(Frontier Funds, Inc. Logo)
SEMI-ANNUAL REPORT
For the Period Ended
March 31, 1998
(Frontier Funds, Inc. Logo)
TO OUR INVESTORS
Dear Shareholders,
Thank you for your investment in Frontier Funds, Inc. Equity Portfolio. I
appreciate the opportunity to serve you. The recent vote not to liquidate the
Frontier Equity Fund was a vote of confidence for the 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 stock market has, for the most part, overlooked
the potential capital appreciation of many small companies.
I believe that the investment community will recognize these small companies
as a great place for investment opportunities. 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, 1998 (UNAUDITED)
QUOTED
MARKET
SHARES VALUE
- ------- ---------
(NOTE 2)
COMMON STOCKS -- 99.29%
APPAREL -- 6.02%
70,000+<F1> Cygne Designs Inc. $ 19,688
10,000+<F1> Evans Inc. 10,625
---------
30,313
---------
BIOTECHNOLOGY -- 15.17%
40,000+<F1> Erox Corp. 45,000
14,000+<F1> Energy Bio Systems Inc. 31,500
---------
76,500
---------
COMPUTER PERIPHERALS -- 19.84%
20,000+<F1> Dense-Pac Microsystems Inc. 50,000
5,000+<F1> Hauppauge Digital Inc. 50,000
---------
100,000
---------
COMPUTER SOFTWARE -- 6.69%
40,000+<F1> Mitek Systems Inc. 33,750
---------
HEALTH CARE -- 11.90%
40,000+<F1> Procyte Corp. 60,000
---------
HEALTH CARE TECHNOLOGY -- 4.96%
10,000+<F1> Cell Robotics International Inc. 25,000
---------
RECYCLING MANAGEMENT -- 10.41%
15,000+<F1> Hi-Rise Recycling Systems Inc. 52,500
---------
TECHNOLOGY -- 7.44%
20,000+<F1> Digital Video Systems Inc. 37,500
---------
TELECOMMUNICATIONS -- 16.86%
40,000+<F1> RSI Systems Inc. 85,000
---------
TOTAL COMMON STOCK (Cost $747,119) 500,563
---------
TOTAL INVESTMENTS (Cost $747,119) 99.29% 500,563
---------
Other assets in excess of liabilities 0.71% 3,599
--------- ---------
---------
TOTAL NET ASSETS 100.00% $504,162
--------- ---------
--------- ---------
(1)Federal Tax Information: At March 31,
1998 the net unrealized appreciation based
on cost for Federal Income tax purposes of
$747,119 was as follows:
Aggregate gross unrealized appreciation for all
investments for which there was an excess of
value over cost $ 20,000
Aggregate gross unrealized depreciation for
all investments for which there was an excess
of cost over value (266,556)
---------
Net unrealized appreciation $ 246,556
---------
---------
+<F1> Non-income producing security
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998 (UNAUDITED)
ASSETS:
Investments in securities, at value (cost $747,119) (Note 2) $ 500,562
Cash 11,195
Receivable for securities sold 15,187
---------
Total Assets 526,944
---------
LIABILITIES:
Payables:
Accrued expenses 22,782
---------
Total Liabilities 22,782
---------
Net Assets $ 504,162
---------
---------
NET ASSETS CONSIST OF:
Additional paid in capital $1,537,602
Accumulated net realized loss from investment income (368,369)
Accumulated net realized loss from investment
transactions (Note 6) (418,515)
Net unrealized depreciation on investments (246,556)
---------
Net Assets $ 504,162
---------
---------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE:
($504,162 / 166,533 shares of capital stock
outstanding) (Note 4) $ 3.03
---------
---------
Maximum offering price per share (net asset value
plus sales charge of 8.00%) $ 3.29
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1998 (UNAUDITED)
INVESTMENT INCOME:
Other $ 723
---------
723
---------
EXPENSES:
Management fee 3,171
Administration fee 14,402
Audit fee 2,878
Custody fee 3,948
Directors' fee and expenses 1,271
Insurance 733
Legal fee 15,614
Printing 511
Registration fees 3,586
Transfer agent fees 10,495
Other 326
---------
Total expenses 56,935
Less: Waiver of management fee (3,171)
---------
Net expenses 53,764
---------
Net investment loss (53,041)
---------
NET REALIZED AND UNREALIZED GAINS (LOSSES) ON INVESTMENTS (Note 2)
Net realized loss from investment transactions (46,034)
Net change in unrealized depreciation of investments (134,988)
---------
Net realized and unrealized loss on investments (181,022)
---------
Net decrease in net assets resulting from operations $ (234,063)
---------
---------
The accompanying notes to financial statements are an integral part of this
statement.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
---------------- --------------------
(UNAUDITED)
<S> <C> <C>
Net investment loss $ (53,041) $ (126,410)
Net realized loss from investment transactions (46,034) (385,258)
Net change in unrealized depreciation of investments (134,988) (4,396)
----------- -----------
Net decrease in net assets resulting from operations (234,063) (516,064)
----------- -----------
Net capital share transactions (Note 4) (117,868) (72,650)
----------- -----------
Net decrease in net assets (351,931) (588,714)
----------- -----------
NET ASSETS:
Beginning of period 856,093 1,444,807
----------- -----------
End of period $ 504,162 $ 856,093
----------- -----------
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<TABLE>
APRIL 1, 1992
FOR THE SIX (COMMENCEMENT
MONTHS ENDED FOR THE YEARS ENDED OF OPERATIONS) TO
MARCH 31, SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------
1998 1997 1996 1995 1994 1993 1992
----------- ------ ------ ------- ------ ------ -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 4.28 $ 6.61 $ 8.06 $ 7.59 $ 8.68 $ 9.39 $10.00
------ ------ ------ ------ ------ ------ ------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment loss (0.29) (0.59) (0.51) (0.47) (0.77) (1.12) (1.11)
Net realized and unrealized
gain on investments (0.96) (1.74) 0.94 0.94 0.13 0.41 0.50
------ ------ ------ ------ ------ ------ ------
Total from investment
operations (1.25) (2.33) (1.45) 0.47 (0.64) (0.71) (0.61)
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net
investment income -- -- -- -- -- -- --
Distribution from realized gains
from security transactions -- -- -- -- (0.27) -- --
Distributions in excess of book
realized gains -- -- -- -- (0.18) -- --
------ ------ ------ ------ ------ ------ ------
Total distributions -- -- -- -- (0.45) -- --
------ ------ ------ ------ ------ ------ ------
Net asset value, end of period $ 3.03 $ 4.28 $ 6.61 $ 8.06$ 7.59 $ 8.68 $ 9.39
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
Total return**<F3> (29.21%) (35.25%) (17.99%) 6.19% (7.23%) (7.56%) (12.17%)
RATIOS/SUPPLEMENTAL DATA
Net assets end of period (in 000's) 504 856 1,445 1,557 1,188 1,079 332
Ratio of expenses to average
net assets 17.96%*<F2> 13.29% 8.29% 8.08% 9.61% 14.51% 35.05%
Ratio of net expenses to average
net assets 16.96% 12.29% 7.29% 7.08% 9.55% 13.51% 24.02%
Ratio of net investment income (loss)
to average net assets (16.73%)*<F2> (12.29%) (7.26%) (7.06%) (9.40%) (12.36%) (23.10%)
Portfolio turnover rate 44.68% 74.85% 133.42% 100.80% 121.48% 84.66% 0.00%
Average commission rate paid***<F4> $0.0232 $0.0334 $0.0511
*<F2> Annualized
**<F3> Based on net asset value per share.
***<F4>Disclosure of this rate is required by the SEC 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.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED)
(1) Organization
The Frontier Funds, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management company. The Corporation was established under the laws of Maryland
on October 24, 1991. The Corporation permits the Trustees 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. The investment objective of the
Equity Fund is to provide capital appreciation on its assets.
(2) Significant Accounting Policies
The following is a summary of significant accounting policies followed by the
Fund in the preparation of its financial statements.
Security Valuation -- Securities which are traded on any exchange or on the
NASDAQ over-the-counter market are valued at the last quoted sale price. All
other securities for which over-the-counter market quotations are readily
available are valued at their last bid price. When market quotations are not
readily available, when it is determined that the last bid price does not
accurately reflect the current value or when restricted securities are being
valued, such securities are valued as determined in good faith under procedures
established by and under the general supervision of the Fund's directors.
Fixed income securities generally are valued by using market quotation, but
may be valued on the basis of prices furnished by a pricing service when the
Adviser believes such prices accurately reflect the fair market value of such
securities. A pricing service utilizes electronic data processing techniques
based on yield spreads relating to securities with similar characteristics to
determine prices for normal institutional-size trading units of debt securities
without regard to sale or bid prices. Short term investments in fixed income
securities with maturities of less than 60 days when acquired, or which
subsequently are within 60 days of maturity, are valued by using the amortized
cost method of valuation, unless the Board of 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 Board of
Directors.
Federal Income Taxes -- The Fund intends to comply with requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all of its net investment income as dividends to its
shareholders. The Fund intends to distribute its net long-term capital gains and
its net short-term capital gains at least once a year. Therefore no provision
for income taxes is required. Federal income tax loss carryforwards generated
in prior years will be used to offset a portion of current year's net realized
gains.
Other -- The Fund follows industry practice and records security transactions
on the trade date. The specific identification method is used for determining
gains or losses for financial statement and income tax purposes. Dividend
income is recorded on the ex-dividend date and interest income is recorded on an
accrual basis. Discounts and premiums on securities purchased are amortized
over the life of the respective securities.
Estimates -- 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 revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(3) Investment Advisory Agreement
The Fund has an investment advisory agreement with Freedom Investors Corp.
("the Advisor", with whom certain officers and directors of the Fund are
affiliated). Under the terms of the management agreement, a monthly fee is paid
to the investment advisor based on 1/12th of 1% (1% on an annual basis) of the
average daily net asset value. The Advisor waived the management fee for the
six months ended March 31, 1998 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, 1998 were approximately $245.
(4) Capital Share Transactions
As of March 31, 1998 there was 80,000,000, $0.01 par value shares of capital
stock authorized for the Equity Portfolio.
Transactions in capital stock were as follows:
<TABLE>
FOR THE SIX MONTHS ENDED FOR THE YEAR ENDED
MARCH 31, 1998 SEPTEMBER 30, 1997
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold 628 $ 2,834 7,572 $ 44,323
Shares issued in reinvestment of dividends -- -- --
Shares redeemed (34,096) (120,703) (26,148) (116,973)
-------- -------- -------- --------
Net decrease (33,468) (117,869) (18,576) (72,650)
-------- -------- -------- --------
Total paid in capital $1,537,602 $1,655,471
-------- --------
-------- --------
</TABLE>
"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.
(6) Investment Transactions
Purchases and sales, excluding short term securities, for the six months
ended March 31, 1998 aggregated $156,344 and $321,072 respectively for the
Equity Fund.
(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.
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.
