UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07685
FRONTEGRA FUNDS, INC.
(Exact name of registrant as specified in charter)
400 Skokie Blvd.
Suite 500
Northbrook, Illinois 60062
(Address of principal executive offices) (Zip code)
William D. Forsyth III
400 Skokie Blvd., Suite 500
Northbrook, Illinois 60062
(Name and address of agent for service)
(847) 509-9860
Registrant's telephone number, including area code
Date of fiscal year end: June 30, 2004
Date of reporting period: December 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------
(FRONTEGRA FUNDS LOGO)
SEMI-ANNUAL REPORT
Frontegra Total Return Bond Fund
Frontegra Investment Grade Bond Fund
Frontegra IronBridge Small Cap Fund
FRONTEGRA ASSET MANAGEMENT, INC.
December 31, 2003
TABLE OF CONTENTS
SHAREHOLDER LETTER 1
FRONTEGRA TOTAL RETURN BOND FUND
FRONTEGRA INVESTMENT GRADE BOND FUND
Report from Reams Asset Management Company, LLC 4
Investment Highlights 6
Schedule of Investments 7
Statement of Assets and Liabilities 15
Statement of Operations 16
Statements of Changes in Net Assets 17
Financial Highlights 18
Investment Highlights 19
Schedule of Investments 20
Statement of Assets and Liabilities 27
Statement of Operations 28
Statements of Changes in Net Assets 29
Financial Highlights 30
FRONTEGRA IRONBRIDGE SMALL CAP FUND
Report from IronBridge Capital Management, LLC 32
Investment Highlights 34
Schedule of Investments 35
Statement of Assets and Liabilities 40
Statement of Operations 41
Statements of Changes in Net Assets 42
Financial Highlights 43
NOTES TO FINANCIAL STATEMENTS 44
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors unless
accompanied or preceded by an effective Prospectus for the applicable Fund. Each
Prospectus includes more complete information about management fees and
expenses, investment objectives, risks and operating policies of the applicable
Fund. Please read the Prospectus carefully.
DEAR FELLOW SHAREHOLDERS:
We are pleased to report on the progress of the Frontegra Funds for the first
six months of our fiscal year (July 1, 2003 through December 31, 2003). During
the past six months, the equity markets continued to post significant gains,
while gains in the bond market tapered off.
During the period, we changed the name of the Frontegra Horizon Fund to the
Frontegra IronBridge Small Cap Fund. We feel that the Fund's new name better
incorporates both the identity of the Fund manager and the primary type of
stocks in which the Fund invests.
FUND RESULTS
The bond market showed limited gains over the past six months. The broad bond
market as measured by the Lehman Brothers Aggregate Bond Index returned 0.17%
for the period, while the equity market as measured by the S&P 500 Index was up
15.14%.
The Frontegra Total Return Bond Fund and the Frontegra Investment Grade Bond
Fund, managed by Reams Asset Management, both returned 1.27% for the six-month
period. The Funds' defensive interest rate posture was the main contributing
factor to each Fund's outperformance. Underexposure to the credit sector had
only a slight negative impact over the period.
The Frontegra IronBridge Small Cap Fund, managed by IronBridge Capital
Management, has returned 37.26% since the Fund's August 30, 2002 inception date.
Over the same period, that figure compares favorably versus the 32.10% return of
the Russell 2000 Index, a proxy for small stocks. However, during the past six
months, the Fund trailed its benchmark with a return of 17.11% versus 24.92%.
During that period, the Russell 2000 Index proved a difficult benchmark to keep
up with given the scope and magnitude of the market's appreciation.
SUMMARY
Uncertainty continues to be a dominant factor regarding the strength and
sustainability of the recovery in the equity markets. While issues on the
geopolitical front remain somewhat unsettled, a jobless recovery, an upcoming
presidential election and the possibility of an eventual increase in interest
rates will all do their part to influence the future direction of both the bond
and stock markets.
As always, we appreciate your investment and continued confidence in the
Frontegra Funds.
Sincerely,
/s/ Thomas J. Holmberg, Jr. /s/ William D. Forsyth III
Thomas J. Holmberg, CFA William D. Forsyth, CFA
Frontegra Asset Management, Inc. Frontegra Asset Management, Inc.
FRONTEGRA
TOTAL RETURN BOND FUND
FRONTEGRA
INVESTMENT GRADE
BOND FUND
REPORT FROM REAMS ASSET
MANAGEMENT COMPANY, LLC:
The bond market provided modest returns over the last six months. In fact,
absolute returns in the bond market were barely positive as Treasury rates
trended up during the period. Relative returns proved more favorable, however,
as the Total Return Bond Fund returned 1.27% over the past six months compared
to 0.17% for the benchmark, Lehman Brothers Aggregate Bond Index.
In similar fashion, the Investment Grade Bond Fund returned 1.27% over the past
six months, bettering the 0.17% return of the benchmark.
PORTFOLIO REVIEW
Interest rates soared from July into early September then fell again before
trading in a narrow range over the final three months. By year-end, ten-year
Treasury yields were 45 basis points higher than at the end of 2002. Credit
markets became very accommodating across the entire ratings spectrum, with
record new issuance at increasingly narrower credit spreads. Further, the
mortgage market turned from concerns of rising prepayment to a contemplation of
falling prepayments. One factor that did not change during the period was the
shape of the yield curve, as the curve remained extremely steep. Despite the
recovery in the economy, inflation has so far remained quiescent and encouraged
the Fed to delay any increase in short rates, causing the curve to steepen as
longer rates rose.
The main factor contributing to incremental performance during the period was
the interest rate sensitivity of the Funds. Especially in the past few months,
ten-year Treasury yields moved consistently within a 4.0-4.5% trading range.
This is a critical range in our valuation models, and we tended to increase the
duration of the Funds at the top of the range and lower the duration at the
bottom.
After a break in the mortgage market during the third calendar quarter when
rising rates caused the expectation of a rapid slowing in prepayments and
lengthening in durations, the mortgage market stabilized during the fourth
calendar quarter with spreads narrowing. The raw yield available in the
mortgage market remains enticing to investors in the current extremely low-yield
market environment. However, the mortgage market could rapidly be destabilized
again by a sharp move in interest rates in either direction.
Credit conditions proved highly favorable during the past six months. Default
rates have fallen with the recovery and the market is wide open for new issues
of all quality levels. Credit spreads continue to be driven to unattractive
levels by the paucity of acceptable-yield alternatives. This is especially true
in the high yield market.
PORTFOLIO OUTLOOK AND STRATEGY
The Funds are positioned to benefit from movement over the current trading range
in the longer-term Treasury market, from an eventual flattening in the yield
curve, from underexposure to the overvalued credit market and from relative
stability in the mortgage market.
With the longer-term Treasury market expected to remain in a trading range as
long as inflation remains well-behaved and short-rates remain unchanged, we will
generally be extending duration near the top of the range (4.5% ten-year) and
contracting duration near the bottom (4.0%). This corresponds to a "real" range
of 2.0-2.5% on the Treasury ten-year, which is consistent with our market
valuation model.
The Funds remain modestly "barbelled" to take advantage of an eventual
flattening in the curve. This is a strategy worth waiting for since, given the
extreme slope of the curve, it is potentially more powerful than the duration
strategy itself, and could benefit from both increasing-rate and declining-rate
scenarios. Credit exposure is light, since we think that most credits have
tightened so much in spread that they do not compensate adequately for risk.
Holdings in energy/power credits, aircraft equipment trust certificates ("ETC"),
and high yield bonds in general have been greatly reduced as they recovered
during 2003.
Mortgage holdings are significant and have been actively traded, adding
performance, since the sector has provided significant opportunities. We think
that these opportunities are likely to continue, especially with favorably-
structured discount coupons becoming more available.
Non prepayment-sensitive commercial mortgage backed securities ("CMBS") and
asset-backed holdings continue to be significant in the Funds, since their AAA
credit qualities and favorable structures are attractive compared to current
alternatives.
SUMMARY
We think that the Funds are well positioned to take advantage of the
opportunities afforded investors in the fixed income markets, particularly from
a defensive duration posture and yield curve perspective. We appreciate your
continued support as fellow shareholders in the Funds.
Regards,
/s/ Mark M. Egan /s/ Robert A. Crider
Mark M. Egan, CFA, CPA Robert A. Crider, CFA
Reams Asset Management Company, LLC Reams Asset Management Company, LLC
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra Total Lehman Brothers
Date Return Bond Fund Aggregate Bond Index
---- ---------------- --------------------
11/25/96*<F1> $100,000 $100,000
12/31/96 $99,239 $99,546
3/31/97 $98,362 $98,989
6/30/97 $102,032 $102,625
9/30/97 $105,600 $106,035
12/31/97 $107,761 $109,156
3/31/98 $109,814 $110,855
6/30/98 $112,097 $113,445
9/30/98 $116,435 $118,242
12/31/98 $116,850 $118,641
3/31/99 $116,509 $118,052
6/30/99 $115,847 $117,015
9/30/99 $116,931 $117,808
12/31/99 $116,688 $117,664
3/31/00 $120,434 $120,260
6/30/00 $123,697 $122,356
9/30/00 $127,807 $126,045
12/31/00 $132,423 $131,346
3/31/01 $137,575 $135,332
6/30/01 $138,374 $136,096
9/30/01 $143,478 $142,373
12/31/01 $142,220 $142,436
3/31/02 $142,420 $142,571
6/30/02 $143,131 $147,838
9/30/02 $144,301 $154,611
12/31/02 $150,349 $157,044
3/31/03 $154,795 $159,231
6/30/03 $162,151 $163,214
9/30/03 $162,793 $162,977
12/31/03 $164,216 $163,491
*<F1> 11/25/96 commencement of operations.
Portfolio Total Return**<F2>
FOR THE PERIOD ENDED 12/31/03
ONE YEAR 9.22%
FIVE YEAR
AVERAGE ANNUAL 7.04%
SINCE COMMENCEMENT
AVERAGE ANNUAL 7.24%
This chart assumes an initial gross investment of $100,000 made on 11/25/96
(commencement of operations). Returns shown include the reinvestment of all
distributions. Past performance is not predictive of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may be
worth more or less than the original cost. In the absence of existing fee
waivers, total return would be reduced.
The Lehman Brothers Aggregate Bond Index is an unmanaged market value-weighted
performance benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities, with
maturities of at least one year. The Index does not reflect investment
management fees, brokerage commissions and other expenses associated with
investing in fixed income securities.
**<F2> The returns shown do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
Frontegra Total Return Bond Fund
SCHEDULE OF INVESTMENTS
December 31, 2003 (Unaudited)
Principal Amount Value
- ---------------- -----
ASSET-BACKED SECURITIES 10.7%
$ 6,070,000 American Express Master Trust, 2002-2 A, 1.21%, 5/15/06 $ 6,070,995
1,910,000 Bank One Issuance Trust, 2003-A2 A2, 1.21%, 2/15/06 1,910,847
2,470,000 Chase Credit Card Master Trust, 2002-6 A, 1.22%, 9/15/05 2,470,890
2,100,000 Citibank Credit Card Issuance Trust,
2001-A2 A2, 1.29%, 2/07/06 2,104,150
3,440,000 Conseco Finance Securitizations Corp.,
2000-4 A4, 7.73%, 4/01/31 3,506,192
2,457,615 Conseco Finance Securitizations Corp.,
2002-1 A, 6.681%, 7/01/31 2,501,777
1,568,306 Conseco Finance Securitizations Corp.,
2001-4 A2, 5.15%, 9/01/33 1,591,648
3,435,000 Discover Card Master Trust I, 2001-3 A, 1.31%, 3/15/06 3,444,155
1,200,000 GE Commercial Equipment Financing LLC,
2003-1 A3, 1.21%, 6/20/07 1,200,211
24,078 Green Tree Financial Corp., 1995-7 A5, 6.95%, 10/15/26 24,501
200,000 Green Tree Financial Corp., 1996-7 M1, 7.70%, 10/15/27 170,062
1,188,673 Lehman ABS Manufactured Housing Contract,
2001-B A3, 4.35%, 5/15/14 1,152,882
1,795,000 MBNA Credit Card Master Note Trust,
2003-A2 A2, 1.17%, 8/15/08 1,795,823
1,785,000 MBNA Master Credit Card Trust, 2000-C A, 1.28%, 2/15/05 1,786,856
1,785,000 MBNA Master Credit Card Trust, 2000-K A, 1.26%, 3/17/08 1,787,022
25,033 Mego Mortgage Home Loan Trust, 1996-2 A, 7.275%, 8/25/17 25,008
1,254,190 Mid-State Trust, 11 A1, 4.864%, 7/15/38 1,180,179
920,854 Nissan Auto Receivables Owner Trust,
2003-A A2, 1.45%, 5/16/05 921,479
1,670,000 Regions Auto Receivables Trust, 2002-1 A3, 2.63%, 1/16/07 1,687,560
1,353,985 Salomon Smith Barney RV Trust, 2001-1 A3, 4.74%, 2/15/13 1,379,889
1,405,951 World Omni Auto Receivables Trust,
2003-A A2, 1.46%, 8/15/05 1,407,400
------------
TOTAL ASSET-BACKED SECURITIES
(cost $38,332,640) 38,119,526
------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES 7.5%
1,958,649 Capco America Securitization Corp.,
1998-D7 A1A, 5.86%, 10/15/30 2,060,971
33,356 Chase Commercial Mortgage Securities Corp.,
1997-2 A1, 6.45%, 12/19/04 33,691
350,000 Chase Commercial Mortgage Securities Corp.,
1997-2 A2, 6.60%, 11/19/07 384,581
735,464 Commercial Mortgage Asset Trust,
1999-C1 A1, 6.25%, 1/17/32 770,311
860,924 Commercial Mortgage Pass-Through Certificate,
1999-1 A1, 6.145%, 5/15/32 909,915
917,234 Credit Suisse First Boston Mortgage Securities Corp.,
1998-C2 A1, 5.96%, 12/15/07 974,638
1,887,087 Credit Suisse First Boston Mortgage Securities Corp.,
2003-1 1A1, 7.00%, 2/25/33 1,938,645
2,450,000 General Growth Properties, 1 A1, 6.537%, 11/15/04 (Acquired
10/23/01; Cost $2,491,779) r<F3> 2,539,441
204,998 GMAC Commercial Mortgage Securities Inc.,
1997-C1 A2, 6.853%, 7/15/29 207,693
1,151,389 GMAC Commercial Mortgage Securities Inc.,
1999-C1 A1, 5.83%, 5/15/33 1,215,796
1,210,458 GMAC Commercial Mortgage Securities Inc.,
2000-C2 A1, 7.273%, 8/16/33 1,321,981
817,812 GMAC Commercial Mortgage Securities Inc.,
1998-C2 A1, 6.15%, 5/15/35 857,568
1,678,724 Lehman Brothers Commercial Conduit Mortgage Trust,
1998-C4 A1A, 5.87%, 10/15/35 1,751,657
320,000 Merrill Lynch Mortgage Investors, Inc.,
1998-C1 A3, 6.72%, 11/15/26 348,987
1,617,837 Morgan Stanley Capital I, 1999-WF1 A1, 5.91%, 11/15/31 1,720,670
1,669,252 Mortgage Capital Funding, Inc.,
1998-MC3 A1, 6.001%, 11/18/31 1,774,240
1,161,489 Nationslink Funding Corp., 1998-2 A1, 6.001%, 8/20/30 1,223,766
1,593,678 Nomura Asset Securities Corp.,
1998-D6 A1A, 6.28%, 3/15/30 1,699,180
710,000 NYC Mortgage Loan Trust, 1996 A3, 6.75%, 9/25/19 (Acquired
Multiple Dates; Cost $659,909) r<F3> 784,436
1,580,000 Principal Residential Mortgage Capital Resources,
2001-3A A1, 4.55%, 12/20/04 (Acquired Multiple Dates;
Cost $1,579,320) r<F3> 1,595,010
816,735 Salomon Brothers Mortgage Securities VII,
2002-CDCA A1, 1.40%, 11/15/13 (Acquired 5/01/03;
Cost $817,187) r<F3> 816,654
550,509 Salomon Brothers Mortgage Securities VII,
2000-C2 A1, 7.298%, 7/18/33 558,767
777,884 Salomon Brothers Mortgage Securities VII,
2001-MMA A1, 5.3228%, 2/18/34 (Acquired Multiple
Dates; Cost $792,791) r<F3> 806,745
215,316 TIAA Commercial Real Estate Securitization,
2001-C1A A1, 5.77%, 6/19/16 (Acquired Multiple Dates;
Cost $221,010) r<F3> 227,576
------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(cost $25,716,362) 26,522,919
------------
CORPORATE BONDS 15.1%
Airlines 0.3%
1,201,925 American Airlines, Inc., 1.76%, 9/23/07 1,203,142
------------
Automobiles 0.9%
1,625,000 Daimlerchrysler NA Hldg., 4.05%, 6/04/08 1,613,937
815,000 Ford Motor Co., 6.375%, 2/01/29 727,081
855,000 Hertz Corp., 4.70%, 10/02/06 870,051
------------
3,211,069
------------
Banks 0.3%
945,000 Credit Suisse First Boston London, 7.90%, 5/01/07 (Acquired
12/17/02; Cost $991,909) r<F3> 1,055,464
------------
Broadcast Services 0.2%
690,000 Liberty Media Corp., 3.50%, 9/25/06 693,448
------------
Cable Television 0.2%
800,000 Comcast Corp., 5.30%, 1/15/14 797,343
------------
Chemicals 0.6%
925,000 Equistar Chemicals LP, 8.75%, 2/15/09 966,625
970,000 ICI Wilmington Inc., 5.625%, 12/01/13 974,671
175,000 Lyondell Chemical Co., 11.125%, 7/15/12 194,250
------------
2,135,546
------------
Energy 4.8%
1,300,996 AES Ironwood LLC, 8.857%, 11/30/25 1,385,560
1,524,000 American Ref-Fuel Co. LLC, 6.26%, 12/31/15 (Acquired
Multiple Dates; Cost $1,524,000) r<F3> 1,492,834
597,275 East Coast Power LLC, 6.737%, 3/31/08 603,248
3,405,000 Edison Mission Energy Funding, 7.33%, 9/15/08 (Acquired
Multiple Dates; Cost $3,178,908) r<F3> 3,558,225
1,400,000 FirstEnergy Corp., 7.375%, 11/15/31 1,432,168
490,000 Florida Power and Light Co., 5.95%, 10/01/33 501,902
1,173,104 FPL Energy Caithness Funding, 7.645%, 12/31/18 (Acquired
8/18/03; Cost $1,093,600) r<F3> 1,102,718
1,035,000 Northern States Power, 2.875%, 8/01/06 1,038,919
585,000 PSEG Power LLC, 5.50%, 12/01/15 585,827
220,000 PSEG Power LLC, 8.625%, 4/15/31 283,348
2,613,740 Sithe/Independence Funding, 8.50%, 6/30/07 2,822,840
935,000 Southern California Edison Co., 8.00%, 2/15/07 1,069,406
380,885 Sutton Bridge Financing LTD, 7.97%, 6/30/22 (Acquired
6/01/00; Cost $358,995) r<F3> 386,473
800,000 Utilicorp-AMBAC, 6.875%, 10/01/04 821,459
------------
17,084,927
------------
Financial 3.9%
680,000 CIT Group Inc., 4.125%, 2/21/06 703,669
1,075,000 CIT Group Inc., 4.00%, 5/08/08 1,087,215
2,600,000 Citigroup Inc., 1.2731%, 9/01/06 2,601,412
654,933 Dryden Investor Trust, 7.157%, 7/23/08 (Acquired 8/18/03;
Cost $704,662) r<F3> 707,328
700,000 Ford Motor Credit Co., 7.375%, 2/01/11 762,958
420,000 Ford Motor Credit Co., 7.25%, 10/25/11 455,517
680,000 Ford Motor Credit Co., 7.00%, 10/01/13 717,182
2,380,000 General Electric Capital Corp., 6.00%, 6/15/12 2,580,998
890,000 General Motors Acceptance Corp., 6.875%, 8/28/12 957,485
1,290,000 Household Finance Corp., 4.125%, 12/15/08 1,301,281
1,775,000 International Lease Finance Corp., 1.39%, 9/22/05 1,781,150
------------
13,656,195
------------
Food 0.3%
580,000 Tyson Foods Inc., 7.25%, 10/01/06 635,583
195,000 Tyson Foods Inc., 8.25%, 10/01/11 226,115
------------
861,698
------------
Forestry 0.2%
725,000 Weyerhaeuser Co., 7.375%, 3/15/32 788,294
------------
Insurance 1.2%
2,520,000 Met Life Global Funding I, 1.32%, 8/28/06 (Acquired 8/22/03;
Cost $2,520,000) r<F3> 2,523,359
940,000 Principal Life Global, 2.80%, 6/26/08 (Acquired 11/05/03;
Cost $898,849) r<F3> 909,427
805,000 Protective Life Secured Trust, 3.70%, 11/24/08 802,443
------------
4,235,229
------------
Networking Products 0.1%
275,000 Lucent Technologies, 5.50%, 11/15/08 255,750
------------
Oil & Gas 0.8%
930,000 Amerada Hess Corp., 7.30%, 8/15/31 960,315
1,110,000 Devon Energy Corp., 2.75%, 8/01/06 1,110,516
780,000 Motiva Enterprises LLC, 5.20%, 9/15/12 (Acquired 9/18/02;
Cost $777,551) r<F3> 794,062
------------
2,864,893
------------
Pipelines 0.3%
1,100,000 El Paso Natural Gas Co., 7.625%, 8/01/10 1,130,250
------------
Telecommunications 1.0%
1,190,000 AT&T Corp., 8.00%, 11/15/31 1,390,590
840,000 Deutsche Telekom International Finance BV, 8.25%, 6/15/30 1,073,040
485,000 Sprint Capital Corp., 8.375%, 3/15/12 566,383
590,000 Telefonos de Mexico, S.A. de C.V., 4.50%, 11/19/08 (Acquired
11/12/03; cost $588,720) r<F3> 590,897
------------
3,620,910
------------
TOTAL CORPORATE BONDS
(cost $51,283,795) 53,594,158
------------
U.S. GOVERNMENT AGENCIES 38.5%
Fannie Mae 21.0%
3,150,000 4.00%, 3/01/19 w<F4> 3,052,545
7,255,000 4.50%, 3/01/19 w<F4> 7,209,656
11,545,000 5.00%, 3/01/19 w<F4> 11,700,142
7,695,000 4.50%, 1/01/34 w<F4> 7,360,745
7,905,000 5.00%, 1/01/34 w<F4> 7,801,247
25,005,000 5.50%, 1/01/34 w<F4> 25,325,364
1,830,000 5.00%, 3/01/34 w<F4> 1,797,404
1,755,318 Pool 545938, 5.111%, 11/01/12 1,826,872
6,887 Pool 555569, 6.00%, 5/01/16 7,240
158,391 Pool 433043, 6.50%, 6/01/28 165,846
107,521 Pool 447704, 6.50%, 11/01/28 112,582
91,981 Pool 448235, 6.50%, 11/01/28 96,311
177,236 Pool 448635, 6.50%, 11/01/28 185,579
81,566 Pool 449012, 6.50%, 11/01/28 85,405
105,126 Pool 487778, 6.50%, 3/01/29 110,012
3,636,867 Pool 555203, 7.00%, 9/01/32 3,851,726
10,429 Series 1991-26 G, 8.00%, 4/25/06 10,853
85,000 Series 1994-3 PL, 5.50%, 1/25/24 88,700
1,225,282 Series 2003-W10 3A1, 1.623%, 3/25/32 1,219,271
1,037,397 Series 2001-T10 A1, 7.00%, 12/25/41 1,119,417
1,271,022 Series 2003-W2 1A3, 7.50%, 7/25/42 1,387,797
------------
74,514,714
------------
Freddie Mac 0.5%
557,545 Gold Pool M80779, 5.00%, 11/01/09 571,957
1,114,506 Pool 780653, 3.134%, 7/01/33 1,117,677
------------
1,689,634
------------
Ginnie Mae 15.6%
7,600,000 5.50%, 1/01/34 w<F4> 7,725,871
7,690,000 6.00%, 1/01/34 w<F4> 7,990,387
8,775,000 6.50%, 1/01/34 w<F4> 9,246,656
21,705,000 6.00%, 2/01/34 w<F4> 22,485,034
6,955,000 6.50%, 2/01/34 w<F4> 7,317,968
58,059 Pool 331001, 8.25%, 7/15/07 62,379
36,463 Pool 036629, 9.50%, 10/15/09 40,263
425,000 Series 20 H, 5.50%, 10/25/23 440,373
------------
55,308,931
------------
Sallie Mae 1.4%
2,955,000 Series 2003-12 A1, 1.1931%, 6/15/09 2,955,000
2,140,000 Series 2003-11 A1, 1.1984%, 9/15/09 2,140,179
------------
5,095,179
------------
TOTAL U.S. GOVERNMENT AGENCIES
(cost $135,747,699) 136,608,458
------------
U.S. TREASURIES 35.0%
U.S. Treasury Bonds 10.3%
2,890,000 6.875%, 8/15/25 3,535,395
6,800,000 5.25%, 2/15/29 6,860,030
25,290,000 5.375%, 2/15/31 26,373,727
------------
36,769,152
------------
U.S. Treasury Inflation Index Bonds 2.3%
957,372 1.875%, 7/15/13 950,490
5,724,535 3.625%, 4/15/28 7,093,053
------------
8,043,543
------------
U.S. Treasury Notes 22.4%
10,060,000 1.625%, 10/31/05 10,044,286
185,000 2.625%, 5/15/08 182,218
11,425,000 3.375%, 11/15/08 11,515,600
27,385,000 3.375%, 12/15/08 27,571,136
30,085,000 4.25%, 11/15/13 c<F5> 30,052,087
------------
79,365,327
------------
TOTAL U.S. TREASURIES
(cost $123,968,326) 124,178,022
------------
SHORT-TERM INVESTMENTS 21.9%
U.S. Government Agencies 21.6%
11,465,000 Fannie Mae Discount Note, 1.05%, 2/25/04 c<F5> 11,446,170
65,188,000 Federal Home Loan Bank Discount Note, 1.03%, 1/02/04 c<F5> 65,187,185
------------
76,633,355
------------
Variable Rate Demand Notes v<F6> 0.3%
291,909 American Family Financial Services Inc., 0.7609% c<F5> 291,909
594,814 Wisconsin Corporate Central Credit Union, 0.7900% c<F5> 594,814
------------
886,723
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $77,520,078) 77,520,078
------------
TOTAL INVESTMENTS 128.7%
(cost $452,568,900) 456,543,161
Liabilities, less Other Assets (28.7)% (101,682,536)
------------
NET ASSETS 100.0% $354,860,625
------------
------------
r<F3> Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers. The total
value of these securities amounted to $19,890,649 (5.6% of net assets)
at December 31, 2003.
w<F4> When-issued security.
c<F5> Security marked as segregated to cover when-issued securities. The
balance of when-issued securities was collateralized by cash.
v<F6> Variable rate demand notes are considered short-term obligations and
are payable upon demand. Interest rates change periodically on
specified dates. The rates listed are as of December 31, 2003.
See notes to financial statements.
Frontegra Total Return Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003 (Unaudited)
ASSETS:
Investments at value (cost $452,568,900) $456,543,161
Cash 19,028,624
Interest receivable 2,293,329
Receivable for investments sold 74,018,748
Receivable for Fund shares sold 1,161
Other assets 40,373
------------
Total assets 551,925,396
------------
LIABILITIES:
Payable for investments purchased 196,918,385
Accrued investment advisory fee 95,827
Accrued expenses 50,559
------------
Total liabilities 197,064,771
------------
NET ASSETS $354,860,625
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $358,152,994
Undistributed net investment income 17,471
Undistributed net realized loss (7,284,101)
Net unrealized appreciation on investments 3,974,261
------------
NET ASSETS $354,860,625
------------
------------
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 11,517,981
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $30.81
------
------
See notes to financial statements.
Frontegra Total Return Bond Fund
STATEMENT OF OPERATIONS
SIX MONTHS ENDED
DECEMBER 31, 2003
(UNAUDITED)
-----------------
INVESTMENT INCOME:
Interest $ 6,594,518
-----------
EXPENSES:
Investment advisory fees 708,970
Fund administration and accounting fees 109,038
Custody fees 24,668
Federal and state registration fees 12,034
Audit fees 8,895
Shareholder servicing fees 7,296
Legal fees 7,282
Directors' fees and related expenses 3,143
Reports to shareholders 1,152
Other 6,829
-----------
Total expenses before waiver 889,307
Waiver of expenses by Adviser (136,027)
-----------
Net expenses 753,280
-----------
NET INVESTMENT INCOME 5,841,238
-----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (5,311,298)
Change in net unrealized
appreciation/depreciation on investments 3,900,034
-----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (1,411,264)
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 4,429,974
-----------
-----------
See notes to financial statements.
Frontegra Total Return Bond Fund
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 2003 YEAR ENDED
(UNAUDITED) JUNE 30, 2003
----------------- -------------
OPERATIONS:
Net investment income $ 5,841,238 $ 20,290,234
Net realized gain (loss) on investments (5,311,298) 13,982,416
Change in net unrealized
appreciation/depreciation on investments 3,900,034 9,250,988
------------ ------------
Net increase in net assets
resulting from operations 4,429,974 43,523,638
------------ ------------
DISTRIBUTIONS
PAID FROM:
Net investment income (6,099,028) (21,105,270)
Net realized gain on investments (10,758,922) (3,205,518)
------------ ------------
Net decrease in net assets resulting
from distributions paid (16,857,950) (24,310,788)
------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 5,021,152 48,896,678
Shares issued to holders in
reinvestment of distributions 16,190,478 23,686,272
Shares redeemed (11,975,444) (83,475,172)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions 9,236,186 (10,892,222)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (3,191,790) 8,320,628
------------ ------------
NET ASSETS:
Beginning of period 358,052,415 349,731,787
------------ ------------
End of period
(includes undistributed
net investment income of
$17,471 and $275,261, respectively) $354,860,625 $358,052,415
------------ ------------
------------ ------------
See notes to financial statements.
Frontegra Total Return Bond Fund
FINANCIAL HIGHLIGHTS
SIX MONTHS EIGHT
ENDED YEAR YEAR YEAR YEAR MONTHS YEAR
DECEMBER 31, ENDED ENDED ENDED ENDED ENDED ENDED
2003 JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30, OCTOBER 31,
(UNAUDITED) 2003 2002 2001 2000 1999 1998
---------- -------- -------- -------- -------- -------- ----------
NET ASSET VALUE,
BEGINNING OF PERIOD $31.92 $30.21 $31.01 $29.36 $29.34 $31.38 $30.85
INCOME (LOSS)
FROM INVESTMENT
OPERATIONS:
Net investment income 0.53 1.80 1.45 1.74 1.90 1.29 1.75
Net realized and unrealized
gain (loss) on investments (0.12) 2.06 (0.40) 1.68 0.02 (1.18) 0.59
------ ------ ------ ------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS 0.41 3.86 1.05 3.42 1.92 0.11 2.34
------ ------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
PAID:
From net investment income (0.55) (1.87) (1.38) (1.74) (1.90) (1.44) (1.75)
From net realized gain
on investments (0.97) (0.28) (0.47) (0.03) -- (0.71) (0.06)
------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS PAID (1.52) (2.15) (1.85) (1.77) (1.90) (2.15) (1.81)
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $30.81 $31.92 $30.21 $31.01 $29.36 $29.34 $31.38
------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------
TOTAL RETURN(1)<F7> 1.27% 13.29% 3.44% 11.87% 6.78% 0.32% 7.79%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $354,861 $358,052 $349,732 $167,191 $70,435 $48,413 $48,457
Ratio of expenses
to average
net assets(2)<F8>(3)<F9> 0.425% 0.425% 0.425% 0.425% 0.43% 0.50% 0.50%
Ratio of net investment
income to average
net assets(2)<F8>(3)<F9> 3.30% 5.78% 4.84% 6.47% 6.82% 6.37% 5.79%
Portfolio turnover rate(1)<F7> 615% 489% 885% 635% 438% 83% 131%
(1)<F7> Not annualized for periods less than a full year.
(2)<F8> Net of waivers and reimbursements by Adviser. Without waivers and
reimbursements of expenses, the ratio of expenses to average net
assets would have been 0.505%, 0.505%, 0.535%, 0.605%, 0.71%, 0.82%
and 0.78%, and the ratio of net investment income to average net
assets would have been 3.22%, 5.70%, 4.73%, 6.29%, 6.54%, 6.05% and
5.51% for the periods ended December 31, 2003, June 30, 2003, June
30, 2002, June 30, 2001, June 30, 2000, June 30, 1999 and October 31,
1998, respectively.
(3)<F9> Annualized.
See notes to financial statements.
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Frontegra Investment Lehman Brothers
Date Grade Bond Fund Aggregate Bond Index
---- --------------- --------------------
2/23/2001*<F10> $100,000 $100,000
3/31/2001 $101,242 $101,377
6/30/2001 $101,975 $101,949
9/30/2001 $106,197 $106,652
12/31/2001 $106,384 $106,699
3/31/2002 $106,324 $106,800
6/30/2002 $109,262 $110,746
9/30/2002 $111,830 $115,820
12/31/2002 $113,632 $117,642
3/31/2003 $115,161 $119,281
6/30/2003 $117,928 $122,264
9/30/2003 $118,839 $122,086
12/31/2003 $119,424 $122,471
*<F10> 2/23/01 commencement of operations.
Portfolio Total Return**<F11>
FOR THE PERIOD ENDED 12/31/03
ONE YEAR 5.10%
SINCE COMMENCEMENT
AVERAGE ANNUAL 6.42%
This chart assumes an initial gross investment of $100,000 made on 2/23/01
(commencement of operations). Past performance is not predictive of future
results. Investment return and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than the original cost. In the absence
of existing fee waivers, total return would be reduced.
The Lehman Brothers Aggregate Bond Index is an unmanaged market value-weighted
performance benchmark for investment-grade fixed-rate debt issues, including
government, corporate, asset-backed and mortgage-backed securities, with
maturities of at least one year. The Index does not reflect investment
management fees, brokerage commissions and other expenses associated with
investing in fixed income securities.
**<F11> The returns shown do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of
Fund shares.
Frontegra Investment Grade Bond Fund
SCHEDULE OF INVESTMENTS
December 31, 2003 (Unaudited)
Principal Amount Value
- ---------------- -----
ASSET-BACKED SECURITIES 13.2%
$ 2,230,000 American Express Master Trust, 2002-2 A, 1.21%, 5/15/06 $ 2,230,365
650,000 Bank One Issuance Trust, 2003-A2 A2, 1.21%, 2/15/06 650,288
1,049,282 California Infrastructure PG&E-1, 1997-1 A7, 6.42%, 9/25/08 1,116,039
835,000 Chase Credit Card Master Trust, 2002-6 A, 1.22%, 9/15/05 835,301
664,090 CIT Equipment Collateral, 2002-VT1 A3, 4.03%, 1/20/06 673,890
715,000 Citibank Credit Card Issuance Trust,
2001-A2 A2, 1.29%, 2/07/06 716,413
290,000 Conseco Finance Securitizations Corp.,
2000-4 A4, 7.73%, 4/01/31 295,580
837,744 Conseco Finance Securitizations Corp.,
2002-1 A, 6.681%, 7/01/31 852,798
299,764 Conseco Finance Securitizations Corp.,
2001-3 A2, 5.16%, 5/01/33 303,197
193,884 Conseco Finance Securitizations Corp.,
2001-4 A2, 5.15%, 9/01/33 196,770
1,160,000 Discover Card Master Trust I, 2001-3 A, 1.31%, 3/15/06 1,163,092
405,000 GE Commercial Equipment Financing LLC,
2003-1 A3, 1.21%, 6/20/07 405,071
326,086 Keystone Owner Trust, 1998-P1 M1, 7.53%, 5/25/25 (Acquired
4/22/03; Cost $341,901) r<F12> 337,482
276,548 Lehman ABS Manufactured Housing Contract,
2001-B A3, 4.35%, 5/15/14 268,221
660,000 MBNA Credit Card Master Note Trust,
2003-A2 A2, 1.17%, 8/15/08 660,303
605,000 MBNA Master Credit Card Trust, 2000-C A, 1.28%, 2/15/05 605,629
605,000 MBNA Master Credit Card Trust, 2000-K A, 1.26%, 3/17/08 605,685
458,622 Mid-State Trust, 11 A1, 4.864%, 7/15/38 431,558
60,250 MMCA Automobile Trust, 2002-1 A3, 4.15%, 5/15/06 60,285
324,301 Nissan Auto Receivables Owner Trust,
2003-A A2, 1.45%, 5/16/05 324,521
1,073,657 Oakwood Mortgage Investors Inc., 1995-A A4, 7.70%, 9/15/20 1,126,393
89,615 Oakwood Mortgage Investors Inc., 1996-A A3, 6.60%, 5/15/21 92,560
575,000 Regions Auto Receivables Trust, 2002-1 A3, 2.63%, 1/16/07 581,046
371,478 Salomon Smith Barney RV Trust, 2001-1 A3, 4.74%, 2/15/13 378,585
495,688 World Omni Auto Receivables Trust,
2003-A A2, 1.46%, 8/15/05 496,199
------------
TOTAL ASSET-BACKED SECURITIES
(cost $15,465,859) 15,407,271
------------
COMMERCIAL MORTGAGE-BACKED
SECURITIES 6.8%
300,471 Capco America Securitization Corp.,
1998-D7 A1A, 5.86%, 10/15/30 316,167
615,852 Commercial Mortgage Asset Trust,
1999-C1 A1, 6.25%, 1/17/32 645,032
559,076 Credit Suisse First Boston Mortgage Securities Corp.,
1998-C2 A1, 5.96%, 12/15/07 594,065
680,499 Credit Suisse First Boston Mortgage Securities Corp.,
2003-1 1A1, 7.00%, 2/25/33 699,091
68,163 Credit Suisse First Boston Mortgage Securities Corp.,
1998-C1 A1A, 6.26%, 5/17/40 71,210
263,045 First Union Commercial Mortgage Trust,
1999-C1 A1, 5.73%, 10/15/35 275,145
940,000 General Growth Properties, 1 A1, 6.537%, 11/15/04 (Acquired
Multiple Dates; Cost $963,581) r<F12> 974,316
43,302 GMAC Commercial Mortgage Securities Inc.,
1997-C1 A2, 6.853%, 7/15/29 43,871
222,686 GMAC Commercial Mortgage Securities Inc.,
1999-C1 A1, 5.83%, 5/15/33 235,143
129,949 GMAC Commercial Mortgage Securities Inc.,
1998-C2 A1, 6.15%, 5/15/35 136,266
130,923 Lehman Brothers Commercial Conduit Mortgage Trust,
1998-C4 A1A, 5.87%, 10/15/35 136,611
115,000 Merrill Lynch Mortgage Investors, Inc.,
1998-C1 A3, 6.72%, 11/15/26 125,417
446,459 Morgan Stanley Capital I, 1999-WF1 A1, 5.91%, 11/15/31 474,837
331,639 Mortgage Capital Funding, Inc.,
1998-MC3 A1, 6.001%, 11/18/31 352,498
708,837 Nationslink Funding Corp., 1998-2 A1, 6.001%, 8/20/30 746,843
255,746 Nomura Asset Securities Corp.,
1998-D6 A1A, 6.28%, 3/15/30 272,677
260,000 NYC Mortgage Loan Trust, 1996 A3, 6.75%, 9/25/19 (Acquired
8/18/03; Cost $278,289) r<F12> 287,258
200,000 Principal Residential Mortgage Capital Resources,
2001-3A A1, 4.55%, 12/20/04 (Acquired Multiple Dates;
Cost $201,907) r<F12> 201,900
288,560 Salomon Brothers Mortgage Securities VII,
2002-CDCA A1, 1.40%, 11/15/13 (Acquired 5/01/03;
Cost $288,720) r<F12> 288,532
214,097 Salomon Brothers Mortgage Securities VII,
2001-MMA A1, 5.3228%, 2/18/34 (Acquired Multiple
Dates; Cost $222,453) r<F12> 222,040
26,258 TIAA Commercial Real Estate Securitization,
2001-C1A A1, 5.77%, 6/19/16 (Acquired Multiple Dates;
Cost $27,481) r<F12> 27,753
658,240 Wachovia Bank Commercial Mortgage Trust,
2003-C5 A1, 2.986%, 2/15/12 626,570
262,630 Wachovia Bank Commercial Mortgage Trust,
2002-C1 A1, 4.539%, 4/15/34 272,401
------------
TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES
(cost $7,965,261) 8,025,643
------------
CORPORATE BONDS 14.0%
Airlines 0.4%
463,338 American Airlines, Inc., 1.76%, 9/23/07 463,807
------------
Automobiles 0.7%
545,000 Daimlerchrysler NA Hldg., 4.05%, 6/04/08 541,290
285,000 Hertz Corp., 4.70%, 10/02/06 290,017
------------
831,307
------------
Banks 0.3%
270,000 Credit Suisse First Boston London, 7.90%, 5/01/07 (Acquired
Multiple Dates; Cost $281,123) r<F12> 301,561
------------
Broadcast Services 0.2%
240,000 Liberty Media Corp., 3.50%, 9/25/06 241,199
------------
Cable Television 0.2%
270,000 Comcast Corp., 5.30%, 1/15/14 269,103
------------
Diversified Manufacturing 0.6%
660,000 General Electric Co., 5.00%, 2/01/13 667,481
------------
Energy 2.8%
598,000 American Ref-Fuel Co. LLC, 6.26%, 12/31/15 (Acquired
Multiple Dates; Cost $598,000) r<F12> 585,771
540,000 Consumers Energy Co., 5.375%, 4/15/13 (Acquired 6/19/03;
Cost $575,551) r<F12> 542,498
295,000 Duke Energy Corp., 4.50%, 4/01/10 300,928
615,000 Entergy Arkansas Inc., 5.00%, 7/01/18 (Acquired 6/18/03;
Cost $611,273) r<F12> 575,382
325,000 NiSource Finance Corp., 3.20%, 11/01/06 327,624
380,000 Northern States Power, 2.875%, 8/01/06 381,439
180,000 PSEG Power, LLC, 8.625%, 4/15/31 231,830
260,000 Public Service Electric & Gas Co., 4.00%, 11/01/08 262,414
128,438 Sutton Bridge Financing LTD, 7.97%, 6/30/22 (Acquired
8/18/03; Cost $123,461) r<F12> 130,322
------------
3,338,208
------------
Financial 3.6%
240,000 CIT Group Inc., 4.125%, 2/21/06 248,354
380,000 CIT Group Inc., 4.00%, 5/08/08 384,318
950,000 Citigroup Inc., 1.2731%, 9/01/06 950,516
241,774 Dryden Investor Trust, 7.157%, 7/23/08 (Acquired 8/18/03;
Cost $260,132) r<F12> 261,116
230,000 Ford Motor Credit Co., 7.375%, 2/01/11 250,686
140,000 Ford Motor Credit Co., 7.25%, 10/25/11 151,839
230,000 Ford Motor Credit Co., 7.00%, 10/01/13 242,576
295,000 General Motors Acceptance Corp., 6.875%, 8/28/12 317,369
425,000 Household Finance Corp., 4.125%, 12/15/08 428,717
595,000 International Lease Finance Corp., 1.39%, 9/22/05 597,062
440,000 National Rural Utilities Cooperative Finance Corp.,
4.378%, 10/01/10 441,810
------------
4,274,363
------------
Insurance 2.2%
925,000 Met Life Global Funding I, 1.32%, 8/28/06 (Acquired 8/22/03;
Cost $925,000) r<F12> 926,233
1,070,000 Principal Life Global, 2.80%, 6/26/08 (Acquired 6/19/03;
Cost $1,066,737) r<F12> 1,035,198
585,000 Protective Life Secured Trust, 3.70%, 11/24/08 583,141
------------
2,544,572
------------
Oil & Gas 0.6%
405,000 Devon Energy Corp., 2.75%, 8/01/06 405,188
290,000 Motiva Enterprises LLC, 5.20%, 9/15/12 (Acquired Multiple
Dates; Cost $289,517) r<F12> 295,228
------------
700,416
------------
Real Estate 0.5%
515,000 Liberty Property LP, 7.75%, 4/15/09 601,600
------------
Special Purpose Entity 0.5%
605,000 PF Export Rec Master Trust, 3.748%, 6/01/13 (Acquired
Multiple Dates; Cost $606,863) r<F12> 589,694
------------
Telecommunications 1.4%
400,000 AT&T Corp., 8.00%, 11/15/31 467,425
310,000 Deutsche Telekom International Finance BV, 8.25%, 6/15/30 396,003
195,000 Telefonos de Mexico, S.A. de C.V., 4.50%, 11/19/08 (Acquired
11/12/03; Cost $194,577) r<F12> 195,296
535,000 Verizon North Inc., 5.634%, 1/01/21 (Acquired Multiple Dates;
Cost $536,080) r<F12> 531,116
------------
1,589,840
------------
TOTAL CORPORATE BONDS
(cost $16,262,558) 16,413,151
------------
U.S. GOVERNMENT AGENCIES 42.1%
Fannie Mae 25.5%
1,250,000 4.00%, 3/01/19 w<F13> 1,211,328
2,290,000 4.50%, 3/01/19 w<F13> 2,275,688
3,865,000 5.00%, 3/01/19 w<F13> 3,916,938
2,860,000 4.50%, 1/01/34 w<F13> 2,735,767
2,995,000 5.00%, 1/01/34 w<F13> 2,955,691
8,355,000 5.50%, 1/01/34 w<F13> 8,462,044
1,760,000 Pool 385537, 4.745%, 11/01/12 1,785,527
609,690 Pool 545938, 5.111%, 11/01/12 634,544
6,887 Pool 555569, 6.00%, 5/01/16 7,240
1,343,788 Pool 555180, 6.00%, 11/01/17 1,411,011
1,386,966 Pool 555203, 7.00%, 9/01/32 1,468,905
1,253,794 Series 2003-M2 A, 2.92%, 5/25/09 1,225,213
452,357 Series 2003-W10 3A1, 1.623%, 3/25/32 450,138
444,469 Series 2003-W10 1A1, 1.701%, 6/25/32 442,574
366,619 Series 2001-T10 A1, 7.00%, 12/25/41 395,605
449,463 Series 2003-W2 1A3, 7.50%, 7/25/42 490,757
------------
29,868,970
------------
Freddie Mac 0.4%
412,605 Pool 780653, 3.134%, 7/01/33 413,778
------------
Ginnie Mae 14.8%
2,505,000 5.50%, 1/01/34 w<F13> 2,546,488
2,565,000 6.00%, 1/01/34 w<F13> 2,665,194
2,000,000 6.50%, 1/01/34 w<F13> 2,107,500
6,835,000 6.00%, 2/01/34 w<F13> 7,080,636
2,580,000 6.50%, 2/01/34 w<F13> 2,714,645
141,570 Series 25 B, 6.50%, 12/25/08 149,557
------------
17,264,020
------------
Sallie Mae 1.4%
970,000 Series 2003-12 A1, 1.1931%, 6/15/09 970,000
720,000 Series 2003-11 A1, 1.1984%, 9/15/09 720,060
------------
1,690,060
------------
TOTAL U.S. GOVERNMENT AGENCIES
(cost $48,916,724) 49,236,828
------------
U.S. TREASURIES 33.7%
U.S. Treasury Bonds 9.4%
995,000 6.875%, 8/15/25 1,217,203
2,235,000 5.25%, 2/15/29 2,254,731
7,185,000 5.375%, 2/15/31 7,492,892
------------
10,964,826
------------
U.S. Treasury Inflation Index Bonds 1.8%
317,444 1.875%, 7/15/13 315,163
1,418,287 3.625%, 4/15/28 1,757,346
------------
2,072,509
------------
U.S. Treasury Notes 22.5%
3,565,000 1.625%, 10/31/05 3,559,431
150,000 3.00%, 2/15/08 150,697
65,000 2.625%, 5/15/08 64,022
3,735,000 3.375%, 11/15/08 3,764,619
8,955,000 3.375%, 12/15/08 c<F14> 9,015,867
9,835,000 4.25%, 11/15/13 c<F14> 9,824,241
------------
26,378,877
------------
TOTAL U.S. TREASURIES
(cost $39,348,504) 39,416,212
------------
SHORT-TERM INVESTMENTS 16.8%
U.S. Government Agencies 16.2%
3,780,000 Fannie Mae Discount Note, 1.05%, 2/25/04 c<F14> 3,773,792
15,151,000 Federal Home Loan Bank Discount Note, 1.03%, 1/02/04 c<F14> 15,150,811
------------
18,924,603
------------
Variable Rate Demand Notes v<F15> 0.6%
391,375 American Family Financial Services Inc., 0.7609% c<F14> 391,375
291,711 Wisconsin Corporate Central Credit Union, 0.7900% c<F14> 291,711
------------
683,086
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $19,607,689) 19,607,689
------------
TOTAL INVESTMENTS 126.6%
(cost $147,566,595) 148,106,794
Liabilities, less Other Assets (26.6)% (31,159,914)
------------
NET ASSETS 100.0% $116,946,880
------------
------------
r<F12> Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration normally to qualified institutional buyers. The total
value of these securities amounted to $8,308,696 (7.1% of net assets)
at December 31, 2003.
w<F13> When-issued security.
c<F14> Security marked as segregated to cover when-issued securities. The
balance of when-issued securities was collateralized by cash.
v<F15> Variable rate demand notes are considered short-term obligations and
are payable upon demand. Interest rates change periodically on
specified dates. The rates listed are as of December 31, 2003.
See notes to financial statements.
Frontegra Investment Grade Bond Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003 (Unaudited)
ASSETS:
Investments at value (cost $147,566,595) $148,106,794
Cash 6,166,489
Interest receivable 688,312
Receivable for investments sold 26,081,006
Other assets 18,612
------------
Total assets 181,061,213
------------
LIABILITIES:
Payable for investments purchased 64,062,981
Accrued investment advisory fee 20,599
Accrued expenses 30,753
------------
Total liabilities 64,114,333
------------
NET ASSETS $116,946,880
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $117,164,215
Undistributed net investment income 11,026
Undistributed net realized loss (768,560)
Net unrealized appreciation on investments 540,199
------------
NET ASSETS $116,946,880
------------
------------
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 11,321,921
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $10.33
------
------
See notes to financial statements.
Frontegra Investment Grade Bond Fund
STATEMENT OF OPERATIONS
SIX MONTHS ENDED
DECEMBER 31, 2003
(UNAUDITED)
-----------------
INVESTMENT INCOME:
Interest $2,135,847
----------
EXPENSES:
Investment advisory fees 257,512
Fund administration and accounting fees 61,080
Custody fees 15,052
Audit fees 8,887
Federal and state registration fees 8,696
Legal fees 7,620
Shareholder servicing fees 7,616
Directors' fees and related expenses 3,144
Reports to shareholders 852
Other 3,463
----------
Total expenses before waiver 373,922
Waiver of expenses by Adviser (116,410)
----------
Net expenses 257,512
----------
NET INVESTMENT INCOME 1,878,335
----------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (747,590)
Change in net unrealized
appreciation/depreciation on investments 71,060
----------
NET REALIZED AND UNREALIZED
LOSS ON INVESTMENTS (676,530)
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,201,805
----------
----------
See notes to financial statements.
Frontegra Investment Grade Bond Fund
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 2003 YEAR ENDED
(UNAUDITED) JUNE 30, 2003
----------------- -------------
OPERATIONS:
Net investment income $ 1,878,335 $ 4,132,136
Net realized gain (loss) on investments (747,590) 4,022,023
Change in net unrealized
appreciation/depreciation on investments 71,060 371,112
------------ ------------
Net increase in net assets
resulting from operations 1,201,805 8,525,271
------------ ------------
DISTRIBUTIONS
PAID FROM:
Net investment income (1,926,543) (4,087,825)
Net realized gain on investments (2,757,171) (1,203,767)
------------ ------------
Net decrease in net assets resulting
from distributions paid (4,683,714) (5,291,592)
------------ ------------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 5,065,848 105,680,111
Shares issued to holders in
reinvestment of distributions 3,463,497 4,596,057
Shares redeemed (23,311,803) (13,733,982)
------------ ------------
Net increase (decrease) in net assets resulting
from capital share transactions (14,782,458) 96,542,186
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (18,264,367) 99,775,865
------------ ------------
NET ASSETS:
Beginning of period 135,211,247 35,435,382
------------ ------------
End of period
(includes undistributed
net investment income of
$11,026 and $59,234, respectively) $116,946,880 $135,211,247
------------ ------------
------------ ------------
See notes to financial statements.
Frontegra Investment Grade Bond Fund
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR YEAR PERIOD
DECEMBER 31, ENDED ENDED ENDED
2003 JUNE 30, JUNE 30, JUNE 30,
(UNAUDITED) 2003 2002 2001(1)<F16>
------------ -------- -------- -----------
NET ASSET VALUE,
BEGINNING OF PERIOD $10.62 $10.28 $10.02 $10.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income 0.17 0.35 0.35 0.18
Net realized and unrealized gain (loss)
on investments (0.04) 0.45 0.35 0.02
------ ------ ------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS 0.13 0.80 0.70 0.20
------ ------ ------ ------
LESS DISTRIBUTIONS PAID:
From net investment income (0.17) (0.35) (0.35) (0.18)
From net realized gain
on investments (0.25) (0.11) (0.09) --
------ ------ ------ ------
TOTAL DISTRIBUTIONS PAID (0.42) (0.46) (0.44) (0.18)
------ ------ ------ ------
NET ASSET VALUE,
END OF PERIOD $10.33 $10.62 $10.28 $10.02
------ ------ ------ ------
------ ------ ------ ------
TOTAL RETURN(2)<F17> 1.27% 7.93% 7.15% 1.98%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $116,947 $135,211 $35,435 $7,242
Ratio of expenses to
average net assets(3)<F18>(4)<F19> 0.42% 0.42% 0.37% 0.30%
Ratio of net investment
income to average
net assets(3)<F18>(4)<F19> 3.06% 3.78% 3.79% 5.21%
Portfolio turnover rate(2)<F17> 451% 625% 1,624% 212%
(1)<F16> Commenced operations on February 23, 2001.
(2)<F17> Not annualized for periods less than a full year.
(3)<F18> Net of waivers and reimbursements by Adviser. Without waivers and
reimbursements of expenses, the ratio of expenses to average net
assets would have been 0.61%, 0.62%, 1.02% and 2.64% and the ratio of
net investment income to average net assets would have been 2.87%,
3.58%, 3.14% and 2.87% for the periods ended December 31, 2003, June
30, 2003, June 30, 2002 and June 30, 2001, respectively.
(4)<F19> Annualized.
See notes to financial statements.
FRONTEGRA
IRONBRIDGE
SMALL CAP FUND
REPORT FROM IRONBRIDGE CAPITAL MANAGEMENT, LLC:
Since its inception on August 30, 2002, the Frontegra IronBridge Small Cap Fund
has returned 37.26% compared to 32.10% for the Russell 2000 Index, a proxy for
small stocks. Over the past six months, the Fund was up 17.11% but trailed the
Russell 2000 Index, which was up 24.92%. While our goal is to beat the Russell
2000 Index every year, a few of the Fund's largest holdings just could not keep
up with Russell 2000 Index during the last six months of the calendar year.
Additionally, a cash drag held the Fund back as it took profits in some fully
valued positions, our new buy ideas experienced price increases above our
preferred entry points and new assets came into the Fund in a rising market
environment.
During the period, small company stocks continued to outshine those of larger
market capitalization. Large companies, as measured by the S&P 500 Index,
increased "only" 15.14% for the six-month period. While many investors wonder
if the small-company winning streak can continue, our current research concludes
it is less obvious that the trend has sustainability going forward.
PORTFOLIO OUTLOOK AND STRATEGY
We remain optimistic for the prospects of the equity market. Nevertheless, as
we look at all of the components of wealth creation within the context of our
pricing equation, things look almost too good to be true. Cash flow return on
investments ("CFROI") are rising due to a synchronized global recovery. This is
the first recovery in twenty years that simultaneously includes Japan, Europe
and the United States. China is booming. Even the "old economy" manufacturing
companies are exhibiting improving CFROIs and have positive growth. Capital
spending is picking up, driven by low interest rates, profit growth and improved
balance sheets. CFROIs remain solid. The investors' discount rate remains low
due to low inflation and taxes. The environment is ripe for wealth creation.
The big question is whether all of the above good news is already discounted in
current stock prices; our valuation work concludes much of it is. Clearly,
expectations going into 2004 are very high. We expect to deliver more "normal
returns" of 300-400 basis points of excess return from our disciplined stock
picking process. We would be very happy with a 10% to 14% return in the next
calendar year.
There are certainly many risks to our rosy scenario that we will be monitoring.
The declining dollar could trigger some sort of crisis. Gold hitting new highs
foretells an increased risk of higher inflation. Clearly, something has got to
give in the next few quarters. Discount rates cannot remain low while gold and
other commodities remain at new highs indefinitely. Either gold and/or other
commodities will decline or remain stable as increased investment increases
supply, or the discount rate will begin to increase, making it difficult for
equities to advance. A bull market in both equities and commodities is
unsustainable. Another concern is the uncertainty surrounding the election.
Currently, the market is pricing a Bush victory, which we believe is a good bet.
Many Democratic front-runners want to roll back the Bush tax cuts. If elected
and successful in rolling back the tax cuts, we believe the market would fall
perhaps as much as 20%.
SUMMARY
Our investment time horizon is long-term. Thus, our current portfolio strategy
remains unchanged. IronBridge employs a disciplined investment process with an
emphasis on stock picking. We just keep looking for approximately 85 companies,
which are doing the right thing to create shareholder value, and are likely to
beat the expectations implied by their current share price. We diversify
industry and life cycle risk. The objective of our risk controls is to smooth
out volatility and to deliver consistent out-performance without taking on too
much risk. Perhaps the risk considerations of our process, which lowers
volatility, made it difficult for us to keep up with our soaring benchmark in
the past six months. However, in the past, our disciplined investment process
has served our clients well, and we are confident in our ability to deliver
solid results into the future.
Thank you for your continued support.
/s/ Christopher Faber
Christopher Faber
IronBridge Capital Management, LLC
INVESTMENT HIGHLIGHTS
Growth of a $100,000 Investment
Date Frontegra IronBridge Small Cap Fund Russell 2000 Index
---- ----------------------------------- ------------------
8/30/2002*<F20> $100,000 $100,000
9/30/2002 $95,200 $92,819
12/31/2002 $106,200 $98,534
3/31/2003 $104,500 $94,108
6/30/2003 $130,400 $116,152
9/30/2003 $136,000 $126,696
12/31/2003 $152,713 $145,095
*<F20> 8/30/02 commencement of operations.
Portfolio Total Return**<F21>
FOR THE PERIOD ENDED 12/31/03
ONE YEAR 43.80%
SINCE COMMENCEMENT
AVERAGE ANNUAL 37.26%
This chart assumes an initial gross investment of $100,000 made on 8/30/02
(commencement of operations). Returns shown include the reinvestment of all
distributions. Past performance is not predictive of future results. Investment
return and principal value will fluctuate so that shares, when redeemed, may be
worth more or less than the original cost. In the absence of existing fee
waivers, total return would be reduced.
The Russell 2000 Index measures the performance of the 2,000 smallest companies
in the Russell 3000 Index. The Russell 3000 Index measures the performance of
the 3,000 largest U.S. companies based on total market capitalization. The
Index does not reflect investment management fees, brokerage commissions and
other expenses associated with investing in equity securities.
**<F21> The returns shown do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund
shares.
Frontegra IronBridge Small Cap Fund
SCHEDULE OF INVESTMENTS
December 31, 2003 (Unaudited)
Number of Shares Value
- ---------------- -----
COMMON STOCKS 96.8%
Aerospace 2.5%
38,110 DRS Technologies, Inc.*<F22> $ 1,058,696
89,901 Herley Industries, Inc.*<F22> 1,860,951
------------
2,919,647
------------
Apparel Manufacturer 1.1%
37,180 Oxford Industries, Inc. 1,259,658
------------
Audio/Video Products 1.9%
22,830 Harman International Industries, Inc. 1,688,963
59,715 ParkerVision, Inc.*<F22> 584,610
------------
2,273,573
------------
Banks and Savings & Loans 11.6%
30,312 BOK Financial Corp.*<F22> 1,173,681
20,824 Cathay General Bancorp 1,159,480
12,110 Community Bank System, Inc. 593,390
49,603 Doral Financial Corp. 1,601,185
59,490 First BanCorp. 2,352,830
17,865 First Midwest Bancorp, Inc. 579,005
33,686 Pacific Capital Bancorp 1,240,319
50,455 R&G Financial Corp. - Class B 2,008,109
48,369 Texas Regional Bancshares, Inc. - Class A 1,789,653
37,840 United Bankshares, Inc. 1,180,608
------------
13,678,260
------------
Biomedical 2.6%
83,405 CryoLife, Inc.*<F22> 482,081
155,680 Interpore International, Inc.*<F22> 2,023,840
54,325 Maxygen Inc.*<F22> 577,475
------------
3,083,396
------------
Biotechnology 1.9%
24,475 Affymetrix, Inc.*<F22> 602,330
12,650 Celgene Corp.*<F22> 569,503
42,000 Cell Genesys, Inc.*<F22> 543,480
67,520 Exelixis, Inc.*<F22> 478,042
------------
2,193,355
------------
Broadcast Services 0.5%
21,320 4Kids Entertainment, Inc.*<F22> 554,746
------------
Chemicals 5.0%
52,800 Cabot Corp. 1,681,152
165,110 Methanex Corp. 1,854,185
112,415 Symyx Technologies, Inc.*<F22> 2,310,128
------------
5,845,465
------------
Computers & Software 8.6%
28,745 CACI International Inc. - Class A*<F22> 1,397,582
41,510 CheckFree Corp.*<F22> 1,147,752
258,310 Cray, Inc.*<F22> 2,565,018
107,768 DocuCorp International, Inc.*<F22> 1,093,845
54,960 Overland Storage, Inc.*<F22> 1,033,248
54,660 PC-Tel, Inc.*<F22> 579,943
46,245 Sybase, Inc.*<F22> 951,722
86,195 Synaptics Inc.*<F22> 1,291,201
------------
10,060,311
------------
E-Commerce 0.5%
97,745 Stamps.com Inc.*<F22> 606,019
------------
Electronic Components & Technology 5.4%
99,890 Applied Micro Circuits Corp.*<F22> 597,342
45,565 Cubic Corp. 1,047,995
134,175 KEMET Corp.*<F22> 1,836,856
78,915 Mentor Graphics Corp.*<F22> 1,147,424
92,065 OSI Systems, Inc.*<F22> 1,768,569
------------
6,398,186
------------
Energy 2.3%
118,010 Duquesne Light Holdings Inc. 2,164,303
30,360 Headwaters Inc.*<F22> 595,663
------------
2,759,966
------------
Financial 3.2%
31,745 A.G. Edwards, Inc. 1,150,121
30,370 Gabelli Asset Management Inc. - Class A 1,208,726
42,500 Jefferies Group, Inc. 1,403,350
------------
3,762,197
------------
Instruments of Measurement 4.5%
47,506 Analogic Corp. 1,947,746
61,670 BEI Technologies, Inc. 1,233,400
56,505 Trimble Navigation Ltd.*<F22> 2,104,246
------------
5,285,392
------------
Insurance 2.8%
37,405 Arthur J. Gallagher & Co. 1,215,288
53,222 Fidelity National Financial, Inc. 2,063,949
------------
3,279,237
------------
Medical Instruments 5.0%
77,645 Cholestech Corp.*<F22> 592,431
34,250 Cyberonics, Inc.*<F22> 1,096,343
86,322 Intuitive Surgical, Inc.*<F22> 1,475,243
34,580 Techne Corp.*<F22> 1,306,432
111,180 Thoratec Corp.*<F22> 1,446,452
------------
5,916,901
------------
Motion Pictures & Services 1.2%
61,905 Macrovision Corp.*<F22> 1,398,434
------------
Oil & Gas 7.3%
64,755 Cabot Oil & Gas Corp. 1,900,559
40,865 Energen Corp. 1,676,691
88,385 Frontier Oil Corp. 1,521,990
49,365 Nuevo Energy Co.*<F22> 1,193,152
21,990 Precision Drilling Corp.*<F22> 960,523
57,800 Southwestern Energy Co.*<F22> 1,381,420
------------
8,634,335
------------
Paper 1.0%
87,470 Wausau-Mosinee Paper Corp. 1,182,594
------------
Pharmaceuticals 0.9%
67,380 Perrigo Co. 1,059,214
------------
Power Conversion 0.5%
23,745 Advanced Energy Industries, Inc.*<F22> 618,557
------------
Real Estate Investment Trust 1.7%
93,850 Corporate Office Properties Trust 1,970,850
------------
Research & Development 1.6%
71,490 SFBC International, Inc.*<F22> 1,898,774
------------
Retailing & Restaurants 7.8%
18,165 Angelica Corp. 399,630
72,370 BJ's Wholesale Club, Inc.*<F22> 1,661,615
107,230 Blue Rhino Corp.*<F22> 1,489,425
70,800 Dillard's Inc. - Class A 1,165,368
135,265 Oakley, Inc. 1,872,068
57,125 Pacific Sunwear of California, Inc.*<F22> 1,206,480
43,065 Sharper Image Corp.*<F22> 1,406,072
------------
9,200,658
------------
Schools 1.2%
43,630 Education Management Corp.*<F22> 1,354,275
------------
Scientific Instruments 1.8%
49,685 Varian Inc.*<F22> 2,073,355
------------
Semiconductor Equipment 2.9%
23,590 Actel Corp.*<F22> 568,519
100,210 ANADIGICS, Inc.*<F22> 597,252
41,065 DuPont Photomasks, Inc.*<F22> 991,309
61,275 Photronics, Inc.*<F22> 1,220,598
------------
3,377,678
------------
Superconductor Equipment 1.1%
95,975 American Superconductor Corp.*<F22> 1,330,214
------------
Telecommunications 4.8%
112,079 Applied Signal Technology, Inc. 2,578,938
117,395 Newport Corp.*<F22> 1,940,539
29,060 UTStarcom, Inc.*<F22> 1,077,254
------------
5,596,731
------------
Toys 2.4%
106,115 Leapfrog Enterprises, Inc.*<F22> 2,815,231
------------
Transportation 1.2%
25,565 Teekay Shipping Corp. 1,457,972
------------
TOTAL COMMON STOCKS
(cost $97,080,231) 113,845,181
------------
Principal Amount
- ----------------
SHORT-TERM INVESTMENTS 2.3%
U.S. Government Agency 2.0%
$2,406,000 Federal Home Loan Bank
Discount Note, 1.03%, 1/02/04 2,405,970
------------
Variable Rate Demand Notes v<F23> 0.3%
152,543 American Family Financial Services Inc., 0.7609% 152,543
156,790 Wisconsin Corporate Central Credit Union, 0.7900% 156,790
------------
309,333
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $2,715,303) 2,715,303
------------
TOTAL INVESTMENTS 99.1%
(cost $99,795,534) 116,560,484
Other Assets, less Liabilities 0.9% 1,082,205
------------
NET ASSETS 100.0% $117,642,689
------------
------------
*<F22> Non-income producing
v<F23> Variable rate demand notes are considered short-term obligations and
are payable upon demand. Interest rates change periodically on
specified dates. The rates listed are as of December 31, 2003.
See notes to financial statements.
Frontegra IronBridge Small Cap Fund
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2003 (Unaudited)
ASSETS:
Investments at value (cost $99,795,534) $116,560,484
Cash 8,421
Interest and dividend receivable 91,938
Receivable for Fund shares sold 1,236,412
Other assets 28,481
------------
Total assets 117,925,736
------------
LIABILITIES:
Payable for investments purchased 180,635
Payable for Fund shares purchased 5,000
Accrued investment advisory fee 87,072
Accrued expenses 10,340
------------
Total liabilities 283,047
------------
NET ASSETS $117,642,689
------------
------------
NET ASSETS CONSIST OF:
Paid in capital $ 98,245,796
Undistributed net investment loss (117,008)
Undistributed net realized gain 2,748,951
Net unrealized appreciation on investments 16,764,950
------------
NET ASSETS $117,642,689
------------
------------
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000
Issued and outstanding 7,886,490
NET ASSET VALUE, REDEMPTION PRICE AND OFFERING PRICE PER SHARE $14.92
------
------
See notes to financial statements.
Frontegra IronBridge Small Cap Fund
STATEMENT OF OPERATIONS
SIX MONTHS ENDED
DECEMBER 31, 2003
(UNAUDITED)
-----------------
INVESTMENT INCOME:
Dividends(1)<F24> $ 390,794
Interest 21,543
-----------
412,337
-----------
EXPENSES:
Investment advisory fees 481,320
Fund administration and accounting fees 36,784
Custody fees 14,904
Federal and state registration fees 11,936
Shareholder servicing fees 8,794
Audit fees 7,241
Legal fees 6,698
Directors' fees and related expenses 3,155
Reports to shareholders 866
Other 548
-----------
Total expenses before waiver 572,246
Waiver of expenses by Adviser (42,794)
-----------
Net expenses 529,452
-----------
NET INVESTMENT LOSS (117,115)
-----------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments 4,931,719
Change in net unrealized
appreciation/depreciation on investments 11,075,157
-----------
NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS 16,006,876
-----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $15,889,761
-----------
-----------
(1)<F24> Net of $5,429 in foreign withholding taxes.
See notes to financial statements.
Frontegra IronBridge Small Cap Fund
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
DECEMBER 31, 2003 PERIOD ENDED
(UNAUDITED) JUNE 30, 2003(1)<F25> (2)<F26>
----------------- ------------------------------
OPERATIONS:
Net investment loss $ (117,115) $ (5,927)
Net realized gain on investments 4,931,719 424,389
Change in net unrealized
appreciation/ depreciation on investments 11,075,157 5,689,793
------------ -----------
Net increase in net assets
resulting from operations 15,889,761 6,108,255
------------ -----------
DISTRIBUTIONS
PAID FROM:
Net realized gain on investments (2,607,189) --
------------ -----------
Net decrease in net assets resulting
from distributions paid (2,607,189) --
------------ -----------
CAPITAL SHARE
TRANSACTIONS:
Shares sold 59,937,705 48,088,461
Shares issued to holders in
reinvestment of distributions 2,248,355 --
Shares redeemed (11,900,006) (122,653)
------------ -----------
Net increase in net assets resulting
from capital share transactions 50,286,054 47,965,808
------------ -----------
TOTAL INCREASE IN NET ASSETS 63,568,626 54,074,063
------------ -----------
NET ASSETS:
Beginning of period 54,074,063 --
------------ -----------
End of period
(includes undistributed
net investment income (loss) of
$(117,008) and $107, respectively) $117,642,689 $54,074,063
------------ -----------
------------ -----------
(1)<F25> Commenced operations on August 30, 2002.
(2)<F26> Formerly the Frontegra Horizon Fund for the period ended June 30,
2003.
See notes to financial statements.
Frontegra IronBridge Small Cap Fund
FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED PERIOD ENDED
DECEMBER 31, 2003 JUNE 30,
(UNAUDITED) 2003(1)<F27>(6)<F32>
----------------- --------------------
NET ASSET VALUE,
BEGINNING OF PERIOD $13.04 $10.00
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income (loss) (0.02) --(5)<F31>
Net realized and unrealized gain
on investments 2.24 3.04
------ ------
TOTAL INCOME FROM
INVESTMENT OPERATIONS 2.22 3.04
------ ------
LESS DISTRIBUTIONS PAID:
From net realized gain
on investments (0.34) --
------ ------
TOTAL DISTRIBUTIONS PAID (0.34) --
------ ------
NET ASSET VALUE,
END OF PERIOD $14.92 $13.04
------ ------
------ ------
TOTAL RETURN(2)<F28> 17.11% 30.40%
SUPPLEMENTAL DATA
AND RATIOS:
Net assets, end of period
(in thousands) $117,643 $54,074
Ratio of expenses to
average net assets(3)<F29>(4)<F30> 1.10% 1.10%
Ratio of net investment
loss to average
net assets(3)<F29>(4)<F30> (0.24)% (0.07)%
Portfolio turnover rate(2)<F28> 48% 28%
(1)<F27> Commenced operations on August 30, 2002.
(2)<F28> Not annualized for periods less than a full year.
(3)<F29> Net of waivers and reimbursements by Adviser. Without waivers and
reimbursements of expenses, the ratio of expenses to average net
assets would have been 1.19% and 2.15% and the ratio of net
investment loss to average net assets would have been (0.33)% and
(1.12)% for the periods ended December 31, 2003 and June 30, 2003,
respectively.
(4)<F30> Annualized.
(5)<F31> Less than one cent per share.
(6)<F32> Formerly the Frontegra Horizon Fund for the period ended June 30,
2003.
See notes to financial statements.
Frontegra Funds
NOTES TO FINANCIAL STATEMENTS
December 31, 2003 (Unaudited)
(1) ORGANIZATION
Frontegra Funds, Inc. ("Frontegra") was incorporated on May 24, 1996, as a
Maryland corporation and is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end investment company
issuing its shares in series, each series representing a distinct portfolio
with its own investment objectives and policies. Frontegra consists of
three series: the Frontegra Total Return Bond Fund, the Frontegra
Investment Grade Bond Fund and the Frontegra IronBridge Small Cap Fund
(formerly Frontegra Horizon Fund) (the "Funds"). The Frontegra Total Return
Bond and Investment Grade Bond Funds, sub-advised by Reams Asset Management
Company, LLC ("Reams"), commenced operations on November 25, 1996 and
February 23, 2001, respectively. The Frontegra IronBridge Small Cap Fund,
sub-advised by IronBridge Capital Management, LLC ("IronBridge"), commenced
operations on August 30, 2002.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
(a) Investment Valuation
Debt securities (other than short-term instruments) are valued at bid
prices furnished by a pricing service, unless actual sale prices are
available. Securities (other than short-term investments) for which
market quotations are readily available are valued at the last trade
price on the national securities exchange on which such securities are
primarily traded. Securities for which there were no transactions on
a given day or securities not listed on a national securities exchange
are valued at the most recent bid price. With respect to all Funds,
all equity securities that are traded using the National Association
of Securities Dealers' Automated Quotation System ("NASDAQ") are
valued using the NASDAQ Official Closing Price ("NOCP"). Securities
maturing within 60 days or less when purchased are valued by the
amortized cost method. Any securities for which market quotations are
not readily available are valued at their fair value as determined in
good faith by Reams and IronBridge, pursuant to guidelines established
by the Board of Directors.
(b) Federal Income Taxes
Each Fund intends to comply with the requirement of Subchapter M of
the Internal Revenue Code necessary to qualify as regulated investment
companies and to make the requisite distributions of income and
capital gains to its shareholders sufficient to relieve it from all or
substantially all federal income taxes. Therefore, no federal income
tax provision has been provided.
(c) Distributions to Shareholders
Dividends from net investment income are usually declared and paid
quarterly for the Frontegra Total Return Bond and Frontegra Investment
Grade Bond Funds and at least annually for the Frontegra IronBridge
Small Cap Fund. Distributions of net realized gains, if any, will be
declared and paid at least annually for all Funds. All short-term
capital gains are included in ordinary income for tax purposes.
Distributions to shareholders are recorded on the ex-dividend date.
The tax character of distributions paid during the six months ended
December 31, 2003 and the period ended June 30, 2003 were as follows:
SIX MONTHS ENDED PERIOD ENDED
DECEMBER 31, 2003 JUNE 30, 2003
--------------------------- ----------------------------
ORDINARY LONG-TERM ORDINARY LONG-TERM
INCOME CAPITAL GAINS INCOME CAPITAL GAINS
-------- ------------- -------- -------------
Frontegra Total
Return Bond Fund $16,857,950 $ 0 $24,310,788 $ 0
Frontegra Investment
Grade Bond Fund 4,473,373 210,341 5,274,240 17,352
Frontegra IronBridge
Small Cap Fund(1)<F33> 2,568,988 38,201 0 0
(1)<F33> Commenced operations on August 30, 2002.
Due to inherent differences in the recognition of income, expenses and
realized gains/losses under accounting principles generally accepted
in the United States of America and federal income tax purposes,
permanent differences between book and tax basis reporting have been
identified and appropriately reclassified on the Statements of Assets
and Liabilities.
As of December 31, 2003, the cost of investments and net unrealized
appreciation (depreciation) for income tax purposes were as follows:
FRONTEGRA FRONTEGRA
FRONTEGRA INVESTMENT IRONBRIDGE
TOTAL RETURN GRADE SMALL CAP
BOND FUND BOND FUND FUND
------------ --------- ----------
Cost of investments(a)<F34> $453,697,233 $147,587,409 $99,802,683
------------ ------------ -----------
Gross unrealized appreciation 5,004,426 936,148 18,804,872
Gross unrealized depreciation (2,158,498) (416,763) (2,047,071)
------------ ------------ -----------
Net unrealized appreciation $ 2,845,928 $ 519,385 $16,757,801
------------ ------------ -----------
------------ ------------ -----------
At June 30, 2003, undistributed ordinary income and undistributed
long-term capital gains for income tax purposes were as follows:
Undistributed ordinary income $ 11,034,171 $ 2,605,980 $ 431,677
Undistributed long-term capital gain -- 210,269 --
------------ ------------ -----------
Total distributable earnings $ 11,034,171 $ 2,816,249 $ 431,677
------------ ------------ -----------
------------ ------------ -----------
(a)<F34> Represents cost for federal income tax purposes and differs
from the cost for financial reporting purposes.
(d) When-Issued Securities
The Frontegra Total Return Bond and Investment Grade Bond Funds may
purchase securities on a when-issued basis. The price of securities
purchased on a when-issued basis is fixed at the time the commitment
to purchase is made, but delivery and payment for the securities take
place at a later date, normally within 45 days of the purchase. At the
time of purchase, the Funds will record the transaction and reflect
the value of the security and related liability in determining their
net asset value. During the period between the purchase and
settlement, no payment is made by the Funds to the issuer and no
interest is accrued. The Funds will maintain segregated cash, U.S.
government securities and liquid securities equal in value to
commitments for when-issued securities.
(e) Mortgage Dollar Rolls
The Frontegra Total Return Bond and Investment Grade Bond Funds may
enter into mortgage dollar rolls, in which a Fund would sell mortgage-
backed securities for delivery in the current month and simultaneously
contract to purchase substantially similar securities on a specified
future date. While a Fund would forego principal and interest paid on
the mortgage-backed securities during the roll period, it would be
compensated by the difference between the current sale price and the
lower price for the future purchase as well as by any interest earned
on the proceeds of the initial sale. A Fund also could be compensated
through the receipt of fee income equivalent to a lower forward price.
(f) Stock Index Options
Each Fund may purchase stock index options for any purpose, sell stock
index options in order to close out existing positions, and/or write
covered options on stock indexes for hedging purposes. Stock index
options are put options and call options on various stock indexes.
Upon the exercise of an index option, the option holder who exercises
the index option receives an amount of cash if the closing level of
the stock index upon which the option is based is greater than, in the
case of a call, or less than, in the case of a put, the exercise price
of the option. This amount of cash is equal to the difference between
the closing price of the stock index and the exercise price of the
option expressed in dollars times a specified multiple. Each Fund will
comply with the regulatory requirements of the SEC and the CFTC with
respect to coverage of options positions by registered investment
companies and, if the guidelines so require, will set aside cash
and/or other permissible liquid assets in a segregated custodial
account in the amount prescribed. Securities held in a segregated
account cannot be sold while the options position is outstanding,
unless replaced with other permissible assets, and will be marked-to-
market daily.
(g) Other
Investment transactions are accounted for on the trade date. The Funds
determine the gain or loss realized from investment transactions by
comparing the original cost of the security lot sold with the net sale
proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis. All
discounts/premiums are accreted/amortized and are included in interest
income.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States 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 increases and decreases in net assets from operations
during the reporting period. Actual results could differ from those
estimates.
(3) INVESTMENT ADVISER
Each of the Funds has entered into an agreement with Frontegra Asset
Management, Inc. (the "Adviser"), with whom certain officers and directors
of the Funds are affiliated, to furnish investment advisory services to the
Funds. The terms of these agreements are as follows:
The Frontegra Total Return Bond Fund will pay the Adviser a monthly fee at
the annual rate of 0.40% of the Fund's average daily net assets. Pursuant
to an expense cap agreement dated October 28, 2003, the Adviser agreed to
waive its management fee and/or reimburse the Fund's operating expenses
(exclusive of brokerage, interest, taxes and extraordinary expenses) to
ensure that the Fund's operating expenses do not exceed 0.425% of the
Fund's average daily net assets. This expense cap agreement will continue
in effect until October 31, 2004 with successive renewal terms of one year
unless terminated by the Adviser or the Fund prior to any such renewal.
The Frontegra Investment Grade Bond Fund will pay the Adviser a monthly fee
at the annual rate of 0.42% of the Fund's average daily net assets.
Pursuant to an expense cap agreement dated October 28, 2003, the Adviser
agreed to waive its management fee and/or reimburse the Fund's operating
expenses (exclusive of brokerage, interest, taxes and extraordinary
expenses) to ensure that the Fund's operating expenses do not exceed 0.42%
of the Fund's average daily net assets. This expense cap agreement will
continue in effect until October 31, 2004 with successive renewal terms of
one year unless terminated by the Adviser or the Fund prior to any such
renewal.
The Frontegra IronBridge Small Cap Fund will pay the Adviser a monthly fee
at the annual rate of 1.00% of the Fund's average daily net assets.
Pursuant to an expense cap agreement dated October 28, 2003, the Adviser
has agreed to waive its management fee and/or reimburse the Fund's
operating expenses (exclusive of brokerage, interest, taxes and
extraordinary expenses) to ensure that the Fund's operating expenses do not
exceed 1.10% of the Fund's average daily net assets. This expense cap
agreement will continue in effect until October 31, 2004 with successive
renewal terms of one year unless terminated by the Adviser or the Fund
prior to any such renewal.
Any waivers or reimbursements are subject to later adjustment to allow the
Adviser to recoup amounts waived or reimbursed to the extent actual fees
and expenses for a fiscal period are less than each Fund's expense
limitation cap, provided, however, that the Adviser shall only be entitled
to recoup such amounts for a period of three years from the date such
amount was waived or reimbursed.
The following table shows the remaining waived or reimbursed expenses
subject to potential recovery expiring in:
FRONTEGRA
FRONTEGRA FRONTEGRA IRONBRIDGE
TOTAL RETURN INVESTMENT GRADE SMALL CAP
BOND FUND BOND FUND FUND
------------ ---------------- ----------
2004 $181,420 $ 57,467 --
2005 $308,637 $132,621 --
2006 $271,055 $216,003 $83,634
2007 $136,027 $116,410 $42,794
(4) CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Frontegra Total Return Bond Fund were as
follows:
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2003 JUNE 30, 2003
----------------- -------------
Shares sold 158,352 1,598,327
Shares issued to holders in
reinvestment of distributions 521,131 774,555
Shares redeemed (379,656) (2,732,298)
-------- ----------
Net increase (decrease)
in shares outstanding 299,827 (359,416)
-------- ----------
-------- ----------
Transactions in shares of the Frontegra Investment Grade Bond Fund were as
follows:
SIX MONTHS ENDED YEAR ENDED
DECEMBER 31, 2003 JUNE 30, 2003
----------------- -------------
Shares sold 482,866 10,153,278
Shares issued to holders in
reinvestment of distributions 332,740 439,040
Shares redeemed (2,223,838) (1,309,884)
---------- ----------
Net increase (decrease)
in shares outstanding (1,408,232) 9,282,434
---------- ----------
---------- ----------
Transactions in shares of the Frontegra IronBridge Small Cap Fund were as
follows:
SIX MONTHS ENDED PERIOD ENDED
DECEMBER 31, 2003 JUNE 30, 2003(1)(2)
<F35><F36>
----------------- ---------------------
Shares sold 4,396,567 4,156,701
Shares issued to holders in
reinvestment of distributions 153,891 --
Shares redeemed (810,887) (9,782)
--------- ---------
Net increase in shares outstanding 3,739,571 4,146,919
--------- ---------
--------- ---------
(1)<F35> Commenced operations on August 30, 2002.
(2)<F36> Formerly the Frontegra Horizon Fund for the period ended June 30,
2003.
(5) INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government securities, for the Funds for the six
months ended December 31, 2003, are summarized below:
FRONTEGRA
FRONTEGRA FRONTEGRA IRONBRIDGE
TOTAL RETURN INVESTMENT GRADE SMALL CAP
BOND FUND BOND FUND FUND
------------ ---------------- ----------
Purchases $500,140,523 $174,993,245 $88,907,416
Sales $630,763,660 $217,820,510 $42,854,369
Purchases and sales of long-term U.S. government securities for the
Frontegra Total Return Bond Fund were $1,630,010,423 and $1,466,534,462,
respectively. Purchases and sales of long-term U.S. government securities
for the Frontegra Investment Grade Bond Fund were $374,185,996 and
$322,888,228, respectively.
There were no purchases or sales of long-term U.S. government securities
for the Frontegra IronBridge Small Cap Fund.
The Funds intend to utilize provisions of the federal income tax laws which
allow them to carry a realized capital loss forward for eight years
following the year of loss and offset such losses against any future
realized capital gains. At June 30, 2003 there were no capital loss
carryforwards for the Funds.
At June 30, 2003 the Frontegra Total Return Bond Fund had a post-October
loss of $844,458.
A NOTE ON FORWARD-LOOKING STATEMENTS
Except for historical information contained in this semi-annual report for the
Funds, the matters discussed in this report may constitute forward-looking
statements made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. These include any adviser, sub-adviser and/or
portfolio manager predictions, assessments, analyses or outlooks for individual
securities, industries, market sectors and/or markets. These statements involve
risks and uncertainties. In addition to the general risks described for the
Funds in the current Prospectuses, other factors bearing on these reports
include the accuracy of the adviser's, sub-advisers' or portfolio manager's
forecasts and predictions, and the appropriateness of the investment programs
designed by the adviser, sub-adviser or portfolio manager to implement their
strategies efficiently and effectively. Any one or more of these factors, as
well as other risks affecting the securities markets and investment instruments
generally, could cause the actual results of the Funds to differ materially as
compared to benchmarks associated with the Funds.
PROXY VOTING POLICIES AND PROCEDURES
Frontegra Funds has adopted proxy voting policies and procedures that delegate
to Frontegra Asset Management, Inc., the Funds' investment adviser (the
"Adviser"), the authority to vote proxies. The proxy voting policies permit the
Adviser to delegate its authority to vote proxies to each Fund's subadviser. A
description of the Frontegra Funds proxy voting policies and procedures is
available without charge, upon request, by calling the Funds toll free at 1-888-
825-2100. A description of these policies and procedures is also included in
the Funds' Statement of Additional Information, which is available on the SEC's
website at http://www.sec.gov.
ITEM 2. CODE OF ETHICS.
- -----------------------
Not applicable for semi-annual reports.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
- ----------------------------------------
Not applicable for semi-annual reports.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
- -----------------------------------------------
Not applicable for semi-annual reports.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
- ----------------------------------------------
Not applicable to open-end investment companies.
ITEM 6. [RESERVED]
- ------------------
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
- -------------------------------------------------------------------------
MANAGEMENT INVESTMENT COMPANIES.
- --------------------------------
Not applicable to open-end investment companies.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
- ---------------------------------------------------------------------------
COMPANY AND AFFILIATED PURCHASERS.
- ----------------------------------
Not applicable to open-end investment companies.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------------------------------------------------------------
Not applicable for periods ending before January 1, 2004.
ITEM 10. CONTROLS AND PROCEDURES.
- ---------------------------------
(a) Based on an evaluation of the Registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940 (the "Act")) as of a date within 90 days prior to the filing date of
this Form N-CSR, the Registrant's Co-Presidents and Treasurer have
concluded that the disclosure controls and procedures are effective.
(b) There were no changes in the Registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the Registrant's last fiscal half-year that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control
over financial reporting.
ITEM 11. EXHIBITS.
- -----------------
(a) (1) Not applicable.
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002. Filed herewith.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Frontegra Funds, Inc.
---------------------
By: /s/William D. Forsyth III
----------------------------------------------------
William D. Forsyth III, Co-President
(Principal Executive Officer)
Date March 1, 2004
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/Thomas J. Holmberg, Jr.
----------------------------------------------------
Thomas J. Holmberg, Jr., Co-President
(Principal Executive Officer)
Date March 1, 2004
----------------------------------
By: /s/William D. Forsyth III
----------------------------------------------------
William D. Forsyth III, Co-President and Treasurer
(Principal Executive and Financial Officer)
Date March 1, 2004
----------------------------------