FRONTIER FUNDS, INC.
P.O. Box 68
Pewaukee, Wisconsin 53072-0068
PROXY STATEMENT
FOR SPECIAL MEETING OF STOCKHOLDERS
The enclosed Proxy is solicited by and on behalf of the Board of
Directors (the "Board") of Frontier Funds, Inc., Equity Fund Portfolio (the
"Fund"), for voting at a special meeting of stockholders to be held on Monday,
February 2, 1998, and at any and all adjournments thereof (the "Meeting").
GENERAL INFORMATION
Stockholders of record at the close of business on December 15, 1997
(the "Record Date") are entitled to notice of the Meeting and to vote at the
Meeting. Any share of common stock issued subsequent to the Record Date shall
not be entitled to vote at the Meeting. As of the Record Date, there were
181,411.051 shares of the Fund's common stock outstanding. All such shares of
common stock have equal voting rights, and each such share will be entitled to
one share at the Meeting. It is anticipated that the Proxy solicitation
materials will initially be mailed to stockholders on or about January 2, 1998.
Shares represented by duly represented Proxies will be voted as
directed or, if no instructions are given, they will be voted FOR the adoption
of the plan to liquidate the Fund. Proxies may be revoked at any time before
the Meeting, either by a subsequent writing delivered to the Fund at the address
set forth above or by voting in person at the time of the Meeting, insofar as it
has not been exercised. EACH PROPOSAL REQUIRES THE VOTE OF A "MAJORITY" (AS
DEFINED BELOW) OF THE FUND'S OUTSTANDING VOTING SECURITIES.
PURPOSE OF THE LIQUIDATION
OF THE ASSETS OF THE FUND
On November 20, 1997, the Board approved the decision to liquidate the
Fund and authorized the investment advisor, Freedom Investors, Inc.
(the "Advisor"), to take all steps necessary to obtain liquidation. On May 8,
1997, during a regular meeting of the Board, the Board discussed at length the
status of the Fund and its ability to remain competitive in the future. The
decision was made in that meeting that if the Fund's net asset value ("NAV") did
not improve over the next six months, the Board would recommend selling or
liquidating the Fund. In the next regular meeting of the Board on August 26,
1997, the Board once again discussed the status of the Fund and noted that no
improvement had been made. The Board agreed that there were at least three
options for the Fund: (1) to liquidate the Fund; (2) to find a new investment
manager for the Fund; or (3) to create a new portfolio. The Board agreed that
whatever it decided to do, a decision should be made before the end of the
calendar year. It should be noted that director, James R. Fay, did not agree
with the other directors (including the independent directors) to liquidate the
Fund, and voted against the resolution.
Several factors influenced the Board's recommendations that the Fund
be liquidated:
1. ASSET AND SHAREHOLDER DECLINE. The Board noted that since the
Fund's inception in 1992, the Fund has had a negative return every year, except
for 1995. At the close of the Fund's year ended September 30, 1996, the Fund
had 142 stockholders. Since that time, the number of stockholders has declined
to 127 as of September 30, 1997. The Fund's assets have also declined 40% from
$1,444,807 on September 30, 1996 to $856,093 on September 30, 1997.
2. EXPENSE RATIO INCREASE DURING THE SAME TIME PERIOD. The fixed
expenses incurred in maintaining the Fund's status as a registered investment
company have not experienced such a decline, as such expenses have to be
incurred regardless of the number of stockholders or the amount of net assets of
the Fund. Such expenses include those incurred in complying with the reporting
requirements of the Securities and Exchange Commission (the "SEC") and the
states in which the Fund's shares are sold, and covering the auditing and legal
fees. It should be noted that the Fund must also incur variable expenses that
are dependent on variable factors, such as the number of stockholders and the
number of transactions that are conducted with a certain agent. As a result,
the Fund's ratio of expenses, net of reimbursement, to its average net assets
has increased from 8.29% for the fiscal year ending September 30, 1996 to 13.29%
for the fiscal year ended September 30, 1997. Since it would take a significant
rise in the Fund's assets and the number of investors participating in the Fund
to materially decrease the Fund's expense ratio, it is not expected that the
expense ratio will decrease in the near future.
The Advisor informed the Board that, in its opinion, the continuing
diminution of the asset base is related to the Fund's small number of
stockholders. The Advisor stated during the August 26, 1997 Board meeting that
the small number of stockholders is related to the consistently poor performance
of the Fund. The Advisor attributes the poor performance of the Fund to the
fact that small cap funds are continually undervalued and have simply not
performed well in comparison to the market for the stocks of large companies
listed on the national exchanges. In the August 26, 1997 meeting, the Board
discussed the possibility of selling the Fund's assets. However, during the
discussion, the Board acknowledged the difficulty it would have in obtaining a
buyer for the Fund's assets because of the fact that the Fund had very few
stockholders and did not have a history of performance.
The liquidation of the assets of the Fund will have the effect of
permitting the Fund's stockholders to invest distributions to be received by
them from the Fund upon the Fund's liquidation in investments of their own
choice. As a result, the Fund's Board has determined that it would be in the
best interests of all the Fund's stockholders if the assets of the Fund were
liquidated.
Under the Articles of Incorporation of the Fund, as well as under the
laws of the State of Maryland, the affirmative vote of the holders of at least a
Majority of the outstanding shares of common stock on the Record Date (90,705.6
shares) must be obtained in order for the plan of liquidation (the "Plan") to be
approved. If the affirmative vote of a Majority of the Fund's stockholders on
that date of the Meeting is not obtained in favor of the plan, the Fund will
continue to operate and be managed by the Advisor. The Fund's Board may choose
to submit a new plan of liquidation for approval by the stockholders.
THE BOARD RECOMMENDS THAT STOCKHOLDERS
APPROVE THE PLAN OF LIQUIDATION
The Plan provides for the complete liquidation of all of the assets of
the Fund with such prices and on such terms and conditions as the officers of
the Fund shall determine to be reasonable and in the best interest of the Fund
and its stockholders. In no event will any of the portfolio securities owned by
the Fund be sold at a price which is less than the best price available in the
public market on the date of the sale. At the November 20, 1997 meeting of the
Board, the Board determined that it would be in the best interest of the
stockholders for the Fund to take a defensive position and apply an estimate of
the expenses expected to be incurred for the Fund in this liquidation process to
the amount of accrued expenses. This action will have an immediate direct
negative effect on the Fund's NAV; however, it will prevent any one stockholder
from having to absorb the full effect of the liquidation. The Board also
determined that it would be in the best interest of the stockholders of the Fund
to shift the entire portfolio from its concentration in thinly traded over-the-
counter traded stocks of small corporations to a concentration in cash and high
quality fixed-income short-term securities. Additionally, the Board determined
that an orderly liquidation of the Fund's thinly traded holdings over a long
period of time would decrease the probability of having to sell portfolio stocks
at an unfavorable price. As a result of the actions taken at the November 20,
1997 meeting, the Board determined that the Fund should accept no orders for
shares for any new investor, nor should the Fund sell additional shares to any
existing stockholder.
LIQUIDATION VALUE
If the Plan is adopted by the Fund's stockholders at the Meeting, as
soon as practicable after the consummation of the sale of all of the Fund's
portfolio securities and the payment of the Fund's known liabilities and
obligations, the officers of the Fund will determine the liquidation value
("Liquidation Value," as such term is hereinafter defined) of the Fund's shares
of common stock. The Liquidation Value shall be determined in the same manner
as the Fund's NAV is currently determined by the Fund on a daily basis.
Accordingly, the term "Liquidation Value" means, as of the date of distribution:
1. the aggregate value of all of the assets of the Fund, less
2. the sum of the aggregate amount of all of the liabilities of the
Fund, divided by
3. the total number of issued and outstanding shares of common stock
of the Fund.
The Board may, if appropriate, authorize the establishment of a reserve to meet
any contingent liabilities of the Fund. Although the Board is not aware of any
contingent liabilities, nor does it expect any to arise, any amount that is
placed in reserve shall be deducted pro rata from the Liquidation Value. It is
expected that the Fund's stockholders shall receive a distribution equal to
their respective pro rata portion of the Liquidation Value (the "Liquidation
Distribution") by April 30, 1998. Thereafter, the Equity Fund Portfolio will
cease to exist, and no stockholder will have any interest whatsoever in the
Fund.
The cost of preparing and mailing the enclosed Notice, accompanying
Proxy and Proxy Statement and all other costs in connection with solicitation of
Proxies will be paid by the Fund. As discussed above in this Proxy Statement,
on November 20, 1997, the Board established an estimated expense to cover such
costs. The amount of the accrual was charged against the assets of the Fund at
that time. It is anticipated that, from the date the Plan is approved by the
stockholders until the distribution date, the Fund's Advisor will supervise and
manage the sale of all portfolio securities. It is not expected that a trust
will be created to administer Liquidation Distributions. However, in the event
the Fund is unable to distribute all of its assets pursuant to the Plan because
of its inability to locate stockholders to whom Liquidation Distributions will
be sent, the Fund may create, at the expense of the Advisor, a liquidating trust
with a financial institution and deposit any remaining assets of the Fund for
the benefit of the stockholders that cannot be located.
FEDERAL INCOME TAX CONSEQUENCES
For federal income tax purposes, receipt of the Liquidation Value will
constitute a taxable event for the stockholder comparable to a sale of his or
her Fund shares. As a result, each stockholder will recognize a gain or loss
equal to the difference between the amount received in liquidation of Fund
shares and the stockholder's income tax basis for those shares. Provided that
the Fund shares are held as a capital asset, such gain or loss will constitute a
long-term or short-term capital gain or capital loss depending upon whether the
shares were held for more than one year.
The taxation of long-term capital gains or losses depends on how long
the Fund shares were held prior to the liquidation. The gain or loss on Fund
shares held for more than 1 year but not more than 18 months will be taxed at a
maximum rate of 28%. The gain or loss on Fund shares held for more than 18
months will be taxed at a maximum rate of 20%.
Under applicable tax regulations, liquidating distributions paid to
noncorporate stockholders must be reported to the Internal Revenue Service on
Treasury Form 1099-B. Stockholders who are employee benefit plans, charitable
organizations, certain nonresident alien individuals or foreign corporations may
be exempt from federal income tax.
In general, in order to avoid adverse income tax consequences and a
10% penalty, stockholders who hold Fund shares in an individual retirement
account ("IRA") should take one of the following actions in connection with the
liquidation of the Fund (1) prior to any distribution of the Liquidation Value,
the stockholder may authorize a new IRA trustee or custodian to contact the
current IRA Custodian, Star Bank, with the stockholder's instructions to make a
direct transfer of the funds from the existing IRA to a new IRA trustee or
custodian or (2) within 60 days of receipt of the Liquidation Value, the
stockholder may "rollover" the entire amount into a new IRA, provided the
stockholder has not already made a rollover contribution within the prior 12-
month period. Additional information regarding the procedures for transfers of
IRAs and rollovers may be obtained by writing or calling the Custodian at: 425
Walnut Street, P.O. Box 1118, Cincinnati, Ohio 45202-1118, or 513-632-3299.
The foregoing tax discussion is general in nature and stockholders are
advised to consult their respective tax advisers for additional information as
to the consequences of the liquidation for federal, state and local income and
other tax purposes.
EXCHANGE OF STOCK CERTIFICATES
FOR LIQUIDATION DISTRIBUTIONS
At present, the date or dates on which the Fund will pay Liquidation
Distributions to its stockholders are not known to the Fund, but it is
anticipated that if the Plan is adopted by the stockholders, such liquidation
would occur on or prior to June 30, 1998. Prior to such date or dates, the Fund
will send to the Fund's stockholders to whom certificates representing shares of
common stock have been sent by the Fund a redemption form for the purpose of
effecting a redemption of each stockholder's shares of common stock in exchange
for their Liquidation Distribution. No amount will be distributed by the Fund
to a stockholder to whom a stock certificate has been sent unless and until such
stockholder delivers to the Fund a signed redemption form and the certificates
representing shares of common stock or in the event a stock certificate has been
lost, a lost certificate affidavit and other document and instrument as are
reasonably required by the Fund, together with appropriate forms of assignment
enforced in blank with any and all signatures thereon guaranteed by a financial
institution reasonably acceptable to the Fund. Stockholders to whom
certificates representing shares of common stock have not been sent will receive
their Liquidation Distribution without any further action on their part.
The right of a stockholder to redeem his or her shares of common stock
to the Fund at any time shall not be impaired by the adoption of the Plan.
Therefore, a stockholder may redeem in accordance with the redemption procedures
set forth in the Fund's current Prospectus without the necessity of waiting for
the Fund to take any action. The Fund shall not impose any redemption charges.
DEFINITION OF VOTE OF A "MAJORITY"
OF THE OUTSTANDING SECURITIES OF THE FUND
A "Majority" of the Fund's outstanding voting securities means the
lesser of: (1) more than 50% of its outstanding voting securities or (2) 57% or
more of the voting securities present at a meeting at which more than 50% of the
outstanding voting securities are present or presented by Proxy. The only
voting securities of the Fund are its shares of common stock.
SUBMISSION OF PROPOSALS
FOR MEETING OF STOCKHOLDERS
Under the current law of Maryland, in which state the Fund is
incorporated, meetings of stockholders are required to be held only when
necessary. In the event the Fund is not liquidated, the stockholder proposal
intended to be presented at any meeting hereafter called must be received by the
Fund within a reasonable time before the solicitation relating thereto is made
in order to be included in the Proxy Statement and form of Proxy relating to
such meeting.
SOLICITATION OF PROXIES
In addition to the solicitation of Proxies by mail, the Board and
employees of the Advisor may solicit Proxies in person or by telephone. Persons
holding shares as nominees will, upon request, be reimbursed for their
reasonable expenses in soliciting material to their principals.
OTHER MATTERS
The management does not know of any matters to be presented at the
Meeting other than those mentioned in this Proxy Statement. If any other matter
properly comes before the Meeting, the shares represented by Proxy will be voted
with respect thereto in accordance with the best judgment of the person or
persons voting the Proxies.
A copy of the Fund's March 31, 1997 Semi-Annual Report and the
September 30, 1997 Annual Report are available without charge upon the request
of any stockholder. Please call 1-800-231-2901 or write to the following
address to request the Semi-Annual Report or the Annual Report:
Frontier Funds, Inc.
P.O. Box 68
101 West Wisconsin Avenue
Pewaukee, WI 53072-0068
By Order of the Board of Directors
/s/ William Thomas Duero
William Thomas Duero, Secretary
Pewaukee, Wisconsin
January 2, 1998
FRONTIER FUNDS, INC.
P.O. Box 68
Pewaukee, WI 53072-0068
PROXY SOLICITED ON BEHALF
OF THE BOARD OF DIRECTORS
Revoking any such prior appointments, the undersigned appoints James R. Fay and
William T. Duero (or if only one shall act, then that one) as proxies with the
power of substitution to vote all the common stock of Frontier Funds, Inc. (the
"Fund") registered in the name of the undersigned at the meeting of stockholders
to be held at the offices of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c., 1000 North Water Street, Suite 2100, Milwaukee, Wisconsin 53202, on
Monday, February 2, 1998, at 4 p.m. and at any adjournments thereof.
1. To ratify the decision to liquidate the Fund.
-----FOR -----AGAINST -----ABSTAIN
2. To transact such other business as may properly come before the meeting.
The shares of common stock represented by this Proxy will be voted in accordance
with the specifications made above. If no specifications are made, such shares
will be voted, FOR Proposal One.
NOTE: Please sign exactly as name appears on this card. All joint owners
should sign. When signing as executor, administrator, attorney, trustee
or guardian or as custodian for a minor, please give full title as such.
If a corporation, please sign in full corporate name and indicate the
title of the signing officer. If a partner, please sign in the
partnership name.
Receipt acknowledged of the Proxy Statement for the
annual meeting of stockholders to be held on February
2, 1998.
----------------------------------------------
Signed
----------------------------------------------
(Please Print Name)
----------------------------------------------
Account No.
Date: January ----, 1998
I (we) do --- do not --- expect to be present at the
meeting.
FRONTIER FUNDS, INC.
P.O. Box 68
Pewaukee, WI 53072-0068
NOTICE OF MEETING OF STOCKHOLDERS
The meeting of stockholders of Frontier Funds, Inc. (the "Fund") will
be held at the offices of Reinhart, Boerner, Van Deuren, Norris & Rieselbach,
s.c., 1000 North Water Street, Suite 2100, Milwaukee, Wisconsin 53202, on
Monday, February 2, 1998, at 4 p.m. for the following purposes:
1. To ratify or reject the decision to liquidate the Fund.
2. To transact any other business as may properly come before the
meeting.
Stockholders of record at the close of business on December 15, 1997
are entitled to receive notice of, and to vote at, the meeting.
All stockholders are cordially invited to attend the meeting in
person, if possible. Stockholders who are unable to be present in person are
requested to execute and promptly return the accompanying proxy in the enclosed
envelope. The proxy is being solicited by the directors of the Fund. Your
attendance at the meeting, whether in person or by proxy, is important to ensure
a quorum. If you return the proxy, you still may vote your shares in person by
giving written notice (by subsequent proxy or otherwise) to the Secretary of the
Fund at any time prior to its vote at the meeting.
By Order of the Board of Directors
/s/ William Thomas Duero
William Thomas Duero, Secretary
Pewaukee, Wisconsin
January 2, 1998
