(FRONTIER FUNDS LOGO)
Fifth Year
ANNUAL REPORT
For the Period Ended
September 30, 1996
(FRONTIER FUNDS LOGO)
SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 1996
QUOTED
MARKET
SHARES VALUE
------ -----------
(NOTE 1(B))
COMMON STOCKS -- 99.57%
APPAREL -- 5.19%
60,000 Cygne Designs Inc.*<F1> $75,000
---------
BIOPHARMACEUTICALS -- 5.54%
5,000 Flamel Technologies SA. ADR*<F1> 38,125
5,000 Immunomedics Inc.*<F1> 41,875
---------
80,000
---------
BIOTECHNOLOGY -- 24.33%
14,000 Energy Bio Systems Inc.*<F1> 84,000
40,000 Erox Corp.*<F1> 267,500
---------
351,500
---------
COMPUTER PERIPHERALS -- 5.88%
10,000 Dense-Pac Microsystems Inc.*<F1> 28,125
10,000 Hauppauge Digital Inc.*<F1> 39,375
10,000 Personal Computer Products Inc.*<F1> 17,400
---------
84,900
---------
ELECTRONICS -- 1.86%
10,000 Arizona Instrument Corp.*<F1> 26,875
---------
ENTERTAINMENT -- 3.89%
10,000 Three Do*<F1> 56,250
---------
HEALTH CARE TECHNOLOGY -- 2.96%
15,000 Cell Robotics Int'l Inc.*<F1> 42,750
---------
HEALTHCARE -- 11.19%
10,000 Biomira Inc.*<F1> 67,500
20,000 Cytel Corp.*<F1> 60,000
3,000 Somatogen Inc.*<F1> 34,125
---------
161,625
---------
MISCELLANEOUS -- 5.54%
20,000 Meisenheimer Capital Inc.*<F1> 24,375
15,000 Quest International Resources Corp.*<F1> 20,625
10,000 Venture Seismic Inc.*<F1> 35,000
---------
80,000
---------
PHARMACEUTICALS -- 3.46%
10,000 Gensia Inc.*<F1> 50,000
---------
RECYCLING MANAGEMENT -- 4.28%
15,000 HI-Rise Recycling Systems Inc.*<F1> 61,875
---------
RETAIL -- 5.02%
20,000 Barry's Jewelers*<F1> 72,500
---------
TECHNOLOGY -- 11.09%
20,000 Digital Sound Corp.*<F1> 30,000
11,000 Research Frontiers Inc.*<F1> 99,000
40,000 Voice Powered Tech International, Inc.*<F1> 31,250
---------
160,250
---------
TELECOMMUNICATIONS -- 9.34%
10,000 Telular Inc.*<F1> 51,250
10,000 Vtel Corp.*<F1> 83,750
---------
135,000
----------
Total Investments (All common stocks --
cost of $1,545,698) 1,438,525
----------
Other assets net of other liabilities -- .43% 6,282
----------
Total net assets (basis of
percentages disclosed above) $1,444,807
----------
----------
*<F1> Nondividend paying security
The accompanying notes to financial statements are an integral part of this
schedule.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996
ASSETS:
Investments in securities at market value --
(cost $1,545,698 see accompanying
schedule of investments) (Note 1(b)) $1,438,525
Cash 2,114
Receivable for securities sold 23,588
Prepaid expenses 1,259
----------
Total assets 1,465,486
----------
LIABILITIES
Redemptions payable 1,105
Accrued expenses 19,574
----------
Total liabilities 20,679
----------
Total net assets $1,444,807
----------
----------
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $1,551,980
Accumulated unrealized depreciation on investments (Note 4) (107,173)
----------
Total net assets $1,444,807
----------
----------
NET ASSET VALUE PER SHARE ($.01 par value, 80,000,000 shares authorized):
Redemption price ($1,444,807 / 218,577 shares outstanding) $6.61
----------
----------
Maximum offering price (net asset value plus 8.7%
of the net asset value or 8%
of the offering price calculated as $6.61 x 100 / 92) $7.18
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
INCOME:
Dividends $400
---------
400
---------
EXPENSES:
Management fee (Note 2) 14,351
Transfer and disbursing agent fees 17,984
Administrative fees 25,560
Custodian fees 7,666
Printing 3,432
Registration fees 4,798
Legal fees 17,357
Insurance 2,590
Directors' fees 5,214
Audit fees 14,465
Other operating expenses 5,509
---------
118,926
Less: Waiver of management fee (14,351)
---------
Net expenses 104,575
---------
Net investment loss (104,175)
---------
NET REALIZED GAIN ON INVESTMENTS (Note 1(c)) 103,873
NET DECREASE IN UNREALIZED APPRECIATION ON INVESTMENTS (285,024)
---------
Net loss on investments (181,151)
---------
Net decrease in net assets resulting from operations $(285,326)
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
------ ------
OPERATIONS:
Net investment loss $(104,175) $(84,743)
Net realized gains (loss) on
investments (Note 1(c)) 103,873 (70,650)
Net (decrease) increase in unrealized
appreciation on investments (285,024) 245,143
---------- ---------
Net (decrease) increase in net assets
resulting from operations (285,326) 89,750
---------- ---------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income -- --
Distributions from net realized gains on investments -- --
---------- ---------
Total distributions -- --
---------- ---------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (43,430 and
54,011 shares, respectively) 297,032 385,213
Cost of shares redeemed (18,032 and
17,369 shares, respectively) (123,792) (106,380)
---------- ---------
Increase in net assets derived from
capital share transactions 173,240 278,833
---------- ---------
Total (decrease) increase in net assets (112,086) 368,583
---------- ---------
NET ASSETS, at the beginning of the period 1,556,893 1,188,310
---------- ---------
NET ASSETS, at the end of the period $1,444,807 $1,556,893
---------- ---------
---------- ---------
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
APRIL 1, 1992
(COMMENCEMENT
FOR THE YEARS ENDED OF OPERATIONS) TO
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.06 $7.59 $8.68 $9.39 $10.00
Income (loss) from
investment operations:
Net investment loss (.51) (.47) (.77) (1.12) (1.11)
Net realized and unrealized
(losses) gains on securities
(Note 1 (g)) (.94) .94 .13 .41 .50
------- ------- ------- ------- --------
Total income (loss) from
investment operations (1.45) .47 (.64) (.71) (.61)
Less distributions:
Distributions from net
realized gains on investments -- -- (.27) -- --
Distributions in excess
of book realized gains -- -- (.18) -- --
------- ------- ------- ------- --------
Total distributions -- -- (.45) -- --
------- ------- ------- ------- --------
Net asset value, end of period $6.61 $8.06 $7.59 $8.68 $9.39
------- ------- ------- ------- --------
------- ------- ------- ------- --------
Total return**<F3> (17.99)% 6.19% (7.23)% (7.56)% (12.17)%*<F2>
Ratios/Supplemental Data
Net assets, end of period (in 000's) $1,445 $1,557 $1,188 $1,079 $332
Ratio of total expenses
to average net assets 8.29% 8.08% 9.61% 14.51% 35.05%*<F2>
Ratio of net expenses,
to average net assets 7.29% 7.08% 9.55% 13.51% 24.02%*<F2>
Ratio of net investment
loss to average net assets (7.26)% (7.06)% (9.40)% (12.36)% (23.10)%*<F2>
Portfolio turnover rate 133.42% 100.80% 121.48% 84.66% 0%
Average commission rate paid $.0511***<F4> -- -- -- --
*<F2>Annualized
**<F3>The Fund's sales charge is not reflected in the total return as set forth
in the table.
***<F4>Disclosure of this rate is required by the Securities and Exchange
Commission on a prospective basis beginning with the Fund's 1996 fiscal year
end.
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(1) Summary of Significant Accounting Policies --
The following is a summary of the significant accounting policies of Frontier
Funds, Inc. Equity Fund Portfolio (the "Fund"):
(a) The Fund is a series of the Frontier Funds, Inc. ("Frontier"), a
Maryland corporation. Frontier is an open-end, diversified management
investment company under the Investment Company Act of 1940, authorized to issue
200,000,000 shares of capital stock in separate series, with each series
representing interests in a separate portfolio of securities and other assets,
each with its own investment objectives and policies. The Equity Fund
Portfolio, to which Frontier's Board of Directors has initially allocated
80,000,000 shares, is the only current series of the Frontier Funds.
(b) In the calculation of the Fund's net asset value: (1) a portfolio
security listed or traded on the New York or American Stock Exchanges or quoted
by National Association of Securities Dealers Automated Quotations, Inc.,
("NASDAQ") is valued at its last sale price on that exchange; (2) all other
portfolio securities for which over-the-counter market quotations are readily
available are valued at the latest bid quotations; and (3) when market
quotations are not readily available, portfolio securities are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision of the Fund's directors (valuation of debt securities
for which market prices of securities which are comparable in coupon, rating and
maturity or an appropriate matrix utilizing similar factors).
Short-term debt securities are valued at amortized cost, unless the
directors determine that the amortized cost does not reflect the securities'
fair value, in which case these securities will be valued at their fair value as
determined by the directors.
(c) Net realized gains and losses are computed on the basis of specific
identification.
(d) The Fund has qualified as a regulated investment company under
Subchapter M of the Internal Revenue Code and generally intends to take all
other action required to insure that little or no Federal income or excise taxes
will be payable by the Fund. The Fund will not be subject to Federal income tax
on its net investment income and net short-term capital gains, if any, realized
during any fiscal year in which it distributes such income and capital gains to
its stockholders.
(e) Federal income tax loss carryforwards generated in prior years will be
used to offset a portion of current year's net realized gains. The remaining
net short-term realized gain will be offset by a portion of the current year's
net investment loss. The remaining current year's net investment loss of
$91,399 has been reclassified to fund shares issued and outstanding.
(f) Dividends are recorded on the ex-dividend date. Interest income is
recorded using the accrual method. Noncash dividends, if any, are recorded at
fair market value on date of distribution.
(g) Net realized and unrealized losses/gains on securities included in the
Financial Highlights are balancing amounts necessary to reconcile the change in
net asset value per share with the other per share information presented.
(h) The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent asset and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(2) Investment Adviser and Management Agreement --
The Fund has an agreement with Freedom Investors Corp. (the "Adviser," with
whom certain officers and directors of the Fund are affiliated) to serve as
investment adviser and manager. Under the terms of the agreement, a monthly fee
is paid to the investment adviser based on 1/12 of 1% (1% on an annual basis) of
the average daily net asset value. This advisory agreement is subject to an
annual review by the Directors of the Fund.
The Adviser waived the management fee for the year ended September 30, 1996,
and has continued to waive the fee until further notice to the Board of
Directors.
The Fund pays Freedom Investors Corp. (the "Distributor") commissions on
sales of Fund shares. Total commissions paid to the Distributor for the year
ended September 30, 1996, were approximately $24,200.
(3) Administration Agreement --
The Fund has agreements with American Data Services, Inc. (the
"Administrator") to provide shareholder servicing, fund accounting and
administrative services to the Fund. For the administrative and fund accounting
services, the Fund pays the Administrator a fee computed daily and payable
monthly, the greater of approximately $2,100 per month or, based upon the total
assets of the Fund, at the rate of 1/12th of 0.10% on the first $75 million of
the average total monthly assets, 0.05% on the next $100 million of the average
total monthly assets and 0.03% on the average total monthly assets in excess of
$175 million. For the shareholder services, the Fund pays a monthly fee of
approximately $1,300. In addition, the Fund will reimburse the Administrator
its reasonable out-of-pocket expenses.
(4) Accumulated Unrealized Depreciation --
Aggregate gross unrealized appreciation (depreciation) as of September 30,
1996, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments $192,133
Aggregate gross unrealized depreciation on investments (299,306)
---------
Net unrealized depreciation................. $(107,173)
---------
---------
(5) Investment Transactions --
For the year ended September 30, 1996, purchases and proceeds from sales of
long-term or equity investment securities, other than short-term obligations,
aggregated $2,009,113 and $1,942,437, respectively.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
of the Equity Fund Portfolio:
We have audited the accompanying statement of assets and liabilities of the
Equity Fund Portfolio (a series of Frontier Funds, Inc., a Maryland
corporation), including the schedule of investments, as of September 30, 1996,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the periods presented. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, 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
Equity Fund Portfolio as of September 30, 1996, and the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the periods presented in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
November 11, 1996.
(FRONTIER FUNDS LOGO)
FRONTIER FUNDS, INC.
OFFICERS AND DIRECTORS
James R. Fay............... President and Director
William T. Duero...... Vice President and Director
Jeffrey S. Ackley........................ Director
Scott W. Hanson.......................... Director
Kenneth W. Coshun........................ Director
INVESTMENT ADVISOR
FREEDOM INVESTORS CORP.
NATIONAL DISTRIBUTOR
Freedom Investors Corp.
INDEPENDENT ACCOUNTANTS
Arthur Andersen LLP
CUSTODIAN,
RETIREMENT PLAN CUSTODIAN
Star Bank, N.A.
SHAREHOLDER SERVICES
1-800-231-2901
SECURITIES DEALERS ONLY
1-800-759-6598
(FRONTIER FUNDS LOGO)
FRONTIER FUNDS, INC.
P.O.Box 68
101 W. Wisconsin Ave.
Pewaukee, WI 53072-0068
(414) 691-1196
This report is intended solely for use by the shareholders of Frontier
Funds, Inc. If it is provided to any member of the public, it must be
preceded or accompanied by a currently effective prospectus of the Fund.
