(FRONTIER FUNDS, INC. LOGO)
SEMI-ANNUAL REPORT
For the Period Ended
March 31, 1997
(FRONTIER FUNDS, INC. LOGO)
TO OUR INVESTORS
Dear Shareholders,
Thank you for your investment in Frontier Funds, Inc. Equity Fund Portfolio.
I appreciate the opportunity to serve you.
I am pleased to provide the Semi-Annual Report for the period ended March 31,
1997. The following pages describe the financial position of your fund.
The investment objective of the Equity Portfolio is capital appreciation. The
current strategy is to purchase common stock in undervalued companies and to
purchase common stock in companies that management believes has potential for
superior earnings growth.
The six months ended March 31, 1997 has been very challenging. Your fund is
primarily invested in common stock of small companies. The stock market has, for
the most part, overlooked the potential capital appreciation of many small
companies.
I believe the notable decline in stock prices of many small companies is a
temporary situation which has created significant investment opportunities.
Looking to the future, I expect the investment community to recognize the
excellent investment prospects amongst the small companies. The investment adage
to buy low, sell high is still the best advice. I will position your portfolio
to take advantage of the investment opportunities that present themselves.
I invite your comments and suggestions. Feel free to write or telephone.
Again, thank you for your confidence in Frontier Funds, Inc.
Sincerely,
/s/ James R. Fay
James R. Fay
President
SCHEDULE OF INVESTMENTS
AS OF MARCH 31, 1997 (UNAUDITED)
QUOTED
MARKET
SHARES VALUE
- ------ -------
(NOTE 1(B))
COMMON STOCKS -- 103.94%
APPAREL -- 5.04%
70,000 Cygne Designs Inc.*<F1> $ 48,125
-----------
BIOTECHNOLOGY -- 22.33%
14,000 Energy Bio Systems Inc.*<F1> 85,750
40,000 Erox Corp.*<F1> 127,500
53 Preseptive Biosystems Warrants *<F1> 3
-----------
213,253
-----------
COMPUTER PERIPHERALS --10.57%
40,000 Dense-Pac Microsystems Inc.*<F1> 87,500
5,000 Hauppauge Digital Inc.*<F1> 13,438
-----------
100,938
-----------
COMPUTER SOFTWARE -- 7.33%
40,000 Mitek Systems Inc.*<F1> 70,000
-----------
ELECTRONICS -- 1.27%
5,000 Arizona Instrument Corp.*<F1> 12,187
-----------
ENTERTAINMENT -- 2.42%
5,000 Three Do*<F1> 13,125
20,000 Meisenheimer Capital Inc.*<F1> 10,000
-----------
23,125
-----------
HEALTH CARE TECHNOLOGY -- 5.33%
15,000 Cell Robotics Int'l Inc.*<F1> 36,562
10,000 Imex Medical Systems Inc.*<F1> 14,375
-----------
50,937
-----------
HEALTHCARE -- 16.65%
10,000 Biomira Inc.*<F1> 51,250
10,000 Cytel Corp.*<F1> 23,750
20,000 Procyte Corp*<F1> 35,000
8,000 Somatogen Inc. 49,000
-----------
159,000
-----------
RECYCLING MANAGEMENT -- 5.50%
15,000 High-Rise Recycling Systems Inc.*<F1> 52,500
-----------
RETAIL --5.23%
25,000 Barry's Jewelers *<F1> 50,000
-----------
SERVICES - OIL & GAS EXPLORATION --3.14%
8,000 Venture Seismic Inc.*<F1> 30,000
-----------
TECHNOLOGY --11.47%
40,000 Digital Sound Corp.*<F1> 51,250
6,000 Research Frontiers Inc.*<F1> 36,750
2,500 SATCON Technology Corp.*<F1> 15,313
40,000 Voice Powered Tech Intl Inc.*<F1> 6,250
-----------
109,563
-----------
TELECOMMUNICATIONS --7.66%
40,000 RSI Systems Inc.*<F1> 45,000
5,000 Telular Inc.*<F1> 28,125
-----------
73,125
-----------
Total Investments (All common
stocks -- cost of $1,405,679) 992,753
-----------
Other assets net of
other liabilities -- (3.94%)% (37,651)
-----------
Total net assets (basis of
percentages disclosed above) $ 955,102
===========
*<F1> Non-income producing.
The accompanying notes to financial statements are an integral part of this
schedule.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997 (UNAUDITED)
ASSETS:
Investment in securities at market value
(cost $1,405,679 -- see accompanying
schedule of investments) (Note 1(b)) $ 992,753
-----------
Total assets 992,753
-----------
LIABILITIES:
Due to custodian 33,702
Accrued expenses 3,949
-----------
Total liabilities 37,651
-----------
Total net assets $ 955,102
===========
NET ASSETS CONSIST OF:
Fund shares issued and outstanding 1,368,028
Accumulated unrealized depreciation
on investments (Note 4) (412,926)
-----------
$ 955,102
===========
NET ASSET VALUE PER SHARE ($.01 par value,
80,000,000 shares authorized):
Redemption price ($955,102 / 216,176
shares outstanding) $ 4.42
===========
Maximum offering price (net asset value plus
8.7% of the net asset value or 8%
of the offering price calculated
as $4.42 x 100 / 92) $ 4.80
===========
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
INCOME:
Other $ 131
-----------
131
-----------
EXPENSES:
Management fee (Note 2) 6,205
Transfer and disbursing agent fees 8,237
Administrative fees 13,180
Custodian fee 4,135
Printing 1,162
Registration fees 2,639
Legal fees 21,316
Insurance 1,259
Directors' fees 4,477
Audit fees 6,982
Other operating expenses 2,891
-----------
72,483
Less: Waiver of management fee (6,205)
-----------
Net expenses 66,278
-----------
Net investment loss (66,147)
-----------
NET REALIZED GAIN/LOSS ON
INVESTMENTS (Note 1(c)) (111,290)
NET DECREASE IN UNREALIZED
APPRECIATION ON INVESTMENTS (305,753)
-----------
Net loss on investments (417,043)
-----------
Net decrease in net assets
resulting from operations $ (483,190)
===========
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1997 SEPTEMBER 30, 1996
--------------- ------------------
(UNAUDITED) (AUDITED)
OPERATIONS:
Net investment loss $ (66,147) $(104,175)
Net realized gains (loss) on
investments (Note 1 (c)) (111,290) 103,873
Net (decrease) increase in unrealized
appreciation on investments (305,753) (285,024)
---------- ----------
Net (decrease) increase in net
assets resulting from operations (483,190) (285,326)
---------- ----------
DISTRIBUTIONS:
Distributions from net realized
gains on investments -- --
Distributions in excess of book realized
gains (Note 1(f)) -- --
---------- ----------
Total distributions -- --
---------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (7,191
and 43,430 shares, respectively) 42,703 297,032
Cost of shares redeemed (9,592 and
18,032 shares, respectively) (49,218) (123,792)
---------- ----------
Increase (decrease) in net
assets derived from
capital share transactions (6,515) 173,240
---------- ----------
Total (decrease) increase in net assets (489,705) (112,086)
---------- ----------
NET ASSETS, at the beginning of the period 1,444,807 1,556,893
---------- ----------
NET ASSETS, at the end of the period $ 955,102 $1,444,807
========== ==========
The accompanying notes to financial statements are an integral part of this
statement.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION> APRIL 1, 1992
FOR THE SIX (COMMENCEMENT
MONTHS ENDED FOR THE YEARS ENDED OF OPERATIONS) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------
1997 1996 1995 1994 1993 1992
------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $6.61 $8.06 $7.59 $8.68 $9.39 $10.00
Income (loss) from
investment operations:
Net investment loss (.30) (.51) (.47) (.77) (1.12) (1.11)
Net realized and unrealized
(losses) gains on securities
(Note 1 (g)) (1.89) (.94) .94 .13 .41 .50
------ ------ ------ ------ ------ ------
Total income (loss) from
investment operations (2.19) (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 $4.42 $6.61 $8.06 $7.59 $8.68 $9.39
====== ====== ====== ====== ====== ======
Total return**<F3> (33.13)% (17.99)% 6.19% (7.23)% (7.56)% (12.17)%
Ratios/Supplemental Data
Net assets, end of period (in 000's) $955 $1,445 $1,557 $1,188 $1,079 $332
Ratio of total expenses
to average net assets 11.71%*<F2> 8.29% 8.08% 9.61% 14.51% 35.05%
Ratio of net expenses
to average net assets 10.71%*<F2> 7.29% 7.08% 9.55% 13.51% 24.02%
Ratio of net investment
loss to average net assets (10.68)%* (7.26)% (7.06)% (9.40)% (12.36)% (23.10)%
<F2>
Portfolio turnover rate 45.44% 133.42% 100.80% 121.48% 84.66% 0%
Average commission rate paid***<F4> $.0535 $.0511 -- -- -- --
*<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
MARCH 31, 1997 (UNAUDITED)
(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 Quotation, 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 quotation; 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 Sub-
chapter 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. Non-cash 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 1/12th 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 six months ended March 31, 1997
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 six
months ended March 31, 1997 were approximately $3,702.
(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 $2,203 per month or, based upon the total
net 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 $1,377. 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 March 31, 1997,
based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation on investments $ 46,567
Aggregate gross unrealized depreciation on investments (459,493)
-----------
Net unrealized depreciation $ (412,926)
===========
(5) Investment Transactions --
For the six months ended March 31, 1997, purchase and proceed from sales of
long-term or equity investment securities, other than short-term obligations,
aggregated $568,943 and $596,730, respectively.
(FRONTIER FUNDS, INC. LOGO)
FRONTIER FUNDS, INC.
OFFICERS AND DIRECTORS
James R. Fay President and Director
William T. Duero Vice President and Director
Jeffrey S. Ackley 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
SECURITY DEALER SERVICES
1-800-759-6598
(FRONTIER FUNDS, INC. 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.
