Rydex Inverse Mid-Cap Strategy

Objective And Strategy

Objective
Investment returns that inversely correlate to the daily performance of the S&P MidCap 400 Index. The fund does not seek to achieve its investment objective over a period of time greater than one day.

Strategy
Inverse index Portfolios are designed to benefit from decreases in the underlying benchmark index. When the value of the underlying index increases, however, the value of the Portfolio's shares should decrease on a daily basis by an inversely proportionate amount. The Fund will not own the securities included in the underlying index. Instead, its primary investment strategy is to engage to a significant extent in short sales of securities or futures contracts and in options on securities, futures contracts, and stock indices. On a day-to-day basis, the Fund holds U.S. Government securities or cash equivalents to collateralize these futures and options contracts.
Tax Inefficient Fund

Principal Risks

* This portfolio is non-diversified, with the potential to invest a greater portion of its assets in a limited number of companies. Consequently, this portfolio may have more risk as changes in the value of a single security may have a more significant effect on the portfolio's net asset value.

* This portfolio can leverage or use leveraged instruments or derivatives. Portfolios that use leverage, that is, borrow money, are subject to the risk that the cost of borrowing money to leverage will exceed the returns for the securities purchased or that the securities purchased may actually go down in value. Thus, the portfolio's net asset value can decrease more quickly than if the portfolio had not borrowed. Portfolios that use leveraged instruments or derivatives such as futures, options and swap agreements, may expose the portfolio to additional risks that it would not be subject to if it invested directly in the securities underlying those derivatives. The more a portfolio invests in leveraged instruments, the more the leverage will magnify any gains or losses on those investments.

* This portfolio is subject to the risks of short selling (selling securities that the portfolio does not own). The Fund may be required to pay a premium to sell a security short. There is no guarantee that the price of a shorted stock will fall, or that the portfolio will produce positive returns. It is possible for the portfolio to lose money on shorted stocks.

* This portfolio is subject to tracking error risk such that the Advisor may not be able to cause the portfolio's performance to match or exceed that of its benchmark, either on a daily or an aggregate basis. Tracking error may cause the portfolio's performance to be less than you expect.

* Certain portfolios are subject to active trading risk. (Some may derive a significant portion of their assets from investors who take part in certain strategic and tactical asset allocation programs). The frequent exchange of shares of the portfolio may cause the portfolio to experience high turnover. High portfolio turnover may result in the portfolio having to pay higher transaction costs and may negatively impact the portfolio manager's ability to achieve the investment objective of the portfolio.