PROACTIVE
ASSET ALLOCATION FUNDS
[LOGO]
THE OPTI-FLEX(R) DYNAMIC FUND
ANNUAL REPORT
DECEMBER 31, 1999
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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[LOGO] THE OPTI-FLEX(R) DYNAMIC FUND
Dear Fellow OPTI-FLEX(R) DYNAMIC Fund Shareholder: February 25, 2000
We are very pleased that 1999 was the best performance year in the 3 1/4-year
history of our OPTI-FLEX(R) DYNAMIC FUND (OPTIX). As you can see from the table
and graph below, our long-term performance is now catching up with our
benchmark, the Dow Jones World Stock Index (DJW-X), from the inception of our
Fund and for the last 3-year period, and is now exceeding our benchmark for the
last 2-year period. In 1999, our OPTIX performance more than doubled the
performance of our benchmark.
AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDING 12/31/99
SINCE INCEPTION LAST 3-YEAR LAST 2-YEAR LAST 1-YEAR
(10/01/96) PERIOD PERIOD PERIOD
---------- ------ ------ ------
OPTIX +19.0% +19.4% +27.3% +51.1%
DJW-X +19.2% +19.6% +23.1% +24.5%
Past performance does not guarantee future results. Fund shares fluctuate in
value and, when redeemed, may be worth more or less than their initial cost. All
returns assume dividends and capital gains are reinvested, and do not reflect a
1% contingent deferred sales charge on Fund shares held less than one year. The
charts illustrate a hypothetical $10,000 initial investment on the Fund's
inception date of 10/1/96. We invite you to check out our current Fund price,
performance figures, Fund Facts, and our current prospectus anytime that you
wish on our website at WWW.PROACTIVE-INC.COM/OPTIFUND/NAV.HTML.
[GRAPH] The following information was presented as a line graph:
OPTIFLEX(R) DYNAMIC FUND vs. DOW JONES WORLD STOCK INDEX
OCTOBER 1, 1996 TO DECEMBER 31, 1999
DOW JONES WORLD STOCK INDEX OPTI-FLEX(R) DYNAMIC FUND
--------------------------- -------------------------
09/30/1996 $10,000 $10,000
12/31/1996 10,349 10,322
03/31/1997 10,299 10,403
06/30/1997 11,748 11,014
09/30/1997 12,144 11,565
12/31/1997 11,685 10,840
03/31/1998 13,250 11,685
06/30/1998 13,488 11,051
09/30/1998 11,785 11,529
12/31/1998 14,221 11,629
03/31/1999 14,620 11,763
06/30/1999 15,429 12,474
09/30/1999 15,109 12,796
12/31/1999 17,703 17,566
Our Fund now has a 4 STAR RATING FROM MORNINGSTAR, which is their second highest
rating on a scale of 1 to 5, and indicates that our Fund is in the top 30% of
all investment companies for the last 3-year period. According to the
WWW.MORNINGSTAR.COM web page of 1/4/2000, OPTIX FINISHED 1999 IN THE TOP 6% OF
533 MUTUAL FUNDS IN THEIR DOMESTIC HYBRID CATEGORY FOR THE LAST 3-YEAR PERIOD,
AND IN THE TOP 1% OF 716 MUTUAL FUNDS IN THEIR DOMESTIC HYBRID CATEGORY FOR THE
LAST 1-YEAR PERIOD.
According to the FUNDS OF FUNDS ASSOCIATION, at WWW.FUNDSOFFUNDS.ORG, based on
data provided by LIPPER ANALYTICAL SERVICES, INC., OPTIX PERFORMANCE FOR 1999
RANKED #1 OF 26 FUNDS OF FUNDS IN THEIR CONSERVATIVE ALLOCATION CATEGORY. (Our
1999 performance also exceeded all 27 Funds of Funds in their Moderate
Allocation Category and all 33 Funds of Funds in their Aggressive Allocation
Category.)
We are particularly pleased that we have just received a Performance Achievement
Certificate from Lipper showing that our OPTI-FLEX(R)DYNAMIC FUND RANks NUMBER
ONE among 223 mutual funds in their Flexible Portfolio Funds category for the
1-year Period Ending December 31, 1999. THE OPTI-FLEX(R) DYNAMIC FUND
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[LOGO] THE OPTI-FLEX(R) DYNAMIC FIND
We were able to achieve our above average Fund performance last year by
substantially increasing our investment in the Montgomery Global Long-Short Fund
(MNGLX) to over 60% of our portfolio. The performance of MNGLX has continued to
exceed our expectations, and we expect it to remain a core holding of our Fund
for some time in the future. However, we will continue to closely monitor its
performance on a day-by-day basis.
Our Fund performance during 1999 was also enhanced by our becoming more
defensive around an interim top in the U.S. stock market the middle of July, and
by our becoming much more aggressive in our investment portfolio near the end of
October. This proved to be very timely, and contributed to the substantial
increase in the value of our Fund during the last quarter of 1999, as shown on
the mountain chart below.
[GRAPH] The following information was presented as a line graph:
GROWTH OF $10,000 INVESTMENT
OPTI-FLEX(R) DYNAMIC FUND
-------------------------
09/30/1996 $10,000
12/31/1996 10,322
03/31/1997 10,403
06/30/1997 11,014
09/30/1997 11,565
12/31/1997 10,840
03/31/1998 11,685
06/30/1998 11,051
09/30/1998 11,529
12/31/1998 11,629
03/31/1999 11,763
06/30/1999 12,474
09/30/1999 12,796
12/31/1999 17,566
We believe significant parts of the U.S. stock market are now substantially
over-priced. With a heavy calendar of new issues coming to the market, a
tightening policy from the Federal Reserve, and rising interest rates, we think
it will be much more difficult to achieve substantial gains with a buy-and-hold
approach to investing in the U.S. stock market in 2000. We believe our global
long-short approach and OPTI-FLEX(R) (OPTImuM-FLexible) DYNAMIC money management
strategy is well suited to the diverse stock market action that we expect to
continue throughout most of this year.
Note that new accounts with our Fund can normally be opened with as little as
$1,000, but can even be opened with only $500 for all IRAs, including
Traditional, Roth, and Education IRAs. Our Fund Investment Advisor, PROACTIVE
MONEY MANAGEMENT, INC. paid the $8 annual IRA fee for all our Fund accounts in
1999, as well as the $10 annual fee for accounts below $10,000. They have also
agreed to pay the same fees for the year 2000.
Please let your representative or us know if you have any questions, or if we
can assist you in any way. We believe we are now better equipped than ever
before to continue to seek above average market returns with below average
market risk. We believe our Fund is A FUND FOR ALL SEASONS.(R) "WE CAN'T CONTROL
THE WIND, BUT WE Can ADJUST THE SAILS." Thank you for the confidence you have
placed in us.
Sincerely yours,
/s/ C. Martin Unterreiner
C. Martin Unterreiner,
OPTI-FLEX(R) Portfolio Manager
3
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[LOGO] THE OPTI-flex DYNAMIC FUND
PORTFOLIO OF INVESTMENTS
December 31, 1999
SHARES VALUE
------------ ------------
REGISTERED INVESTMENT COMPANIES - 100%
Montgomery Global Long-Short Fund # 383,683 $ 11,947,877
Oppenheimer Gold and Special Minerals Fund 215,443 2,253,536
Prudent Bear Fund # 572,298 2,111,778
Rydex Precious Metals Fund # 323,058 1,476,376
Van Wagoner Emerging Growth Fund # 17,243 739,186
Van Wagoner Micro-Cap Fund # 4,850 168,722
Rydex Series Trust Ursa Fund 5,887 45,917
Van Wagoner Post-Venture Fund # 348 13,244
Rydex Series Trust Arktos Fund 2,580 11,197
Van Wagoner Technology Fund # 133 7,754
Caldwell & Orkin Market Opportunity Fund 72 1,335
Van Kampen American Value Fund # 53 1,259
Flex-funds Money Market Fund 14,368 14,368
-----------
TOTAL REGISTERED INVESTMENT COMPANIES
(Cost $13,824,725) 18,792,549
-----------
TOTAL INVESTMENTS - 100%
(Cost $13,824,725) $ 18,792,549
===========
# Represents non-income producing security.
See accompanying notes to financial statements.
4
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[LOGO] THE OPTI-flex DYNAMIC FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
Assets:
Investments, at market value (cost $13,824,725) $ 18,792,549
Interest receivable 21
Prepaid expense and other assets 16,986
Total Assets 18,809,556
Liabilities:
Management fees payable 17
Distribution fees payable 29,266
Shareholder services fees payable 9,046
Other accrued liabilities 25,524
Total Liabilities 63,853
Net Assets $ 18,745,703
Components of Net Assets:
Capital $ 12,148,920
Accumulated net investment gain (loss) (295,526)
Accumulated undistributed net realized gains 1,924,485
from investment transactions
Net unrealized appreciation of investments 4,967,824
Total Net Assets $ 18,745,703
Capital Stock Outstanding 1,186,446
Net Asset Value -- Offering and Redemption Price $ 15.80
Per Share
See accompanying notes to financial statements.
5
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[LOGO] THE OPTI-flex DYNAMIC FUND
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1999
Investment Income:
Dividends $ 91,979
Interest 1,747
Total Investment Income 93,726
Fund Expenses:
Management fees 101,475
Distribution expense 101,475
Transfer agent and accounting fees 34,129
Shareholder service fee 33,825
Trustee fees 30,874
Administrative fees 26,279
Registration and filing fees 17,349
Amortization of organization costs 14,987
Custodian fees 13,633
Audit fees 12,045
Insurance expense 9,652
Other expenses 4,399
Total Expenses 400,122
Expenses voluntarily reimbursed by Investment (75,385)
Manager
Distribution expenses reimbursed (1,570)
Net Expenses 323,167
Net Investment Income (Loss) (229,441)
Realized and Unrealized Gains from Investments:
Net realized gains from investment transactions 1,181,305
Net realized gains from distributions of 721,080
realized gains by other investment companies
Net change in unrealized appreciation of 4,669,767
investments
Net Realized and Unrealized Gains from 6,572,152
Investments
Net Increase in Net Assets Resulting from $ 6,342,711
Operations
See accompanying notes to financial statements.
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[LOGO] THE OPTI-flex DYNAMIC FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1999 1998
<S> <C> <C>
Increase (Decrease) In Net Assets:
Operations:
Net investment income (loss) $ (229,441) $ (72,020)
Net realized gains from investment transactions 1,902,385 640,705
Net change in unrealized appreciation of investments 4,669,767 365,142
Net Increase in Net Assets Resulting from Operations 6,342,711 933,827
Capital Transactions:
Proceeds from shares subscribed 1,794,654 1,949,493
Cost of shares redeemed (2,183,144) (3,621,361)
Net Increase (Decrease) in Net Assets Resulting
from Capital Transactions (388,490) (1,671,868)
Total Increase (Decrease) In Net Assets 5,954,221 (738,041)
Net Assets - Beginning of Period 12,791,482 13,529,523
Net Assets - End of Period $18,745,703 $12,791,482
Share Transactions:
Subscribed 152,258 194,882
Redeemed (188,799) (359,249)
Net Increase (Decrease) in Shares Outstanding (36,541) (164,367)
</TABLE>
See accompanying notes to financial statements.
7
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[LOGO] THE OPTI-flex DYNAMIC FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended October 1, 1996 (1)
December 31, December 31, December 31, through December
1999 1998 1997 31, 1996
<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) (0.20) (0.06) 0.03 0.09
Net gains from investments (realized 5.54 0.77 0.47 0.23
and unrealized)
Total 5.34 0.71 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 $ 15.80 $ 10.46 $ 9.75 $ 10.13
Total Return (excludes redemption charge): 51.05% 7.28% 5.02% 3.22%(2)
Ratios/Supplemental Data:
Net assets, end of period (000) $ 18,746 $ 12,791 $ 13,530 $ 6,806
Ratio of expenses to average net assets(5) 2.39% 2.35% 2.35% 2.39%(3)
Ratio of net investment income (loss) to -1.69% -0.56% 0.32% 17.25%(3)(4)
averge net assets
Ratio of expenses to average net assets, 2.96% 2.99% 3.33% 14.61%(3)
before voluntary fee reductions(5)
Ratio of net investment income (loss) to -2.26% -1.20% -0.66% 5.03%(3)
average net assets before voluntary
fee reductions
Portfolio turnover rate 1011.63% 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.
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[LOGO] THE OPTI-flex DYNAMIC FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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
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
reclassified within the composition of net assets based on their federal
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[LOGO] THE OPTI-flex DYNAMIC FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1999
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 year ended December 31, 1999, PROACTIVE voluntarily reimbursed
expenses totaling $75,385 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. During the year ended December 31, 1999,
distribution expenses were reduced by $1,570 due to reimbursements.
Certain officers and trustees of the Fund are also officers or directors of the
Advisor and the Distributor and currently own 26% of the capital stock
outstanding.
4. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 1999, the cost of purchases and proceeds from
sales, excluding short-term investments and U.S. Government and agency
obligations, were $137,072,720 and $136,964,648 respectively.
As of December 31, 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 Dynamic Fund $13,824,725 $5,191,309 ($223,485) $4,967,824
10
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INDEPENDENT AUDITOR'S REPORT
The Shareholders and Board of Trustees of
The Proactive Asset Allocation Funds-The OPTI-flex Dynamic Fund:
We have audited the accompanying statement of assets and liabilities of the
OPTI-flex Dynamic Fund (the Fund), including the portfolio of investments, as of
December 31, 1999, and the related statement of operations, statements of
changes in net assets and the financial highlights for each of the periods
indicated herein. These financial statements and the financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
December 31, 1999, by confirmation with the custodia n and other appropriate
audit procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
OPTI-flex Dynamic Fund at December 31, 1999, the results of its operations, the
changes in its net assets and the financial highlights for each of the periods
indicated herein, in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 11, 2000
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[LOGO] THE OPTI-FLEX(R) DYNAMIC FUND
INVESTMENT ADVISOR
PROACTIVE Money Management, Inc.
DISTRIBUTOR
PROACTIVE Financial Services, Inc.
ADDRESS OF ADVISOR & DISTRIBUTOR
21 Hawk Ridge Circle
Lake Saint Louis, MO 63367
888-776-2284
636-561-0100
CUSTODIAN
Firstar Bank, N.A.
Firstar Tower
425 Walnut Street
Cincinnati, OH 45202
TRANSFER AGENT & DIVIDEND
DISBURSING AGENT
Mutual Funds Service Company
6000 Memorial Drive
Dublin, OH 43017
LEGAL COUNSEL
Armstrong, Teasdale, Schlafly, & Davis
One Metropolitan Square
St. Louis, MO 63102-2740
AUDITORS
KPMG LLP
Two Nationwide Plaza
Columbus, OH 43215
PROACTIVE Asset Allocation Funds
21 Hawk Ridge Circle
Lake Saint Louis, MO 63367
636-561-0100
