Direxion/Wilshire Dynamic Fund

DXDWX CUSIP: 254939416
DXDWX Inception Date: 3/2/2009
DXWCX CUSIP: 254939325
DXWCX Inception Date: 3/1/2010

The Direxion/Wilshire Dynamic Fund ("Dynamic Fund") seeks capital appreciation. To achieve its investment objective, the Dynamic Fund combines a strategic asset allocation with a "tactical overlay" to position the Dynamic Fund defensively or aggressively, depending upon the outlook of the Subadviser.

Under normal circumstances, the Dynamic Fund is managed by the Adviser pursuant to the Subadviser's traditional asset allocation model which allocates approximately 60% of the Dynamic Fund's total assets to equity securities and 40% to fixed income securities, with a tactical overlay to increase or decrease the Dynamic Fund’s risk exposure based on the Subadviser's outlook for the market. The Subadviser's tactical model evaluates asset class allocations on a monthly basis. In response to market conditions, the Subadviser may recommend that the Adviser rebalance the Dynamic Fund's portfolio, use short positions and/or employ leverage in its tactical allocations.

August 2010

Allocation Summary:

This month the Direxion/Wilshire Dynamic Fund (the Fund) increased its overweight positions in the U.S. investment-grade fixed income asset classes while maintaining a neutral position in high yield and non-U.S. investment grade fixed income. The Fund's allocation to TIPS was reduced from a neutral to an underweight position, the magnitude of the underweight position in U.S. equities was maintained and the underweight position in non-U.S. equities was reduced. Relative to the Strategic Asset Allocation (SAA), the Fund's beta increased to .89 from .87, a marginal increase that keeps the Fund fairly defensive.

• Fixed Income: net exposure of 50.5% (an increase of 4.0% over last month)
• Equities: net exposure of 51.5% (an increase of 1.0% over last month)
• Cash: net exposure of 0% (a decrease of 6.0% over last month)
• Commodities: net exposure of 2.0% (an increase of 0.5% over last month)

After several negative months, markets made a dramatic turnaround this July with the Wilshire 5000 Total Market IndexSM rising 6.97%. Solid corporate earnings and modestly positive economic news around the world, including the results of the bank stress tests in Europe, bolstered nearly every asset class this month. In a complete reversal from June, when small value was the worst performer, this July that style turned in the strongest performance, up 7.54%. All ten GICS sectors were positive, led by the cyclical sectors like Materials and Industrials. The Fund's underweight to equities, both within the U.S. and abroad, detracted from performance as the market rallied.

Bond markets continued to move upwards with the Barclays U.S. Aggregate Bond Index returning 1.07%. High yield was the strongest performer this July, up 3.46%, its strongest monthly return since September 2009. Corporate bonds were up nearly two percent, led by Financials, Industrials and Utilities, and corporate issuance increased substantially. While the defensive position of the Fund was a hindrance this month, a market shift in direction could be beneficial.