PROACTIVE
ASSET ALLOCATION FUNDS
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THE
OPTI-FLEX(R) DYNAMIC FUND
SEMI-ANNUAL REPORT
JUNE 30, 1998
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This report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
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August 27, 1998
Dear Fellow OPTI-FLEX(R)DYNAMIC FUND Shareholder:
Although we are not satisfied with the performance of our Fund for the first six
months of 1998, we are optimistic about our investment return prospects for the
balance of this year and beyond. We know by hindsight that we could have
provided a higher return during the first half of 1998 by being willing to be
more aggressively invested in various stock markets. However, our reluctance to
do so is being justified by significant declines in virtually all stock markets
around the globe from their peaks in mid July.
According to FastTrack, from the close of business on July 17, 1998 to the close
of business today on August 27, 1998 various stock market indices have declined
as follows:
Dow Jones 15 Utilities Average -3.60% NYSE Composite Average -13.64%
Hong Kong Hang Seng Index -8.18% Frankfurt Dax Index -14.90%
AMEX Oil Index -10.93% NASDAQ Composite Average -16.05%
S&P 500 Composite Average -12.15% AMEX Composite Average -17.28%
Dow Jones 30 Industrials -12.23% Dow Jones 20 Transportation Avg. -18.79%
London Financial Times Index -13.05% Russell 2,000 Small Cap. Average -20.82%
NYSE Composite Average -13.64% Philadelphia Gold & Silver Index -22.90%
With slowing corporate profit growth and increasing uncertainty of events in the
White House and around the globe, we believe both U.S. and foreign investors
will continue to reduce their stock market exposure during the coming weeks and
months. Consequently, we have increased our investments in "long-short funds" to
93% of our portfolio. The "long-short funds" in which we are invested buy stocks
"long" that they believe are undervalued and sell stocks "short" (stocks that
they do not yet own) that they anticipate will fall in value. We believe the mix
of funds in which we are currently invested has potential for profit (as well as
loss) in bear markets, bull markets and choppy markets, which is what we expect
over the near term. We believe the strong U.S. dollar, which has supported our
financial markets during the past few years, has reached strong resistance
levels.
Thank you for your patience during the past year. Several of the "long-short
funds" in which we wanted to invest a larger portion of our portfolio have
continued to grow in recent months, allowing us to add to our investment
positions. We also expect several new flexible funds to become available to us
during the next few months. It should not be assumed that recommendations made
in the future will be profitable or will equal past performance. I have
personally had at least $1.6 million invested in this Fund since December 1996.
I added $500,000 in April 1997 and I transferred the full remaining balance of
my own retirement accounts, worth about $600,000, into this Fund last month,
bringing my total investment in this Fund to approximately $2.7 million.
Consequently, I have a common interest with you in attempting to control risk as
well as in attempting to achieve an above average return with our OPTI-FLEX(R)
DYNAMIC FUND.
Sincerely yours,
/s/ C. Martin Unterreiner
C. Martin Unterreiner
OPTI-FLEX(R) Portfolio Manager
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THE OPTI-flex(R) DYNAMIC FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998
(Unaudited)
SHARES VALUE
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MUTUAL FUNDS - 100.0%
Ameristock Mutual Fund* 10,847 $ 341,476
Caldwell & Orkin Market Opportunity Fund 348,308 7,115,937
Flex-funds Money Market Fund 40,584 40,584
Invesco European Small Company Fund* 27,550 426,480
Montgomery Emerging Asia Fund* 33,244 205,448
Montgomery Global Communications Fund 7,205 164,859
Montgomery Global Long Short Class-A* 75,405 1,057,177
Montgomery Global Opportunities Trust* 8,501 163,134
Montgomery International Small Cap Fund* 10,729 162,438
Montgomery Partners Emerging Markets Focus* 9,627 89,919
Montgomery Small Cap Fund* 7,857 162,885
Montgomery Small Cap Opportunity Fund* 8,529 163,419
Montgomery U.S. Emerging Growth Fund* 7,445 162,814
Nicholas Applegate Emerging Countries Fund 20,814 307,428
Pioneer India Fund* 56,808 318,126
Rydex Retailing Fund* 15,193 165,602
Rydex Series Trust Healthcare Fund* 25,050 262,775
Rydex Telecommunications Fund* 16,567 167,820
Vontobel Eastern European Equity Fund 25,020 304,746
Warburg Pincus Japan OTC Fund* 50,489 318,583
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TOTAL MUTUAL FUNDS
(Cost $11,444,828) 12,101,650
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TOTAL INVESTMENTS - 100%
(Cost $11,444,828) $ 12,101,650
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* Represents non-income producing securities.
See accompanying notes to financial statements.
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THE OPTI-flex DYNAMIC(R) FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998
(Unaudited)
Assets:
Investments, at market value (cost $11,444,828) $ 12,101,650
Interest receivable 1,012
Receivable from adviser 16,766
Unamortized organization costs 48,775
Prepaid expense and other assets 17,033
Total Assets 12,185,236
Liabilities:
Payable for capital stock redeemed 4,116
Dividends payable 196
Management fees payable 22,754
12b-1 fees payable 23,806
Organizational costs due to advisor 52,520
Shareholder services fees payable 7,226
Other accrued liabilities 17,917
Total Liabilities 128,535
Net Assets $ 12,056,701
Components of Net Assets:
Capital $ 12,444,227
Accumulated net investment loss (85,806)
Accumulated undistributed net realized gains (958,542)
(losses) from investment transactions
Net unrealized appreciation (depreciation) of 656,822
investments
Total Net Assets $ 12,056,701
Capital Stock Outstanding 1,213,400
Net Asset Value -- Offering and Redemption $ 9.94
Price Per Share
See accompanying notes to financial statements.
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THE OPTI-flex(R) DYNAMIC FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(Unaudited)
Investment Income:
Interest $ 25,737
Dividends 37,127
Total Investment Income 62,864
Fund Expenses:
Investment advisory fees 48,627
Distribution expense 48,627
Shareholder service fee 16,209
Transfer agent and accounting fees 15,301
Administrative fees 15,230
Registration and filing fees 15,060
Trustee fees 10,690
Amortization of organization costs 7,432
Audit fees 5,921
Custodian fees 5,285
Insurance expense 4,510
Other expenses 2,172
Total expenses 195,064
Expenses voluntarily waived by adviser (38,863)
12b-1 expenses reduced (1,596)
Net Expenses 154,605
Net investment loss (91,741)
Realized and Unrealized Gains (Losses) from Investments
Net realized losses from investment transactions (339,937)
Net change in net unrealized appreciation of investments 723,907
Net Realized and Unrealized Gains from Investments 383,970
Net Increase in Net Assets Resulting from Operations $ 292,229
See accompanying notes to financial statements.
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THE OPTI-flex(R) DYNAMIC FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Year Ended
Ended June December 31,
30, 1998 1997
(Unaudited)
Increase (Decrease) In Net Assets:
Operations:
Net investment loss $ (91,741) $ 35,805
Net realized losses from investment (339,937) 476,703
transactions
Net change in unrealized appreciation of 723,907 (64,715)
investments
Net Increase in Net Assets Resulting from 292,229 447,793
Operations
Dividends and Distributions to Shareholders:
From net investment income --- (29,870)
From net realized gains --- (476,703)
In excess of net realized gains --- (618,605)
Net Decrease in Net Assets Resulting from --- (1,125,178)
Dividends and Distributions to Shareholders
Capital Transactions:
Proceeds from shares subscribed 915,989 8,429,617
Reinvestment of dividends --- 1,095,529
Cost of shares redeemed (2,681,040) (2,124,308)
Net Increase (Decrease) in Net Assets (1,765,051) 7,400,838
Resulting from Capital Transactions
Total Increase (Decrease) In Net Assets (1,472,822) 6,723,453
Net Assets - Beginning of Period 13,529,523 6,806,070
Net Assets - End of Period $12,056,701 $13,529,523
Share Transactions:
Subscribed 92,697 802,295
Reinvested --- 112,362
Redeemed (266,651) (199,325)
Net Increase (Decrease) in Shares (173,954) 715,332
Outstanding
See accompanying notes to financial statements.
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THE OPTI-flex(R) DYNAMIC FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Year Ended October 1, 1996 (1)
Ended June 30, December 31, through December
1998 1997 31, 1996
(Unaudited)
<S> <C> <C> <C>
Net Asset Value, Beginning of Period $ 9.75 $ 10.13 $ 10.00
Investment Operations:
Net investment income (loss) (0.07) 0.03 0.09
Net gains from investments (realized and unrealized) 0.26 0.47 0.23
Total 0.19 0.50 0.32
Distributions:
From net investment income --- (0.02) (0.09)
From net realized gains --- (0.38) (0.10)
In excess of net realized gains --- (0.48) ---
Total --- (0.88) (0.19)
Net Asset Value, End of Period $ 9.94 $ 9.75 $ 10.13
Total Return 1.95%(2) 4.94% 3.22%(2)
Ratios/Supplemental Data:
Net assets, end of period (000) $12,057 $13,530 $ 6,806
Ratio of expenses to average net assets 2.38%(3) 2.35% 2.39%(3)
Ratio of net investment income (loss) to average net assets -1.41%(3) 0.32% 17.25%(3)(4)
Ratio of expenses to average net assets, before voluntary 3.00%(3) 3.33% 14.61%(3)
fee reductions
Ratio of net investment income (loss) to average net assets -2.03%(3) -0.66% 5.03%(3)
before voluntary fee reductions
Portfolio turnover rate 1356.04% 1237.35% 18.77%
<FN>
(1) Date of commencement of operations.
(2) Not annualized.
(3) Annualized.
(4) This ratio is higher than normal for a fund of this type because it is an
annualized ratio based on the net investment income earned during the
period which included annual dividends from its investment holdings.
</FN>
</TABLE>
See accompanying notes to financial statements.
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THE OPTI-FLEX(R) DYNAMIC FUND, JUNE 30, 1998
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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1. ORGANIZATION
The PROACTIVE Asset Allocation Funds was organized in 1996 and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as a
non-diversified, open-end management investment company. The OPTI-FLEX(R)
Dynamic Fund (the "Fund") commenced operations on October 1, 1996. The Fund is
authorized to issue an indefinite number of shares of $0.10 par value stock. The
Fund's objective is to seek a high total return over the long-term consistent
with exhibiting less investment risk than a portfolio consisting solely of
common stocks.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Investments - Securities which are traded on stock exchanges are valued at the
last sales price as of the close of business of the New York Stock Exchange on
the day of valuation, or, lacking any sales, at the closing bid prices. Mutual
funds are valued at the daily redemption value determined by the underlying
fund.
Money market securities maturing more than sixty days after the valuation date
are valued at the last sales price as of the close of business on the day of
valuation, or, lacking any sales, at the most recent bid price or yield
equivalent as obtained from dealers that make markets in such securities. When
such securities are valued within sixty days or less to maturity, the difference
between the valuation existing on the sixty-first day before maturity and
maturity value is amortized on a straight-line basis to maturity. Securities
maturing within sixty days from their date of acquisition are valued at
amortized cost.
Repurchase Agreements -- The Fund may engage in repurchase agreement
transactions whereby the Fund takes possession of an underlying debt instrument
subject to an obligation of the seller to repurchase the instrument from the
Fund and an obligation of the Fund to resell the instrument at an agreed upon
price and term. At all times, the Fund maintains the value of collateral,
including accrued interest, at least 100% of the amount of the repurchase
agreement, plus accrued interest. If the seller defaults or the fair value of
the collateral declines, realization of the collateral by the Fund may be
delayed or limited.
Income Taxes -- It is the Fund's policy to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute all of its taxable income to its shareholders. Therefore, no Federal
income tax provision is required.
Dividends and Distributions - The amounts of dividends from net investment
income and of distributions from net realized gains are determined in accordance
with federal income tax regulations which may differ from generally accepted
accounting principles. These "book/tax" differences are either considered
temporary or permanent in nature. To the extent these differences are permanent
in nature such amounts are reclassified within the composition of net assets
based on their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends and distributions to shareholders which exceed net
investment income and net realized capital gains for financial reporting
purposes but not for tax purposes are reported as dividends in excess of net
investment income or distributions in excess of net realized gains.
<PAGE>
Organizational Costs -- Costs related to the organization of the Fund have been
deferred and are being amortized on a straight-line basis over a five-year
period.
3. AGREEMENTS AND TRANSACTIONS WITH AFFILIATES
PROACTIVE Money Management, Inc. (the "Advisor") provides the Fund with
investment management research, statistical and advisory services. For such
services the Fund pays monthly a fee based upon the average daily value of the
Fund's net assets at the following annual rates: 0.75% of average net assets up
to $500 million, 0.65% of average net assets exceeding $500 million. During the
six months ended June 30, 1998, PROACTIVE voluntarily reimbursed expenses of the
Fund so that total expenses of the Fund would not exceed 2.40% of average daily
net assets.
During the six months ended June 30, 1998 fee waivers and reimbursements of
$40,459 were required to achieve the recorded expense ratios. To the extent the
Fund does not increase net assets, the Fund is reliant upon the ability of the
investment advisor to continue to provide fee waivers and reimbursements. The
investment advisor is dependent upon achieving its own financial goals,
including targeted increases in the Fund's net assets through net sales of fund
shares, in order to provide such support to the Fund.
Pursuant to Rule 12b-1 of the Act, the Fund has adopted a Distribution Plan (the
"Plan") with PROACTIVE Financial Services, Inc. (the "Distributor"). Under the
provisions of the Plan, the Fund pays the Distributor an annual fee, at a
maximum rate of 0.75% of average daily net assets of the Fund, to aid in the
distribution of Fund shares. Additionally, the Fund has adopted a Service Plan
with the Distributor. Under the provisions of the Service Plan, the Fund pays
the Distributor an annual fee, at a maximum rate of 0.25% of average daily net
assets of the Fund, to reimburse securities dealers for personal services or
maintenance of shareholder accounts.
Certain officers and trustees of the Fund are also officers or directors of the
Advisor and the Distributor.
4. PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, excluding short-term investments and U.S.
Government and agency obligations for the six months ended June 30, 1998 were as
follows:
PURCHASES SALES
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OPTI-FLEX(R)Dynamic Fund $172,555,326 $173,601,114
As of June 30, 1998, the aggregate cost of investments and net unrealized
appreciation (depreciation) for Federal income tax purposes was comprised of the
following:
Investments Unrealized Unrealized Net Unrealized
at cost Appreciation Depreciation Depreciation
Opti-FLEX(R)
Dynamic Fund $11,444,828 $684,257 ($27,435) $656,822
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
INVESTMENT ADVISOR
PROACTIVE Money Management, Inc.
DISTRIBUTOR
PROACTIVE Financial Services, Inc.
ADDRESS OF FUND, ADVISOR, & DISTRIBUTOR
500 Chesterfield Center, Suite 250
Chesterfield, MO 63017
888-PROACTIVE
(888-776-2284)
314-530-7575
www.proactive-inc.com/optifund
CUSTODIAN
Star Bank, N.A.
Star Bank Center
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Company
6000 Memorial Drive
Dublin, OH 43017
888-587-3539
614-798-3149 (in Central Ohio)
LEGAL COUNSEL
Armstrong, Teasdale, Schlafly, & Davis
One Metropolitan Square
St. Louis, MO 63102-2740
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza
Columbus, OH 43215
