FAQs

What is your investment philosophy?

Frontier is a value investor that specializes in stock and bond investments. In selecting equity investments, we search for attractive business from an operating and/or existing asset standpoint which we believe are trading below their true intrinsic value. In other words, we buy stocks at a price which, we believe, will protect the investor from long-term downside price movementsand offer attractive upside potential.

In selecting fixed income investments, we search for investments that are attractive on both a relative and absolute return basis, while maximizing the risk/return relationship with respect to yield and potential price movements. This is coupled with an analysis of both default risk (i.e. inability to meet obligation) and event risk (i.e. ratings downgrade), which can have a major impact on the capital gain potential of an investment.

This really centers on the various definitions of growth that have come fromWall Street with respect to value and growth. We feel that this delineation is often made where in fact it is unnecessary. Often the returns from so-called value and growth investment strategies are comparable - whether buying a low growth company at a "cheap" price or a high growth company at a "higher" price - it becomes a matter of the risk involved in each strategy. In this line of thought, we often find many value situations that have inherent growth characteristics; conversely we do not find many growth situations that exhibit inherent value characteristics. These risks are both market and company specific, and often we find this is where we tend to end up in the "low growth, cheap price" profile. We feel that if we can get to the ultimate destination - satisfactory investment returns - with a better risk profile, our clients are rewarded. These benefits are not obvious at every moment as reflected in current market prices, but over time will avail themselves.

How does Frontier find its investments?

To target equity investments, we use statistical databases into which 10,000+ companies report financial data in the form of annual and quarterly reports and into which over 6,000+ mutual funds report such data as performance and holdings. These databases provide the input for Frontier's quantitative analysis which identifies potential investment holdings. Investment decisions in the fixed income marketplace are the result of both in-house analytical work and the advantages created from actual market trading activity.
How do you know when to sell an investment?
It is often more difficult to know when to sell an investment in a business than when to buy an investment in a business. Frontier typically sells an investment for one or more of the following reasons:

• A price target is met. This triggers a review of the company to determine if the investment should be held or liquidated
• A better opportunity has been identified with a more attractive risk/return profile.
• The fundamentals of the business have changed and are no longer viewed attractive.

What market capitalization do you specialize in?

Frontier does not limit itself to any particular market capitalization. We believe this offers our clients the ability to hold attractive investments without limiting our efforts or the universe from which to choose. In fact, we often find attractive situations in areas that would be viewed by the "traditional brokerage community" as having more risk. This is because we focus on individual business fundamentals and not generalization of investments by defined "sectors," which can lead to missed opportunities for their clientele. For example, we have found that the so-called "risk" often associated with "small-cap" investment can often be mitigated by investing in specific small businesses that tend to exhibit the lower risks more often associated with larger capitalization stocks - "buying large cap business risk for small cap prices."

How do you define risk?

We define risk in the following three areas:

• Business risk - the viability of a business either on an ongoingor on a liquidation basis. With viability defined in terms of "profitability" and the factors that warrant profitability (i.e. ongoing - pricing power, market position, etc.) and liquidation (i.e. "hidden" assets, quality of assets, etc.). 
• Default risk - which is the ability of a business being able to continue and grow as a "going concern" through its ability to meet both contractual fixed obligations (i.e. interest, lease payments, etc.) and non-contractual obligations (i.e. plant capital expenditures, acquisitions, advertising expenditures, etc.).
• Investment Risk - which is the "price" we are being asked to pay to assume the above mentioned risks. This is the area where we can create a "margin of safety" by buying a business at a quoted "price," which is below its true (intrinsic) value. Often a "good" company can be a bad "stock" because of this risk.

Simply put, it is our goal to exceed your expectations by providing both responsive service and superior investment performance . We believe that we offer a better long term solution for our clientele with respect to:

• Accessibility,
• Peace of mind (professional management), and
• Providing perpetual management in the event of changes in the client's situation.

Other important benefits include:

• Frontier's compensation is based on assets under management, as opposed to transactions and commissions,which aligns the motivations of both the client and Frontier -- wealth creation
• Controlling investment activities with regard to restricted securities, and
• Managing investments from the perspective of tax implications.

How does Frontier set up my account?

Client accounts are opened at a third party custodian in the client's name (it is your account, not Frontier's). During this process the client gives Frontier authorization to direct trades, access account information, and direct funds only to the holder of the account -- you. All investment activity is based within the guidelines of the mutually agreed upon Statement of Investment Policy.

Upon opening an account with Frontier will my account be insured?

All accounts at Frontier use a third party custodian to custody client account assets. Through a third party custodian your account can be insured up to a market value of $100 million provided by Securities Investor Protection Corporation (SIPC) and additional insurance provided by private insurance. As an example, this means that your account would be covered up to $500,000 by SIPC (of which $100,000 in cash is covered) and $99.5 million in additional insurance. This insurance provides account protection in the event of insolvency of the custodian, it does not offer protection from market value fluctuations.

Is Frontier regulated by anybody?

Frontier Investment Management Co. is a registered investment advisory firm which is registered under the Investment Act of 1940. Ongoing regulation is administered by the Securities & Exchange Commission (SEC) and the Texas State Securities Board. This regulation takes the form of required reporting by Frontier to the appropriate regulatory agency and unannounced 'on-site' examinations administered by the SEC, at their discretion.

Will Frontier make all the investment decisions?

Our relationship with you will begin with a thorough analysis of your needs and objectives. Together we will establish a written Investment Policy for your portfolio. As your investment advisor, Frontier will have the authority to make investment decisions and trades for you within the established guidelines of this policy. Your involvement in the investment process will depend on your desire to do so.

What minimum amount is needed to open an account?

Typically an account size of $1,000,000 and above are best suited for our services. Special situations do occur and we review smaller account relationships on a case by case basis.

How does your fee structure work?

Our fees are based on a percentage of your assets and are computed on the market value of the account based on the prices of the last trading day of the preceding quarter. These fees are computed and billed quarterly.

Will I receive an account statement?

You will receive a monthly statement from the custodian of the assets that reflects the current assets in your account. You will also receive a quarterly performance report from Frontier that reflects changes in total account value, account returns (total, asset class, and asset specific), and account activity.

If my situation changes dramatically, can I access the assets in my account?

Yes, you always have access to the assets in your account. Keep in mind that market fluctuations will have an impact on the value of the investments in your account and that withdrawals could affect your account performance.


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