of the method by which
dates are encoded and calculated. This failure,
commonly referred to as the "Year 2000 Issue," could
adversely affect the handling of security trades,
pricing and account servicing for the Fund.
Frontegra has made compliance with the Year 2000
Issue a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems.
Frontegra has also been informed that comparable steps
are being taken by Reams. In addition, Firstar has
represented to Frontegra that it does not currently
anticipate that the Year 2000 Issue will have a
material impact on its ability to continue to fulfill
its duties as a service provider to the Fund. However,
there can be no assurance that the steps taken by
Frontegra, Reams or Firstar will be sufficient to avoid
any adverse impact.
With respect to the companies in which the Fund
invests, the Fund cannot make any assurances as to
their Year 2000 compliance efforts. To the extent the
Fund invests in foreign companies, those companies may
be more likely to be affected by Year 2000 issues. In
the event that one or more of these companies is not
Year 2000 compliant, the Fund's investment in such
companies may be adversely affected.
<PAGE>
DIRECTORS TRANSFER AGENT AND ADMINISTRATOR
William D. Forsyth III Firstar Mutual Fund Services, LLC
Thomas J. Holmberg, Jr. For overnight deliveries, use:
David L. Heald Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
OFFICERS 615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
William D. Forsyth III
Thomas J. Holmberg, Jr. For regular mail deliveries, use:
INVESTMENT ADVISER Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Frontegra Asset Management, Inc. P.O. Box 701
400 Skokie Blvd. Milwaukee, Wisconsin 53201-0701
Suite 500
Northbrook, Illinois 60062 AUDITORS
SUB-ADVISER Ernst & Young LLP
Sears Tower
Reams Asset Management Company, LLC 233 S. Wacker Drive
227 Washington Street Chicago, Illinois 60606-6301
Columbus, Indiana 47201
LEGAL COUNSEL
CUSTODIAN
Godfrey & Kahn, S.C.
Firstar Bank, N.A. 780 N. Water Street
Milwaukee, Wisconsin 53202
Additional information regarding the Company and the
Fund is included in the Statement of Additional
Information ("SAI") which has been filed with the
Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference. Further
information about the Fund's investments is also
available in the Fund's annual and semi-annual reports
to shareholders. The Fund's annual report provides a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its last fiscal year. You may
receive the Fund's SAI, annual reports and semi-annual
reports free of charge, request other information about
the Fund and make shareholder inquiries by contacting
the Company at the address listed on the cover page of
this Prospectus or by calling, toll-free, 1-888-825-2100.
Information about the Fund (including the SAI) can be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-202-942-
8090 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the EDGAR database
on the SEC's Internet site located at
http://www.sec.gov. Alternatively, copies of this
information may be obtained, upon payment of a
duplicating fee, by electronic request to the following
e-mail address: [email protected], or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-0102.
The Company's 1940 Act File Number is 811-7685.
<PAGE>
PROSPECTUS
December 31, 1999
FRONTEGRA FUNDS, INC.
FRONTEGRA GROWTH FUND
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-825-2100
The FRONTEGRA GROWTH FUND (the "Fund") is a series
of FRONTEGRA FUNDS, INC., (the "Company").
The investment objective of the Fund is long-term
capital appreciation. The Fund invests primarily in a
diversified portfolio of equity securities of companies
with mid- to large-sized market capitalizations.
This Prospectus contains information you should
consider before investing in the Fund. Please read it
carefully and keep it for future reference.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
THE FRONTEGRA GROWTH FUND AT A GLANCE 1
FEES AND EXPENSES OF THE FUND 2
INVESTMENT OBJECTIVE 2
INVESTMENT STRATEGY 2
IMPLEMENTATION OF INVESTMENT OBJECTIVE 3
PRIOR PERFORMANCE OF NORTHERN 3
FINANCIAL HIGHLIGHTS 5
FUND MANAGEMENT 5
YOUR ACCOUNT 6
EXCHANGE PRIVILEGE 8
VALUATION OF FUND SHARES 8
TAX-SHELTERED RETIREMENT PLANS 9
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT 9
YEAR 2000 ISSUE 9
You should rely only on the information contained in
this Prospectus and in the Statement of Additional
Information ("SAI"), which is available upon request.
The Company has not authorized others to provide
additional information. The Company does not authorize
use of this Prospectus in any state or jurisdiction
where the offering cannot legally be made.
<PAGE>
The Frontegra Growth Fund at a Glance
* Investment Objective
The Fund's goal, also referred to as its
investment objective, is long-term capital
appreciation.
* Principal Investment Strategy
The Fund seeks to achieve its goal primarily
through investment in a diversified portfolio of equity
securities of companies with mid- to large-sized market
capitalizations. For this purpose, a mid- to large-
sized market capitalization company would typically
have a market capitalization of $1 billion or more. In
constructing a portfolio for the Fund, the Fund's
subadviser, Northern Capital Management Incorporated
("Northern"), selects securities with the highest
expected rates of return based on Northern's analysis
of each company's competitive position. Equity
securities in which the Fund may invest include common
stocks, preferred stocks, warrants to purchase common
stocks or preferred stocks, depositary receipts and
securities convertible or exchangeable into common or
preferred stocks. Under normal market conditions, the
Fund will invest at least 80% of its assets in these
securities.
* Risk Factors
The main risks of investing in the Fund are:
- Market Risks: The Fund's investments are subject
to market risk, so that the value of the Fund's
investments may go up or down. If the value of the
Fund's investments goes down, you may lose money. The
share price of the Fund is expected to fluctuate with
changing market valuations of its portfolio holdings.
Your shares at redemption may be worth more or less
than your initial investment. Market risks associated
with equity investments include the possibility that
stock prices in general will decline over short or even
extended periods.
- Stock Selection Risks: The stocks selected for
inclusion in the Fund's portfolio may decline in value
or not increase in value when the stock market in
general is rising.
* Who Should Invest
The Fund is suitable for long-term investors only
and is not designed as a short-term investment vehicle.
The Fund may be an appropriate investment for you if you:
- Seek long-term capital appreciation;
- Want to include a mid- to large-cap fund in your
portfolio; and
- Are willing to accept the risk that your
investment may fluctuate.
* Performance Tables
The Fund's average annual return for the 1999
calendar year will be provided in the next
Prospectus update.
The Fund's year-to-date return through September 30, 1999 was 3.40%.
<PAGE>
Fees and Expenses of the Fund
This table describes the fees and expenses that
you may pay if you buy and hold shares of the Fund.
Shareholder Fees (fees paid directly from your investment) NONE(1)
Annual Fund Operating Expenses (expenses that are deducted
from Fund assets)(2)
Management Fees 0.80%
Distribution (12b-1) Fees NONE
Other Expenses 1.35%
Total Annual Fund Operating Expenses 2.15%
Fee Waiver/Reimbursement(3) 1.35%
Net Expenses 0.80%
________________
(1) The Fund will charge a service fee of $12 for
redemptions effected via wire transfer, and $25 for
checks that do not clear.
(2) Stated as a percentage of the Fund's average
daily net assets.
(3) Pursuant to an expense cap agreement dated
February 26, 1999, as amended August 2 and December 31,
1999, between the Fund's adviser, Frontegra Asset
Management, Inc. ("Frontegra") and the Fund, Frontegra
agreed to waive its management fee and/or reimburse the
Fund's operating expenses to the extent necessary to
ensure that the Fund's total operating expenses do not
exceed 0.80% of the Fund's average daily net assets.
The expense cap agreement will terminate on December
31, 2000 unless extended by Frontegra and the Fund.
"Other expenses" are presented before any waivers or
reimbursements.
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year,
that the Fund's operating expenses remain the same each
year and that Frontegra's fee waiver/expense
reimbursement discussed above will not continue beyond
the period of the current expense cap agreement, which
will terminate on December 31, 2000. Although your
actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
1 Year $ 82
3 Years $ 543
5 Years $1,030
10 Years $2,376
Investment Objective
The Fund's investment objective is long-term
capital appreciation. This investment objective may
not be changed without shareholder approval.
Investment Strategy
The Fund will seek, under normal market
conditions, to achieve its investment objective by
investing its assets primarily in the equity securities
of companies with mid- to large-sized market
capitalizations. The Fund will invest at least 80% of
its net assets in equity securities. These securities
include: common stocks; preferred stocks; warrants to
purchase common stocks or preferred stocks; depositary
receipts; and securities convertible into common or
preferred stocks, such as convertible bonds and
debentures rated Baa or higher by Moody's Investors
Service ("Moody's") or BBB or higher by Standard &
Poor's ("S&P"), Duff & Phelps, Inc. ("D&P") or Fitch
Investors Service, Inc. ("Fitch"). At least 65% of the
Fund's total assets will normally be invested in equity
securities of those companies with a market
capitalization of $1 billion or more at the time of the
Fund's investment.
<PAGE>
In seeking to achieve the Fund's investment
objective, Northern identifies companies with market
capitalizations greater than $1 billion and historical
earnings growth greater than the Standard & Poor's 500r
Stock Index (the "S&P 500"). Northern then assesses
the competitive position of each such company through
fundamental research, including an evaluation of its
products or services, its management, and the industry
competition, and through Northern's proprietary
price/growth analysis. A target price is then
established for each security based on projected
earnings growth relative to market expectations. The
45-55 securities with the highest expected rates of
return would be among those securities selected for the
Fund's portfolio. On average, a security will be held
by the Fund for approximately 12 months. Securities
are generally sold as a result of price appreciation,
when they become less attractive on a risk/return basis
relative to their growth prospects and other identified
securities, or when the assumptions used in Northern's
proprietary price/growth analysis change with respect
to the security.
Implementation of Investment Objective
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and elsewhere in this
Prospectus.
Common Stocks and Other Equity Securities
The Fund will invest at least 80% of its net
assets in common stocks and other equity securities.
Other equity securities may include depositary
receipts, preferred stocks, warrants to purchase common
and preferred stocks and securities convertible or
exchangeable into common or preferred stock.
Principal Risks. Common stocks and other equity
securities generally increase or decrease in value
based on the earnings of a company and on general
industry and market conditions. A fund that invests a
significant amount of its assets in common stocks and
other equity securities is likely to have greater
fluctuations in share price than a fund that invests a
significant portion of its assets in fixed income
securities.
Temporary Strategies
The Fund may invest up to 20% of its total assets
in cash and short-term fixed income securities to meet
anticipated redemption requests, pending investment and
to pay expenses. The Fund may temporarily exceed this
20% limitation, but only in circumstances pending
investment and only for short periods of time.
Prior Performance of Northern
The following table shows the historical composite
performance data for all of Northern's advisory
accounts which have investment objectives, policies,
strategies and risks substantially similar to the Fund,
known as the NCM Equity Portfolio (the "Composite"),
for the periods indicated. Since its inception on
January 1, 1991, the Composite has shown an annual
return of approximately 21.61%. The Composite has not
been subject to the same types of expenses to which the
Fund is subject nor to the diversification
requirements, specific tax restrictions and investment
limitations imposed on the Fund by the Internal Revenue
Code of 1986, as amended (the "Code"), and the
Investment Company Act of 1940, as amended (the "1940
Act"), respectively. Consequently, the performance
results for the Composite could have been adversely
affected if the Composite had been regulated under the
federal security and tax laws. The Composite's
expenses are lower than the Fund's expenses. If the
Fund's expenses had been deducted from the Composite's
returns, the returns would be lower than those shown.
The data is provided to illustrate the past performance
of Northern in managing a substantially similar
portfolio as measured against the Russell 1000 Growth
Index and the S&P 500 and does not represent the
performance of the Fund. You should not consider this
performance data as an indication of the future
performance of the Fund or Northern.
Northern's performance information has been
calculated in accordance with recommended standards of
the Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses. All returns reflect the deduction of
investment advisory fees, brokerage commissions and
execution costs paid by the Composite, without
provision for federal or state income taxes. Cash and
cash equivalents are included in the performance
returns. Total return is calculated monthly in
accordance with the
<PAGE>
time weighted rate of return method
provided for by AIMR standards accounted for on a trade-
date and accrual basis. AIMR standards for calculation
of total return differ from the standards required by
the SEC for calculation of average annual total return.
No leveraged positions were used. The monthly returns
are geometrically linked to derive an annual total
return.
The investment results of the Composite presented
below are unaudited and are not intended to predict or
suggest the future returns of the Fund. You should be
aware that the use of a methodology different than that
used below to calculate performance could result in
different performance data.
Northern Capital Management
NCM Equity Composite Performance History: 1/1/91-9/30/99
NCM Equity Russell 1000
Period Composite Growth S&P
Rate of Return Index(1) 500(2)
9/30/98-9/30/99 31.04% 34.85% 27.80%
9/30/96-9/30/99 20.90% 26.87% 25.09%
9/30/94-9/30/99 22.38% 26.78% 25.03%
1/1/91(3)-9/30/99 21.61% 20.45% 19.60%
___________
(1) The Russell 1000 Growth Index is an unmanaged
index that contains securities typically selected by
growth managers as being representative of the U.S.
stock market. The index does not reflect investment
management fees, brokerage commissions and other
expenses associated with investing in equity
securities.
(2) The S&P 500 is an unmanaged index generally
representative of the U.S. stock market. The index
does not reflect investment management fees,
brokerage commissions and other expenses associated
with investing in equity securities.
(3) The Composite commenced operations on January 1, 1991.
Average Annualized Return in Percent: 1/1/91-9/30/99
NCM Equity Composite Performance 21.61%
Russell 1000 Growth Index 20.45%
S&P 500 19.60%
Financial Highlights
The financial highlights table is intended to help
you understand the Fund's financial performance for the
periods from March 18, 1998 (commencement of
operations) to June 30, 1999. Certain information
reflects financial results for a single Fund share.
The total return in the table represents the rate that
an investor would have earned (or lost) on an
investment in the Fund for the stated period (assuming
reinvestment of all dividends and distributions). This
information has been audited by Ernst & Young LLP,
whose report, along with the Fund's financial
statements, is included in the Fund's annual report,
which is available upon request.
March 18, 1998(1)
Eight Months Ended to
June 30, 1999(2) October 31, 1998
Net asset value, beginning of period $9.29 $10.00
Income (loss) from investment operations:
Net investment income 0.01 0.01
Net realized and unrealized gains
(losses) on investments 2.64 (0.72)
Total income (loss) from investment
operations 2.65 (0.71)
Less distributions paid:
From net investment income (0.01) -
Total distributions paid (0.01) -
Net asset value, end of period $11.93 $9.29
======= =======
Total return(3) 28.58% (7.10)%
Supplemental data and ratios:
Net assets, end of period (in thousands) $4,619 $2,343
Ratio of expenses to average net
assets(4)(5) 0.80% 0.80%
Ratio of net investment income to
average net assets(4)(5) 0.16% 0.28%
Portfolio turnover rate(3) 106% 67%
____________
(1) Commencement of operations.
(2) Effective June 30, 1999, the Company changed
its fiscal year-end from October 31 to June 30.
(3) Not annualized for periods less than a full year.
(4) Net of waivers and reimbursements by Frontegra.
Without waivers and reimbursements of expenses, the
ratio of expenses to average net assets would have
been 4.52% and 9.23% and the ratio of net investment
loss to average net assets would have been (3.56)%
and (8.15)% for the periods ended June 30, 1999 and
October 31, 1998, respectively.
(5) Annualized.
Fund Management
Under the laws of the State of Maryland, the Board
of Directors of the Company (the "Board of Directors")
is responsible for managing the Company's business and
affairs. The Board of Directors also oversees duties
required by applicable state and federal law. The
Company has entered into an investment advisory
agreement with Frontegra dated October 30, 1996, as
amended as of February 1, 1998 and December 31, 1999
(the "Investment Advisory Agreement"), pursuant to
which Frontegra supervises the management of the Fund's
investments and business affairs, subject to the
supervision of the Company's Board of Directors.
Frontegra has entered into a subadvisory agreement with
Northern under which Northern serves as the Fund's
portfolio manager and, subject to Frontegra's
supervision,
<PAGE>
manages the Fund's portfolio assets.
Frontegra provides office facilities for the Fund and
pays the salaries, fees, and expenses of all officers
and directors of the Fund who are interested persons of
Frontegra.
Adviser. The Fund is managed by Frontegra, which
supervises the management of the Fund's portfolio by
the subadviser and administers the Company's business
affairs. Frontegra was organized in 1996 and is
located at 400 Skokie Boulevard, Suite 500, Northbrook,
Illinois 60062. Mr. William D. Forsyth III and Mr.
Thomas J. Holmberg, Jr. each own 50% of Frontegra.
Under the Investment Advisory Agreement, the Fund
compensates Frontegra for its management services at
the annual rate of 0.80% of the Fund's average daily
net assets. Pursuant to an expense cap agreement dated
February 26, 1999, as amended December 31, 1999,
between Frontegra and the Fund, Frontegra agreed to
waive its management fee and/or reimburse the Fund's
operating expenses to the extent necessary to ensure
that the Fund's total operating expenses do not exceed
0.80% of the Fund's average daily net assets. This
expense cap will terminate on December 31, 2000, unless
extended by Frontegra and the Fund. The expense cap
agreement has the effect of lowering the overall
expense ratio for the Fund and increasing the Fund's
overall return to investors at the time any such
amounts are waived and/or reimbursed.
Subadviser. Northern is located at 8018 Excelsior
Drive, Suite 300, Madison, Wisconsin 53717. Under the
subadvisory agreement, Northern is compensated by
Frontegra for its investment advisory services at the
annual rate of (i) 0.25% of the Fund's average daily
net assets prior to the first date when the Fund's
average daily net assets exceed $200 million and (ii)
0.30% of the Fund's average daily net assets on and
after the first date when the Fund's average daily net
assets exceed $200 million. For the fiscal period
ended June 30, 1999, Northern did not receive any
compensation from Frontegra for its investment advisory
services to the Fund. Northern provides continuous
advice and recommendations concerning the Fund's
investments and is responsible for selecting the
broker/dealers who execute the portfolio transactions.
In executing such transactions, Northern seeks to
obtain the best net results for the Fund. In addition
to providing investment advisory services to the Fund,
Northern serves as investment adviser to pension and
profit-sharing plans, institutional investors and
private accounts. As of December 1, 1999, Northern had
approximately $1.2 billion under management. United
Asset Management Corporation, an investment adviser
holding company, owns 100% of the voting stock of
Northern.
Portfolio Managers. The day-to-day management
responsibilities for the Fund's portfolio are primarily
handled by Northern's portfolio management team. The
portfolio management team is managed primarily by
Daniel T. Murphy and Brian A. Hellmer. The Fund's
overall investment strategy, and portfolio allocation
and risk parameters are determined by Northern's
Investment Committee, which consists of Stephen L.
Hawk, Mr. Murphy and Mr. Hellmer. Mr. Hawk, Chairman
of Northern, has been with the firm since March 1983;
Mr. Murphy, the President, Chief Investment Officer,
Portfolio Manager and a Director of Northern, joined
the firm in March 1995 and was a Senior Investment
Analyst at Brinson Partners, Inc. from December 1989 to
March 1995; and Mr. Hellmer, Senior Vice President and
Director of Research of Northern, joined the firm in
April 1996 and was an Investment Officer of Fleet
Investment Advisors from July 1989 to April 1996. The
portfolio management team reviews and approves the
analyst's recommendations and makes the final buy and
sell decisions. The Fund's portfolio is reviewed on a
weekly basis by the Investment Committee.
Custodian, Transfer Agent and Administrator.
Firstar Bank, N.A. acts as custodian of the Fund's
assets. Firstar Mutual Fund Services, LLC serves as
the Transfer Agent for the Fund (the "Transfer Agent")
and as the Fund's administrator. Firstar Bank, N.A.
and Firstar Mutual Fund Services, LLC are affiliated
entities and are collectively referred to in this
Prospectus as "Firstar."
Your Account
How to Purchase Shares
Shares of the Fund are sold on a continuous basis
at net asset value. The Fund's net asset value is
determined as of the close of trading on the New York
Stock Exchange (the "NYSE") (generally 4:00 p.m.,
Eastern Time) on each day the NYSE is open. Your
purchase price will be the Fund's net asset value next
determined after the Fund receives your request in
proper form. A confirmation indicating the details of
the transaction will be sent to you promptly. Shares
are credited to your account, but certificates are not
issued. However, you will have full shareholder rights.
<PAGE>
The Fund's minimum initial investment is $100,000.
Subsequent investments may be made by mail or wire with
a minimum subsequent investment of $1,000. The Fund
reserves the right to change or waive these minimums at
any time. You will be given at least 30 days' notice
of any increase in the minimum dollar amount of
purchases.
If you purchase shares of the Fund by check and
request the redemption of such shares within 15 days of
the initial purchase, payment of the redemption
proceeds may be delayed for up to seven business days
in order to ensure that the check has cleared. This is
a security precaution only and does not affect your
investment.
Initial Investment - Minimum $100,000
You may purchase shares of the Fund by completing
an application and mailing it along with a check or
money order payable to "Frontegra Funds, Inc." to:
Frontegra Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. For overnight deliveries, please use 615 East
Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Purchases must be made in U.S. dollars and all
checks must be drawn on a U.S. bank. If your check
does not clear, you will be charged a $25 service fee.
You will also be responsible for any losses suffered by
the Fund as a result. All applications to purchase
shares of the Fund are subject to acceptance by the
Company and are not binding until so accepted. The
Company reserves the right to decline an application in
whole or in part.
Alternatively, you may place an order to purchase
shares of the Fund through a broker/dealer.
Broker/dealers may charge a transaction fee for placing
orders to purchase Fund shares. It is the
responsibility of the broker/dealer to place the order
with the Fund on a timely basis.
In addition, you may purchase shares of the Fund
by wire. To establish a new account by wire transfer,
please call the Transfer Agent at 1-888-825-2100. The
Transfer Agent will assign an account number to you at
that time. Funds should then be wired through the
Federal Reserve System as follows:
Firstar Bank, N.A.
ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC
Account Number 112-952-137
For further credit to Frontegra Funds, Inc.
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
(identify Frontegra Growth Fund)
The Fund is not responsible for the consequences of
delays resulting from the banking or Federal Reserve
wire system.
Subsequent Investments - Minimum $1,000
You may make additions to your account in amounts
of $1,000 or more by mail or by wire. When making an
additional purchase by mail, enclose a check payable to
"Frontegra Funds, Inc." along with the additional
investment form provided on the lower portion of your
account statement. To make an additional purchase by
wire, please follow the instructions listed above.
How to Redeem Shares
You may request redemption of part or all of your
Fund shares at any time. The price you receive will be
the net asset value next determined after the Fund
receives your request in proper form. Once your
redemption request is received in proper form, the Fund
normally will mail or wire your redemption proceeds the
next business day and, in any event, no later than
seven business days after receipt of a redemption
request. However, the Fund may hold payment of that
portion of an investment which was made by check which
has not been collected. In addition to the redemption
procedures described below, redemptions may also be
made through broker/dealers who may charge a commission
or other transaction fee.
<PAGE>
Written Redemption
To redeem your Fund shares please furnish a
written, unconditional request to: Frontegra Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. For written
redemption requests sent via overnight delivery, please
use 615 East Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202. Your request must (i) be signed
exactly as the shares are registered, including the
signature of each owner and (ii) specify the number of
Fund shares or dollar amount to be redeemed. The
Transfer Agent may request additional documentation
from corporations, executors, administrators, trustees,
guardians, agents or attorneys-in-fact. Redemption
proceeds may be wired to a commercial bank authorized
on your account application. However, you will be
charged a $12 service fee for wire redemptions. If the
dollar amount requested to be redeemed is greater than
the current value of your account, your entire account
balance will be redeemed.
Signature Guarantees
Signature guarantees are required for: (i)
redemption requests mailed or wired to a person other
than the registered owner(s) of the shares, (ii)
redemption requests mailed or wired to other than the
address of record and (iii) redemption requests
submitted within 30 days of an address change. A
signature guarantee may be obtained from any bank,
savings and loan association, credit union, brokerage
firm or other eligible guarantor institution. A notary
public is not an acceptable guarantor.
Account Termination
Your account may be terminated by the Fund on not
less than 30 days' notice if the value of the shares in
the account falls below $10,000. Upon any such
termination, a check for the redemption proceeds will
be sent to the address of record within seven business
days of the redemption.
Exchange Privilege
You may exchange your shares in the Fund for
shares in any other Fund of the Company at any time by
written request. The value of the shares to be
exchanged and the price of the shares being purchased
will be the net asset value next determined after
receipt of instructions for exchange in proper form.
An exchange from one Fund to another is treated the
same as an ordinary sale and purchase for federal
income tax purposes and you will realize a capital gain
or loss. This is not a tax-free exchange. Exchange
requests should be directed to: Frontegra Funds, Inc.,
c/o Firstar Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. For written exchange
requests sent via overnight delivery, please use 615
East Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Exchange requests may be subject to
limitations, including those relating to frequency,
that may be established from time to time to ensure
that the exchanges do not disadvantage the Fund or its
shareholders. The Company reserves the right to modify
or terminate the exchange privilege upon 60 days'
written notice to each shareholder prior to the
modification or termination taking effect.
Valuation of Fund Shares
The price of Fund shares is the Fund's net asset
value, which is calculated using the market price
method of valuation and is determined as of the close
of trading (generally 4:00 p.m. Eastern Time) on each
day the New York Stock Exchange ("NYSE") is open for
business. The Fund does not determine net asset value
on days the NYSE is closed. The NYSE is closed on New
Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. In addition,
if any of these holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday,
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or yearly period.
Tax-Sheltered Retirement Plans
The Company offers through its Custodian, Firstar
Bank, N.A., various qualified retirement plans for
adoption by individuals and employers. Participants in
these plans can accumulate shares of the Fund on a tax-
deferred basis. Please call 1-888-825-2100 for a
current list of the plans offered.
<PAGE>
Dividends, Capital Gain Distributions And Tax Treatment
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
are taxable as ordinary income whether reinvested or
received in cash unless you are exempt from taxation or
entitled to a tax deferral. Distributions paid by the
Fund from net realized long-term capital gains, whether
received in cash or reinvested in additional shares,
are taxable as a capital gain unless you are exempt
from taxation or entitled to a tax deferral. The
capital gain holding period is determined by the length
of time the Fund has held the security and not the
length of time you have held shares in the Fund.
Shareholders are informed annually as to the amount and
nature of all dividends and capital gains paid during
the prior year. Such capital gains and dividends may
also be subject to state or local taxes. If you are
not required to pay taxes on your income, you are
generally not required to pay federal income taxes on
the amounts distributed to you.
The Fund will usually distribute dividends and
capital gains at least annually. When a dividend or
capital gain is distributed, the Fund's net asset value
decreases by the amount of the payment. If you
purchase shares shortly before a distribution, you
will, nonetheless, be subject to income taxes on the
distribution, even though the value of your investment
(plus cash received, if any) remains the same. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of capital
gains. All dividends or capital gain distributions
will automatically be reinvested in shares of the Fund
at the then prevailing net asset value unless an
investor specifically requests that either dividends or
capital gains or both be paid in cash. The election to
receive dividends or reinvest them may be changed by
writing to: Frontegra Funds, Inc., c/o Firstar Mutual
Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. For overnight deliveries, please use 615
East Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Such notice must be received at least five
business days prior to the record date of any dividend
or capital gain distribution.
If you do not furnish the Fund with your correct
Social Security Number or Taxpayer Identification
Number and/or the Fund receives notification from the
Internal Revenue Service requiring back-up withholding,
the Fund is required by federal law to withhold federal
income tax from your distributions and redemption
proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
adviser.
Year 2000 Issue
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of Frontegra,
Northern and Firstar. Many computer software systems
in use today cannot properly process date-related
information after December 31, 1999 because of the
method by which dates are encoded and calculated. This
failure, commonly referred to as the "Year 2000 Issue,"
could adversely affect the handling of security trades,
pricing and account servicing for the Fund.
Frontegra has made compliance with the Year 2000
Issue a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems.
Frontegra has also been informed that comparable steps
are being taken by Northern. In addition, Firstar has
represented to Frontegra that it does not currently
anticipate that the Year 2000 Issue will have a
material impact on its ability to fulfill its duties as
a service provided to the Fund. However, there can be
no assurance that the steps taken by Frontegra,
Northern or Firstar will be sufficient to avoid any
adverse impact.
With respect to the companies in which the Fund
invests, the Fund cannot make any assurances as to
their Year 2000 compliance efforts. To the extent the
Fund invests in foreign companies, those companies may
be more likely to be affected by Year 2000 issues. In
the event that one or more of these companies is not
Year 2000 compliant, the Fund's investment in such
companies may be adversely affected.
<PAGE>
DIRECTORS TRANSFER AGENT AND ADMINISTRATOR
William D. Forsyth III Firstar Mutual Fund Services, LLC
Thomas J. Holmberg, Jr. For overnight deliveries, use:
David L. Heald Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
OFFICERS 615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
William D. Forsyth III
Thomas J. Holmberg, Jr. For regular mail deliveries, use:
INVESTMENT ADVISER Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Frontegra Asset Management, Inc. P.O. Box 701
400 Skokie Blvd. Milwaukee, Wisconsin 53201-0701
Suite 500
Northbrook, Illinois 60062 AUDITORS
SUB-ADVISER Ernst & Young LLP
Sears Tower
Northern Capital Management, Inc. 233 S. Wacker Drive
8018 Excelsior Drive Chicago, Illinois 60606-6301
Suite 300
Madison, Wisconsin 53717 LEGAL COUNSEL
CUSTODIAN Godfrey & Kahn, S.C.
780 N. Water Street
Firstar Bank, N.A. Milwaukee, Wisconsin 53202
Additional information regarding the Company and the
Fund is included in the Statement of Additional
Information ("SAI") which has been filed with the
Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference. Further
information about the Fund's investments is also
available in the Fund's annual and semi-annual reports
to shareholders. The Fund's annual report provides a
discussion of the market conditions and investment
strategies that significantly affected the Fund's
performance during its last fiscal year. You may
receive the Fund's SAI, annual reports and semi-annual
reports free of charge, request other information about
the Fund and make shareholder inquiries by contacting
the Company at the address listed on the cover page of
this Prospectus or by calling, toll-free, 1-888-825-2100.
Information about the Fund (including the SAI) can be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-202-942-
8090 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the EDGAR database
on the SEC's Internet site located at
http://www.sec.gov. Alternatively, copies of this
information may be obtained, upon payment of a
duplicating fee, by electronic request to the following
e-mail address: [email protected], or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-0102.
The Company's 1940 Act File Number is 811-7685.
<PAGE>
PROSPECTUS
December 31, 1999
FRONTEGRA FUNDS, INC.
FRONTEGRA EMERGING GROWTH FUND
c/o Firstar Mutual Fund Services, LLC
P. O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-825-2100
The FRONTEGRA EMERGING GROWTH FUND (the "Fund") is
a series of FRONTEGRA FUNDS, INC., (the "Company").
The investment objective of the Fund is long-term
capital appreciation. The Fund invests primarily in a
diversified portfolio of equity securities of companies
with small-to-medium market capitalizations.
This Prospectus contains information you should
consider before investing in the Fund. Please read it
carefully and keep it for future reference.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or
disapproved these securities or determined if this
Prospectus is truthful or complete. Any representation
to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
THE FRONTEGRA EMERGING GROWTH FUND AT A GLANCE 1
FEES AND EXPENSES OF THE FUND 2
INVESTMENT OBJECTIVE 2
INVESTMENT STRATEGY 2
IMPLEMENTATION OF INVESTMENT OBJECTIVE 3
PRIOR PERFORMANCE OF B&H 4
FUND MANAGEMENT 5
YOUR ACCOUNT 5
EXCHANGE PRIVILEGE 7
VALUATION OF FUND SHARES 8
TAX-SHELTERED RETIREMENT PLANS 8
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT 8
YEAR 2000 ISSUE 9
You should rely only on the information contained in
this Prospectus and in the Statement of Additional
Information ("SAI"), which is available upon request.
The Company has not authorized others to provide
additional information. The Company does not authorize
use of this Prospectus in any state or jurisdiction
where the offering cannot legally be made.
<PAGE>
The Frontegra Emerging Growth Fund at a Glance
* Investment Objective
The Fund's goal, also referred to as its
investment objective, is long-term capital
appreciation.
* Principal Investment Strategy
The Fund seeks to achieve its goal primarily
through investment in a diversified portfolio of equity
securities of companies with small-to-medium market
capitalizations. For this purpose, a small-to-medium
capitalization company would typically have a market
capitalization of $2 billion or less and annual
revenues of less than $500 million at purchase. In
constructing a portfolio for the Fund, the Fund's
subadviser, Berents & Hess Capital Management
Incorporated ("B&H" or the "Subadviser") identifies
companies B&H believes will have a growing stream of
earnings. Equity securities in which the Fund may
invest include common stocks, preferred stocks,
warrants to purchase common stocks or preferred stocks,
depositary receipts and securities convertible or
exchangeable into common or preferred stocks. Under
normal market conditions, the Fund will invest at least
85% of its assets in these securities.
* Risk Factors
The main risks of investing in the Fund are:
- Small Cap Risks: Because the Fund will invest
primarily in small-to-medium capitalization stocks
which are more volatile than investments in large
companies, you should expect that the value of the
Fund's shares will be more volatile than the shares of
a fund that invests in large capitalization companies.
- Market Risks: The Fund's investments are subject
to market risk, so that the value of the Fund's
investments may go up or down. If the value of the
Fund's investments goes down, you may lose money. The
share price of the Fund is expected to fluctuate with
changing market valuations of its portfolio holdings.
Your shares at redemption may be worth more or less
than your initial investment. Market risks associated
with equity investments include the possibility that
stock prices in general will decline over short or even
extended periods.
- Stock Selection Risks: The stocks selected for
inclusion in the Fund's portfolio may decline in value
or not increase in value when the stock market in
general is rising.
* Who Should Invest
The Fund is suitable for long-term investors only
and is not designed as a short-term investment vehicle.
The Fund may be an appropriate investment for you if you:
- Seek long-term capital appreciation;
- Want to include a small- to mid-cap fund in your
portfolio; and
- Are willing to accept the risk that your
investment may fluctuate.
* Performance Tables
Because the Fund did not commence operations until
the date of this Prospectus, it has no annual
returns history.
<PAGE>
Fees and Expenses of the Fund
The following table describes the fees and
expenses that you may pay if you buy and hold shares of
the Fund.
Shareholder Fees (fees paid directly from your investment) NONE(1)
Annual Fund Operating Expenses (expenses that are deducted
from Fund assets)(2)
Management Fees 0.90%
Distribution (12b-1) Fees NONE
Other Expenses(3) 0.90%
Total Annual Fund Operating Expenses(3) 1.80%
Fee Waiver/Reimbursement(4) 0.90%
Net Expenses 0.90%
_________________________
(1) The Fund will charge a service fee of $12 for
redemptions effected via wire transfer and $25
for checks that do not clear.
(2) Stated as a percentage of the Fund's average net assets.
(3) "Other Expenses" and "Total Annual Operating
Expenses" are estimates for the calendar year 2000.
(4) Pursuant to an expense cap agreement effective
December 31, 1999 between the Fund's adviser,
Frontegra Asset Management, Inc. ("Frontegra" or
the "Adviser") and the Fund, Frontegra agreed to
waive its management fee and/or reimburse the
Fund's operating expenses to the extent
necessary to ensure that the Fund's total
operating expenses do not exceed 0.90% of the
Fund's average daily net assets. The expense
cap agreement will terminate on
December 31, 2000 unless extended by Frontegra
and the Fund.
Example
The following Example is intended to help you
compare the cost of investing in the Fund with the cost
of investing in other mutual funds. The Example
assumes that you invest $10,000 in the Fund for the
time periods indicated and then redeem all of your
shares at the end of those periods. The Example also
assumes that your investment has a 5% return each year,
that the Fund's operating expenses remain the same each
year and that Frontegra's fee waiver/expense
reimbursement discussed above will not continue beyond
the period of the current expense cap agreement, which
will terminate on December 31, 2000. Although your
actual costs may be higher or lower, based on these
assumptions, your costs would be as follows:
1 Year $ 92
3 Years $479
Investment Objective
The Fund's investment objective is long-term
capital appreciation. This investment objective may
not be changed without shareholder approval.
Investment Strategy
The Fund will seek, under normal market
conditions, to achieve its investment objective by
investing its assets primarily in the equity securities
of companies with small-to-medium market
capitalizations. The Fund will invest at least 85% of
its net assets in equity securities. These securities
include: common stocks; preferred stocks; warrants to
purchase common stocks or preferred stocks; depositary
receipts; and securities convertible into common or
preferred stocks, such as convertible bonds and
debentures rated Baa or higher by Moody's Investors
Service ("Moody's") or BBB or higher by Standard &
Poor's ("S&P"), Duff & Phelps, Inc. ("D&P") or Fitch
Investors Service, Inc. ("Fitch"). At least 65% of the
Fund's total assets will normally be invested in equity
securities of those companies with market
capitalizations of $2 billion or less and annual
revenues of $500 million or less at the time of the
Fund's investment. In
<PAGE>
general, investments in small-to-medium
capitalization companies often involve greater
risks than investments in larger capitalized companies.
In seeking to achieve the Fund's investment
objective, B&H starts the stock selection process by
establishing its emerging growth universe, which totals
approximately 400 companies. Using a database that
includes all publicly traded securities, B&H screens
for stocks with 15% historical and/or expected earnings
growth and sales of less than $500 million. B&H
supplements its emerging growth universe with ideas
generated from various sources including internal
research, conferences and industry contacts.
B&H narrows the emerging growth universe to 125-
150 companies that it believes are likely to sustain
earnings growth over the long term. Analysts review
each company's market position, looking for leading or
increasing market share. The stability of earnings and
cash flow is also analyzed. Finally, B&H assesses the
relative attractiveness of the companies in the
universe with measures such as sales to market cap and
price to earnings growth.
Once the emerging growth universe is narrowed to
establish a research list, the investment team conducts
fundamental, bottom-up analysis to identify the most
favorable investment prospects. Internally, B&H
evaluates corporate filings, such as annual and
quarterly reports, and reviews any street research on
the companies and their industries. Visits to
corporations, interviews and conference calls with
management by the firm's analysts are critical factors
in confirming information and forming judgments. B&H's
analysis encompasses corporate financial strength,
quality of management, product leadership, industry
dynamics and expected earnings growth. A key to the
process is B&H's emphasis on high R&D productivity, as
characterized by a product line that not only alters
its industry but also makes its existing product line
obsolete. Ultimately, the portfolio is constructed
from the most attractive 40-50 issues identified from
this process.
B&H will generally sell a security as a result of
deteriorating business fundamentals, overvaluation
based on a security's price earnings ratio relative to
its growth rate or a significant price spike. In
addition, positions will be cut back when they become
greater than 5% of the Fund's portfolio. B&H will
generally hold a security for 12 to 24 months.
Implementation of Investment Objective
In implementing its investment objective, the Fund
may invest in the following securities and use the
following investment techniques. Some of these
securities and investment techniques involve special
risks, which are described below and elsewhere in this
Prospectus.
Common Stocks and Other Equity Securities
The Fund will invest at least 85% of its net
assets in common stocks and other equity securities.
Other equity securities may include depositary
receipts, preferred stocks, warrants to purchase common
and preferred stocks and securities convertible or
exchangeable into common or preferred stock.
Principal Risks. Common stocks and other equity
securities generally increase or decrease in value
based on the earnings of a company and on general
industry and market conditions. A fund that invests a
significant amount of its assets in common stocks and
other equity securities is likely to have greater
fluctuations in share price than a fund that invests a
significant portion of its assets in fixed income
securities.
Small Companies
The Fund will invest a substantial portion of its
assets in small-to-medium capitalization companies
which have a market capitalization of $2 billion or
less at purchase.
Principal Risks. While smaller companies may have
the potential for rapid growth, investments in smaller
companies often involve greater risks than investments
in larger, more established companies because smaller
companies may lack the management experience, financial
resources, product diversification and competitive
strengths of larger companies. In addition, in many
instances the securities of smaller companies are
traded only over-the-counter or on a regional
securities exchange, and the frequency and volume of
their trading is substantially less than is
<PAGE>
typical of larger companies. Therefore, the securities
of smaller companies may be subject to greater and more
abrupt price fluctuations. When making large sales, the
Fund may have to sell portfolio holdings at discounts from
quoted prices or may have to make a series of small
sales over an extended period of time due to the
trading volume of smaller company securities. An
investment in the Fund may be subject to greater price
fluctuations than an investment in a fund that invests
primarily in larger companies.
Temporary Strategies
The Fund may invest up to 15% of its total assets
in cash and short-term fixed income securities to meet
anticipated redemption requests, pending investment and
to pay expenses. The Fund may temporarily exceed this
15% limitation, but only in circumstances pending
investment and only for short periods of time.
Prior Performance of B&H
The following table shows the historical composite
performance data for all of the B&H advisory accounts
which have investment objectives, policies, strategies
and risks substantially similar to the Fund, known as
the B&H Emerging Growth Portfolio (the "Composite"),
for the periods indicated. Since its inception, the
Composite has shown an annual return of approximately
22.89%. The Composite includes all discretionary
"Emerging Growth" accounts managed by B&H. The
Composite has not been subject to the same types of
expenses to which the Fund is subject nor to the
diversification requirements, specific tax restrictions
and investment limitations imposed on the Fund by the
Internal Revenue Code of 1986, as amended (the "Code"),
and the Investment Company Act of 1940, as amended (the
"1940 Act"), respectively. Consequently, the
performance results for the Composite could have been
adversely affected if the Composite had been regulated
under the federal security and tax laws. The
Composite's expenses are higher than the Fund's
expenses after waivers and reimbursements. If the
Fund's expenses had been deducted from the Composite's
returns, the returns would be higher than those shown.
The data is provided to illustrate the past performance
of B&H in managing a substantially similar portfolio as
measured against the Russell 2000 Growth Index and does
not represent the performance of the Fund. You should
not consider this performance data as an indication of
the future performance of the Fund or B&H.
B&H's performance information has been calculated
in accordance with recommended standards of the
Association for Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses. All returns reflect the deduction of
investment advisory fees, brokerage commissions and
execution costs paid by the Composite, without
provision for federal or state income taxes. Cash and
cash equivalents are included in the performance
returns. Total return is calculated monthly in
accordance with the time weighted rate of return method
provided for by AIMR standards accounted for on a trade-
date and accrual basis. AIMR standards for calculation
of total return differ from the standards required by
the SEC for calculation of average annual total return.
The monthly returns are geometrically linked to derive
an annual total return.
The investment results of the Composite presented
below are unaudited and are not intended to predict or
suggest the future returns of the Fund. You should be
aware that the use of a methodology different than that
used below to calculate performance could result in
different performance data.
Berents & Hess Capital Management
B&H Emerging Growth Composite Performance History: 12/31/95 - 9/30/99
B&H Emerging Growth Russell 2000
Composite Growth
Period Rate of Return Index(1)
9/30/98-9/30/99 75.62% 32.63%
9/30/96-9/30/99 25.33% 7.14%
12/31/95(2)-9/30/99 22.89% 8.65%
____________
(1) The Russell 2000 Growth Index is an unmanaged
index generally representative of the U.S. market for
small domestic stocks. The index does not reflect
investment management fees, brokerage commissions and
other expenses associated with investing in equity
securities.
(2) The Composite commenced operations on December 31, 1995.
<PAGE>
Average Annualized Return in Percent: 12/31/95 - 9/30/99
B&H Emerging Growth Composite Performance 22.89%
Russell 2000 Growth Index 8.65%
Fund Management
Under the laws of the State of Maryland, the Board
of Directors of the Company (the "Board of Directors")
is responsible for managing the Company's business and
affairs. The Board of Directors also oversees duties
required by applicable state and federal law. The
Company has entered into an investment advisory
agreement with Frontegra dated October 30, 1996, as
amended as of February 1, 1998 and December 31, 1999
(the "Investment Advisory Agreement"), pursuant to
which Frontegra supervises the management of the Fund's
investments and business affairs, subject to the
supervision of the Company's Board of Directors.
Frontegra has entered into a subadvisory agreement with
B&H under which B&H serves as the Fund's portfolio
manager and, subject to Frontegra's supervision,
manages the Fund's portfolio assets. Frontegra
provides office facilities for the Fund and pays the
salaries, fees and expenses of all officers and
directors of the Fund who are interested persons of
Frontegra.
Adviser. The Fund is managed by Frontegra, which
supervises the management of the Fund's portfolio by
the subadviser and administers the Company's business
affairs. Frontegra was organized in 1996 and is
located at 400 Skokie Boulevard, Suite 500, Northbrook,
Illinois 60062. Mr. William D. Forsyth III and Mr.
Thomas J. Holmberg, Jr. each own 50% of Frontegra.
Under the Investment Advisory Agreement, the Fund
compensates Frontegra for its management services at
the annual rate of 0.90% of the Fund's average daily
net assets. Pursuant to an expense cap agreement dated
December 31, 1999 between Frontegra and the Fund,
Frontegra agreed to waive its management fee and/or
reimburse the Fund's operating expenses to the extent
necessary to ensure that the Fund's total operating
expenses do not exceed 0.90% of the Fund's average
daily net assets. The term of this expense cap
agreement is 12 months. The expense cap agreement has
the effect of lowering the overall expense ratio for
the Fund and increasing the Fund's overall return to
investors at the time any such amounts are waived
and/or reimbursed.
Subadviser. B&H is located at 99 Summer Street,
Suite 1720, Boston, Massachusetts 02119. Under the
subadvisory agreement, B&H is compensated by Frontegra
for its investment advisory services at the annual rate
of 0.45% of the Fund's average daily net assets. B&H
provides continuous advice and recommendations
concerning the Fund's investments and is responsible
for selecting the broker/dealers who execute the
portfolio transactions. In executing such
transactions, B&H seeks to obtain the best net results
for the Fund. While B&H has not previously provided
investment advice to a mutual fund, B&H serves as
investment adviser to pension and profit-sharing plans,
institutional investors and private accounts. As of
December 1, 1999, B&H had approximately $169
million under management. Charles N. Berents, Jr. owns
46% of B&H and Herbert P. Hess owns 54% of B&H.
Portfolio Managers. The day-to-day management
responsibilities for the Fund's portfolio are primarily
handled by B&H's portfolio managers, Mr. Berents and
Mr. Hess. Mr. Berents, Managing Director of B&H, has
been with the firm since 1984. Mr. Hess, Managing
Director of B&H, has been with the firm since 1991.
The Fund's portfolio is reviewed whenever a securities
transaction opportunity arises based on the Fund's
investment strategy. The portfolio managers make the
final buy and sell decisions for the Fund.
Custodian, Transfer Agent and Administrator.
Firstar Bank, N.A. acts as custodian of the Fund's
assets. Firstar Mutual Fund Services, LLC serves as
Transfer Agent for the Fund (the "Transfer Agent") and
as the Fund's administrator. Firstar Bank, N.A. and
Firstar Mutual Fund Services, LLC are affiliated
entities and are collectively referred to in this
Prospectus as "Firstar."
Your Account
How to Purchase Shares
Shares of the Fund are sold on a continuous basis
at net asset value. The Fund's net asset value is
determined as of the close of trading on the New York
Stock Exchange (the "NYSE") (generally 4:00 p.m.,
Eastern Time) on each day the NYSE is open. Your
purchase price will be the Fund's net asset value next
determined after the Fund receives
<PAGE>
your request in proper form. A confirmation indicating
the details of the transaction will be sent to you promptly.
Shares are credited to your account, but certificates are not
issued. However, you will have full shareholder rights.
The Fund's minimum initial investment is $100,000.
Subsequent investments may be made by mail or wire with
a minimum subsequent investment of $1,000. The Fund
reserves the right to change or waive these minimums at
any time. You will be given at least 30 days' notice
of any increase in the minimum dollar amount of
purchases.
If you purchase shares of the Fund by check and
request the redemption of such shares within 15 days of
the initial purchase, payment of the redemption
proceeds may be delayed for up to seven business days
in order to ensure that the check has cleared. This is
a security precaution only and does not affect your
investment.
Initial Investment - Minimum $100,000
You may purchase shares of the Fund by completing
an application and mailing it along with a check or
money order payable to "Frontegra Funds, Inc." to:
Frontegra Funds, Inc., c/o Firstar Mutual Fund
Services, LLC, P.O. Box 701, Milwaukee, Wisconsin 53201-
0701. For overnight deliveries, please use 615
E. Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Purchases must be made in U.S. dollars and all
checks must be drawn on a U.S. bank. If your check
does not clear, you will be charged a $25 service fee.
You will also be responsible for any losses suffered by
the Fund as a result. All applications to purchase
shares of the Fund are subject to acceptance by the
Company and are not binding until so accepted. The
Company reserves the right to decline an application in
whole or in part.
Alternatively, you may place an order to purchase
shares of the Fund through a broker/dealer.
Broker/dealers may charge a transaction fee for placing
orders to purchase Fund shares. It is the
responsibility of the broker/dealer to place the order
with the Fund on a timely basis.
In addition, you may purchase shares of the Fund
by wire. To establish a new account by wire transfer,
please call the Transfer Agent at 1-888-825-2100. The
Transfer Agent will assign an account number to you at
that time. Funds should then be wired through the
Federal Reserve System as follows:
Firstar Bank, N.A.
ABA Number 075000022
For credit to Firstar Mutual Fund Services, LLC
Account Number 112-952-137
For further credit to Frontegra Funds, Inc.
(investor account number)
(name or account registration)
(Social Security or Taxpayer Identification Number)
(identify Frontegra Emerging Growth Fund)
The Fund is not responsible for the consequences of
delays resulting from the banking or Federal Reserve
wire system.
Subsequent Investments - Minimum $1,000
You may make additions to your account in amounts
of $1,000 or more by mail or by wire. When making an
additional purchase by mail, enclose a check payable to
"Frontegra Funds, Inc." along with the additional
investment form provided on the lower portion of your
account statement. To make an additional purchase by
wire, please follow the instructions listed above.
<PAGE>
How to Redeem Shares
You may request redemption of part or all of your
Fund shares at any time. The price you receive will be
the net asset value next determined after the Fund
receives your request in proper form. Once your
redemption request is received in proper form, the Fund
normally will mail or wire your redemption proceeds the
next business day and, in any event, no later than
seven business days after receipt of a redemption
request. However, the Fund may hold payment of that
portion of an investment which was made by check which
has not been collected. In addition to the redemption
procedures described below, redemptions may also be
made through broker/dealers who may charge a commission
or other transaction fee.
Written Redemption
To redeem your Fund shares please furnish a
written, unconditional request to: Frontegra Funds,
Inc., c/o Firstar Mutual Fund Services, LLC, P.O. Box
701, Milwaukee, Wisconsin 53201-0701. For written
redemption requests sent via overnight delivery, please
use 615 E. Michigan Street, Third Floor, Milwaukee,
Wisconsin 53202. Your request must (i) be signed
exactly as the shares are registered, including the
signature of each owner and (ii) specify the number of
Fund shares or dollar amount to be redeemed. The
Transfer Agent may request additional documentation
from corporations, executors, administrators, trustees,
guardians, agents or attorneys-in-fact. Redemption
proceeds may be wired to a commercial bank authorized
on your account application. However, you will be
charged a $12 service fee for wire redemptions. If the
dollar amount requested to be redeemed is greater than
the current value of your account, your entire account
balance will be redeemed.
Signature Guarantees
Signature guarantees are required for: (i)
redemption requests mailed or wired to a person other
than the registered owner(s) of the shares, (ii)
redemption requests mailed or wired to other than the
address of record and (iii) redemption requests
submitted within 30 days of an address change. A
signature guarantee may be obtained from any bank,
savings and loan association, credit union, brokerage
firm or other eligible guarantor institution. A notary
public is not an acceptable guarantor.
Account Termination
Your account may be terminated by the Fund on not
less than 30 days' notice if the value of the shares in
the account falls below $10,000. Upon any such
termination, a check for the redemption proceeds will
be sent to the address of record within seven business
days of the redemption.
Exchange Privilege
You may exchange your shares in the Fund for
shares in any other Fund of the Company at any time by
written request. The value of the shares to be
exchanged and the price of the shares being purchased
will be the net asset value next determined after
receipt of instructions for exchange in proper form.
An exchange from one Fund to another is treated the
same as an ordinary sale and purchase for federal
income tax purposes and you will realize a capital gain
or loss. This is not a tax-free exchange. Exchange
requests should be directed to: Frontegra Funds, Inc.,
c/o Firstar Mutual Fund Services, LLC, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. For written exchange
requests sent via overnight delivery, please use 615
E. Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Exchange requests may be subject to
limitations, including those relating to frequency,
that may be established from time to time to ensure
that the exchanges do not disadvantage the Fund or its
shareholders. The Company reserves the right to modify
or terminate the exchange privilege upon 60 days'
written notice to each shareholder prior to the
modification or termination taking effect.
<PAGE>
Valuation of Fund Shares
The price of Fund shares is the Fund's net asset
value, which is calculated using the market price
method of valuation and is determined as of the close
of trading (generally 4:00 p.m. Eastern Time) on each
day the New York Stock Exchange ("NYSE") is open for
business. The Fund does not determine net asset value
on days the NYSE is closed. The NYSE is closed on New
Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day and Christmas Day. In addition,
if any of these holidays falls on a Saturday, the NYSE
will not be open for trading on the preceding Friday,
and when such holiday falls on a Sunday, the NYSE will
not be open for trading on the succeeding Monday,
unless unusual business conditions exist, such as the
ending of a monthly or yearly period.
Tax-Sheltered Retirement Plans
The Company offers through its Custodian, Firstar
Bank, N.A., various qualified retirement plans for
adoption by individuals and employers. Participants in
these plans can accumulate shares of the Fund on a tax-
deferred basis. Please call 1-888-825-2100 for a
current list of the plans offered.
Dividends, Capital Gain Distributions And Tax Treatment
For federal income tax purposes, all dividends and
distributions of net realized short-term capital gains
are taxable as ordinary income whether reinvested or
received in cash unless you are exempt from taxation or
entitled to a tax deferral. Distributions paid by the
Fund from net realized long-term capital gains, whether
received in cash or reinvested in additional shares,
are taxable as a capital gain unless you are exempt
from taxation or entitled to a tax deferral. The
capital gain holding period is determined by the length
of time the Fund has held the security and not the
length of time you have held shares in the Fund.
Shareholders are informed annually as to the amount and
nature of all dividends and capital gains paid during
the prior year. Such capital gains and dividends may
also be subject to state or local taxes. If you are
not required to pay taxes on your income, you are
generally not required to pay federal income taxes on
the amounts distributed to you.
The Fund will usually distribute dividends and
capital gains at least annually. When a dividend or
capital gain is distributed, the Fund's net asset value
decreases by the amount of the payment. If you
purchase shares shortly before a distribution, you
will, nonetheless, be subject to income taxes on the
distribution, even though the value of your investment
(plus cash received, if any) remains the same. The
Fund expects that, because of its investment objective,
its distributions will consist primarily of capital
gains. All dividends or capital gain distributions
will automatically be reinvested in shares of the Fund
at the then prevailing net asset value unless an
investor specifically requests that either dividends or
capital gains or both be paid in cash. The election to
receive dividends or reinvest them may be changed by
writing to: Frontegra Funds, Inc., c/o Firstar Mutual
Fund Services, LLC, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. For overnight deliveries, please use 615
E. Michigan Street, Third Floor, Milwaukee, Wisconsin
53202. Such notice must be received at least five
business days prior to the record date of any dividend
or capital gain distribution.
If you do not furnish the Fund with your correct
Social Security Number or Taxpayer Identification
Number and/or the Fund receives notification from the
Internal Revenue Service requiring back-up withholding,
the Fund is required by federal law to withhold federal
income tax from your distributions and redemption
proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state,
or local tax considerations applicable to a particular
investor. You are urged to consult your own tax
adviser.
<PAGE>
Year 2000 Issue
The Fund's operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of the Adviser, the
Subadviser and Firstar. Many computer software systems
in use today cannot properly process date-related
information after December 31, 1999 because of the
method by which dates are encoded and calculated. This
failure, commonly referred to as the "Year 2000 Issue,"
could adversely affect the handling of security trades,
pricing and account servicing for the Fund.
The Adviser has made compliance with the Year 2000
Issue a high priority and is taking steps that it
believes are reasonably designed to address the Year
2000 Issue with respect to its computer systems. The
Adviser has also been informed that comparable steps
are being taken by the Subadviser. In addition,
Firstar has represented to the Adviser that it does not
currently anticipate that the Year 2000 Issue will have
a material impact on its ability to continue to fulfill
its duties as a service provider to the Fund. However,
there can be no assurance that the steps taken by the
Adviser, Subadviser or Firstar will be sufficient to
avoid any adverse impact.
With respect to the companies in which the Fund
invests, the Fund cannot make any assurances as to
their Year 2000 compliance efforts. To the extent the
Fund invests in foreign companies, those companies may
be more likely to be affected by Year 2000 issues. In
the event that one or more of these companies is not
Year 2000 compliant, the Fund's investment in such
companies may be adversely affected.
<PAGE>
DIRECTORS TRANSFER AGENT AND ADMINISTRATOR
William D. Forsyth III Firstar Mutual Fund Services, LLC
Thomas J. Holmberg, Jr. For overnight deliveries, use:
David L. Heald Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
OFFICERS 615 East Michigan Street, 3rd Floor
Milwaukee, Wisconsin 53202
William D. Forsyth III
Thomas J. Holmberg, Jr. For regular mail deliveries, use:
INVESTMENT ADVISER Frontegra Funds, Inc.
c/o Firstar Mutual Fund Services, LLC
Frontegra Asset Management, Inc. P.O. Box 701
400 Skokie Blvd. Milwaukee, Wisconsin 53201-0701
Suite 500
Northbrook, Illinois 60062 AUDITORS
SUB-ADVISER Ernst & Young LLP
Sears Tower
Berents & Hess Capital Management 233 S. Wacker Drive
Incorporated Chicago, Illinois 60606-6301
99 Summer Street
Suite 1720 LEGAL COUNSEL
Boston, Massachusetts 02119
Godfrey & Kahn, S.C.
CUSTODIAN 780 N. Water Street
Milwaukee, Wisconsin 53202
Firstar Bank, N.A.
Additional information regarding the Company and the
Fund is included in the Statement of Additional
Information ("SAI") which has been filed with the
Securities and Exchange Commission ("SEC") and is
incorporated in this Prospectus by reference. You may
receive the Fund's SAI free of charge, request other
information about the Fund and make shareholder
inquiries by contacting the Company at the address
listed on the cover page of this Prospectus or by
calling, toll-free, 1-888-825-2100.
Information about the Fund (including the SAI) can be
reviewed and copied at the SEC's Public Reference Room
in Washington, D.C. Please call the SEC at 1-202-942-
8090 for information relating to the operation of the
Public Reference Room. Reports and other information
about the Fund are also available on the EDGAR database
on the SEC's Internet site located at
http://www.sec.gov. Alternatively, copies of this
information may be obtained, upon payment of a
duplicating fee, by electronic request to the following
e-mail address: [email protected], or by writing the
Public Reference Section of the SEC, Washington, D.C. 20549-0102.
The Company's 1940 Act File Number is 811-7685.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FRONTEGRA FUNDS, INC.
Frontegra Total Return Bond Fund
Frontegra Opportunity Fund
Frontegra Growth Fund
Frontegra Emerging Growth Fund
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
1-888-825-2100
This Statement of Additional Information ("SAI")
is not a prospectus and should be read in conjunction
with the Prospectuses of the Frontegra Total Return
Bond Fund (the "Total Return Bond Fund"), the Frontegra
Opportunity Fund (the "Opportunity Fund"), the
Frontegra Growth Fund (the "Growth Fund") and the
Frontegra Emerging Growth Fund (the "Emerging Growth
Fund") dated December 31, 1999, each of which is a
series of Frontegra Funds, Inc. (the "Company")
(individually, a "Fund," and collectively, the
"Funds"). The audited financial statements for the
Total Return Bond, Opportunity and Growth Funds for the
fiscal period ended June 30, 1999 are incorporated
herein by reference to those Funds' 1999 Annual
Reports. A copy of a Prospectus and/or each of the
above-noted Fund's 1999 Annual Report is available
without charge upon request to the above address or
toll-free telephone number.
This Statement of Additional Information is dated December 31, 1999.
<PAGE>
Table of Contents
FUND ORGANIZATION 1
FUND POLICIES: FUNDAMENTAL AND NON-FUNDAMENTAL 1
IMPLEMENTATION OF INVESTMENT OBJECTIVE 3
DIRECTORS AND OFFICERS 17
PRINCIPAL SHAREHOLDERS 18
INVESTMENT ADVISER 19
FUND TRANSACTIONS AND BROKERAGE 21
CUSTODIAN 22
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT 22
ADMINISTRATOR AND FUND ACCOUNTANT 23
SHAREHOLDER MEETINGS 23
PURCHASE AND PRICING OF SHARES 23
TAXATION OF THE FUND 24
PERFORMANCE INFORMATION 24
INDEPENDENT AUDITORS 26
FINANCIAL STATEMENTS 26
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN
THIS SAI AND THE PROSPECTUSES DATED DECEMBER 31, 1999.
THE COMPANY HAS NOT AUTHORIZED OTHERS TO PROVIDE
ADDITIONAL INFORMATION. THIS SAI IS NOT AN OFFER TO
SELL SECURITIES IN ANY STATE OR JURISDICTION WHERE THE
OFFERING CANNOT LEGALLY BE MADE.
<PAGE>
Fund Organization
The Company is an open-end management investment
company, commonly referred to as a mutual fund. The
Company was organized as a Maryland corporation on May
24, 1996.
The Company is authorized to issue 150,000,000,
$.01 par value shares of common stock, in addition to
the 100,000,000, $.01 par value shares of the Total
Return Bond Fund, the 100,000,000, $.01 par value
shares of the Frontegra Opportunity Fund, the
100,000,000, $.01 par value shares of the Frontegra
Growth Fund and the 50,000,000 $.01 par value shares of
the Frontegra Emerging Growth Fund. The assets
belonging to each Fund will be held separately by the
custodian, Firstar Bank, N.A., and if the
Company issues additional series, each additional
series will be held separately. In effect, each series
will be a separate fund.
Each share of common stock, irrespective of
series, is entitled to one vote on all questions,
except that certain matters must be voted on separately
by the series of shares affected, and matters affecting
only one series are voted upon only by that series.
Shares have non-cumulative voting rights, which means
that the holders of more than 50% of the shares voting
for the election of Directors can elect all of the
Directors if they choose to do so and, in such event,
the holders of the remaining shares will not be able to
elect any person or persons to the Board of Directors.
Each share of common stock is entitled to participate
in dividends and capital gains distributions as
determined by the Board of Directors. Each share is
entitled to the residual assets of the respective
series in the event of liquidation.
Fund Policies: Fundamental and Non-Fundamental
The investment objective of the Total Return Bond
Fund is a high level of total return, consistent with
the preservation of capital. The investment objective
of the Opportunity Fund is capital appreciation. The
investment objective of the Growth Fund is long-term
capital appreciation. The investment objective of the
Emerging Growth Fund is long-term capital appreciation.
These investment objectives may not be changed without
shareholder approval. Each Fund is diversified.
The following is a complete list of each Fund's
fundamental investment limitations which cannot be
changed without shareholder approval, which requires
the approval of a majority of each Fund's outstanding
voting securities. As used herein, a "majority of each
Fund's outstanding voting securities" means the lesser
of (i) 67% of the shares of common stock of each Fund
represented at a meeting at which more than 50% of the
outstanding shares are present, or (ii) more than 50%
of the outstanding shares of common stock of the Fund.
Each Fund:
1. May not with respect to 75% of its total
assets, purchase the securities of any issuer
(except securities issued or guaranteed by
the U.S. government or its agencies or
instrumentalities) if, as a result, (i) more
than 5% of the Fund's total assets would be
invested in the securities of that issuer or
(ii) the Fund would hold more than 10% of the
outstanding voting securities of that issuer.
2. May (i) borrow money from banks and (ii) make
other investments or engage in other
transactions permissible under the Investment
Company Act of 1940 (the "1940 Act") which
may involve a borrowing, provided that the
combination of (i) and (ii) shall not exceed
33-1/3% of the value of the Fund's total
assets (including the amount borrowed), less
the Fund's liabilities (other than
borrowings). The Fund may also borrow money
from other Frontegra Funds or other persons
to the extent permitted by applicable law.
3. May not issue senior securities, except as
permitted under the 1940 Act.
4. May not act as an underwriter of another
issuer's securities, except to the extent the
Fund may be deemed to be an underwriter
within the meaning of the Securities Act of
1933 in connection with the purchase and sale
of portfolio securities.
5. May not purchase or sell physical commodities
unless acquired as a result of ownership of
securities or other instruments (but this
limitation shall not prevent the Fund from
purchasing or selling options, futures
contracts, or other derivative instruments,
or from investing in securities or other
instruments backed by physical commodities).
<PAGE>
6. May not make loans if, as a result, more than
33-1/3% of the Fund's total assets would be
lent to other persons, except through (i)
purchases of debt securities or other debt
instruments or (ii) engaging in repurchase
agreements.
7. May not purchase the securities of any issuer
if, as a result, more than 25% of the Fund's
total assets would be invested in the
securities of issuers, the principal business
activities of which are in the same industry.
8. May not purchase or sell real estate unless
acquired as a result of ownership of
securities or other instruments (but this
limitation shall not prohibit the Fund from
purchasing or selling securities or other
instruments backed by real estate or of
issuers engaged in real estate activities).
9. May, notwithstanding any other fundamental
investment policy or restriction, invest all
of its assets in the securities of a single
open-end management investment company with
substantially the same fundamental investment
objective, policies, and restrictions as the
Fund.
With the exception of the investment restriction
set out in item 2 above, if a percentage restriction is
adhered to at the time of investment, a later increase
in percentage resulting from a change in market value
of the investment or the total assets will not
constitute a violation of that restriction.
The following are the Funds' non-fundamental
operating policies which may be changed by the Board of
Directors of the Company (the "Board of Directors")
without shareholder approval.
Each Fund may not:
1. Sell securities short, unless the Fund owns
or has the right to obtain securities
equivalent in kind and amount to the
securities sold short or unless it covers
such short sale as required by the current
rules and positions of the Securities and
Exchange Commission or its staff, and
provided that transactions in options,
futures contracts, options on futures
contracts, or other derivative instruments
are not deemed to constitute selling
securities short.
2. Purchase securities on margin, except that
the Fund may obtain such short-term credits
as are necessary for the clearance of
transactions, and provided that margin
deposits in connection with futures
contracts, options on futures contracts, or
other derivative instruments shall not
constitute purchasing securities on margin.
3. Invest in illiquid securities if, as a result
of such investment, more than 15% of its net
assets would be invested in illiquid
securities, or such other amounts as may be
permitted under the 1940 Act.
4. Purchase securities of other investment
companies except in compliance with the 1940
Act.
5. Invest all of its assets in the securities of
a single open-end investment management
company with substantially the same
fundamental investment objective,
restrictions and policies as the Fund.
6. Engage in futures or options on futures
transactions which are impermissible pursuant
to Rule 4.5 under the Commodity Exchange Act
and, in accordance with Rule 4.5, will use
futures or options on futures transactions
solely for bona fide hedging transactions
(within the meaning of the Commodity Exchange
Act), provided, however, that the Fund may,
in addition to bona fide hedging
transactions, use futures and options on
futures transactions if the aggregate initial
margin and premiums required to establish
such positions, less the amount by which any
such options positions are in the money
(within the meaning of the Commodity Exchange
Act), do not exceed 5% of the Fund's net
assets.
7. Borrow money, except (i) from banks or (ii)
through reverse repurchase agreements or
mortgage dollar rolls, and will not purchase
securities when bank borrowings exceed 5% of
its total assets.
8. Make any loans other than loans of portfolio
securities, except through (i) purchases of
debt securities or other debt instruments, or
(ii) engaging in repurchase agreements.
<PAGE>
Implementation Of Investment Objective
The following information supplements the
discussion of the Funds' investment objectives,
policies, and techniques that are described in each
Prospectus under the captions "Investment Objective"
and "Implementation of Investment Objective."
Illiquid Securities
The Funds may invest in illiquid securities (i.e.,
securities that are not readily marketable). For
purposes of this restriction, illiquid securities
include, but are not limited to, restricted securities
(securities the disposition of which is restricted
under the federal securities laws), securities which
may only be resold pursuant to Rule 144A under the
Securities Act of 1933, as amended (the "Securities
Act"), and repurchase agreements with maturities in
excess of seven days. However, none of the Funds will
acquire illiquid securities if, as a result, such
securities would comprise more than 15% of the value of
the Fund's net assets. The Growth Fund does not
currently intend to invest more than 5% of its net
assets in illiquid securities. Rule 144A securities
will be treated as illiquid securities, subject to the
liquidity guidelines. The Board of Directors or its
delegate has the ultimate authority to determine, to
the extent permissible under the federal securities
laws, which securities are liquid or illiquid for
purposes of this 15% limitation. The Board of
Directors has delegated to each Fund's respective
subadviser the day-to-day determination of the
liquidity of any security, although it has retained
oversight and ultimate responsibility for such
determinations. Although no definitive liquidity
criteria are used, the Board of Directors has directed
each subadviser to look to such factors as (i) the
nature of the market for a security (including the
institutional private resale market), (ii) the terms of
certain securities or other instruments allowing for
the disposition to a third party or the issuer thereof
(e.g., certain repurchase obligations and demand
instruments), (iii) the availability of market
quotations (e.g., for securities quoted in the PORTAL
system) and (iv) other permissible relevant factors.
Restricted securities may be sold only in
privately negotiated transactions or in a public
offering with respect to which a registration statement
is in effect under the Securities Act. Where
registration is required, a Fund may be obligated to
pay all or part of the registration expenses and a
considerable period may elapse between the time of the
decision to sell a security and the time the Fund may
be permitted to sell a security under an effective
registration statement. If, during such a period,
adverse market conditions were to develop, the Fund
might obtain a less favorable price than that which
prevailed when it decided to sell. Restricted
securities will be priced at fair value as determined
in good faith by the Board of Directors. If, through
the appreciation of restricted securities or the
depreciation of unrestricted securities, the Growth
Fund should be in a position where more than 5% of the
value of its net assets are invested in illiquid
securities and the Total Return Bond Fund, the
Opportunity Fund and the Emerging Growth Fund should be
in a position where more than 15% of the value of their
respective net assets are invested in illiquid
securities, including restricted securities which are
not readily marketable, the affected Fund will take
such steps as is deemed advisable, if any, to protect
liquidity.
Short-Term Fixed Income Securities
The Total Return Bond Fund may invest without
limitation in cash and short-term fixed income
securities. The Opportunity Fund may invest up to 20%
of its total assets in cash and short-term fixed income
securities for any purpose and up to 100% of its total
assets may be invested in such instruments for
temporary defensive purposes. The Growth Fund and the
Emerging Growth Fund intend to be fully invested at all
times and accordingly will only hold cash or short-term
fixed income securities to meet anticipated redemption
requests, pending investment and to pay expenses which,
in any case, generally will not exceed 20% of total
assets with respect to the Growth Fund and 15% of total
assets with respect to the Emerging Growth Fund. The
Growth Fund and the Emerging Growth Fund may, however,
temporarily exceed this 20% or 15% limitation, as the
case may be, but only in circumstances pending
investment and only for short periods of time. Short-
term fixed income securities are defined to include
without limitation, the following:
1. U.S. government securities, including bills,
notes and bonds differing as to maturity and
rates of interest, which are either issued or
guaranteed by the U.S. Treasury or by U.S.
government agencies or instrumentalities.
U.S. government agency securities include
securities issued by: (a) the Federal Housing
Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small
Business Administration and the Government
National Mortgage Association, whose
securities are supported by the full faith and
credit of the United States; (b) the Federal
Home Loan Banks, Federal Intermediate Credit
Banks and the Tennessee Valley Authority,
whose securities are supported by the
<PAGE>
right of the agency to borrow from the U.S. Treasury;
(c) the Federal National Mortgage Association,
whose securities are supported by the
discretionary authority of the U.S. government
to purchase certain obligations of the agency
or instrumentality; and (d) the Student Loan
Marketing Association, whose securities are
supported only by its credit. While the U.S.
government provides financial support to such
U.S. government-sponsored agencies or
instrumentalities, no assurance can be given
that it always will do so since it is not so
obligated by law. The U.S. government, its
agencies and instrumentalities do not
guarantee the market value of their securities
and consequently the value of such securities
may fluctuate.
2. Certificates of Deposit issued against funds
deposited in a bank or savings and loan
association. Such certificates are for a
definite period of time, earn a specified rate
of return and are normally negotiable. If such
certificates of deposit are non-negotiable,
they will be considered illiquid securities
and be subject to each Fund's restriction on
investments in illiquid securities. Pursuant
to the certificate of deposit, the issuer
agrees to pay the amount deposited plus
interest to the bearer of the certificate on
the date specified thereon. Under current
Federal Deposit Insurance Corporation
regulations, the maximum insurance payable as
to any one certificate of deposit is $100,000;
therefore, certificates of deposit purchased
by a Fund may not be fully insured.
3. Bankers' acceptances which are short-term
credit instruments used to finance commercial
transactions. Generally, an acceptance is a
time draft drawn on a bank by an exporter or
an importer to obtain a stated amount of funds
to pay for specific merchandise. The draft is
then "accepted" by a bank that, in effect,
unconditionally guarantees to pay the face
value of the instrument on its maturity date.
The acceptance may then be held by the
accepting bank as an asset or it may be sold
in the secondary market at the going rate of
interest for a specific maturity.
4. Repurchase agreements which involve purchases
of debt securities. In such an action, at the
time a Fund purchases the security, it
simultaneously agrees to resell and redeliver
the security to the seller, who also
simultaneously agrees to buy back the security
at a fixed price and time. This assures a
predetermined yield for the Fund during its
holding period since the resale price is
always greater than the purchase price and
reflects an agreed-upon market rate. Such
actions afford an opportunity for the Fund to
invest temporarily available cash. The Funds
may enter into repurchase agreements only with
respect to obligations of the U.S. government,
its agencies or instrumentalities,
certificates of deposit, or bankers
acceptances in which the Funds may invest.
Repurchase agreements may be considered loans
to the seller, collateralized by the
underlying securities. The risk to the Funds
is limited to the ability of the seller to pay
the agreed-upon sum on the repurchase date.
In the event of default, the repurchase
agreement provides that the affected Fund is
entitled to sell the underlying collateral.
However, if the value of the collateral
declines after the agreement is entered into,
and if the seller defaults under a repurchase
agreement when the value of the underlying
collateral is less than the repurchase price,
the Fund could incur a loss of both principal
and interest. Each Fund's subadviser monitors
the value of the collateral at the time the
transaction is entered into and at all times
during the term of the repurchase agreement.
The subadviser does so in an effort to
determine that the value of the collateral
always equals or exceeds the agreed-upon
repurchase price to be paid to the Fund. If
the seller were to be subject to a federal
bankruptcy proceeding, the ability of a Fund
to liquidate the collateral could be delayed
or impaired because of certain provisions of
the bankruptcy laws.
5. Bank time deposits, which are monies kept on
deposit with banks or savings and loan
associations for a stated period of time at a
fixed rate of interest. There may be
penalties for the early withdrawal of such
time deposits, in which case the yields of
these investments will be reduced.
6. Commercial paper consists of short-term
unsecured promissory notes, including variable
rate master demand notes issued by
corporations to finance their current
operations. Master demand notes are direct
lending arrangements between a Fund and a
corporation. There is no secondary market for
the notes. However, they are redeemable by
the Funds at any time. Each Fund's subadviser
will consider the financial condition of the
corporation (e.g., earning power, cash flow
and liquidity ratios) and will continuously
monitor the corporation's ability to meet all
of its financial obligations, because a Fund's
liquidity might be impaired if the corporation
were unable to pay principal and interest on
demand. Investments in commercial paper will
be limited to commercial paper rated in the
two highest categories by a major rating
agency or unrated commercial paper which is,
in the opinion of Frontegra Asset Management,
Inc. (the "Adviser") or a subadviser, of
comparable quality.
<PAGE>
Short-term fixed income securities must be rated
at least A or higher by S&P, Moody's Investors Service
("Moody's") or Fitch Investors Service, Inc. ("Fitch")
or A- or higher by Duff & Phelps, Inc. ("D&P"). These
securities (each of which has a stated maturity of one
year or less from the date of purchase unless otherwise
indicated) include: U.S. government securities,
including bills, notes and bonds, differing as to
maturity and rate of interest, which are either issued
or guaranteed by the U.S. Treasury or by U.S.
governmental agencies or instrumentalities;
certificates of deposit issued against funds deposited
in a U.S. bank or savings and loan association; bank
time deposits, which are monies kept on deposit with
U.S. banks or savings and loan associations for a
stated period of time at a fixed rate of interest;
bankers' acceptances which are short-term credit
instruments used to finance commercial transactions;
commercial paper and commercial paper master notes
(which are demand instruments without a fixed maturity
bearing interest at rates which are fixed to known
lending rates and automatically adjusted when such
lending rates change) rated A-1 or better by S&P,
Prime-1 or better by Moody's, Duff 2 or higher by D&P,
or Fitch 2 or higher by Fitch; or repurchase agreements
entered into only with respect to obligations of the
U.S. government, its agencies or instrumentalities.
The Funds may also invest in the short-term investment
funds of their custodial bank.
Short Sales Against the Box
When the Adviser or a subadviser believes that the
price of a particular security held by the Total Return
Bond Fund, the Growth Fund or the Emerging Growth Fund
may decline, it may make "short sales against the box"
to hedge the unrealized gain on such security. Selling
short against the box involves selling a security which
the Fund owns for delivery at a specified date in the
future. The Total Return Bond Fund, the Growth Fund
and the Emerging Growth Fund will limit their
transactions in short sales against the box to 5% of
their respective net assets.
Variable- or Floating-Rate Securities
The Total Return Bond Fund may invest in
securities which offer a variable- or floating-rate of
interest. Variable-rate securities provide for
automatic establishment of a new interest rate at fixed
intervals (e.g., daily, monthly, semi-annually, etc.).
Floating-rate securities generally provide for
automatic adjustment of the interest rate whenever some
specified interest rate index changes. The interest
rate on variable- or floating-rate securities is
ordinarily determined by reference to or is a
percentage of a bank's prime rate, the 90-day U.S.
Treasury bill rate, the rate of return on commercial
paper or bank certificates of deposit, an index of
short-term interest rates, or some other objective
measure.
Variable- or floating-rate securities frequently
include a demand feature entitling the holder to sell
the securities to the issuer at par. In many cases,
the demand feature can be exercised at any time on 7
days notice; in other cases, the demand feature is
exercisable at any time on 30 days notice or on similar
notice at intervals of not more than one year. Some
securities which do not have variable or floating
interest rates may be accompanied by puts producing
similar results and price characteristics. When
considering the maturity of any instrument which may be
sold or put to the issuer or a third party, the Fund
may consider that instrument's maturity to be shorter
than its stated maturity.
Variable-rate demand notes include master demand
notes which are obligations that permit the Fund to
invest fluctuating amounts, which may change daily
without penalty, pursuant to direct arrangements
between the Fund, as lender, and the borrower. The
interest rates on these notes fluctuate from time to
time. The issuer of such obligations normally has a
corresponding right, after a given period, to prepay in
its discretion the outstanding principal amount of the
obligations plus accrued interest upon a specified
number of days' notice to the holders of such
obligations. The interest rate on a floating-rate
demand obligation is based on a known lending rate,
such as a bank's prime rate, and is adjusted
automatically each time such rate is adjusted. The
interest rate on a variable-rate demand obligation is
adjusted automatically at specified intervals.
Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by
banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not
contemplated that such instruments will generally be
traded. There generally is not an established secondary
market for these obligations, although they are
redeemable at face value. Accordingly, where these
obligations are not secured by letters of credit or
other credit support arrangements, the Fund's right to
redeem is dependent on the ability of the borrower to
pay principal and interest on demand.
The Total Return Bond Fund will not invest more
than 15% of its net assets in variable- and floating-
rate demand obligations that are not readily marketable
(a variable- or floating-rate demand obligation that
may be disposed of on not more than seven days notice
will be deemed readily marketable and will not be
subject to this limitation). In addition, each
variable- or floating-rate obligation must meet the
credit quality requirements applicable to all the Fund's
<PAGE>
investments at the time of purchase. When
determining whether such an obligation meets the Fund's
credit quality requirements, the Fund may look to the
credit quality of the financial guarantor providing a
letter of credit or other credit support arrangement.
In determining the Fund's weighted average
portfolio maturity, the Fund will consider a floating
or variable rate security to have a maturity equal to
its stated maturity (or redemption date if it has been
called for redemption), except that it may consider (i)
variable rate securities to have a maturity equal to
the period remaining until the next readjustment in the
interest rate, unless subject to a demand feature, (ii)
variable rate securities subject to a demand feature to
have a remaining maturity equal to the longer of (a)
the next readjustment in the interest rate or (b) the
period remaining until the principal can be recovered
through demand, and (iii) floating rate securities
subject to a demand feature to have a maturity equal to
the period remaining until the principal can be
recovered through demand. Variable and floating rate
securities generally are subject to less principal
fluctuation than securities without these attributes
since the securities usually trade at par following the
readjustment in the interest rate.
When-Issued Securities
The Total Return Bond Fund may from time to time
purchase securities on a "when-issued" basis. The
price of securities purchased on a when-issued basis is
fixed at the time the commitment to purchase is made,
but delivery and payment for the securities take place
at a later date. Normally, the settlement date occurs
within 45 days of the purchase. During the period
between the purchase and settlement, no payment is made
by the Fund to the issuer and no interest is accrued on
debt securities or dividend income is earned on equity
securities. When-issued securities involve a risk of
loss if the value of the security to be purchased
declines prior to the settlement date, which risk is in
addition to the risk of decline in value of the Fund's
other assets. While when-issued securities may be sold
prior to the settlement date, the Fund intends to
purchase such securities with the purpose of actually
acquiring them. At the time the Fund makes the
commitment to purchase a security on a when-issued
basis, it will record the transaction and reflect the
value of the security in determining its net asset
value. The Fund does not believe that net asset value
will be adversely affected by purchases of securities
on a when-issued basis.
The Fund will maintain cash, U.S. government
securities and liquid securities equal in value to
commitments for when-issued securities. Such
segregated securities either will mature or, if
necessary, be sold on or before the settlement date.
When the time comes to pay for when-issued securities,
the Fund will meet its obligations from then available
cash flow, sale of the securities held in the separate
account, described above, sale of other securities or,
although it would not normally expect to do so, from
the sale of the when-issued securities themselves
(which may have a market value greater or less than the
Fund's payment obligation).
Investment Grade Debt Obligations
Investment grade debt obligations include: (i)
U.S. government securities; (ii) commercial paper rated
in one of the three highest rating categories (e.g.,
A-2 or higher by S&P); (iii) short-term notes rated in
one of the three highest rating categories (e.g., SP-2
or higher by S&P); (iv) bonds rated in one of the four
highest rating categories (e.g., BBB or higher by S&P);
and (v) unrated securities determined by a subadviser
to be of comparable quality. Investment grade
securities are generally believed to have relatively
low degrees of credit risk. However, certain
investment grade securities may have some speculative
characteristics because their issuers' capacity for
repayment may be more vulnerable to adverse economic
conditions or changing circumstances than that of
higher-rated issuers.
Non-Investment Grade Debt Securities (Junk Bonds)
The Total Return Bond Fund may invest up to 25% of
its net assets in junk bonds. While generally offering
higher yields than investment grade securities with
similar maturities, non-investment grade debt
securities involve greater risks, including the
possibility of default or bankruptcy. They are
regarded as predominantly speculative with respect to
the issuer's capacity to pay interest and repay
principal. The special risk considerations in
connection with investments in these securities are
discussed below. Refer to the Appendix of this
Statement of Additional Information for a discussion of
securities ratings.
Effect of Interest Rates and Economic Changes.
The junk bond market is relatively new and its growth
has paralleled a long economic expansion. As a result,
it is not clear how this market may withstand a
prolonged recession or economic downturn. Such an
economic downturn could severely disrupt the market for
and adversely affect the value of such securities.
<PAGE>
All interest-bearing securities typically
experience appreciation when interest rates decline and
depreciation when interest rates rise. The market
values of junk bond securities tend to reflect
individual corporate developments to a greater extent
than do higher rated securities, which react primarily
to fluctuations in the general level of interest rates.
Junk bond securities also tend to be more sensitive to
economic conditions than are higher-rated securities.
As a result, they generally involve more credit risks
than securities in the higher-rated categories. During
an economic downturn or a sustained period of rising
interest rates, highly leveraged issuers of junk bond
securities may experience financial stress and may not
have sufficient revenues to meet their payment
obligations. The risk of loss due to default by an
issuer of these securities is significantly greater
than issuers of higher-rated securities because such
securities are generally unsecured and are often
subordinated to other creditors. Further, if the
issuer of a junk bond security defaulted, a Fund might
incur additional expenses to seek recovery. Periods of
economic uncertainty and changes would also generally
result in increased volatility in the market prices of
these securities and thus in the Fund's net asset
value.
Payment Expectations. Junk bond securities
typically contain redemption, call or prepayment
provisions which permit the issuer of such securities
containing such provisions to redeem the securities at
its discretion. During periods of falling interest
rates, issuers of these securities are likely to redeem
or prepay the securities and refinance them with debt
securities with a lower interest rate. To the extent
an issuer is able to refinance the securities, or
otherwise redeem them, the Fund may have to replace the
securities with a lower yielding security, which could
result in a lower return for the Fund.
Credit Ratings. Credit ratings issued by credit-
rating agencies evaluate the safety of principal and
interest payments of rated securities. They do not,
however, evaluate the market value risk of junk bond
securities and, therefore may not fully reflect the
true risks of an investment. In addition, credit
rating agencies may or may not make timely changes in a
rating to reflect changes in the economy or in the
condition of the issuer that affect the market value of
the security. Consequently, credit ratings are used
only as a preliminary indicator of investment quality.
Investments in junk bond securities will be more
dependent on the subadviser's credit analysis than
would be the case with investments in investment-grade
debt securities. The subadviser employs its own credit
research and analysis, which includes a study of
existing debt, capital structure, ability to service
debt and to pay dividends, the issuer's sensitivity to
economic conditions, its operating history and the
current trend of earnings. The subadviser continually
monitors the Fund's investments and carefully evaluates
whether to dispose of or to retain junk bond securities
whose credit ratings or credit quality may have
changed.
Liquidity and Valuation. The Fund may have
difficulty disposing of certain junk bond securities
because there may be a thin trading market for such
securities. Because not all dealers maintain markets
in all junk bond securities there is no established
retail secondary market for many of these securities.
The Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional
investors. To the extent a secondary trading market
does exist, it is generally not as liquid as the
secondary market for higher-rated securities. The lack
of a liquid secondary market may have an adverse impact
on the market price of the security. The lack of a
liquid secondary market for certain securities may also
make it more difficult for the Fund to obtain accurate
market quotations for purposes of valuing the Fund.
Market quotations are generally available on many junk
bond issues only from a limited number of dealers and
may not necessarily represent firm bids of such dealers
or prices for actual sales. During periods of thin
trading, the spread between bid and asked prices is
likely to increase significantly. In addition, adverse
publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values
and liquidity of junk bond securities, especially in a
thinly traded market.
Debt Obligations-General
The debt obligations that the Total Return Bond
Fund may invest in include: (i) corporate debt
securities, including bonds, debentures, and notes;
(ii) bank obligations, such as certificates of deposit,
banker's acceptances and time deposits of domestic and
foreign banks, domestic savings associations and their
subsidiaries and branches (in amounts in excess of the
current $100,000 per account insurance coverage
provided by the Federal Deposit Insurance Corporation);
(iii) commercial paper (including variable-amount
master demand notes); (iv) repurchase agreements; (v)
loan interests; (vi) foreign debt obligations issued by
foreign issuers traded either in foreign markets or in
domestic markets through depositary receipts; (vii)
convertible securities - debt obligations convertible
into or exchangeable for equity securities or debt
obligations that carry with them the right to acquire
equity securities, as evidenced by warrants attached to
such securities, or acquired as part of units of the
securities; (viii) preferred stocks - securities that
<PAGE>
represent an ownership interest in a corporation and
that give the owner a prior claim over common stock on
the company's earnings or assets; (ix) U.S. government
securities; (x) mortgage-backed securities,
collateralized mortgage obligations and similar
securities; and (xi) municipal obligations.
Corporate Debt Securities
The Total Return Bond Fund may invest in corporate
debt securities. Corporate debt securities include
investment grade and non-investment grade corporate
bonds, debentures, notes and other similar corporate
debt instruments, including convertible securities.
Corporate debt securities may be acquired with warrants
attached. Income producing corporate debt securities
may also include forms of preferred or preference
stock. The rate of interest on a corporate debt
security may be fixed, floating or variable, and may
vary inversely with respect to a reference rate. See
"Variable and Floating Rate Securities" above.
Mortgage- and Other Asset-Backed Securities
The Total Return Bond Fund may invest in mortgage-
and other asset-backed securities. Mortgage-backed
securities represent direct or indirect participation
in, or are secured by and payable from, mortgage loans
secured by real property, and include single- and multi-
class pass-through securities and collateralized
mortgage obligations. Such securities may be issued or
guaranteed by U.S. government agencies or
instrumentalities or by private issuers, generally
originators in mortgage loans, including savings
associations, mortgage bankers, commercial banks,
investment bankers and special purpose entities
(collectively, "private lenders"). Mortgage-backed
securities issued by private lenders may be supported
by pools of mortgage loans or other mortgage-backed
securities that are directly or indirectly guaranteed
by the U.S. government or one of its agencies or
instrumentalities, or they may be issued without any
governmental guarantee of the underlying mortgage
assets but with some form of non-governmental credit
enhancement.
Asset-backed securities have structural
characteristics similar to mortgage-backed securities.
However, the underlying assets are not first-lien
mortgage loans or interests therein. Instead, they
include assets such as motor vehicle installment sales
contracts, installment loan contracts, home equity
loans, leases of various types of property and
receivables from credit card issuers or other revolving
credit arrangements. Payments or distributions of
principal and interest on asset-backed securities may
be supported by non-governmental credit enhancements
similar to those utilized in connection with mortgage-
backed securities.
The yield characteristics of mortgage- and asset-
backed securities differ from those of traditional debt
obligations. Among the principal differences are that
interest and principal payments are made more
frequently on mortgage- and asset-backed securities,
usually monthly, and that principal may be prepaid at
any time because the underlying mortgage loans or other
assets generally may be prepaid at any time. As a
result, if the Fund purchases these securities at a
premium, a prepayment rate that is faster than expected
will reduce yield to maturity, while a prepayment rate
that is slower than expected will have the opposite
effect of increasing the yield to maturity.
Conversely, if the Fund purchases these securities at a
discount, a prepayment rate that is faster than
expected will increase yield to maturity, while a
prepayment rate that is slower than expected will
reduce yield to maturity. Accelerated prepayments on
securities purchased by the Fund at a premium also
impose a risk of loss of principal because the premium
may not have been fully amortized at the time the
principal is prepaid in full. The market for privately
issued mortgage- and asset-backed securities is smaller
and less liquid than the market for government
sponsored mortgage-backed securities.
The Fund may invest in stripped mortgage- or asset-
backed securities which receive differing proportions
of the interest and principal payments from the
underlying assets. The market value of such securities
generally is more sensitive to changes in prepayment
and interest rates than is the case with traditional
mortgage- and asset-backed securities, and in some
cases the market value may be extremely volatile. With
respect to certain stripped securities, such as
interest only and principal only classes, a rate of
prepayment that is faster or slower than anticipated
may result in the Fund failing to recover all or a
portion of its investment, even though the securities
are rated investment grade.
Loan Interests
The Total Return Bond Fund may invest its assets
in loan interests, which are interests in amounts owed
by a corporate, governmental or other borrower to
lenders or lending syndicates. Loan interests
purchased by the Fund may have a maturity of any number
of days or years and may be secured or unsecured. Loan
interests, which may take the
<PAGE>
form of interests in, assignments of, or novations of a loan,
may be acquired from U.S. and foreign banks, insurance
companies, finance companies or other financial institutions
that have made loans or are members of a lending syndicate
or from the holders of loan interests. Loan interests
involve the risk of loss in the case of default or
bankruptcy of the borrower and, in the case of
participation interests, involve a risk of insolvency
of the agent lending bank or other financial
intermediary. Loan interests are not rated by any
nationally recognized statistical rating organization,
and are, at present, not readily marketable and may be
subject to contractual restrictions on resale.
Zero-Coupon, Step-Coupon and Pay-In-Kind Securities
The Total Return Bond Fund may invest in zero-
coupon, step-coupon and pay-in-kind securities. These
securities are debt securities that do not make regular
cash interest payments. Zero-coupon and step-coupon
securities are sold at a deep discount to their face
value. Pay-in-kind securities pay interest through the
issuance of additional securities. Because these
securities do not pay current cash income, their price
can be volatile when interest rates fluctuate. Federal
income tax law requires the holders of zero-coupon,
step-coupon and pay-in-kind securities to include in
income each year the portion of the original issue
discount (or deemed discount) and other non-cash income
on such securities accrued during that year. In order
to qualify for treatment as a "regulated investment
company" under the Internal Revenue Code of 1986, as
amended (the "Code"), and avoid excise tax, the Fund
may be required to distribute a portion of such
discount and may be required to dispose of other
portfolio securities (which may occur in periods of
adverse market prices) in order to generate cash to
meet these distribution requirements.
Reverse Repurchase Agreements and Mortgage Dollar Rolls
The Total Return Bond Fund may engage in reverse
repurchase agreements to facilitate portfolio liquidity
(a practice common in the mutual fund industry) or for
arbitrage transactions. In a reverse repurchase
agreement, the Fund would sell a security and enter
into an agreement to repurchase the security at
specified future date and price. The Fund generally
retains the right to interest and principal payments on
the security. Since the Fund receives cash upon
entering into a reverse repurchase agreement, it may be
considered a borrowing and therefore, subject to the
Fund's fundamental investment restrictions. When
required by SEC guidelines, the Fund will set aside
permissible liquid assets in a segregated account to
secure its obligation to repurchase the security.
The Fund also may enter into mortgage dollar
rolls, in which the Fund would sell mortgage-backed
securities for delivery in the current month and
simultaneously contract to purchase substantially
similar securities on a specified future date. While
the Fund would forego principal and interest paid on
the mortgage-backed securities during the roll period,
it would be compensated by the difference between the
current sale price and the lower price for the future
purchase as well as by any interest earned on the
proceeds of the initial sale. The Fund also could be
compensated through the receipt of fee income
equivalent to a lower forward price. When required by
SEC guidelines, the Fund will set aside permissible
liquid assets in a segregated account to secure its
obligation for the forward commitment to buy mortgage-
backed securities. Mortgage dollar roll transactions
may be considered a borrowing by the Fund.
The reverse repurchase agreements and mortgage
dollar rolls entered into by the Fund may be used as
arbitrage transactions in which the Fund will maintain
an offsetting position in investment grade debt
obligations or repurchase agreements that mature on or
before the settlement date of the related mortgage
dollar roll or reverse repurchase agreement. Since the
Fund will receive interest on the securities or
repurchase agreements in which it invests the
transaction proceeds, the transactions may involve
leverage.
Foreign Securities and Currencies
The Funds may invest directly in foreign
securities. Investments in securities of foreign
issuers involve risks which are in addition to the
usual risks inherent in domestic investment. In many
countries there is less publicly available information
about issuers than is available in the reports and
ratings published about companies in the U.S.
Additionally, foreign companies are not subject to
uniform accounting, auditing and financial reporting
standards as are companies in the U.S. Other risks
inherent in foreign investment include: expropriation;
confiscatory taxation; capital gains taxes; withholding
taxes on dividends and interest; less extensive
regulation of foreign brokers, securities markets and
issuers; costs incurred in conversions between
currencies; the possibility of delays in settlement in
foreign securities markets; limitations on the use or
transfer of assets (including suspension of the ability
to transfer currency from a given country); the
difficulty of enforcing obligations in other countries;
diplomatic developments; and political or social
instability. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects,
and many foreign securities are less liquid and their
prices are more volatile than comparable U.S.
securities.
<PAGE>
From time to time, foreign securities may
be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign
investing, such as custody charges and brokerage costs,
are higher than those attributable to domestic
investing.
Because most foreign securities are denominated in
non-U.S. currencies, the investment performance of the
Fund could be affected by changes in foreign currency
exchange rates to some extent. The value of the Fund's
assets denominated in foreign currencies will increase
or decrease in response to fluctuations in the value of
those foreign currencies relative to the U.S. dollar.
Currency exchange rates can be volatile at times in
response to various political and economic conditions.
In addition, the Funds may purchase and sell
foreign currency on a spot basis and may engage in
forward currency contracts, currency options and
futures transactions for hedging or any other lawful
purpose.
Hedging Strategies
General Description of Hedging Strategies. The
Funds may engage in hedging activities, including
options, futures contracts (sometimes referred to as
"futures") and options on futures contracts to attempt
to hedge a Fund's holdings.
Hedging instruments on securities generally are
used to hedge against price movements in one or more
particular securities positions that a Fund owns or
intends to acquire. Hedging instruments on stock
indices, in contrast, generally are used to hedge
against price movements in broad equity market sectors
in which a Fund has invested or expects to invest. The
use of hedging instruments is subject to applicable
regulations of the Securities and Exchange Commission
(the "SEC"), the several options and futures exchanges
upon which they are traded, the Commodity Futures
Trading Commission (the "CFTC") and various state
regulatory authorities. In addition, a Fund's ability
to use hedging instruments will be limited by tax
considerations.
General Limitations on Futures and Options
Transactions. The Company has filed a notice of
eligibility for exclusion from the definition of the
term "commodity pool operator" with the CFTC and the
National Futures Association, which regulate trading in
the futures markets. Pursuant to Section 4.5 of the
regulations under the Commodity Exchange Act (the
"CEA"), the notice of eligibility for the Funds
includes the representation that the Funds will use
futures contracts and related options solely for bona
fide hedging purposes within the meaning of CFTC
regulations, provided that the Funds may hold other
positions in futures contracts and related options that
do not fall within the definition of bona fide hedging
transactions (i.e., for speculative purposes) if
aggregate initial margins and premiums paid, less the
amount by which any such option positions are in the
money (within the meaning of the CEA), do not exceed 5%
of the net asset value of the respective Funds. In
addition, none of the Funds will enter into futures
contracts and options transactions if more than 50% of
its net assets would be committed to such instruments.
The foregoing limitations are not fundamental
policies of the Funds and may be changed without
shareholder approval as regulatory agencies permit.
Various exchanges and regulatory authorities have
undertaken reviews of options and futures trading in
light of market volatility. Among the possible actions
that have been presented are proposals to adopt new or
more stringent daily price fluctuation limits for
futures and options transactions and proposals to
increase the margin requirements for various types of
futures transactions.
Asset Coverage for Futures and Options Positions.
Each Fund will comply with the regulatory requirements
of the SEC and the CFTC with respect to coverage of
options and futures positions by registered investment
companies and, if the guidelines so require, will set
aside cash and/or other permissible liquid assets in a
segregated custodial account in the amount prescribed.
Securities held in a segregated account cannot be sold
while the futures or options position is outstanding,
unless replaced with other permissible assets, and will
be marked-to-market daily.
Stock Index Options. Each Fund may (i) purchase
stock index options for any purpose, (ii) sell stock
index options in order to close out existing positions,
and/or (iii) write covered options on stock indexes for
hedging purposes. Stock index options are put options
and call options on various stock indexes. In most
respects, they are identical to listed options on
common stocks. The primary difference between stock
options and index options occurs when index options are
exercised. In the case of stock options, the
underlying security, common stock, is delivered.
However, upon the exercise of an index option,
settlement does not occur by delivery of the securities
comprising the index. The option holder who exercises
the index option receives an amount of cash if the
closing level of the stock
<PAGE>
index upon which the option
is based is greater than, in the case of a call, or
less than, in the case of a put, the exercise price of
the option. This amount of cash is equal to the
difference between the closing price of the stock index
and the exercise price of the option expressed in
dollars times a specified multiple.
A stock index fluctuates with changes in the
market values of the stocks included in the index. For
example, some stock index options are based on a broad
market index, such as the Standard & Poor's 500 or the
Value Line Composite Index or a narrower market index,
such as the Standard & Poor's 100. Indexes may also be
based on an industry or market segment, such as the
AMEX Oil and Gas Index or the Computer and Business
Equipment Index. Options on stock indexes are
currently traded on the following exchanges: the
Chicago Board of Options Exchange, the New York Stock
Exchange, the American Stock Exchange, the Pacific
Stock Exchange, and the Philadelphia Stock Exchange.
A Fund's use of stock index options is subject to
certain risks. Successful use by the Funds of options
on stock indexes will be subject to the ability of the
subadviser to correctly predict movements in the stock
market. This requires different skills and techniques
than predicting changes in the prices of individual
securities. In addition, a Fund's ability to
effectively hedge all or a portion of the securities in
its portfolio, in anticipation of or during a market
decline through transactions in put options on stock
indexes, depends on the degree to which price movements
in the underlying index correlate with the price
movements of the securities held by a Fund. Inasmuch
as a Fund's securities will not duplicate the
components of an index, the correlation will not be
perfect. Consequently, each Fund will bear the risk
that the prices of its securities being hedged will not
move in the same amount as the prices of its put
options on the stock indexes. It is also possible that
there may be a negative correlation between the index
and a Fund's securities which would result in a loss on
both such securities and the options on stock indexes
acquired by the Fund.
The hours of trading for options may not conform
to the hours during which the underlying securities are
traded. To the extent that the options markets close
before the markets for the underlying securities,
significant price and rate movements can take place in
the underlying markets that cannot be reflected in the
options markets. The purchase of options is a highly
specialized activity which involves investment
techniques and risks different from those associated
with ordinary portfolio securities transactions. The
purchase of stock index options involves the risk that
the premium and transaction costs paid by a Fund in
purchasing an option will be lost as a result of
unanticipated movements in prices of the securities
comprising the stock index on which the option is
based.
Certain Considerations Regarding Options. There
is no assurance that a liquid secondary market on an
options exchange will exist for any particular option,
or at any particular time, and for some options no
secondary market on an exchange or elsewhere may exist.
If a Fund is unable to close out a call option on
securities that it has written before the option is
exercised, the Fund may be required to purchase the
optioned securities in order to satisfy its obligation
under the option to deliver such securities. If a Fund
is unable to effect a closing sale transaction with
respect to options on securities that it has purchased,
it would have to exercise the option in order to
realize any profit and would incur transaction costs
upon the purchase and sale of the underlying
securities.
The writing and purchasing of options is a highly
specialized activity which involves investment
techniques and risks different from those associated
with ordinary portfolio securities transactions.
Imperfect correlation between the options and
securities markets may detract from the effectiveness
of attempted hedging. Options transactions may result
in significantly higher transaction costs and portfolio
turnover for the Funds.
Federal Tax Treatment of Options. Certain option
transactions have special tax results for the Funds.
Expiration of a call option written by a Fund will
result in short-term capital gain. If the call option
is exercised, the Fund will realize a gain or loss from
the sale of the security covering the call option and,
in determining such gain or loss, the option premium
will be included in the proceeds of the sale.
If a Fund writes options other than "qualified
covered call options," as defined in Section 1092 of
the Code, or purchases puts, any losses on such options
transactions, to the extent they do not exceed the
unrealized gains on the securities covering the
options, may be subject to deferral until the
securities covering the options have been sold.
A "nonequity option" includes an option with
respect to any group of stocks or a stock index if
there is in effect a designation by the CFTC of a
contract market for a contract based on such group of
stocks or indexes. For example, options involving
stock indexes such as the Standard & Poor's 500 and 100
indexes would be "nonequity options" within the meaning
of Code Section 1256. In the case of transactions
involving "nonequity options," the Funds will treat any
gain or loss arising from the lapse, closing out or
exercise of such positions as 60% long-term and
<PAGE>
40% short-term capital gain or loss as required by Section
1256 of the Code. In addition, such positions must be
marked-to-market as of the last business day of the
year, and gain or loss must be recognized for federal
income tax purposes in accordance with the 60%/40% rule
discussed above even though the position has not been
terminated.
Futures Contracts. The Funds may enter into
futures contracts (hereinafter referred to as "Futures"
or "Futures Contracts"), including index and interest
rate Futures as a hedge against movements in the equity
and bond markets, in order to establish more definitely
the effective return on securities held or intended to
be acquired by the Funds or for other purposes
permissible under the CEA. Each Fund's hedging may
include sales of Futures as an offset against the
effect of expected declines in stock or bond prices and
purchases of Futures as an offset against the effect of
expected increases in stock or bond prices. The Funds
will not enter into Futures Contracts which are
prohibited under the CEA and will, to the extent
required by regulatory authorities, enter only into
Futures Contracts that are traded on national futures
exchanges and are standardized as to maturity date and
underlying financial instrument. The principal
interest rate Futures exchanges in the United States
are the Board of Trade of the City of Chicago and the
Chicago Mercantile Exchange. Futures exchanges and
trading are regulated under the CEA by the CFTC.
An index Futures Contract is an agreement pursuant
to which the parties agree to take or make delivery of
an amount of cash equal to the difference between the
value of the index at the close of the last trading day
of the contract and the price at which the index
Futures Contract was originally written. An interest
rate futures contract provides for the future sale by
one party and purchase by another party of a specified
amount of a specific financial instrument (e.g., debt
security) for a specified price at a designated date,
time, and place. Transaction costs are incurred when a
Futures Contract is bought or sold and margin deposits
must be maintained. A Futures Contract may be
satisfied by delivery or purchase, as the case may be,
of the instrument or by payment of the change in the
cash value of the index. More commonly, Futures
Contracts are closed out prior to delivery by entering
into an offsetting transaction in a matching Futures
Contract. Although the value of an index might be a
function of the value of certain specified securities,
no physical delivery of those securities is made. If
the offsetting purchase price is less than the original
sale price, a gain will be realized; if it is more, a
loss will be realized. Conversely, if the offsetting
sale price is more than the original purchase price, a
gain will be realized; if it is less, a loss will be
realized. The transaction costs must also be included
in these calculations. There can be no assurance,
however, that the Funds will be able to enter into an
offsetting transaction with respect to a particular
Futures Contract at a particular time. If the Funds
are not able to enter into an offsetting transaction,
the Funds will continue to be required to maintain the
margin deposits on the Futures Contract.
Margin is the amount of funds that must be
deposited by each Fund with its custodian in a
segregated account in the name of the futures
commission merchant in order to initiate Futures
trading and to maintain the Fund's open positions in
Futures Contracts. A margin deposit is intended to
ensure the Fund's performance of the Futures Contract.
The margin required for a particular Futures Contract
is set by the exchange on which the Futures Contract is
traded and may be significantly modified from time to
time by the exchange during the term of the Futures
Contract. Futures Contracts are customarily purchased
and sold on margins that may range upward from less
than 5% of the value of the Futures Contract being
traded.
If the price of an open Futures Contract changes
(by increase in the case of a sale or by decrease in
the case of a purchase) so that the loss on the Futures
Contract reaches a point at which the margin on deposit
does not satisfy margin requirements, the broker will
require an increase in the margin. However, if the
value of a position increases because of favorable
price changes in the Futures Contract so that the
margin deposit exceeds the required margin, the broker
will pay the excess to the Fund. In computing daily
net asset value, each Fund will mark to market the
current value of its open Futures Contracts. The Funds
expect to earn interest income on their margin
deposits.
Because of the low margin deposits required,
Futures trading involves an extremely high degree of
leverage. As a result, a relatively small price
movement in a Futures Contract may result in immediate
and substantial loss, as well as gain, to the investor.
For example, if at the time of purchase, 10% of the
value of the Futures Contract is deposited as margin, a
subsequent 10% decrease in the value of the Futures
Contract would result in a total loss of the margin
deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the
original margin deposit, if the Futures Contract were
closed out. Thus, a purchase or sale of a Futures
Contract may result in losses in excess of the amount
initially invested in the Futures Contract. However, a
Fund would presumably have sustained comparable losses
if, instead of the Futures Contract, it had invested in
the underlying financial instrument and sold it after
the decline.
<PAGE>
Most United States Futures exchanges limit the
amount of fluctuation permitted in Futures Contract
prices during a single trading day. The daily limit
establishes the maximum amount that the price of a
Futures Contract may vary either up or down from the
previous day's settlement price at the end of a trading
session. Once the daily limit has been reached in a
particular type of Futures Contract, no trades may be
made on that day at a price beyond that limit. The
daily limit governs only price movement during a
particular trading day and therefore does not limit
potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures Contract
prices have occasionally moved to the daily limit for
several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of
Futures positions and subjecting some Futures traders
to substantial losses.
There can be no assurance that a liquid market
will exist at a time when the Funds seek to close out a
Futures position. The Funds would continue to be
required to meet margin requirements until the position
is closed, possibly resulting in a decline in the
Funds' net asset value. In addition, many of the
contracts are relatively new instruments without a
significant trading history. As a result, there can be
no assurance that an active secondary market will
develop or continue to exist.
A public market exists in Futures Contracts
covering a number of indexes, including, but not
limited to, the Standard & Poor's 500 Index, the
Standard & Poor's 100 Index, the NASDAQ 100 Index, the
Value Line Composite Index and the New York Stock
Exchange Composite Index.
Options on Futures. The Funds may also purchase
or write put and call options on Futures Contracts and
enter into closing transactions with respect to such
options to terminate an existing position. A futures
option gives the holder the right, in return for the
premium paid, to assume a long position (call) or short
position (put) in a Futures Contract at a specified
exercise price prior to the expiration of the option.
Upon exercise of a call option, the holder acquires a
long position in the Futures Contract and the writer is
assigned the opposite short position. In the case of a
put option, the opposite is true. Prior to exercise or
expiration, a futures option may be closed out by an
offsetting purchase or sale of a futures option of the
same series.
The Funds may use options on Futures Contracts in
connection with hedging strategies. Generally, these
strategies would be employed under the same market and
market sector conditions in which the Funds use put and
call options on securities or indexes. The purchase of
put options on Futures Contracts is analogous to the
purchase of puts on securities or indexes so as to
hedge the Funds' securities holdings against the risk
of declining market prices. The writing of a call
option or the purchasing of a put option on a Futures
Contract constitutes a partial hedge against declining
prices of the securities which are deliverable upon
exercise of the Futures Contract. If the futures price
at expiration of a written call option is below the
exercise price, the Fund will retain the full amount of
the option premium which provides a partial hedge
against any decline that may have occurred in the
Fund's holdings of securities. If the futures price
when the option is exercised is above the exercise
price, however, the Fund will incur a loss, which may
be offset, in whole or in part, by the increase in the
value of the securities held by the Fund that were
being hedged. Writing a put option or purchasing a
call option on a Futures Contract serves as a partial
hedge against an increase in the value of the
securities the Fund intends to acquire.
Foreign Currency - Related Derivative Strategies -
Special Considerations. The Funds may purchase and
sell foreign currency on a spot basis, and may use
currency-related derivative instruments such as options
on foreign currencies, futures on foreign currencies,
options on futures on foreign currencies and forward
currency contracts (i.e., an obligation to purchase or
sell a specific currency at a specified future date,
which may be any fixed number of days from the contract
date agreed upon by the parties, at a price set at the
time the contract is entered into). The Funds may use
these instruments for hedging or any other lawful
purpose consistent with its investment objective,
including transaction hedging, anticipatory hedging,
cross hedging, proxy hedging, and position hedging. A
Fund's use of currency-related derivative instruments
will be directly related to the Fund's current or
anticipated portfolio securities, and the Fund may
engage in transactions in currency-related derivative
instruments as a means to protect against some or all
of the effects of adverse changes in foreign currency
exchange rates on its portfolio investments. In
general, if the currency in which a portfolio
investment is denominated appreciates against the U.S.
dollar, the dollar value of the security will increase.
Conversely, a decline in the exchange rate of the
currency would adversely affect the value of the
portfolio investment expressed in U.S. dollars.
For example, a Fund might use currency-related
derivative instruments to "lock in" a U.S. dollar price
for a portfolio investment, thereby enabling the Fund
to protect itself against a possible loss resulting
from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the
period between the date the security is purchased or
sold and the date on which payment is made or received.
The Fund also might use
<PAGE>
currency-related derivative
instruments when the Adviser or a subadviser believes
that one currency may experience a substantial movement
against another currency, including the U.S. dollar,
and it may use currency-related derivative instruments
to sell or buy the amount of the former foreign
currency, approximating the value of some or all of the
Fund's portfolio securities denominated in such foreign
currency. Alternatively, where appropriate, the Fund
may use currency-related derivative instruments to
hedge all or part of its foreign currency exposure
through the use of a basket of currencies or a proxy
currency where such currency or currencies act as an
effective proxy for other currencies. The use of this
basket hedging technique may be more efficient and
economical than using separate currency-related
derivative instruments for each currency exposure held
by a Fund. Furthermore, currency-related derivative
instruments may be used for short hedges - for example,
a Fund may sell a forward currency contract to lock in
the U.S. dollar equivalent of the proceeds from the
anticipated sale of a security denominated in a foreign
currency.
In addition, a Fund may use a currency-related
derivative instrument to shift exposure to foreign
currency fluctuations from one foreign country to
another foreign country where it's anticipated that the
foreign currency exposure purchased will appreciate
relative to the U.S. dollar and thus better protect the
Fund against the expected decline in the foreign
currency exposure sold. For example, if a Fund owns
securities denominated in a foreign currency and it is
anticipated that the currency will decline, it might
enter into a forward contract to sell an appropriate
amount of the first foreign currency, with payment to
be made in a second foreign currency that would better
protect the Fund against the decline in the first
security than would a U.S. dollar exposure. Hedging
transactions that use two foreign currencies are
sometimes referred to as "cross hedges." The effective
use of currency-related derivative instruments by a
Fund in a cross hedge is dependent upon a correlation
between price movements of the two currency instruments
and the underlying security involved, and the use of
two currencies magnifies the risk that movements in the
price of one instrument may not correlate or may
correlate unfavorably with the foreign currency being
hedged. Such a lack of correlation might occur due to
factors unrelated to the value of the currency
instruments used or investments being hedged, such as
speculative or other pressures on the markets in which
these instruments are traded.
The Funds also might seek to hedge against changes
in the value of a particular currency when no hedging
instruments on that currency are available or such
hedging instruments are more expensive than certain
other hedging instruments. In such cases, a Fund may
hedge against price movements in that currency by
entering into transactions using currency-related
derivative instruments on another foreign currency or a
basket of currencies, the values of which are believed
to have a high degree of positive correlation to the
value of the currency being hedged. The risk that
movements in the price of the hedging instrument will
not correlate perfectly with movements in the price of
the currency being hedged is magnified when this
strategy is used.
The use of currency-related derivative instruments
by a Fund involves a number of risks. The value of
currency-related derivative instruments depends on the
value of the underlying currency relative to the U.S.
dollar. Because foreign currency transactions
occurring in the interbank market might involve
substantially larger amounts than those involved in the
use of such derivative instruments, a Fund could be
disadvantaged by having to deal in the odd lot market
(generally consisting of transactions of less than $1
million) for the underlying foreign currencies at
prices that are less favorable than for round lots
(generally consisting of transactions of greater than
$1 million).
There is no systematic reporting of last sale
information for foreign currencies or any regulatory
requirement that quotations available through dealers
or other market sources be firm or revised on a timely
basis. Quotation information generally is
representative of very large transactions in the
interbank market and thus might not reflect odd-lot
transactions where rates might be less favorable. The
interbank market in foreign currencies is a global,
round-the-clock market. To the extent the U.S. options
or futures markets are closed while the markets for the
underlying currencies remain open, significant price
and rate movements might take place in the underlying
markets that cannot be reflected in the markets for the
derivative instruments until they re-open.
Settlement of transactions in currency-related
derivative instruments might be required to take place
within the country issuing the underlying currency.
Thus, a Fund might be required to accept or make
delivery of the underlying foreign currency in
accordance with any U.S. or foreign regulations
regarding the maintenance of foreign banking
arrangements by U.S. residents and might be required to
pay any fees, taxes and charges associated with such
delivery assessed in the issuing country.
When a Fund engages in a transaction in a currency-
related derivative instrument, it relies on the
counterparty to make or take delivery of the underlying
currency at the maturity of the contract or otherwise
complete the contract. In other words, a Fund will be
subject to the risk that a loss may be sustained by the
Fund as a result of the failure of the counterparty to
comply with the terms of the transaction. The
counterparty risk for exchange-traded instruments is
<PAGE>
generally less than for privately-negotiated or OTC
currency instruments, since generally a clearing
agency, which is the issuer or counterparty to each
instrument, provides a guarantee of performance. For
privately-negotiated instruments, there is no similar
clearing agency guarantee. In all transactions, a Fund
will bear the risk that the counterparty will default,
and this could result in a loss of the expected benefit
of the transaction and possibly other losses to the
Fund. The Fund will enter into transactions in
currency-related derivative instruments only with
counterparties that are reasonably believed to be
capable of performing under the contract.
Permissible foreign currency options will include
options traded primarily in the OTC market. Although
options on foreign currencies are traded primarily in
the OTC market, the Funds will normally purchase or
sell OTC options on foreign currency only when it is
believed that a liquid secondary market will exist for
a particular option at any specific time.
When required by the SEC guidelines, a Fund will
set aside permissible liquid assets in segregated
accounts or otherwise cover its potential obligations
under currency-related derivative instruments. To the
extent a Fund's assets are so set aside, they cannot be
sold while the corresponding currency position is open,
unless they are replaced with similar assets. As a
result, if a large portion of a Fund's assets are so
set aside, this could impede portfolio management or
the Fund's ability to meet redemption requests or other
current obligations.
The decision to engage in a particular currency-
related derivative instrument will reflect the
portfolio manager's judgment that the transaction will
provide value to the Fund and its shareholders and is
consistent with the Fund's objective and policies. In
making such a judgment, the benefits and risks of the
transaction will be weighed in the context of the
Fund's entire portfolio and objective. The
effectiveness of any transaction in a currency-related
derivative instrument is dependent on a variety of
factors, including the portfolio manager's skill in
analyzing and predicting currency values and upon a
correlation between price movements of the currency
instrument and the underlying security. There might be
imperfect correlation, or even no correlation, between
price movements of an instrument and price movements of
investments being hedged. Such a lack of correlation
might occur due to factors unrelated to the value of
the investments being hedged, such as speculative or
other pressures on the markets in which these
instruments are traded. In addition, a Fund's use of
currency-related derivative instruments is always
subject to the risk that the currency in question could
be devalued by the foreign government. In such a case,
any long currency positions would decline in value and
could adversely affect any hedging position maintained
by a Fund.
A Fund's dealing in currency-related derivative
instruments will generally be limited to the
transactions described above. However, the Funds
reserve the right to use currency-related derivative
instruments for different purposes and under different
circumstances. It also should be realized that use of
these instruments does not eliminate, or protect
against, price movements in a Fund's securities that
are attributable to other (i.e., non-currency related)
causes. Moreover, while the use of currency-related
derivative instruments may reduce the risk of loss due
to a decline in the value of a hedged currency, at the
same time the use of these instruments tends to limit
any potential gain which may result from an increase in
the value of that currency.
Foreign Investment Companies
Some of the countries in which the Funds may
invest may not permit direct investment by outside
investors. Investments in such countries may only be
permitted through foreign government-approved or -
authorized investment vehicles, which may include other
investment companies. Investing through such vehicles
may involve frequent or layered fees or expenses and
may also be subject to limitation under the 1940 Act.
Under the 1940 Act, a Fund may invest up to 10% of its
assets in shares of investment companies and up to 5%
of its assets in any one investment company as long as
the investment does not represent more than 3% of the
voting stock of the acquired investment company.
Depositary Receipts
The Opportunity Fund, the Growth Fund and the
Emerging Growth Fund may invest in foreign securities
by purchasing depositary receipts, including American
Depositary Receipts ("ADRs") and European Depositary
Receipts ("EDRs") or other securities convertible into
securities or issuers based in foreign countries.
These securities may not necessarily be denominated in
the same currency as the securities into which they may
be converted. Generally, ADRs, in registered form, are
denominated in U.S. dollars and are designed for use in
the U.S. securities markets, while EDRs, in bearer
form, may be denominated in other currencies and are
designed for use in European securities markets. ADRs
are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying
securities.
<PAGE>
EDRs are European receipts evidencing a
similar arrangement. For purposes of each Fund's
investment policies, ADRs and EDRs are deemed to have
the same classification as the underlying securities
they represent. Thus, an ADR or EDR representing
ownership of common stock will be treated as common
stock.
ADR facilities may be established as either
"unsponsored" or "sponsored." While ADRs issued under
these two types of facilities are in some respects
similar, there are distinctions between them relating
to the rights and obligations of ADR holders and the
practices of market participants. A depositary may
establish an unsponsored facility without participation
by (or even necessarily the acquiescence of) the issuer
of the deposited securities, although typically the
depositary requests a letter of non-objection from such
issuer prior to the establishment of the facility.
Holders of unsponsored ADRs generally bear all the
costs of such facilities. The depositary usually
charges fees upon the deposit and withdrawal of the
deposited securities, the conversion of dividends into
U.S. dollars, the disposition of non-cash distribution,
and the performance of other services. The depositary
of an unsponsored facility frequently is under no
obligation to distribute shareholder communications
received from the issuer of the deposited securities or
to pass through voting rights to ADR holders in respect
of the deposited securities. Sponsored ADR facilities
are created in generally the same manner as unsponsored
facilities, except that the issuer of the deposited
securities enters into a deposit agreement with the
depositary. The deposit agreement sets out the rights
and responsibilities of the issuer, the depositary and
the ADR holders. With sponsored facilities, the issuer
of the deposited securities generally will bear some of
the costs relating to the facility (such as dividend
payment fees of the depositary), although ADR holders
continue to bear certain other costs (such as deposit
and withdrawal fees). Under the terms of most
sponsored arrangements, depositaries agree to
distribute notices of shareholder meetings and voting
instructions, and to provide shareholder communications
and other information to the ADR holders at the request
of the issuer of the deposited securities.
Lending of Portfolio Securities
Each Fund is authorized to lend up to 33 1/3% of
its total assets to broker-dealers or institutional
investors, but only when the borrower maintains with
the Fund's custodian bank collateral either in cash or
money market instruments in an amount at least equal to
the market value of the securities loaned, plus accrued
interest and dividends, determined on a daily basis and
adjusted accordingly. However, the Funds do not
presently intend to engage in such lending. In
determining whether to lend securities to a particular
broker-dealer or institutional investor, the portfolio
manager will consider, and during the period of the
loan will monitor, all relevant facts and
circumstances, including the creditworthiness of the
borrower. The Fund will retain authority to terminate
any loans at any time. The Funds may pay reasonable
administrative and custodial fees in connection with a
loan and may pay a negotiated portion of the interest
earned on the cash or money market instruments held as
collateral to the borrower or placing broker. The
Funds will receive reasonable interest on the loan or a
flat fee from the borrower and amounts equivalent to
any dividends, interest or other distributions on the
securities loaned. The Funds will retain record
ownership of loaned securities to exercise beneficial
rights, such as voting and subscription rights and
rights to dividends, interest or other distributions,
when retaining such rights is considered to be in a
Fund's interest.
Repurchase Agreements
The Funds may enter into repurchase agreements
with certain banks or non-bank dealers. In a
repurchase agreement, a Fund buys a security at one
price, and at the time of sale, the seller agrees to
repurchase the obligation at a mutually agreed upon
time and price (usually within seven days). The
repurchase agreement, thereby, determines the yield
during the purchaser's holding period, while the
seller's obligation to repurchase is secured by the
value of the underlying security. The Adviser or a
subadviser will monitor, on an ongoing basis, the value
of the underlying securities to ensure that the value
always equals or exceeds the repurchase price plus
accrued interest. Repurchase agreements could involve
certain risks in the event of a default or insolvency
of the other party to the agreement, including possible
delays or restrictions upon the Fund's ability to
dispose of the underlying securities. Although no
definitive creditworthiness criteria are used, the
portfolio manager reviews the creditworthiness of the
banks and non-bank dealers with which the Fund enters
into repurchase agreements to evaluate those risks.
The Funds may, under certain circumstances, deem
repurchase agreements collateralized by U.S. government
securities to be investments in U.S. government
securities.
<PAGE>
Directors and Officers
Under the laws of the State of Maryland, the Board
of Directors of the Company is responsible for managing
the Company's business and affairs. The Board of
Directors also oversees duties required by applicable
state and federal law.
The directors and officers of the Company,
together with information as to their principal
business occupations during the last five years, and
other information, are shown below. Each director who
is deemed an "interested person," as defined in the
1940 Act, is indicated by an asterisk.
*William D. Forsyth III, Co-President, Treasurer,
Assistant Secretary and a Director of the Company.
Mr. Forsyth, age 35, received his B.S. in Finance
from the University of Illinois in 1986 and his
M.B.A. from the University of Chicago in 1988.
Mr. Forsyth has served as Co-President, Treasurer,
Assistant Secretary and a Director of the Adviser
since May 1996. From July 1993 until the present,
Mr. Forsyth has also served as a Partner of
Frontier Partners, Inc., a consulting/marketing
firm. From April 1987 until June 1993, Mr.
Forsyth served as a Partner of Brinson Partners,
Inc., an investment advisor, and from June 1986
until April 1987, he served as a product marketing
representative of Harris Trust & Savings Bank.
Mr. Forsyth received his CFA designation in 1991.
*Thomas J. Holmberg, Jr., Co-President, Secretary,
Assistant Treasurer and a Director of the Company.
Mr. Holmberg, age 40, received his B.A. in
Economics from the College of William and Mary in
1980 and his M.P.P.M. from Yale University in
1987. Mr. Holmberg has served as Co-President,
Secretary, Assistant Treasurer and a Director of
the Adviser since May 1996. From July 1993 until
the present, Mr. Holmberg has also served as a
Partner of Frontier Partners, Inc., a
consulting/marketing firm. From February 1989
until July 1993, Mr. Holmberg served as a Partner
of, and Account Manager for, Brinson Partners,
Inc., an investment advisor. From July 1987 until
January 1989, Mr. Holmberg served as an associate
in the fixed income sales area of Goldman, Sachs &
Co., and from May 1986 until August 1986, he
served as a summer associate in the corporation
finance area of Lehman Brothers. Mr. Holmberg
received his CFA designation in 1991.
David L. Heald, a Director of the Company.
Mr. Heald, age 55, received his B.A. in English
from Denison University in 1966 and his J.D. from
Vanderbilt University School of Law in 1969. Mr.
Heald has been a principal of Consulting
Fiduciaries, Inc. ("CFI"), a registered investment
adviser, since August of 1994. CFI provides
professional, independent, fiduciary decision
making, consultation and alternative dispute
resolution services to ERISA plans, plan sponsors
and investment managers. Between April 1994 and
August 1994, Mr. Heald engaged in the private
practice of law. From August 1992 until April
1994, Mr. Heald was a managing director and the
chief administrative officer of Calamos Asset
Management, Inc., a registered investment adviser
specializing in convertible securities, and he
served as an officer and director of CFS
Investment Trust, a registered investment company
comprised of four series. From January 1990 until
August 1992, Mr. Heald was a partner in the
Chicago based law firm of Gardner, Carton &
Douglas.
The address of Mr. Forsyth and Mr. Holmberg is
Frontegra Asset Management, Inc., 400 Skokie Blvd.,
Suite 500, Northbrook, Illinois 60062. Mr. Heald's
address is 400 Skokie Blvd., Suite 260, Northbrook,
Illinois 60062.
As of December 1, 1999, officers and directors of
the Company owned 157 shares of common stock of the
Total Return Bond Fund (0.01%), 4,863 shares of common
stock of the Opportunity Fund (0.98%), 11,194 shares of
common stock of the Growth Fund (1.35%) and no shares
of common stock of the Emerging Growth Fund. Directors
and officers of the Company who are also officers,
directors, employees, or shareholders of the Adviser do
not receive any remuneration from the Funds for serving
as directors or officers.
<PAGE>
The following table provides information relating
to compensation paid to directors of the Company for
their services as such for the eight month fiscal
period ended June 30, 1999(1):
Name Cash Compensation(2) Other Compensation Total
David L. Heald $6,000 $ 0 $6,000
All directors as
a group (3 persons) $6,000 $ 0 $6,000
______________
(1) Effective June 30, 1999, the fiscal year end of
the Company was changed from October 31 to June 30 by
unanimous consent of the directors of the Company.
(2) When the Company's assets equal or exceed
$100,000,000, the disinterested director will receive
$10,000 for that fiscal year. When the Company's
assets exceed $500,000,000, the disinterested
director will receive $20,000 for that fiscal year.
The Board intends to hold four meetings during fiscal
2000. The Funds may have assets exceeding
$100,000,000 during such time. The disinterested
director may invest his compensation in shares of the
Funds.
Principal Shareholders
As of December 1, 1999, the following persons
owned of record or are known by the Company to own of
record or beneficially 5% or more of the outstanding
shares of each Fund:
Name and Address Fund No. Shares Percentage
Union Planters Bank, Trustee Total Return Bond Fund 575,692.547 34.270%
BGO Southern Illinois Hospital
1301 Walnut Street
Post Office Box 1389
Murphysboro, Illinois 62966-1389
Jerry Branson and Total Return Bond Fund 394,215.741 23.467%
Paul Hopkins, Trustees
IBEW Local 461 Pension Fund
1661 Landmark Road
Aurora, Illinois 60506
Walt Loukota and John Negro, Total Return Bond Fund 370,800.416 22.073%
Trustees
IBEW Local 405
Retirement Savings Fund
150 1st Avenue, N.E.,
Suite 375
Cedar Rapids, Iowa 52404
Bankers Trust Company, Total Return Bond Fund 202,547.552 12.057%
Trustee
F/B/O Culver Educational
Foundation
Mike Bloebaum
MS 7200
648 Grassmere Park Road
Nashville, Tennessee 37211
IBEW Local 117 Pension Fund Opportunity Fund 189,709.736 38.397%
c/o Ed Otstott OBA Midwest Ltd.
8160 S. Cass Avenue
Darien, Illinois 60561-5013
Culver Educational Foundation Opportunity Fund 136,591.566 27.646%
1300 Academy Road
Post Office Box 156
Culver, Indiana 46511-1234
<PAGE>
Board of Trustees Opportunity Fund 53,365.027 10.801%
UA Local 125 Retirement
Savings Fund
Eastern Iowa Fringe
Benefit Funds
c/o Jennifer Sager
205 50th Avenue SW
Cedar Rapids, Iowa 52404-4912
IBEW Local 9 and Line Opportunity Fund 46,311.148 9.373%
Clearance
Contractors Pension Fund
c/o James Gallery
OBA Midwest Ltd.
8160 S. Cass Avenue
Darien, Illinois 60561-5013
G. Segal, H. Silverstone Opportunity Fund 40,407.569 8.178%
and B. Schneidewind,
Trustees
Euromarkets Designs Inc.
Profit Sharing Trust
725 Landwehr Road
Northbrook, Illinois 60062-2349
Madison Psychiatric Growth Fund 337,067.939 40.556%
Association
P/S Plan Balanced
U/A/D Aug. 10 99
5534 Medical Cir.
Madison, Wisconsin 53719-1202
Mitra & Co. Growth Fund 89,383.951 10.755%
1000 North Water Street
Milwaukee, Wisconsin 53202-6648
Madison Psychiatric Growth Fund 60,828.221 7.319%
Association
P/S Equity
U/A/D Aug. 10 99
5534 Medical Cir.
Madison, Wisconsin 53719-1202
As of December 1, 1999, no person owned a
controlling interest (i.e., more than 25%) in the
Company. However, Union Planters Bank, Trustee for
Southern Illinois Hospital, beneficially owned a
controlling interest in the Total Return Bond Fund,
IBEW Local 117 Pension Fund and the Culver Educational
Foundation each beneficially owned a controlling
interest in the Opportunity Fund and the Madison
Psychiatric Association beneficially owned a
controlling interest in the Growth Fund. Shareholders
with a controlling interest could affect the outcome of
proxy voting or the direction of management of the
Company.
Investment Adviser
Frontegra Asset Management, Inc. (the "Adviser")
is the investment adviser to the Funds. Mr. William D.
Forsyth III and Mr. Thomas J. Holmberg, Jr. each own
50% of the Adviser. Mr. Forsyth and Mr. Holmberg are
co-presidents of the Company. A brief description of
the Funds' investment advisory agreements is set forth
in each Prospectus under "Fund Management."
The advisory agreement between the Adviser and the
Funds is dated October 30, 1996, while the amendment to
add the Growth Fund is dated as of February 1, 1998 and
the amendment to add the Emerging Growth Fund is dated
as of December 31, 1999 (the "Advisory Agreement").
The Advisory Agreement has an initial term of two years
(with an October 30, 1996, a February 1, 1998 or a
December 31, 1999 starting point, as the case may be)
and is required to be approved annually by the Board of
Directors of the Company or by vote of a majority of
each of the Fund's
<PAGE>
outstanding voting securities (as defined in the 1940 Act).
Each annual renewal must also be approved by the separate
vote of the Company's disinterested director, cast in person
at a meeting called for the purpose of voting on such approval.
The Advisory Agreement as it relates to the Total Return
Bond, Opportunity and Growth Funds was most recently
approved by the vote of the Company's disinterested
director on August 30, 1999. The Advisory Agreement as
it relates to the Total Return Bond and Opportunity
Funds was most recently approved by the
shareholders of the Total Return Bond and the
Opportunity Funds on July 28, 1999. The amendment to
the Advisory Agreement to add the Growth Fund was
approved by the disinterested director on December 15,
1997. The amendment to the Advisory Agreement to add
the Emerging Growth Fund was approved by the
disinterested director on November 16, 1999. The
Advisory Agreement is terminable without penalty, on 60
days' written notice by the Board of Directors of the
Company, by vote of a majority of each of the Fund's
outstanding voting securities or by the Adviser, and
will terminate automatically in the event of its
assignment.
Pursuant to an expense cap agreement dated
February 26, 1999, as amended August 2, 1999, between
the Adviser and the Total Return Bond, Opportunity and
Growth Funds, the Adviser agreed to waive its
management fee and/or reimburse each Fund's operating
expenses to the extent necessary to ensure that the
Total Return Bond Fund's total operating expenses do
not exceed 0.425% of that Fund's average daily net
assets, the Opportunity Fund's total operating expenses
do not exceed 0.90% of that Fund's average daily net
assets and the Growth Fund's total operating expenses
do not exceed 0.80% of that Fund's average daily net
assets. The expense cap agreement will terminate on
December 31, 2000 unless extended by the Adviser and
the Total Return Bond, Opportunity and Growth Funds.
Pursuant to an expense cap agreement dated
December 31, 1999 between the Adviser and the Emerging
Growth Fund, the Advisor has agreed to waive its
management fee and/or reimburse the Emerging Growth
Fund's operating expenses to the extent necessary to
ensure that the Emerging Growth Fund's total operating
expenses do not exceed 0.90% of that Fund's average
daily net assets. The expense cap agreement will
terminate on December 31, 2000 unless extended by the
Adviser and the Emerging Growth Fund.
Under the terms of the Advisory Agreement, the
Adviser supervises the management of the Funds'
investments and business affairs, subject to the
supervision of the Company's Board of Directors. At
its expense, the Adviser provides office space and all
necessary office facilities, equipment and personnel
for servicing the investments of the Funds. As
compensation for its services, the Opportunity Fund
pays to the Adviser a monthly advisory fee at the
annual rate of 0.65% of the average daily net asset
value of the Fund, the Total Return Bond Fund pays to
the Adviser a monthly advisory fee at the annual rate
of 0.40% of the average daily net asset value of the
Fund, the Growth Fund pays to the Adviser a monthly
advisory fee at the annual rate of 0.80% of the average
daily net asset value of the Fund and the Emerging
Growth Fund pays to the Adviser a monthly advisory fee
at the annual rate of 0.90% of the average daily net
asset value of the Fund. For the fiscal period ended
October 31, 1997, the fiscal year ended October 31,
1998 and the fiscal period ended June 30, 1999, the
Adviser agreed to waive its management fee and/or
reimburse the operating expenses of the Total Return
Bond Fund and the Opportunity Fund to the extent
necessary to ensure that the total operating expenses
of the Total Return Bond Fund and the Opportunity Fund
did not exceed 0.50% and 0.90%, respectively, of the
Fund's average daily net assets. For the fiscal
periods ended October 31, 1998 and June 30, 1999, the
Adviser agreed to waive its management fee and/or
reimburse the operating expenses of the Growth Fund to
the extent necessary to ensure that the total operating
expenses of the Growth Fund did not exceed 0.80% of the
Fund's average daily net assets. The expense cap
agreement provides that the Adviser will continue this
waiver/ reimbursement policy with respect to the Total
Return Bond, Opportunity and Growth Funds until
December 31, 2000. For the fiscal period from November
25, 1996 to October 31, 1997, the fiscal year ended
October 31, 1998 and the eight month fiscal period
ended June 30, 1999, the Adviser received $0, $55,268
and $26,184 from the Total Return Bond Fund,
respectively, for its services under the Advisory
Agreement. For the fiscal period from July 31, 1997 to
October 31, 1997, the fiscal year ended October 31,
1998 and the eight month fiscal period ended June 30,
1999, the Adviser received $0 from the Opportunity Fund
for its services under the Advisory Agreement for each
period. The amounts received by the Adviser for such
services would have been $73,665, $186,149 and $128,483
for the Total Return Bond Fund, respectively, and
$1,796, $47,155 and $54,105 for the Opportunity Fund,
respectively, had the Adviser not waived all or a portion
of its fees for the fiscal period ended October 31, 1997,
the fiscal year ended October 31, 1998 and the fiscal
period ended June 30, 1999. For the fiscal period from
March 18, 1998 to October 31, 1998 and the eight month
fiscal period ended June 30, 1999, the Adviser received
$0 from the Growth Fund for its services under the
Advisory Agreement for each period. The amounts
received by the Advisor for such services for the
Growth Fund would have been $7,231 and $18,609,
respectively, had the Adviser not waived all of its
fees during the fiscal periods ended October 31,
1998 and June 30, 1999. The organizational expenses of
the Total Return Bond Fund and the Opportunity Fund
were advanced by the Adviser and will be reimbursed by
the Funds over a period of not more than 60 months.
The organizational expenses were approximately $38,000
for the Total Return Bond Fund and $40,000 for the
Opportunity Fund.
<PAGE>
The Advisory Agreement requires the Adviser to
reimburse the Funds in the event that the expenses and
charges payable by the Funds in any fiscal year,
including the advisory fee but excluding taxes,
interest, brokerage commissions, and similar fees,
exceed those set forth in any statutory or regulatory
formula, if any, prescribed by any state in which
shares of the Funds are registered. Such excess is
determined by valuations made as of the close of each
business day of the year. Reimbursement of expenses in
excess of the applicable limitation will be made on a
monthly basis and will be paid to the Funds by
reduction of the Adviser's fee, subject to later
adjustment, month by month, for the remainder of the
Funds' fiscal year.
The Adviser has entered into an agreement with
Reams Asset Management Company, LLC ("Reams") under
which Reams serves as the subadviser of the Total
Return Bond Fund and the Opportunity Fund and, subject
to the Adviser's supervision, manages the portfolio
assets of the Total Return Bond Fund and the
Opportunity Fund. (Reams operated as a corporation
(Reams Asset Management Company, Inc.) from its
founding in 1981 until March 31, 1994, when it became
an Indiana limited liability company (LLC), with no
change in principals, employees or clients.) Under
this agreement, and with certain exceptions described
herein, Reams is compensated by the Adviser for its
investment advisory services at the annual rate of
0.45% of the Opportunity Fund's average daily net
assets and 0.15% of the Total Return Bond Fund's
average daily net assets. In recognition of the
economies of scale that will be gained by such Funds
and the Adviser, and with the exception of defined
contribution or 401(k) investments in such Funds, for
initial investments of over $15 million the Adviser
will compensate Reams an extra 0.10% of the average
daily net assets of such investments. Frontier
Partners, Inc., an affiliate of the Adviser, acts as a
third party solicitor on behalf of Reams and has a 2.2%
nonvoting ownership interest in Reams. Mr. Mark M.
Egan owns units representing a majority of the voting
rights of Reams.
The Adviser has also entered into an agreement
with Northern Capital Management Incorporated
("Northern") under which Northern serves as the
subadviser of the Growth Fund and, subject to the
Adviser's supervision, manages the Growth Fund's
portfolio assets. Under this agreement, Northern is
compensated for its investment advisory services at the
annual rate of (i) 0.25% of the Growth Fund's average
daily net assets prior to the first date when the
Growth Fund's average daily net assets exceed $200
million and (ii) 0.30% of the Growth Fund's average
daily net assets on and after the first date when the
Fund's average daily net assets exceed $200 million.
Frontier Partners, Inc., an affiliate of the Adviser,
acts as a third party solicitor on behalf of Northern.
United Asset Management, an investment adviser holding
company, owns 100% of the voting stock of Northern.
The Adviser has also entered into an agreement
with Berents & Hess Capital Management, Inc. ("B&H")
under which B&H acts as the subadviser of the Emerging
Growth Fund and, subject to the Adviser's supervision,
manages the Emerging Growth Fund's portfolio assets.
Under this agreement, B&H is compensated by the Adviser
for its investment advisory services at the annual rate
of 0.45% of the Emerging Growth Fund's average daily
net assets. Mr. Charles N. Berents, Jr. owns 46% of
the voting stock of B&H and Mr. Herbert P. Hess owns
54% of the voting stock of B&H.
Fund Transactions and Brokerage
Reams, Northern and B&H (the "Subadvisers") are
responsible for decisions to buy and sell securities
for the Funds and for the placement of the Funds'
securities business, the negotiation of the commissions
to be paid on such transactions and the allocation of
portfolio brokerage and principal business. The
Subadvisers seek the best execution at the best
security price available with respect to each
transaction, in light of the overall quality of
brokerage and research services provided to the
Subadvisers or the Funds. The best price to the Funds
means the best net price without regard to the mix
between purchase or sale price and commission, if any.
Purchases may be made from underwriters, dealers and,
on occasion, the issuers. Commissions will be paid on
the Funds' futures and options transactions. The
purchase price of portfolio securities purchased from
an underwriter or dealer may include underwriting
commissions and dealer spreads. The Funds may pay mark-
ups on principal transactions. In selecting broker-
dealers and in negotiating commissions, the Subadvisers
consider the firm's reliability, the quality of its
execution services on a continuing basis and its
financial condition. Brokerage will not be allocated
based on the sale of a Fund's shares.
The Total Return Bond Fund did not pay any
brokerage commissions for the fiscal period ended
October 31, 1997, the fiscal year ended October 31,
1998 and the fiscal period ended June 30, 1999. The
Opportunity Fund paid $2,996, $27,546 and $25,449 in
brokerage commissions for the fiscal period ended
October 31, 1997, the fiscal year
<PAGE>
ended October 31, 1998 and the fiscal period ended
June 30, 1999, respectively. The Growth Fund paid $4,350
and $8,210 in brokerage commissions for the fiscal periods
ended October 31, 1998 and June 30, 1999, respectively. The
Emerging Growth Fund did not commence operations until
the date of this SAI.
Section 28(e) of the Securities Exchange Act of
1934 ("Section 28(e)") permits an investment adviser,
under certain circumstances, to cause an account to pay
a broker or dealer who supplies brokerage and research
services a commission for effecting a transaction in
excess of the amount of commission another broker or
dealer would have charged for effecting the
transaction. Brokerage and research services include
(a) furnishing advice as to the value of securities,
the advisability of investing, purchasing or selling
securities and the availability of securities or
purchasers or sellers of securities; (b) furnishing
analyses and reports concerning issuers, industries,
securities, economic factors and trends, portfolio
strategy and the performance of accounts; and (c)
effecting securities transactions and performing
functions incidental thereto (such as clearance,
settlement, and custody).
In selecting brokers, the Subadvisers consider
investment and market information and other research,
such as economic, securities and performance
measurement research provided by such brokers and the
quality and reliability of brokerage services,
including execution capability, performance and
financial responsibility. Accordingly, the commissions
charged by any such broker may be greater than the
amount another firm might charge if the Subadvisers
determine in good faith that the amount of such
commissions is reasonable in relation to the value of
the research information and brokerage services
provided by such broker to the Funds. The Subadvisers
believe that the research information received in this
manner provides the Funds with benefits by
supplementing the research otherwise available to the
Funds. The Subadvisory Agreements provide that such
higher commissions will not be paid by the Funds unless
(a) the Subadvisers determine in good faith that the
amount is reasonable in relation to the services in
terms of the particular transaction or in terms of the
Subadvisers' overall responsibilities with respect to
the accounts as to which they exercise investment
discretion; (b) such payment is made in compliance with
the provisions of Section 28(e), other applicable state
and federal laws, and the Subadvisory Agreements; and
(c) in the opinion of the Subadvisers, the total
commissions paid by the Funds will be reasonable in
relation to the benefits to the Funds over the long
term. The investment advisory fees paid by the Funds
under the Advisory Agreement are not reduced as a
result of the Subadvisers' receipt of research
services.
The Subadvisers place portfolio transactions for
other advisory accounts managed by the Subadvisers.
Research services furnished by firms through which the
Funds effect their securities transactions may be used
by the Subadvisers in servicing all of its accounts;
not all of such services may be used by the Subadvisers
in connection with the Funds. The Subadvisers believe
it is not possible to measure separately the benefits
from research services to each of the accounts
(including the Funds) managed by them. Because the
volume and nature of the trading activities of the
accounts are not uniform, the amount of commissions in
excess of those charged by another broker paid by each
account for brokerage and research services will vary.
However, the Subadvisers believe such costs to the
Funds will not be disproportionate to the benefits
received by the Funds on a continuing basis. The
Subadvisers seek to allocate portfolio transactions
equitably whenever concurrent decisions are made to
purchase or sell securities by the Funds and another
advisory account. In some cases, this procedure could
have an adverse effect on the price or the amount of
securities available to the Funds. In making such
allocations between the Fund and other advisory
accounts, the main factors considered by the
Subadvisers are the respective investment objectives,
the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for
investment and the size of investment commitments
generally held.
Custodian
As custodian of the Funds' assets, Firstar Bank,
N.A., 615 E. Michigan Street, Milwaukee, Wisconsin
53202, has custody of all securities and cash of each
Fund, delivers and receives payment for securities
sold, receives and pays for securities purchased,
collects income from investments and performs other
duties, all as directed by the officers of the Company.
Transfer Agent and Dividend Disbursing Agent
Firstar Mutual Fund Services, LLC, 615 E. Michigan
Street, Third Floor, Milwaukee, Wisconsin 53202, an
affiliate of Firstar Bank, N.A., acts as transfer agent
and dividend-disbursing agent for the Funds (the
"Transfer Agent"). The Transfer Agent is compensated
based on an annual fee per open account of $14.00,
subject to minimum
<PAGE>
annual fees of $8,000 per Fund until the fund exceeds 150
accounts, at which time the minimum annual fee will increase
to $12,000 per Fund. There is a fee of $10,000 per year for
each additional fund or class.
Administrator and Fund Accountant
The Transfer Agent also provides administrative
and fund accounting services to the Funds pursuant to
separate Administration and Fund Accounting Agreements.
Under these Agreements, the Transfer Agent calculates
the daily net asset value of each Fund and provides
administrative services (which include clerical,
compliance and regulatory services such as filing all
required federal income and excise tax returns and
state property tax returns, assisting with regulatory
filings, preparing financial statements and monitoring
expense accruals). For the foregoing services, the
Transfer Agent receives from the Fund, effective
September 1, 1999, a fee, computed daily and payable
monthly based on each Fund's average net assets at the
annual rate of 0.14 of 1% on the first $50 million,
0.01 of 1% on the next $450 million and 0.03 of 1% on
the average net assets in excess of $500 million,
subject to an annual minimum of $48,000, plus out-of-
pocket expenses. For the fiscal period ended October
31, 1997, the fiscal year ended October 31, 1998 and
the fiscal period ended June 30, 1999, Sunstone
Financial Group, Inc. ("Sunstone"), the Fund's prior
administrator, received $74,588, $174,170 and $132,415,
respectively, under an Administration and Fund
Accounting Agreement between the Fund and Sunstone.
Shareholder Meetings
Maryland law permits registered investment
companies, such as the Company, to operate without an
annual meeting of shareholders under specified
circumstances if an annual meeting is not required by
the 1940 Act. The Company has adopted the appropriate
provisions in its Bylaws and may, at its discretion,
not hold an annual meeting in any year in which the
election of directors is not required to be acted on by
shareholders under the 1940 Act.
The Company's Bylaws also contain procedures for
the removal of directors by shareholders of the
Company. At any meeting of shareholders, duly called
and at which a quorum is present, the shareholders may,
by the affirmative vote of the holders of a majority of
the votes entitled to be cast thereon, remove any
director or directors from office and may elect a
successor or successors to fill any resulting vacancies
for the unexpired terms of removed directors.
Purchase and Pricing of Shares
Purchase of Shares
Shares of each Fund are sold on a continuous basis
at each Fund's net asset value. The net asset value of
each Fund and is determined as of the close of trading
on the New York Stock Exchange ("NYSE") (generally 4:00
p.m., Eastern Time) on each day the NYSE is open. The
price at which your purchase will be effected is based
on the Fund's net asset value next determined after
each Fund receives your request in proper form. A
confirmation indicating the details of the transaction
will be sent to you promptly. Shares are credited to
your account, but certificates are not issued.
However, you will have full shareholder rights.
The minimum initial investment required by each
Fund is $100,000. Subsequent investments may be made
by mail or wire with a minimum subsequent investment of
$1,000. Each Fund reserves the right to change or
waive these minimums at any time. Shareholders will be
given at least 30 days' notice of any increase in the
minimum dollar amount of purchases.
Offering Price
As set forth in each Prospectus under "Valuation
of Fund Shares," each Fund's net asset value per share
is determined as of the close of trading on the NYSE
(generally 4:00 p.m., Eastern Time) on each day the
NYSE is open for business. Each Fund is not required
to calculate its net asset value on days during which
that Fund receives no orders to purchase shares and no
shares are tendered for redemption. Net asset value is
calculated by taking the market value of the Fund's
total assets, including interest or dividends accrued,
but not yet collected, less all liabilities, and
dividing by the total number of shares outstanding.
The result, rounded to the nearest cent, is the net
asset value per share. In determining net asset value,
expenses are accrued and applied daily and securities
and other assets for which market quotations are
available are valued at market value. Debt securities
are valued by a pricing service that utilizes
electronic data processing techniques to determine
values for normal institutional-sized trading units of
debt securities
<PAGE>
without regard to the existence of sale
or bid prices when such values are believed by Reams to
reflect more accurately the fair market value of such
securities; otherwise, actual sale or bid prices are
used. Common stocks and other equity-type securities
are valued at the last trade price on the national
securities exchange or Nasdaq on which such securities
are primarily traded; however, securities traded on a
national securities exchange or Nasdaq for which there
were no transactions on a given day or securities not
listed on a national securities exchange or Nasdaq are
valued at the most recent bid prices. Other exchange-
traded securities (generally foreign securities) will
be valued based on market quotations.
Taxation of the Fund
Each Fund intends to qualify annually as a
"regulated investment company" under Subchapter M of
the Code, and if so qualified will not be liable for
federal income taxes to the extent earnings are
distributed to shareholders on a timely basis. As a
result of being a regulated investment company, net
capital gain that the Funds distribute to shareholders
will retain their original capital gain character in
the shareholders' individual tax returns. In the event
a Fund fails to qualify as a "regulated investment
company," it will be treated as a regular corporation
for federal income tax purposes. Accordingly, the
disqualifying Fund would be subject to federal income
taxes and any distributions that it makes would be
taxable and non-deductible by the Fund. This would
increase the cost of investing in such Fund for
shareholders and would make it more economical for
shareholders to invest directly in securities held by
the Fund instead of investing indirectly in such
securities through the Fund.
The Funds will distribute to shareholders at least
annually, any net capital gains which have been
recognized for federal income tax purposes (including
unrealized gains at the end of the Fund's fiscal year).
Such distributions will be combined with distributions
of capital gains and shareholders will be advised of
the nature of the payments.
Each Fund will be treated as a separate entity for
federal income tax purposes since the Tax Reform Act of
1986 requires that all portfolios of a series fund be
treated as separate taxpayers.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on an investor. There may be other federal,
state or local tax considerations applicable to a
particular investor. Investors are urged to consult
their own tax advisors.
Performance Information
The Funds' historical performance or return may be
shown in the form of various performance figures,
including average annual total return, total return and
cumulative total return. The Funds' performance
figures are based upon historical results and are not
necessarily representative of future performance.
Factors affecting the Funds' performance include
general market conditions, operating expenses and
investment management.
Total Return
Average annual total return and total return
figures measure both the net investment income
generated by, and the effect of any realized and
unrealized appreciation or depreciation of, the
underlying investments in each Fund over a specified
period of time, assuming the reinvestment of all
dividends and distributions. Average annual total
return figures are annualized and therefore represent
the average annual percentage change over the specified
period. Total return figures are not annualized and
therefore represent the aggregate percentage or dollar
value change over the period.
The average annual total return of each Fund is
computed by finding the average annual compounded rates
of return over the periods that would equate the
initial amount invested to the ending redeemable value,
according to the following formula:
<PAGE>
P(1+T)n = ERV
P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the stated
periods at the end of the stated periods.
Performance for a specific period is calculated by
first taking an investment (assumed to be $1,000)
("initial investment") in a Fund's shares on the first
day of the period and computing the "ending value" of
that investment at the end of the period. The total
return percentage is then determined by subtracting the
initial investment from the ending value and dividing
the remainder by the initial investment and expressing
the result as a percentage. The calculation assumes
that all income and capital gains dividends paid by a
Fund have been reinvested at the net asset value of the
Fund on the reinvestment dates during the period.
Total return may also be shown as the increased dollar
value of the hypothetical investment over the period.
Cumulative total return represents the simple
change in value of an investment over a stated period
and may be quoted as a percentage or as a dollar
amount. Total returns may be broken down into their
components of income and capital (including capital
gains and changes in share price) in order to
illustrate the relationship between these factors and
their contributions to total return.
The total return for the Total Return Bond Fund,
the Opportunity Fund and the Growth Fund for the eight
month fiscal period ended June 30, 1999 was 0.32%,
15.49% and 28.58%, respectively. The Emerging Growth
Fund was not available for investment until the date of
this SAI.
Yield
The Total Return Bond Fund's yield is computed in
accordance with a standardized method prescribed by
rules of the SEC. Under that method, the current yield
quotation for the Fund is based on a one month or
30-day period. The yield is computed by dividing the
net investment income per share earned during the
30-day or one month period by the maximum offering
price per share on the last day of the period,
according to the following formula:
Yield = 2[(a-b/cd+1)6-1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on
the last day of the period.
The 30-day yield for the Total Return Bond Fund
for the period ended June 30, 1999 was 6.31%. The
30-day yield for the Total Return Bond Fund after
waivers and reimbursements for the period ended June
30, 1999 was 6.59%.
Volatility
Occasionally statistics may be used to specify a
Fund's volatility or risk. Measures of volatility or
risk are generally used to compare a Fund's net asset
value or performance relative to a market index. One
measure of volatility is beta. Beta is the volatility
of a fund relative to the total market as represented
by the S&P 500. A beta of more than 1.00 indicates
volatility greater than the market, and a beta of less
than 1.00 indicates volatility less than the market.
Another measure of volatility or risk is standard
deviation. Standard deviation is used to measure
variability of net asset value or total return around
an average, over a specified period of time. The
premise is that greater volatility connotes greater
risk undertaken in achieving performance.
Comparisons
From time to time, in marketing and other Fund
literature, the Funds' performance may be compared to
the performance of other mutual funds in general or to
the performance of particular types of mutual funds
with similar investment goals, as tracked by
independent organizations. Among these organizations,
Lipper Analytical Services, Inc. ("Lipper"), a widely
used independent research firm which ranks mutual funds
by overall performance, investment
<PAGE>
objectives, and assets, may be cited. Lipper performance
figures are based on changes in net asset value, with all
income and capital gains dividends reinvested. Such
calculations do not include the effect of any sales
charges imposed by other funds. The Funds will be
compared to Lipper's appropriate fund category, that
is, by fund objective and portfolio holdings.
The Funds' performance may also be compared to the
performance of other mutual funds by Morningstar, Inc.,
which ranks funds on the basis of historical risk and
total return. Morningstar's rankings range from five
stars (highest) to one star (lowest) and represent
Morningstar's assessment of the historical risk level
and total return of a fund as a weighted average for 3,
5 and 10 year periods. Rankings are not absolute or
necessarily predictive of future performance.
Evaluations of Fund performance made by
independent sources may also be used in advertisements
concerning the Funds, including reprints of or
selections from, editorials or articles about the
Funds. Sources for Fund performance and articles about
the Funds may include publications such as Money,
Forbes, Kiplinger's, Financial World, Business Week,
U.S. News and World Report, the Wall Street Journal,
Barron's and a variety of investment newsletters.
The Funds may compare their performance to a wide
variety of indices and measures of inflation including
the S&P 500, the NASDAQ Over-the-Counter Composite
Index, the Russell 2500 Index, the Russell 1000 Growth
Index and the Lehman Aggregate Bond Index. There are
differences and similarities between the investments
that the Funds may purchase for their respective
portfolios and the investments measured by these
indices.
Investors may want to compare the Funds'
performance to that of certificates of deposit offered
by banks and other depositary institutions.
Certificates of deposit may offer fixed or variable
interest rates and principal is guaranteed and may be
insured. Withdrawal of the deposits prior to maturity
normally will be subject to a penalty. Rates offered
by banks and other depositary institutions are subject
to change at any time specified by the issuing
institution. Investors may also want to compare
performance of the Funds to that of money market funds.
Money market fund yields will fluctuate and shares are
not insured, but share values usually remain stable.
Independent Auditors
Ernst & Young LLP, Sears Tower, 233 South Wacker
Drive, Chicago, IL 60606-6301, have been selected as
the independent auditors for the Funds. Ernst & Young
will audit and report on the Funds' annual financial
statements, review certain regulatory reports and the
Funds' federal income tax returns, and perform other
professional, accounting auditing, tax and advisory
services when engaged to do so by the Funds.
Financial Statements
The following audited financial statements of the
Total Return Bond Fund, the Opportunity Fund and the
Growth Fund are incorporated herein by reference to
each Fund's Annual Report to Shareholders as filed with
the SEC on August 27, 1999:
Total Return Bond Fund
(a) Schedule of Investments as of June 30, 1999.
(b) Statement of Assets and Liabilities as of June 30, 1999.
(c) Statement of Operations for the period from November 1, 1998
to June 30, 1999.
(d) Statement of Changes in Net Assets for the period from
November 1, 1998 to June 30, 1999 and the year ended
October 31, 1998.
(e) Financial Highlights for the period from November 1, 1998
to June 30, 1999 and the year ended October 31, 1998.
(f) Notes to Financial Statements.
<PAGE>
(g) Report of Independent Auditors dated July 21, 1999.
Opportunity Fund
(a) Schedule of Investments as of June 30, 1999.
(b) Statement of Assets and Liabilities as of June 30, 1999.
(c) Statement of Operations for the period from
November 1, 1998 to June 30, 1999.
(d) Statement of Changes in Net Assets for the period from
November 1, 1998 to June 30, 1999 and the year ended
October 31, 1998.
(e) Financial Highlights for the period from
November 1, 1998 to June 30, 1999 and the year
ended October 31, 1998.
(f) Notes to Financial Statements.
(g) Report of Independent Auditors dated July 21, 1999.
Growth Fund
(a) Schedule of Investments as of June 30, 1999.
(b) Statement of Assets and Liabilities as of June 30, 1999.
(c) Statement of Operations for the period
from November 1, 1998 to June 30, 1999.
(d) Statement of Changes in Net Assets for the
period from November 1, 1998 to June 30, 1999
and the period from March 18, 1998
(commencement of operations) to October 31, 1998.
(e) Financial Highlights for the period from
November 1, 1998 to June 30, 1999 and the
period from March 18, 1998 (commencement of
operations) to October 31, 1998.
(f) Notes to Financial Statements.
(g) Report of Independent Auditors dated July 21, 1999.
<PAGE>
APPENDIX
SHORT-TERM RATINGS
Standard & Poor's Short-Term Debt Credit Ratings
A Standard & Poor's credit rating is a current
opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific
class of financial obligations or a specific financial
program. It takes into consideration the
creditworthiness of guarantors, insurers or other forms
of credit enhancement on the obligation and takes into
account the currency in which the obligation is
denominated. The credit rating is not a recommendation
to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or
suitability for a particular investor.
Credit ratings are based on current information
furnished by the obligors or obtained by Standard &
Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion,
rely on unaudited financial information. Credit
ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such
information, or based on other circumstances.
Short-term ratings are generally assigned to those
obligations considered short-term in the relevant
market. In the U.S., for example, that means
obligations with an original maturity of no more than
365 days-including commercial paper. Short-term
ratings are also used to indicate the creditworthiness
of an obligor with respect to put features on long-term
obligations. The result is a dual rating, in which the
short-term rating addresses the put feature, in
addition to the usual long-term rating.
Ratings are graded into several categories,
ranging from `A-1' for the highest quality obligations
to `D' for the lowest. These categories are as
follows:
A-1 A short-term obligation rated `A-1' is rated
in the highest category by Standard & Poor's.
The obligor's capacity to meet its financial
commitment on the obligation is strong.
Within this category, certain obligations are
designated with a plus sign (+). This
indicates that the obligor's capacity to meet
its financial commitment on these obligations
is extremely strong.
A-2 A short-term obligation rated `A-2' is
somewhat more susceptible to the adverse
effects of changes in circumstances and
economic conditions than obligations in
higher rating categories. However, the
obligor's capacity to meet its financial
commitment on the obligation is satisfactory.
A-3 A short-term obligation rated `A-3' exhibits
adequate protection parameters. However,
adverse economic conditions or changing
circumstances are more likely to lead to a
weakened capacity of the obligor to meet its
financial commitment on the obligation.
B A short-term obligation rated `B' is regarded
as having significant speculative
characteristics. The obligor currently has
the capacity to meet its financial commitment
on the obligation; however, it faces major
ongoing uncertainties which could lead to the
obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated `C' is
currently vulnerable to nonpayment and is
dependent upon favorable business, financial
and economic conditions for the obligor to
meet its financial commitment on the
obligation.
D A short-term obligation rated `D' is in
payment default. The `D' rating category is
used when payments on an obligation are not
made on the date due even if the applicable
grace period has not expired, unless Standard
& Poor's believes that such payments will be
made during such grace period. The `D'
rating also will be used upon the filing of a
bankruptcy petition or the taking of a
similar action if payments on an obligation
are jeopardized.
<PAGE>
Moody's Short-Term Debt Ratings
Moody's short-term debt ratings are opinions of
the ability of issuers to repay punctually senior debt
obligations. These obligations have an original
maturity not exceeding one year, unless explicitly
noted. Moody's ratings are opinions, not
recommendations to buy or sell, and their accuracy is
not guaranteed.
Moody's employs the following three designations,
all judged to be investment grade, to indicate the
relative repayment ability of rated issuers:
PRIME-1 Issuers rated `Prime-1' (or supporting
institutions) have a superior ability for
repayment of senior short-term debt
obligations. Prime-1 repaying ability will
often be evidenced by many of the following
characteristics:
* Leading market positions in well-established
industries.
* High rates of return on funds employed.
* Conservative capitalization structure with
moderate reliance on debt and ample asset protection.
* Broad margins in earnings coverage of fixed
financial charges and high internal cash generation.
* Well-established access to a range of financial
markets and assured sources of alternate liquidity.
PRIME-2 Issuers rated `Prime-2' (or supporting
institutions) have a strong ability for
repayment of senior short-term debt
obligations. This will normally be evidenced
by many of the characteristics cited above,
but to a lesser degree. Earnings trends and
coverage ratios, while sound, may be more
subject to variation. Capitalization
characteristics, while still appropriate, may
be more affected by external conditions.
Ample alternate liquidity is maintained.
PRIME-3 Issuers rated `Prime-3' (or supporting
institutions) have an acceptable ability for
repayment of senior short-term obligations.
The effect of industry characteristics and
market compositions may be more pronounced.
Variability in earnings and profitability may
result in changes in the level of debt
protection measurements and may require
relatively high financial leverage. Adequate
alternate liquidity is maintained.
NOT PRIME Issuers rated `Not Prime' do not fall within
any of the Prime rating categories.
Fitch IBCA International Short-Term Debt Credit Ratings
Fitch IBCA's international debt credit ratings are
applied to the spectrum of corporate, structured and
public finance. They cover sovereign (including
supranational and subnational), financial, bank,
insurance and other corporate entities and the
securities they issue, as well as municipal and other
public finance entities, securities backed by
receivables or other financial assets and
counterparties. When applied to an entity, these short-
term ratings assess its general creditworthiness on a
senior basis. When applied to specific issues and
programs, these ratings take into account the relative
preferential position of the holder of the security and
reflect the terms, conditions and covenants attaching
to that security.
International credit ratings assess the capacity
to meet foreign currency or local currency commitments.
Both "foreign currency" and "local currency" ratings
are internationally comparable assessments. The local
currency rating measures the probability of payment
within the relevant sovereign state's currency and
jurisdiction and therefore, unlike the foreign currency
rating, does not take account of the possibility of
foreign exchange controls limiting transfer into
foreign currency.
A short-term rating has a time horizon of less
than 12 months for most obligations, or up to three
years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to
meet financial commitments in a timely manner.
<PAGE>
F-1 Highest credit quality. Indicates the
strongest capacity for timely payment of
financial commitments; may have an added "+"
to denote any exceptionally strong credit
feature.
F-2 Good credit quality. A satisfactory capacity
for timely payment of financial commitments,
but the margin of safety is not as great as
in the case of the higher ratings.
F-3 Fair credit quality. The capacity for timely
payment of financial commitments is adequate;
however, near term adverse changes could
result in a reduction to non-investment
grade.
B Speculative. Minimal capacity for timely
payment of financial commitments, plus
vulnerability to near term adverse changes in
financial and economic conditions.
C High default risk. Default is a real
possibility. Capacity for meeting financial
commitments is solely reliant upon a
sustained, favorable business and economic
environment.
D Default. Denotes actual or imminent payment
default.
Duff & Phelps, Inc. Short-Term Debt Ratings
Duff & Phelps Credit Ratings' short-term debt
ratings are consistent with the rating criteria used by
money market participants. The ratings apply to all
obligations with maturities of under one year,
including commercial paper, the uninsured portion of
certificates of deposit, unsecured bank loans, master
notes, bankers acceptances, irrevocable letters of
credit and current maturities of long-term debt. Asset-
backed commercial paper is also rated according to this
scale.
Emphasis is placed on liquidity which is defined
as not only cash from operations, but also access to
alternative sources of funds including trade credit,
bank lines and the capital markets. An important
consideration is the level of an obligor's reliance on
short-term funds on an ongoing basis.
The distinguishing feature of Duff & Phelps Credit
Ratings' short-term debt ratings is the refinement of
the traditional `1' category. The majority of short-
term debt issuers carry the highest rating, yet quality
differences exist within that tier. As a consequence,
Duff & Phelps Credit Rating has incorporated gradations
of `1+' (one plus) and `1-` (one minus) to assist
investors in recognizing those differences.
These ratings are recognized by the SEC for broker-
dealer requirements, specifically capital computation
guidelines. These ratings meet Department of Labor
ERISA guidelines governing pension and profit sharing
investments. State regulators also recognize the
ratings of Duff & Phelps Credit Rating for insurance
company investment portfolios.
Rating Scale: Definition
High Grade
D-1+ Highest certainty of timely payment. Short-
term liquidity, including internal operating
factors and/or access to alternative sources
of funds, is outstanding, and safety is just
below risk-free U.S. Treasury short-term
obligations.
D-1 Very high certainty of timely payment.
Liquidity factors are excellent and supported
by good fundamental protection factors. Risk
factors are minor.
D-1- High certainty of timely payment. Liquidity
factors are strong and supported by good
fundamental protection factors. Risk factors
are very small.
Good Grade
D-2 Good certainty of timely payment. Liquidity
factors and company fundamentals are sound.
Although ongoing funding needs may enlarge
total financing requirements, access to
capital markets is good. Risk factors are
small.
<PAGE>
Satisfactory Grade
D-3 Satisfactory liquidity and other protection
factors qualify issue as to investment grade.
Risk factors are larger and subject to more
variation. Nevertheless, timely payment is
expected.
Non-investment Grade
D-4 Speculative investment characteristics.
Liquidity is not sufficient to insure against
disruption in debt service. Operating
factors and market access may be subject to a
high degree of variation.
Default
D-5 Issuer failed to meet scheduled principal
and/or interest payments.
LONG-TERM RATINGS
Standard & Poor's Long-Term Debt Credit Ratings
A Standard & Poor's credit rating is a current
opinion of the creditworthiness of an obligor with
respect to a specific financial obligation, a specific
class of financial obligations or a specific financial
program. It takes into consideration the
creditworthiness of guarantors, insurers or other forms
of credit enhancement on the obligation and takes into
account the currency in which the obligation is
denominated. The credit rating is not a recommendation
to purchase, sell or hold a financial obligation,
inasmuch as it does not comment as to market price or
suitability for a particular investor.
Credit ratings are based on current information
furnished by the obligors or obtained by Standard &
Poor's from other sources it considers reliable.
Standard & Poor's does not perform an audit in
connection with any credit rating and may, on occasion,
rely on unaudited financial information. Credit
ratings may be changed, suspended or withdrawn as a
result of changes in, or unavailability of, such
information, or based on other circumstances.
Credit ratings are based, in varying degrees, on
the following considerations: (1) likelihood of
payment-capacity and willingness of the obligor to meet
its financial commitment on an obligation in accordance
with the terms of the obligation; (2) nature of and
provisions of the obligation; and (3) protection
afforded by, and relative position of, the obligation
in the event of bankruptcy, reorganization or other
arrangement under the laws of bankruptcy and other laws
affecting creditors' rights.
The rating definitions are expressed in terms of
default risk. As such, they pertain to senior
obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to
reflect the lower priority in bankruptcy. (Such
differentiation applies when an entity has both senior
and subordinated obligations, secured and unsecured
obligations, or operating company and holding company
obligations.) Accordingly, in the case of junior debt,
the rating may not conform exactly with the category
definition.
AAA An obligation rated `AAA' has the highest
rating assigned by Standard & Poor's. The
obligor's capacity to meet its financial
commitment on the obligation is EXTREMELY
STRONG.
AA An obligation rated `AA' differs from the
highest rated obligations only in small
degree. The obligor's capacity to meet its
financial commitment on the obligation is
VERY STRONG.
A An obligation rated `A' is somewhat more
susceptible to the adverse effects of changes
in circumstances and economic conditions than
obligations in higher rated categories.
However, the obligor's capacity to meet its
financial commitment on the obligation is
still STRONG.
BBB An obligation rated `BBB' exhibits ADEQUATE
protection parameters. However, adverse
economic conditions or changing circumstances
are more likely to lead to a weakened
capacity of the obligor to meet its financial
commitment on the obligation.
<PAGE>
Obligations rated `BB', `B', `CCC, `CC', and `C'
are regarded as having significant speculative
characteristics. `BB' indicates the least degree of
speculation and `C' the highest. While such
obligations will likely have some quality and
protective characteristics, these may be outweighed by
large uncertainties or major exposures to adverse
conditions.
BB An obligation rated `BB' is LESS VULNERABLE
to nonpayment than other speculative issues.
However, it faces major ongoing uncertainties
or exposure to adverse business, financial or
economic conditions which could lead to the
obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated `B' is MORE VULNERABLE to
nonpayment than obligations rated `BB', but
the obligor currently has the capacity to
meet its financial commitment on the
obligation. Adverse business, financial or
economic conditions will likely impair the
obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC An obligation rated `CCC' is CURRENTLY
VULNERABLE to nonpayment, and is dependent
upon favorable business, financial and
economic conditions for the obligor to meet
its financial commitment on the obligation.
In the event of adverse business, financial
or economic conditions, the obligor is not
likely to have the capacity to meet its
financial commitment on the obligation.
CC An obligation rated `CC' is CURRENTLY HIGHLY
VULNERABLE to nonpayment.
C The `C' rating may be used to cover a
situation where a bankruptcy petition has
been filed or similar action has been taken,
but payments on this obligation are being
continued.
D An obligation rated `D' is in payment
default. The `D' rating category is used
when payments on an obligation are not made
on the date due even if the applicable grace
period has not expired, unless Standard &
Poor's believes that such payments will be
made during such grace period. The `D'
rating also will be used upon the filing of a
bankruptcy petition or the taking of a
similar action if payments on an obligation
are jeopardized.
Plus (+) or minus (-): The ratings from `AA' to
`CCC' may be modified by the addition of a plus or
minus sign to show relative standing within the major
rating categories.
Moody's Long-Term Debt Ratings
Aaa Bonds which are rated `Aaa' are judged to be
of the best quality. They carry the smallest
degree of investment risk and are generally
referred to as "gilt edged." Interest
payments are protected by a large or by an
exceptionally stable margin and principal is
secure. While the various protective
elements are likely to change, such changes
as can be visualized are most unlikely to
impair the fundamentally strong position of
such issues.
Aa Bonds which are rated `Aa' are judged to be
of high quality by all standards. Together
with the Aaa group they comprise what are
generally known as high-grade bonds. They
are rated lower than the best bonds because
margins of protection may not be as large as
in Aaa securities or fluctuation of
protective elements may be of greater
amplitude or there may be other elements
present which make the long-term risk appear
somewhat larger than Aaa securities.
A Bonds which are rated `A' possess many
favorable investment attributes and are to be
considered as upper-medium-grade obligations.
Factors giving security to principal and
interest are considered adequate, but
elements may be present which suggest a
susceptibility to impairment some time in the
future.
Baa Bonds which are rated `Baa' are considered as
medium-grade obligations (i.e., they are
neither highly protected nor poorly secured).
Interest payments and principal security
appear adequate for the present but certain
protective elements may be lacking or may be
characteristically unreliable over any great
length of time. Such bonds lack outstanding
investment characteristics and in fact have
speculative characteristics as well.
<PAGE>
Ba Bonds which are rated `Ba' are judged to have
speculative elements; their future cannot be
considered as well-assured. Often the
protection of interest and principal payments
may be very moderate, and thereby not well
safeguarded during both good and bad times
over the future. Uncertainty of position
characterizes bonds in this class.
B Bonds which are rated `B' generally lack
characteristics of the desirable investment.
Assurance of interest and principal payments
or of maintenance of other terms of the
contract over any long period of time may be
small.
Caa Bonds which are rated `Caa' are of poor
standing. Such issues may be in default or
there may be present elements of danger with
respect to principal or interest.
Ca Bonds which are rated `Ca' represent
obligations which are speculative in a high
degree. Such issues are often in default or
have other marked shortcomings.
C Bonds which are rated `C' are the lowest
rated class of bonds, and issues so rated can
be regarded as having extremely poor
prospects of ever attaining any real
investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in
each generic rating classification from `Aa' through
`B.' The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category;
the modifier 2 indicates a mid-range ranking; and the
modifier 3 indicates a ranking in the lower end of that
generic rating category.
Fitch IBCA International Long-Term Debt Credit Ratings
Fitch IBCA's international debt credit ratings are
applied to the spectrum of corporate, structured and
public finance. They cover sovereign (including
supranational and subnational), financial, bank,
insurance and other corporate entities and the
securities they issue, as well as municipal and other
public finance entities, securities backed by
receivables or other financial assets and
counterparties. When applied to an entity, these long-
term ratings assess its general creditworthiness on a
senior basis. When applied to specific issues and
programs, these ratings take into account the relative
preferential position of the holder of the security and
reflect the terms, conditions and covenants attaching
to that security.
International credit ratings assess the capacity
to meet foreign currency or local currency commitments.
Both "foreign currency" and "local currency" ratings
are internationally comparable assessments. The local
currency rating measures the probability of payment
within the relevant sovereign state's currency and
jurisdiction and therefore, unlike the foreign currency
rating, does not take account of the possibility of
foreign exchange controls limiting transfer into
foreign currency.
Investment Grade
AAA Highest credit quality. `AAA' ratings
denote the lowest expectation of credit
risk. They are assigned only in case of
exceptionally strong capacity for timely
payment of financial commitments. This
capacity is highly unlikely to be
adversely affected by foreseeable
events.
AA Very high credit quality. `AA' ratings
denote a very low expectation of credit
risk. They indicate very strong
capacity for timely payment of financial
commitments. This capacity is not
significantly vulnerable to foreseeable
events.
A High credit quality. `A' ratings denote
a low expectation of credit risk. The
capacity for timely payment of financial
commitments is considered strong. This
capacity may, nevertheless, be more
vulnerable to changes in circumstances
or in economic conditions than is the
case for higher ratings.
BBB Good credit quality. `BBB' ratings
indicate that there is currently a low
expectation of credit risk. The
capacity for timely payment of financial
commitments is considered adequate, but
adverse changes in circumstances and in
economic conditions are more likely to
impair this capacity. This is the
lowest investment grade category.
<PAGE>
Speculative Grade
BB Speculative. `BB' ratings indicate that
there is a possibility of credit risk
developing, particularly as the result
of adverse economic change over time;
however, business or financial
alternatives may be available to allow
financial commitments to be met.
B Highly speculative. `B' ratings
indicate that significant credit risk is
present, but a limited margin of safety
remains. Financial commitments are
currently being met; however, capacity
for continued payment is contingent upon
a sustained, favorable business and
economic environment.
CCC, CC, C High default risk. Default is a
real possibility. Capacity for meeting
financial commitments is solely reliant
upon sustained, favorable business or
economic developments. A `CC' rating
indicates that default of some kind
appears probable. `C' ratings signal
imminent default.
DDD, DD and D Default. Securities are not
meeting current obligations and are
extremely speculative. `DDD' designates
the highest potential for recovery of
amounts outstanding on any securities
involved. For U.S. corporates, for
example, `DD' indicates expected
recovery of 50% - 90% of such
outstandings, and `D' the lowest
recovery potential, i.e. below 50%.
Duff & Phelps, Inc. Long-Term Debt Ratings
These ratings represent a summary opinion of the
issuer's long-term fundamental quality. Rating
determination is based on qualitative and quantitative
factors which may vary according to the basic economic
and financial characteristics of each industry and each
issuer. Important considerations are vulnerability to
economic cycles as well as risks related to such
factors as competition, government action, regulation,
technological obsolescence, demand shifts, cost
structure and management depth and expertise. The
projected viability of the obligor at the trough of the
cycle is a critical determination.
Each rating also takes into account the legal form
of the security (e.g., first mortgage bonds,
subordinated debt, preferred stock, etc.). The extent
of rating dispersion among the various classes of
securities is determined by several factors including
relative weightings of the different security classes
in the capital structure, the overall credit strength
of the issuer and the nature of covenant protection.
The Credit Rating Committee formally reviews all
ratings once per quarter (more frequently, if
necessary). Ratings of `BBB-` and higher fall within
the definition of investment grade securities, as
defined by bank and insurance supervisory authorities.
Structured finance issues, including real estate, asset-
backed and mortgage-backed financings, use this same
rating scale. Duff & Phelps Credit Rating claims
paying ability ratings of insurance companies use the
same scale with minor modification in the definitions.
Thus, an investor can compare the credit quality of
investment alternatives across industries and
structural types. A "Cash Flow Rating" (as noted for
specific ratings) addresses the likelihood that
aggregate principal and interest will equal or exceed
the rated amount under appropriate stress conditions.
Rating Scale Definition
AAA Highest credit quality. The risk factors are
negligible, being only slightly more
than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are
AA strong. Risk is modest but may
AA- vary slightly from time to time because of
economic conditions.
<PAGE>
A+ Protection factors are average but adequate.
A However, risk factors are more variable
A- and greater in periods of economic stress.
BBB+ Below-average protection factors but still
BBB considered sufficient for prudent investment.
BBB- Considerable variability in risk during economic cycles.
BB+ Below investment grade but deemed likely to
BB meet obligations when due. Present or prospective
BB- financial protection factors fluctuate according to
industry conditions or company fortunes.
Overall quality may move up or down frequently within
this category.
B+ Below investment grade and possessing risk
B that obligations will not be met
B- when due. Financial protection factors will
fluctuate widely according to
economic cycles, industry conditions and/or
company fortunes. Potential
exists for frequent changes in the rating
within this category or into a higher
or lower rating grade.
CCC Well below investment grade securities.
Considerable uncertainty exists as to
timely payment of principal, interest or
preferred dividends.
Protection factors are narrow and risk can be
substantial with unfavorable
economic/industry conditions, and/or with
unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to
meet scheduled principal and/or interest payments.
DP Preferred stock with dividend arrearages.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
See "Exhibit Index."
Item 24. Persons Controlled by or under Common Control with Registrant
Registrant neither controls any person nor is
under common control with any other person.
Item 25. Indemnification
Article VI of Registrant's By-Laws provides as follows:
ARTICLE VI INDEMNIFICATION
The Corporation shall indemnify (a) its
Directors and officers, whether serving the
Corporation or at its request any other entity, to
the full extent required or permitted by (i)
Maryland law now or hereafter in force, including
the advance of expenses under the procedures and
to the full extent permitted by law, and (ii) the
Investment Company Act of 1940, as amended, and
(b) other employees and agents to such extent as
shall be authorized by the Board of Directors and
be permitted by law. The foregoing rights of
indemnification shall not be exclusive of any
other rights to which those seeking
indemnification may be entitled. The Board of
Directors may take such action as is necessary to
carry out these indemnification provisions and is
expressly empowered to adopt, approve and amend
from time to time such resolutions or contracts
implementing such provisions or such further
indemnification arrangements as may be permitted
by law.
Item 26. Business and Other Connections of Investment Adviser
None.
Item 27. Principal Underwriters
(a) None
(b) None
(c) None
Item 28. Location of Accounts and Records
All accounts, books or other documents
required to be maintained by section 31(a) of the
Investment Company Act of 1940 and the rules
promulgated thereunder are in the possession of
Frontegra Asset Management, Inc., Registrant's
investment adviser, at Registrant's corporate
offices, except records held and maintained by
Firstar Bank, N.A. and Firstar Mutual Fund
Services LLC, 615 E. Michigan Street, Milwaukee,
Wisconsin 53202, relating to the former's function
as custodian and the latter's function as transfer
agent, administrator and fund accountant.
Item 29. Management Services
All management-related service contracts
entered into by Registrant are discussed in Parts
A and B of this Registration Statement.
Item 30. Undertakings.
Registrant undertakes to furnish each person
to whom a prospectus or statement of additional
information is delivered with a copy of the
Registrant's latest semi-annual or annual report
to shareholders, without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933 and the Investment Company Act of 1940, the
Registrant certifies that it meets all of the
requirements for effectiveness under Rule 485(b) under
the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City
of Chicago and State of Illinois on the 14th day of
December, 1999.
FRONTEGRA FUNDS, INC. (Registrant)
By: /s/ William D. Forsyth III
----------------------------
William D. Forsyth III
Co-President
Pursuant to the requirements of the Securities Act
of 1933, this Post-Effective Amendment No. 8 to the
Registration Statement on Form N-1A has been signed
below by the following persons in the capacities and on
the date(s) indicated.
Name Title Date
/s/ William D. Forsyth III Co-President and a Director December 14, 1999
- ---------------------------
William D. Forsyth III
/s/ Thomas J. Holmberg, Jr. Co-President and a Director December 14, 1999
- ---------------------------
Thomas J. Holmberg, Jr.
/s/ David L. Heald Director December 14, 1999
- --------------------------
David L. Heald
<PAGE>
EXHIBIT INDEX
Exhibit No. Exhibit
(a.1) Registrant's Articles of Incorporation(1)
(a.2) Articles Supplementary to the Registrant's
Articles of Incorporation dated January 14, 1998(3)
(a.3) Articles Supplementary to the Registrant's
Articles of Incorporation dated November 16, 1999
(b) Registrant's By-Laws(1)
(c) None
(d.1) Investment Advisory Agreement dated October 30, 1996(2)
(d.2) Exhibit C dated as of February 1, 1998 to
the Investment Advisory Agreement(3)
(d.3) Exhibit D dated as of December 31, 1999 to
the Investment Advisory Agreement
(d.4) Subadvisory Agreement between Frontegra and
Reams dated August 2, 1999
(d.5) Subadvisory Agreement between Frontegra and
Northern dated as of January 30, 1998(3)
(d.6) Subadvisory Agreement between Frontegra and
B&H dated as of December 31, 1999
(d.7) Expense Cap/Reimbursement Agreement between
Frontegra and Frontegra Funds, Inc. dated as of
February 26, 1999, as amended August 2, 1999
(d.8) Amendment to Expense Cap/Reimbursement
Agreement between Frontegra and Frontegra Funds, Inc.
dated as of December 31, 1999
(d.9) Expense Cap/Reimbursement Agreement between
Frontegra and the Frontegra Emerging Growth Fund
dated as of December 31, 1999
(e) None
(f) None
(g.1) Custodian Servicing Agreement
(h.1) Transfer Agent Servicing Agreement
(h.2) Fund Administration Servicing Agreement
(h.3) Fund Accounting Servicing Agreement
(i.1) Opinion and Consent of Godfrey & Kahn, S.C.
dated October 10, 1996(2)
(i.2) Opinion and Consent of Godfrey & Kahn, S.C.
dated January 27, 1998(3)
(i.3) Opinion and Consent of Godfrey & Kahn, S.C.
dated December 15, 1999
(j) Consent of Ernst & Young LLP
(k) None
(l) Initial Subscription Agreements(2)
(m) None
(n) None
(o) Reserved
(p) Code of Ethics (4)
_____________________
(1) Incorporated by reference to Registrant's
Form N-1A as filed with the Commission on July 2, 1996.
(2) Incorporated by reference to Registrant's Form
N-1A as filed with the Commission on October 11, 1996.
(3) Incorporated by reference to Registrant's Form
N-1A as filed with the Commission on January 28, 1998.
(4) To be filed in the next Post-Effective
Amendment filed by the Registrant after March 1, 2000.
Exhibit a.3
FRONTEGRA FUNDS, INC.
Articles Supplementary
Frontegra Funds, Inc., a Maryland corporation
having its principal office in Maryland in Baltimore
City (hereinafter called the "Corporation"), hereby
certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: The Board of Directors of the
Corporation by unanimous vote on November 16, 1999
approved the adoption of a resolution classifying Fifty
Million (50,000,000) shares of the Corporation's
authorized but unissued and unclassified Common Stock
as the Frontegra Emerging Growth Fund (the "Fund").
SECOND: The shares of the Fund as so classified
by the Board of Directors of the Corporation shall have
the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption
as set forth in Article V, Section 5.5 of the Articles
of Incorporation of the Corporation, and shall be
subject to all of the provisions of the Articles of
Incorporation of the Corporation relating to the stock
of the Corporation generally.
THIRD: The shares of the Fund aforesaid have
been duly classified by the Board of Directors pursuant
to authority and power contained in the Articles of
Incorporation of the Corporation.
FOURTH: These Articles Supplementary will become
effective at 12:00 a.m. on December 31, 1999.
IN WITNESS WHEREOF, Frontegra Funds, Inc. has
caused these Articles Supplementary to be signed as of
the 16th day of November, 1999 in its name and on its
behalf by its duly undersigned authorized officers, who
acknowledge that these Articles Supplementary are the
act of the Corporation and that, to the best of their
knowledge, information and belief, all matters and
facts set forth herein relating to the authorization
and approval of these Articles Supplementary are true
in all material respects and that this statement is
made under penalties of perjury.
Witness: FRONTEGRA FUNDS, INC.
/s/ Thomas J. Holmberg, Jr. /s/ William D. Forsyth, III
- ---------------------------- -----------------------------
Thomas J. Holmberg, Jr. William D. Forsyth, III
Secretary Co-President
Exhibit d.3
EXHIBIT D
to the
INVESTMENT ADVISORY AGREEMENT
FRONTEGRA EMERGING GROWTH FUND
For all services rendered by Frontegra Asset
Management, Inc. (the "Adviser") hereunder, the above-
named Fund, a series of Frontegra Funds, Inc., shall
pay the Adviser and the Adviser agrees to accept as
full compensation for all services rendered hereunder,
an annual investment advisory fee equal to 0.90 of 1%
of the average daily net assets of the Fund.
The portion of the fee based upon the average
daily net assets of the Fund shall be accrued daily at
the rate of 1/365th of 0.90 of 1% applied to the daily
net assets of the Fund.
The advisory fee so accrued shall be paid to the
Adviser monthly.
Executed as of the 31st day of December, 1999.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ William D. Forsyth
----------------------------------
William D. Forsyth, Co-President
FRONTEGRA FUNDS, INC.
By: /s/ Thomas J. Holmberg
---------------------------------
Thomas J. Holmberg, Co-President
Exhibit d.4
AMENDED AND RESTATED SUB-ADVISORY AGREEMENT
SUB-ADVISORY AGREEMENT dated as of the 2nd day of
August, 1999, between Frontegra Asset Management, Inc.,
an Illinois corporation (the "Adviser"), and Reams
Asset Management Company, LLC, a limited liability
company organized under the laws of the State of
Indiana (the "Sub-Adviser").
WHEREAS the Adviser has entered into an Investment
Advisory Agreement dated as of October 30, 1996 (the
"Advisory Agreement") with Frontegra Funds, Inc. (the
"Fund"), an open-end management investment company
registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), with respect to certain of
the Fund's investment portfolios; and
WHEREAS the Adviser wishes to retain the Sub-
Adviser to furnish certain investment advisory services
to such portfolios, and the Sub-Adviser is willing to
furnish those services;
NOW, THEREFORE, in consideration of the premises
and mutual covenants herein contained, the parties
agree as follows:
1. Appointment. The Adviser hereby appoints the
Sub-Adviser as an investment sub-adviser with respect
to each of the Fund's portfolios named on an Exhibit to
this Agreement (each, a "Portfolio") for the period and
on the terms set forth in this Agreement. The Sub-
Adviser accepts such appointment and agrees to render
the services herein set forth, for the compensation
herein provided.
2. Duties as Sub-Adviser. (a) Subject to the
supervision of and any guidelines adopted by the Fund's
Board of Directors (the "Board") and the Adviser, the
Sub-Adviser will provide a continuous investment
program for the Portfolios, including investment
research and management. The Sub-Adviser will
determine from time to time what investments will be
purchased, retained or sold by the Portfolios. The Sub-
Adviser will be responsible for placing purchase and
sell orders for investments and for other related
transactions. The Sub-Adviser will provide services
under this Agreement in accordance with each
Portfolio's investment objectives, policies and
restrictions as stated with respect to such Portfolio
in the Fund's Registration Statement on Form N-1A.
(b) The Sub-Adviser agrees that, in placing
orders with brokers, it will obtain the best net result
in terms of price and execution; provided that, on
behalf of the Portfolio's, the Sub-Adviser may, in its
discretion, use brokers who provide the Sub-Adviser
with research, analysis, advice and similar services to
execute transactions with respect to a Portfolio, and
the Sub-Adviser may pay to those brokers in return for
brokerage and research services a higher commission
than may be charged by other brokers, so long as (i)
such commission is paid in compliance with all
applicable state and Federal laws and in accordance with
this Agreement and (ii) the Sub-Adviser has determined in
good faith that such commission is reasonable in terms
either of the particular transaction or of the overall
responsibility of the Sub-Adviser to such
<PAGE>
Portfolio and its other clients and
that the total commissions paid by such Portfolio will
be reasonable in relation to the benefits to such
Portfolio over the long term. In no instance will
securities of any Portfolio be purchased from or sold
to the Sub-Adviser, or any affiliated person thereof
except in accordance with the Federal securities laws
and the rules and regulations thereunder. The Sub-
Adviser may aggregate sales and purchase orders with
respect to the assets of the Portfolios with similar
orders being made simultaneously for other accounts
advised by the Sub-Adviser or its affiliates. Whenever
the Sub-Adviser simultaneously places orders to
purchase or sell the same security on behalf of a
Portfolio and one or more other accounts advised by the
Sub-Adviser, the orders will be allocated as to price
and amount among all such accounts in a manner believed
to be equitable over time to each such account. The
Adviser recognizes that in some cases this procedure
may adversely affect the results obtained for such
Portfolio.
(c) The Sub-Adviser will maintain all books and
records required to be maintained by the Sub-Adviser
pursuant to the 1940 Act and the rules and regulations
promulgated thereunder with respect to transactions by
the Sub-Adviser on behalf of the Portfolios, and will
furnish the Board and the Adviser with such periodic
and special reports as the Board or the Adviser may
reasonably request. In compliance with the
requirements of Rule 31a-3 under the 1940 Act, the Sub-
Adviser hereby agrees that all records which it
maintains for the Portfolios are the property of the
Fund, agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act any records which it
maintains for the Fund and which are required to be
maintained by Rule 31a-1 under the 1940 Act, and
further agrees to surrender promptly to the Fund any
records which it maintains for the Portfolios upon
request by the Fund.
(d) At such times as shall be reasonably
requested by the Board or the Adviser, the Sub-Adviser
will provide the Board and the Adviser with economic
and investment analyses and reports as well as
quarterly reports setting forth the performance of the
Portfolios and make available to the Board and the
Adviser any economic, statistical and investment
services normally available to institutional or other
customers of the Sub-Adviser. Upon reasonable advance
notice, twice each calendar year the Sub-Adviser will
make its officers and employees available to meet with
the Board and employees of the Fund at the Fund's
principal place of business or another mutually agreed
upon location to review the securities of the
Portfolios.
(e) In accordance with procedures adopted by the
Board, as amended from time to time, the Sub-Adviser is
responsible for assisting in the fair valuation of all
securities constituting the Portfolios and will use its
reasonable efforts to arrange for the provision of a
price from a party or parties independent of the Sub-
Adviser for each security constituting part of a
Portfolio for which the Fund or the Fund's
administrator is unable to obtain prices in the
ordinary course of business from an automated pricing
service.
3. Further Duties. In all matters relating to
the performance of this Agreement, the Sub-Adviser will
act in conformity with the Fund's Articles of
Incorporation, By-laws and currently effective
registration statement under the 1940 Act and any
amendments or supplements thereto (the "Registration
Statement") and with the written instructions and written
<PAGE>
directions of the Board and the Adviser and
will comply with the requirements of the 1940 Act, the
Investment Advisers Act of 1940, as amended (the
"Advisers Act"), the rules under each, Subchapter M of
the Internal Revenue Code of 1986 (the "Code") as
applicable to regulated investment companies, the
diversification requirements applicable to the
Portfolios under Section 817(h) of the Code and all
other applicable Federal and state laws and
regulations. The Adviser agrees to provide to the Sub-
Adviser copies of the Fund's Articles of Incorporation,
By-laws, Registration Statement, written instructions
and directions of the Board and the Adviser, and any
amendments or supplements to any of these materials as
soon as practicable after such materials become
available; provided, however, that the Sub-Adviser's
duty under this Agreement to act in conformity with any
document, instruction or guidelines produced by the
Fund or the Adviser shall not arise until it has been
delivered to the Sub-Adviser. In making any changes to
a Portfolio's objectives, policies or restrictions the
Board will make due allowance for the time within which
the Sub-Adviser shall have to bring such Portfolio into
compliance with such changes.
4. Proxies. The Sub-Adviser shall have the
power to vote all securities constituting a Portfolio
and shall not be required to seek or take instruction
from the Adviser or the Fund with respect to any such
vote.
5. Expenses. During the term of this Agreement,
the Sub-Adviser will bear all expenses incurred by it
in connection with its services under this Agreement
other than commissions, taxes, fees or other charges or
expenses directly related to the purchase, sale or
exchange of any securities for the Portfolios. The Sub-
Adviser shall not be responsible for any expenses
incurred by the Fund, the Portfolios or the Adviser.
6. Compensation. (a) For the services provided
by the Sub-Adviser with respect to a Portfolio pursuant
to this Agreement, the Adviser will pay to the Sub-
Adviser a fee, computed daily and payable monthly, at
an annual rate of (i) the fee percentage of such
Portfolio's average daily net assets (computed in the
manner specified in the Advisory Agreement) set forth
on the Exhibit relating to such Portfolio plus (ii)
0.10% of the average daily net assets of such Portfolio
attributable to investors in such Portfolio whose
initial investment in such Portfolio (other than
defined contribution or 401(k) plan investments) was
equal to or greater than $15,000,000, regardless of the
value of such investments following their initial
investment.
(b) The fee due the Sub-Advisor with respect to
each Portfolio shall be computed daily and shall be
paid monthly to the Sub-Adviser on or before the last
business day of the next succeeding calendar month.
Along with each such monthly payment the Adviser shall
provide the Sub-Adviser with a schedule showing the
manner in which such fee was computed.
(c) If during a Portfolio's first twelve months
of operation the Adviser waives any portion of the
management fee due to the Adviser pursuant to the terms
of the Advisory Agreement for the purpose of limiting
such Portfolio's total operating expenses to the
maximum expense percentage of such Portfolio's average
daily net assets for such period set forth on the
Exhibit relating to such Portfolio, and the resulting
net management fee received by the Adviser
<PAGE>
is less than the compensation due to the Sub-Adviser pursuant
to subparagraph (a) above (the difference between such net
management fee and such compensation being hereinafter
referred to as the "Difference"), the Sub-Adviser shall
refund to the Adviser an amount equal to the
Difference; provided, however, that (i) the Sub-Adviser
shall not be required to refund to the Adviser an
amount greater than the fees paid by the Adviser to the
Sub-Adviser during such 12-month period; and (ii) such
Difference shall be reduced to the extent that in such
12-month period the net management fee received by the
Adviser with respect to all Portfolios exceeds the
compensation due to the Sub-Adviser with respect to
such Portfolios.
(d) If this Agreement becomes effective or
terminates with respect to a Portfolio before the end
of any month, the fee relating to such Portfolio for
the period from the effective date with respect to such
Portfolio to the end of the month or from the beginning
of such month to the date of termination, as the case
may be, shall be prorated according to the proportion
which such period bears to the full month in which such
effectiveness or termination occurs.
7. Limitation of Liability. The Sub-Adviser
shall not be liable for any error of judgment or
mistake of law or for any loss suffered by any
Portfolio, the Fund or its shareholders or by the
Adviser in connection with the matters to which this
Agreement relates, except a loss resulting from willful
misfeasance, bad faith or gross negligence on its part
in the performance of its duties or from reckless
disregard by it of its obligations and duties under
this Agreement.
8. Representations of Sub-Adviser. The Sub-
Adviser represents, warrants and agrees as follows:
(a) The Sub-Adviser (i) is registered as an Investment
Adviser under the Advisers Act and will continue to be
so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from performing the services contemplated
by this Agreement; (iii) has met, and will seek to
continue to meet for so long as this Agreement remains
in effect, any other applicable Federal or state
requirements, or the applicable requirements of any
regulatory or industry self-regulatory agency,
necessary to be met in order to perform the services
contemplated by this Agreement; (iv) has the authority
to enter into and perform the services contemplated by
this Agreement; and (v) will promptly notify the
Adviser of the occurrence of any event that would
disqualify the Sub-Adviser from serving as an
investment adviser of an investment company pursuant to
Section 9(a) of the 1940 Act or otherwise.
(b) The Sub-Adviser has adopted a written code of
ethics complying with the requirements of Rule 17j-1
under the 1940 Act and will provide the Adviser and the
Board with a copy of such code of ethics, together with
evidence of its adoption. Within 15 calendar days of
the end of the last calendar quarter of each year that
this Agreement is in effect, the President of the Sub-
Adviser shall certify to the Adviser that the Sub-
Adviser has complied with the requirements of Rule
17j-1 during the previous year and that there has been
no violation of the Sub-Adviser's code of ethics or, if
such a violation has occurred, that appropriate action
was taken in response to such violation. Upon the
written request of the Adviser, the Sub-Adviser shall
permit the Adviser, its employees or its agents to
examine the reports required to be made
<PAGE>
to the Sub-Adviser by Rule 17j-1(c)(1) and all other records
relevant to the Sub-Adviser's code of ethics.
(c) The Sub-Adviser has provided the Adviser with
a copy of its Form ADV as most recently filed with the
Securities and Exchange Commission (the "SEC") and
promptly will furnish a copy of all amendments to the
Adviser at least annually.
9. Trademark. The Sub-Adviser shall have no
rights relating to the name of the Fund or the word
"Frontegra" used in connection with investment
products, services or otherwise, and shall make no use
of such names without the express written consent of
the Fund or Adviser, as the case may be.
10. Services Not Exclusive. The Sub-Adviser may
act as an investment adviser to any other person, firm
or corporation, excluding any registered investment
company, and may perform management and any other
services for any other person, association,
corporation, firm or other entity, excluding any
registered investment company, pursuant to any contract
or otherwise, and take any action or do anything in
connection therewith or related thereto, except as
prohibited by applicable law; and no such performance
of management or other services or taking of any such
action or doing of any such thing shall be in any
manner restricted or otherwise affected by any aspect
of any relationship of the Sub-Adviser to or with the
Fund, the Portfolios or the Adviser or deemed to
violate or give rise to any duty or obligation of the
Sub-Adviser to the Fund, the Portfolios or the Adviser
except as otherwise imposed by law or by this
Agreement.
11. Duration and Termination. (a) This Agreement
shall become effective with respect to a Portfolio upon
the date of execution of the Exhibit relating to such
Portfolio; provided that this Agreement shall not take
effect unless it has first been approved (i) by a vote
of a majority of those members of the Board who are not
parties to this Agreement or interested persons of the
Adviser, the Sub-Adviser or the Fund, cast in person at
a meeting called for the purpose of voting on such
approval, and (ii) by vote of a majority of the
outstanding voting securities issued by such Portfolio.
(b) Unless sooner terminated with respect to a
Portfolio as provided herein, this Agreement shall
continue in effect for two years from its effective
date. Thereafter, if not terminated, this Agreement
shall continue automatically for successive periods of
12 months each, provided that such continuance is
specifically approved at least annually (i) by a vote
of a majority of those members of the Board who are not
parties to this Agreement or interested persons of the
Adviser, the Sub-Adviser or the Fund, cast in person at
a meeting called for the purpose of voting on such
approval, and (ii) by the Board or by vote of a
majority of the outstanding voting securities issued by
such Portfolio.
(c) Notwithstanding the foregoing, this Agreement
may be terminated with respect to a Portfolio at any time,
without the payment of any penalty, by vote of the Board
or by a vote of a majority of the outstanding voting
securities issued by such Portfolio upon 60 calendar days
<PAGE>
written notice to the Sub-Adviser. This
Agreement may also be terminated, without the payment
of any penalty, by either party hereto upon 180
calendar days written notice. This Agreement will
terminate automatically in the event of its assignment
or upon termination of the Advisory Agreement.
12. Amendment. No provision of this Agreement
may be changed, waived, discharged or terminated
orally, but only by an instrument in writing signed by
the party against which enforcement of the change,
waiver, discharge or termination is sought. No
amendment of this Agreement with respect to a Portfolio
shall be effective until approved (a) by a vote of a
majority of those members of the Board who are not
parties to this Agreement or interested persons of the
Adviser, the Sub-Adviser or the Fund, and (b) if
required by the 1940 Act, by a vote of a majority of
the outstanding voting securities issued by such
Portfolio (in the case of (b), the Fund may rely upon
an SEC order or no-action letter permitting it to
modify this Agreement without such vote).
13. Governing Law. This Agreement shall be
construed in accordance with the 1940 Act and the laws
of the State of Indiana, without giving effect to the
conflicts of laws principles thereof. To the extent
that the applicable laws of the State of Indiana
conflict with the applicable provisions of the 1940
Act, the latter shall control.
14. Independent Contractor. In performing its
duties under this Agreement the Sub-Adviser shall act
as an independent contractor and unless otherwise
expressly provided herein or authorized in writing, the
Sub-Adviser will have no authority to represent the
Fund, the Portfolios or the Adviser in any way or
otherwise be deemed an agent of the Fund, the Portfolio
or the Adviser.
15. Miscellaneous. The captions in this
Agreement are included for convenience of reference
only and in no way define or delimit any of the
provisions hereof or otherwise affect their
construction or effect. If any provision of this
Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors. As used in this Agreement, the terms
"majority of the outstanding voting securities,"
"affiliated person," "interested person," "assignment,"
"broker," "investment adviser," "net assets," "sale,"
"sell" and "security" shall have the same meaning as
such terms have in the 1940 Act, subject to such
exemption as may be granted by the SEC by any rule,
regulation or order. Where the effect of a requirement
of the Federal securities laws reflected in any
provision of this Agreement is made less restrictive by
a rule, regulation or order of the SEC, whether of
special or general application, such provision shall be
deemed to incorporate the effect of such rule,
regulation or order. This Agreement may be signed in
counterpart.
16. Notices. Any written notice herein required
to be given to the Sub-Adviser or the Adviser shall be
deemed to have been given upon receipt of the same at
their respective addresses set forth below.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed by their duly authorized
signatories as of the date and year first above
written.
FRONTEGRA ASSET MANAGEMENT, INC.
400 Skokie Boulevard
Suite 500
Northbrook, Illinois 60062
By: /s/ Thomas J. Holmberg, Jr.
------------------------------------
Name: Thomas J. Holmberg, Jr.
Title: Co-President
Attest:
/s/ Ellen Drought
- --------------------
REAMS ASSET MANAGEMENT COMPANY, LLC
227 Washington Street
Columbus, Indiana 47201
By: /s/ David B. McKinney
-----------------------------------
Name: David B. McKinney
Title: President
Attest:
/s/ Diana J. Mans
- --------------------
<PAGE>
Exhibit A
to the Sub-Advisory Agreement
FRONTEGRA OPPORTUNITY FUND
Fee percentage: 0.45%
Executed as of the 2nd day of August, 1999.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ Thomas J. Holmberg, Jr.
-------------------------------
Name: Thomas J. Holmberg, Jr.
Title: Co-President
REAMS ASSET MANAGEMENT COMPANY, LLC
By: /s/ David B. McKinney
-------------------------------
Name: David B. McKinney
Title: President
<PAGE>
Exhibit B
to the Sub-Advisory Agreement
FRONTEGRA TOTAL RETURN BOND FUND
Fee percentage: 0.15%
Executed as of the 2nd day of August, 1999.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ Thomas J. Holmberg, Jr.
-----------------------------------
Name: Thomas J. Holmberg, Jr.
Title: Co-President
REAMS ASSET MANAGEMENT COMPANY, LLC
By: /s/ David B. McKinney
-----------------------------------
Name: David B. McKinney
Title: President
Exhibit d.6
SUBADVISORY AGREEMENT
THIS SUBADVISORY AGREEMENT is entered into as of
the 31st day of December, 1999 between Frontegra Asset
Management, Inc. ("Adviser") and Berents & Hess Capital
Management Incorporated ("Subadviser").
W I T N E S S E T H
WHEREAS, Frontegra Funds, Inc., a Maryland
corporation (the "Corporation"), is registered with the
Securities and Exchange Commission (the "SEC") as an
open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, pursuant to an Investment Advisory
Agreement with Adviser (the "Advisory Agreement"), the
Corporation has retained Adviser to act as its
investment adviser;
WHEREAS, the Corporation is currently comprised of
four series: the Frontegra Total Return Bond Fund, the
Frontegra Opportunity Fund, the Frontegra Growth Fund
and the Frontegra Emerging Growth Fund;
WHEREAS, the Advisory Agreement permits Adviser to
delegate certain of its duties to a subadviser, subject
to the requirements of the 1940 Act; and
WHEREAS, Adviser desires to retain Subadviser as
subadviser for the Frontegra Emerging Growth Fund (the "Fund").
NOW, THEREFORE, Adviser and Subadviser mutually
agree as follows:
1. Appointment as Subadviser. Adviser hereby
retains Subadviser to act as subadviser for the Fund,
subject to the supervision of Adviser and the Board of
Directors of the Corporation and subject to the terms
of this Agreement, and Subadviser agrees to accept such
employment.
2. Duties of Subadviser.
(a) Investments. Subject to the 1940 Act,
the direction of Adviser, the Board of Directors of the
Corporation and the investment policies and
restrictions of the Fund as set forth in the
Corporation's current registration statement on Form N-
1A, Subadviser is authorized and directed to purchase,
hold, sell and monitor on a continuous basis
investments for the account of the Fund (the
"Investments"). In providing these services,
Subadviser will conduct a continual program of
investment, evaluation and, if appropriate, sale and
reinvestment of the Fund's assets. Adviser will
provide Subadviser with reasonable assistance in
connection with Subadviser's activities under this
Agreement, including without limitation, information
concerning the Fund, its funds available for investment
and general affairs of the Corporation.
<PAGE>
(b) Allocation of Brokerage. Subject to the
supervision of Adviser and the Board of Directors of
the Corporation, Subadviser is authorized and directed
to establish and maintain accounts on behalf of the
Fund, place orders for the purchase and sale of
Investments with or through, such persons, brokers or
dealers as Subadviser may select, and negotiate
commissions to be paid on such transactions. In
selecting brokers or dealers and placing orders,
Subadviser will seek to obtain the most favorable
combination of price and execution available
(considering all factors it deems relevant, including
price, size of transaction, nature of the market for
the security, amount of commission, if any, timing,
reputation of broker or dealer and other factors),
except to the extent it may be permitted to pay higher
brokerage commissions for brokerage and research
services as provided below. The Subadviser may cause
the Fund to pay a broker that provides brokerage and
research services to the Subadviser a commission in
excess of the commission that another broker would have
charged for effecting that transaction provided (i) the
Subadviser determines in good faith that the commission
is reasonable in relation to the value of the brokerage
and research services provided by the executing broker
in the terms of the particular transaction or in terms
of the Subadviser's overall responsibilities with
respect to the Fund and the other accounts as to which
the Subadviser exercises investment discretion, (ii)
such commission is paid in compliance with all
applicable state and federal laws, including Section
28(e) of the Securities Exchange Act of 1934, as
amended, and in accordance with this Agreement, and
(iii) in the opinion of the Subadviser, the total
commissions paid by the Fund will be reasonable in
relation to the benefits to the Fund over the long
term. To the extent not prohibited by applicable law,
if Subadviser deems the purchase or sale of a security
to be in the best interests of the Fund as well as
other clients of Subadviser, it may aggregate the
securities to be sold or purchased in order to obtain
the most favorable price or lower brokerage commissions
and efficient execution. In such event, allocation of
these securities and the expenses incurred in the
transaction will be made by Subadviser in the manner it
considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and its other
clients.
(c) Securities Transactions. Subadviser and
any of its affiliated persons will not purchase
securities or other instruments from or sell securities
or other instruments to the Fund; provided, however,
Subadviser may purchase securities or other instruments
from or sell securities or other instruments to the
Fund if such transaction is permissible under
applicable law or any exemptive regulatory order.
Subadviser will observe and comply with Rule 17j-l
under the 1940 Act. Upon request during any business
day, Subadviser immediately will make available to
Adviser or the Fund any reports concerning the Fund
required to be made by Subadviser pursuant to Rule 17j-1
under the 1940 Act.
(d) Books and Records. Subadviser will
maintain all books and records required to be
maintained pursuant to the 1940 Act, including without
limitation, brokerage and other records of all
securities transactions, and will furnish to Adviser in
a timely manner all information relating to
Subadviser's services under this Agreement. The
Subadviser will also preserve such books and records
for the periods prescribed in Rule 31a-2 under the 1940
Act. The Subadviser is not responsible for calculation
of the Fund's net asset value. All books and records
remain the sole property of the Corporation and shall
be immediately surrendered to the Corporation upon
request, provided that Subadviser may retain a copy of
the books and records. Upon request during any
business day, all books and records maintained under
this Agreement immediately will be made available to
the Corporation or Adviser.
<PAGE>
(e) Information Concerning Investments. As
Adviser or the Board of Directors of the Corporation
may reasonably request, Subadviser will furnish reports
on portfolio transactions and reports on Investments
held in the portfolio in such detail as the requesting
party may request. As mutually agreed upon, Subadviser
also will provide the Fund and Adviser periodic
economic and investment analyses and reports or other
investment services normally available to Subadviser's
other clients. Upon reasonable advance notice,
Subadviser will make its officers and employees
available to meet with Adviser and the Corporation's
Board of Directors at the Corporation's principal place
of business or another mutually agreed location to
review the Investments of the Fund. Subadviser will
inform the Corporation and Adviser of changes in
investment strategy, tactics or key personnel.
Subadviser also will provide information or perform
additional acts as are customarily performed by a
subadviser or which are required for the Fund or
Adviser to comply with their respective obligations
under applicable law, including without limitation the
Internal Revenue Code of 1986, as amended, the 1940
Act, the Investment Advisers Act of 1940, as amended
(the "Advisers Act"), the Securities Act of 1933, as
amended (the "1933 Act"), and any state securities law,
rule or regulation.
(f) Custody Arrangements. Subadviser
acknowledges receipt of a Custody Agreement for the
Fund and, to the extent within its control, will comply
with the requirements of the Custody Agreement. On
each business day, Subadviser will provide the Fund's
custodian with information relating to all transactions
concerning the Fund's assets as Adviser or the
custodian requests.
(g) Voting of Proxies. Subadviser will have
the power to vote all securities in which it invests
Fund assets and shall not be required to seek or take
instruction from Adviser or the Fund with respect to
any such vote.
(h) Agent. Subject to any other written
instructions of Adviser, the Corporation or the Fund,
Subadviser is hereby appointed as Adviser's, the
Corporation's and the Fund's agent and attorney-in-fact
for the limited purpose of executing account
documentation, agreements, contracts and other
documents as Subadviser is requested by brokers,
dealers, counterparties and other persons in connection
with its management of the Investments; provided,
however, that any such documentation that the
Subadviser shall execute shall comply with all laws,
rules and regulations applicable to the business of the
Adviser and the Corporation, including but not limited
to the Advisers Act, the 1940 Act and the rules and
regulations thereunder. The Subadviser shall provide
the Adviser and the Corporation with copies of any
documents executed on behalf of the Adviser or the
Corporation hereunder as soon as possible after the
execution of any such documents.
(i) Compliance with Applicable Law and
Governing Documents. With respect to all matters
relating to its performance under this Agreement,
Subadviser and its directors, officers, partners,
employees and interested persons will act in accordance
with all applicable laws. Subadviser will act in
accordance with the Corporation's governing instruments
and regulatory filings, including the Corporation's
Articles of Incorporation, By-Laws, currently effective
Registration Statement under the 1940 Act and the 1933
Act and Notice of Eligibility under Rule 4.5 of the
Commodity Exchange Act (the "CEA") (collectively,
"Governing
<PAGE>
Instruments and Regulatory Filings") and any
instructions or directions of the Corporation, its
Board of Directors or Adviser which whenever
practicable the Adviser or the Corporation shall
provide in writing. Adviser will provide Subadviser
with any amendments, supplements or other changes to
the Governing Instruments and Regulatory Filings as
soon as practicable after such materials become
available, and upon receipt Subadviser will act in
accordance with such amendments, supplements or other
changes.
(j) Corporation's Name; Adviser's Name.
Subadviser will have no rights relating to the
Corporation's name, the Fund's name or in the name
"Frontegra" as it is used in connection with investment
products, services or otherwise, and Subadviser will
make no use of such names without the express written
consent of the Corporation, the Fund or Adviser, as the
case may be; provided that notwithstanding anything in
this Agreement, Subadviser shall be entitled to use the
Fund's name and the name "Frontegra" in connection with
compiling and advertising its performance record and in
Form ADV or any other document required to be filed
with any governmental agency or self-regulatory
organization.
3. Services Exclusive. Except as consented to
by the Adviser in writing (which consent shall not be
unreasonably withheld), during the term of this
Agreement and for a period of one year thereafter,
Subadviser (and its successors) and any person or
entity controlled by Subadviser other than individual
employees, will not act as investment adviser or
subadviser or render investment advice to or sponsor,
promote or distribute any investment company or
comparable entity registered under the 1940 Act that is
in the same Lipper category as the Fund.
4. Duties of Adviser. Adviser will continue to
be responsible for all services to be provided to the
Fund pursuant to the Advisory Agreement, and shall
oversee and review Subadviser's performance under this
Agreement.
5. Independent Contractor. Subadviser will be
an independent contractor in performing its duties
under this Agreement and unless otherwise expressly
provided herein or otherwise authorized in writing,
will have no authority to act for or represent the
Corporation, the Fund or Adviser in any way or
otherwise be deemed an agent of the Corporation, the
Fund or Adviser.
6. Compensation. Adviser will pay Subadviser a
fee for its services (the "Subadvisory Fee") at the
annual rate of 0.45 of 1% of the Fund's average daily
net assets. The Subadvisory Fee shall be accrued each
calendar day during the term of this Agreement and the
sum of the daily fee accruals shall be paid monthly as
soon as practicable following the last day of each
month. The daily fee accruals will be computed by
multiplying the fraction of 1/365 by the annual rate
and multiplying the product by the net asset value of
the Fund as determined in accordance with the
Corporation's registration statement as of the close of
business on the previous business day on which the Fund
was open for business, or in such other manner as the
parties agree.
7. Expenses. The Subadviser shall bear all
expenses incurred by it in connection with its services
under this Agreement other than the cost of securities,
commodities and other investments (including brokerage
commissions and other transaction charges, if any)
purchased
<PAGE>
by the Fund. In addition, the Subadviser
will, from time to time at its sole expense, employ such
persons, as it believes to be particularly fitted
to assist it in the execution of its duties hereunder.
The Subadviser shall not be responsible for the Fund's
or the Adviser's expenses. Specifically, Subadviser
will not be responsible for expenses of the Fund or the
Adviser, including, but not limited to, the following:
(a) charges and expenses for determining the Fund's net
asset value and the maintenance of the Fund's books and
records and related overhead; (b) the charges and
expenses of the Fund's lawyers and auditors; (c) the
charges and expenses of any custodian, transfer agent,
plan agent, dividend disbursing agent and/or
administrator appointed by the Fund; (d) brokers'
commissions, and issue and transfer taxes chargeable to
the Fund in connection with securities transactions to
which the Fund is a party; (e) insurance premiums,
interest charges, dues and fees for membership in trade
associations and all taxes and corporate fees payable
by the Fund to federal, state or other government
agencies; (f) fees and expenses required to be paid for
registration with the SEC, or any fees and expenses
required to be paid for the sale of Fund shares in any
state; (g) expenses related to shareholders' and
directors' meetings, and the preparation, printing and
distribution of prospectuses, proxy statements, reports
to shareholders and other Fund sales literature; (h)
distribution fees payable pursuant to rule 12b-1 under
the 1940 Act, if any; and (i) compensation payable to
the Fund's directors. The Fund or the Adviser shall
reimburse Subadviser for any such expenses or other
expenses of the Fund or the Adviser as may be
reasonably incurred by Subadviser on behalf of the Fund
or the Adviser. The Subadviser shall maintain and
provide to the Fund or the Adviser adequate records of
all such expenses.
8. Representations and Warranties of Subadviser.
Subadviser represents and warrants to Adviser, the
Corporation, and the Fund as follows:
(a) Subadviser is registered as an
investment adviser under the Advisers Act;
(b) Subadviser will not engage in any
futures transactions or options thereon on behalf of
the Fund prior to Subadviser filing a notice of
exemption pursuant to Rule 4.14 under the CEA with the
Commodity Futures Trading Commission (the "CFTC") and
the National Futures Association or becoming otherwise
qualified to act as a commodity trading advisor under
the CEA;
(c) Subadviser is a corporation duly
organized and validly existing under the laws of
Massachusetts with the power to carry on its business
as it is now being conducted;
(d) The execution, delivery and performance
by Subadviser of this Agreement are within its powers
and have been duly authorized by all necessary action
on the part of its members, and no action or filing
with any governmental body, agency or official is
required for the execution, delivery and performance of
this Agreement, and the execution, delivery and
performance by Subadviser of this Agreement do not
contravene or constitute a default under any provision
of applicable law, rule or regulation, Subadviser
governing instruments or any agreement, judgment,
injunction, order, decree or other instrument binding
upon Subadviser;
(e) This Agreement is a valid and binding
agreement of Subadviser;
<PAGE>
(f) Subadviser has provided its current (and
will provide all amendments thereto) Form ADV to
Adviser, and each Form ADV provided to Adviser is and
will be a true and complete copy of the form filed with
the SEC and, to the best of Subadviser's knowledge and
belief, after consultation with counsel, the
information contained therein is accurate and complete
in all material respects and does not omit to state any
material fact necessary in order to make the statements
made, in light of the circumstances under which they
were made, not misleading; and
(g) Subadviser has provided its Code of
Ethics to Adviser, and the Code of Ethics meets the
requirements of Rule 17j-1 under the 1940 Act. Within
30 calendar days of the Corporation's fiscal year-end,
the Sub-Adviser will (i) provide the Corporation's
Board of Directors with a written report that describes
issues that arose during the previous year under its
Code of Ethics, including information about material
Code violations and sanctions, and (ii) certify to the
Corporation's Board of Directors that it has adopted
procedures reasonably necessary to prevent its access
persons from violating its Code of Ethics.
9. Representations and Warranties of Adviser.
Adviser represents and warrants to Subadviser, as
follows:
(a) Adviser is registered as an investment
adviser under the Advisers Act;
(b) Adviser is a corporation duly organized
and validly existing under the laws of Illinois with
the power to carry on its business as it is now being
conducted;
(c) The execution, delivery and performance
by Adviser of this Agreement are within its powers and
have been duly authorized by all necessary action, and
Adviser has caused to be taken all necessary action
under the Advisory Agreement and the 1940 Act to
authorize the retention of Subadviser under this
Agreement, and no action or filing with any
governmental body, agency or official is required for
the execution, delivery and performance of this
Agreement;
(d) This Agreement is a valid and binding
agreement of Adviser and the Corporation on behalf of
the Fund; and
(e) Adviser has provided to Subadviser the
Corporation's current Registration Statement on Form N-
1A, and agrees to provide Subadviser with all
supplements or amendments thereto and to advise
Subadviser promptly in writing of any changes in the
Fund's investment policies or restrictions.
10. Survival of Representations and Warranties.
All representations and warranties made by Subadviser
pursuant to Section 8 will survive for the duration of
this Agreement, and Subadviser will immediately notify
Adviser and the Corporation in writing upon becoming
aware that any of the foregoing representations and
warranties are no longer true. In addition, Subadviser
will deliver to Adviser and the Fund copies of any
material amendments, supplements or updates to any of
the information provided to Adviser within 15 days
after becoming available.
<PAGE>
11. Liability and Indemnification.
(a) Liability. In the absence of willful
misfeasance, bad faith, gross negligence, or reckless
disregard on the part of the Subadviser of its duties
or obligations under this Agreement, the Subadviser
shall not be subject to any liability for errors of
judgment, mistake of law or for any loss suffered by
the Adviser, the Corporation, the Fund, or its
shareholders in connection with matters to which this
Agreement relates. In the absence of willful
misfeasance, bad faith, gross negligence, or reckless
disregard on the part of the Adviser of its duties or
obligations under this Agreement, the Adviser shall not
be subject to any liability to the Subadviser, for any
act or omission in the course of, or in connection
with, rendering services hereunder or for any losses
that may be sustained in the purchase, holding or sale
of Investments; provided, however, that nothing herein
shall relieve the Adviser or the Subadviser from any of
their respective obligations under applicable law,
including without limitation, federal and state
securities laws and the CEA.
(b) Indemnification. The Subadviser shall
indemnify the Adviser and the Corporation, and their
respective officers, directors and "controlling
persons" (within the meaning of Section 2(a)(9) of the
1940 Act), for any liability and expenses, including
reasonable attorneys' fees, which may be sustained as a
result of the Subadviser's willful misfeasance, bad
faith, gross negligence, or reckless disregard of its
duties or obligations hereunder or any violations of
applicable law, including, without limitation, federal
and state securities laws and the CEA. The Adviser
shall indemnify the Subadviser and its officers,
directors, and "controlling persons" (within the
meaning of Section 2(a)(9) of the 1940 Act) for any
liability and expenses, including reasonable attorneys'
fees, which may be sustained as a result of the
Adviser's willful misfeasance, bad faith, gross
negligence, or reckless disregard of its duties and
obligations hereunder or any violations of applicable
law, including, without limitation, federal and state
securities laws and the CEA.
12. Duration and Termination.
(a) Duration. This Agreement shall begin
for the Fund as of the date of execution hereof and
shall continue in effect for two years from the date of
this Agreement and thereafter for successive periods of
one year, subject to the provisions for termination and
all of the other terms and conditions hereof if such
continuation shall be specifically approved at least
annually (i) by the vote of a majority of the Board of
Directors of the Corporation, including a majority of
the directors who are not parties to this Agreement or
"interested persons" of any such party (as defined in
the 1940 Act), cast in person at a meeting called for
that purpose or (ii) by the vote of a majority of the
outstanding voting securities (as that phrase is
defined in Section 2(a)(42) of the 1940 Act) of the
Fund.
(b) Termination. Notwithstanding anything
to the contrary provided herein, this Agreement may be
terminated at any time, without payment of any penalty:
(i) by the vote of a majority of the Board of Directors
of the Corporation, by the vote of a majority of the
outstanding voting securities of the Fund or by
Adviser, in each case upon 60 days' written notice; or
(ii) by Subadviser upon 120 days written notice to
Adviser, the Corporation, and the
<PAGE>
Fund. This Agreement
shall also terminate automatically in the event of its
assignment (as defined in Section 2(a)(4) of the 1940
Act) or upon the termination of the Advisory Agreement.
13. Amendment. This Agreement may be amended by
the mutual consent of the parties, provided that the
terms of each such amendment shall be approved by (i)
the affirmative vote of a majority of the Board of
Directors of the Corporation cast in person at a
meeting called for that purpose, including a majority
of directors who are not "interested persons" of the
Fund or the Adviser, and (ii) if necessary, by a vote
of a majority of the outstanding voting securities of
the Fund. If such amendment is proposed in order to
comply with the requirements of the SEC, state
regulatory bodies or other governmental authorities, or
to expressly obtain any advantage for Adviser and
Subadviser under federal or state laws, Adviser will
notify Subadviser of the form of amendment which it
deems necessary or advisable and the reasons therefor,
and if Subadviser declines to assent to such amendment,
the Adviser may terminate this Agreement forthwith.
14. Confidentiality. Subject to the duties of
the Subadviser to comply with applicable laws,
including any demand of any regulatory or taxing
authority having jurisdiction or under compulsory
process of law, the Subadviser shall, during the term
of this Agreement and for a period of 5 years
thereafter, treat as confidential all non-public
information pertaining to the Fund and the actions of
the Subadviser, the Adviser and the Corporation in
respect thereof. Information disclosed in voluntary
and required reports to shareholders of the Corporation
and to regulatory authorities is deemed to be public
information.
15. Notice. Any notice that is required to be
given by the parties to each other under the terms of
this Agreement shall be in writing, delivered or mailed
postpaid to the other party, or transmitted by
facsimile with acknowledgment of receipt, to the
parties at their principal places of business, which
may from time to time be changed by the parties by
notice to the other party.
16. Governing Law. This Agreement is governed by
and construed in accordance with the laws of the United
States and the internal laws of the State of Illinois;
provided, however, that nothing herein shall be
construed in a manner that is inconsistent with the
1940 Act, the Advisers Act or the rules and regulations
promulgated with respect to such respective Acts.
17. Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall
together constitute one and the same instrument.
<PAGE>
18. Third-Party Rights. In addition to the
parties hereto, this Agreement is intended
to be for the benefit of the Corporation, which is
intended to be a third-party beneficiary hereunder and
may, as such, exercise such rights as if it were the
Adviser. With the exception of such parties, no other
party shall have any rights hereunder.
19. Severability. If any provision of this
Agreement is held or made invalid by a court decision
or applicable law, the remainder of the Agreement shall
not be affected adversely and shall remain in full
force and effect.
20. Miscellaneous. Any question of
interpretation of any term or provision of this
Agreement having a counterpart in or otherwise derived
from a term or provision of the 1940 Act shall be
resolved by reference to such term or provision of the
1940 Act and to interpretations thereof. Specifically,
as used in this Agreement, "investment company,"
"affiliated person," "interested person," "assignment,"
"broker," "dealer" and affirmative "vote of the
majority of the Fund's outstanding voting securities"
shall all have such meaning as such terms have in the
1940 Act. The term "investment adviser" shall have
such meaning as such term has in the Advisers Act or
the 1940 Act, as the case may be. In addition, where
the effect of a requirement of the 1940 Act reflected
in any provision of this Agreement is relaxed by a
rule, regulation or order of the SEC, such provision
shall be deemed to incorporate the effect of such rule,
regulation or order.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement on the day and year first
written above.
FRONTEGRA ASSET MANAGEMENT, INC.
on behalf of Frontegra Emerging Growth Fund
By: /s/ William D. Forsyth, III
--------------------------------
Its: Co-President
Attest: /s/ Ellen R. Drought
-----------------------------
BERENTS & HESS CAPITAL MANAGEMENT INCORPORATED
By: /s/ Herbert P. Hess
--------------------------------
Its: Managing Director
Attest: /s/ Joseph Cunningham, Jr.
------------------------------
Exhibit d.7
AMENDED EXPENSE CAP/REIMBURSEMENT AGREEMENT
This Agreement is entered into as of the 26th day
of February, 1999, as amended August 2, 1999, between
Frontegra Asset Management, Inc. (the "Adviser") and
Frontegra Funds, Inc. (the "Company") on behalf of the
Frontegra Total Return Bond Fund, Frontegra Opportunity
Fund and the Frontegra Growth Fund (collectively, the
"Funds").
WHEREAS, the Adviser has previously voluntarily
agreed to reduce its advisory fee and/or reimburse the
Funds for certain operating expenses to the extent
necessary to cap the Funds' total operating expenses at
certain levels.
WHEREAS, the Adviser now desires to contractually
agree to waive a portion of its advisory fee or
reimburse certain of the Funds' operating expenses to
ensure that the Funds' total operating expenses do not
exceed the levels described below.
NOW THEREFORE, the parties agree as follows:
The Adviser agrees that, for the term of this
Agreement, it will reduce its compensation as provided
for in the Investment Advisory Agreement between the
Funds and the Adviser dated October 30, 1996, and/or
assume expenses for the Funds to the extent necessary
to ensure that the Frontegra Total Return Bond Fund's
total operating expenses do not exceed 0.425%; the
Frontegra Opportunity Fund's total operating expenses
do not exceed 0.90% and the Frontegra Growth Fund's
total operating expenses do not exceed 0.80%, on an
annual basis of each Fund's average daily net assets.
The Adviser shall be entitled to recoup such
amounts for a period of up to three (3) years from the
date the Adviser reduced its compensation and/or
assumed expenses for the Funds.
This Agreement shall terminate on February 29,
2000 unless extended by the mutual agreement of the
parties, as provided for in an amendment to this
Agreement.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ William D. Forsyth, III
-------------------------------
William D. Forsyth, III
FRONTEGRA FUNDS, INC.
By: /s/ Thomas J. Holmberg, Jr.
--------------------------------
Thomas J. Holmberg, Jr.
Exhibit d.8
AMENDMENT TO EXPENSE CAP/REIMBURSEMENT AGREEMENT
This Amendment to the Amended Expense
Cap/Reimbursement Agreement (the "Agreement") entered
into as of the 26th day of February, 1999, and amended
August 2, 1999, is entered into as of the 31st day of
December 1999, between Frontegra Asset Management, Inc.
(the "Adviser") and Frontegra Funds, Inc. (the
"Company") on behalf of the Frontegra Total Return Bond
Fund, Frontegra Opportunity Fund and Frontegra Growth
Fund.
WHEREAS, the Agreement provides that it shall
terminate on February 29, 2000 unless extended by the
mutual agreement of the parties, as provided for in an
amendment to the Agreement;
WHEREAS, the parties to the Agreement wish to
extend the term of the Agreement until December 31, 2000.
NOW THEREFORE, the parties agree as follows:
Pursuant to this Amendment, the Agreement shall
terminate on December 31, 2000, unless extended by the
mutual agreement of the parties, as provided for in an
amendment to the Agreement.
All other provisions of the Agreement shall remain
in full force and effect.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ William D.Forsyth, III
----------------------------
William D. Forsyth, III
Co-President
FRONTEGRA FUNDS, INC.
By: /s/ Thomas J. Holmberg, Jr.
-----------------------------
Thomas J. Holmberg, Jr.
Co-President
Exhibit d.9
FRONTEGRA EMERGING GROWTH FUND
EXPENSE CAP/REIMBURSEMENT AGREEMENT
This Agreement is entered into as of the 31st day
of December, 1999, between Frontegra Asset Management,
Inc. (the "Adviser") and Frontegra Funds, Inc. (the
"Company") on behalf of the Frontegra Emerging Growth
Fund (the "Fund").
WHEREAS, the Adviser desires to contractually
agree to waive a portion of its advisory fee or
reimburse certain of the Fund's operating expenses to
ensure that the Fund's total operating expenses do not
exceed the level described below.
NOW THEREFORE, the parties agree as follows:
The Adviser agrees that, for the term of this
Agreement, it will reduce its compensation as provided
for in the Investment Advisory Agreement between the
Company and the Adviser dated October 30, 1996,
including Exhibit D dated December 31, 1999, and/or
assume certain expenses for the Fund to the extent
necessary to ensure that the Fund's total operating
expenses do not exceed 0.90% of the Fund's average
daily net assets on an annual basis.
The Adviser shall be entitled to recoup such
amounts for a period of up to three (3) years from the
date the Adviser reduced its compensation and/or
assumed expenses for the Fund.
This Agreement shall terminate on December 31,
2000 unless extended by the mutual agreement of the
parties, as provided for in an amendment to this
Agreement.
FRONTEGRA ASSET MANAGEMENT, INC.
By: /s/ William D. Forsyth, III
-------------------------------
William D. Forsyth, III
FRONTEGRA FUNDS, INC.
on behalf of Frontegra Emerging Growth Fund
By: /s/ Thomas J. Holmberg, Jr.
------------------------------
Thomas J. Holmberg, Jr.
Exhibit g.1
CUSTODIAN SERVICING AGREEMENT
THIS AGREEMENT made as of September 1, 1999,
between Frontegra Funds, Inc., a Maryland corporation
(hereinafter called the "Company"), and Firstar Bank
Milwaukee, N.A., a Wisconsin corporation (hereinafter
called "Custodian").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio; and
WHEREAS, the Company desires that the securities
and cash of each series of the Company listed on
Exhibit A attached hereto (each, a "Fund"), as may be
amended from time to time, shall be hereafter held and
administered by Custodian pursuant to the terms of this
Agreement.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Custodian agree
as follows:
1. Definitions
The word "securities" as used herein includes
stocks, shares, bonds, debentures, notes, mortgages or
other obligations, and any certificates, receipts,
warrants or other instruments representing rights to
receive, purchase or subscribe for the same, or
evidencing or representing any other rights or
interests therein, or in any property or assets.
The words "officers' certificate" shall mean a
request or direction or certification in writing signed
in the name of the Company by any two of a Co-
President, a Vice President, the Secretary and the
Treasurer of the Company, or any other persons duly
authorized to sign by the Board of Directors.
The word "Board" shall mean the Board of Directors
of the Company.
2. Names, Titles, and Signatures of the Company's Officers
An officer of the Company will certify to
Custodian the names and signatures of those persons
authorized to sign the officers' certificates described
in Section 1 hereof, and the names of the members of
the Board of Directors, together with any changes which
may occur from time to time.
<PAGE>
3. Receipt and Disbursement of Money
A. Custodian shall open and maintain a separate
account or accounts in the name of the Company, subject
only to draft or order by Custodian acting pursuant to
the terms of this Agreement. Custodian shall hold in
such account or accounts, subject to the provisions
hereof, all cash received by it from or for the account
of the Company. Custodian shall make payments of cash
to, or for the account of, the Company from such cash
only:
(a) for the purchase of securities for the
portfolio of the Fund upon the delivery
of such securities to Custodian,
registered in the name of the Company or
of the nominee of Custodian referred to
in Section 7 or in proper form for
transfer;
(b) for the purchase or redemption of shares
of the common stock of the Fund upon
delivery thereof to Custodian, or upon
proper instructions from the Company;
(c) for the payment of interest, dividends,
taxes, investment adviser's fees or
operating expenses (including, without
limitation thereto, fees for legal,
accounting, auditing and custodian
services, expenses for printing and
postage and payments under any Rule 12b-
1 plan);
(d) for payments in connection with the
conversion, exchange or surrender of
securities owned or subscribed to by the
Fund held by or to be delivered to
Custodian; or
(e) for other proper corporate purposes
certified by resolution of the Board of
Directors of the Company.
Before making any such payment, Custodian shall
receive (and may rely upon) an officers' certificate
requesting such payment and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), or (d) of this Subsection A, and also, in respect
of item (e), upon receipt of an officers' certificate
specifying the amount of such payment, setting forth
the purpose for which such payment is to be made,
declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such
payment is to be made, provided, however, that an
officers' certificate need not precede the disbursement
of cash for the purpose of purchasing a money market
instrument, or any other security with same or next-day
settlement, if a Co-President, a Vice President, the
Secretary or the Treasurer of the Company issues
appropriate oral or facsimile instructions to Custodian
and an appropriate officers' certificate is received by
Custodian within two business days thereafter.
B. Custodian is hereby authorized to endorse and
collect all checks, drafts or other orders for the
payment of money received by Custodian for the account
of the Company.
<PAGE>
C. Custodian shall, upon receipt of proper
instructions, make federal funds available to the
Company as of specified times agreed upon from time to
time by the Company and the Custodian in the amount of
checks received in payment for shares of the Fund which
are deposited into the Fund's account.
D. If so directed by the Company, Custodian will
invest any and all available cash in overnight cash-
equivalent investments as specified by the investment
manager.
4. Segregated Accounts
Upon receipt of proper instructions, the Custodian
shall establish and maintain a segregated account(s)
for and on behalf of the Fund, into which account(s)
may be transferred cash and/or securities.
5. Transfer, Exchange, Redelivery, etc. of Securities
Custodian shall have sole power to release or
deliver any securities of the Company held by it
pursuant to this Agreement. Custodian agrees to
transfer, exchange or deliver securities held by it
hereunder only:
(a) for sales of such securities for the account of
the Fund upon receipt by Custodian of payment
therefore;
(b) when such securities are called, redeemed or
retired or otherwise become payable;
(c) for examination by any broker selling any such
securities in accordance with "street
delivery" custom;
(d) in exchange for, or upon conversion into, other
securities alone or other securities and cash
whether pursuant to any plan of merger,
consolidation, reorganization, recapitalization
or readjustment, or otherwise;
(e) upon conversion of such securities pursuant to
their terms into other securities;
(f) upon exercise of subscription, purchase or
other similar rights represented by such
securities;
(g) for the purpose of exchanging interim receipts
or temporary securities for definitive
securities;
(h) for the purpose of redeeming in kind shares of
common stock of the Fund upon delivery
thereof to Custodian; or
(i) for other proper corporate purposes.
<PAGE>
As to any deliveries made by Custodian pursuant to
items (a), (b), (d), (e), (f), and (g), securities or
cash receivable in exchange therefor shall be
deliverable to Custodian.
Before making any such transfer, exchange or
delivery, Custodian shall receive (and may rely upon)
an officers' certificate requesting such transfer,
exchange or delivery, and stating that it is for a
purpose permitted under the terms of items (a), (b),
(c), (d), (e), (f), (g), or (h) of this Section 5 and
also, in respect of item (i), upon receipt of an
officers' certificate specifying the securities to be
delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be
made, provided, however, that an officers' certificate
need not precede any such transfer, exchange or
delivery of a money market instrument, or any other
security with same or next-day settlement, if a Co-
President, a Vice President, the Secretary or the
Treasurer of the Company issues appropriate oral or
facsimile instructions to Custodian and an appropriate
officers' certificate is received by Custodian within
two business days thereafter.
6. Custodian's Acts Without Instructions
Unless and until Custodian receives an officers'
certificate to the contrary, Custodian shall: (a)
present for payment all coupons and other income items
held by it for the account of the Fund, which call for
payment upon presentation and hold the cash received by
it upon such payment for the account of the Fund; (b)
collect interest and cash dividends received, with
notice to the Company, for the account of the Fund; (c)
hold for the account of the Fund hereunder all stock
dividends, rights and similar securities issued with
respect to any securities held by it hereunder; and (d)
execute, as agent on behalf of the Company, all
necessary ownership certificates required by the
Internal Revenue Code of 1986, as amended (the "Code")
or the Income Tax Regulations (the "Regulations") of
the United States Treasury Department (the "Treasury
Department") or under the laws of any state now or
hereafter in effect, inserting the Company's name on
such certificates as the owner of the securities
covered thereby, to the extent it may lawfully do so.
7. Registration of Securities
Except as otherwise directed by an officers'
certificate, Custodian shall register all securities,
except such as are in bearer form, in the name of a
registered nominee of Custodian as defined in the Code
and any Regulations of the Treasury Department issued
thereunder or in any provision of any subsequent
federal tax law exempting such transaction from
liability for stock transfer taxes, and shall execute
and deliver all such certificates in connection
therewith as may be required by such laws or
regulations or under the laws of any state. All
securities held by Custodian hereunder shall be at all
times identifiable in its records as being held in an
account or accounts of Custodian containing only the
assets of the Company.
The Company shall from time to time furnish to
Custodian appropriate instruments to enable Custodian
to hold or deliver in proper form for transfer, or to
register in the name of its
<PAGE>
registered nominee, any
securities which it may hold for the account of the
Company and which may from time to time be registered
in the name of the Company.
8. Voting and Other Action
Neither Custodian nor any nominee of Custodian
shall vote any of the securities held hereunder by or
for the account of the Fund, except in accordance with
the instructions contained in an officers' certificate.
Custodian shall deliver, or cause to be executed and
delivered, to the Company all notices, proxies and
proxy soliciting materials with respect to such
securities, such proxies to be executed by the
registered holder of such securities (if registered
otherwise than in the name of the Company), but without
indicating the manner in which such proxies are to be
voted.
9. Transfer Tax and Other Disbursements
The Company shall pay or reimburse Custodian from
time to time for any transfer taxes payable upon
transfers of securities made hereunder, and for all
other necessary and proper disbursements and expenses
made or incurred by Custodian in the performance of
this Agreement.
Custodian shall execute and deliver such
certificates in connection with securities delivered to
it or by it under this Agreement as may be required
under the provisions of the Code and any Regulations of
the Treasury Department issued thereunder, or under the
laws of any state, to exempt from taxation any exempt
transfers and/or deliveries of any such securities.
10. Concerning Custodian
Custodian shall be paid as compensation for its
services pursuant to this Agreement such compensation
as may from time to time be agreed upon in writing
between the two parties. Until modified in writing,
such compensation shall be as set forth in Exhibit A
attached hereto.
Custodian shall not be liable for any action taken
in good faith upon any certificate herein described or
certified copy of any resolution of the Board, and may
rely on the genuineness of any such document which it
may in good faith believe to have been validly
executed.
The Company agrees to indemnify and hold harmless
Custodian and its nominee from all taxes, charges,
expenses, assessments, claims and liabilities
(including reasonable counsel fees) incurred or
assessed against it or by its nominee in connection
with the performance of this Agreement, except such as
may arise from its or its nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct. Custodian is authorized to charge any
account of the Fund for such items. In the event of
any advance of cash for any purpose made by Custodian
resulting from orders or instructions of the Company,
or in the event that Custodian or its nominee shall
incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with
the performance of this Agreement, except such as may
arise from its or its
<PAGE>
nominee's own bad faith,
negligent action, negligent failure to act or willful
misconduct, any property at any time held for the
account of the Company shall be security therefor.
Custodian agrees to indemnify and hold harmless
the Company from all charges, expenses, assessments,
and claims/liabilities (including reasonable counsel
fees) incurred or assessed against it in connection
with the performance of this Agreement, except such as
may arise from the Fund's own bad faith, negligent
action, negligent failure to act, or willful
misconduct.
11. Subcustodians
Custodian is hereby authorized to engage another
bank or trust company as a subcustodian for all or any
part of the Company's assets, so long as any such bank
or trust company is itself qualified under the 1940 Act
and the rules and regulations thereunder and provided
further that, if the Custodian utilizes the services of
a subcustodian, the Custodian shall remain fully liable
and responsible for any losses caused to the Company by
the subcustodian as fully as if the Custodian was
directly responsible for any such losses under the
terms of this Agreement.
Notwithstanding anything contained herein, if the
Company requires the Custodian to engage specific
subcustodians for the safekeeping and/or clearing of
assets, the Company agrees to indemnify and hold
harmless Custodian from all claims, expenses and
liabilities incurred or assessed against it in
connection with the use of such subcustodian in regard
to the Company's assets, except as may arise from
Custodian's own bad faith, negligent action, negligent
failure to act or willful misconduct.
12. Reports by Custodian
Custodian shall furnish the Company periodically
as agreed upon with a statement summarizing all
transactions and entries for the account of Company.
Custodian shall furnish to the Company, at the end of
every month, a list of the portfolio securities for the
Fund showing the aggregate cost of each issue. The
books and records of Custodian pertaining to its
actions under this Agreement shall be open to
inspection and audit at reasonable times by officers
of, and by auditors employed by, the Company.
13. Termination or Assignment
This Agreement may be terminated by the Company,
or by Custodian, on ninety (90) days notice, given in
writing and sent by registered mail to:
Firstar Bank Milwaukee, N.A.
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
or to the Company at:
Frontegra Funds, Inc.
400 Skokie Boulevard, Suite 500
Northbrook, IL 60062-2815
Attn: William Forsyth
as the case may be. Upon any termination of this
Agreement, pending appointment of a successor to
Custodian or a vote of the shareholders of the Fund to
dissolve or to function without a custodian of its
cash, securities and other property, Custodian shall
not deliver cash, securities or other property of the
Fund to the Company, but may deliver them to a bank or
trust company of its own selection that meets the
requirements of the 1940 Act as a Custodian for the
Company to be held under terms similar to those of this
Agreement, provided, however, that Custodian shall not
be required to make any such delivery or payment until
full payment shall have been made by the Company of all
liabilities constituting a charge on or against the
properties then held by Custodian or on or against
Custodian, and until full payment shall have been made
to Custodian of all its fees, compensation, costs and
expenses, subject to the provisions of Section 10 of
this Agreement.
This Agreement may not be assigned by Custodian
without the consent of the Company, authorized or
approved by a resolution of its Board of Directors.
14. Deposits of Securities in Securities Depositories
No provision of this Agreement shall be deemed to
prevent the use by Custodian of a central securities
clearing agency or securities depository, provided,
however, that Custodian and the central securities
clearing agency or securities depository meet all
applicable federal and state laws and regulations, and
the Board of Directors of the Company approves by
resolution the use of such central securities clearing
agency or securities depository.
15. Records
Custodian shall keep records relating to its
services to be performed hereunder, in the form and
manner, and for such period, as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular Section 31 of the
1940 Act and the rules thereunder. Custodian agrees
that all such records prepared or maintained by the
Custodian relating to the services performed by
Custodian hereunder are the property of the Company and
will be preserved, maintained, and made available in
accordance with such section and rules of the 1940 Act
and will be promptly surrendered to the Company on and
in accordance with its request.
<PAGE>
16. Governing Law
This Agreement shall be governed by Wisconsin law.
However, nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
FRONTEGRA FUNDS, INC. FIRSTAR BANK MILWAUKEE, N.A.
By: /s/ William D. Forsyth, III By: /s/ Robert Kern
----------------------------- ---------------------------
Its: Co-President Its: Senior Vice President
----------------------------- ---------------------------
<PAGE>
Custody Services
Annual Fee Schedule - Domestic Funds
Exhibit A
Separate Series of Frontegra Funds, Inc.
Name of Series Date Added
--------------------------------------------
Frontegra Total Return Bond Fund September 1, 1999
Frontegra Opportunity Fund September 1, 1999
Frontegra Growth Fund September 1, 1999
Frontegra Emerging Growth Fund December 31, 1999
Annual fee based upon the Company's total market value
1 basis point on the first $100 million
0.75 basis points on the next $100 million
0.50 basis points on balance
Investment transactions (purchase, sale, exchange, tender, redemption,
maturity, receipt, delivery):
$12.00 per book entry security (depository or Federal Reserve system)
$25.00 per definitive security (physical)
$25.00 per mutual fund trade
$75.00 per Euroclear
$ 8.00 per principal reduction on pass-through certificates
$ 6.00 per short sale/liability transaction
$35.00 per option/futures contract
$15.00 per variation margin
$15.00 per Fed wire deposit or withdrawal
Variable Amount Demand Notes: Used as a short-term
investment, variable amount notes offer safety and
prevailing high interest rates. Our charge, which is
1/4 of 1%, is deducted from the variable amount note
income at the time it is credited to your account.
Plus out-of-pocket expenses, and extraordinary expenses
based upon complexity. Foreign securities custody
services quoted separately.
Fees and out-of-pocket expenses are billed to the Fund
monthly, based upon market value at the beginning of
the month.
Exhibit h.1
TRANSFER AGENT SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
1st day of September, 1999, by and between Frontegra
Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), and Firstar Mutual Fund
Services, LLC, a Wisconsin limited liability company
(hereinafter referred to as the "Firstar").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of
administering transfer and dividend disbursing agent
functions for investment companies; and
WHEREAS, the Company desires to retain Firstar to
provide transfer and dividend disbursing agent services
to each series of the Company listed on Exhibit A
attached hereto (each, a "Fund"), as may be amended
from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Transfer Agent
The Company hereby appoints Firstar as Transfer
Agent of the Company on the terms and conditions set
forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and
duties set forth in this Agreement in consideration of
the compensation provided for herein.
2. Duties and Responsibilities of Firstar
Firstar shall perform all of the customary
services of a transfer agent and dividend disbursing
agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including
without limitation any periodic investment plan or
periodic withdrawal program), including but not limited
to:
A. Receive orders for the purchase of shares;
B. Process purchase orders with prompt delivery,
where appropriate, of payment and supporting
documentation to the Company's custodian, and
issue the appropriate number of
uncertificated shares with such
uncertificated shares being held in the
appropriate shareholder account;
<PAGE>
C. Process redemption requests received in good
order and, where relevant, deliver
appropriate documentation to the Company's
custodian;
D. Pay monies upon receipt from the Company's
custodian, where relevant, in accordance with
the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with
the shareholder's instructions;
F. Process exchanges between funds and/or classes
of shares of funds both within the same
family of funds and with the Firstar Money
Market Funds, if applicable;
G. Prepare and transmit payments for dividends and
distributions declared by the Company with
respect to the Fund;
H. Make changes to shareholder records, including,
but not limited to, address changes in plans
(i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
I. Record the issuance of shares of the Fund and
maintain, pursuant to Rule 17ad-10(e)
promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), a
record of the total number of shares of the
Fund which are authorized, issued and
outstanding;
J. Prepare shareholder meeting lists and, if
applicable, mail, receive and tabulate proxies;
K. Mail shareholder reports and prospectuses to
current shareholders;
L. Prepare and file U.S. Treasury Department Forms
1099 and other appropriate information
returns required with respect to dividends
and distributions for all shareholders;
M. Provide shareholder account information upon
request and prepare and mail confirmations
and statements of account to shareholders for
all purchases, redemptions and other
confirmable transactions as agreed upon with
the Company;
N. Provide a Blue Sky System which will enable the
Company to monitor the total number of shares
of the Fund sold in each state. In addition,
the Company or its agent, including Firstar,
shall identify to Firstar in writing those
transactions and assets to be treated as
exempt from the Blue Sky reporting for each
state. The responsibility of Firstar for the
Company's Blue Sky state registration status
under this Agreement is solely limited to the
initial compliance by the Company and the
reporting of such transactions to the Company
or its agent.
<PAGE>
O. Answer telephone calls and correspondence from
shareholders relating to their accounts
during Firstar's normal business hours.
Firstar shall strive to promptly respond to
all such telephone or written inquiries from
shareholders. Copies of all correspondence
from shareholders involving complaints about
the management of the Company, services
provided by or for the Company, Firstar or
others, shall be promptly forwarded to the
Company. Firstar shall keep records of
substantive shareholder telephone calls and
correspondence and replies thereto, and of
the lapse of time between receipt of such
calls and correspondence and replies.
P. Prepare such reports as may be reasonably
requested from time to time by the Company or
its Board of Directors relating to fees paid
out under a Fund's Rule 12b-1 plan.
3. Compensation
The Company agrees to pay Firstar for the
performance of the duties listed in this Agreement as
set forth on Exhibit A attached hereto; the fees and
out-of-pocket expenses include, but are not limited to
the following: printing, postage, forms, stationery,
record retention (if requested by the Company),
mailing, insertion, programming (if requested by the
Company), labels, shareholder lists and proxy expenses.
If the Company elects to terminate this Agreement
within 3 years from the date of its execution, for
reasons other than unacceptable service levels
performed by or on behalf of Firstar, the Company
agrees to pay to Firstar $10,000 (ten thousand dollars)
which is the estimated amount of the costs incurred by
Firstar to convert the Company's records from its prior
transfer agent's system to Firstar's system.
These fees and reimbursable expenses may be
changed from time to time subject to mutual written
agreement between the Company and Firstar.
The Company agrees to pay all fees and
reimbursable expenses within ten (10) business days
following the receipt of the billing notice.
4. Representations of Firstar
Firstar represents and warrants to the Company that:
A. It is a limited liability company duly
organized, existing and in good standing
under the laws of Wisconsin;
B. It is a registered transfer agent under the
Exchange Act.
C. It is duly qualified to carry on its business in
the State of Wisconsin;
D. It is empowered under applicable laws and by its
charter and bylaws to enter into and perform
this Agreement;
<PAGE>
E. All requisite corporate proceedings have been
taken to authorize it to enter and perform
this Agreement;
F. It has and will continue to have access to the
necessary facilities, equipment and personnel
to perform its duties and obligations under
this Agreement; and
G. It will comply with all applicable requirements
of the Securities Act of 1933, as amended
(the "Securities Act"), and the Exchange Act,
the 1940 Act, and any laws, rules, and
regulations of governmental authorities
having jurisdiction.
5. Representations of the Company
The Company represents and warrants to Firstar that:
A. The Company is an open-end management investment
company under the 1940 Act;
B. The Company is a corporation organized,
existing, and in good standing under the laws
of Maryland;
C. The Company is empowered under applicable laws
and by its Articles of Incorporation and
Bylaws to enter into and perform this
Agreement;
D. All necessary proceedings required by the
Articles of Incorporation have been taken to
authorize it to enter into and perform this
Agreement;
E. The Company will comply with all applicable
requirements of the Securities Act, the
Exchange Act, the 1940 Act, and any laws,
rules and regulations of governmental
authorities having jurisdiction; and
F. A registration statement under the Securities
Act will be made effective and will remain
effective, and appropriate state securities
law filings have been made and will continue
to be made, with respect to all shares of the
Company being offered for sale.
6. Covenants of the Company and Firstar
The Company shall furnish Firstar a certified copy
of the resolution of the Board of Directors of the
Fund authorizing the appointment of Firstar and the
execution of this Agreement. The Company shall provide
to Firstar a copy of its Articles of Incorporation and
Bylaws, and all amendments thereto.
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner as it may deem advisable and as required under
the Exchange Act. To the extent
<PAGE>
required by Section 31 of the 1940 Act, and the rules
thereunder, Firstar agrees that all such records prepared
or maintained by Firstar relating to the services to be
performed by Firstar hereunder are the property of the
Company and will be preserved, maintained and made available
in accordance with such section and rules and will be
surrendered to the Company on and in accordance with
its request.
7. Performance of Service; Limitation of Liability
Firstar shall exercise reasonable care in the
performance of its duties under this Agreement.
Firstar shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication
or power supplies beyond Firstar's control, except a
loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement,
the Company shall indemnify and hold harmless Firstar
from and against any and all claims, demands, losses,
expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which Firstar
may sustain or incur or which may be asserted against
Firstar by any person arising out of any action taken
or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized
officer of the Company, such duly authorized officer to
be included in a list of authorized officers furnished
to Firstar and as amended from time to time in writing
by resolution of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the
Company may sustain or incur or which may be asserted
against the Company by any person arising out of any
action taken or omitted to be taken by Firstar as a
result of Firstar's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence,
or willful misconduct.
In the event of a mechanical breakdown or failure
of communication or power supplies beyond its control,
Firstar shall take all reasonable steps to minimize
service interruptions for any period that such
interruption continues beyond Firstar's control.
Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of
Firstar. Firstar agrees that it shall, at all times,
have reasonable contingency plans with appropriate
parties, making reasonable provision for emergency use
of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of
the Company shall be entitled to inspect Firstar's
premises and operating capabilities at any time during
regular business hours of Firstar, upon reasonable
notice to Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative errors at
its own expense.
<PAGE>
In order that the indemnification provisions
contained in this section shall apply, it is understood
that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the
indemnitor shall be fully and promptly advised of all
pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will
use all reasonable care to notify the indemnitor
promptly concerning any situation which presents or
appears likely to present the probability of a claim
for indemnification. The indemnitor shall have the
option to defend the indemnitee against any claim which
may be the subject of this indemnification. In the
event that the indemnitor so elects, it will so notify
the indemnitee and thereupon the indemnitor shall take
over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification
under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in
which the indemnitor will be asked to indemnify the
indemnitee except with the indemnitor's prior written
consent.
8. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders (and clients of said shareholders) and not
to use such records and information for any purpose
other than the performance of its responsibilities and
duties hereunder, except after prior notification to
and approval in writing by the Company, which approval
shall not be unreasonably withheld and may not be
withheld where Firstar may be exposed to civil or
criminal contempt proceedings for failure to comply
after being requested to divulge such information by
duly constituted authorities, or when so requested by
the Company.
9. Term of Agreement; Amendment
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. The Agreement may be
terminated by either party upon giving sixty (60) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties. This
Agreement may be amended only by mutual written consent
of the parties.
10. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
and notice to the Company shall be sent to:
Frontegra Funds, Inc.
400 Skokie Boulevard, Suite 500
Northbrook, IL 60062-2815
Attn: William Forsyth
11. Duties in the Event of Termination
In the event that, in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the
Company, transfer to such successor all relevant books,
records, correspondence, and other data established or
maintained by Firstar under this Agreement in a form
reasonably acceptable to the Company (if such form
differs from the form in which Firstar has maintained,
the Company shall pay any expenses associated with
transferring the data to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records, and
other data by such successor.
12. Governing Law
This Agreement shall be construed and the
provisions thereof interpreted under and in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
FRONTEGRA FIRSTAR MUTUAL FUND
FUNDS, INC. SERVICES, LLC
By: /s/ William D. Forsyth, III By: /s/ Robert Kern
---------------------------- ---------------------------
Its: Co-President Its: Senior Vice President
---------------------------- ---------------------------
<PAGE>
Transfer Agent and Shareholder Servicing
Annual Fee Schedule
Exhibit A
Separate Series of Frontegra Funds, Inc.
Name of Series Date Added
----------------------------------------------
Frontegra Total Return Bond Fund September 1, 1999
Frontegra Opportunity Fund September 1, 1999
Frontegra Growth Fund September 1, 1999
Frontegra Emerging Growth Fund December 31, 1999
Annual Fee
$14.00 per shareholder account
Minimum annual fees of $8,000 per Fund until
the Fund exceeds 150 accounts, at which time
the minimum annual fee will increase to
$12,000 per Fund
Additional funds or classes, $10,000 per year
Plus Out-of-Pocket Expenses, including but not limited to:
Telephone - toll-free lines Proxies
Postage Retention of records
Programming (with prior approval) (with prior approval)
Microfilm/fiche of records
Stationery/envelopes Special reports
Mailing ACH fees
Insurance
ACH Shareholder Services
$125.00 per month per Fund group
$ .50 per account setup and/or change
$ .50 per ACH item
$ 5.00 per correction, reversal, return item
Draft Check Processing
$1.00 per draft
File Transfer
$160/month plus $.01 per record
Daily Valuation Trades
$6.75 per trade (non-automated)
<PAGE>
Extraordinary Services-quoted separately
Qualified Plan Fees (Billed to Investors)
Annual maintenance fee per account $12.50/acct. (Cap at $25.00 per SSN)
Transfer to successor trustee $15.00/trans.
Distribution to participant $15.00/trans. (Exclusive of SWP)
Refund of excess contribution $15.00/trans.
Education IRA $ 5.00/acct. (Cap at $25.00 per SSN)
Additional Shareholder Fees (Billed to Investors)
Any outgoing wire transfer $12.00 / wire
Telephone Exchange $ 5.00 / exchange transaction
Return check fee $25.00 / item
Stop payment $20.00 / stop
(Liquidation, dividend, draft check)
Research fee $ 5.00 / item
(For requested items of the second calendar
year [or previous] to the request)(Cap at $25.00)
Exhibit h.2
FUND ADMINISTRATION SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
1st day of September, 1999, by and between Frontegra
Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company"), and Firstar Mutual Fund
Services, LLC, a Wisconsin limited liability company
(hereinafter referred to as "Firstar").
WHEREAS, the Company is an open-end management
investment company which is registered under the
Investment Company Act of 1940, as amended (the "1940
Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of providing,
among other things, fund administration services to
investment companies; and
WHEREAS, the Company desires to retain Firstar to
act as Administrator for each series of the Company
listed on Exhibit A attached hereto (each, a "Fund"),
as may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Administrator
The Company hereby appoints Firstar as
Administrator of the Company on the terms and
conditions set forth in this Agreement, and Firstar
hereby accepts such appointment and agrees to perform
the services and duties set forth in this Agreement in
consideration of the compensation provided for herein.
2. Duties and Responsibilities of Firstar
A. General Fund Management
1. Act as liaison among all Fund service providers
2. Coordinate board communication by:
a. Assisting Company counsel in establishing meeting agendas
b. Preparing board reports based on financial and
administrative data
c. Evaluating independent auditor
<PAGE>
d. Securing and monitoring fidelity bond and director and
officer liability coverage, and making the necessary
SEC filings relating thereto
e. Preparing minutes of meetings of the board and shareholders
3. Audits
a. Prepare appropriate schedules and assist independent auditors
b. Provide information to SEC and facilitate audit process
c. Provide office facilities
4. Assist in overall operations of the Fund
5. Pay Fund expenses upon written authorization from the Company
B. Compliance
1. Regulatory Compliance
a. Monitor compliance with 1940 Act requirements, including:
1) Asset diversification tests
2) Total return and SEC yield calculations
3) Maintenance of books and records under Rule 31a-3
4) Code of Ethics for the disinterested directors
of the Fund
b. Monitor Fund's compliance with the policies and
investment limitations of the Company as set forth in its
Prospectus and Statement of Additional Information
2. Blue Sky Compliance
a. Prepare and file with the appropriate state securities
authorities any and all required compliance filings
relating to the registration of the securities of the
Company so as to enable the Company to make a
continuous offering of its shares in all states
b. Monitor status and maintain registrations in each state
3. SEC Registration and Reporting
a. Assist Company counsel in updating Prospectus and
Statement of Additional Information and in
preparing proxy statements and Rule 24f-2 notices
b. Prepare annual and semiannual reports
<PAGE>
c. Coordinate the printing of publicly
disseminated Prospectuses and reports
d. File fidelity bond under Rule 17g-1
e. File shareholder reports under Rule 30b2-1
4. IRS Compliance
a. Monitor Company's status as a regulated investment
company under Subchapter M through review of the following:
1) Asset diversification requirements
2) Qualifying income requirements
3) Distribution requirements
b. Calculate required distributions
(including excise tax distributions)
C. Financial Reporting
1. Provide financial data required by Fund's
Prospectus and Statement of Additional Information
2. Prepare financial reports for shareholders,
the board, the SEC, and independent auditors
3. Supervise the Company's Custodian and Company Accountants
in the maintenance of the Company's general ledger and in
the preparation of the Fund's financial statements, including
oversight of expense accruals and payments, of the
determination of net asset value of the Company's net assets
and of the Company's shares, and of the declaration
and payment of dividends and other distributions to shareholders
D. Tax Reporting
1. Prepare and file on a timely basis appropiate federal and state
tax returns including Forms 1120/8610 with any necessary schedules
2. Prepare state income breakdowns where relevant
3. File Form 1099 Miscellaneous for payments
to directors and other service providers
4. Monitor wash losses
5. Calculate eligible dividend income for corporate shareholders
<PAGE>
3. Compensation
The Company, on behalf of the Fund, agrees to pay
Firstar for the performance of the duties listed in
this Agreement, the fees and out-of-pocket expenses as
set forth in the Fund Accounting Servicing Agreement
dated as of September 1, 1999, between the Company and
Firstar.
These fees may be changed from time to time,
subject to mutual written Agreement between the Company
and Firstar.
The Company agrees to pay all fees and
reimbursable expenses within ten (10) business days
following the receipt of the billing notice.
4. Performance of Service; Limitation of Liability
A. Firstar shall exercise reasonable care in the
performance of its duties under this Agreement.
Firstar shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the
Company in connection with matters to which this
Agreement relates, including losses resulting from
mechanical breakdowns or the failure of communication
or power supplies beyond Firstar's control, except a
loss resulting from Firstar's refusal or failure to
comply with the terms of this Agreement or from bad
faith, negligence, or willful misconduct on its part in
the performance of its duties under this Agreement.
Notwithstanding any other provision of this Agreement,
the Company shall indemnify and hold harmless Firstar
from and against any and all claims, demands, losses,
expenses, and liabilities (whether with or without
basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which Firstar
may sustain or incur or which may be asserted against
Firstar by any person arising out of any action taken
or omitted to be taken by it in performing the services
hereunder (i) in accordance with the foregoing
standards, or (ii) in reliance upon any written or oral
instruction provided to Firstar by any duly authorized
officer of the Company, such duly authorized officer to
be included in a list of authorized officers furnished
to Firstar and as amended from time to time in writing
by resolution of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims, demands,
losses, expenses, and liabilities (whether with or
without basis in fact or law) of any and every nature
(including reasonable attorneys' fees) which the
Company may sustain or incur or which may be asserted
against the Company by any person arising out of any
action taken or omitted to be taken by Firstar as a
result of Firstar's refusal or failure to comply with
the terms of this Agreement, its bad faith, negligence,
or willful misconduct.
In the event of a mechanical breakdown or
failure of communication or power supplies beyond its
control, Firstar shall take all reasonable steps to
minimize service interruptions for any period that such
interruption continues beyond Firstar's control.
Firstar will make every reasonable effort to restore
any lost or damaged data and correct any errors
resulting from such a breakdown at the expense of
Firstar. Firstar agrees that it shall, at all times,
have reasonable contingency plans with appropriate
parties, making reasonable provision for
<PAGE>
emergency use
of electrical data processing equipment to the extent
appropriate equipment is available. Representatives of
the Company shall be entitled to inspect Firstar's
premises and operating capabilities at any time during
regular business hours of Firstar, upon reasonable
notice to Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative errors at
its own expense.
B. In order that the indemnification provisions
contained in this section shall apply, it is understood
that if in any case the indemnitor may be asked to
indemnify or hold the indemnitee harmless, the
indemnitor shall be fully and promptly advised of all
pertinent facts concerning the situation in question,
and it is further understood that the indemnitee will
use all reasonable care to notify the indemnitor
promptly concerning any situation which presents or
appears likely to present the probability of a claim
for indemnification. The indemnitor shall have the
option to defend the indemnitee against any claim which
may be the subject of this indemnification. In the
event that the indemnitor so elects, it will so notify
the indemnitee and thereupon the indemnitor shall take
over complete defense of the claim, and the indemnitee
shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification
under this section. The indemnitee shall in no case
confess any claim or make any compromise in any case in
which the indemnitor will be asked to indemnify the
indemnitee except with the indemnitor's prior written
consent.
5. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the performance
of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be
exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such
information by duly constituted authorities, or when so
requested by the Company.
6. Data Necessary to Perform Services
The Company or its agent, which may be Firstar,
shall furnish to Firstar the data necessary to perform
the services described herein at times and in such form
as mutually agreed upon.
7. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. The Agreement may be
terminated by either party upon giving ninety (90) days
prior
<PAGE>
written notice to the other party or such shorter
period as is mutually agreed upon by the parties.
However, this Agreement may be amended by mutual
written consent of the parties.
8. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
and notice to the Company shall be sent to:
Frontegra Funds, Inc.
400 Skokie Boulevard, Suite 500
Northbrook, IL 60062-2815
Attn: William Forsyth
9. Duties in the Event of Termination
In the event that, in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the
Company, transfer to such successor all relevant books,
records, correspondence, and other data established or
maintained by Firstar under this Agreement in a form
reasonably acceptable to the Company (if such form
differs from the form in which Firstar has maintained,
the Company shall pay any expenses associated with
transferring the data to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records, and
other data by such successor.
10. Governing Law
This Agreement shall be construed and the
provisions thereof interpreted under and in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the Securities and Exchange
Commission thereunder.
11. Records
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular, Section 31 of
the 1940 Act and the rules thereunder. Firstar agrees
that all such records prepared or maintained by Firstar
relating to the services to be performed by Firstar
hereunder are the property of the Company and will be
preserved, maintained, and made
<PAGE>
available in accordance with such section and rules of the
1940 Act and will be promptly surrendered to the Company
on and in accordance with its request.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
FRONTEGRA FUNDS, INC. FIRSTAR MUTUAL FUND
SERVICES, LLC
By: /s/ William D. Forsyth, III By: /s/ Robert Kern
----------------------------- ----------------------------
Its: Co-President Its: Senior Vice President
----------------------------- ----------------------------
<PAGE>
Fund Administration Servicing Agreement
Exhibit A
Separate Series of Frontegra Funds, Inc.
Name of Series Date Added
---------------------------------------------
Frontegra Total Return Bond Fund September 1, 1999
Frontegra Opportunity Fund September 1, 1999
Frontegra Growth Fund September 1, 1999
Frontegra Emerging Growth Fund December 31, 1999
Exhibit h.3
FUND ACCOUNTING SERVICING AGREEMENT
THIS AGREEMENT is made and entered into as of this
1st day of September, 1999, by and between Frontegra
Funds, Inc., a Maryland corporation (hereinafter
referred to as the "Company") and Firstar Mutual Fund
Services, LLC, a Wisconsin limited liability company
(hereinafter referred to as "Firstar").
WHEREAS, the Company is an open-end management
investment company registered under the Investment
Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company is authorized to create
separate series, each with its own separate investment
portfolio;
WHEREAS, Firstar is in the business of providing,
among other things, mutual fund accounting services to
investment companies; and
WHEREAS, the Company desires to retain Firstar to
provide accounting services to each series of the
Company listed on Exhibit A attached hereto (each, a
"Fund"), as it may be amended from time to time.
NOW, THEREFORE, in consideration of the mutual
agreements herein made, the Company and Firstar agree
as follows:
1. Appointment of Fund Accountant
The Company hereby appoints Firstar as Fund
Accountant of the Company on the terms and conditions
set forth in this Agreement, and Firstar hereby accepts
such appointment and agrees to perform the services and
duties set forth in this Agreement in consideration of
the compensation provided for herein.
2. Duties and Responsibilities of Firstar
A. Portfolio Accounting Services:
(1) Maintain portfolio records on a trade
date +1 basis using security trade information
communicated from the adviser or sub-adviser.
(2) For each valuation date, obtain prices
from a pricing source approved by the Board of
Directors of the Company and apply those prices to
the portfolio positions. For those securities
where market quotations are not readily available,
the Board of Directors of the Company shall
approve, in good faith, the method for determining
the fair value for such securities.
<PAGE>
(3) Identify interest and dividend accrual
balances as of each valuation date and calculate
gross earnings on investments for the accounting
period.
(4) Determine gain/loss on security sales
and identify them as, short-term or long-term;
account for periodic distributions of gains or
losses to shareholders and maintain undistributed
gain or loss balances as of each valuation date.
B. Expense Accrual and Payment Services:
(1) For each valuation date, calculate the
expense accrual amounts as directed by the Company
as to methodology, rate or dollar amount.
(2) Record payments for Fund expenses upon
receipt of written authorization from the Company.
(3) Account for Fund expenditures and
maintain expense accrual balances at the level of
accounting detail, as agreed upon by Firstar and
the Company.
(4) Provide expense accrual and payment reporting.
C. Fund Valuation and Financial Reporting Services:
(1) Account for Fund share purchases, sales,
exchanges, transfers, dividend reinvestments, and
other Fund share activity as reported by the
transfer agent on a timely basis.
(2) Apply equalization accounting as
directed by the Company.
(3) Determine net investment income
(earnings) for the Fund as of each valuation date.
Account for periodic distributions of earnings to
shareholders and maintain undistributed net
investment income balances as of each valuation
date.
(4) Maintain a general ledger and other
accounts, books, and financial records for the
Fund in the form as agreed upon.
(5) Determine the net asset value of the
Fund according to the accounting policies and
procedures set forth in the Fund's Prospectus.
(6) Calculate per share net asset value, per
share net earnings, and other per share amounts
reflective of Fund operations at such time as
required by the nature and characteristics of the
Fund.
(7) Communicate, at an agreed upon time, the
per share price for each valuation date to parties
as agreed upon from time to time.
<PAGE>
(8) Prepare monthly reports which document
the adequacy of accounting detail to support month-
end ledger balances.
D. Tax Accounting Services:
(1) Maintain accounting records for the
investment portfolio of the Fund to support the
tax reporting required for IRS-defined regulated
investment companies.
(2) Maintain tax lot detail for the
investment portfolio.
(3) Calculate taxable gain/loss on security
sales using the tax lot relief method designated
by the Company.
(4) Provide the necessary financial
information to support the taxable components of
income and capital gains distributions to the
transfer agent to support tax reporting to the
shareholders.
E. Compliance Control Services:
(1) Support reporting to regulatory bodies
and support financial statement preparation by
making the Fund's accounting records available to
the Company, the Securities and Exchange
Commission, and the outside auditors.
(2) Maintain accounting records according to
the 1940 Act and regulations provided thereunder.
3. Pricing of Securities
For each valuation date, obtain prices from a
pricing source selected by Firstar but approved by the
Company's Board of Directors and apply those prices to
the portfolio positions of the Fund. For those
securities where market quotations are not readily
available, the Company's Board of Directors shall
approve, in good faith, the method for determining the
fair value for such securities.
If the Company desires to provide a price which
varies from the pricing source, the Company shall
promptly notify and supply Firstar with the valuation
of any such security on each valuation date. All
pricing changes made by the Company will be in writing
and must specifically identify the securities to be
changed by CUSIP, name of security, new price or rate
to be applied, and, if applicable, the time period for
which the new price(s) is/are effective.
4. Changes in Accounting Procedures
Any resolution passed by the Board of Directors of
the Company that affects accounting practices and
procedures under this Agreement shall be effective upon
written receipt and acceptance by the Firstar.
<PAGE>
5. Changes in Equipment, Systems, Service, Etc.
Firstar reserves the right to make changes from
time to time, as it deems advisable, relating to its
services, systems, programs, rules, operating schedules
and equipment, so long as such changes do not adversely
affect the service provided to the Company under this
Agreement.
6. Compensation
Firstar shall be compensated for providing the
services set forth in this Agreement in accordance with
the Fee Schedule attached hereto as Exhibit A and as
mutually agreed upon and amended from time to time.
The Company agrees to pay all fees and reimbursable
expenses within ten (10) business days following the
receipt of the billing notice.
7. Performance of Service; Limitation of Liability
A. Firstar shall exercise reasonable care
in the performance of its duties under this
Agreement. Firstar shall not be liable for any
error of judgment or mistake of law or for any
loss suffered by the Company in connection with
matters to which this Agreement relates, including
losses resulting from mechanical breakdowns or the
failure of communication or power supplies beyond
Firstar's control, except a loss resulting from
Firstar's refusal or failure to comply with the
terms of this Agreement or from bad faith,
negligence, or willful misconduct on its part in
the performance of its duties under this
Agreement. Notwithstanding any other provision of
this Agreement, the Company shall indemnify and
hold harmless Firstar from and against any and all
claims, demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which Firstar may sustain or
incur or which may be asserted against Firstar by
any person arising out of any action taken or
omitted to be taken by it in performing the
services hereunder (i) in accordance with the
foregoing standards, or (ii) in reliance upon any
written or oral instruction provided to Firstar by
any duly authorized officer of the Company, such
duly authorized officer to be included in a list
of authorized officers furnished to Firstar and as
amended from time to time in writing by resolution
of the Board of Directors of the Company.
Firstar shall indemnify and hold the Company
harmless from and against any and all claims,
demands, losses, expenses, and liabilities
(whether with or without basis in fact or law) of
any and every nature (including reasonable
attorneys' fees) which the Company may sustain or
incur or which may be asserted against the Company
by any person arising out of any action taken or
omitted to be taken by Firstar as a result of
Firstar's refusal or failure to comply with the
terms of this Agreement, its bad faith,
negligence, or willful misconduct.
In the event of a mechanical breakdown or
failure of communication or power supplies beyond
its control, Firstar shall take all reasonable
steps to minimize service interruptions for any
period that such interruption continues beyond
Firstar's control.
<PAGE>
Firstar will make every
reasonable effort to restore any lost or damaged
data and correct any errors resulting from such a
breakdown at the expense of Firstar. Firstar
agrees that it shall, at all times, have
reasonable contingency plans with appropriate
parties, making reasonable provision for emergency
use of electrical data processing equipment to the
extent appropriate equipment is available.
Representatives of the Company shall be entitled
to inspect Firstar's premises and operating
capabilities at any time during regular business
hours of Firstar, upon reasonable notice to
Firstar.
Regardless of the above, Firstar reserves the
right to reprocess and correct administrative
errors at its own expense.
B. In order that the indemnification
provisions contained in this section shall apply,
it is understood that if in any case the
indemnitor may be asked to indemnify or hold the
indemnitee harmless, the indemnitor shall be fully
and promptly advised of all pertinent facts
concerning the situation in question, and it is
further understood that the indemnitee will use
all reasonable care to notify the indemnitor
promptly concerning any situation which presents
or appears likely to present the probability of a
claim for indemnification. The indemnitor shall
have the option to defend the indemnitee against
any claim which may be the subject of this
indemnification. In the event that the indemnitor
so elects, it will so notify the indemnitee and
thereupon the indemnitor shall take over complete
defense of the claim, and the indemnitee shall in
such situation initiate no further legal or other
expenses for which it shall seek indemnification
under this section. Indemnitee shall in no case
confess any claim or make any compromise in any
case in which the indemnitor will be asked to
indemnify the indemnitee except with the
indemnitor's prior written consent.
8. No Agency Relationship
Nothing herein contained shall be deemed to
authorize or empower Firstar to act as agent for the
other party to this Agreement, or to conduct business
in the name of, or for the account of the other party
to this Agreement.
9. Records
Firstar shall keep records relating to the
services to be performed hereunder, in the form and
manner, and for such period as it may deem advisable
and is agreeable to the Company but not inconsistent
with the rules and regulations of appropriate
government authorities, in particular, Section 31 of
the 1940 Act, and the rules thereunder. Firstar agrees
that all such records prepared or maintained by Firstar
relating to the services to be performed by Firstar
hereunder are the property of the Company and will be
preserved, maintained, and made available in accordance
with such section and rules of the 1940 Act and will be
promptly surrendered to the Company on and in
accordance with its request.
10. Data Necessary to Perform Services
<PAGE>
The Company or its agent, which may be Firstar,
shall furnish to Firstar the data necessary to perform
the services described herein at such times and in such
form as mutually agreed upon. If Firstar is also
acting as the transfer agent for the Company, nothing
herein shall be deemed to relieve Firstar of any of its
obligations under the Transfer Agent Servicing
Agreement.
11. Notification of Error
The Company will notify Firstar of any balancing
or control error caused by Firstar within three (3)
business days after receipt of any reports rendered by
Firstar to the Company, or within three (3) business
days after discovery of any error or omission not
covered in the balancing or control procedure, or
within three (3) business days of receiving notice from
any shareholder.
12. Proprietary and Confidential Information
Firstar agrees on behalf of itself and its
directors, officers, and employees to treat
confidentially and as proprietary information of the
Company all records and other information relative to
the Company and prior, present, or potential
shareholders of the Company (and clients of said
shareholders), and not to use such records and
information for any purpose other than the performance
of its responsibilities and duties hereunder, except
after prior notification to and approval in writing by
the Company, which approval shall not be unreasonably
withheld and may not be withheld where Firstar may be
exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such
information by duly constituted authorities, or when so
requested by the Company.
13. Term of Agreement
This Agreement shall become effective as of the
date hereof and, unless sooner terminated as provided
herein, shall continue automatically in effect for
successive annual periods. This Agreement may be
terminated by either party upon giving sixty (60) days
prior written notice to the other party or such shorter
period as is mutually agreed upon by the parties.
However, this Agreement may be replaced or modified by
a subsequent agreement between the parties.
14. Notices
Notices of any kind to be given by either party to
the other party shall be in writing and shall be duly
given if mailed or delivered as follows: Notice to
Firstar shall be sent to:
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
<PAGE>
and notice to the Company shall be sent to:
Frontegra Funds, Inc.
400 Skokie Boulevard, Suite 500
Northbrook, IL 60062-2815
Attn: William Forsyth
15. Duties in the Event of Termination
In the event that in connection with termination,
a successor to any of Firstar's duties or
responsibilities hereunder is designated by the Company
by written notice to Firstar, Firstar will promptly,
upon such termination and at the expense of the Company
transfer to such successor all relevant books, records,
correspondence and other data established or maintained
by Firstar under this Agreement in a form reasonably
acceptable to the Company (if such form differs from
the form in which Firstar has maintained the same, the
Company shall pay any expenses associated with
transferring the same to such form), and will cooperate
in the transfer of such duties and responsibilities,
including provision for assistance from Firstar's
personnel in the establishment of books, records and
other data by such successor.
16. Governing Law
This Agreement shall be construed in accordance
with the laws of the State of Wisconsin. However,
nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or
regulation promulgated by the SEC thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by a duly authorized
officer in one or more counterparts as of the day and
year first written above.
FRONTEGRA FIRSTAR MUTUAL FUND
FUNDS, INC. SERVICES, LLC
By: /s/ William D. Forsyth, III By: /s/ Robert Kern
----------------------------- --------------------------
Its: Co-President Its: Senior Vice President
----------------------------- --------------------------
<PAGE>
Fund Accounting and Fund
Administration Services
Annual Fee Schedule
Exhibit A
Separate Series of Frontegra Funds, Inc.
Name of Series Date Added
Frontegra Total Return Bond Fund September 1, 1999
Frontegra Opportunity Fund September 1, 1999
Frontegra Growth Fund September 1, 1999
Frontegra Emerging Growth Fund December 31, 1999
.14 of 1% (14 basis points) on the first $50 million per Fund
.04 of 1% (4 basis points) on the next $450 million per Fund
.03 of 1% (3 basis points) on the average net assets exceeding
$500 million per Fund
Minimum annual fee of $48,000 per Fund
The Frontegra Growth Fund and any additional series
will receive a 10% discount for the first six (6) months
Plus out-of-pocket expense reimbursements, including but not limited to:
Postage
Programming
Stationery
Proxies, Insurance
Retention of records
Special reports
Federal and state regulatory filing fees
Certain insurance premiums
Expenses from board of directors meetings
Auditing and legal expenses
Fees and out-of-pocket expenses are billed to the Fund monthly.
Exhibit i.3
G O D F R E Y & K A H N, S. C.
ATTORNEYS AT LAW
780 NORTH WATER STREET
MILWAUKEE, WI 53202-3590
www.gklaw.com
PHONE: 414-273-3500 FAX: 414-273-5198
December 15, 1999
Frontegra Funds, Inc.
400 Skokie Blvd., Suite 500
Northbrook, IL 60062
RE: Frontegra Emerging Growth Fund
Gentlemen:
We have acted as your counsel in connection with the
preparation of Post-Effective Amendment No. 8 to the Registration
Statement on Form N-1A (Registration Nos. 333-7305; 811-7685)
(the "Registration Statement") relating to the sale by you of
fifty million (50,000,000) shares of Common Stock, $0.01 par
value (the "Shares"), of the Frontegra Emerging Growth Fund, a
series of Frontegra Funds, Inc. (the "Company"), in the manner
set forth in the Registration Statement (and the prospectus
included therein).
We have examined: (a) the Registration Statement (and the
prospectus included therein), (b) the Company's Articles of
Incorporation, as supplemented, and Bylaws, (c) certain
resolutions of the Company's Board of Directors, and (d) such
other proceedings, documents and records we have deemed necessary
to render this opinion.
Based upon the foregoing, we are of the opinion that the
Shares, once sold as contemplated in the Registration Statement,
will be duly authorized and validly issued, fully paid and non-
assessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement. In giving this consent, however, we do
not admit that we are "experts" within the meaning of Section 11
of the Securities Act of 1933, as amended, or within the category
of persons whose consent is required by Section 7 of said Act.
Very truly yours,
/s/ Godfrey & Kahn, S. C.
GODFREY & KAHN, S.C.
Exhibit j
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the
captions "Financial Highlights," "Independent Auditors"
and "Financial Statements" and to the use of our
reports dated July 21, 1999 for the Frontegra Total
Return Bond Fund, the Frontegra Opportunity Fund and
the Frontegra Growth Fund in the Registration Statement
(Form N-1A) of the Frontegra Funds, Inc. and their
incorporation by reference in the related Prospectuses
and Statement of Additional Information filed with the
Securities and Exchange Commission in this Post-
Effective Amendment No. 8 to the Registration Statement
under the Securities Act of 1933 (File No. 333-7305)
and in this Amendment No. 9 to the Registration
Statement under the Investment Company Act of 1940
(File No. 811-7685).
/s/ Ernst & Young LLP
Milwaukee, Wisconsin
December 15, 1999