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FRONTEGRA FUNDS
ANNUAL REPORT
Frontegra Total Return Bond Fund
Frontegra Opportunity Fund
Frontegra Growth Fund
Frontegra Emerging Growth Fund
FRONTEGRA ASSET MANAGEMENT, INC.
-----------
June 30, 2000
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FRONTEGRA FUNDS
TABLE OF CONTENTS
SHAREHOLDER LETTER...................................................1
FRONTEGRA TOTAL RETURN BOND FUND
Report from Reams Asset Management Company, LLC ...................4
Investment Highlights .............................................7
Schedule of Investments ...........................................8
Statement of Assets and Liabilitites .............................15
Statement of Operations ..........................................16
Statements of Changes in Net Assets ..............................17
Financial Highlights .............................................18
FRONTEGRA OPPORTUNITY FUND
Report from Reams Asset Management Company, LLC ..................20
Investment Highlights ............................................22
Schedule of Investments ..........................................23
Statement of Assets and Liabilitites .............................26
Statement of Operations ..........................................27
Statements of Changes in Net Assets ..............................28
Financial Highlights .............................................29
FRONTEGRA GROWTH FUND
Report from Northern Capital Management, LLC .....................32
Investment Highlights ............................................36
Schedule of Investments ..........................................37
Statement of Assets and Liabilitites .............................40
Statement of Operations ..........................................41
Statements of Changes in Net Assets ..............................42
Financial Highlights .............................................43
FRONTEGRA EMERGING GROWTH FUND
Report from Berents & Hess Capital Management, Inc. ..............46
Investment Highlights ............................................49
Schedule of Investments ..........................................50
Statement of Assets and Liabilitites .............................53
Statement of Operations ..........................................54
Statement of Changes in Net Assets ...............................55
Financial Highlights .............................................56
NOTES TO FINANCIAL STATEMENTS.......................................57
REPORT OF INDEPENDENT AUDITORS......................................63
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors unless
accompanied or preceded by effective Prospectuses for the Funds. The
Prospectuses include more complete information about management fees and
expenses, investment objectives, risks and operating policies of the Funds.
Please read the Prospectuses carefully.
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FRONTEGRA FUNDS
DEAR FELLOW SHAREHOLDERS:
We are pleased to present the June 30, 2000, annual report for the Frontegra
Funds. For the first time, we have combined all four Funds in one report. We
introduced the Frontegra Funds in 1996 to provide the highest quality investment
management to institutions and individuals through low cost mutual funds.
We started by introducing the Frontegra Total Return Bond Fund, managed by Reams
Asset Management Company in November of 1996. The Fund has compiled excellent
results and was recently named to Standard & Poors Select List of Investment
Grade Bond Funds. Next, we rolled out the Frontegra Opportunity Fund in July
1997, a small cap value offering also managed by Reams Asset Management Company.
In March, 1998, we added the Frontegra Growth Fund, a large capitalization
growth fund managed by Northern Capital Management, LLC. Finally, on December
31, 1999, we opened the Frontegra Emerging Growth Fund, a small cap growth fund
managed by Berents & Hess Capital Management, located in Boston.
The fiscal year ended June 30, 2000, was a tale of two very different markets.
The first six months (7/1/99 to 12/31/99) were characterized by strong equity
returns, fueled by technology stocks, combined with weak fixed income results
due to inflation fears and expected interest rate hikes. During the most recent
six months, technology stocks have stumbled, dragging down the equity indices,
while fixed income securities have rebounded somewhat, even in the midst of
several interest rate increases.
The Frontegra Funds fared well in this volatile environment. The Total Return
Bond Fund returned 6.78% compared to the benchmark (Lehman Brothers Aggregate
Bond Index) return of 4.56%. The Opportunity Fund trailed the Russell 2000 and
Russell 2000 Value Indices over this time frame, but posted strong relative
results when value stocks came back into favor in recent months. The Growth
Fund returned 15.33%, compared to the 7.27% return for the S&P 500 Stock Index.
Finally, the Emerging Growth Fund is off to an encouraging start, returning
2.30% for its first six months compared to 1.23% for the Russell 2000 Growth
Index. You can find more detail on results and current investment strategy in
the shareholder letters for each Fund.
We hope that you find the combined reporting more convenient than separate
reporting for each Fund. We encourage you to visit our website at
www.frontegra.com for daily prices and portfolio data. As shareholders in the
Funds, we have a strong vested interest in the success of each Fund and we truly
appreciate your investment and your confidence in the investment managers
overseeing the Funds.
Sincerely,
/s/ Thomas J. Holmberg Jr. /s/ William D. Forsyth
Thomas J. Holmberg, CFA William D. Forsyth, CFA
Frontegra Asset Management Frontegra Asset Management
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FRONTEGRA FUNDS
FRONTEGRA
TOTAL RETURN BOND FUND
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FRONTEGRA FUNDS
REPORT FROM REAMS ASSET MANAGEMENT COMPANY, LLC:
The Frontegra Total Return Bond Fund had a very good year ending June 30, 2000.
The Fund returned 6.78% compared to 4.56% for the benchmark, Lehman Brothers
Aggregate Bond Index. The recent twelve months were particularly strong for the
Fund, in part due to the volatility found in the fixed income markets. As you
know, our style of fixed income management is predicated on the assumption that
the only constant in the fixed income markets is change.
As we talk to current and prospective investors, we like to point out a little
known fact that in every year since 1975, interest rates have changed at least
1%. Over the same 25 years, interest rates have changed at least 2% two-thirds
of the time. Although history is not always a reliable predictor of the future,
we feel confident that volatility is here to stay in the fixed income markets.
Therefore, when constructing portfolios, we attempt to take advantage of this
volatility through our top-down decisions as well as the bottom-up security
selections we make for the Fund. This approach has served us well in a variety
of markets, and it served us particularly well over the last twelve to eighteen
months.
PORTFOLIO REVIEW
For the first time in several years, bonds as an asset class are beginning to
attract attention. With equities struggling in 2000, investors are beginning to
revisit their asset allocations and are looking for their bond portfolios to
provide stability. After experiencing a weak environment for bonds in 1999, we
believed that coming into 2000, the bond market was as attractive as it had been
in a number of years, even after taking into consideration the expected rate
increases by the Federal Reserve.
The Federal Reserve did indeed follow through with a series of rate hikes early
in 2000 in an attempt to combat future inflation. After holding off on any
increases late in 1999 due to Y2K concerns, the Federal Reserve implemented a
series of rate increases bringing the Federal Funds rate to 6.5% as of June 30.
With recent indications of a tentative slowing in the rapid pace of economic
growth, the pressure for the Federal Reserve to continue to increase rates has
abated somewhat. However, a reacceleration of growth or other indications of
rising inflation would cause the Fed to continue to push up short-term rates.
In the midst of the rate increases, longer-term Treasury yields actually
decreased early in 2000. This is thought to have been mostly due to the large
volume of current and projected debt buy-backs resulting from unexpectedly large
Treasury surpluses. As a result, the yield curve inverted, with long rates
lower than short-term rates. We were able to take advantage of this change in
the structure of the yield curve by owning longer-term securities at the time.
We have since concentrated our holdings in the middle of the curve, to take
advantage of an eventual steepening of the yield curve.
It is interesting to note that interest rates on the ten-year Treasury bond
began the fiscal year at 6.0% and ended the year at 6.0%, but as we noted above
there was a significant amount of volatility in rates over that time period.
Given the volatility, we were able to take advantage of the opportunities
afforded us by adjusting the portfolio duration (the portfolio's sensitivity to
changes in interest rates.) Our estimate of expected inflation, which is the
key variable we use to determine value in the bond market, has not changed
dramatically in the midst of the signs of upward inflationary pres-
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FRONTEGRA FUNDS
sures and Fed rate increases. However, early this year we adjusted our estimate
of future inflation from 2.5% to a range of 2.5% to 3.0% based on our
proprietary inflation model.
While our top-down duration and yield curve decisions have been additive in the
last year, most of the value added has been a result of our bottom-up bond
selection process. The volatility in credit spreads (the difference in yield
between non-Treasury bonds and Treasury bonds) has provided us with the
opportunity to add value by purchasing corporate, mortgage and asset-backed
securities when the spread to Treasuries is relatively high. Our primary area
of emphasis over the last year has been investment-grade corporate securities.
The corporate exposure has been made up primarily of moderate-risk securities
with a concentration in utilities, power projects and equipment trust
certificates.
We have had little exposure to the high yield sector of the market. Credit
problems increased significantly in the last year with the market plagued by
negative credit events both from voluntary leveraging and involuntary credit
erosion. Having said that, the high yield market has weakened so much that some
interesting opportunities are now appearing there. We will likely be adding to
our high yield exposure as long as spreads remain attractive.
PORTFOLIO STRATEGY
As of June 30, 2000, the portfolio had a duration of 5.4 years compared to 4.9
years for the benchmark, Lehman Brothers Aggregate Bond Index. With longer-term
Treasury yields down significantly, we no longer consider the levels to be
attractive and are in the process of positioning the Fund's duration in line
with that of the benchmark. The portfolio is somewhat 'bulleted' with cash
flows partially concentrated in the middle of the curve to take advantage of an
eventual steepening of the yield curve.
Treasury holdings have been reduced as spreads from Treasury securities to all
other sectors have widened. In particular, we have moved our liquidity position
into Agency securities that offer a historically unique spread advantage with
negligible credit risk. Treasury positions are currently 5.2% of the portfolio
and Agency notes are 22.2%. The yield advantage of Agency notes above
Treasuries stands at 102 basis points.
Corporate bonds continue to offer attractive spreads and good structure.
Currently, the Fund has 49.3% invested in corporates, with an emphasis on
equipment trusts, power projects, energy issues, and utilities. High yield
accounts for only 3.3% of the portfolio, given the deteriorating high-yield
market.
Mortgage and asset-backed securities are 20.7% of the portfolio. We are using
very few residential mortgage pass-throughs due to their poor structure. We
have added some asset-backed issues and call-protected mortgages when spreads
have been attractive.
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SUMMARY
The Total Return Bond Fund will be starting its fifth year in November, 2000.
We truly appreciate the confidence our investors have placed in us and we will
continue to seek out the best opportunities in the fixed income market as we
manage the Fund.
Regards,
/s/Mark M. Egan /s/Robert A. Crider
Mark M. Egan, CFA, CPA Robert A. Crider, CFA
Reams Asset Management Co. Reams Asset Management Co.
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FRONTEGRA FUNDS
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra Total Lehman Brothers
Return Bond Fund Aggregate Bond Index
---------------- --------------------
11/25/96 100,000 100,000
12/31/96 99,239 99,546
3/31/97 98,362 98,989
6/30/97 102,032 102,625
9/30/97 105,600 106,035
12/31/97 107,761 109,156
3/31/98 109,814 110,855
6/30/98 112,097 113,445
9/30/98 116,435 118,242
12/31/98 116,850 118,641
3/31/99 116,509 118,052
6/30/99 115,847 117,015
9/30/99 116,931 117,809
12/31/99 116,688 117,665
3/31/00 120,434 120,263
6/30/00 123,697 122,347
--------------------------
Portfolio Total Return
FOR THE YEAR ENDED 6/30/00
--------------------------
ONE YEAR 6.78%
AVERAGE ANNUAL
SINCE COMMENCEMENT 6.09%
-------------------------
This chart assumes an initial gross investment of $100,000 made on 11/25/96
(commencement of operations). Returns shown include the reinvestment of all
distributions. Past performance is not predictive of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may be
worth more or less than the original cost. In the absence of existing fee
waivers, total return would be reduced.
The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated
investment grade or higher by Moody's Investors Service, Standard & Poor's
Corporation, or Fitch IBCA, Inc., in that order. All issues have at least one
year to maturity and an outstanding par value of at least $100 million. Price,
coupon, paydown and total return are reported for all sectors on a month-end to
month-end basis. All returns are market value-weighted inclusive of accrued
interest.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS
June 30, 2000
Principal Amount Value
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ASSET-BACKED SECURITIES 10.5%
$700,000 Comed Transitional Funding Trust,
1998-1 A7, 5.44%, 3/25/07 $656,712
500,000 Comed Transitional Funding Trust,
1998-1 A7, 5.74%, 12/25/10 448,585
700,000 Conseco Finance Securitizations Corp.,
2000-2 M2, 10.32%, 12/1/31 750,158
600,000 Fingerhut Master Trust, 1998-2 A, 6.23%, 2/15/07 587,262
250,000 Green Tree Financial Corp.,
1995-7 A5, 6.95%, 10/15/26 246,508
200,000 Green Tree Financial Corp.,
1996-7 M1, 7.70%, 10/15/27 192,442
23,590 Green Tree Recreational, 1996-A A1, 5.55%, 2/15/18 22,833
1,050,000 MBNA Master Credit Card Trust,
1999-B A, 5.90%, 3/15/09 959,858
49,354 Mego Mortgage Home Loan Trust,
1996-2 A, 7.275%, 8/25/17 48,810
925,000 PP&L Transition Bond Company LLC,
1991-1 A8, 7.15%, 6/25/09 916,675
1,150,000 Peco Energy Transition Trust,
1999-A A7, 6.13%, 3/1/09 1,060,139
1,500,000 World Financial Network Credit Card Master Trust,
1996-B A, 6.95%, 4/15/06 1,495,365
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TOTAL ASSET-BACKED SECURITIES
(cost $7,381,757) 7,385,347
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COLLATERALIZED MORTGAGE OBLIGATIONS 0.8%
400,000 NYC Mortgage Loan Trust, 1996 A3, 6.75%, 9/25/19
(Acquired 5/23/00; Cost $340,323)<F1><F2> 355,000
110,224 Resolution Trust Corp., 1991-6 A1, 6.7938%, 5/25/19 106,871
76,562 Resolution Trust Corp., 1991-6 C1, 9.00%, 9/25/28 76,214
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TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $530,657) 538,085
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COMMERCIAL MORTGAGE-BACKED
SECURITIES 9.4%
1,318,001 Capco America Securitization Corp., 1998-D7 A1A,
5.86%, 12/15/07 1,242,545
804,079 Chase CMBS, 1997-2 A1, 6.45%, 12/19/04 783,662
350,000 Chase CMBS, 1997-2 A2, 6.60%, 11/19/07 334,371
932,232 Commercial Mortgage Asset Trust,
1999-C1 A1, 6.25%, 8/17/06 893,292
1,200,000 GMAC CMBS, 1999-C1 A2, 6.175%, 5/15/33 1,100,164
1,300,000 GSMS, 1997-GL A2B, 6.86%, 7/13/30 1,270,674
378,109 J.P. Morgan, 1996-C2 A, 6.47%, 11/25/27 367,919
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
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COMMERCIAL MORTGAGE-BACKED
Securities 9.4% (continued)
$150,000 Merrill Lynch Mortgage Investors, Inc.,
1998-C1 A3, 6.72%, 11/15/26 $ 129,826
500,000 Nationslink Funding Corp.,
1999-1 A2, 6.316%, 11/20/08 465,848
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TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(cost $6,669,056) 6,588,301
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CORPORATE BONDS 49.3%
Airlines 6.7%
799,974 Air 2 Us, 8.027%, 10/01/19
(Acquired 5/11/00; Cost $773,822)<F1> 792,382
604,651 America West Airlines, Inc., 7.33%, 7/2/08 571,148
600,000 Continental Airlines, 6.32%, 11/1/08 542,028
600,000 Continental Airlines, 8.048%, 11/1/20 598,920
400,000 Delta Air Lines, Inc., 89-B, 9.75%, 6/1/03 409,056
437,282 Delta Air Lines, Inc., 9.375%, 9/11/07 450,028
550,000 Delta Air Lines, Inc., 8.30%, 12/15/29 482,379
387,187 Northwest Airlines, 8.304%, 9/1/10 375,993
588,075 US Airways, Inc., 6.85%, 1/30/18 522,222
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4,744,156
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Automobiles 0.8%
600,000 Ford Motor Company, 7.45%, 7/16/31 562,338
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Convertible Bonds 0.7%
300,000 Healthsouth Corp., 3.25%, 4/1/03 235,500
105,000 Omnicare Inc., 5.00%, 12/1/07 70,613
200,000 Tower Automotive Inc., 5.00%, 8/1/04 153,750
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459,863
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Diversified 1.1%
800,000 FMC Corp., 7.125%, 11/25/02 785,991
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Electronics 0.7%
500,000 Lockheed Martin Corp., 8.375%, 6/15/24 494,330
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See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
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Energy 7.1%
$ 250,000 CMS Energy Corp., 8.125%, 5/15/02 $ 244,595
600,000 Cogentrix Energy, 8.10%, 3/15/04 587,214
1,085,000 LS Power Funding, 7.19%, 6/30/10 1,034,450
475,827 Salton Sea Funding, 7.37%, 5/30/05 466,353
457,911 Selkirk Cogen Funding Corp., 8.65%, 12/26/07 463,570
250,000 Sithe/Independence Funding, 8.50%, 6/30/07 248,105
200,000 Sithe/Independence Funding, 9.00%, 12/30/13 206,612
1,000,000 Southern Energy Inc., 7.40%, 7/15/04
(Acquired 4/5/00; Cost $976,707)<F1> 947,576
800,000 Sutton Bridge, 7.97%, 6/30/22
(Acquired 6/1/00; Cost $750,913)<F1> 766,680
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4,965,155
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Financial 6.5%
300,000 Associates Corp. N.A., 5.80%, 4/20/04 281,153
700,000 Bank of America Corp., 7.80%, 2/15/10 696,297
300,000 Credit Suisse, 7.90%, 5/1/07
(Acquired 4/12/00; Cost $280,124)<F1> 277,980
500,000 Dresdner Funding Trust, 8.151%, 6/30/31
(Acquired Multiple Dates; Cost $431,040)<F1> 435,365
400,000 Ford Motor Credit Company, 7.875%, 6/15/10 399,448
500,000 General Motors Acceptance Corp., 7.75%, 1/19/10 497,045
525,000 Household Finance Corp., 5.875%, 2/1/09 456,051
8 Midland Funding Corp., 10.33%, 7/23/02 8
300,000 Royal Bank of Scotland, 8.817%, 3/31/05 309,047
500,000 Royal Bank of Scotland, 9.118%, 3/31/10 510,885
800,000 Socgen Real Estate LLC, 7.64%, 9/30/07
(Acquired 6/9/00; Cost $726,400)<F1> 728,247
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4,591,526
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Food Products 0.3%
250,000 Dole Foods, 6.375%, 10/1/05 209,453
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Hotels 1.4%
1,000,000 Marriott International, 7.875%, 9/15/09 981,988
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See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
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Insurance 1.9%
$1,000,000 Allstate Corp., 7.20%, 12/1/09 $ 952,040
430,000 Florida Windstorm, 7.125%, 2/25/19
(Acquired 5/16/00; Cost $384,224)<F1> 393,391
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1,345,431
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Medical/Hospitals 0.7%
300,000 Columbia/HCA Healthcare, 6.91%, 6/15/05 274,052
300,000 Columbia/HCA Healthcare, 7.69%, 6/15/25 237,028
-----------
511,080
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Multimedia 0.5%
400,000 News America Holdings, 7.43%, 10/1/26 385,289
-----------
Oil & Gas 5.4%
600,000 Coastal Corp., 7.75%, 6/15/10 595,962
850,000 PDV America, Inc., 7.875%, 8/1/03 803,854
800,000 Tennessee Gas Pipeline, 7.50%, 4/1/17 759,667
660,000 Tosco Trust, 8.58%, 3/1/10
(Acquired Multiple Dates; Cost $663,985)<F1> 661,496
1,000,000 Yosemite Sec Trust, 8.25%, 11/15/04
(Acquired 6/29/00; Cost $994,911)<F1> 995,413
-----------
3,816,392
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Real Estate Investment Trust 0.7%
500,000 HRPT Properties Trust, 6.75%, 12/18/02 479,705
-----------
Retail 0.2%
200,000 Saks Inc., 7.375%, 2/15/19 148,391
-----------
Services 1.5%
210,319 Federal Express Corp., 8.04%, 11/22/07 208,653
650,896 Federal Express Corp., 7.85%, 1/30/15 626,284
250,000 International Game Technology, 8.375%, 5/15/09 236,250
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1,071,187
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See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
----------------------------------------------------------------------------
Transportation 1.1%
$ 500,000 JB Hunt Transport Services, 7.00%, 9/15/04 $ 489,783
300,000 Norfolk Southern Corp., 8.625%, 5/15/10 313,202
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802,985
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Utilities 4.7%
400,000 Cleveland Electric Illuminating Co.,
7.85%, 7/30/02 400,717
500,000 Consumers Energy Co., 6.20%, 5/1/03 475,085
500,000 Texas Utilities, 6.75%, 3/1/03 491,911
1,000,000 Utilicorp United Inc., 6.70%, 10/15/06 987,218
1,000,000 Utilicorp United Inc.
(AMBAC Insured), 6.875%, 10/1/04 958,964
-------------
3,313,895
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Waste Management 0.8%
600,000 Republic Services Inc., 7.125%, 5/15/09 532,038
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Yankee Bonds 6.5%
500,000 Imperial Tobacco O/S BV, 7.125%, 4/1/09 444,723
500,000 Norsk Hydro A/S, 9.00%, 4/15/12 542,475
2,000,000 PDVSA Finance Ltd., 1998-1, 6.65%, 2/15/06 1,741,578
500,000 Pemex Finance Ltd., 8.875%, 11/15/10 497,705
1,000,000 Pemex Finance Ltd., 9.03%, 2/15/11
(Acquired 4/25/00; Cost $1,019,035)<F1> 1,031,780
400,000 Rothmans Nedrlnd Holdings, 6.875%, 5/6/08 345,542
-------------
4,603,803
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TOTAL CORPORATE BONDS
(cost $35,393,500) 34,804,996
-------------
U.S. GOVERNMENT AGENCIES 22.2%
Fannie Mae 12.9%
750,000 7.125%, 2/15/05 752,598
3,000,000 7.25%, 1/15/10 3,024,492
237,871 Pool 073339, 6.18%, 1/1/03 231,062
281,959 Pool 160098, 7.91%, 3/1/04 283,950
429,629 Pool 411429, 6.50%, 2/1/28 405,810
437,050 Pool 423088, 6.50%, 4/1/28 412,820
900,811 Pool 433043, 6.50%, 6/1/28 850,008
393,124 Pool 252093, 6.50%, 11/1/28 370,953
458,979 Pool 448235, 6.50%, 11/1/28 433,094
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
----------------------------------------------------------------------------
Fannie Mae 12.9% (continued)
$ 453,093 Pool 447704, 6.50%, 11/1/28 $ 427,539
968,639 Pool 448635, 6.50%, 11/1/28 914,011
413,029 Pool 449012, 6.50%, 11/1/28 389,736
457,377 Pool 487778, 6.50%, 3/1/29 431,392
80,101 Series 1991-26 G, 8.00%, 4/25/06 80,704
85,000 Series 1994-3 PL, 5.50%, 1/25/24 71,580
-------------
9,079,749
-------------
Freddie Mac 8.9%
1,300,000 7.375%, 5/15/03 1,312,364
1,400,000 5.75%, 4/15/08 1,283,668
2,975,000 7.00%, 3/15/10 2,949,936
515,000 Series 20 H, 5.50%, 10/25/23 429,464
350,000 Series 20 L, 5.50%, 10/25/23 274,962
-------------
6,250,394
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Ginnie Mae 0.4%
163,210 Pool 331001, 8.25%, 7/15/07 165,460
73,541 Pool 036629, 9.50%, 10/15/09 76,624
-------------
242,084
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TOTAL U.S. GOVERNMENT AGENCIES
(cost $15,781,031) 15,572,227
-------------
U.S. TREASURIES 5.2%
U.S. Treasury Bond 3.4%
2,375,000 6.25%, 8/15/29 2,400,234
-------------
U.S. Treasury Notes 1.8%
150,000 5.75%, 8/15/03 147,422
1,200,000 5.50%, 5/15/09 1,147,680
-------------
1,295,102
-------------
TOTAL U.S. TREASURIES
(cost $3,662,093) 3,695,336
-------------
See notes to financial statements.
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Principal Amount Value
---------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 2.4%
Variable Rate Demand Notes 2.4%
$ 104,527 American Family Financial Services Inc.,
6.31% $ 104,527
298,974 General Mills, Inc., 6.28% 298,974
1,059,828 Sara Lee Corp., 6.27% 1,059,828
192,437 Wisconsin Corporate Central Credit Union, 6.34% 192,437
60,000 Wisconsin Electric Power Co., 6.31% 60,000
-----------
1,715,766
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $1,715,766) 1,715,766
-----------
TOTAL INVESTMENTS 99.8%
(cost $71,133,860) 70,300,058
Other Assets, less Liabilities 0.2% 134,458
-----------
NET ASSETS 100.0% $70,434,516
===========
<F1> Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers.
<F2> Security Fair Valued under procedures established by the Board of
Directors.
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
ASSETS:
Investments at value (cost $71,133,860) $70,300,058
Cash 16,534
Interest receivable 999,079
Receivable for investments sold 565,785
Receivable for Fund shares sold 300,000
Deferred organizational costs, net 11,771
Other assets 2,685
-----------
Total assets 72,195,912
-----------
LIABILITIES:
Payable for investments purchased 1,711,391
Dividends payable 4,906
Accrued investment advisory fee 5,063
Accrued expenses 40,036
-----------
Total liabilities 1,761,396
-----------
NET ASSETS $70,434,516
===========
NET ASSETS CONSIST OF:
Paid in capital $71,702,622
Undistributed net investment income 12,356
Undistributed net realized loss (446,660)
Net unrealized depreciation on investments (833,802)
-----------
Net Assets $70,434,516
===========
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 2,398,660
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $29.36
======
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENT OF OPERATIONS
YEAR ENDED
JUNE 30, 2000
Investment Income: -------------
Interest $4,004,533
----------
EXPENSES:
Investment advisory fees 220,948
Fund administration and accounting fees 88,775
Legal fees 18,965
Shareholder servicing fees 13,880
Custody fees 11,886
Amortization of organizational costs 8,843
Reports to shareholders 8,531
Audit fees 7,887
Federal and state registration fees 6,829
Directors' fees and related expenses 2,500
Other 2,036
----------
Total expenses before waiver and reimbursement 391,080
Waiver and reimbursement of expenses by Adviser (153,127)
----------
Net expenses 237,953
----------
NET INVESTMENT INCOME 3,766,580
----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (59,524)
Change in net unrealized
depreciation on investments 236,651
----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 177,127
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $3,943,707
==========
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
STATEMENTS OF CHANGES IN NET ASSETS
EIGHT MONTHS
YEAR ENDED ENDED YEAR ENDED
JUNE 30, 2000 JUNE 30, 1999 OCTOBER 31, 1998
------------- ------------- ----------------
OPERATIONS:
Net investment income $3,766,580 $ 2,044,061 $ 2,696,141
Net realized gain (loss)
on investments (59,524) (391,769) 1,082,198
Change in net unrealized
appreciation/depreciation
on investments 236,651 (1,503,727) (226,487)
------------ ----------- -----------
Net increase in net assets
resulting from operations 3,943,707 148,565 3,551,852
------------ ----------- -----------
DISTRIBUTIONS
PAID FROM:
Net investment income (3,755,804) (2,276,914) (2,634,499)
Net realized gain on
investments - (1,084,178) (83,976)
------------ ----------- -----------
Decrease in net assets
resulting from
distributions paid (3,755,804) (3,361,092) (2,718,475)
------------ ----------- -----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 34,687,876 1,481,740 11,881,429
Shares issued to holders in
reinvestment of
distributions 3,733,402 3,326,082 2,687,931
Shares redeemed (16,587,197) (1,639,512) (6,041,766)
------------ ----------- -----------
Net increase in net assets
resulting from capital
share transactions 21,834,081 3,168,310 8,527,594
----------- ----------- -----------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 22,021,984 (44,217) 9,360,971
----------- ----------- -----------
NET ASSETS:
Beginning of period 48,412,532 48,456,749 39,095,778
End of period ----------- ----------- -----------
(includes undistributed
net investment income of
$12,356, $2,993 and
$241,806, respectively) $70,434,516 $48,412,532 $48,456,749
=========== =========== ===========
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Total Return Bond Fund
FINANCIAL HIGHLIGHTS
EIGHT
YEAR MONTHS YEAR PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31, OCTOBER 31,
2000 1999 1998 1997<F1>
---- ------------ ---------- -----------
NET ASSET VALUE,
BEGINNING OF PERIOD $29.34 $31.38 $30.85 $30.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 1.90 1.29 1.75 1.37
Net realized and unrealized gain
(loss) on investments 0.02 (1.18) 0.59 0.70
------- ------- ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS 1.92 0.11 2.34 2.07
------- ------- ------ ------
LESS DISTRIBUTIONS PAID:
From net investment income (1.90) (1.44) (1.75) (1.22)
From net realized gain on
investments - (0.71) (0.06) -
------- ------- ------ ------
TOTAL DISTRIBUTIONS PAID (1.90) (2.15) (1.81) (1.22)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $29.36 $29.34 $31.38 $30.85
======= ======= ====== ======
TOTAL RETURN<F2> 6.78% 0.32% 7.79% 7.13%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $70,435 $48,413 $48,457 $39,096
Ratio of expenses to average
net assets<F3><F4> 0.43% 0.50% 0.50% 0.50%
Ratio of net investment income
to average net assets<F3><F4> 6.82% 6.37% 5.79% 6.02%
Portfolio turnover rate<F2> 438% 83% 131% 202%
<F1> Commenced operations on November 25, 1996.
<F2> Not annualized for periods less than a full year.
<F3> Net of waivers and reimbursements of expenses by Adviser. Without
waivers and reimbursements of expenses, the ratio of expenses to
average net assets would have been 0.71%, 0.82%, 0.78% and 1.27%,
and the ratio of net investment income to average net assets
would have been 6.54%, 6.05%, 5.51% and 5.25% for the periods
ended June 30, 2000, June 30, 1999, October 31, 1998 and October
31, 1997, respectively.
<F4> Annualized.
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
FRONTEGRA
OPPORTUNITY FUND
<PAGE>
(LOGO)
FRONTEGRA FUNDS
REPORT FROM REAMS ASSET MANAGEMENT COMPANY, LLC:
The Frontegra Opportunity Fund's results were mixed in the fiscal year ended
June 30, 2000. The Fund returned (6.67)% for the period compared to a (0.93)%
return for the Russell 2000 Value Index and a 14.32% return for the broader-
based Russell 2000 Index. The small cap market was led through most of the
period by technology and health care stocks. However, the growth stocks that
had led the Nasdaq to new highs in early 2000, struggled in the March-May period
of this year. The chart below shows the change in leadership in the small cap
markets this year:
Jan-Feb 2000 Mar-May 2000
------------ ------------
Russell 2000 Value Index 3.3% (0.5%)
Russell 2000 Growth Index<F1> 22.1% (26.6%)
As you know, given our value discipline, the Opportunity Fund tends to do better
in environments like we saw during March, April and May of 2000. In fact, as
both the Russell 2000 Value and Growth Indices declined, the Fund advanced 5.66%
during the March-May period. We are confident that the Fund will continue to
benefit from more rational valuation of stocks in the small cap area.
PORTFOLIO REVIEW
In the first eight months of the fiscal year, the biggest contributor to our
performance differential with the indices was our underweight in the technology
and health care sectors of the market. Given our value bias, we expect to have
an underweight in these sectors, particularly in times of extreme speculation,
as was the case in late 1999 and early 2000. Technology stocks accounted for
over 35% of the Russell 2000 Index and over 15% of the Russell 2000 Value Index
before the recent market correction. Our exposure to technology peaked at 8% of
the portfolio in late 1999. While our underweight to these sectors was a drag
on results in late 1999 and the first two months of 2000, it turned out to help
performance as growth stocks came under pressure more recently.
Stock selection continues to add value in the Fund. As we pointed out in the
semi-annual report dated December 31, 1999, acquisitions of three portfolio
holdings in the second half of 1999 helped results considerably. Lone Star
Industries, Furon Corp. and Giant Cement were all acquired at significant
premiums (40% to 50%.)
This trend in acquisitions continued in 2000, as the portfolio's stronger
relative returns in recent months were led by the acquisition of two portfolio
companies. International Home Foods (IHF), a company we highlighted in the most
recent semi-annual report, was acquired by ConAgra in June at a 43% premium to
the previous day's closing price. We held IHF because of its strong management
team and diversified line of food products with name brands such as Chef
Boyardee and PAM cooking spray. In addition, Santa Fe Energy, a leading oil and
gas producer and a long-time Fund holding, was acquired by Devon Energy in May,
boosting its share price and adding to the Fund's performance.
Away from acquisitions, one of the strongest performers in the Fund in recent
months has been Suiza Foods, the nation's largest milk processor. Suiza is
benefiting from greater economies of scale and market share gains following a
string of acquisitions in the past three years to give the company a national
distribution footprint. At June 30, 2000, Suiza Foods was the largest holding
in the Fund at a 4.2% position.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
PORTFOLIO OUTLOOK
The Fund's sector allocation continues to evolve as a result of our bottom-up
stock selection process. As has been the case for some time, the portfolio is
underweight in the technology and health care sectors of the market due to the
extended valuations of many of the stocks in these sectors. The portfolio is
focused on stocks in the consumer durable, financial and producer manufacturing
sectors of the market.
We have moved to a maximum overweight in the consumer durables sector (18%), up
from just 8% at the beginning of the fiscal year. Three of the Fund's top ten
holdings, Clarcor, Bush Industries and Snap-On Tools, are in the consumer
durables sector. This sector also includes one of the recent strong performers
in the Fund, Toll Brothers, a leading residential builder.
We also increased our exposure to financial stocks throughout the year, from 7%
to 17% at June 30. While we find the inexpensive valuations in the sector
attractive, we are being selective due to potential credit quality issues. Our
largest holding in the financial group is Seacoast Financial, one of several
regional banks in the Fund.
Overall, the Fund continues to trade at a significant discount to the small cap
market on a number of valuation parameters, including price/book and
price/earnings. In addition, as we try to buy good companies at attractive
valuations, the portfolio's return on equity stands at a 10% premium to the
Russell 2000 Index. We are confident that as value stocks continue to regain
favor with investors after an extended dry spell, that the portfolio is well
positioned from both the perspective of the overall portfolio characteristics
and from an individual stock standpoint.<F2>
SUMMARY
We have seen some turn in the markets with the correction in growth stocks and
rotation to the value-oriented sectors of the market. We continue to apply our
value discipline in the Fund and hope that the modest turnaround that we have
seen recently in value stocks has some staying power. As always, we appreciate
your confidence and investment in the Fund.
Regards,
/s/ David R. Milroy
David R. Milroy
Reams Asset Management Co.
<F1> The Russell 2000 Growth Index is comprised of those securities in the
Russell 2000 Index which have higher price-to-book ratios and higher
forecasted growth values.
<F2> The Fund is an actively managed portfolio. The companies discussed in this
letter may or may not be currently held by the Fund.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra Lipper Russell Russell 2000
Opportunity Small-Cap 2000 Value
Fund Fund Index Index Index
----------- ----------- -------- ------------
7/31/97 100,000 100,000 100,000 100,000
9/30/97 109,900 108,959 109,774 108,346
12/31/97 108,269 102,603 106,098 110,170
3/31/98 116,471 113,600 116,770 119,379
6/30/98 108,032 109,216 111,325 115,069
9/30/98 89,248 85,849 88,898 94,504
12/31/98 97,301 101,723 103,396 103,086
3/31/99 87,352 96,920 97,787 93,086
6/30/99 107,619 111,310 112,994 108,494
9/30/99 100,023 108,842 105,849 100,015
12/31/99 100,439 143,976 125,377 101,549
3/31/00 97,911 160,087 134,254 105,435
6/30/00 100,439 150,562 129,177 107,484
--------------------------
Portfolio Total Return
FOR THE YEAR ENDED 6/30/00
--------------------------
ONE YEAR (6.67)%
AVERAGE ANNUAL
SINCE COMMENCEMENT 0.15%
--------------------------
This chart assumes an initial gross investment of $100,000 made on 7/31/97
(commencement of operations). Returns shown include the reinvestment of all
distributions. Past performance is not predictive of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may be
worth more or less than the original cost. In the absence of existing fee
waivers, total return would be reduced.
The Lipper Small-Cap Fund Index includes the 30 largest funds which, by
prospectus or portfolio practice, limit their investments to companies on the
basis of the size of the company.
The Russell 2000 Index is comprised of the smallest 2000 companies in the
Russell 3000 Index. The Russell 3000 Index is comprised of the 3000 largest U.S.
companies based on market capitalization.
The Russell 2000 Value Index is comprised of those securities in the Russell
2000 Index which have lower price-to-book ratios and lower forecasted growth
values.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Opportunity Fund
SCHEDULE OF INVESTMENTS
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
COMMON STOCKS 96.0%
Building Products 1.8%
13,300 York International Corp. $ 335,825
----------
Chemicals 6.2%
45,300 Crompton Corp. 554,925
18,950 Ferro Corp. 397,950
31,700 International Specialty Products, Inc.<F1> 180,294
----------
1,133,169
----------
Commercial Services 3.3%
18,300 Banta Corp. 346,556
10,200 Lawson Products, Inc. 251,175
---------
597,731
---------
Consumer Durables 14.9%
31,400 Bush Industries, Inc. 502,400
31,750 CLARCOR Inc. 631,031
23,100 Furniture Brands International, Inc.<F1> 349,387
6,900 Harman International Industries, Inc. 420,900
14,500 Mohawk Industries, Inc.<F1> 315,375
18,500 Snap-on Inc. 492,563
----------
2,711,656
----------
Consumer Services 1.5%
21,200 Regis Corp. 265,000
----------
Dental Supplies & Equipment 2.7%
16,200 DENTSPLY International Inc. 499,163
----------
Electronic Technology 7.2%
12,800 Applied Power Inc. 428,800
16,700 Belden Inc. 427,937
30,700 Pioneer-Standard Electronics, Inc. 452,825
---------
1,309,562
---------
Finance 14.2%
9,400 Bank United Corp. 330,762
28,400 The Colonial BancGroup, Inc. 255,600
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Opportunity Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Finance 14.2% (continued)
29,200 Commercial Federal Corp. $ 454,425
25,500 First Bell Bancorp, Inc. 388,875
22,100 Golden State Bancorp Inc.<F1> 397,800
32,900 Local Financial Corp.<F1> 274,509
51,400 Seacoast Financial Services Corp. 488,300
----------
2,590,271
----------
Food 9.2%
29,900 International Home Foods, Inc.<F1> 626,031
15,500 Suiza Foods Corp.<F1> 757,563
16,100 Universal Foods Corp. 297,850
----------
1,681,444
----------
Health Technology 1.5%
12,600 Haemonetics Corp.<F1> 264,600
----------
Housing 2.2%
19,400 Toll Brothers, Inc.<F1> 397,700
----------
Industrial Services 3.4%
13,500 Jacobs Engineering Group, Inc.<F1> 441,281
12,000 Quanex Corp. 178,500
----------
619,781
----------
Insurance 2.5%
25,000 Fidelity National Financial, Inc. 457,813
----------
Machinery 1.7%
18,700 Regal-Beloit Corp. 300,369
----------
Oil & Gas 6.0%
11,500 Noble Affiliates, Inc. 428,375
58,300 Santa Fe Snyder Corp.<F1> 663,163
----------
1,091,538
----------
Producer Manufacturing 9.0%
46,900 Griffon Corp.<F1> 260,881
22,900 HON INDUSTRIES Inc. 538,150
6,000 Matthews International Corp. 174,000
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Opportunity Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Producer Manufacturing 9.0% (continued)
8,700 National Service Industries, Inc. $ 169,650
26,300 Northwest Pipe Co.<F1> 312,313
11,300 Standex International Corp. 179,388
-----------
1,634,382
-----------
Real Estate Investment Trust 6.8%
7,700 Amli Residential Properties Trust 181,431
9,500 First Industrial Realty Trust, Inc. 280,250
16,400 Great Lakes REIT, Inc. 278,800
13,000 Prentiss Properties Trust 312,000
6,100 Storage USA, Inc. 179,950
-----------
1,232,431
-----------
Transportation 1.9%
29,300 Arnold Industries, Inc. 353,431
-----------
TOTAL COMMON STOCKS
(cost $16,834,909) 17,475,866
-----------
Principal Amount
----------------
SHORT-TERM INVESTMENTS 2.7%
Variable Rate Demand Notes 2.7%
$323,349 American Family Financial Services Inc., 6.31% 323,349
37,100 General Mills, Inc., 6.28% 37,100
131,774 Wisconsin Corporate Central Credit Union, 6.34% 131,774
220 Wisconsin Electric Power Co., 6.31% 220
-----------
492,443
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $492,443) 492,443
-----------
TOTAL INVESTMENTS 98.7%
(cost $17,327,352) 17,968,309
Other Assets, less Liabilities 1.3% 235,621
-----------
NET ASSETS 100.0% $18,203,930
===========
<F1> Non-income producing
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Opportunity Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
ASSETS:
Investments at value (cost $17,327,352) $ 17,968,309
Receivable for investments sold 213,247
Interest and dividends receivable 36,294
Deferred organizational costs, net 16,811
Other assets 1,249
------------
Total assets 18,235,910
------------
LIABILITIES:
Accrued investment advisory fee 5,027
Accrued expenses 26,953
------------
Total liabilities 31,980
------------
NET ASSETS $ 18,203,930
============
NET ASSETS CONSIST OF:
Paid in capital $ 18,752,811
Undistributed net investment income 95,465
Undistributed net realized loss (1,285,303)
Net unrealized appreciation on investments 640,957
------------
NET ASSETS $ 18,203,930
============
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 645,388
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $28.21
======
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Opportunity Fund
STATEMENT OF OPERATIONS
YEAR ENDED
JUNE 30, 2000
-------------
INVESTMENT INCOME:
Dividends $ 267,589
Interest 29,401
------------
296,990
------------
EXPENSES:
Investment advisory fees 103,318
Fund administration and accounting fees 52,650
Legal fees 18,923
Shareholder servicing 15,182
Custody fees 9,532
Reports to shareholders 8,554
Amortization of organizational costs 8,100
Audit fees 7,398
Directors' fees and related expenses 2,500
Federal and state registration fees 1,592
Other 1,201
------------
Total expenses before waiver and reimbursement 228,950
Waiver and reimbursement of expenses by Adviser (85,877)
------------
Net expenses 143,073
------------
NET INVESTMENT INCOME 153,917
------------
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on investments (440,696)
Change in net unrealized appreciation
on investments (794,398)
------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (1,235,094)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,081,177)
============
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Opportunity Fund
STATEMENTS OF CHANGES IN NET ASSETS
EIGHT
YEAR MONTHS YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998
-------- -------- -----------
OPERATIONS:
Net investment income $ 153,917 $ 83,039 $ 66,764
Net realized loss
on investments (440,696) (19,993) (158,568)
Change in net unrealized
appreciation/depreciation
on investments (794,398) 2,235,006 (905,970)
------------- ------------ -----------
Net increase (decrease) in net
assets resulting from
operations (1,081,177) 2,298,052 (997,774)
------------- ------------ -----------
DISTRIBUTIONS PAID FROM:
Net investment income (105,971) (80,263) (7,018)
Net realized gain on investments (697,166) -- --
------------- ------------ -----------
Decrease in net assets resulting
from distributions paid (803,137) (80,263) (7,018)
------------- ------------ -----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 3,952,596 8,086,316 1,925,149
Shares issued to holders in
reinvestment of distributions 803,137 80,263 7,018
Shares redeemed (1,878,900) -- --
------------- ------------ -----------
Net increase in net assets
resulting from capital
share transactions 2,876,833 8,166,579 1,932,167
------------- ------------ -----------
TOTAL INCREASE IN NET ASSETS 992,519 10,384,368 927,375
------------- ------------ -----------
NET ASSETS:
Beginning of period 17,211,411 6,827,043 5,899,668
------------- ------------ -----------
End of period
(includes undistributed
net investment income of
$95,465, $66,964 and
$64,806, respectively) $18,203,930 $17,211,411 $6,827,043
============= ============ ==========
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Opportunity Fund
FINANCIAL HIGHLIGHTS
EIGHT
YEAR MONTHS YEAR PERIOD
ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31, OCTOBER 31,
2000 1999 1998 1997<F1>
-------- ----------- ------- -----------
NET ASSET VALUE,
BEGINNING OF PERIOD $32.02 $27.93 $32.22 $30.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.27 0.07 0.26 0.04
Net realized and unrealized gain
(loss) on investments (2.44) 4.23 (4.52) 2.18
------- ------ ------ ------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS (2.17) 4.30 (4.26) 2.22
------- ------ ------ ------
LESS DISTRIBUTIONS PAID:
From net investment income (0.22) (0.21) (0.03) -
From net realized gain on investments (1.42) - - -
------- ------ ------ ------
TOTAL DISTRIBUTIONS PAID (1.64) (0.21) (0.03) -
------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $28.21 $32.02 $27.93 $32.22
======= ====== ====== ======
TOTAL RETURN<F2> (6.67)% 15.49% (13.24)% 7.40%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $18,204 $17,211 $6,827 $5,900
Ratio of expenses to
average net assets<F3><F4> 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income
to average net assets<F3><F4> 0.97% 1.00% 0.92% 2.61%
Portfolio turnover rate<F2> 64% 38% 54% 9%
<F1> Commenced operations on July 31, 1997.
<F2> Not annualized for periods less than a full year.
<F3> Net of waivers and reimbursements of expenses by Adviser.
Without waivers and reimbursements of expenses, the ratio
of expenses to average net assets would have been 1.44%, 1.73%,
2.53% and 12.02% and the ratio of net investment income (loss)
to average net assets would have been 0.43%, 0.17%, (0.71)% and
(8.51)% for the periods ended June 30, 2000, June 30, 1999,
October 31, 1998 and October 31, 1997, respectively.
<F4> Annualized.
See notes to financial statements.
<PAGE>
This page intentionally left blank.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
FRONTEGRA
GROWTH FUND
<PAGE>
(LOGO)
FRONTEGRA FUNDS
REPORT FROM NORTHERN CAPITAL MANAGEMENT, LLC:
During the first six months of 2000, the Frontegra Growth Fund increased by 1.2%
versus a 0.5% decline in the S&P 500 Stock Index. For the fiscal year ending
June 30, the Fund increased by 15.3% versus a gain of 7.3% for the S&P 500 Stock
Index.
SIX FISCAL 2 YEARS -
MONTHS YEAR ANNUALIZED
1/1/00 - 7/1/99 - 6/30/98 -
6/30/00 6/30/00 6/30/00
-------- --------- ----------
FRONTEGRA GROWTH FUND 1.2% 15.3% 16.2%
S&P 500 Stock Index (0.4)% 7.3% 14.7%
Over the past two years the Fund's 15%-plus annual return outpaced the overall
market during what has been a very difficult environment for many active equity
managers. Although we are not happy with all of the decisions we made during
this period, we are proud to report that your Fund was able to achieve a
positive return versus the benchmark.
OWNERSHIP CHANGES AT NORTHERN CAPITAL AND UAM
On June 28th, the senior management team at Northern Capital purchased an equity
stake in our firm from United Asset Management Corporation (UAM). Prior to this
transaction, UAM owned a 100% interest in Northern Capital. We believe this
purchase demonstrates our commitment to our firm and to our clients and we thank
the shareholders of the Frontegra Growth Fund for their continued support
through your ownership in the Fund. Regarding the purchase, only the ownership
structure will change. There will be no changes in our investment philosophy or
process and all of our senior professionals will remain in their respective
roles.
In an unrelated event, UAM has agreed to join Old Mutual plc, a UK-based
financial services company. As has been the case since we joined UAM in 1986,
Northern Capital will continue to retain its operating and investment
independence. In addition, our recent equity purchase provides further
assurances that we will operate independently and thus, we do not expect this
transaction to have any impact on our firm or our client relationships.
However, since the transaction does constitute a change in control, you will
soon be receiving a proxy solicitation requesting your approval of the
transaction and your desire to maintain Northern Capital as the investment sub-
advisor to the Frontegra Growth Fund.
DIVERSIFICATION AND BENCHMARK ISSUES
In past correspondences we included both the Russell 1000 Growth Index and the
S&P 500 Stock Index in our discussions of performance since both Indices had
historically been representative of our investment style. However, with the
recent changes in the composition of the Russell 1000 Growth Index, we do not
believe that the Index is representative of our diversified "core-growth"
approach and thus, we are no longer using it for performance and characteristics
comparisons. The table below illustrates the changes in the Indices over the
last two years. While the S&P 500 Stock Index remains fairly well diversified
across the major sector groups, the Russell 1000 Growth Index is now over 60%
weighted in technology companies.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
S&P 500 STOCK INDEX 12/31/98 12/31/99 6/30/00
-------- -------- -------
Consumer Related 42% 35% 33%
Economically Sensitive 37% 33% 34%
Technology 21% 32% 33%
RUSSELL 1000 GROWTH INDEX 12/31/98 12/31/99 6/30/00
-------- -------- -------
Consumer Related 52% 40% 28%
Economically Sensitive 18% 13% 11%
Technology 30% 47% 61%
Since we do not intend to compromise our diversified "core-growth" approach, it
has become inappropriate to compare the Fund to the Russell 1000 Growth Index
for either performance or characteristics analysis. Our strategy for achieving
strong long-term performance results is to own a diversified portfolio of growth
companies with sustainable competitive advantages. We believe this strategy will
provide above average returns on a secular basis and thus, we see no benefit to
significantly increasing our exposure to technology stocks in response to a
change in the Russell 1000 Growth Index.
MARKET ENVIRONMENT DURING 1ST HALF OF 2000
Although the stock market finished the first six months of 2000 flat with year-
end levels, the period was anything but stable. The major equity indices were
down as much as 10% by mid-February before staging a 15% rally in early March.
This was followed by a 15% decline during the April-May period followed by
another rally during June. The recent increase in volatility can be attributed
to changing views on the sustainability of high valuation levels within the
technology sector, the direction of interest rates, and the possibility of a
slowdown in corporate earnings growth. With continued uncertainty about the
Federal Reserve Board's intention for interest rates and the upcoming
Presidential election, we expect the market to continue to trade in a fairly
narrow range until late in the fall.
In the December 31, 1999 Fund report we presented a graph comparing the price
performance of the S&P 500 Stock Index in 1998 and 1999. We were surprised by
the striking similarities in return patterns since the underlying fundamental
environment was very different during those years. The graph below provides an
update including the year-to-date performance in 2000.
Thus far in 2000 the stock market has traded in a range of (8)% to +5%. As
indicated above, we believe that the possibility of a slowdown in the technology
sector and the steady increase in interest rates has held back investor
enthusiasm for stocks during the first half of the year. For the remainder of
2000 the big question remains - will we get a strong market recovery in the
fourth quarter? While it is still too early to determine with any level of
certainty, we believe the critical variables remain: (1) the sustainability of
the momentum in the technology sector, (2) the possibility for further increases
in the Federal Funds rate, and (3) the outcome of the Presidential election. At
this point we remain optimistic about the strength in earnings growth of the
technology companies and we do not anticipate any further increases in interest
rates. Therefore, we remain cautiously optimistic about the likelihood of a
third straight fourth quarter rally.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
S&P 500 STOCK INDEX
-----------------------------------------------------------------------------
S&P 500 - 2000 S&P 500 - 1999 S&P 500 - 1998
-----------------------------------------------------------------------------
31-Dec-1999 100.00 31-Dec-1998 100.00 31-Dec-1997 100.00
03-Jan-2000 99.05 04-Jan-1999 99.91 02-Jan-1998 100.48
04-Jan-2000 95.25 05-Jan-1999 101.27 05-Jan-1998 100.68
05-Jan-2000 95.43 06-Jan-1999 103.51 06-Jan-1998 99.60
06-Jan-2000 95.52 07-Jan-1999 103.29 07-Jan-1998 99.34
07-Jan-2000 98.11 08-Jan-1999 103.73 08-Jan-1998 98.52
10-Jan-2000 99.21 11-Jan-1999 102.82 09-Jan-1998 95.60
11-Jan-2000 97.91 12-Jan-1999 100.84 12-Jan-1998 96.78
12-Jan-2000 97.48 13-Jan-1999 100.42 13-Jan-1998 98.11
13-Jan-2000 98.67 14-Jan-1999 98.61 14-Jan-1998 98.71
14-Jan-2000 99.72 15-Jan-1999 101.14 15-Jan-1998 97.97
18-Jan-2000 99.04 19-Jan-1999 101.85 16-Jan-1998 99.08
19-Jan-2000 99.09 20-Jan-1999 102.23 20-Jan-1998 100.84
20-Jan-2000 98.39 21-Jan-1999 100.48 21-Jan-1998 100.04
21-Jan-2000 98.10 22-Jan-1999 99.67 22-Jan-1998 99.24
24-Jan-2000 95.39 25-Jan-1999 100.39 23-Jan-1998 98.68
25-Jan-2000 95.97 26-Jan-1999 101.88 26-Jan-1998 98.61
26-Jan-2000 95.57 27-Jan-1999 101.13 27-Jan-1998 99.85
27-Jan-2000 95.19 28-Jan-1999 102.94 28-Jan-1998 100.72
28-Jan-2000 92.58 29-Jan-1999 104.10 29-Jan-1998 101.55
31-Jan-2000 94.91 01-Feb-1999 103.56 30-Jan-1998 101.02
01-Feb-2000 95.92 02-Feb-1999 102.67 02-Feb-1998 103.18
02-Feb-2000 95.91 03-Feb-1999 103.49 03-Feb-1998 103.67
03-Feb-2000 96.99 04-Feb-1999 101.57 04-Feb-1998 103.76
04-Feb-2000 96.95 05-Feb-1999 100.83 05-Feb-1998 103.41
07-Feb-2000 96.94 08-Feb-1999 101.18 06-Feb-1998 104.33
08-Feb-2000 98.13 09-Feb-1999 98.94 09-Feb-1998 104.15
09-Feb-2000 96.08 10-Feb-1999 99.54 10-Feb-1998 105.01
10-Feb-2000 96.43 11-Feb-1999 102.02 11-Feb-1998 105.11
11-Feb-2000 94.41 12-Feb-1999 100.07 12-Feb-1998 105.53
14-Feb-2000 94.60 16-Feb-1999 101.03 13-Feb-1998 105.12
15-Feb-2000 95.43 17-Feb-1999 99.58 17-Feb-1998 105.39
16-Feb-2000 94.45 18-Feb-1999 100.65 18-Feb-1998 106.35
17-Feb-2000 94.49 19-Feb-1999 100.81 19-Feb-1998 105.96
18-Feb-2000 91.62 22-Feb-1999 103.49 20-Feb-1998 106.57
22-Feb-2000 92.03 23-Feb-1999 103.41 23-Feb-1998 106.98
23-Feb-2000 92.61 24-Feb-1999 101.97 24-Feb-1998 106.20
24-Feb-2000 92.12 25-Feb-1999 101.28 25-Feb-1998 107.47
25-Feb-2000 90.75 26-Feb-1999 100.74 26-Feb-1998 108.06
28-Feb-2000 91.75 01-Mar-1999 100.56 27-Feb-1998 108.13
29-Feb-2000 93.00 02-Mar-1999 99.70 02-Mar-1998 107.96
01-Mar-2000 93.87 03-Mar-1999 99.88 03-Mar-1998 108.41
02-Mar-2000 94.05 04-Mar-1999 101.42 04-Mar-1998 107.92
03-Mar-2000 95.91 05-Mar-1999 103.76 05-Mar-1998 106.66
06-Mar-2000 94.69 08-Mar-1999 104.35 06-Mar-1998 108.79
07-Mar-2000 92.27 09-Mar-1999 104.12 09-Mar-1998 108.44
08-Mar-2000 93.02 10-Mar-1999 104.69 10-Mar-1998 109.67
09-Mar-2000 95.40 11-Mar-1999 105.57 11-Mar-1998 110.10
10-Mar-2000 94.95 12-Mar-1999 105.32 12-Mar-1998 110.25
13-Mar-2000 94.17 15-Mar-1999 106.35 13-Mar-1998 110.12
14-Mar-2000 92.51 16-Mar-1999 106.28 16-Mar-1998 111.22
15-Mar-2000 94.75 17-Mar-1999 105.58 17-Mar-1998 111.34
16-Mar-2000 99.27 18-Mar-1999 107.10 18-Mar-1998 111.86
17-Mar-2000 99.67 19-Mar-1999 105.70 19-Mar-1998 112.29
20-Mar-2000 99.14 22-Mar-1999 105.51 20-Mar-1998 113.27
21-Mar-2000 101.68 23-Mar-1999 102.68 23-Mar-1998 112.89
22-Mar-2000 102.14 24-Mar-1999 103.20 24-Mar-1998 113.93
23-Mar-2000 103.95 25-Mar-1999 104.94 25-Mar-1998 113.55
24-Mar-2000 103.96 26-Mar-1999 104.36 26-Mar-1998 113.43
27-Mar-2000 103.72 29-Mar-1999 106.58 27-Mar-1998 112.88
28-Mar-2000 102.62 30-Mar-1999 105.82 30-Mar-1998 112.69
29-Mar-2000 102.67 31-Mar-1999 104.65 31-Mar-1998 113.53
30-Mar-2000 101.27 01-Apr-1999 105.25 01-Apr-1998 114.19
31-Mar-2000 102.00 05-Apr-1999 107.48 02-Apr-1998 115.41
03-Apr-2000 102.50 06-Apr-1999 107.21 03-Apr-1998 115.69
04-Apr-2000 101.73 07-Apr-1999 107.94 06-Apr-1998 115.55
05-Apr-2000 101.23 08-Apr-1999 109.34 07-Apr-1998 114.34
06-Apr-2000 102.18 09-Apr-1999 109.69 08-Apr-1998 113.52
07-Apr-2000 103.21 12-Apr-1999 110.53 09-Apr-1998 114.45
10-Apr-2000 102.40 13-Apr-1999 109.81 13-Apr-1998 114.35
11-Apr-2000 102.13 14-Apr-1999 108.07 14-Apr-1998 114.97
12-Apr-2000 99.86 15-Apr-1999 107.62 15-Apr-1998 115.34
13-Apr-2000 98.04 16-Apr-1999 107.30 16-Apr-1998 114.19
14-Apr-2000 92.33 19-Apr-1999 104.90 17-Apr-1998 115.69
17-Apr-2000 95.38 20-Apr-1999 106.26 20-Apr-1998 115.79
18-Apr-2000 98.12 21-Apr-1999 108.70 21-Apr-1998 116.10
19-Apr-2000 97.16 22-Apr-1999 110.54 22-Apr-1998 116.50
20-Apr-2000 97.64 23-Apr-1999 110.38 23-Apr-1998 115.37
24-Apr-2000 97.32 26-Apr-1999 110.64 24-Apr-1998 114.17
25-Apr-2000 100.56 27-Apr-1999 110.87 27-Apr-1998 111.96
26-Apr-2000 99.44 28-Apr-1999 109.90 28-Apr-1998 111.82
27-Apr-2000 99.71 29-Apr-1999 109.24 29-Apr-1998 112.80
28-Apr-2000 98.86 30-Apr-1999 108.62 30-Apr-1998 114.56
01-May-2000 99.93 03-May-1999 110.20 01-May-1998 115.52
02-May-2000 98.44 04-May-1999 108.36 04-May-1998 115.63
03-May-2000 96.31 05-May-1999 109.61 05-May-1998 114.95
04-May-2000 95.94 06-May-1999 108.36 06-May-1998 113.86
05-May-2000 97.51 07-May-1999 109.42 07-May-1998 112.85
08-May-2000 96.93 10-May-1999 109.04 08-May-1998 114.19
09-May-2000 96.11 11-May-1999 110.28 11-May-1998 114.04
10-May-2000 94.13 12-May-1999 110.96 12-May-1998 114.98
11-May-2000 95.82 13-May-1999 111.25 13-May-1998 115.30
12-May-2000 96.71 14-May-1999 108.83 14-May-1998 115.14
15-May-2000 98.85 17-May-1999 108.97 15-May-1998 114.25
16-May-2000 99.78 18-May-1999 108.47 18-May-1998 113.95
17-May-2000 98.54 19-May-1999 109.36 19-May-1998 114.33
18-May-2000 97.82 20-May-1999 108.92 20-May-1998 115.32
19-May-2000 95.76 21-May-1999 108.22 21-May-1998 114.86
22-May-2000 95.34 24-May-1999 106.30 22-May-1998 114.43
23-May-2000 93.51 25-May-1999 104.49 26-May-1998 112.74
24-May-2000 95.22 26-May-1999 106.14 27-May-1998 112.55
25-May-2000 94.03 27-May-1999 104.24 28-May-1998 113.10
26-May-2000 93.79 28-May-1999 105.91 29-May-1998 112.41
30-May-2000 96.81 01-Jun-1999 105.29 01-Jun-1998 112.42
31-May-2000 96.69 02-Jun-1999 105.34 02-Jun-1998 112.65
01-Jun-2000 98.61 03-Jun-1999 105.72 03-Jun-1998 111.57
02-Jun-2000 100.55 04-Jun-1999 108.01 04-Jun-1998 112.82
05-Jun-2000 99.89 07-Jun-1999 108.57 05-Jun-1998 114.78
06-Jun-2000 99.22 08-Jun-1999 107.17 08-Jun-1998 114.97
07-Jun-2000 100.14 09-Jun-1999 107.27 09-Jun-1998 115.25
08-Jun-2000 99.48 10-Jun-1999 105.99 10-Jun-1998 114.62
09-Jun-2000 99.16 11-Jun-1999 105.24 11-Jun-1998 112.79
12-Jun-2000 98.42 14-Jun-1999 105.27 12-Jun-1998 113.23
13-Jun-2000 100.01 15-Jun-1999 105.85 15-Jun-1998 110.98
14-Jun-2000 100.09 16-Jun-1999 108.23 16-Jun-1998 112.07
15-Jun-2000 100.65 17-Jun-1999 109.00 17-Jun-1998 114.08
16-Jun-2000 99.67 18-Jun-1999 109.24 18-Jun-1998 114.01
19-Jun-2000 101.14 21-Jun-1999 109.74 19-Jun-1998 113.42
20-Jun-2000 100.46 22-Jun-1999 108.68 22-Jun-1998 113.69
21-Jun-2000 100.67 23-Jun-1999 108.45 23-Jun-1998 115.36
22-Jun-2000 98.84 24-Jun-1999 107.04 24-Jun-1998 116.74
23-Jun-2000 98.11 25-Jun-1999 107.00 25-Jun-1998 116.37
26-Jun-2000 99.05 28-Jun-1999 108.31 26-Jun-1998 116.77
27-Jun-2000 98.73 29-Jun-1999 109.94 29-Jun-1998 117.32
28-Jun-2000 99.02 30-Jun-1999 111.67 30-Jun-1998 116.84
29-Jun-2000 98.17 01-Jul-1999 112.34 01-Jul-1998 118.36
30-Jun-2000 99.00 02-Jul-1999 113.18 02-Jul-1998 118.14
03-Jul-2000 100.02 06-Jul-1999 112.93 06-Jul-1998 119.26
05-Jul-2000 98.43 07-Jul-1999 113.56 07-Jul-1998 118.98
06-Jul-2000 99.14 08-Jul-1999 113.44 08-Jul-1998 120.19
07-Jul-2000 100.66 09-Jul-1999 114.16 09-Jul-1998 119.39
10-Jul-2000 100.43 12-Jul-1999 113.82 10-Jul-1998 119.98
11-Jul-2000 100.79 13-Jul-1999 113.37 13-Jul-1998 120.07
12-Jul-2000 101.61 14-Jul-1999 113.74 14-Jul-1998 121.35
13-Jul-2000 101.81 15-Jul-1999 114.68 15-Jul-1998 121.06
14-Jul-2000 102.77 16-Jul-1999 115.42 16-Jul-1998 122.01
17-Jul-2000 102.77 19-Jul-1999 114.51 17-Jul-1998 122.29
18-Jul-2000 102.02 20-Jul-1999 112.03 20-Jul-1998 122.02
19-Jul-2000 100.87 21-Jul-1999 112.21 21-Jul-1998 120.06
20-Jul-2000 101.79 22-Jul-1999 110.72 22-Jul-1998 119.96
21-Jul-2000 100.74 23-Jul-1999 110.39 23-Jul-1998 117.45
24-Jul-2000 99.66 26-Jul-1999 109.64 24-Jul-1998 117.56
25-Jul-2000 100.36 27-Jul-1999 110.87 27-Jul-1998 118.22
26-Jul-2000 98.85 28-Jul-1999 111.08 28-Jul-1998 116.47
27-Jul-2000 98.66 29-Jul-1999 109.10 29-Jul-1998 115.95
28-Jul-2000 96.58 30-Jul-1999 108.09 30-Jul-1998 117.78
02-Aug-1999 108.04 31-Jul-1998 115.48
03-Aug-1999 107.56 03-Aug-1998 114.63
04-Aug-1999 106.19 04-Aug-1998 110.48
05-Aug-1999 106.87 05-Aug-1998 111.44
06-Aug-1999 105.78 06-Aug-1998 112.28
09-Aug-1999 105.58 07-Aug-1998 112.26
10-Aug-1999 104.25 10-Aug-1998 111.61
11-Aug-1999 105.91 11-Aug-1998 110.16
12-Aug-1999 105.61 12-Aug-1998 111.73
13-Aug-1999 108.01 13-Aug-1998 110.77
16-Aug-1999 108.26 14-Aug-1998 109.51
17-Aug-1999 109.35 17-Aug-1998 111.67
18-Aug-1999 108.43 18-Aug-1998 113.48
19-Aug-1999 107.68 19-Aug-1998 113.15
20-Aug-1999 108.74 20-Aug-1998 112.49
23-Aug-1999 110.66 21-Aug-1998 111.42
24-Aug-1999 110.92 24-Aug-1998 112.13
25-Aug-1999 112.41 25-Aug-1998 112.62
26-Aug-1999 110.80 26-Aug-1998 111.72
27-Aug-1999 109.68 27-Aug-1998 107.44
30-Aug-1999 107.71 28-Aug-1998 105.84
31-Aug-1999 107.42 31-Aug-1998 98.64
01-Sep-1999 108.28 01-Sep-1998 102.46
02-Sep-1999 107.31 02-Sep-1998 102.07
03-Sep-1999 110.41 03-Sep-1998 101.22
07-Sep-1999 109.86 04-Sep-1998 100.36
08-Sep-1999 109.35 08-Sep-1998 105.46
09-Sep-1999 109.63 09-Sep-1998 103.69
10-Sep-1999 109.96 10-Sep-1998 101.01
13-Sep-1999 109.35 11-Sep-1998 103.98
14-Sep-1999 108.71 14-Sep-1998 106.11
15-Sep-1999 107.22 15-Sep-1998 106.93
16-Sep-1999 107.26 16-Sep-1998 107.73
17-Sep-1999 108.64 17-Sep-1998 104.99
20-Sep-1999 108.65 18-Sep-1998 105.12
21-Sep-1999 106.33 21-Sep-1998 105.51
22-Sep-1999 106.57 22-Sep-1998 106.10
23-Sep-1999 104.13 23-Sep-1998 109.86
24-Sep-1999 103.89 24-Sep-1998 107.45
27-Sep-1999 104.37 25-Sep-1998 107.66
28-Sep-1999 104.29 28-Sep-1998 108.06
29-Sep-1999 103.15 29-Sep-1998 108.10
30-Sep-1999 104.35 30-Sep-1998 104.80
01-Oct-1999 104.36 01-Oct-1998 101.64
04-Oct-1999 106.13 02-Oct-1998 103.32
05-Oct-1999 105.87 05-Oct-1998 101.87
06-Oct-1999 107.82 06-Oct-1998 101.46
07-Oct-1999 107.19 07-Oct-1998 100.03
08-Oct-1999 108.69 08-Oct-1998 98.87
11-Oct-1999 108.60 09-Oct-1998 101.44
12-Oct-1999 106.81 12-Oct-1998 102.81
13-Oct-1999 104.54 13-Oct-1998 102.51
14-Oct-1999 104.37 14-Oct-1998 103.62
15-Oct-1999 101.45 15-Oct-1998 107.94
18-Oct-1999 102.02 16-Oct-1998 108.86
19-Oct-1999 102.58 19-Oct-1998 109.48
20-Oct-1999 104.86 20-Oct-1998 109.63
21-Oct-1999 104.46 21-Oct-1998 110.25
22-Oct-1999 105.84 22-Oct-1998 111.13
25-Oct-1999 105.19 23-Oct-1998 110.33
26-Oct-1999 104.21 26-Oct-1998 110.50
27-Oct-1999 105.43 27-Oct-1998 109.78
28-Oct-1999 109.17 28-Oct-1998 110.06
29-Oct-1999 111.70 29-Oct-1998 111.90
1-Nov-1999 110.15 30-Oct-1998 113.21
2-Nov-1999 109.58 02-Nov-1998 114.55
3-Nov-1999 110.15 03-Nov-1998 114.47
4-Nov-1999 110.80 04-Nov-1998 115.28
5-Nov-1999 111.45 05-Nov-1998 116.84
8-Nov-1999 112.02 06-Nov-1998 117.58
9-Nov-1999 111.05 09-Nov-1998 116.46
10-Nov-1999 111.70 10-Nov-1998 116.26
11-Nov-1999 112.35 11-Nov-1998 115.51
12-Nov-1999 113.57 12-Nov-1998 115.17
15-Nov-1999 113.40 13-Nov-1998 116.00
16-Nov-1999 115.44 16-Nov-1998 117.05
17-Nov-1999 114.71 17-Nov-1998 117.40
18-Nov-1999 115.11 18-Nov-1998 117.94
19-Nov-1999 115.68 19-Nov-1998 118.77
22-Nov-1999 115.60 20-Nov-1998 119.90
23-Nov-1999 114.22 23-Nov-1998 122.44
24-Nov-1999 115.28 24-Nov-1998 121.90
26-Nov-1999 115.19 25-Nov-1998 122.30
29-Nov-1999 114.46 27-Nov-1998 122.87
30-Nov-1999 112.99 30-Nov-1998 119.91
01-Dec-1999 113.71 01-Dec-1998 121.11
02-Dec-1999 114.63 02-Dec-1998 120.69
03-Dec-1999 116.60 03-Dec-1998 118.52
06-Dec-1999 115.79 04-Dec-1998 121.26
07-Dec-1999 114.64 07-Dec-1998 122.39
08-Dec-1999 114.21 08-Dec-1998 121.74
09-Dec-1999 114.55 09-Dec-1998 121.96
10-Dec-1999 115.28 10-Dec-1998 120.05
13-Dec-1999 115.13 11-Dec-1998 120.20
14-Dec-1999 114.15 14-Dec-1998 117.60
15-Dec-1999 114.98 15-Dec-1998 119.83
16-Dec-1999 115.42 16-Dec-1998 119.73
17-Dec-1999 115.60 17-Dec-1998 121.59
20-Dec-1999 115.36 18-Dec-1998 122.42
21-Dec-1999 116.61 21-Dec-1998 123.95
22-Dec-1999 116.83 22-Dec-1998 124.02
23-Dec-1999 118.64 23-Dec-1998 126.60
27-Dec-1999 118.53 24-Dec-1998 126.36
28-Dec-1999 118.53 28-Dec-1998 126.28
29-Dec-1999 119.02 29-Dec-1998 127.96
30-Dec-1999 119.10 30-Dec-1998 126.95
31-Dec-1999 119.53 31-Dec-1998 126.67
HIGHLIGHTING OUR BEST PERFORMING STOCKS
It is no surprise that our best performing stocks were in the semiconductor and
healthcare areas as they were top-performing sectors in the S&P 500 with gains
of 29% and 25% respectively. The other areas of strength included the energy
sector (+15%) and computer hardware companies (+7%). The relatively poor
performing areas included the cyclical stocks, retailers and telecommunication
companies, which were down 10% during the period.
BROADCOM (BRCM) is the leading provider of integrated circuits that enable
broadband digital-data transmission to residential and business users. We
purchased a small position in Broadcom after meeting with management in late
May. At the time, the stock had declined over 50% from its March high while
the company continued to post earnings growth in excess of 70%. During June,
Broadcom gained over 65% to become the best performing stock in our portfolio
over the past six months.
INTEL (INTC) is the World's leading provider of proprietary microprocessor
semiconductors used to drive the computer industry. Our Intel holdings gained
over 60% as the company benefited from the overall strength in the semiconductor
sector. The strength in demand for semiconductor products is being driven by
the increasing demand for broadband telecommunications and portable computing
and telephony devices.
ORACLE (ORCL) has been one of our top performing stocks for the past two years.
Oracle provides database-management and network products that are used to store
information critical to corporate information systems and more recently, to
manage web-based services. During the first six months of 2000, the stock price
increased by over 50% as Oracle continues to benefit from the growing demand for
database products as both new and old economy companies are becoming web
enabled.
PFIZER (PFE) was also a strong performer gaining over 50%. Pfizer, one of the
world's leading providers of pharmaceutical products, completed the acquisition
of Warner Lambert during the first half of 2000. The combined company now
dominates the market with the largest product revenues, research and development
budget and sales and marketing staff in the industry.
CARDINAL HEALTH (CAH) manufactures and distributes pharmaceuticals, surgical and
hospital supplies, in addition to providing value added services to the
pharmaceutical industry in the form of
<PAGE>
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FRONTEGRA FUNDS
proprietary drug delivery mechanisms. We made a very opportunistic purchase of
the stock in January of 2000 as it had fallen out of favor with investors after
declining by over 40% during 1999. The company continues to meet its operating
goals and the stock has been a very solid performer for us, gaining over 45% as
it continues to deliver on its revenue and earnings guidance.
TEN LARGEST HOLDINGS AS OF 6/30/00
NAME TICKER POSITION SIZE
---- ------ -------------
General Electric GE 5.2%
Microsoft MSFT 4.6%
Cendant CD 3.2%
Bristol-Myers BMY 2.9%
Fannie Mae FNM 2.7%
WorldCom WCOM 2.7%
Cisco Systems CSCO 2.7%
Cabletron Systems CS 2.7%
Chevron CHV 2.6%
Merck MRK 2.6%
SUMMARY
For the fiscal year ending June 30, 2000, we provided a very solid 15.3% return
versus the broad market return of 7.3% represented by the S&P 500 Stock Index.
During this period we were able to deliver these results while remaining within
our discipline of selecting a diversified portfolio of growth companies with
sustainable competitive advantages. These companies are primarily market leaders
- in fact, our top four performing stocks during the period, Broadcom, Intel,
Oracle and Pfizer are all dominant players in their respective industries.
A second discipline within our process is be opportunistic - we try not to
overpay for a company's growth prospects or competitive positioning when buying
stocks. Over the past two years this has become increasingly difficult as the
price/earnings ratios of the leading companies in many high growth areas have
doubled or tripled and are now at all time highs. Given this market backdrop,
we believe it is important to maintain diversification and limit our holdings in
potentially risky areas. Our renewed emphasis on the S&P 500 as the Fund's
primary benchmark is consistent with this approach, and we are confident that we
will be able to continue to outperform without increasing the level of risk in
the portfolio.
Please visit the Frontegra website at www.frontegra.com for daily prices and
portfolio data.<F1>
We thank you for your continued support and we encourage you to e-mail or write
with comments or questions about your Fund.
Sincerely,
/S/Daniel T. Murphy /S/Brian A. Hellmer /S/Stephen L. Hawk
Daniel T. Murphy, CFA Brian A. Hellmer, CFA Stephen L. Hawk, Ph.D.
President and Chief Senior Vice President and Chairman and
Investment Officer Director of Research Chief Executive Officer
[email protected] [email protected] [email protected]
<F1> The Fund is an actively managed portfolio. The companies discussed in
this letter may or may not be currently held by the Fund.
<PAGE>
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra S&P 500
Growth Stock
Fund Index
--------- ---------
3/18/98 $100,000 $100,000
3/31/98 101,100 101,523
6/30/98 102,000 104,875
9/30/98 85,800 94,443
12/31/98 108,939 114,556
3/31/99 113,144 120,264
6/30/99 119,452 128,742
9/30/99 112,643 120,710
12/31/99 136,161 138,670
3/31/00 141,792 141,858
6/30/00 137,770 138,096
--------------------------
Portfolio Total Return
FOR THE YEAR ENDED 6/30/00
--------------------------
ONE YEAR 15.33%
AVERAGE ANNUAL
SINCE COMMENCEMENT 15.03%
--------------------------
This chart assumes an initial gross investment of $100,000 made on 3/18/98
(commencement of operations). Past performance is not predictive of future
results. Investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than the original cost. In the absence
of existing fee waivers, total return would be reduced.
The S&P 500 Stock Index includes 500 common stocks, most of which are listed on
The New York Stock Exchange. The Index is a market capitalization-weighted index
representing approximately two-thirds of the total market value of all domestic
common stocks.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
SCHEDULE OF INVESTMENTS
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
COMMON STOCKS 98.3%
Airlines 0.7%
4,700 AMRCorp.<F1> $ 124,256
-----------
Building Products 1.1%
9,700 Masco Corp. 175,206
-----------
Chemicals 1.6%
6,900 Praxair, Inc. 258,319
-----------
Electronic Components 9.1%
4,250 Applied Materials, Inc.<F1> 385,156
2,950 Altera Corp.<F1> 300,716
3,150 Analog Devices, Inc.<F1> 239,400
1,225 Broadcom Corp.<F1> 268,198
4,150 Flextronics International Ltd.<F1> 285,053
-----------
1,478,523
-----------
Financial 8.0%
3,900 Citigroup Inc. 234,975
8,550 Fannie Mae 446,203
11,550 MBNA Corp. 313,294
10,400 Washington Mutual, Inc. 300,300
-----------
1,294,772
-----------
Food & Beverages 4.2%
6,450 Coca-Cola Co. (The) 370,472
13,900 Kroger Co. (The)<F1> 306,669
-----------
677,141
-----------
Healthcare 12.7%
4,000 Biogen, Inc.<F1> 258,000
2,475 Baxter International Inc. 174,023
8,200 Bristol-Myers Squibb Co. 477,650
4,850 Cardinal Health, Inc. 358,900
5,500 Merck &Co. 421,438
7,825 Pfizer Inc. 375,600
-----------
2,065,611
-----------
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Information Services & Software 15.3%
6,950 Cisco Systems, Inc.<F1> $ 441,759
3,000 EMC Corp.<F1> 230,812
4,050 First Data Corp. 200,981
9,450 Microsoft Corp.<F1> 756,000
3,600 Oracle Corp.<F1> 302,625
5,275 Seagate Technology, Inc.<F1> 290,125
3,000 Sun Microsystems, Inc.<F1> 272,813
----------
2,495,115
----------
Leisure & Entertainment 5.6%
11,050 AT&T Corp. - Liberty Media Group<F1> 267,963
7,550 Comcast Corp. - Special Class A<F1> 305,775
4,500 Time Warner, Inc. 342,000
----------
915,738
----------
Multi-Sector Companies 11.0%
16,175 General Electric Co. 847,169
8,975 Ralston-Ralston Purina Group 178,939
8,875 Tyco International Ltd. 420,453
8,150 Williams Companies, Inc. (The) 339,753
----------
1,786,314
----------
Oil & Gas 2.6%
5,000 Chevron Corp. 424,062
----------
Retailing & Restaurants 7.2%
36,075 Cendant Corp.<F1> 505,050
3,325 Costco Companies, Inc.<F1> 109,725
4,925 Target Corp. 285,650
8,425 Walgreen Co. 271,180
----------
1,171,605
----------
Technology 6.6%
17,300 Cabletron Systems, Inc.<F1> 436,825
2,950 Intel Corp. 394,378
3,450 Texas Instruments Inc. 236,972
----------
1,068,175
----------
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Telecommunications 10.1%
11,400 AT&T Corp. $ 361,460
5,175 Motorola, Inc. 150,398
5,700 Nortel Networks Corp. 389,025
3,450 US West, Inc. 295,838
9,700 WorldCom, Inc.<F1> 444,988
-----------
1,641,709
-----------
Utilities 2.5%
8,950 AESCorp. (The)<F1> 408,344
-----------
TOTAL COMMON STOCKS
(cost $13,403,118) 15,984,890
-----------
Principal Amount
----------------
SHORT-TERM INVESTMENTS 2.4%
Variable Rate Demand Notes 2.4%
$ 10,768 American Family Financial Services Inc., 6.31% 10,768
346,415 Sara Lee Corp., 6.27% 346,415
25,415 Wisconsin Corporate Central Credit Union,
6.34% 25,415
-----------
382,598
-----------
TOTAL SHORT-TERM INVESTMENTS
(cost $382,598) 382,598
-----------
TOTAL INVESTMENTS 100.7%
(cost $13,785,716) 16,367,488
Liabilities, less Other Assets (0.7)% (109,880)
-----------
NET ASSETS 100.0% $16,257,608
===========
<F1> Non-income producing
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
ASSETS:
Investments at value (cost $13,785,716) $ 16,367,488
Cash 55,692
Receivable for investments sold 157,676
Interest and dividends receivable 13,835
Receivable from Adviser 2,689
Other assets 2,035
------------
Total assets 16,599,415
------------
LIABILITIES:
Payable for investments purchased 310,567
Accrued expenses 31,240
------------
Total liabilities 341,807
------------
NET ASSETS $ 16,257,608
============
NET ASSETS CONSIST OF:
Paid in capital $ 13,763,768
Undistributed net investment income 2,712
Undistributed net realized loss (90,644)
Net unrealized appreciation on investments 2,581,772
------------
NET ASSETS $ 16,257,608
============
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 1,187,579
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $13.69
======
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENT OF OPERATIONS
YEAR ENDED
JUNE 30, 2000
-------------
INVESTMENT INCOME:
Dividends (net of $164 foreign withholding taxes) $ 85,638
Interest 13,103
---------
98,741
---------
EXPENSES:
Investment advisory fees 93,423
Fund administration and accounting fees 50,396
Legal fees 18,528
Custody fees 14,485
Shareholder servicing fees 13,416
Audit fees 12,702
Reports to shareholders 9,627
Federal and state registration fees 4,565
Directors' fees and related expenses 2,500
Other 931
---------
Total expenses before waiver and reimbursement 220,573
Waiver and reimbursement of expenses by Adviser (127,142)
---------
Net expenses 93,431
---------
NET INVESTMENT INCOME 5,310
---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (52,605)
Change in net unrealized appreciation
on investments 2,005,447
---------
NET REALIZED AND UNREALIZED GAIN
ON INVESTMENTS 1,952,842
---------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,958,152
==========
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Growth Fund
STATEMENTS OF CHANGES IN NET ASSETS
EIGHT
YEAR MONTHS PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998<F1>
-------- -------- ----------
OPERATIONS:
Net investment income $ 5,310 $ 3,778 $ 2,486
Net realized gain (loss)
on investments (52,605) 104,466 (95,500)
Change in net unrealized
appreciation/depreciation on
investments 2,005,447 659,763 (83,438)
---------- --------- ---------
Net increase (decrease) in net
assets resulting from operations 1,958,152 768,007 (176,452)
---------- --------- ---------
DISTRIBUTIONS PAID FROM:
Net investment income (6,376) (3,813) -
Net realized gain on investments (42,785) - -
---------- --------- ---------
Decrease in net assets resulting
from distributions paid (49,161) (3,813) -
---------- --------- ---------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 11,445,571 1,563,725 2,533,745
Shares issued to holders in
reinvestment of distributions 49,091 3,813 -
Shares redeemed (1,765,284) (55,261) (14,525)
---------- --------- ---------
Net increase in net assets
resulting from capital share
transactions 9,729,378 1,512,277 2,519,220
---------- --------- ---------
TOTAL INCREASE
IN NET ASSETS 11,638,369 2,276,471 2,342,768
---------- --------- ---------
NET ASSETS:
Beginning of period 4,619,239 2,342,768 -
---------- --------- ---------
End of period
(includes undistributed
net investment income of
$2,712, $3,778 and
$3,813, respectively) $16,257,608 $4,619,239 $2,342,768
=========== ========== ==========
<F1> Commenced operations on March 18, 1998.
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Growth Fund
FINANCIAL HIGHLIGHTS
EIGHT
YEAR MONTHS PERIOD
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998<F1>
-------- -------- ----------
NET ASSET VALUE,
BEGINNING OF PERIOD $11.93 $9.29 $10.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income -<F5> 0.01 0.01
Net realized and unrealized gain
(loss) on investments 1.82 2.64 (0.72)
------- -------- -------
TOTAL INCOME (LOSS) FROM
INVESTMENT OPERATIONS 1.82 2.65 (0.71)
------- -------- -------
Less Distributions Paid:
From net investment income (0.01) (0.01) -
From net realized gain on investments (0.05) - -
------- -------- -------
TOTAL DISTRIBUTIONS PAID (0.06) (0.01) -
------- -------- -------
NET ASSET VALUE, END OF PERIOD $13.69 $11.93 $ 9.29
====== ====== =======
TOTAL RETURN<F2> 15.33% 28.58% (7.10)%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $ 16,258 $4,619 $2,343
Ratio of expenses to
average net assets<F3><F4> 0.80% 0.80% 0.80%
Ratio of net investment income
to average net assets<F3><F4> 0.05% 0.16% 0.28%
Portfolio turnover rate<F2> 213% 106% 67%
<F1> Commenced operations on March 18, 1998.
<F2> Not annualized for periods less than a full year.
<F3> Net of waivers and reimbursements of expenses by Adviser. Without waivers
and reimbursements of expenses, the ratio of expenses to average net assets
would have been 1.89%, 4.52% and 9.23%, and the ratio of net investment
income (loss) to average net assets would have been (1.04)%, (3.56)% and
(8.15)% for the periods ended June 30, 2000, June 30, 1999 and October 31,
1998, respectively.
<F4> Annualized.
<F5> Less than one cent per share.
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
This page intentionally left blank.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
FRONTEGRA
EMERGING GROWTH FUND
<PAGE>
(LOGO)
FRONTEGRA FUNDS
REPORT FROM BERENTS & HESS CAPITAL MANAGEMENT, INC.:
We are pleased to present the first report to shareholders for the Frontegra
Emerging Growth Fund. Our first six months of operation coincided with some of
the most turbulent activity we have seen recently in the small cap markets. We
were able to ride the momentum of the Nasdaq and technology stocks for our first
two months of operation. Through February, the Fund advanced nearly 20%, even
though we were not fully invested the entire period. However, we were hit with
what we considered to be a healthy correction in our area of the market over the
next three months. As a result, we gave back most of the Fund's early gains.
The chart below gives you a sense for the volatility in the small cap markets
for the first six months of the year:
Jan-Feb Mar-May June
-------- -------- ------
Russell 2000 Value Index<F1> 3.3% (0.5%) 2.9%
Russell 2000 Growth Index 22.1% (26.6%) 12.9%
For the six months ended June 30, the Fund returned 2.30% compared to a 1.23%
return for the Russell 2000 Growth Index. We use the Russell 2000 Growth Index
as our primary benchmark, but the portfolio is constructed on a bottom-up, stock
by stock basis, without particular emphasis or reliance on the sector weights in
the benchmark.
OUR APPROACH
Given that this is our first report to shareholders, we thought it might be
appropriate to review our investment philosophy and approach for the Fund. Our
investment philosophy is based on the premise that investing in emerging
companies with earnings growth rates in excess of the market will generate
consistently superior investment results over time. We invest in emerging
growth companies which are attractively priced relative to their future earnings
growth and which offer the highest potential returns.
Companies in our portfolio exhibit the following characteristics:
-Superior earnings growth
-High returns on equity and assets
-Dominant market position
-Strong balance sheet
-Productive research and development teams
-Effective management
Our investment process begins with the establishment of our emerging growth
universe, which totals approximately 400 companies. Using a database that
includes all publicly traded securities, we screen for stocks with 15%
historical and/or expected earnings growth and sales less than $500 million. We
supplement our emerging growth universe with ideas generated from various
sources including internal research, conferences and industry contacts.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
We narrow the emerging growth universe to 125-150 companies that we believe are
likely to sustain earnings growth over the long-term. We consider both
quantitative and qualitative factors at this point in the process. Analysts
review companies' market position, looking for leading or increasing market
share. The stability of earnings and cash flow is also analyzed. Finally, we
assess the relative attractiveness of the companies in the universe with
measures such as sales to market cap and price to earnings growth.
Once the research list is established, the investment team conducts fundamental,
bottom-up analysis to identify the most favorable investment prospects.
Internally, we evaluate corporate filings, such as annual and quarterly reports,
and review 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.
A key to our process, however, is our 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 Fund portfolio is
constructed from the most attractive 40-50 issues.
PORTFOLIO OUTLOOK
Given our approach and our commitment to investing in the fastest growing areas
of the market, we have historically had significant exposure to technology
companies, as well as companies outside of the technology sector that benefit
from the use of technology. For the first six months, the Fund had exposure to
a wide range of technology companies, with an emphasis in the software,
telecommunications, and network equipment industries. One of the strongest
performing companies in the portfolio was a network equipment company, Ciena.
Ciena is in one of the hottest areas of technology, the optical networking
equipment market. The company offers products for telecommunications and data
communications service providers worldwide. Ciena's customers include long
distance carriers, local exchange carriers, internet service providers and
wholesale carriers. After hitting a low of $30 late last year, the stock jumped
to $189 in early March and has held most of its gains through the market
correction and stood at $166 at June 30.
A more recent purchase in the Fund that falls in the category of stocks that we
think will benefit from the use of technology is Martha Stewart Living Omnimedia
(MSO). This is a stock that went public last fall and quickly skyrocketed to
$50 per share. The stock retreated to below $15 earlier this year, a point at
which we found it attractive. MSO is an integrated content company consisting
of four business segments, publishing, internet/direct commerce, television, and
merchandising segments. We believe MSO is a play on leveraging technology. The
MSO management team is using technology with the same degree of success that
they have historically applied to the content and merchandising world by using
the online platform to leverage its traditional business models. Unlike some of
its counterparts, MSO is profitable and spins off considerable cash flow. We
believe that MSO will be a model for successful online ventures in the
future.<F2>
<PAGE>
(LOGO)
FRONTEGRA FUNDS
SUMMARY
As we pointed out at the beginning of the letter, it has been a turbulent time
to start an emerging growth mutual fund, but we have weathered the most recent
storm. We have been investing in emerging growth companies for over 30 years
and have seen our share of good and bad markets. We feel confident that we have
constructed a portfolio of companies with very exciting growth prospects. We
appreciate your confidence and we will continue to work hard to produce strong
relative and absolute results for our shareholders.
Sincerely,
/s/ Charles N. Berents /s/ Herbert P. Hess
Charles N. Berents, Jr., CFA Herbert P. Hess
Managing Director Managing Director
Berents & Hess Capital Management Berents & Hess Capital Management
<F1> The Russell 2000 Value Index is comprised of those securities in the
Russell 2000 Index which have lower price-to-book ratios and lower
forecasted growth values.
<F2> The Fund is an actively managed portfolio. The companies discussed in this
letter may or may not be currently held by the Fund.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra Emerging Russell 2000
Growth Fund Growth Index
------------------ ------------
12/31/99 100,000 100,000
1/31/00 107,000 99,070
2/29/00 118,700 122,124
3/31/00 110,400 109,288
4/30/00 97,500 98,250
5/31/00 89,200 89,644
6/30/00 102,300 101,225
-----------------------------------
Portfolio Total Return
FOR THE PERIOD ENDED 6/30/00
-----------------------------------
SINCE COMMENCEMENT 2.30%
-----------------------------------
This chart assumes an initial gross investment of $100,000 made on 12/31/99
(commencement of operations). Past performance is not predictive of future
results. Investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than the original cost. In the absence
of existing fee waivers, total return would be reduced.
The Russell 2000 Growth Index is comprised of those securities in the Russell
2000 Index which have higher price-to-book ratios and higher forecasted growth
values. The Russell 2000 Index is comprised of the smallest 2000 companies in
the Russell 3000 Index. The Russell 3000 Index is comprised of the 3000 largest
U.S. companies based on market capitalization.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
SCHEDULE OF INVESTMENTS
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
COMMON STOCKS 101.3%
Agricultural Operations 3.2%
2,600 Cadiz Inc.<F1> $ 20,800
----------
Computers 7.9%
2,000 Dot Hill Systems Corp.<F1> 22,000
1,000 NetScout Systems, Inc.<F1> 12,875
500 Synopsys, Inc. 17,281
----------
52,156
----------
E-Commerce 2.1%
2,200 MediaBay, Inc.<F1> 6,875
1,000 Neoforma.com, Inc.<F1> 7,031
----------
13,906
----------
Electronic Components 9.9%
200 Cree, Inc.<F1> 26,700
400 Dallas Semiconductor Corp. 16,300
1,500 General Semiconductor, Inc.<F1> 22,125
----------
65,125
----------
Food 6.3%
1,500 United Natural Foods, Inc.<F1> 20,625
500 Whole Foods Market, Inc.<F1> 20,656
----------
41,281
----------
Machinery 6.8%
400 Cognex Corp.<F1> 20,700
400 Kulicke and Soffa Industries, Inc.<F1> 23,750
----------
44,450
----------
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Medical 16.7%
3,000 Eclipse Surgical Technologies, Inc.<F1> $ 13,125
1,000 IntraBiotics Pharmaceuticals, Inc.<F1> 26,687
200 MiniMed Inc.<F1> 23,600
400 Transkaryotic Therapies, Inc.<F1> 14,700
300 Vertex Pharmaceuticals Inc.<F1> 31,613
----------
109,725
----------
Multimedia 3.3%
1,000 Martha Stewart Living Omnimedia, Inc.<F1> 22,000
----------
Networking Equipment 7.7%
200 CIENA Corp.<F1> 33,338
1,000 Computer Network Technology Corp.<F1> 17,375
----------
50,713
----------
Oil & Gas 3.1%
700 Core Laboratories N.V.<F1> 20,300
----------
Professional Services 9.4%
100 Catalina Marketing Corp.<F1> 10,200
2,000 Nextera Enterprises, Inc.<F1> 9,563
700 Pre-Paid Legal Services, Inc.<F1> 20,912
200 Sapient Corp.<F1> 21,388
----------
62,063
----------
Scientific Instruments 2.0%
500 Dionex Corp.<F1> 13,375
----------
Software 12.7%
400 Advent Software, Inc.<F1> 25,800
200 Akamai Technologies, Inc.<F1> 23,747
500 Bottomline Technologies, Inc.<F1> 17,094
1,500 National Information Consortium, Inc.<F1> 17,063
----------
83,704
----------
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
SCHEDULE OF INVESTMENTS (continued)
June 30, 2000
Number of Shares Value
---------------------------------------------------------------------------
Telecommunications 10.2%
600 Alamosa PCS Holdings, Inc.<F1> $ 12,525
700 Digital Microwave Corp.<F1> 26,687
1,000 GoAmerica, Inc.<F1> 15,437
900 Network Plus Corp.<F1> 12,769
----------
67,418
----------
TOTAL COMMON STOCKS
(cost $635,851) 667,016
----------
TOTAL INVESTMENTS 101.3%
(cost $635,851) 667,016
Liabilities, less Other Assets (1.3)% (8,689)
----------
NET ASSETS 100.0% $658,327
==========
<F1> Non-income producing
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
STATEMENT OF ASSETS AND LIABILITIES
June 30, 2000
ASSETS:
Investments at value (cost $635,851) $ 667,016
Cash 8,794
Receivable for investments sold 8,906
Receivable from Adviser 9,292
Other assets 1,945
------------
Total assets 695,953
------------
LIABILITIES:
Accrued expenses 37,626
------------
Total liabilities 37,626
------------
NET ASSETS $ 658,327
============
NET ASSETS CONSIST OF:
Paid in capital $ 687,531
Undistributed net investment income 753
Undistributed net realized loss (61,122)
Net unrealized appreciation on investments 31,165
------------
NET ASSETS $ 658,327
============
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 64,337
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $10.23
======
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
STATEMENT OF OPERATIONS
PERIOD ENDED
JUNE 30, 2000<F1>
-----------------
INVESTMENT INCOME:
Interest $ 3,287
Dividends 20
---------
3,307
---------
EXPENSES:
Fund administration and accounting fees $23,735
Audit fees 8,187
Shareholder servicing 7,979
Federal and state registration fees 5,681
Reports to shareholders 5,460
Legal fees 4,987
Investment advisory fees 2,554
Custody fees 1,614
Directors' fees and related expenses 1,250
Other 108
---------
Total expenses before waiver and reimbursement 61,555
Waiver and reimbursement of expenses by Adviser (59,001)
---------
Net expenses 2,554
---------
NET INVESTMENT INCOME 753
---------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (61,122)
Change in net unrealized appreciation
on investments 31,165
---------
NET REALIZED AND UNREALIZED LOSS
ON INVESTMENTS (29,957)
---------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(29,204)
=========
<F1> Commenced operations on December 31, 1999.
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
STATEMENT OF CHANGES IN NET ASSETS
PERIOD ENDED
JUNE 30, 2000<F1>
------------------
OPERATIONS:
Net investment income $ 753
Net realized loss
on investments (61,122)
Change in net unrealized appreciation
on investments 31,165
----------
Net decrease in net
assets resulting from operations (29,204)
----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 687,531
----------
Net increase in net assets resulting
from capital share transactions 687,531
----------
TOTAL INCREASE
IN NET ASSETS 658,327
----------
NET ASSETS:
Beginning of period -
----------
End of period
(includes undistributed net
investment income of $753) $658,327
==========
<F1> Commenced operations on December 31, 1999.
See notes to financial statements.
<PAGE>
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FRONTEGRA FUNDS
Frontegra Emerging Growth Fund
FINANCIAL HIGHLIGHTS
PERIOD ENDED
JUNE 30, 2000<F1>
-----------------
NET ASSET VALUE,
BEGINNING OF PERIOD $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.01
Net realized and unrealized gain
on investments 0.22
------
TOTAL INCOME FROM
INVESTMENT OPERATIONS 0.23
------
NET ASSET VALUE, END OF PERIOD $10.23
======
TOTAL RETURN<F2> 2.30%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period (in thousands) $ 658
Ratio of expenses to average net assets<F3><F4> 0.90%
Ratio of net investment income
to average net assets<F3><F4> 0.27%
Portfolio turnover rate<F2> 67%
<F1> Commenced operations on December 31, 1999.
<F2> Not annualized for periods less than a full year.
<F3> Net of waivers and reimbursements of expenses by Adviser. Without waivers
and reimbursements of expenses, the ratio of expenses to average net assets
would have been 21.69% and the ratio of net investment income (loss) to
average net assets would have been (20.52)% for the period ended June 30,
2000.
<F4> Annualized.
See notes to financial statements.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS
June 30, 2000
(1) ORGANIZATION
Frontegra Funds, Inc. ("Frontegra") was incorporated on May 24, 1996, as a
Maryland corporation and is registered under the Investment Company Act
of 1940, as amended (the "1940 Act"), as an open-end investment company
issuing its shares in series, each series representing a distinct
portfolio with its own investment objectives and policies. Frontegra
consists of four series: the Frontegra Total Return Bond Fund, the
Frontegra Opportunity Fund, the Frontegra Growth Fund and the Frontegra
Emerging Growth Fund (the "Funds"). The Frontegra Total Return Bond and
Opportunity Funds, sub-advised by Reams Asset Management Co., LLC
("Reams"), commenced operations on November 25, 1996 and July 31, 1997,
respectively. The Frontegra Growth Fund, sub-advised by Northern Capital
Management, LLC ("Northern"), commenced operations on March 18, 1998, and
the Frontegra Emerging Growth Fund, sub-advised by Berents & Hess Capital
Management, Inc. ("Berents & Hess"), commenced operations on December 31,
1999.
Costs incurred by the Frontegra Total Return Bond and Opportunity Funds in
connection with the organization, registration and the initial public
offering of shares have been deferred and are being amortized over the
period of benefit, but not to exceed five years from the respective dates
upon which the Funds commenced operations. Frontegra Asset Management,
Inc. (the "Adviser") has paid the costs incurred with the organization,
registration and initial public offering of shares for the Frontegra
Growth and Emerging Growth Funds.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
(a) Investment Valuation
Debt securities (other than short-term instruments) are valued at bid
prices furnished by a pricing service, unless actual sale prices are
available. Securities (other than short-term investments) for which
market quotations are readily available are valued at the last trade
price on the national securities exchange on which such securities are
primarily traded. Securities for which there were no transactions on a
given day or securities not listed on a national securities exchange are
valued at the most recent bid price. Securities maturing within 60 days
or less when purchased are valued by the amortized cost method. Any
securities for which market quotations are not readily available are
valued at their fair value as determined in good faith by Reams, Northern
and Berents & Hess, respectively, pursuant to guidelines established by
the Board of Directors.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 2000
(b) Federal Income Taxes
No federal income tax provision has been made since the Funds intend to
meet the requirements of the Internal Revenue Code applicable to
regulated investment companies and to distribute substantially all
investment company net taxable income and net capital gains to
shareholders in a manner which results in no tax cost to the Funds.
(c) Distributions to Shareholders
Dividends from net investment income are usually declared and paid
quarterly for the Frontegra Total Return Bond Fund and at least annually
for the Frontegra Opportunity, Growth and Emerging Growth Funds.
Distributions of net realized gains, if any, will be declared and paid at
least annually for all Funds. Distributions to shareholders are recorded
on the ex-dividend date. The character of distributions made during the
period from net investment income or net realized gains may differ from
the characterization for federal income tax purposes due to differences
in the recognition of income, expense and gain items for financial
statement and tax purposes. Where appropriate, reclassifications between
net asset accounts are made for such differences that are permanent in
nature. Accordingly, at June 30, 2000, reclassifications were recorded to
decrease undistributed net investment income by $1,413 and $19,445,
decrease undistributed net realized loss by $5,603 and $22,604 and
decrease paid in capital by $4,190 and $3,159 for the Frontegra Total
Return Bond and Opportunity Funds, respectively. Reclassifications were
recorded to increase undistributed net realized loss by $4,220 and
increase paid in capital by $4,220 for the Frontegra Growth Fund. No
reclassifications were made to the Frontegra Emerging Growth Fund.
(d) Other
Investment transactions are accounted for on the trade date. The Funds
determine the gain or loss realized from investment transactions by
comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of increases and decreases
in net assets from operations during the reporting period. Actual results
could differ from those estimates.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 2000
(3) INVESTMENT ADVISER
Each of the Funds has entered into an agreement with the Adviser, with
whom certain officers and directors of the Funds are affiliated, to
furnish investment advisory services to the Funds. The terms of these
agreements are as follows:
The Frontegra Total Return Bond Fund will pay the Adviser a monthly fee
at the annual rate of 0.40% of the Fund's average daily net assets.
Pursuant to an expense cap agreement dated February 26, 1999, as amended
August 2 and December 31, 1999, the Adviser agreed to waive its
management fee and/or reimburse the Fund's operating expenses (exclusive
of brokerage, interest, taxes and extraordinary expenses) to ensure that
the Fund's operating expenses do not exceed 0.425% of the Fund's average
daily net assets. This expense cap agreement terminates on December 31,
2000.
The Frontegra Opportunity Fund will pay the Adviser a monthly fee 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 August 2 and
December 31, 1999, the Adviser agreed to waive its management fee and/or
reimburse the Fund's operating expenses (exclusive of brokerage,
interest, taxes and extraordinary expenses) to ensure that the Fund's
operating expenses do not exceed 0.90% of the Fund's average daily net
assets. This expense cap agreement terminates on December 31, 2000.
The Frontegra Growth Fund will pay the Adviser a monthly fee 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 August 2 and
December 31, 1999, the Adviser has agreed to waive its management fee
and/or reimburse the Fund's operating expenses (exclusive of brokerage,
interest, taxes and extraordinary expenses) to ensure that the Fund's
operating expenses do not exceed 0.80% of the Fund's average daily net
assets. This expense cap agreement terminates on December 31, 2000.
The Frontegra Emerging Growth Fund will pay the Adviser a monthly fee 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, the Adviser
has agreed to waive its management fee and/or reimburse the Fund's
operating expenses (exclusive of brokerage, interest, taxes and
extraordinary expenses) to ensure that the Fund's operating expenses do
not exceed 0.90% of the Fund's average daily net assets. This expense
cap agreement terminates on December 31, 2000.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 2000
(4) CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Frontegra Total Return Bond Fund were as
follows:
EIGHT
YEAR MONTHS YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998
--------- --------- -----------
Shares sold 1,185,248 47,995 385,190
Shares issued to holders in
reinvestment of
distributions 128,336 110,347 86,889
Shares redeemed (565,083) (52,435) (195,049)
---------- ---------- ---------
Net increase in shares
outstanding 748,501 105,907 277,030
========== ========== =========
Transactions in shares of the Frontegra Opportunity Fund were as follows:
EIGHT
YEAR MONTHS YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998
--------- --------- -----------
Shares sold 144,034 290,271 61,127
Shares issued to holders in
reinvestment of
distributions 29,067 2,845 216
Shares redeemed (65,274) - -
---------- ---------- ---------
Net increase in shares
outstanding 107,827 293,116 61,343
========== ========== =========
Transactions in shares of the Frontegra Growth Fund were as follows:
EIGHT
YEAR MONTHS YEAR
ENDED ENDED ENDED
JUNE 30, JUNE 30, OCTOBER 31,
2000 1999 1998<F1>
--------- --------- -----------
Shares sold 924,338 139,727 253,765
Shares issued to holders in
reinvestment of
distributions 3,634 351 -
Shares redeemed (127,661) (5,018) (1,557)
---------- ---------- ---------
Net increase in shares
outstanding 800,311 135,060 252,208
========== ========== =========
<F1> Commenced operations on March 18, 1998.
Transactions in shares of the Frontegra Emerging Growth Fund were as
follows:
PERIOD ENDED
JUNE 30, 2000<F1>
-----------------
Shares sold 64,337
------
Net increase in shares outstanding 64,337
======
<F1> Commenced operations on December 31, 1999.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 2000
(5) INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government securities, for the Funds for the period
ended June 30, 2000, are summarized below:
FRONTEGRA FRONTEGRA FRONTEGRA FRONTEGRA
TOTAL RETURN OPPORTUNITY GROWTH EMERGING
BOND FUND FUND FUND GROWTH FUND
------------- ----------- --------- -----------
Purchases $48,898,576 $11,891,730 $34,030,221 $999,017
Sales $40,451,594 $9,831,948 $24,588,063 $302,044
Purchases and sales of U.S. government securities for the Frontegra Total
Return Bond Fund were $204,974,770 and $192,179,242, respectively.
There were no purchases and sales of U.S. government securities for the
other Funds.
At June 30, 2000, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of
$71,140,595, $17,398,334, $14,174,201 and $635,851 were as follows:
FRONTEGRA FRONTEGRA FRONTEGRA FRONTEGRA
TOTAL RETURN OPPORTUNITY GROWTH EMERGING
BOND FUND FUND FUND GROWTH FUND
------------- ---------- ---------- ------------
Appreciation $ 576,005 $2,192,098 $ 3,003,802 $101,262
(Depreciation) (1,416,542) (1,622,123) (810,515) (70,097)
----------- ----------- ----------- --------
Net Appreciation
(Depreciation)
on
investments $(840,537) $ 569,975 $2,193,287 $ 31,165
----------- ----------- ----------- ---------
At June 30, 2000, the Frontegra Total Return Bond and Opportunity Funds
had accumulated net realized capital loss carryovers of $349,504 and
$132,054 expiring in 2007 and 2006, respectively. To the extent the
Funds realize future net capital gains, taxable distributions to its
shareholders will be offset by any unused capital loss carryover.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS (continued)
June 30, 2000
(6) SUBSEQUENT EVENT - CHANGE OF CONTROL OF NORTHERN CAPITAL
MANAGEMENT, LLC (UNAUDITED)
Northern is a subsidiary of United Asset Management Corporation ("UAM").
UAM has entered into an agreement with Old Mutual Plc ("Old Mutual")
whereby Old Mutual has agreed to acquire UAM. Old Mutual is a UK-based
financial services group with substantial asset management, insurance and
banking businesses. This transaction, which is expected to close in the
fourth quarter of this year, is not expected to affect the sub-advisory
services which Northern provides to the Frontegra Growth Fund.
Under the Investment Company Act of 1940, the transaction would result in
a change of control of Northern and, therefore, an assignment and
termination of the Sub-Advisory Agreement between the Adviser and
Northern with respect to the Frontegra Growth Fund. At a meeting held on
August 15, 2000, the Board of Directors of the Fund approved a new Sub-
Advisory Agreement between the Adviser and Northern with respect to the
Fund, subject to approval by the shareholders of the Fund.
<PAGE>
(LOGO)
FRONTEGRA FUNDS
Frontegra Funds
REPORT OF INDEPENDENT AUDITORS
June 30, 2000
To the Board of Directors and Shareholders of the Frontegra Funds, Inc.
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of the Frontegra Funds, Inc., comprised of the
Frontegra Total Return Bond Fund, Frontegra Opportunity Fund, Frontegra Growth
Fund and Frontegra Emerging Growth Fund (collectively the "Funds"), as of June
30, 2000, and the related statements of operations, statements of changes in net
assets and the financial highlights for the periods indicated therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of June 30, 2000, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds at June 30, 2000, the results of their operations, changes in net assets
and the financial highlights for the periods indicated therein, in conformity
with accounting principles generally accepted in the United States.
/s/Ernst & Young LLP
Chicago, Illinois
July 28, 2000
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<PAGE>
FRONTEGRA FUNDS, INC.
C/O FIRSTAR MUTUAL FUND SERVICES, LLC
P.O. BOX 701, MILWAUKEE, WISCONSIN 53201-0701
FO-410-0700
<PAGE>
