PROACTIVE
ASSET ALLOCATION FUNDS
[LOGO] Sailboat
THE
OPTI-FLEX(R) DYNAMIC FUnd
SEMI-ANNUAL REPORT
JUNE 30, 1999
This report has been prepared for shareholders
and may be distributed to others only if preceded
or accompanied by a current prospectus.
<PAGE>
Dear Fellow OPTI-FLEX(R) DYNAMIC FUND Shareholder:
Although the performance of our Fund is still significantly behind our
benchmark, the Dow Jones World Stock Index since the inception of our Fund (8.4%
Average Annual Total Return vs. 15% AATR), we are pleased that the gap is being
significantly reduced. For the last twelve months, relative performance was
12.9% vs. 14.4%. For the first half of 1999 it was 7.3% vs. 8.5%. We are pleased
that for the second quarter of 1999, and so far in the third quarter, the
performance of our Fund is exceeding the performance of the Dow Jones World
Stock Index.
We are also pleased that so far in 1999, our OPTI-FLEX(R) DYNAMIC FUNd is
meeting its primary goal, which is "an above average total return." In
year-to-date performance, as of yesterday's close, our Fund is ahead of over 59%
of all 2,133 mutual funds and indices in the FastTrack database. Our Fund also
has a larger year-to-date gain than 65% of all the Funds of Funds in the
FastTrack database. MOST REWARDING IS THAT OUR FUND IS AHEAD OF OVER 85% OF ALL
ASSET ALLOCATION FUNDS IN THE FASTTRACK DATABASE IN YEAR-TO-DATE PERFORMANCE,
WHILE MAINTAINING A CONSERVATIVE RATING FROM THE FUNDS OF FUNDS ASSOCIATION.
It is interesting to note that the number one Asset Allocation fund in the
FastTrack database is Montgomery Global Long-Short Fund (MNGLX), which is our
largest holding at 60% of our investment portfolio. MNGLX is also in the top 5%
of all funds and indices in the FastTrack database. We have been investing the
maximum we could in MNGLX ever since we discovered it on February 6th of last
year, when it was only five weeks old and had only $3 million of assets. It now
has over $260 million of assets and closed to new investors on May 23rd of this
year. We can continue to add to MNGLX for the benefit of new and old clients
because our Fund is an existing shareholder.
Our second largest holding, the Caldwell & Orkin Market Opportunity Fund
(COAGX), has been a disappointment to us since the bottom of the stock market in
early October of last year. Despite the fact that COAGX has an excellent
long-term track record of performance, approximately equal to the S&P 500, with
an incredibly low Beta of only 11% of the S&P 500; the fund price is actually
lower today than it was at the stock market bottom in early October of last
year. Consequently, we have been reducing our position in COAGX from almost 75%
of our investment portfolio last October, to only about 15% of our investment
portfolio currently.
Most of the recent allocations for our Fund have been to a strategy that we have
been working on developing over the past year within the Rydex mutual fund
family. We decided to call it our OPTI-FLEX(R) SECTORS+ 4 X 4 TRADING STRATEGY.
Since we actually began trading the strategy for our Fund on July 9th, this
short-term trading strategy has outperformed COAGX and MNGLX, as well as over
90% of all mutual funds and indices in the FastTrack database. We have increased
the percentage of our Fund invested in our OPTI-FLEX(R) SECTORS+ 4 X 4 TRADING
STRATEgy from 10% of our investment portfolio on July 9th, to 20% on July 23rd
and to 25% as of yesterday. It should not be assumed that recommendations made
in the future will be profitable or will equal past performance.
Since I own almost 25% of our OPTI-FLEX(R) DYNAMIC FUND, I have a common
interest with you in working toward our goal; which is seeking "to provide an
above average total return over the long term consistent with exhibiting less
investment risk than a portfolio consisting only of common stocks." We are
looking forward to providing you with superior performance as well as service
for many years. Thank you for your confidence in us.
Sincerely yours,
/s/ C. Martin Unterreiner
C. Martin Unterreiner
OPTI-FLEX(R) Money Manager
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
PORTFOLIO OF INVESTMENTS
JUNE 30, 1999
(Unaudited)
SHARES VALUE
------ -----
MUTUAL FUNDS - 100.0%
Montgomery Global Long Short Fund # 370,076 $ 7,290,498
Caldwell & Orkin Market Opportunity Fund 184,256 3,825,144
Rydex Precious Metals Fund # 219,314 1,028,581
Prudent Bear Fund 217,561 841,962
Van Kampen American Value Fund # 50 1,179
Flex-funds Money Market Fund 101,761 101,761
-----------
TOTAL MUTUAL FUNDS
(Cost $11,750,621) 13,089,125
-----------
TOTAL INVESTMENTS - 100%
(Cost $11,750,621) $ 13,089,125
==========
# Represents non-income producing security.
See accompanying notes to financial statements.
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999
(Unaudited)
Assets:
Investments, at market value (cost $11,750,621) $ 13,089,125
Interest receivable 110
Receivable from adviser 17,325
Unamortized organization costs 33,788
Prepaid expense and other assets 21,676
----------------
Total Assets 13,162,024
----------------
Liabilities:
Payable for capital stock redeemed 99,449
Management fees payable 24,035
12b-1 fees payable 24,115
Organizational costs due to advisor 37,524
Shareholder services fees payable 7,329
Other accrued liabilities 18,783
----------------
Total Liabilities 211,235
----------------
Net Assets $ 12,950,789
================
Components of Net Assets:
Capital $ 11,732,790
Accumulated net investment income (loss) (149,537)
Accumulated undistributed net realized gains
(losses) from investment transactions 29,032
Net unrealized appreciation (depreciation) of
investments 1,338,504
----------------
Total Net Assets $ 12,950,789
================
Shares of Capital Stock Outstanding 1,154,537
================
Net Asset Value -- Offering and Redemption Price Per Share $ 11.22
================
See accompanying notes to financial statements.
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
Investment Income:
Dividends $ 1,346
Interest 817
-------------
Total Investment Income 2,163
-------------
Fund Expenses:
Investment advisory fees 47,681
Distribution expense 47,681
Shareholder service fee 15,894
Transfer agent and accounting fees 16,486
Administrative fees 14,578
Registration and filing fees 14,105
Trustee fees 7,240
Amortization of organization costs 7,432
Audit fees 5,973
Insurance expense 5,175
Custodian fees 3,077
Other expenses 2,172
-------------
Total Expenses 187,494
-------------
Expenses voluntarily reimbursed by advisor (34,685)
12b-1 expenses reduced (1,109)
-------------
Net Expenses 151,700
-------------
Net Investment Income (Loss) (149,537)
-------------
Realized and Unrealized Gains (Losses) from Investments:
Net realized gains (losses) from investment transactions 6,932
Net change in unrealized appreciation of investments 1,040,447
-------------
Net Realized and Unrealized Gains (Losses) from Investments 1,047,379
-------------
Net Increase (Decrease) in Net Assets Resulting from Operations $ 897,842
=============
See accompanying notes to financial statement.
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Year Ended
Ended June December
30, 1999 31, 1998
(Unaudited)
Increase (Decrease) In Net Assets:
Operations:
Net investment income (loss) $ (149,537) $ (72,020)
Net realized gains (losses) from
investment transactions 6,932 640,705
Net change in unrealized appreciation
of investments 1,040,447 365,142
------------ ------------
Net Increase in Net Assets Resulting
from Operations 897,842 933,827
------------ ------------
Capital Transactions:
Proceeds from shares subscribed 559,337 1,949,493
Cost of shares redeemed (1,297,872) (3,621,361)
------------ ------------
Net Increase (Decrease) in Net Assets
Resulting from Capital Transactions (738,535) (1,671,868)
------------ ------------
Total Increase (Decrease) In Net Assets 159,307 (738,041)
Net Assets - Beginning of Period 12,791,482 13,529,523
============ ============
Net Assets - End of Period $12,950,789 $12,791,482
============ ============
Share Transactions:
Subscribed 52,348 194,882
Redeemed (120,798) (359,249)
============ ============
Net Increase (Decrease) in Shares Outstanding (68,450) (164,367)
============ ============
See accompanying notes to financial statements.
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Year Ended Year Ended 10/1/96 (1)
Ended June December December through
30, 1999 31, 1998 31, 1997 12/31/96
(Unaudited)
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 10.46 $ 9.75 $ 10.13 $ 10.00
Investment Operations:
Net investment income (loss) (0.13) (0.06) 0.03 0.09
Net gains (losses) from investments 0.89 0.77 0.47 0.23
(realized and unrealized)
Total 0.76 0.71 0.50 0.32
===== ===== ===== ====
Distributions:
From net investment income 0.00 0.00 (0.02) (0.09)
From net realized gains 0.00 0.00 (0.38) (0.10)
In excess of net realized gains 0.00 0.00 (0.48) 0.00
----- ----- ------ ----
Total 0.00 0.00 (0.88) (0.19)
----- ----- ------ ------
Net Asset Value, End of Period $ 11.22 $ 10.46 $ 9.75 $ 10.13
====== ====== ===== =====
Total Return (excludes redemption charge): 7.27% (2) 7.28% 5.02% 3.22% (2)
Ratios/Supplemental Data:
Net assets, end of period (000) $ 12,951 $ 12,791 $ 13,530 $ 6,806
Ratio of expenses to average net assets (5) 2.39% (3) 2.35% 2.35% 2.39% (3)
Ratio of net investment income (loss) -2.35% (3) -0.56% 0.32% 17.25% (3)(4)
to average net assets
Ratio of expenses to average net assets, 2.95% (3) 2.99% 3.33% 14.61% (3)
before voluntary fee reductions (5)
Ratio of net investment income (loss) to -2.91% (3) -1.20% -0.66% 5.03% (3)
average net assets before voluntary fee
reductions
Portfolio turnover rate 509.19% (2) 1574.17% 1237.35% 18.77% (2)
<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.
(5) These ratios exclude the expenses of the mutual funds in which the Fund
invests.
</FN>
</TABLE>
See accompanying notes to financial statements.
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. ORGANIZATION
The PROACTIVE Asset Allocation Funds Trust was organized in 1996 and is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as a diversified, open-end management investment company. The
OPTI-FLEX(R) Dynamic Fund (the "Fund"), a series of the PROACTIVE Asset
Allocation 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 an above average 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.
Security Transactions - The Fund records purchases and sales of investments on
the trade date. The Fund calculates realized gains and losses from sales of
investments on the first-in first-out basis. Dividend income is recognized on
the ex-dividend date and interest income is recognized as earned.
Dividends and Distributions -- Dividends to shareholders are recorded on the
ex-dividend date. The Fund declares dividends from net investment income
annually. The Fund distributes net capital gains, if any, on an annual basis.
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
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
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.
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. The amount paid by the Fund on any redemption by the stockholders of any
of the initial 10,000 shares will be reduced by a portion of any unamortized
organization expenses, determined by the proportion of the amount of the initial
shares redeemed to the aggregate amount of the initial shares then outstanding
after taking into account any prior redemptions of any of the initial shares.
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, 1999, PROACTIVE voluntarily reimbursed
expenses totaling $34,685 so that total expenses of the Fund would not exceed
2.40% of average daily net assets. 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 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 1940 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
For the six months ended June 30, 1999, the cost of purchases and proceeds from
sales, excluding short-term investments and U.S. Government and agency
obligations were $64,483,023 and $65,369,740, respectively.
As of June 30, 1999, 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 Appreciation
------- ------------ ------------ ------------
OPTI-FLEX(R)DYNAMIC Fund $11,750,621 $1,503,428 ($164,924) $1,338,504
5. FEDERAL TAX INFORMATION
At December 31, 1998, the Fund had unused capital loss carryforwards of
$1,175,074 available to offset future gains, if any, for Federal income tax
purposes. The capital loss carryforward expires 2006.
August 20, 1999
<PAGE>
The OPTI-FLEX(R) DYNAMIC Fund
INVESTMENT ADVISOR
PROACTIVE Money Management, Inc.
DISTRIBUTOR
PROACTIVE Financial Services, Inc.
ADDRESS OF FUND, ADVISOR, & DISTRIBUTOR
21 Hawk Ridge Circle
Lake St. Louis, MO 63366-4240
888-PROACTIVE
(888-776-2284)
636-561-0100
www.proactive-inc.com/optifund
CUSTODIAN
Firstar Bank, N.A.
Firstar 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
