Frontier Funds filed 10-Q

Frontier Funds revealed 10-Q form on Wed, Aug 14 accessible here.

Purchasers of Units are limited owners of the Trust (‘Limited Owners’) with respect to beneficial interests of the Series’ Units purchased. The Trust Act provides that, except as otherwise provided in the second amended and restated declaration of trust and trust agreement dated December 9, 2013, as further amended, by and among the Managing Owner, Wilmington Trust Company as trustee and the unitholders, and may be amended from time to time (‘Trust Agreement’), unitholders of the Trust will have the same limitation of liability as do stockholders of private corporations organized under the General Corporation Law of the State of Delaware. The Trust Agreement confers substantially the same limited liability, and contains the same limited exceptions thereto, as would a limited partnership agreement for a Delaware limited partnership engaged in like transactions as the Trust. In addition, pursuant to the Trust Agreement, the Managing Owner of the Trust is liable for obligations of a Series in excess of that Series’ assets. Limited Owners do not have any such liability. The Managing Owner will make contributions to the Series of the Trust necessary to maintain at least a 1% interest in the aggregate capital, profits and losses of the combined Series of the Trust.

●all payments made to selling agents who are members of the Financial Industry Regulatory Authority, Inc. (‘FINRA’) and their associated persons that constitute underwriting compensation will be subject to the limitations set forth in Rule 2310(b)(4)(B)(ii) (formerly Rule 2810(b)(4)(B)(ii)) of the Conduct Rules of FINRA (‘Rule 2310’). An investor’s Class 1 Units or Class 2 Units of any Series, or Class 1a Units or Class 2a Units of the Frontier Long/Short Commodity Fund or Frontier Balanced Fund will be classified as Class 3 or Class 3a Units of such Series, as applicable, when the Managing Owner determines that the fee limitation set forth in Rule 2310 with respect to such Units has been reached or will be reached. The service fee limit applicable to each unit sold is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. No service fees are paid with respect to Class 3 or Class 3a Units. Units of any Class in a Series may be redeemed, in whole or in part, on a daily basis, at the then current NAV per Unit for such Series on the day of the week after the date the Managing Owner is in receipt of a redemption request for at least one (1) business day to be received by the Managing Owner prior to 4:00 PM in New York.

As of June 30, 2019, the Trust, with respect to the Frontier Diversified Fund and Frontier Masters Fund separates Units into three separate Classes—Class 1, Class 2, and Class 3. The Trust, with respect to the Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund separates Units into a maximum of three separate Classes—Class 1, Class 2 and Class 1AP. The Trust, with respect to the Frontier Balanced Fund separates Units into a maximum of five separate Classes—Class 1, Class 1AP, Class 2, Class 2A and Class 3A. The Trust, with respect to the Frontier Long/Short Commodity Fund separates Units into a maximum of five separate Classes—Class 1A, Class 2A, Class 2, Class 3A and Class 3. Between April 15, 2016 and May 10, 2017, a portion of the interests in Frontier Trading Company I, LLC and all of the interests in Frontier Trading Company VII, LLC, Frontier Trading Company XV, LLC, and Frontier Trading Company XXIII LLC held by Frontier Diversified Fund, Frontier Masters Fund, Frontier Select Fund, Frontier Balanced Fund and Frontier Long/Short Commodity Fund were exchanged for equivalent interests in the Galaxy Plus Managed Account Platform (‘Galaxy Plus’) which is an unaffiliated, third-party managed account platform. The assets of Frontier Trading Company I, LLC, which included exposure to Quantmetrics Capital Management LLP’s Multi-Strategy Program, Quantitative Investment Management, LLC’s Quantitative Global Program, Quest Partners LLC’s Quest Tracker Index Program, Chesapeake Capital Management, LLC’s Diversified Program, and Doherty Advisors LLC’s Relative Value Moderate Program, the assets of Frontier Trading Company VII, LLC, which included exposure to Emil van Essen LLC’s Multi-Strategy Program, Red Oak Commodity Advisors, Inc.’s Fundamental Diversified Program, Rosetta Capital Management, LLC’s Rosetta Trading Program, and Landmark Trading Company’s Landmark Program, the assets of Frontier Trading Company XV, LLC, which included exposure to Transtrend B.V.’s TT Enhanced Risk (USD) Program, and the assets of Frontier Trading Company XXIII, LLC which included exposure to Fort L.P.’s Global Contrarian Program have been transferred to individual Delaware limited liability companies (‘Master Funds’) in Galaxy Plus. Each Master Fund is sponsored and operated by Gemini Alternative Funds, LLC (‘Sponsor’). The Sponsor has contracted with the Trading Advisors to manage the portfolios of the Master Funds pursuant to the advisors’ respective program. For those Series that invest in Galaxy Plus, approximately 30-70% of those Series assets are used to support the margin requirements of the Master Funds. The remaining assets of the Series are split between investments in Trading Companies and a pooled cash management account that invests primarily in U.S. Treasury securities. For those Series that do not invest in Galaxy Plus, their assets are split between investments in Trading Companies and investments in the pooled cash management account.

Interest Income— U.S. Treasury Securities are pooled for purposes of maximizing returns on these assets to investors of all Series. Interest income from pooled cash management assets is recognized on the accrual basis and allocated daily to each Series based upon its daily proportion of ownership of the pool. Aggregate interest income from all sources, including U.S. Treasuries and assets held at a futures commission merchant (‘FCM’), of up to two percentage points of the aggregate percentage yield (annualized) of net asset value less any fair market value related to swaps, is paid to the Managing Owner by the Frontier Balanced Fund (Class 1, and Class 2 only), Frontier Long/Short Commodity Fund (Class 2 and Class 3), Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a and Class 3a), Frontier Masters Fund and Frontier Balanced Fund (Class 1AP, Class 2a and Class 3a), 100% of the interest is retained by the respective Series. All interest not paid to the Managing Owner is interest income to the Series and shown net on the statement of operations. The amount reflected in the financial statements of the Series are disclosed on a net basis. Due to some classes not exceeding the 2% paid to the Managing Owner, amounts earned by those Series may be zero.

In the opinion of the Managing Owner, (i) the Trust, with respect to the Series, is treated as a partnership for federal income tax purposes and, assuming that at least 90% of the gross income of the Trust constitutes ‘qualifying income’ within the meaning of Section 7704(d) of the Code, (ii) the Trust is not a publicly traded partnership treated as a corporation, and (iii) the discussion set forth in the Prospectus under the heading ‘U.S. Federal Income Tax Consequences’ correctly summarizes the material federal income tax consequences as of the date of the Prospectus to potential U.S. Limited Owners of the purchase, ownership and disposition of Units of the Trust.

Incentive Fee (rebate)—The Managing Owner is allowed to share in the incentive fees earned by the CTAs up to 10% of New Net Profits (as defined in the prospectus). If the Managing Owner’s share of the incentive fee exceeds 10% of new net profits during the period for a particular series, then the Managing Owner is obligated to return any amount in excess to the Series. The returned amounts are recorded as Incentive Fee (Rebate) on the Statements of Operations.

Service Fees—The Trust may maintain each Series of Units in three to seven sub-classes—Class 1, Class 1AP, Class 1a, Class 2, Class 2a, Class 3, and Class 3a. Investors who have purchased Class 1 or Class 1a Units of Frontier Diversified Fund, Frontier Masters Fund, and Frontier Long/Short Commodity Fund are charged a service fee of up to two percent (2.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to two percent (2.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to two percent (2.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. Investors who have purchased Class 1 or Class 1a Units of Frontier Balanced Fund, Frontier Heritage Fund, Frontier Select Fund, and Frontier Global Fund are charged a service fee of up to three percent (3.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to three percent (3.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to three percent (3.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. With respect to Class 2 and Class 2a Units of any Series, the Managing Owner pays an ongoing service fee to selling agents of up to one half percent (0.5%) annually of the NAV of each Class 2 or Class 2a Unit (of which 0.25% will be charged to Limited Owners holding Class 2 Units of the Frontier Diversified Fund and Frontier Masters Fund or Class 2a Units of the Frontier Long/Short Commodity Fund sold) until such Class 2 or Class 2a Units which are subject to the fee limitation are reclassified as Class 3 or Class 3a Units of the applicable Series for administrative purposes. Currently the service fee is not charged to Class 1AP investors. The Managing Owner may also pay selling agents certain additional fees and expenses for administrative and other services rendered and expenses incurred by such selling agents.

Swap Contracts. Certain Series of the Trust strategically invest a portion or all of their assets in total return swaps, selected at the direction of the Managing Owner. Swaps are privately negotiated contracts designed to provide investment returns linked to those produced by one or more investment products or indices. In a typical swap, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on one or more particular predetermined investments or instruments. The gross returns to be exchanged or ‘swapped’ between parties are calculated with respect to a ‘notional amount’ (i.e., the amount of value of the underlying asset used in computing the particular interest rate, return, or other amount to be exchanged) in a particular investment, or in a ‘basket’ of securities. Swap contracts are reported at fair value upon daily reports from the counterparty. In addition, a third party takes the inputs from the counterparty, makes certain adjustments, and runs it through their pricing model to come up with their daily price. The fair value measurements of the swap contracts are valued using unadjusted inputs that were not internally developed. The Managing Owner reviews and compares approved current day pricing of the CTA positions, as received from the counterparty which includes intra-day volatility and volume and daily index performance, in addition to reports from the administrator. Differences in prices exceeding 5% are investigated. Unexplainable differences are escalated to the Managing Owner’s Valuation Committee for evaluation and resolution. Swap contracts are reported at fair value using Level 3 inputs.

The Managing Owner follows a procedure in selecting well-established financial institutions which the Managing Owner, in its sole discretion, considers to be reputable, reliable, financially responsible and well established to act as swap counterparties. The procedure includes due diligence review of documentation on all new and existing financial institution counterparties prior to initiation of the relationship, and quarterly ongoing review during the relationship, to ensure that counterparties meet the Managing Owner’s minimum credit requirements, the counterparty average rating being no less than an investment grade rating as defined by the rating agencies. As of June 30, 2019, and December 31, 2018, approximately 2.0% and 1.6%, respectively, of the Trust’s assets were deposited with over-the-counter counterparties in order to initiate and maintain swaps and is recorded as collateral within the swap fair value within the statement of financial condition. The cash held with the counterparty is not restricted.

To help to reduce counterparty risk on the Series, the Managing Owner has the right to reduce the Series’ exposure and remove cash from the Series’ total return swaps with Deutsche Bank AG. This cash holding shall be in excess of $250,000 and may not exceed 40% of the Index exposure in total. Index exposure is defined as the total notional amount plus any profit. The Series are charged interest on this cash holding and any amount removed will be offset against the final settlement value of the swap. As of June 30, 2019, the Frontier Balanced Fund, the Frontier Diversified Fund, the Frontier Long/Short Commodity Fund and Frontier Heritage Fund, had $6,176,555, $4,000,000, $115,000, and $1,900,000, respectively, in cash holdings as shown in the Series’ Statements of Financial Conditions under advance on unrealized swap appreciation, which relates to the Trading Companies’ total return swaps with Deutsche Bank AG.

The Galaxy Plus structure is made up of feeder funds in which the Series invests and master trading entities into which the feeder funds invest. No investment held by a Galaxy Plus master trading entity is greater than 5% of any Series’ total capital.

The Managing Owner contributes funds to the Trust, with respect to the Series, in order to have a 1% interest (‘Minimum Purchase Commitment’) in the aggregate capital, profits and losses of all Series and in return will receive units designated as general units in the Series in which the Managing Owner invests such funds. The general units may only be purchased by the Managing Owner and may be subject to no management fees or management fees at reduced rates. Otherwise, the general units hold the same rights as the limited units. The Managing Owner will make contributions to the Series of the Trust necessary to maintain at least a 1% interest in the aggregate capital, profits and losses of the combined Series of the Trust. Such contribution was made by the Managing Owner before trading commenced for the Trust and will be maintained throughout the existence of the Trust, and the Managing Owner will make such purchases as are necessary to effect this requirement. Additionally, the Managing Owner agreed with certain regulatory bodies to maintain a 1% interest specifically in the Frontier Balanced Fund Class 1AP and 2a Units, aggregated, and each of the Frontier Long/Short Commodity Fund, Frontier Diversified Fund and Frontier Masters Fund. The 1% interest in these specific Series is included in computing the Minimum Purchase Commitment in aggregate capital. In addition to the general units the Managing Owner receives in respect of its Minimum Purchase Commitment, the Managing Owner may purchase limited units in any Series as a Limited Owner. Principals of the Managing Owner or affiliates are allowed to own beneficial interests in the Trust, with respect to the Series, as well. All Units purchased by the Managing Owner are held for investment purposes only and not for resale. The Managing Owner may make purchases or redemptions at any time on the same terms as any Limited Owner. The Trust has and will continue to have certain relationships with the Managing Owner and its affiliates.

Management Fees—Each Series of Units pays to the Managing Owner a monthly management fee equal to a percentage of the notional assets of such Series allocated to Trading Companies, calculated on a daily basis. The percentage basis of the fees varies and are in line with the amounts being disclosed below. In addition, the Managing Owner receives a monthly management fee equal to a certain percentage of the assets in the Galaxy Plus entities attributable to such Series’ (including notional assets), calculated on a monthly basis. The management fees attributable to Galaxy Plus entities are included in unrealized gain/(loss) on private investment companies on the Statements of Operations. The total amount of assets of a Series allocated to Trading Advisors and/or reference programs, including (i) actual funds deposited in accounts directed by the Trading Advisors or deposited as margin in respect of swaps or other derivative instruments referencing a reference program plus (ii) any notional equity allocated to the Trading Advisors and any reference programs, is referred to herein as the ‘notional assets’ of the Series. The annual rate of the management fee is: 0.5% for the Frontier Balanced Fund Class 1 and Class 2, 0.5% for the Frontier Balanced Fund Class 1AP, Class 2a and Class 3a, 2.0% for the Frontier Global Fund, Frontier Long/Short Commodity Fund Class 1a, Class 2a, and Class 3a and Frontier Masters Fund, 0.75% for Frontier Diversified Fund, 2.5% for the Frontier Heritage Fund and Frontier Select Fund, and 3.5% for the Frontier Long/Short Commodity Fund Class 2 and Class 3. The Managing Owner may pay all or a portion of such management fees to the Trading Advisor(s) and/or waive (up to the percentage specified) any such management fee to the extent any related management fee is paid by a trading company or estimated management fee is embedded in a swap or other derivative instrument. Any management fee embedded in a swap or other derivative instrument may be greater or less than the management fee that would otherwise be charged to the Series by the Managing Owner.

As of the date of this report, for a Series that has invested in a swap, a Trading Advisor does not receive any management fees directly from the Series for such swap, and instead the relevant Trading Advisor receives compensation via the fees embedded in the swap. As of June 30, 2019 and December 31, 2018, the management fee embedded in (i) swaps owned by Frontier Diversified Fund was 1.00% per annum, (ii) swaps owned by Frontier Balanced Fund was 1.00% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 1.50% per annum, (iv) swaps owned by Frontier Select Fund was 1.00% per annum, and (v) swaps owned by Frontier Heritage Fund was 1.00% per annum, and the Managing Owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee was accrued on the relevant notional amount of the swap.

Trading Fees— In connection with each Series’ trading activities the Frontier Balanced Fund, Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund pays to the Managing Owner an FCM fee of up to 2.25% per annum of notional assets allocated to the trading advisors, including through investments in commodity pools available on the Galaxy Plus Platform, and any reference programs of the applicable Series. The Frontier Diversified Fund, Frontier Long/Short Commodity Fund and Frontier Masters Fund pays to the Managing Owner an FCM fee of up to 2.25% of notional assets allocated to the trading advisors, including through investments in commodity pools available on the Galaxy Plus Platform, and a custodial/due diligence fee of 0.12% of such Series’ NAV, calculated daily.

Incentive Fees—Some Series pay to the Managing Owner an incentive fee of a certain percentage of new net trading profits generated in the Trading Companies by such Series, monthly or quarterly. In addition, the Managing Owner receives a quarterly incentive fee of a certain percentage of new net trading profits generated in the Galaxy Plus entities that have been allocated to the Series. The incentive fees attributable to Galaxy Plus entities are included in unrealized gain/(loss) on private investment companies on the Statements of Operations. Because the Frontier Diversified Fund, Frontier Masters Fund, Frontier Balanced Fund, Frontier Heritage Fund, Frontier Select Fund, and Frontier Long/Short Commodity Fund may each employ multiple Trading Advisors, these Series will pay the Managing Owner a monthly incentive fee calculated on a Trading Advisor by Trading Advisor basis. It is therefore possible that in any given period the Series may pay incentive fees to the Managing Owner for one or more Trading Advisors while each of these Series as a whole experiences losses. The incentive fee is 25% for the Frontier Balanced Fund and the Frontier Diversified Fund and 20% for the Frontier Global Fund, Frontier Heritage Fund, Frontier Select Fund, Frontier Long/Short Commodity Fund and Frontier Masters Fund. The Managing Owner may pay all or a portion of such incentive fees to the Trading Advisor(s) for such Series. As of the date of this report, for a Series that has invested in a swap, the Managing Owner or Trading Advisor(s) do not receive any incentive fees directly from the Series for such swap, and instead the relevant Trading Advisor receives compensation via the fees embedded in the swap. As of June 30, 2019 and December 31, 2018, the range of incentive fees as a percentage of net new trading profits on swaps embedded in (i) swaps owned by Frontier Diversified Fund was 20-25% per annum, (ii) swaps owned by Frontier Balanced Fund was 20-25% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 25% per annum, and (iv) swaps owned by Frontier Heritage Fund was 15% per annum, and the Managing Owner has waived the entire incentive fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded incentive fee was accrued based on the net new trading profits of the swap.

Service Fees— Investors who have purchased Class 1 or Class 1a Units of Frontier Diversified Fund, Frontier Masters Fund, and Frontier Long/Short Commodity Fund are charged a service fee of up to two percent (2.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to two percent (2.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to two percent (2.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. Investors who have purchased Class 1 or Class 1a Units of Frontier Balanced Fund, Frontier Heritage Fund, Frontier Select Fund, and Frontier Global Fund are charged a service fee of up to three percent (3.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to three percent (3.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to three percent (3.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. With respect to Class 2 and Class 2a Units of any Series, the Managing Owner pays an ongoing service fee to selling agents of up to one half percent (0.5%) annually of the NAV of each Class 2 or Class 2a Unit (of which 0.25% will be charged to Limited Owners holding Class 2 Units of the Frontier Diversified Fund and Frontier Masters Fund or Class 2a Units of the Frontier Long/Short Commodity Fund sold) until such Class 2 or Class 2a Units which are subject to the fee limitation are reclassified as Class 3 or Class 3a Units of the applicable Series for administrative purposes. Currently the service fee is not charged to Class 1AP investors. The Managing Owner may also pay selling agents certain additional fees and expenses for administrative and other services rendered and expenses incurred by such selling agents.

Aggregate interest income from all sources, including U.S. Treasury Securities assets net of premiums and cash held at clearing brokers, of up to the first 2% (annualized) of average net assets less any fair market value related to swaps is paid to the Managing Owner by the Frontier Balanced Fund (Class 1 and Class 2), Frontier Long/Short Commodity Fund (Class 2 and Class 3), Frontier Global Fund, Frontier Select Fund, and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a, and Class 3a only), Frontier Masters Fund, and Frontier Balanced Fund (Class 1AP, Class 2a and Class 3a) 100% of the interest is retained by the respective Series.

The Series’ primary business is to engage in speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), options contracts and other derivative instruments (including swap contracts). The Series do not enter into or hold positions for hedging purposes as defined under ASC 815, Derivatives and Hedging (‘ASC 815′). The detail of the fair value of the Series’ derivatives by instrument types as of June 30, 2019 and December 31, 2018 is included in the Condensed Schedules of Investments. See Note 4 for further disclosure related to each Series’ position in swap contracts. As further described in Note 6 above, there are management fees embedded in these swaps ranging from 1% to 1.5% accrued on the relevant notional amount of the swap and incentive fees embedded in these swaps ranging from 15% to 25% accrued based on the net new trading profits of the swaps.

The term ‘off-balance sheet risk’ refers to an unrecorded potential liability that, even though it does not appear on the statements of financial condition, may result in future obligation or loss in excess of the amount paid by the Series for a particular investment. Each Trading Company expects to trade in futures, options, forward and swap contracts and will therefore be a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, there exists a market risk that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures positions held by a Trading Company or Galaxy Plus entity in respect of any Series at the same time, and if the Trading Advisor(s) of such Trading Company or Galaxy Plus entity are unable to offset such futures interests positions, such Trading Company or Galaxy Plus entity could lose all of its assets and the holders of Units of such Series would realize a 100% loss. The Managing Owner will seek to minimize market risk through real-time monitoring of open positions and the level of diversification of each Trading Advisor’s portfolio. It is anticipated that any Trading Advisor’s margin-to-equity ratio will typically not exceed approximately 35% although the actual ratio could be higher or lower from time to time.

Purchasers of Units are Limited Owners of the Trust with respect to beneficial interests of the Series’ Units purchased. The Trust Act provides that, except as otherwise provided in the second amended and restated declaration of trust and trust agreement dated December 9, 2013, as further amended, by and among the Managing Owner, Wilmington Trust Company as trustee and the unitholders, as amended from time to time (the ‘Trust Agreement’), unitholders of the Trust will have the same limitation of liability as do stockholders of private corporations organized under the General Corporation Law of the State of Delaware. The Trust Agreement confers substantially the same limited liability, and contains the same limited exceptions thereto, as would a limited partnership agreement for a Delaware limited partnership engaged in like transactions as the Trust. In addition, pursuant to the Trust Agreement, the Managing Owner of the Trust is liable for obligations of a Series in excess of that Series’ assets. Limited Owners do not have any such liability. The Managing Owner will make contributions to the Series of the Trust necessary to maintain at least a 1% interest in the aggregate capital, profits and losses of all Series.

● all payments made to selling agents who are members of the Financial Industry Regulatory Authority, Inc. (‘FINRA’) and their associated persons that constitute underwriting compensation will be subject to the limitations set forth in Rule 2310(b)(4)(B)(ii) (formerly Rule 2810(b)(4)(B)(ii)) of the Conduct Rules of FINRA (‘Rule 2310’). An investor’s Class 1 Units or Class 2 Units of any Series, or Class 1a Units or Class 2a Units of the Frontier Long/Short Commodity Fund or Frontier Balanced Fund will be classified as Class 3 or Class 3a Units of such Series, as applicable, when the Managing Owner determines that the fee limitation set forth in Rule 2310 with respect to such Units has been reached or will be reached. The service fee limit applicable to each unit sold is reached upon the earlier of when (i) the aggregate initial and ongoing service fees received by the selling agent with respect to such unit equals 9% of the purchase price of such unit or (ii) the aggregate underwriting compensation (determined in accordance with FINRA Rule 2310) paid in respect of such unit totals 10% of the purchase price of such unit. No service fees are paid with respect to Class 3 or Class 3a Units. Units of any Class in a Series may be redeemed, in whole or in part, on a daily basis, at the then current NAV per Unit for such Series on the day of the week after the date the Managing Owner is in receipt of a redemption request for at least one (1) business day to be received by the Managing Owner prior to 4:00 PM in New York.

As of June 30, 2019, the Trust, with respect to the Frontier Diversified Fund and Frontier Masters Fund, separates Units into three separate Classes—Class 1, Class 2, and Class 3. The Trust, with respect to the Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund separates Units into a maximum of three separate Classes – Class 1, Class 2 and Class 1AP. The Trust, with respect to the Frontier Balanced Fund separates Units into a maximum of five separate Classes— Class 1, Class 1AP, Class 2, Class 2A and Class 3A. The Trust, with respect to the Frontier Long/Short Commodity Fund separates Units into a maximum of five separate Classes— Class 1A, Class 2A, Class 2, Class 3A and Class 3. Between April 15, 2016 and May 10, 2017, a portion of the interests in Frontier Trading Company I, LLC and all of the interests in Frontier Trading Company VII, LLC, Frontier Trading Company XV, LLC, and Frontier Trading Company XXIII LLC held by Frontier Diversified Fund, Frontier Masters Fund, Frontier Select Fund, Frontier Balanced Fund and Frontier Long/Short Commodity Fund were exchanged for equivalent interests in the Galaxy Plus Managed Account Platform (‘Galaxy Plus’) which is an unaffiliated, third-party managed account platform. The assets of Frontier Trading Company I, LLC, which included exposure to Quantmetrics Capital Management LLP’s Multi-Strategy Program, Quantitative Investment Management, LLC’s Quantitative Global Program, Quest Partners LLC’s Quest Tracker Index Program, Chesapeake Capital Management, LLC’s Diversified Program, and Doherty Advisors LLC’s Relative Value Moderate Program, the assets of Frontier Trading Company VII, LLC, which included exposure to Emil van Essen LLC’s Multi-Strategy Program, Red Oak Commodity Advisors, Inc.’s Fundamental Diversified Program, Rosetta Capital Management, LLC’s Rosetta Trading Program, and Landmark Trading Company’s Landmark Program, the assets of Frontier Trading Company XV, LLC, which included exposure to Transtrend B.V.’s TT Enhanced Risk (USD) Program, and the assets of Frontier Trading Company XXIII, LLC which included exposure to Fort L.P.’s Global Contrarian Program have been transferred to individual Delaware limited liability companies (‘Master Funds’) in Galaxy Plus. Each Master Fund is sponsored and operated by Gemini Alternative Funds, LLC (‘Sponsor’). The Sponsor has contracted with the Trading Advisors to manage the portfolios of the Master Funds pursuant to the advisors’ respective program. For those Series that invest in Galaxy Plus, approximately 30-70% of those Series assets are used to support the margin requirements of the Master Funds. The remaining assets of the Series are split between investments in Trading Companies and a pooled cash management account that invests primarily in U.S. Treasury securities. For those Series that do not invest in Galaxy Plus, their assets are split between investments in Trading Companies and investments in the pooled cash management account.

Interest Income—U.S. Treasury Securities are pooled for purposes of maximizing returns on these assets to investors of all Series. Interest income from pooled cash management assets is recognized on the accrual basis and allocated daily to each Series based upon its daily proportion of ownership of the pool. Aggregate interest income from all sources, including U.S. Treasuries and assets held at a futures commission merchant (‘FCM’), of up to two percentage points of the aggregate percentage yield (annualized) of net asset value less any fair market value related to swaps, is paid to the Managing Owner by the Frontier Balanced Fund (Class 1, and Class 2 only), Frontier Long/Short Commodity Fund (Class 2 and Class 3), Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a and Class 3a), Frontier Masters Fund and Frontier Balanced Fund (Class 1AP, Class 2a and Class 3a), 100% of the interest is retained by the respective Series. All interest not paid to the Managing Owner is interest income to the Series, and shown net on the statement of operations.

In the opinion of the Managing Owner, (i) the Trust is treated as a partnership for Federal income tax purposes and, assuming that at least 90% of the gross income of the Trust constitutes ‘qualifying income’ within the meaning of Section 7704(d) of the Code, (ii) the Trust is not a publicly traded partnership treated as a corporation, and (iii) the discussion set forth in the Prospectus under the heading ‘U.S. Federal Income Tax Consequences’ correctly summarizes the material Federal income tax consequences as of the date of the Prospectus to potential U.S. Limited Owners of the purchase, ownership and disposition of Series Units of the Trust.

Incentive Fee (rebate)—The Managing Owner is allowed to share in the incentive fees earned by the Commodity Trading Advisors up to 10% of New Net Profits (as defined in the prospectus). If the Managing Owner’s share of the incentive fee exceeds 10% of new net profits during the period, then the Managing Owner is obligated to return any amount in excess. The returned amounts are recorded as Incentive Fee (Rebate) on the Consolidated Statements of Operations.

Service Fees—The Trust may maintain each Series of Units in three to seven sub-classes—Class 1, Class 1AP, Class 1a, Class 2, Class 2a, Class 3, and Class 3a. Investors who have purchased Class 1 or Class 1a Units of Frontier Diversified Fund, Frontier Masters Fund, and Frontier Long/Short Commodity Fund are charged a service fee of up to two percent (2.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to two percent (2.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to two percent (2.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. Investors who have purchased Class 1 or Class 1a Units of Frontier Balanced Fund, Frontier Heritage Fund, Frontier Select Fund, and Frontier Global Fund are charged a service fee of up to three percent (3.0%) annually of the NAV (of the purchase price, in case of the initial service fee) of each Unit purchased, for the benefit of selling agents selling such Class 1 or Class 1a Units. The initial service fee, which is amortized monthly at an annual rate of up to three percent (3.0%) of the average daily NAV of Class 1 or Class 1a of such Series, is prepaid to the Managing Owner by each Series, and paid to the selling agents by the Managing Owner in the month following sale; provided, however, that investors who redeem all or a portion of their Class 1 and Class 1a Units of any Series during the first twelve (12) months following the effective date of their purchase are subject to a redemption fee of up to three percent (3.0%) of the purchase price at which such investor redeemed to reimburse the Managing Owner for the then-unamortized balance of the prepaid initial service fee. With respect to Class 2 and Class 2a Units of any Series, the Managing Owner pays an ongoing service fee to selling agents of up to one half percent (0.5%) annually of the NAV of each Class 2 or Class 2a Unit (of which 0.25% will be charged to Limited Owners holding Class 2 Units of the Frontier Diversified Fund and Frontier Masters Fund or Class 2a Units of the Frontier Long/Short Commodity Fund sold) until such Class 2 or Class 2a Units which are subject to the fee limitation are reclassified as Class 3 or Class 3a Units of the applicable Series for administrative purposes. Currently the service fee is not charged to Class 1AP investors. The Managing Owner may also pay selling agents certain additional fees and expenses for administrative and other services rendered and expenses incurred by such Selling agents.

Swap Contracts. Certain Series of the Trust strategically invest a portion or all of their assets in total return swaps, selected at the direction of the Managing Owner. Swaps are privately negotiated contracts designed to provide investment returns linked to those produced by one or more investment products or indices. In a typical swap, two parties agree to exchange the returns (or differentials in rates of return) earned or realized on one or more particular predetermined investments or instruments. The gross returns to be exchanged or ‘swapped’ between parties are calculated with respect to a ‘notional amount’ (i.e., the amount of value of the underlying asset used in computing the particular interest rate, return, or other amount to be exchanged) in a particular investment, or in a ‘basket’ of securities. Swap contracts are reported at fair value upon daily reports from the counterparty. In addition, a third party takes the inputs from the counterparty, makes certain adjustments, and runs it through their pricing model to come up with their daily price. The fair value measurements of the swap contracts are valued using unadjusted inputs that were not internally developed. The Managing Owner reviews and compares approved current day pricing of the CTA positions, as received from the counterparty which includes intra-day volatility and volume and daily index performance, in addition to reports from the administrator. Differences in prices exceeding 5% are investigated. Unexplainable differences are escalated to the Managing Owner’s Valuation Committee for evaluation and resolution. The Swap Contracts are reported at fair value using Level 3 inputs.

The Managing Owner follows a procedure in selecting well-established financial institutions which the Managing Owner, in its sole discretion, considers to be reputable, reliable, financially responsible and well established to act as swap counterparties. The procedure includes due diligence review of documentation on all new and existing financial institution counterparties prior to initiation of the relationship, and quarterly ongoing review during the relationship, to ensure that counterparties meet the Managing Owner’s minimum credit requirements, the counterparty average rating being no less than an investment grade rating as defined by the rating agencies. As of June 30, 2019 and December 31, 2018, approximately 2.06% or $1,177,400 and 1.46% or $1,180,900 respectively, of the Trust’s assets were deposited with over-the-counter counterparties in order to initiate and maintain swaps and is recorded as Swap Contracts, at fair value on the Consolidated Statements of Financial Condition of the Trust. This cash held with the counterparty is not restricted.

The Galaxy Plus structure is made up of feeder funds in which the Trust invests and master trading entities into which the feeder funds invest. No investment held by a Galaxy Plus master trading entity is greater than 5% of the Trust’s total capital.

The Managing Owner contributes funds to the Trust in order to have a 1% interest in the aggregate capital, profits and losses and in return will receive units designated as general units in the Series of the Trust in which the Managing Owner invests such funds. The general units may only be purchased by the Managing Owner and may be subject to no advisory fees or management advisory fees at reduced rates. Otherwise, the general units hold the same rights as the limited units. The Managing Owner is required to maintain at least a 1% interest (‘Minimum Purchase Commitment’) in the aggregate capital, profits and losses of the Trust so long as it is acting as the Managing Owner of the Trust. Such contribution was made by the Managing Owner before trading commenced for the Trust and will be maintained throughout the existence of the Trust, and the Managing Owner will make such purchases as are necessary to effect this requirement. Additionally, the Managing Owner agreed with certain regulatory bodies to maintain a 1% interest specifically in the Frontier Balanced Fund Class 1AP Units and Frontier Balanced Fund Class 2a Units, aggregated, and each of the Frontier Long/Short Commodity Fund, Frontier Diversified Fund, and Frontier Masters Fund. The 1% interest in these specific Series of the Trust is included in computing the Minimum Purchase Commitment in aggregate capital. In addition to the general units the Managing Owner receives in respect of its Minimum Purchase Commitment, the Managing Owner may purchase limited units in any Series as a Limited Owner. Principals of the Managing Owner or affiliates are allowed to own beneficial interests in the Trust, as well. All units purchased by the Managing Owner are held for investment purposes only and not for resale. The Managing Owner may make purchases or redemptions at any time on the same terms as any Limited Owner. The Trust has and will continue to have certain relationships with the Managing Owner and its affiliates.

Management Fees—Each Series of Units pays to the Managing Owner a monthly management fee equal to a percentage of the notional assets of such Series allocated to Trading Companies, calculated on a daily basis. The percentage basis of the fees varies and are in line with the amounts being disclosed below. In addition, the Managing Owner receives a monthly management equal to a certain percentage of the assets in the Galaxy Plus entities attributable to such Series’ (including notional assets), calculated on a monthly basis. The management fees attributable to Galaxy Plus entities are included in unrealized gain/(loss) on private investment companies on the Consolidated Statements of Operations. The total amount of assets of a Series allocated to Trading Advisors and/or reference programs, including (i) actual funds deposited in accounts directed by the Trading Advisors or deposited as margin in respect of swaps or other derivative instruments referencing a reference program plus (ii) any notional equity allocated to the Trading Advisors and any reference programs, is referred to herein as the ‘notional assets’ of the Series. The annual rate of the management fee is: 0.5% for the Frontier Balanced Fund Class 1 and Class 2, 1.0% for the Frontier Balanced Fund Class 1AP, Class 2a and Class 3a, 2.0% for the Frontier Global Fund, Frontier Long/Short Commodity Fund Class 1a, Class 2a and Class 3a and Frontier Masters Fund, 0.75% for Frontier Diversified Fund, 2.5% for the Frontier Heritage Fund and Frontier Select Fund, and 3.5% for the Frontier Long/Short Commodity Fund Class 2 and Class 3. The Managing Owner may pay all or a portion of such management fees to the Trading Advisor(s) and/or waive (up to the percentage specified) any such management fee to the extent any related management fee is paid by a trading company or estimated management fee is embedded in a swap or other derivative instrument. Any management fee embedded in a swap or other derivative instrument may be greater or less than the management fee that would otherwise be charged to the Series by the Managing Owner. As of the date of this report, for a Series that has invested in a swap, the Managing Owner or Trading Advisor(s) do not receive any management fees directly from the Series for such swap, and instead the relevant Trading Advisor receives compensation via the fees embedded in the swap. As of June 30, 2019 and December 31, 2018, the range of management fees embedded based on fair value of swaps in (i) swaps owned by Frontier Diversified Fund was 1.00% per annum, (ii) swaps owned by Frontier Balanced Fund was 1.00% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 1.50% per annum, and (iv) swaps owned by Frontier Heritage Fund was 1.00% per annum, and the Managing Owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee was accrued on the relevant notional amount of the swap.

Trading Fees— In connection with each Series’ trading activities the Frontier Balanced Fund, Frontier Select Fund, Frontier Global Fund and Frontier Heritage Fund pays to the Managing Owner an FCM fee of up to 2.25% per annum of notional assets allocated to the trading advisors, including through investments in commodity pools available on the Galaxy Plus Platform, and any reference programs of the applicable Series. The Frontier Diversified Fund, Frontier Long/Short Commodity Fund and Frontier Masters Fund pays to the Managing Owner an FCM fee of up to 2.25% of notional assets allocated to the trading advisors, including through investments in commodity pools available on the Galaxy Plus Platform, and a custodial/due diligence fee of 0.12% of such Series’ NAV, calculated daily.

Incentive Fees— Some Series pay to the Managing Owner an incentive fee of a certain percentage of new net trading profits generated in the Trading Companies by such Series, monthly or quarterly. In addition, the Managing Owner receives a quarterly incentive fee of a certain percentage of new net trading profits generated in the Galaxy Plus entities that have been allocated to the Series. The incentive fees attributable to Galaxy Plus entities are included in unrealized gain/(loss) on private investment companies on the Consolidated Statements of Operations. Because the Frontier Balanced Fund, Frontier Diversified Fund, Frontier Masters Fund, Frontier Heritage Fund, Frontier Select Fund, and Frontier Long/Short Commodity Fund may each employ multiple Trading Advisors, these Series will pay the Managing Owner a monthly incentive fee calculated on a Trading Advisor by Trading Advisor basis. It is therefore possible that in any given period the Series may pay incentive fees to the Managing Owner for one or more Trading Advisors while each of these Series as a whole experiences losses. The incentive fee is 25% for the Frontier Balanced Fund and the Frontier Diversified Fund and 20% for the Frontier Global Fund, Frontier Heritage Fund, Frontier Select Fund, Frontier Long/Short Commodity Fund and Frontier Masters Fund. The Managing Owner may pay all or a portion of such incentive fees to the Trading Advisor(s) for such Series. As of the date of this report, for a Series that has invested in a swap, the Managing Owner or Trading Advisor(s) do not receive any incentive fees directly from the Series for such swap, and instead the relevant Trading Advisor receives compensation via the fees embedded in the swap. As of June 30, 2019, the range of incentive fees as a percentage of net new trading profits on swaps embedded in (i) swaps owned by Frontier Diversified Fund was 20-25% per annum, (ii) swaps owned by Frontier Balanced Fund was 20-25% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 25% per annum, and (iv) swaps owned by Frontier Heritage Fund was 15% per annum, and the Managing Owner has waived the entire incentive fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded incentive fee was accrued based on the net new trading profits of the swap.

Service Fees—In addition, with respect to Class 1 and Class 1a Units of each Series of the Trust, as applicable, the Series pays monthly or quarterly to the Managing Owner a service fee of up to 3% and 2% annually, for the closed Series and open Series, respectively, which the Managing Owner pays to selling agents of the Trust. With respect to Class 2 Units of each Series of the Trust, as applicable, the Series pays monthly or quarterly to the Managing Owner a service fee of up to 0.25% annually, for the closed Series and open Series, respectively, which the Managing Owner pays to selling agents of the Trust.

Aggregate interest income from all sources, including U.S. Treasury Securities assets net of premiums and cash held at clearing brokers, of up to the first 2% (annualized) is paid to the Managing Owner by the Frontier Balanced Fund (Class 1 and Class 2 only), Frontier Long/Short Commodity Fund (Class 2 and Class 3), Frontier Global Fund, Frontier Select Fund, and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a, Class 3a only), Frontier Masters Fund, and Frontier Balanced Fund (Class 1AP, Class 2a, Class 3a only) 100% of the interest is retained by the respective Series. During the three months ended June 30, 2019 and 2018, the Trust paid $8,299 and $55,400, respectively, of such interest income to the Managing Owner. Such amounts are not included in the Consolidated Statement of Operations of the Trust. All other interest income is recorded by the Trust on the Consolidated Statement of Operations.

The Trust’s primary business is to engage in speculative trading of a diversified portfolio of futures, forwards (including interbank foreign currencies), options contracts and other derivative instruments (including swap contracts). The Trust does not enter into or hold positions for hedging purposes as defined under ASC 815. The detail of the fair value of the Trust’s derivatives by instrument types as of June 30, 2019 and December 31, 2018 is included in the Consolidated Condensed Schedules of Investments. See Note 4 for further disclosure related to the Trust’s positions in swap contracts. As further described in Note 6 above, there are management fees embedded in these swaps ranging from 1% to 1.5% accrued on the relevant notional amount of the swap and incentive fees embedded in these swaps ranging from 15% to 25% accrued based on the net new trading profits of the swaps.

The term ‘off-balance sheet risk’ refers to an unrecorded potential liability that, even though it does not appear on the statements of financial condition, may result in future obligation or loss in excess of the amount paid by the Series for a particular investment. Each Trading Company and Galaxy Plus entity expects to trade in futures, options, forward and swap contracts and will therefore be a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts, there exists a market risk that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures positions held by a Trading Company or Galaxy Plus entity in respect of any Series at the same time, and if the Trading Advisor(s) of such Trading Company or Galaxy Plus entity are unable to offset such futures interests positions, such Trading Company or Galaxy Plus entity could lose all of its assets and the holders of Units of such Series would realize a 100% loss. The Managing Owner will seek to minimize market risk through real-time monitoring of open positions and the level of diversification of each Trading Advisor’s portfolio. It is anticipated that any Trading Advisor’s margin-to-equity ratio will typically not exceed approximately 35% although the actual ratio could be higher or lower from time to time.

The Managing Owner is responsible for the payment of all of the ordinary expenses associated with the organization of the Trust and the offering of each Series of Units, except for the initial and ongoing service fee, if any, and no Series will be required to reimburse these expenses. As a result, 100% of each Series’ offering proceeds are initially available for that Series’ trading activities.

A portion of each Trading Company’s assets is used as margin to maintain that Trading Company’s forward currency contract positions, and another portion is deposited in cash in segregated accounts in the name of each Trading Company maintained for each Trading Company at the clearing brokers in accordance with CFTC segregation requirements. At June 30, 2019, cash deposited at the clearing brokers was $4,146,414 for the Trust. The clearing brokers are expected to credit each Trading Company with approximately 80%-100% of the interest earned on its average net assets on deposit with the clearing brokers each month. As of June 30, 2019, with the Federal Funds target rate at 2.25% to 2.50 %, this amount is estimated to be 2.25%. In an attempt to increase interest income earned, the Managing Owner also may invest the non-margin assets in U.S. government securities which include any security issued or guaranteed as to principal or interest by the U.S., or by a person controlled by or supervised by and acting as an instrumentality of the government of the U.S. pursuant to authority granted by Congress or any certificate of deposit for any of the foregoing, including U.S. treasury bonds, U.S. treasury bills and issues of agencies of the U.S. government, and certain cash items such as money market funds and time deposits. Aggregate interest income from all sources, including assets held at clearing brokers, of up to 2.00% (annualized) is paid to the Managing Owner by the Frontier Balanced Fund (Class 1 and Class 2 only), Frontier Global Fund, Frontier Select Fund, and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a, Class 3a only), Frontier Masters Fund and Frontier Balanced Fund (Class 1AP, Class 2a and Class 3a), 20% of the total interest allocated to the Series was paid to the Managing Owner from January 1, 2017 through April 28, 2017; thereafter 100% of the interest is retained by the respective Series. The amount reflected in the financial statements for the Trust and Series are disclosed on a net basis. Due to some classes not exceeding the 2% paid to the Managing Owner, amounts earned by those classes may be zero.

Approximately 10% to 30% of the Trust’s assets are expected to be committed as required margin for futures contracts and forwards and options trading and held by the respective broker, although the amount committed may vary significantly. Such assets are maintained in the form of cash or U.S. treasury bills in segregated accounts with the futures broker pursuant to the Commodity Exchange Act and regulations there under. Approximately 2% to 6% of the Trust’s assets are expected to be deposited with over-the-counter counterparties in order to initiate and maintain forward and swap contracts. Such assets are not held in segregation or otherwise regulated under the Commodity Exchange Act, unless such over-the-counter counterparty is registered as a futures commission merchant. These assets are held either in U.S. government securities or short-term time deposits with U.S.-regulated bank affiliates of the over-the-counter counterparties. The remaining approximately 64% to 88% of the Trust’s assets will normally be invested in cash equivalents and short-term investments, such as money market funds and time deposits and held by the clearing broker, the over-the-counter counterparties and by U.S. federally chartered banks. As of June 30, 2019, total cash and cash equivalents held at banking institutions were $37,348 for the Frontier Diversified Fund, $75,541 for the Frontier Masters Fund, $26,414 for the Frontier Long/Short Commodity Fund, $12,895 for the Frontier Balanced Fund, $76,187 for the Frontier Select Fund, $38,052 for the Frontier Global Fund, and $50,178 for the Frontier Heritage Fund.

The term ‘off-balance sheet risk’ refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in future obligation or loss. Each Trading Company trades in futures, forward and swap contracts and is therefore a party to financial instruments with elements of off-balance sheet market and credit risk. In entering into these contracts there exists a market risk that such contracts may be significantly influenced by market conditions, such as interest rate volatility, resulting in such contracts being less valuable. If the markets should move against all of the futures interests positions held by a Trading Company in respect of any Series at the same time, and if the Trading Advisor(s) of such Trading Company are unable to offset such futures interests positions, such Trading Company could lose all of its assets and the holders of Units of such Series would realize a 100% loss. The Managing Owner seeks to minimize market risk through monitoring of open positions and the level of diversification of each Trading Advisor’s portfolio. It is anticipated that any Trading Advisor’s margin-to-equity ratio will typically not exceed approximately 35% although the actual ratio could be higher or lower from time to time.

As of the date of this report, for a Series that has invested in a swap, a trading advisor does not receive any management fees directly from the Series for such swap, and instead the relevant trading advisor receives compensation via the fees embedded in the swap. As of June 30, 2019, the effective management fee embedded in (i) swaps owned by Frontier Diversified Fund was 0.80% per annum, (ii) swaps owned by Frontier Balanced Fund was 0.62% per annum, (iii) swaps owned by Frontier Long/Short Commodity Fund was 1.92% per annum, (iv) swaps owned by Frontier Heritage Fund was 2.18% per annum, and (v) swaps owned by Frontier Select Fund was 2.04% per annum and the managing owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee is accrued on the relevant notional amount of the swap.

The Frontier Diversified Fund— Class 1 NAV gained 1.59% and gained 1.66%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Diversified Fund—Class 2 NAV gained 2.02% and gained 2.10%, respectively for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Diversified Fund—Class 3 NAV gained 2.10% and gained 2.16%, respectively for the three months ended June 30, 2019 and 2018.

The Frontier Masters Fund—Class 1 NAV lost 0.98% and gained 1.05% for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Masters Fund —Class 2 NAV lost 0.56% and gained 1.49% for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Masters Fund—Class 3 NAV lost 0.52% and gained 1.56% for the three months ended June 30, 2019 and 2018, net of fees and expenses.

The Frontier Long/Short Commodity Fund—Class 2 NAV gained 5.18% and lost 5.27%, respectively, for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 3 NAV gained 5.18% and lost 5.27% respectively for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 1a NAV gained 5.42% and lost 9.09% respectively, for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 2a NAV gained 5.56% and lost 8.69% respectively, for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3a NAV gained 5.63% and lost 8.63%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses.

The Frontier Balanced Fund—Class 1 NAV gained 1.28% and gained 0.22%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund —Class 2 NAV gained 2.03% and gained 0.98%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund—Class 2a NAV gained 2.09% and gained 1.02%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund—Class 3a NAV gained 2.04% and gained 1.02%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund—Class 1AP NAV gained 2.03% and gained 0.97% for the three months ended June 30, 2019 and 2018, net of fees and expenses.

The Frontier Select Fund—Class 1 NAV gained 7.45% and lost 2.25%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Select Fund —Class 2 NAV gained 8.31% and lost 1.52% respectively for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Select Fund —Class 1AP NAV gained 7.34% and lost 1.51%, respectively, for the three months ended June 30, 2019 and 2018.

The Frontier Global Fund—Class 1 NAV gained 5.36% and gained 2.81%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Global Fund —Class 2 NAV gained 6.14% and gained 3.36%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Global Fund —Class 1AP NAV gained 6.15% and gained 3.45%, respectively, for the three months ended June 30, 2019 and 2018.

The Frontier Heritage Fund—Class 1 NAV gained 9.95% and lost 1.74%, respectively, for the three months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Heritage Fund —Class 2 NAV gained 10.75% and lost 1.01%, respectively for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Heritage Fund —Class 1AP NAV gained 12.36% and lost 1.01%, respectively, for the three months ended June 30, 2019 and 2018.

The Frontier Diversified Fund— Class 1 NAV gained 0.19% and lost 6.97%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Diversified Fund—Class 2 NAV gained 1.05% and lost 6.15%, respectively for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Diversified Fund—Class 3 NAV gained 1.19% and lost 6.04%, respectively for the six months ended June 30, 2019 and 2018.

The current management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.00% per annum of notional assets. The current incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps range from 20% to 25% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management fees and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled. The management and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.

As of June 30, 2019, the management fee embedded in swaps owned by Frontier Diversified Fund was 1.00% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee is accrued on the relevant notional amount of the swap.

Based on an analysis of the management fees charged to Frontier Diversified Fund, the effective management fee rate of Frontier Diversified Fund was higher than the management fee rate otherwise payable to the Managing Owner. The effective management fee rate for the Series was calculated for the period covered by the Form 10-Q by dividing the aggregate management fees paid by such Series (whether directly to the Managing Owner, or as an embedded management fee paid to a third-party commodity trading advisor) by the aggregate assets on which such management fees were paid. For the quarter ended June 30, 2019, the effective management fee rate of Frontier Diversified Fund was 0.80%, compared to a management fee payable to the Managing Owner of 0.75%. For the quarter ended June 30, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Diversified Fund was $16,804.

The Frontier Diversified Fund— Class 1 NAV lost 6.97% and lost 4.04%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Diversified Fund—Class 2 NAV lost 6.15% and lost 3.25%, respectively for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Diversified Fund—Class 3 NAV lost 6.04% and lost 3.12%, respectively for the six months ended June 30, 2018 and 2017.

The Frontier Masters Fund—Class 1 NAV lost 4.14% and lost 13.43% for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Masters Fund —Class 2 NAV lost 3.32% and lost 12.67% for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Masters Fund—Class 3 NAV lost 3.22% and lost 12.56% for the six months ended June 30, 2019 and 2018, net of fees and expenses.

The Frontier Masters Fund—Class 1 NAV lost 13.43% and lost 9.23%, respectively, for the six months ended June 30, 2018 and 2017 net of fees and expenses; the Frontier Masters Fund —Class 2 NAV lost 12.67%, and lost 8.45%, respectively for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Masters Fund—Class 3 NAV lost 12.56% and lost 8.33%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses.

The Frontier Long/Short Commodity Fund—Class 2 NAV lost 0.30% and lost 8.02%, respectively, for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 3 NAV lost 0.31% and lost 8.02% respectively for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 1a NAV lost 6.94% and lost 12.99% respectively, for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund—Class 2a NAV lost 6.43% and lost 12.24% respectively, for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3a NAV lost 6.27% and lost 8.02%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses.

The current management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.50% per annum of notional assets. The current incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 25% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled. The management and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.

As of June 30, 2019, the management fee embedded in swaps owned by Frontier Long/Short Commodity Fund was 1.50% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee is accrued on the relevant notional amount of the swap.

Based on an analysis of the management fees charged to Frontier Long/Short Commodity Fund, the effective management fee rate of Frontier Long/Short Commodity Fund was lower than the management fee rate otherwise payable to the Managing Owner. The effective management fee rate for the Series was calculated for the period covered by the Form 10-Q by dividing the aggregate management fees paid by such Series (whether directly to the Managing Owner, or as an embedded management fee paid to a third-party commodity trading advisor) by the aggregate assets on which such management fees were paid. For the quarter ended June 30, 2019, the effective management fee rate of Frontier Long/Short Commodity Fund was 1.92%, compared to a management fee payable to the Managing Owner of 2.00%. For the quarter ended June 30, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Long/Short Commodity Fund was $3,594.

The Frontier Long/Short Commodity Fund—Class 2 NAV lost 8.02% and lost 10.20%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 3 NAV lost 8.02% and lost 6.68% respectively for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 1a NAV lost 12.99% and lost 9.86% respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Long/Short Commodity Fund —Class 2a NAV lost 12.24% and lost 9.73% respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Long/Short Commodity Fund Class 3a NAV lost 8.02% and lost 7.20%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses.

The Frontier Balanced Fund—Class 1 NAV lost 1.08% and lost 7.91%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund —Class 2 NAV gained 0.40 % and lost 6.50%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund —Class 2a NAV gained 0.43% and lost 6.51%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund —Class 3a NAV gained 0.42% and lost 6.51%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Balanced Fund —Class 1AP NAV gained 0.40% and lost 6.56% for the six months ended June 30, 2019 and 2018, net of fees and expenses.

The current management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.00% per annum of notional assets. The current incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps ranges from 20% to 25% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled. The management and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.

Based on an analysis of the management fees charged to Frontier Balanced Fund, the effective management fee rate of Frontier Balanced Fund was higher than the management fee rate otherwise payable to the Managing Owner. The effective management fee rate for the Series was calculated for the period covered by the Form 10-Q by dividing the aggregate management fees paid by such Series (whether directly to the Managing Owner, or as an embedded management fee paid to a third-party commodity trading advisor) by the aggregate assets on which such management fees were paid. For the quarter ended June 30, 2019, the effective management fee rate of Frontier Balanced Fund was 0.62%, compared to a management fee payable to the Managing Owner of 0.50%. For the quarter ended June 30, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Balanced Fund was $40,357.

The Frontier Balanced Fund—Class 1 NAV lost 7.91% and lost 3.68%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Balanced Fund —Class 2 NAV lost 6.50% and lost 2.24%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Balanced Fund —Class 2a NAV lost 6.51% and lost 1.94%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Balanced Fund —Class 3a NAV lost 6.51% and 1.94%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Balanced Fund —Class 1AP NAV lost 6.56% and lost 2.25% for the six months ended June 30, 2018 and 2017, net of fees and expenses.

The Frontier Select Fund—Class 1 NAV gained 6.47% and lost 17.19%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Select Fund —Class 2 NAV gained 8.12% and lost 15.95% respectively for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Select Fund—Class 1AP NAV gained 7.10% and lost 15.95%, respectively, for the six months ended June 30, 2019 and 2018.

The current management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.00% per annum of notional assets. The current incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 15% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled. The management and incentive fees embedded in a swap may be higher or lower than the management and incentive fee that would otherwise be charged to a Series by the Managing Owner.

As of June 30, 2019, the management fee embedded in swaps owned by Frontier Select Fund was 1.00% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee is accrued on the relevant notional amount of the swap.

Based on an analysis of the management fees charged to Frontier Select Fund, the effective management fee rate of Frontier Select Fund was lower than the management fee rate otherwise payable to the Managing Owner. The effective management fee rate for the Series was calculated for the period covered by the Form 10-Q by dividing the aggregate management fees paid by such Series (whether directly to the Managing Owner, or as an embedded management fee paid to a third-party commodity trading advisor) by the aggregate assets on which such management fees were paid. For the period ended June 30, 2019, the effective management fee rate of Frontier Select Fund was 2.04%, compared to a management fee payable to the Managing Owner of 2.50%. For the quarter ended June 30, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Select Fund was $4,701.

The Frontier Select Fund—Class 1 NAV lost 17.19% and lost 16.23%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Select Fund —Class 2 NAV lost 15.95% and lost 15.00% respectively for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Select Fund —Class 1AP NAV lost 15.95% and 15.09%, respectively, for the six months ended June 30, 2018 and 2017.

The Frontier Global Fund—Class 1 NAV gained 9.17% and lost 6.55%, respectively, for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Global Fund—Class 2 NAV gained 10.85% and lost 6.02%, respectively, for the three months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Global Fund—Class 1AP NAV gained 10.81% and lost 5.24%, respectively, for the six months ended June 30, 2019 and 2018.

The Frontier Global Fund—Class 1 NAV lost 6.55% and lost 6.74%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Global Fund —Class 2 NAV lost 6.02% and lost 5.37%, respectively, for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Global Fund —Class 1AP NAV lost 5.24% and lost 5.36%, respectively, for the three months ended June 30, 2018 and 2017.

The Frontier Heritage Fund—Class 1 NAV gained 9.79% and lost 15.27%, respectively, for the six months ended June 30, 2019 and 2018 net of fees and expenses; the Frontier Heritage Fund—Class 2 NAV gained 11.43% and lost 14.00%, respectively for the six months ended June 30, 2019 and 2018, net of fees and expenses; the Frontier Heritage Fund—Class 1AP NAV gained 13.03% and lost 14.02%, respectively, for the six months ended June 30, 2019 and 2018.

The current management fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 1.00% per annum of notional assets. The current incentive fees payable to the underlying commodity trading advisor(s) comprising the index referenced in the swaps is 15% of new net trading profits on a monthly or quarterly basis. To the extent that there are embedded management and incentive fees incurred in a swap investment, the Managing Owner waives any management and incentive fees to which it is otherwise entitled. The management and incentive fees embedded in a swap may be higher or lower than the management and incentive fees that would otherwise be charged to a Series by the Managing Owner.

As of June 30, 2019, the management fee embedded in swaps owned by Frontier Heritage Fund was 1.00% per annum, and the managing owner has waived the entire management fee due to it from those Series in respect of such Series’ investment in swaps. In each case, the embedded management fee is accrued on the relevant notional amount of the swap.

Based on an analysis of the management fees charged to Frontier Heritage Fund, the effective management fee rate of Frontier Heritage Fund was lower than the management fee rate otherwise payable to the Managing Owner. The effective management fee rate for the Series was calculated for the period covered by the Form 10-Q by dividing the aggregate management fees paid by such Series (whether directly to the Managing Owner, or as an embedded management fee paid to a third-party commodity trading advisor) by the aggregate assets on which such management fees were paid. For the period ended June 30, 2019, the effective management fee rate of Frontier Heritage Fund was 2.18%, compared to a management fee payable to the Managing Owner of 2.50%. For the quarter ended June 30, 2019, the management and incentive fees embedded in gains (losses) from trading companies owned by Frontier Heritage Fund was $4,397.

The Frontier Heritage Fund—Class 1 NAV lost 15.27% and lost 8.86%, respectively, for the six months ended June 30, 2018 and 2017 net of fees and expenses; the Frontier Heritage Fund —Class 2 NAV lost 14.00% and lost 7.51%, respectively for the six months ended June 30, 2018 and 2017, net of fees and expenses; the Frontier Heritage Fund —Class 1AP NAV lost 14.02% and lost 7.51%, respectively, for the six months ended June 30, 2018 and 2017.

Exchange maintenance margin requirements have been used by the Trust as the measure of its value at risk. Maintenance margin requirements are set by exchanges to equal or exceed the maximum losses reasonably expected to be incurred in the fair value of any given contract in 95% to 99% of any one-day interval. The maintenance margin levels are established by brokers, dealers and exchanges using historical price studies as well as an assessment of current market volatility and economic fundamentals to provide a probabilistic estimate of the maximum expected near-term one-day price fluctuation. Maintenance margin has been used rather than the more generally available initial margin, because initial margin includes a credit risk component that is not relevant to value at risk.

In the case of contracts denominated in foreign Currencies, the value at risk figures include foreign currency margin amounts converted into U.S. dollars with an incremental adjustment to reflect the exchange rate risk inherent to the Series, which is valued in U.S. dollars, in expressing value at risk in a functional currency other than U.S. dollars. In quantifying each Series’ value at risk, 100% positive correlation in the different positions held in each market risk category has been assumed. Consequently, the margin requirements applicable to the open contracts have simply been aggregated to determine each trading category’s aggregate value at risk. The diversification effects resulting from the fact that the Series’ positions held through the Trading Companies and Galaxy Plus entities are rarely, if ever, 100% positively correlated have not been reflected.

The face value of the market sector instruments held on behalf of the Series is typically many times the applicable maintenance margin requirement, which generally ranges between approximately 1% and 10% of contract face value, as well as many times the capitalization of the Series. The magnitude of each Series’ open positions creates a risk of ruin not typically found in most other investment vehicles. Because of the size of their positions, certain market conditions, although unusual, but historically recurring from time to time, could cause a Series to incur severe losses over a short period of time. The value at risk table above, as well as the past performance of the Series, gives no indication of this risk of severe losses.

Interest rate risk is one of the principal market exposures of each Series. Interest rate movements directly affect the price of interest rate futures positions held and indirectly the value of a Trading Company’s stock index and currency positions. Interest rate movements in one country as well as relative interest rate movements between countries materially impact profitability. The primary interest rate exposure is to interest rate fluctuations in the U.S. and the other G-7 countries. However, the Trading Companies and Galaxy Plus entities also may take futures positions on the government debt of smaller nations. The Managing Owner anticipates that G-7 interest rates will remain the primary market exposure of each Trading Company and Galaxy Plus entities and accordingly of each Series for the foreseeable future. The changes in interest rates which are expected to have the most effect on the Series are changes in long-term, as opposed to short-term rates. Most of the speculative positions to be held by the Trading Companies and Galaxy Plus entities will be in medium- to long-term instruments. Consequently, even a material change in short-term rates is expected to have little effect on the Series if the medium- to long-term rates remain steady. Aggregate interest income from all sources, including assets held at clearing brokers, of up to 2% (annualized) is paid to the Managing Owner by the Frontier Balanced Fund (Class 1 and Class 2 only), Frontier Global Fund, Frontier Select Fund and Frontier Heritage Fund. For the Frontier Diversified Fund, Frontier Long/Short Commodity Fund (Class 1a, Class 2a, Class 3a only), Frontier Masters Fund and Frontier Balanced Fund (Class 1AP, Class 2a and Class 3a), 20% of the total interest allocated to each Series was paid to the Managing Owner from January 1, 2017 through April 28, 2017; thereafter 100% of the interest is retained by the respective Series.

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