(FRONTIER FUNDS, INC. LOGO)
SEMI-ANNUAL REPORT
For the Six Months Ended
March 31, 1999
(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 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.
During the six months ended March 31, 1999, the Equity Fund's total return
increased 46.20%, substantially exceeding the Russell 2000 Index's 10.13%
increase for the same period. Over the past four years, large-cap stocks have
outperformed small-cap stocks. In my opinion, investors have finally begun to
recognize the capital appreciation potential in small-cap stocks.
I believe that the investment community will continue to 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, 1999 (UNAUDITED)
MARKET
SHARES VALUE
------ ------
COMMON STOCKS -- 107.97%
APPAREL -- 3.66%
70,000 +<F1> Cygne Designs Inc. $ 12,600
--------
BIOTECHNOLOGY -- 1.74%
2,000 +<F1> Energy Bio Systems Inc. 6,000
--------
COMPUTER SOFTWARE -- 18.16%
40,000 +<F1> Mitek Systems Inc. 62,500
--------
COSMETICS & TOILETRIES -- 7.26%
40,000 +<F1> Human Pheromone Sciences Inc. 25,000
--------
ELECTRONIC COMPONENTS-SEMICONDUCTORS -- 8.17%
15,000 +<F1> Dense-Pac Microsystems Inc. 28,125
--------
HEALTH CARE -- 5.46%
40,000 +<F1> Procyte Corp. 18,800
--------
HEALTH CARE TECHNOLOGY -- 2.86%
5,000 +<F1> Cell Robotics International Inc. 9,844
--------
INTERNET CONTENT -- 10.90%
2,500 +<F1> CustomTracks Corp. 37,500
--------
RECYCLING MANAGEMENT -- 14.71%
15,000 +<F1> Hi-Rise Recycling Systems Inc. 50,625
--------
TECHNOLOGY -- 7.45%
20,000 +<F1> Digital Video Systems Inc. 25,625
--------
TELECOMMUNICATIONS -- 27.60%
40,000 +<F1> RSI Systems Inc. 95,000
--------
TOTAL COMMON STOCK (Cost $693,857) 371,619
--------
TOTAL INVESTMENTS (Cost $693,857) 102.60% 371,619
Liabilities in excess of Other Assets (2.60%) (9,418)
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TOTAL NET ASSETS 100.00% $362,201
------- --------
------- --------
+<F1> Non-income producing security
The accompanying notes are an integral part of these financial statements.
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1999 (UNAUDITED)
ASSETS:
Investments in securities, at value (cost $693,857) (Note 2) $ 371,619
Receivable for securities sold 28,818
----------
Total Assets 400,437
----------
LIABILITIES:
Payables:
Accrued expenses $32,336
To custodian bank 5,180
Fund shares redeemed 720
-------
Total Liabilities 38,236
----------
Net Assets $ 362,201
----------
----------
NET ASSETS CONSIST OF:
Additional paid in capital $1,100,897
Undistributed net investment income (65,010)
Accumulated net realized loss from investment
transactions (Note 6) (351,448)
Net unrealized depreciation on investments (322,238)
----------
Net Assets $ 362,201
----------
----------
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE:
($362,201 / 156,826 shares of capital stock
outstanding) (Note 6) $ 2.31
----------
----------
Maximum offering price per share (net asset value
plus sales charge of 8.00%) $ 2.51
----------
----------
The accompanying notes are an integral part of these financial statements.
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
EXPENSES:
Management fee $ 1,760
Administration fee 16,065
Legal fee 14,978
Transfer agent fee 8,896
Custody fee 7,622
Audit fee 4,501
Printing 2,211
Directors' fees and expenses 4,477
Registration fees 2,146
Insurance 997
Other 3,117
--------
Total expenses 66,770
Less: Waiver of management fee (1,760)
--------
Net expenses 65,010
--------
Net investment loss (65,010)
--------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS (NOTE 2)
Net realized gain from investment transactions 25,737
Net change in unrealized appreciation of investments 162,166
--------
Net realized and unrealized gain on investments 187,903
--------
Net increase in net assets resulting from operations $122,893
--------
--------
The accompanying notes are an integral part of these financial statements.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
FOR THE SIX FOR THE
MONTHS ENDED YEAR ENDED
MARCH 31, 1999 SEPTEMBER 30, 1998
-------------- ------------------
(UNAUDITED)
<S> <C> <C>
Net investment loss $ (65,010) $(101,860)
Net realized gain (loss) from investment transactions 25,737 (4,704)
Net change in unrealized appreciation (depreciation) of investments 162,166 (372,835)
--------- ---------
Net increase (decrease) in net assets resulting from operations 122,893 (479,399)
Net capital share transactions (Note 4) (16,535) (120,851)
--------- ---------
Net increase (decrease) in net assets 106,358 (600,250)
NET ASSETS:
Beginning of period 255,843 856,093
--------- ---------
End of period $ 362,201 $ 255,843
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL HIGHLIGHTS
(FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
FOR THE SIX
MONTHS ENDED FOR THE YEARS ENDED
MARCH 31, SEPTEMBER 30,
------------------------------------
1999 1998 1997 1996 1995
---------- ------ ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.58 $ 4.28 $ 6.61 $ 8.06 $ 7.59
------ ------ ------ ------ ------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment loss (0.40) (0.58) (0.59) (0.51) (0.47)
Net realized and unrealized
gain (loss) on investments 1.13 (2.12) (1.74) (0.94) 0.94
------ ------ ------ ------ ------
Total from investment operations 0.73 (2.70) (2.33) (1.45) 0.47
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income 0.00 0.00 0.00 0.00 0.00
Distribution from realized gains from
security transactions 0.00 0.00 0.00 0.00 0.00
Distributions in excess of book realized gains 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Total distributions 0.00 0.00 0.00 0.00 0.00
------ ------ ------ ------ ------
Net asset value, end of period $ 2.31 $ 1.58 $ 4.28 $ 6.61 $ 8.06
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total return**<F3> 46.20% (63.08%) (35.25%) (17.99%) 6.19%
RATIOS/SUPPLEMENTAL DATA:
Net assets end of period (in 000's) 362 256 856 1,445 1,557
Ratio of expenses to average net assets 37.73%*<F2> 20.72% 13.29% 8.29% 8.08%
Ratio of net expenses to average net assets 36.73%*<F2> 19.72% 12.29% 7.29% 7.08%
Ratio of net investment income (loss)
to average net assets (36.73%)*<F2> (19.58%) (12.29%) (7.26%) (7.06%)
Portfolio turnover rate 38.81% 47.78% 74.85% 133.42% 100.80%
*<F2> Annualized.
**<F3> Based on net asset value per share. The Fund's sales charge is not reflected in total return in this table.
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 (UNAUDITED)
(1) Organization --
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 - It is the policy of The Fund to comply with the
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. In addition, The Fund
intends to distribute an amount sufficient to avoid imposition of any
excise tax under Section 4982 of The Internal Revenue Code. Therefore, no
provision for Federal income or excise taxes has been made.
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.
Capital Loss Carryforwards - As of March 31, 1999, the Fund has Federal
Income Tax Capital Loss carryforwards of approximately $ 460,612, expiring
in 2006. It is management's intention to make no distribution of any
realized capital gains until the Federal Income Tax capital loss
carryforward is exhausted.
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, 1999 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, 1999 were approximately $1,814.
(4) Capital Share Transactions --
As of March 31, 1999 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, 1999 September 30, 1998
------------------------ --------------------
<S> <C> <C> <C> <C>
Shares Amount Shares Amount
------- -------- ------- ---------
Shares sold 11,437 $ 20,687 18,066 $ 51,947
Shares issued in reinvestment of dividends 0 0 0 0
Shares redeemed (16,607) (37,222) (56,072) (172,798)
------- -------- ------- ---------
Net decrease (5,170) $(16,535) (38,006) $(120,851)
------- -------- ------- ---------
</TABLE>
(5) Administrative Agreements --
The administrator of the Fund is American Data Services, Inc.
("Administrator"), Hauppauge, New York. Under administrative services and
fund accounting agreements with the Fund (collectively, the "Administration
Agreement"), the Administrator provides services necessary for the
operation of the Fund, including, among other things, (i) preparation of
shareholder reports and communications, (ii) preparation of certain reports
and filings with the Securities and Exchange Commission and with state
securities administrators and (iii) general supervision of the operation of
the Fund, including coordination of the services performed by the Transfer
Agent, custodian, independent accountants, legal counsel and others.
Services rendered by the Administrator do not include investment advisory
or portfolio management services. For its services under the Administration
Agreement, the Administrator receives a monthly fee (based upon the Fund's
average daily net assets), as follows: $2,268 on average net assets under
$5 million; $2,750 from $5 million to $10 million; $3,500 from $10 million
to $20 million; and the greater of $5,000 or 1/12 of 0.0145% of average net
assets in excess of $20 million. In addition, the Administrator is
reimbursed by the Fund for reasonable out-of-pocket expenses. American Data
Services also serves as the Fund's transfer agent and dividend disbursing
agent ("Transfer Agent") and performs other shareholder services, pursuant
to an agreement with the Fund ("Transfer Agency and Service Agreement").
For its services rendered under the Transfer Agency and Service Agreement,
the Transfer Agent receives a monthly fee of approximately $1,418. In
addition, the Transfer Agent is reimbursed by the Fund for reasonable out-
of-pocket expenses.
(6) Investment Transactions --
Purchases and sales, excluding short term securities, for the six months
ended March 31, 1999 aggregated $152,669 and $242,041, respectively for the
Equity Fund.
(7) Accumulated Unrealized Depreciation --
Aggregate gross unrealized appreciation (depreciation) as of March 31,
1999, based on investment cost for Federal Income Tax purposes as follows:
Aggregate gross unrealized appreciation $ 49,287
Aggregate gross unrealized depreciation (371,525)
---------
Net unrealized depreciation $(322,238)
---------
---------
(FRONTIER FUNDS, INC. LOGO)
FRONTIER FUNDS, INC.
OFFICERS AND DIRECTORS
James R. Fay President and Director
Amy L. Siesennop Vice President and Director
Jeffrey S. Ackley Director
Kenneth W. Coshun Director
Matthew G. Drew 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
SECURITIES DEALERS 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.
