FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
FINANCIAL STATEMENTS AS OF SEPTEMBER 30, 1997
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
(ARTHUR ANDERSEN LLP LOGO)
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, 1997,
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, 1997, 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, 1997, 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.
As further discussed in Note 6 to the financial statements, on November 20,
1997, the Fund's Board of Directors voted to recommend to the shareholders to
terminate the Fund via an orderly liquidation of its assets.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
November 21, 1997.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
ASSETS:
Investments in securities at market value--
(cost $958,194, see accompanying schedule
of investments) (Note 1(b)) $846,625
Cash 15,630
Receivable for securities sold 11,281
Prepaid expenses 3,081
---------
Total assets 876,617
---------
LIABILITIES:
Accrued expenses 20,524
---------
Total liabilities 20,524
---------
Total net assets $856,093
=========
NET ASSETS CONSIST OF:
Fund shares issued and outstanding $1,340,144
Accumulated unrealized depreciation on
investments (Note 4) (111,569)
Accumulated realized losses (Note 1(e)) (372,482)
---------
Total net assets $856,093
=========
NET ASSET VALUE PER SHARE ($.01 par value,
80,000,000 shares authorized):
Redemption price ($856,093/200,001
shares outstanding) $4.28
=====
Maximum offering price (net asset value plus
8.7% of the net asset value or 8%
of the offering price calculated as $4.28 x 100/92) $4.65
=====
The accompanying notes to financial statements are an integral part of this
statement.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
INCOME:
Other $131
----------
131
----------
EXPENSES:
Management fee (Note 2) 10,306
Transfer and disbursing agent fees 17,839
Administrative fees 28,568
Custodian fees 9,103
Printing 3,385
Registration fees 6,985
Legal fees 34,182
Insurance 2,526
Directors' fees 8,979
Audit fees 14,001
Other operating expenses 973
----------
Total expenses 136,847
----------
Less- Waiver of management fee (10,306)
----------
Net expenses 126,541
----------
Net investment loss (126,410)
----------
NET REALIZED LOSS ON INVESTMENTS (Note 1(c)) (385,258)
NET INCREASE IN UNREALIZED DEPRECIATION ON INVESTMENTS (4,396)
----------
Net loss on investments (389,654)
----------
Net decrease in net assets resulting
from operations $(516,064)
==========
The accompanying notes to financial statements are an integral part of this
statement.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
---- ----
OPERATIONS:
Net investment loss $(126,410) $(104,175)
Net realized gain (loss) on
investments (Note 1(c)) (385,258) 103,873
Net increase in unrealized depreciation
on investments (4,396) (285,024)
----------- ----------
Net decrease in net assets
resulting from operations (516,064) (285,326)
----------- ----------
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income - -
Distributions from net realized
gains on investments - -
----------- ----------
Total distributions - -
----------- ----------
CAPITAL SHARE TRANSACTIONS:
Proceeds from shares issued (7,752 and
43,430 shares, respectively) 44,323 297,032
Cost of shares redeemed (26,148 and 18,032
shares, respectively) (116,973) (123,792)
----------- ----------
Increase (decrease) in net assets
derived from capital share
transactions (72,650) 173,240
----------- ----------
Total decrease in net assets (588,714) (112,086)
----------- ----------
NET ASSETS, at the beginning of the period 1,444,807 1,556,893
----------- ----------
NET ASSETS, at the end of the period $856,093 $1,444,807
=========== ==========
The accompanying notes to financial statements are an integral part of these
statements.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
April 1,
(Commencement
For the Years Ended September 30, of Operations) to
--------------------------------------------- September 30,
1997 1996 1995 1994 1993 1992
----- ----- ----- ----- ----- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning period $6.61 $8.06 $7.59 $8.68 $9.39 $10.00
Income (loss) from investment operations:
Net investment loss (.59) (.51) (.47) (.77) (1.12) (1.11)
Net realized and unrealized
(loss)/gain on securities
(Note 1 (g)) (1.74) (.94) .94 .13 .41 .50
------ ------ ------ ------ ------ ------
Total income (loss) from
Investment operations (2.33) (1.45) .47 (.64) (.71) (.61)
Less distributions:
Distributions from net realized
gain on investments - - - (.27) - -
Distributions in excess of book
realized gains - - - (.18) - -
------ ------ ------ ------ ------ ------
Total distributions - - - (.45) - -
------ ------ ------ ------ ------ ------
Net asset value, end of period $4.28 $6.61 $8.06 $7.59 $8.68 $9.39
===== ===== ===== ===== ===== =====
Total return**<F2> (35.25)% (17.99)% 6.19% (7.23)% (7.56)% (12.17)%*<F1>
Ratios/Supplemental Data-
- ------------------------
Net assets, end of period (in 000's) $856 $1,445 $1,557 $1,188 $1,079 $332
Ratio of total expenses to average
net assets 13.29% 8.29% 8.08% 9.61% 14.51% 35.05%*<F1>
Ratio of net expenses to average
net assets 12.29% 7.29% 7.08% 9.55% 13.51% 24.02%*<F1>
Ratio of net investment loss to
Average net assets (12.29)% (7.26)% (7.06)% (9.40)% (12.36)% (23.10)%*<F1>
Portfolio turnover rate 74.85% 133.42% 100.80% 121.48% 84.66% 0%
Average commission rate paid $.0334*** $.0511*** - - - -
<F3> <F3>
*<F1>Annualized.
**<F2>The Fund's sales charge is not reflected in the total return as set forth
in the table.
***<F3>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.
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
SCHEDULE OF INVESTMENTS
AS OF SEPTEMBER 30, 1997
Quoted
Market
Shares Value
- ------ -----------
(Note 1(b))
COMMON STOCKS--98.89%
Apparel--6.57%
-------
70,000 Cygne Designs Inc.*<F4> $26,250
2,000 Sport-Haley, Inc.*<F4> 30,000
--------
56,250
--------
Biotechnology--16.13%
-------------
14,000 Energy Bio Systems Inc.*<F4> 83,125
40,000 Erox Corp.*<F4> 55,000
--------
138,125
--------
Computer Peripherals--13.95%
--------------------
29,000 Dense-Pac Microsystems Inc.*<F4> 97,875
5,000 Hauppauge Digital Inc.*<F4> 21,562
--------
119,437
--------
Computer Software--4.09%
-----------------
40,000 Mitek Systems, Inc.*<F4> 35,000
--------
Entertainment--2.30%
-------------
5,000 The 3DO Company*<F4> 19,688
--------
Health Care Technology--4.45%
----------------------
10,000 Cell Robotics International, Inc.*<F4> 38,125
--------
Healthcare--5.44%
----------
5,000 Cytel Corp.*<F4> 11,875
30,000 Procyte Corporation*<F4> 34,687
--------
46,562
--------
Recycling Management--7.23%
--------------------
15,000 HI-Rise Recycling Systems Inc.*<F4> 61,875
--------
Retail--4.38%
------
10,000 Perfumania, Inc.*<F4> 37,500
--------
Technology--16.43%
----------
40,000 Digital Sound Corp.*<F4> 63,750
10,000 Digital Video Systems, Inc.*<F4> 40,625
5,000 Laser Power Corporation* 36,250
--------
140,625
--------
Telecommunications--17.92%
------------------
40,000 RSI Systems, Inc.*<F4> 115,000
5,000 Vtel Corporation*<F4> 38,438
--------
153,438
--------
Total Investments (All common stocks--
cost of $958,194) 846,625
Other assets net of other liabilities--1.11% 9,468
--------
Total net assets (basis of percentages
disclosed above) $856,093
========
*<F4> Nondividend paying security
The accompanying notes to financial statements are an integral part of this
schedule.
FRONTIER FUNDS, INC.
EQUITY FUND PORTFOLIO
(in the process of liquidation)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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) As of September 30, 1997, the Fund has Federal income tax capital loss
carryforwards of approximately $372,000 expiring in 2005. It is
management's intention to make no distribution of any realized capital
gains until the Federal income tax capital loss carryforward is exhausted.
(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) Per share net realized and unrealized loss/gain 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 "Advisor," with
whom certain officers and directors of the Fund are affiliated) to serve as
investment advisor 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 Advisor waived the management fee for the year ended September 30,
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
year ended September 30, 1997, were approximately $3,555.
(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 $2,200 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 $1,400.
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,
1997, based on investment cost for Federal tax purposes is as follows:
Aggregate gross unrealized appreciation
on investments $147,089
Aggregate gross unrealized depreciation
on investments (258,658)
----------
Net unrealized depreciation $(111,569)
==========
(5) Investment Transactions-
-----------------------
For the year ended September 30, 1997, purchases and proceeds from sales of
long-term debt or equity investment securities, other than short-term
obligations, aggregated $777,199 and $978,177, respectively.
(6) Termination of the Fund-
-----------------------
On November 20, 1997, the Board of Directors voted to recommend the
termination of the Fund and requested the Advisor to immediately begin an
orderly liquidation of the Fund's assets. The termination is subject to
shareholder approval. The impact of this recommended termination has no
impact on the results of operations or net asset values at September 30,
1997.
