UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-08243 |
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Direxion Funds |
(Exact name of registrant as specified in charter) |
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1301 Avenue of the Americas (6th Ave.), 28th Floor
New York , NY | |
10019
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(Address of principal executive offices) | | (Zip code) |
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1301 Avenue of the Americas (6th Ave.), 28th Floor
New York , NY 10019 |
(Name and address of agent for service) |
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Registrant’s telephone number, including area code: | 1-800-851-0511 | |
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Date of fiscal year end: | August 31, 2019 | |
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Date of reporting period: | February 28, 2019 | |
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Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
SEMI–ANNUAL REPORT FEBRUARY 28, 2019
1301 Avenue of the Americas (6th Ave.), 28th Floor New York, New York 10019 www.direxioninvestments.com
1.2X BULL FUND
Direxion Monthly High Yield Bull 1.2X Fund (DXHYX)
| 1.25X BULL FUND | | 1.25X BEAR FUND | |
| Direxion Monthly NASDAQ-100® Bull 1.25X Fund (DXNLX) | | Direxion Monthly NASDAQ-100® Bear 1.25X Fund (DXNSX) | |
| 1.35X BULL FUND | | 1.35X BEAR FUND | |
| Direxion Monthly 25+ Year Treasury Bull 1.35X Fund (DXLTX) | | Direxion Monthly 25+ Year Treasury Bear 1.35X Fund (DXSTX) | |
| 2X BULL FUNDS | | 2X BEAR FUNDS | |
| Direxion Monthly NASDAQ-100® Bull 2X Fund (DXQLX) | | | | | |
| Direxion Monthly S&P 500® Bull 2X Fund (DXSLX) | | Direxion Monthly S&P 500® Bear 2X Fund (DXSSX) | |
| Direxion Monthly Small Cap Bull 2X Fund (DXRLX) | | Direxion Monthly Small Cap Bear 2X Fund (DXRSX) | |
| Direxion Monthly 7-10 Year Treasury Bull 2X Fund (DXKLX) | | Direxion Monthly 7-10 Year Treasury Bear 2X Fund (DXKSX) | |
| Direxion Monthly Emerging Markets Bull 2X Fund (DXELX) | | | | | |
You can find a Fund's prospectus, reports to shareholders, and other information about the Fund online at http://www.direxioninvestments.com/regulatory-documents. You can also get this information at no cost by calling (800) 851-0511 or by sending an email request to info@direxionfunds.com.
IMPORTANT NOTE: Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds' annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the shareholder reports from your financial intermediary such as a broker-dealer or bank. Instead, annual and semi-annual shareholder reports will be available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
You may elect to receive all future annual and semi-annual shareholder reports in paper, free of charge. To elect to continue receive paper copies of shareholder reports through the mail or to otherwise change your delivery method, contact your financial intermediary or follow the instructions included with this disclosure. Your election to receive shareholder reports in paper will apply to all funds that you hold through the financial intermediary. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action.
Letter to Shareholders | | | 4 | | |
Expense Example | | | 9 | | |
Allocation of Portfolio Holdings | | | 11 | | |
Schedules of Investments | | | 12 | | |
Statements of Assets and Liabilities | | | 25 | | |
Statements of Operations | | | 29 | | |
Statements of Changes in Net Assets | | | 33 | | |
Financial Highlights | | | 40 | | |
Notes to the Financial Statements | | | 42 | | |
Supplemental Information | | | 60 | | |
Trustees and Officers | | | 61 | | |
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Letter to Shareholders (Unaudited)
Dear Shareholders,
This Semi-Annual Report for the Direxion Monthly Leveraged Mutual Funds (each a "Fund" and collectively the "Funds") covers the period from September 1, 2018 to February 28, 2019 (the "Semi-Annual Period").
Market Review:
U.S. equities entered the Semi-Annual Period amid robust economic growth, strong economic data and sturdy quarterly earnings. Trade tensions were a key driver during the Semi-Annual Period, affecting equity performance at home and abroad. A bilateral trade agreement between the U.S. and Mexico was reached in August 2018, with the addition of Canada coming in late September. U.S. equities outperformed in Q3 2018, compared to their global counterparts, as global trade tensions were outweighed by U.S. market potency. Emerging markets showed continued weakness during this stretch, with the strength of the U.S. dollar weighing on stock performance. Into the fall, U.S. midterm elections cast a shadow of uncertainty over equity markets. A myriad of factors, including the continued threat of a trade war with China, rising rates, a slowing global economy and slowing earnings growth, were all in play as U.S. equities posted sharp declines for Q4. A subsequent rebound could be initially attributed to optimism on a U.S. and China trade deal outweighing other headwinds at hand. A change of tone from the Federal Reserve towards rate flexibility in January 2019 proved a boon to both U.S. and international equities, as emerging markets specifically saw an increased appetite for risk. The rebound kept rolling through the end of the Semi-Annual Period, with tariffs being a key daily driver, as the overall economic backdrop remained fairly consistent from January. Through February, UK equities struggled on ever-present Brexit concerns, while Asian equities gained on trade deal progress.
The fixed income market entered the Semi-Annual Period to a backdrop of strong U.S. economic data, and a hawkish Federal Reserve. September saw U.S. initial jobless claims fall to levels not seen since the 1960s, as high yield bonds outperformed government debt. The Federal Reserve raised the short-term rate to 2% at its September meeting. Shifting from a very hawkish stance in October, the Federal Reserve adopted a more dovish tone in November, as markets continued to price in a December rate hike. U.S. and China trade tensions and tariffs remained elevated through year-end and combined with weak earnings guidance to send bond yields lower. The Federal Reserve raised the short-term rate again in December amid continued positive economic data, while it simultaneously signaled a more cautious view on the economy. Into the New Year, corporate bonds outperformed government bonds, and high yield debt as global growth concerns crept into the fold. With GDP estimates being adjusted downward, and inflation remaining near the stated mandate of 2%, the Federal Reserve provided itself additional latitude on future rate decisions. This was a change in outward sentiment from previous policy, which stated gradual increases in rates would be needed. Nearing the end of the Semi-Annual Period, equity markets continued a rally off the December 2018 lows again on hopes to a resolution of the U.S.-China trade impasse. Bond yields rose, with investors willing to take on more risk as U.S. economic and employment data continued to be consistently strong.
Factors Affecting Direxion Fund Performance:
Benchmark Performance: The calendar month performance of each Fund's benchmark index, and the factors and market conditions implicitly affecting that index, are the primary factors driving Fund performance. Given the Funds' calendar month investment objective, the Funds' calendar month index returns are most important. The market conditions affecting the Funds' benchmark indexes during the past year are described below.
Leverage: Each Fund seeks calendar month investment results (before fees and expenses) of either 120%, 125%, 135% or 200% (for the Bull Funds) or -125%, -135% or -200% (for the Bear Funds) of the performance of its respective underlying index. The use of leverage magnifies a Fund's gains or losses and increases the investment's risk and volatility.
Volatility and Compounding: A leveraged Fund's investment objective is to provide a multiple, or inverse multiple, of the calendar month returns of an underlying index. Over periods longer or shorter than a calendar month, a Fund should not be expected to provide its respective multiple of the return of the underlying index. Due to the effects of compounding – a
DIREXION SEMI-ANNUAL REPORT
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universal mathematical concept that applies to all leveraged investments – returns of the Funds over longer periods will differ from the Funds' calendar month stated investment objective. Periods of high-volatility lacking a clear trend hurt a Fund's performance, while trending low-volatility markets enhance a Fund's performance.
Cost of Financing: In order to attain leveraged exposure, a Bull Fund incurs a cost of LIBOR1 plus or minus a spread, and a Bear Fund receives LIBOR plus or minus a spread as applied to the borrowed portion of the Fund's exposure. Financing costs create a drag on a Bull Fund's performance. Because LIBOR is very low, a Bear Fund receives a negligible amount of financing, or in the case of hard-to-borrow shares, might pay to finance its short position.
Equity Dividends: A Bull Fund's performance is positively impacted by equity and index dividends, as the Funds receive those payments. A Bear Fund's performance is negatively impacted, as they are obligated to pay the dividends.
Fees, Expenses, and Transaction Costs: Fees and expenses are listed in each Fund's prospectus and may be larger than many traditional index funds' fees, causing a greater negative impact on Fund performance. Transactions costs are not included in the expense ratio of the Funds. Transaction costs can be higher due to a Fund's use of leverage, significant purchase and redemption activity by Fund shareholders; or trading securities that are comparatively less liquid.
Fund Operational Review:
The Funds are leveraged and seek to provide a calendar month return of 120%, 125%, 135%, 200%, -125%, -135% or -200% of the calendar month performance of a particular benchmark. The term "calendar month" refers to the period from the close of the markets on the last business day of a given calendar month, until the close of the markets on the last business day of the subsequent calendar month. The Funds seek calendar month leveraged investment results which should not be equated with seeking a leveraged goal for shorter than a calendar month. An investor who purchases shares on a day other than the last business day of a calendar month will generally receive more, or less, than the target exposure to the index, depending on the performance of the target index. If a Fund's shares are held through the end of a calendar month or months, the Fund's performance is likely to deviate from the multiple of the benchmark performance for the longer period. Similarly, the return for investors investing for periods less than a calendar month, or for a period different than the calendar month, will likely deviate from the multiple of the benchmark performance for such shorter periods. The Funds are not suitable for all investors and should be utilized only by sophisticated investors who understand the risks associated with the use of leverage risk, the consequences of seeking calendar month leveraged investment results, for a Bear Fund, understand the risks of shorting, and intend to actively monitor and manage their investments.
The Funds with the word "Bull" in their name attempt to provide investment results that correlate to 120%, 125%, 135% or 200% of the return of an index or benchmark, meaning the Bull Funds attempt to move in the same direction as the target index or benchmark. The Funds with the word "Bear" in their name attempt to provide investment results that correlate to -125%, -135% or -200% of the return of an index or benchmark, meaning that Bear Funds attempt to move in the opposite or inverse direction of the target index or benchmark.
In seeking to achieve each Fund's calendar month investment objective, Rafferty Asset Management ("Rafferty" or the "Adviser") uses statistical and quantitative analysis to determine each Fund's investments and the techniques to employ. Rafferty relies upon a pre-determined model to determine the appropriate repositioning of each Fund's investments in accordance with its calendar month investment objective. Using this analysis, Rafferty determines the type, quantity and mix of investment positions it believes in combination should produce calendar month returns consistent with a Fund's investment objective. In general, if a Fund is performing as designed, the return of the index or benchmark will dictate the return for that Fund. Each Fund pursues its investment objective regardless of market conditions and does not take defensive positions.
1 London Inter-Bank Offer Rate. The interest rate that the banks charge each other for loans (usually in Eurodollars). This rate is applicable to the short-term international interbank market, and applies to very large loans borrowed for anywhere from one day to five years.
DIREXION SEMI-ANNUAL REPORT
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Each Fund has a clearly articulated goal which requires the Fund to seek economic exposure in excess of its net assets. Therefore, each Fund invests in some combination of financial instruments that provide economic exposure consistent with the Fund's investment objective. Financial instruments may include swap agreements, exchange-traded funds ("ETFs"), swaps on ETFs, futures contracts, forward contracts, reverse repurchase agreements, options, and other financial instruments. Each Fund invests significantly in swap agreements. Rafferty uses these types of investments to produce economically "leveraged" investment results. Leveraging allows Rafferty to generate a greater positive or negative return than what would be generated on the invested capital without leverage, thus changing small market movements into larger changes in the value of the investments of a Fund.
The Funds' investments in derivatives may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including risk related to the market, leverage, imperfect monthly correlations with underlying investments or a Fund's other portfolio holdings, higher price volatility, lack of availability, counterparty risk, liquidity, valuation and legal restrictions. The use of derivatives is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio securities transactions. The use of derivatives may result in larger losses or smaller gains than directly investing in securities. When a Fund uses derivatives, there may be imperfect correlation between the value of the reference assets and the derivative, which may prevent the Fund from achieving its investment objective. Because derivatives often require only a limited initial investment, the use of derivatives may expose the Fund to losses in excess of those amounts initially invested.
Each Fund may use a combination of swaps on its respective underlying index and swaps on an ETF whose investment objective is to track the performance of the same, or a substantially similar index to achieve its investment objective. The reference ETF may not closely track the performance of the underlying index due to fees and other costs borne by the ETF and other factors. Thus, to the extent that a Fund invests in swaps that use an ETF as a reference asset, the Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with the Index as it would if the Fund used swaps that utilized the Index as the reference asset. Any financing, borrowing or other costs associated with using derivatives may also reduce the Fund's return.
The discussion below relates to the performance of the Funds for their respective period. The Funds seek to provide calendar month returns which are a multiple – positive or negative – of the calendar month performance of a particular benchmark. The performance of the Funds for their respective period is important for understanding whether these Funds meet their investment objectives. A Fund meeting its calendar month investment objective should have performance for the period similar to the performance indicated by models based on the calendar month returns of the relevant benchmark for the period. Direxion maintains models indicating the expected performance of each Fund in light of the path of the relevant benchmark. The models, and a description of how they work, are available on the Direxion website (www.direxioninvestments.com). The models do not take into account the size of a Fund, the Fund's expense ratio or any transaction fees associated with creating a Fund's portfolio. A brief comparison of the actual returns versus the expected returns for each of the Funds in this Semi-Annual Report follows.
Fund Performance Review:
The Direxion Monthly High Yield Bull 1.2X Fund seeks to provide 120% of the calendar month return of the Solactive High Yield Beta Index. The Solactive High Yield Beta Index is a rules-based, systematic strategy index that provides exposure to an equal-weighted portfolio of three high-yield ETFs. The allocation to each U.S. High Yield Corporate Bond ETF is adjusted on a monthly basis. The index is calculated and distributed by Solactive AG and is calculated and published in U.S. Dollars. For the Semi-Annual Period, the Solactive High Yield Beta Index returned 1.91%. Given the calendar month investment objectives of the Fund and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of annual performance of the Fund. The Direxion Monthly High Yield Bull 1.2X Fund returned 1.19%, while the model indicated an expected return of 2.26%.
The Direxion Monthly NASDAQ-100® Bull 1.25X Fund and the Direxion Monthly NASDAQ-100® Bear 1.25X Fund seek to provide 125% and -125% of the calendar month return of the NASDAQ-100® Index, respectively. The NASDAQ-100® Index includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market® based on market capitalization. All companies listed on the index have an average daily trading volume of at least 200,000 shares. For the Semi-Annual Period, the NASDAQ-100® Index returned -6.74%. Given the calendar month investment
DIREXION SEMI-ANNUAL REPORT
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objectives of the Funds and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of performance of the Funds. The Direxion Monthly NASDAQ-100® Bull 1.25X Fund returned -10.06%, while the model indicated an expected return of -8.73%. The Direxion Monthly NASDAQ-100® Bear 1.25X Fund returned 7.53%, while the model indicated an expected return of 5.42%.
The Direxion Monthly 25+ Year Treasury Bull 1.35X Fund and the Direxion Monthly 25+ Year Treasury Bear 1.35X Fund seek to provide 135% and -135% of the calendar month return of the ICE U.S. Treasury 25+ Year Bond Index, respectively. The ICE U.S. Treasury 25+ Year Bond Index is a market value weighted index that is designed to measure the performance of U.S. dollar-denominated, fixed-rate securities with minimum term to maturity greater than 25 years. Bonds eligible for inclusion must: be issued by the U.S. Treasury; have a minimum term to maturity of greater than 25 years; be denominated in U.S. Dollars; be an either callable or non-callable issue; and have a fixed, non-zero coupon. The index excludes zero-coupon STRIPS, inflation-linked note securities, floating-rate notes, cash management and treasury bills and any government agency debt that is issued with or without a government guarantee. For the Semi-Annual Period, the ICE U.S. Treasury 25+ Year Bond Index returned 0.45%. Given the calendar month investment objectives of the Funds and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of performance of the Funds. The Direxion Monthly 25+ Year Treasury Bull 1.35X Fund returned -1.49%, while the model indicated an expected return of 0.48%. The Direxion Monthly 25+ Year Treasury Bear 1.35X Fund returned -0.18%, while the model indicated an expected return of -1.50%.
The Direxion Monthly NASDAQ-100® Bull 2X Fund seeks to provide 200% of the calendar month return of the NASDAQ-100® Index. The NASDAQ-100® Index includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market® based on market capitalization. All companies listed on the index have an average daily trading volume of at least 200,000 shares. For the Semi-Annual Period, the NASDAQ-100® Index returned -6.74%. Given the calendar month investment objectives of the Fund and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of performance of the Fund. The Direxion Monthly NASDAQ-100® Bull 2X Fund returned -17.48%, while the model indicated an expected return of -15.29%.
The Direxion Monthly S&P 500® Bull 2X Fund and the Direxion Monthly S&P 500® Bear 2X Fund seek to provide 200% and -200% of the calendar month return of the S&P 500® Index, respectively. Standard & Poor's® selects the stocks comprising the S&P 500® Index on the basis of market capitalization, financial viability of the company and the public float, liquidity and price of a company's shares outstanding. The index is a float-adjusted, market capitalization-weighted index. For the Semi-Annual Period, the S&P 500® Index returned -3.04%. Given the calendar month investment objectives of the Funds and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of performance of the Funds. The Direxion Monthly S&P 500® Bull 2X Fund returned -10.39%, while the model indicated an expected return of -8.06%. The Direxion Monthly S&P 500® Bear 2X Fund returned 2.70%, while the model indicated an expected return of 0.00%.
The Direxion Monthly Small Cap Bull 2X Fund and the Direxion Monthly Small Cap Bear 2X Fund seek to provide 200% and -200% of the calendar month return of the Russell 2000® Index, respectively. The Russell 2000® Index measures the performance of approximately 2,000 small-capitalization companies in the Russell 3000® Index, based on a combination of their market capitalization and current index membership. For the Semi-Annual Period, the Russell 2000® Index returned -8.86%. Given the calendar month investment objectives of the Funds and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of annual performance of the Funds. The Direxion Monthly Small Cap Bull 2X Fund returned -22.55%, while the model indicated an expected return of -20.73%. The Direxion Monthly Small Cap Bear 2X Fund returned 8.99%, while the model indicated an expected return of 6.16%.
The Direxion Monthly 7-10 Year Treasury Bull 2X Fund and the Direxion Monthly 7-10 Year Treasury Bear 2X Fund seek to provide 200% and -200% of the calendar month return of the ICE U.S. Treasury 7-10 Year Bond Index, respectively. The ICE U.S. Treasury 7-10 Year Bond Index is a market value weighted index that includes publicly issued U.S. Treasury securities that have a remaining maturity of greater than seven years and less than or equal to ten years. Eligible securities must be fixed rate, denominated in U.S. Dollars, and have $300 million or more of outstanding face value, excluding amounts held by the Federal Reserve. Securities excluded from the index are zero-coupon STRIPS, inflation-linked securities, floating-rate notes, cash management and Treasury bills, and any government agency debt that is issued with or without a government guarantee. For Semi-Annual Period, the ICE U.S. Treasury 7-10 Year Bond Index returned 2.74%. Given the calendar month investment objectives of the Funds and the path dependency of returns for longer periods, the return of the index alone
DIREXION SEMI-ANNUAL REPORT
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should not generate expectations of performance of the Funds. The Direxion Monthly 7-10 Year Treasury Bull 2X Fund returned 3.71%, while the model indicated an expected return of 5.50%. The Direxion Monthly 7-10 Year Treasury Bear 2X Fund returned -3.80%, while the model indicated an expected return of -5.56%.
The Direxion Monthly Emerging Markets Bull 2X Fund seeks to provide 200% of the calendar month return of the MSCI Emerging Markets IndexSM. The MSCI Emerging Market IndexSM is a free float-adjusted market capitalization weighted index that is designed to represent the performance of large- and mid-capitalization securities across emerging markets countries. For the Semi-Annual Period, the MSCI Emerging Markets IndexSM returned -0.22%. Given the calendar month investment objectives of the Fund and the path dependency of returns for longer periods, the return of the index alone should not generate expectations of performance of the Fund. The Direxion Monthly Emerging Markets Bull 2X Fund returned -5.05%, while the model indicated an expected return of -2.60%.
As always, we thank you for using the Direxion Funds and we look forward to our mutual success.
Regards,
| |
Patrick Rudnick | |
Principal Executive Officer
Principal Financial Officer | |
The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. To obtain performance data current to the most recent month-end, please call toll-free, 1.800.851.0511, or visit www.direxioninvestments.com.
An investor should consider the investment objectives, risks, charges and expenses of the Direxion Funds carefully before investing. The prospectus contains this and other information about the Direxion Funds. To obtain a prospectus, please call the Direxion Funds at 1.800.851.0511 or visit www.direxioninvestments.com. The prospectus should be read carefully before investing.
Investing in the Direxion Funds may be more volatile than investing in broadly diversifed funds. The use of leverage by a Fund increases the risk to the Fund. The Direxion Funds are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk, consequences of seeking monthly leveraged, or monthly inverse leveraged, investment results and intend to actively monitor and manage their investment. The Direxion Funds are not designed to track their respective underlying indices over a period of time longer than one calendar month.
An investment in each Fund involves risk, including the possible loss of principal. Each Fund is non-diversifed and includes risks associated with concentration which results from a Fund's investment in a particular industry, sector, or geographic region, which can result in increased volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause their price to fluctuate over time. Each Fund does not attempt to, and should not be expected to, provide returns which are a multiple, or inverse multiple, of the return of its underlying index for periods other than a full calendar month. For other risks including correlation, compounding, market volatility and specific risks regarding each sector, please read the prospectus. An investment in any of the Direxion Funds is subject to a number of risks that could affect the value of its shares. It is important that investors closely review and understand these risks before making an investment.
Distributed by: Rafferty Capital Markets, LLC
DIREXION SEMI-ANNUAL REPORT
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Expense Example (Unaudited)
February 28, 2019
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held the entire period (September 1, 2018 – February 28, 2019).
Actual expenses
The first line under each Fund in the following table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line under each Fund in the following table provides information about hypothetical account values and hypothetical expenses based on each Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in your Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as wire transfers, returned checks or stop payment orders. Therefore, the second line under each Fund in the table is useful in comparing ongoing Fund costs only, and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
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Expense Example (Unaudited)
February 28, 2019
| | | Annualized
Expense
Ratio | | Beginning
Account Value
September 1, 2018 | | Ending
Account Value
February 28, 2019 | | Expenses
Paid During
Period* | |
Direxion Monthly High Yield Bull 1.2X Fund | |
Based on actual fund return | | | 1.37 | % | | $ | 1,000.00 | | | $ | 1,011.90 | | | $ | 6.83 | | |
Based on hypothetical 5% return | | | 1.37 | % | | | 1,000.00 | | | | 1,018.00 | | | | 6.85 | | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | |
Based on actual fund return | | | 1.16 | % | | | 1,000.00 | | | | 899.40 | | | | 5.46 | | |
Based on hypothetical 5% return | | | 1.16 | % | | | 1,000.00 | | | | 1,019.04 | | | | 5.81 | | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | |
Based on actual fund return | | | 1.18 | % | | | 1,000.00 | | | | 1,075.30 | | | | 6.07 | | |
Based on hypothetical 5% return | | | 1.18 | % | | | 1,000.00 | | | | 1,018.94 | | | | 5.91 | | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | |
Based on actual fund return | | | 1.11 | % | | | 1,000.00 | | | | 985.10 | | | | 5.46 | | |
Based on hypothetical 5% return | | | 1.11 | % | | | 1,000.00 | | | | 1,019.29 | | | | 5.56 | | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | |
Based on actual fund return | | | 1.10 | % | | | 1,000.00 | | | | 998.20 | | | | 5.45 | | |
Based on hypothetical 5% return | | | 1.10 | % | | | 1,000.00 | | | | 1,019.34 | | | | 5.51 | | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | |
Based on actual fund return | | | 1.59 | % | | | 1,000.00 | | | | 825.20 | | | | 7.20 | | |
Based on hypothetical 5% return | | | 1.59 | % | | | 1,000.00 | | | | 1,016.91 | | | | 7.95 | | |
Direxion Monthly S&P 500® Bull 2X Fund | |
Based on actual fund return | | | 1.54 | % | | | 1,000.00 | | | | 896.10 | | | | 7.24 | | |
Based on hypothetical 5% return | | | 1.54 | % | | | 1,000.00 | | | | 1,017.16 | | | | 7.70 | | |
Direxion Monthly S&P 500® Bear 2X Fund | |
Based on actual fund return | | | 1.38 | % | | | 1,000.00 | | | | 1,027.00 | | | | 6.94 | | |
Based on hypothetical 5% return | | | 1.38 | % | | | 1,000.00 | | | | 1,017.95 | | | | 6.90 | | |
Direxion Monthly Small Cap Bull 2X Fund | |
Based on actual fund return | | | 1.45 | % | | | 1,000.00 | | | | 774.50 | | | | 6.38 | | |
Based on hypothetical 5% return | | | 1.45 | % | | | 1,000.00 | | | | 1,017.60 | | | | 7.25 | | |
Direxion Monthly Small Cap Bear 2X Fund | |
Based on actual fund return | | | 1.39 | % | | | 1,000.00 | | | | 1,089.90 | | | | 7.20 | | |
Based on hypothetical 5% return | | | 1.39 | % | | | 1,000.00 | | | | 1,017.90 | | | | 6.95 | | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | |
Based on actual fund return | | | 1.38 | % | | | 1,000.00 | | | | 1,037.10 | | | | 6.97 | | |
Based on hypothetical 5% return | | | 1.38 | % | | | 1,000.00 | | | | 1,017.95 | | | | 6.90 | | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | |
Based on actual fund return | | | 1.35 | % | | | 1,000.00 | | | | 962.00 | | | | 6.57 | | |
Based on hypothetical 5% return | | | 1.35 | % | | | 1,000.00 | | | | 1,018.10 | | | | 6.76 | | |
Direxion Monthly Emerging Markets Bull 2X Fund | |
Based on actual fund return | | | 1.37 | % | | | 1,000.00 | | | | 949.50 | | | | 6.62 | | |
Based on hypothetical 5% return | | | 1.37 | % | | | 1,000.00 | | | | 1,018.00 | | | | 6.85 | | |
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days (the number of days in the period of September 1, 2018 to February 28, 2019), then divided by 365.
DIREXION SEMI-ANNUAL REPORT
10
Allocation of Portfolio Holdings (Unaudited)
February 28, 2019
| | | Cash* | | Investment
Companies | | Swaps | | Total | |
Direxion Monthly High Yield Bull 1.2X Fund | | | 20 | % | | | 80 | % | | | 0 | %** | | | 100 | % | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | | 99 | % | | | — | | | | 1 | % | | | 100 | % | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | 103 | % | | | — | | | | (3 | )% | | | 100 | % | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | | 101 | % | | | — | | | | (1 | )% | | | 100 | % | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | 99 | % | | | — | | | | 1 | % | | | 100 | % | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | | 87 | % | | | — | | | | 13 | % | | | 100 | % | |
Direxion Monthly S&P 500® Bull 2X Fund | | | 94 | % | | | — | | | | 6 | % | | | 100 | % | |
Direxion Monthly S&P 500® Bear 2X Fund | | | 107 | % | | | — | | | | (7 | )% | | | 100 | % | |
Direxion Monthly Small Cap Bull 2X Fund | | | 92 | % | | | — | | | | 8 | % | | | 100 | % | |
Direxion Monthly Small Cap Bear 2X Fund | | | 109 | % | | | — | | | | (9 | )% | | | 100 | % | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | | 101 | % | | | — | | | | (1 | )% | | | 100 | % | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | 100 | % | | | — | | | | 0 | %** | | | 100 | % | |
Direxion Monthly Emerging Markets Bull 2X Fund | | | 102 | % | | | — | | | | (2 | )% | | | 100 | % | |
Allocation of Portfolio Holdings reflects percentages of net assets.
* Cash and other assets less liabilities.
** Percentage is less than 0.5%.
DIREXION SEMI-ANNUAL REPORT
11
Direxion Monthly High Yield Bull 1.2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
INVESTMENT COMPANIES - 80.0% | | | |
| | 693,281 | | | iShares iBoxx $ High Yield
Corporate Bond ETF (a) | | $ | 59,448,846 | | |
| | 1,665,700 | | | SPDR® Barclays High Yield
Bond ETF (a) | | | 59,448,833 | | |
| | | | | TOTAL INVESTMENT COMPANIES
(Cost $116,740,845) | | $ | 118,897,679 | | |
SHORT TERM INVESTMENTS - 3.7% | | | |
Money Market Funds - 3.7% | | | |
| | 5,540,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (b)(c) | | $ | 5,540,000 | | |
| | | | | TOTAL SHORT TERM
INVESTMENTS
(Cost $5,540,000) | | $ | 5,540,000 | | |
| | | | | TOTAL INVESTMENTS
(Cost $122,280,845) - 83.7% | | $ | 124,437,679 | | |
| | | | | Other Assets in Excess of
Liabilities - 16.3% | | | 24,195,010 | | |
| | | | | TOTAL NET ASSETS - 100.0% | | $ | 148,632,689 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Shareholders may obtain the financial statements of these investment companies at www.sec.gov.
(b) Represents annualized seven-day yield at February 28, 2019.
(c) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $5,540,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | |
Unrealized
Appreciation | |
Total return of PIMCO
0-5 Year High Yield
Corporate Bond Index ETF | |
3.4311% representing
1 month LIBOR rate + spread | |
Credit Suisse
International | |
12/13/2019 | | | 596,038 | | | $ | 59,132,911 | | | $ | 310,164 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
12
Direxion Monthly NASDAQ-100® Bull 1.25X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 16.1% | |
Money Market Funds - 16.1% | |
| | 5,080,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 5,080,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $5,080,000) | | $ | 5,080,000 | | |
| | | TOTAL INVESTMENTS
(Cost $5,080,000) - 16.1% | | $ | 5,080,000 | | |
| | | Other Assets in Excess of
Liabilities - 83.9% | | | 26,409,373 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 31,489,373 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $5,080,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation | |
Total return of
NASDAQ-100® Index | | 3.0711% representing 1 month
LIBOR rate + spread | | Credit Suisse
International | | 12/13/2019 | | | 5,544 | | | $ | 39,164,914 | | | $ | 169,115 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
13
Direxion Monthly NASDAQ-100® Bear 1.25X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 37.5% | |
Money Market Funds - 37.5% | |
| | 110,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 110,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $110,000) | | $ | 110,000 | | |
| | | TOTAL INVESTMENTS
(Cost $110,000) - 37.5% | | $ | 110,000 | | |
| | | Other Assets in Excess of
Liabilities - 62.5% | | | 183,146 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 293,146 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of these securities have been segregated as collateral for swap contracts. Total value of securities segregated amounted to $110,000.
Short Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Depreciation | |
2.4399% representing
1 month LIBOR rate + spread | | Total return of
NASDAQ-100® Index | | Bank of America
Merrill Lynch | | 12/19/2019 | | | 52 | | | $ | 359,661 | | | $ | (9,366 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
14
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 21.0% | |
Money Market Funds - 21.0% | |
| | 1,160,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 1,160,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $1,160,000) | | $ | 1,160,000 | | |
| | | TOTAL INVESTMENTS
(Cost $1,160,000) - 21.0% | | $ | 1,160,000 | | |
| | | Other Assets in Excess of
Liabilities - 79.0% | | | 4,376,583 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 5,536,583 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $1,160,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Depreciation | |
Total return of ICE
U.S. Treasury 25+
Year Bond Index | | 2.9311% representing
1 month LIBOR rate + spread | |
Credit Suisse
International | | |
12/19/2019 | | | | 76,881 | | | $ | 7,522,108 | | | $ | (55,504 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
15
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 21.6% | |
Money Market Funds - 21.6% | |
| | 130,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 130,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $130,000) | | $ | 130,000 | | |
| | | TOTAL INVESTMENTS
(Cost $130,000) - 21.6% | | $ | 130,000 | | |
| | | Other Assets in Excess of
Liabilities - 78.4% | | | 473,188 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 603,188 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $130,000.
Short Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation | |
1.6311% representing
1 month LIBOR rate + spread | | Total return of
ICE U.S. Treasury
25+ Year Bond Index | |
Credit Suisse
International | | 12/19/2019 | | | 8,379 | | | $ | 818,186 | | | $ | 4,307 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
16
Direxion Monthly NASDAQ-100® Bull 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 31.7% | |
Money Market Funds - 31.7% | |
| | 59,320,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 59,320,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $59,320,000) | | $ | 59,320,000 | | |
| | | TOTAL INVESTMENTS
(Cost $59,320,000) - 31.7% | | $ | 59,320,000 | | |
| | | Other Assets in Excess of
Liabilities - 68.4% | | | 128,116,690 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 187,436,690 | | |
Percentages are stated as a percent of net assets.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $59,320,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation
(Depreciation) | |
Total return of
NASDAQ-100® Index | | 2.6399% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 12/18/2019 | | | 30,224 | | | $ | 190,057,609 | | | $ | 23,961,324 | | |
Total return of
NASDAQ-100® Index | | 3.0691% representing
1 month LIBOR rate + spread | | Credit Suisse
International | | 12/19/2019 | | | 22,596 | | | | 160,673,539 | | | | (294,337 | ) | |
| | | | | | | | | | | $ | 350,731,148 | | | $ | 23,666,987 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
17
Direxion Monthly S&P 500® Bull 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 38.3% | |
Money Market Funds - 38.3% | |
| | 38,450,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 38,450,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $38,450,000) | | $ | 38,450,000 | | |
| | | TOTAL INVESTMENTS
(Cost $38,450,000) - 38.3% | | $ | 38,450,000 | | |
| | | Other Assets in Excess of
Liabilities - 61.7% | | | 61,848,351 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 100,298,351 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $38,450,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation
(Depreciation) | |
Total return of
S&P 500® Index | | 2.8311% representing
1 month LIBOR rate + spread | | Credit Suisse
International | | 12/13/2019 | | | 17,681 | | | $ | 45,018,655 | | | $ | 4,148,619 | | |
Total return of
S&P 500® Index | | 2.6399% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 12/18/2019 | | | 26,732 | | | | 73,184,196 | | | | 1,277,290 | | |
Total return of
S&P 500® Index | | 2.6399% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 3/26/2020 | | | 22,956 | | | | 63,345,617 | | | | 591,823 | | |
Total return of
S&P 500® Index | | 2.6291% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 3/26/2020 | | | 44 | | | | 122,890 | | | | (334 | ) | |
Total return of
S&P 500® Index | | 2.6404% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 4/27/2020 | | | 4,591 | | | | 12,787,454 | | | | (3,655 | ) | |
| | | | | | | | | | | $ | 194,458,812 | | | $ | 6,013,743 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
18
Direxion Monthly S&P 500® Bear 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 60.9% | |
Money Market Funds - 60.9% | |
| | 5,390,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 5,390,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $5,390,000) | | $ | 5,390,000 | | |
| | | TOTAL INVESTMENTS
(Cost $5,390,000) - 60.9% | | $ | 5,390,000 | | |
| | | Other Assets in Excess of
Liabilities - 39.1% | | | 3,457,872 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 8,847,872 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $5,390,000.
Short Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation
(Depreciation) | |
2.4399% representing
1 month LIBOR rate + spread | | Total return of
S&P 500® Index | | Bank of America
Merrill Lynch | |
2/25/2020 | | | 3,138 | | | $ | 8,200,021 | | | $ | (537,085 | ) | |
2.4399% representing
1 month LIBOR rate + spread | | Total return of
S&P 500® Index | | Bank of America
Merrill Lynch | |
3/26/2020 | | | 1,846 | | | | 5,030,528 | | | | (111,419 | ) | |
2.4430% representing
1 month LIBOR rate + spread | | Total return of
S&P 500® Index | | Bank of America
Merrill Lynch | |
3/26/2020 | | | 83 | | | | 231,954 | | | | 781 | | |
2.4393% - 2.4403%
representing 1 month
LIBOR rate + spread | | Total return of
S&P 500® Index | | Bank of America
Merrill Lynch | | 4/27/2020 | | | 1,291 | | | | 3,606,538 | | | | 10,630 | | |
| | | | | | | | | | | | | $ | 17,069,041 | | | $ | (637,093 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
19
Direxion Monthly Small Cap Bull 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 23.5% | |
Money Market Funds - 23.5% | |
| | 8,440,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 8,440,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $8,440,000) | | $ | 8,440,000 | | |
| | | TOTAL INVESTMENTS
(Cost $8,440,000) - 23.5% | | $ | 8,440,000 | | |
| | | Other Assets in Excess of
Liabilities - 76.5% | | | 27,427,967 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 35,867,967 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $8,440,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation | |
Total return of
Russell 2000® Index | | 2.5899% representing
1 month LIBOR rate + spread | | Bank of America
Merrill Lynch | | 12/18/2019 | | | 10,285 | | | $ | 13,697,738 | | | $ | 2,478,223 | | |
Total return of
Russell 2000® Index | | 2.7711% representing
1 month LIBOR rate + spread | | Credit Suisse
International | | 12/20/2020 | | | 35,246 | | | | 55,005,418 | | | | 510,130 | | |
| | | | | | | | | | | $ | 68,703,156 | | | $ | 2,988,353 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
20
Direxion Monthly Small Cap Bear 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 39.8% | |
Money Market Funds - 39.8% | |
| | 1,460,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 1,460,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $1,460,000) | | $ | 1,460,000 | | |
| | | TOTAL INVESTMENTS
(Cost $1,460,000) - 39.8% | | $ | 1,460,000 | | |
| | | Other Assets in Excess of
Liabilities - 60.2% | | | 2,211,272 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 3,671,272 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $1,460,000.
Short Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Depreciation | |
2.5311% representing
1 month LIBOR rate + spread | | Total return of
Russell 2000® Index | | Credit Suisse
International | | 12/13/2019 | | | 4,660 | | | $ | 6,988,673 | | | $ | (345,622 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
21
Direxion Monthly 7-10 Year Treasury Bull 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 30.7% | |
Money Market Funds - 30.7% | |
| | 4,290,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 4,290,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $4,290,000) | | $ | 4,290,000 | | |
| | | TOTAL INVESTMENTS
(Cost $4,290,000) - 30.7% | | $ | 4,290,000 | | |
| | | Other Assets in Excess of
Liabilities - 69.3% | | | 9,697,355 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 13,987,355 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $4,290,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Depreciation | |
Total return of iShares
7-10 Year Treasury Bond ETF | | 2.5811% representing
1 month LIBOR rate + spread | | Credit Suisse
International | | 12/10/2019 | | | 268,730 | | | $ | 28,068,572 | | | $ | (122,084 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
22
Direxion Monthly 7-10 Year Treasury Bear 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 32.1% | |
Money Market Funds - 32.1% | |
| | 920,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 920,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $920,000) | | $ | 920,000 | | |
| | | TOTAL INVESTMENTS
(Cost $920,000) - 32.1% | | $ | 920,000 | | |
| | | Other Assets in Excess of
Liabilities - 67.9% | | | 1,946,224 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 2,866,224 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $920,000.
Short Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Appreciation | |
2.0811% representing
1 month LIBOR rate + spread | | Total return of iShares
7-10 Year Treasury
Bond ETF | | Credit Suisse
International | | 12/12/2019 | | | 55,056 | | | $ | 5,739,734 | | | $ | 12,402 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
23
Direxion Monthly Emerging Markets Bull 2X Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares | | | | Fair Value | |
SHORT TERM INVESTMENTS - 38.1% | |
Money Market Funds - 38.1% | |
| | 1,850,000 | | | Fidelity Investments Money
Market Funds Government
Portfolio Institutional
Class, 2.33% (a)(b) | | $ | 1,850,000 | | |
| | | TOTAL SHORT TERM
INVESTMENTS
(Cost $1,850,000) | | $ | 1,850,000 | | |
| | | TOTAL INVESTMENTS
(Cost $1,850,000) - 38.1% | | $ | 1,850,000 | | |
| | | Other Assets in Excess of
Liabilities - 61.9% | | | 3,002,552 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 4,852,552 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Represents annualized seven-day yield at February 28, 2019.
(b) All or a portion of this security has been segregated as collateral for swap contracts. Total value of amount segregated is $1,850,000.
Long Total Return Swap Contracts (Unaudited)
February 28, 2019
Terms of Payments
to be Received at
Termination | | Terms of Payments
to be Paid at
Termination | | Counterparty | | Termination
Date | | Contracts | | Notional
Amount | | Unrealized
Depreciation | |
Total return of iShares
MSCI Emerging Markets ETF | | 2.8811% representing
1 month LIBOR rate + spread | | Credit Suisse
International | | 10/16/2019 | | | 228,713 | | | $ | 9,787,335 | | | $ | (96,374 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
24
Statements of Assets & Liabilities (Unaudited)
February 28, 2019
| | | Direxion Monthly
High Yield Bull
1.2X Fund | | Direxion Monthly
NASDAQ-100®
Bull 1.25X Fund | | Direxion Monthly
NASDAQ-100®
Bear 1.25X Fund | |
Assets: | |
Investments, at fair value (Note 2) | | $ | 124,437,679 | | | $ | 5,080,000 | | | $ | 110,000 | | |
Cash equivalents | | | 13,663,722 | | | | 36,339,035 | | | | 176,660 | | |
Receivable for Fund shares sold | | | 56,048,873 | | | | 86,011 | | | | 5 | | |
Due from investment adviser, net (Note 4) | | | — | | | | — | | | | 4,776 | | |
Due from broker for swap contracts | | | — | | | | 358,479 | | | | — | | |
Unrealized appreciation on swap contracts | | | 310,164 | | | | 169,115 | | | | — | | |
Dividends and interest receivable | | | 48,196 | | | | 36,361 | | | | 5,484 | | |
Prepaid expenses and other assets | | | 54,168 | | | | 32,741 | | | | 19,733 | | |
Total Assets | | | 194,562,802 | | | | 42,101,742 | | | | 316,658 | | |
Liabilities: | |
Payable for Fund shares redeemed | | | 642,720 | | | | 10,045,558 | | | | 2,525 | | |
Investment securities purchased | | | 44,528,348 | | | | — | | | | — | | |
Due to broker for swap contracts | | | 560,000 | | | | 540,000 | | | | 582 | | |
Unrealized depreciation on swap contracts | | | — | | | | — | | | | 9,366 | | |
Due to investment adviser, net (Note 4) | | | 62,676 | | | | 5,759 | | | | — | | |
Accrued distribution expenses | | | 21,158 | | | | 3,580 | | | | 535 | | |
Accrued expenses and other liabilities | | | 115,211 | | | | 17,472 | | | | 10,504 | | |
Total Liabilities | | | 45,930,113 | | | | 10,612,369 | | | | 23,512 | | |
Net Assets | | $ | 148,632,689 | | | $ | 31,489,373 | | | $ | 293,146 | | |
Net Assets Consist of: | |
Capital stock | | $ | 168,230,436 | | | $ | 39,265,095 | | | $ | 2,731,560 | | |
Total distributable loss | | | (19,597,747 | ) | | | (7,775,722 | ) | | | (2,438,414 | ) | |
Net Assets | | $ | 148,632,689 | | | $ | 31,489,373 | | | $ | 293,146 | | |
Calculation of Net Asset Value Per Share: | |
Net assets | | $ | 148,632,689 | | | $ | 31,489,373 | | | $ | 293,146 | | |
Shares outstanding (unlimited shares of beneficial
interest authorized, no par value) | | | 6,825,744 | | | | 1,060,128 | | | | 28,546 | | |
Net asset value, redemption price and offering
price per share | | $ | 21.7753 | | | $ | 29.7034 | | | $ | 10.2692 | | |
Cost of Investments | | $ | 122,280,845 | | | $ | 5,080,000 | | | $ | 110,000 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
25
Statements of Assets & Liabilities (Unaudited)
February 28, 2019
| | | Direxion Monthly
25+ Year Treasury
Bull 1.35X Fund | | Direxion Monthly
25+ Year Treasury
Bear 1.35X Fund | | Direxion Monthly
NASDAQ-100®
Bull 2X Fund | |
Assets: | |
Investments, at fair value (Note 2) | | $ | 1,160,000 | | | $ | 130,000 | | | $ | 59,320,000 | | |
Cash equivalents | | | 3,792,834 | | | | 1,124,277 | | | | 111,427,731 | | |
Receivable for Fund shares sold | | | 932,836 | | | | — | | | | 17,753,579 | | |
Due from investment adviser, net (Note 4) | | | — | | | | 4,550 | | | | — | | |
Due from broker for swap contracts | | | — | | | | 7,175 | | | | — | | |
Unrealized appreciation on swap contracts | | | — | | | | 4,307 | | | | 23,961,324 | | |
Dividends and interest receivable | | | 31,762 | | | | 2,553 | | | | 317,493 | | |
Prepaid expenses and other assets | | | 33,551 | | | | 23,812 | | | | 41,708 | | |
Total Assets | | | 5,950,983 | | | | 1,296,674 | | | | 212,821,835 | | |
Liabilities: | |
Payable for Fund shares redeemed | | | 331,758 | | | | 677,326 | | | | 61,047 | | |
Due to broker for swap contracts | | | — | | | | — | | | | 24,640,000 | | |
Unrealized depreciation on swap contracts | | | 55,504 | | | | — | | | | 294,337 | | |
Due to investment adviser, net (Note 4) | | | 24 | | | | — | | | | 100,350 | | |
Accrued distribution expenses | | | 3,159 | | | | 254 | | | | 31,863 | | |
Accrued expenses and other liabilities | | | 23,955 | | | | 15,906 | | | | 257,548 | | |
Total Liabilities | | | 414,400 | | | | 693,486 | | | | 25,385,145 | | |
Net Assets | | $ | 5,536,583 | | | $ | 603,188 | | | $ | 187,436,690 | | |
Net Assets Consist of: | |
Capital stock | | $ | 9,836,182 | | | $ | 7,387,056 | | | $ | 185,754,546 | | |
Total distributable earnings (loss) | | | (4,299,599 | ) | | | (6,783,868 | ) | | | 1,682,144 | | |
Net Assets | | $ | 5,536,583 | | | $ | 603,188 | | | $ | 187,436,690 | | |
Calculation of Net Asset Value Per Share: | |
Net assets | | $ | 5,536,583 | | | $ | 603,188 | | | $ | 187,436,690 | | |
Shares outstanding (unlimited shares of beneficial
interest authorized, no par value) | | | 280,577 | | | | 33,966 | | | | 8,160,249 | | |
Net asset value, redemption price and offering
price per share | | $ | 19.7328 | | | $ | 17.7586 | | | $ | 22.97 | | |
Cost of Investments | | $ | 1,160,000 | | | $ | 130,000 | | | $ | 59,320,000 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
26
Statements of Assets & Liabilities (Unaudited)
February 28, 2019
| | | Direxion Monthly
S&P 500® Bull
2X Fund | | Direxion Monthly
S&P 500® Bear
2X Fund | | Direxion Monthly
Small Cap Bull
2X Fund | | Direxion Monthly
Small Cap Bear
2X Fund | |
Assets: | |
Investments, at fair value (Note 2) | | $ | 38,450,000 | | | $ | 5,390,000 | | | $ | 8,440,000 | | | $ | 1,460,000 | | |
Cash equivalents | | | 58,481,196 | | | | 4,087,365 | | | | 27,066,635 | | | | 2,715,421 | | |
Receivable for Fund shares sold | | | 4,319,607 | | | | 114,966 | | | | 1,072,006 | | | | 94,600 | | |
Due from investment adviser, net
(Note 4) | | | — | | | | 540 | | | | — | | | | 1,787 | | |
Unrealized appreciation on swap
contracts | | | 6,017,732 | | | | 11,411 | | | | 2,988,353 | | | | — | | |
Dividends and interest receivable | | | 155,106 | | | | 12,949 | | | | 44,418 | | | | 8,040 | | |
Prepaid expenses and other assets | | | 37,090 | | | | 33,240 | | | | 20,616 | | | | 18,285 | | |
Total Assets | | | 107,460,731 | | | | 9,650,471 | | | | 39,632,028 | | | | 4,298,133 | | |
Liabilities: | |
Payable for Fund shares redeemed | | | 388,775 | | | | 2,778 | | | | 428,833 | | | | 95,113 | | |
Due to broker for swap contracts | | | 6,590,000 | | | | 141,023 | | | | 3,280,000 | | | | 171,147 | | |
Unrealized depreciation on swap
contracts | | | 3,989 | | | | 648,504 | | | | — | | | | 345,622 | | |
Due to investment adviser, net (Note 4) | | | 47,730 | | | | — | | | | 16,650 | | | | — | | |
Accrued distribution expenses | | | 15,926 | | | | 1,261 | | | | 4,614 | | | | 717 | | |
Accrued expenses and other liabilities | | | 115,960 | | | | 9,033 | | | | 33,964 | | | | 14,262 | | |
Total Liabilities | | | 7,162,380 | | | | 802,599 | | | | 3,764,061 | | | | 626,861 | | |
Net Assets | | $ | 100,298,351 | | | $ | 8,847,872 | | | $ | 35,867,967 | | | $ | 3,671,272 | | |
Net Assets Consist of: | |
Capital stock | | $ | 104,223,889 | | | $ | 55,392,492 | | | $ | 38,514,449 | | | $ | 51,842,986 | | |
Total distributable loss | | | (3,925,538 | ) | | | (46,544,620 | ) | | | (2,646,482 | ) | | | (48,171,714 | ) | |
Net Assets | | $ | 100,298,351 | | | $ | 8,847,872 | | | $ | 35,867,967 | | | $ | 3,671,272 | | |
Calculation of Net Asset Value Per
Share: | |
Net assets | | $ | 100,298,351 | | | $ | 8,847,872 | | | $ | 35,867,967 | | | $ | 3,671,272 | | |
Shares outstanding (unlimited shares
of beneficial interest authorized,
no par value) | | | 3,763,257 | | | | 727,945 | | | | 508,932 | | | | 291,044 | | |
Net asset value, redemption price
and offering price per share | | $ | 26.65 | | | $ | 12.15 | | | $ | 70.48 | | | $ | 12.61 | | |
Cost of Investments | | $ | 38,450,000 | | | $ | 5,390,000 | | | $ | 8,440,000 | | | $ | 1,460,000 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
27
Statements of Assets & Liabilities (Unaudited)
February 28, 2019
| | | Direxion Monthly
7-10 Year Treasury
Bull 2X Fund | | Direxion Monthly
7-10 Year Treasury
Bear 2X Fund | | Direxion Monthly
Emerging Markets
Bull 2X Fund | |
Assets: | |
Investments, at fair value (Note 2) | | $ | 4,290,000 | | | $ | 920,000 | | | $ | 1,850,000 | | |
Cash equivalents | | | 9,545,465 | | | | 1,979,871 | | | | 2,969,557 | | |
Receivable for Fund shares sold | | | 307,694 | | | | 199,612 | | | | 118,745 | | |
Due from investment adviser, net (Note 4) | | | — | | | | 6,136 | | | | — | | |
Due from broker for swap contracts | | | 61 | | | | — | | | | — | | |
Unrealized appreciation on swap contracts | | | — | | | | 12,402 | | | | — | | |
Dividends and interest receivable | | | 51,668 | | | | 5,153 | | | | 17,731 | | |
Prepaid expenses and other assets | | | 19,719 | | | | 9,267 | | | | 15,826 | | |
Total Assets | | | 14,214,607 | | | | 3,132,441 | | | | 4,971,859 | | |
Liabilities: | |
Payable for Fund shares redeemed | | | 57,847 | | | | 243,026 | | | | 5,613 | | |
Due to broker for swap contracts | | | — | | | | 4,300 | | | | 1,008 | | |
Unrealized depreciation on swap contracts | | | 122,084 | | | | — | | | | 96,374 | | |
Due to investment adviser, net (Note 4) | | | 12,430 | | | | — | | | | 2,831 | | |
Accrued distribution expenses | | | 5,428 | | | | 517 | | | | 1,820 | | |
Accrued expenses and other liabilities | | | 29,463 | | | | 18,374 | | | | 11,661 | | |
Total Liabilities | | | 227,252 | | | | 266,217 | | | | 119,307 | | |
Net Assets | | $ | 13,987,355 | | | $ | 2,866,224 | | | $ | 4,852,552 | | |
Net Assets Consist of: | |
Capital stock | | $ | 15,744,665 | | | $ | 22,938,234 | | | $ | 49,420,322 | | |
Total distributable loss | | | (1,757,310 | ) | | | (20,072,010 | ) | | | (44,567,770 | ) | |
Net Assets | | $ | 13,987,355 | | | $ | 2,866,224 | | | $ | 4,852,552 | | |
Calculation of Net Asset Value Per Share: | |
Net assets | | $ | 13,987,355 | | | $ | 2,866,224 | | | $ | 4,852,552 | | |
Shares outstanding (unlimited shares of beneficial
interest authorized, no par value) | | | 409,712 | | | | 97,479 | | | | 104,560 | | |
Net asset value, redemption price and offering
price per share | | $ | 34.14 | | | $ | 29.40 | | | $ | 46.41 | | |
Cost of Investments | | $ | 4,290,000 | | | $ | 920,000 | | | $ | 1,850,000 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
28
Statements of Operations (Unaudited)
For the Six Months Ended February 28, 2019
| | | Direxion Monthly
High Yield Bull
1.2X Fund | | Direxion Monthly
NASDAQ-100®
Bull 1.25X Fund | | Direxion Monthly
NASDAQ-100®
Bear 1.25X Fund | |
Investment Income: | |
Dividend income | | $ | 3,543,732 | | | $ | — | | | $ | — | | |
Interest income | | | 323,982 | | | | 207,803 | | | | 62,283 | | |
Securities lending income | | | 74,052 | | | | — | | | | — | | |
Total investment income | | | 3,941,766 | | | | 207,803 | | | | 62,283 | | |
Expenses: | |
Investment advisory fees (Note 4) | | | 455,203 | | | | 74,610 | | | | 21,232 | | |
Distribution expenses (Note 4) | | | 151,734 | | | | 24,870 | | | | 7,077 | | |
Accounting fees | | | 72,555 | | | | 11,938 | | | | 3,397 | | |
Professional fees | | | 56,733 | | | | 12,429 | | | | 6,968 | | |
Report to shareholders | | | 24,808 | | | | 3,579 | | | | 963 | | |
State registration fees | | | 22,586 | | | | 15,415 | | | | 9,559 | | |
Custody fees | | | 17,540 | | | | — | | | | — | | |
Trustees' fees | | | 15,648 | | | | 2,258 | | | | 608 | | |
Management service fees (Note 4) | | | 15,503 | | | | 2,539 | | | | 725 | | |
Administration fees | | | 9,814 | | | | 1,593 | | | | 471 | | |
Insurance fees | | | 6,639 | | | | 958 | | | | 258 | | |
Licensing fees | | | 3,273 | | | | 5,969 | | | | 1,699 | | |
Interest expense | | | 1,532 | | | | 1,292 | | | | 973 | | |
Other | | | 9,708 | | | | 1,401 | | | | 376 | | |
Excise taxes | | | 4,053 | | | | — | | | | — | | |
Total expenses | | | 867,329 | | | | 158,851 | | | | 54,306 | | |
Less: Reimbursement of expenses from Adviser
(Note 4) | | | (37,396 | ) | | | (43,157 | ) | | | (20,777 | ) | |
Net expenses | | | 829,933 | | | | 115,694 | | | | 33,529 | | |
Net investment income | | | 3,111,833 | | | | 92,109 | | | | 28,754 | | |
Realized and unrealized gain (loss) on investments: | |
Net realized loss on: | |
Investments | | | (5,539,286 | ) | | | — | | | | — | | |
Swap contracts | | | (1,672,620 | ) | | | (4,609,034 | ) | | | (1,872,067 | ) | |
| | | | (7,211,906 | ) | | | (4,609,034 | ) | | | (1,872,067 | ) | |
Change in net unrealized appreciation (depreciation) on: | |
Investments | | | (928,862 | ) | | | — | | | | — | | |
Swap contracts | | | (513,049 | ) | | | 134,534 | | | | (3,396 | ) | |
| | | | (1,441,911 | ) | | | 134,534 | | | | (3,396 | ) | |
Net realized and unrealized loss | | | (8,653,817 | ) | | | (4,474,500 | ) | | | (1,875,463 | ) | |
Net decrease in net assets resulting from operations | | $ | (5,541,984 | ) | | $ | (4,382,391 | ) | | $ | (1,846,709 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
29
Statements of Operations (Unaudited)
For the Six Months Ended February 28, 2019
| | | Direxion Monthly
25+ Year Treasury
Bull 1.35X Fund | | Direxion Monthly
25+ Year Treasury
Bear 1.35X Fund | | Direxion Monthly
NASDAQ-100®
Bull 2X Fund | |
Investment Income: | |
Interest income | | $ | 184,571 | | | $ | 86,720 | | | $ | 2,125,492 | | |
Total investment income | | | 184,571 | | | | 86,720 | | | | 2,125,492 | | |
Expenses: | |
Investment advisory fees (Note 4) | | | 64,706 | | | | 30,302 | | | | 678,935 | | |
State registration fees | | | 21,827 | | | | 12,831 | | | | 22,127 | | |
Distribution expenses (Note 4) | | | 21,569 | | | | 10,101 | | | | 226,312 | | |
Professional fees | | | 11,742 | | | | 8,201 | | | | 74,211 | | |
Accounting fees | | | 10,353 | | | | 4,848 | | | | 108,409 | | |
Licensing fees | | | 9,956 | | | | 9,919 | | | | 36,210 | | |
Report to shareholders | | | 3,250 | | | | 1,554 | | | | 33,183 | | |
Management service fees (Note 4) | | | 2,204 | | | | 1,031 | | | | 23,123 | | |
Trustees' fees | | | 2,050 | | | | 979 | | | | 20,930 | | |
Administration fees | | | 1,398 | | | | 648 | | | | 14,642 | | |
Insurance fees | | | 870 | | | | 416 | | | | 8,880 | | |
Interest expense | | | 358 | | | | — | | | | 138,222 | | |
Other | | | 1,272 | | | | 608 | | | | 12,984 | | |
Excise taxes | | | — | | | | — | | | | 82,771 | | |
Total expenses | | | 151,555 | | | | 81,438 | | | | 1,480,939 | | |
Less: Reimbursement of expenses from Adviser
(Note 4) | | | (56,026 | ) | | | (36,994 | ) | | | (37,864 | ) | |
Net expenses | | | 95,529 | | | | 44,444 | | | | 1,443,075 | | |
Net investment income | | | 89,042 | | | | 42,276 | | | | 682,417 | | |
Realized and unrealized gain (loss) on investments: | |
Net realized loss on: | |
Futures contracts | | | (148,671 | ) | | | (230,364 | ) | | | — | | |
Swap contracts | | | (149,573 | ) | | | (184,097 | ) | | | (13,065,674 | ) | |
| | | | (298,244 | ) | | | (414,461 | ) | | | (13,065,674 | ) | |
Change in net unrealized appreciation (depreciation) on: | |
Swap contracts | | | (96,048 | ) | | | 2,048 | | | | (37,507,550 | ) | |
| | | | (96,048 | ) | | | 2,048 | | | | (37,507,550 | ) | |
Net realized and unrealized loss | | | (394,292 | ) | | | (412,413 | ) | | | (50,573,224 | ) | |
Net decrease in net assets resulting from operations | | $ | (305,250 | ) | | $ | (370,137 | ) | | $ | (49,890,807 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
30
Statements of Operations (Unaudited)
For the Six Months Ended February 28, 2019
| | | Direxion Monthly
S&P 500® Bull
2X Fund | | Direxion Monthly
S&P 500® Bear
2X Fund | | Direxion Monthly
Small Cap Bull
2X Fund | | Direxion Monthly
Small Cap Bear
2X Fund | |
Investment Income: | |
Interest income | | $ | 921,174 | | | $ | 81,262 | | | $ | 204,273 | | | $ | 91,555 | | |
Total investment income | | | 921,174 | | | | 81,262 | | | | 204,273 | | | | 91,555 | | |
Expenses: | |
Investment advisory fees (Note 4) | | | 305,202 | | | | 27,593 | | | | 67,253 | | | | 32,372 | | |
Distribution expenses (Note 4) | | | 101,734 | | | | 9,198 | | | | 22,418 | | | | 10,791 | | |
Accounting fees | | | 48,832 | | | | 4,415 | | | | 10,761 | | | | 5,179 | | |
Professional fees | | | 35,772 | | | | 7,726 | | | | 11,417 | | | | 8,365 | | |
Interest expense | | | 26,285 | | | | 1,213 | | | | 9,001 | | | | 1,660 | | |
State registration fees | | | 16,264 | | | | 13,227 | | | | 8,922 | | | | 11,683 | | |
Report to shareholders | | | 14,764 | | | | 1,326 | | | | 3,095 | | | | 1,632 | | |
Management service fees (Note 4) | | | 10,393 | | | | 940 | | | | 2,291 | | | | 1,102 | | |
Trustees' fees | | | 9,312 | | | | 836 | | | | 1,952 | | | | 1,030 | | |
Licensing fees | | | 8,551 | | | | 7,439 | | | | 7,404 | | | | 3,553 | | |
Administration fees | | | 6,573 | | | | 597 | | | | 1,453 | | | | 698 | | |
Insurance fees | | | 3,951 | | | | 355 | | | | 829 | | | | 437 | | |
Other | | | 5,778 | | | | 519 | | | | 1,210 | | | | 639 | | |
Excise taxes | | | 50,131 | | | | — | | | | — | | | | — | | |
Total expenses | | | 643,542 | | | | 75,384 | | | | 148,006 | | | | 79,141 | | |
Less: Reimbursement of
expenses from Adviser (Note 4) | | | (18,043 | ) | | | (24,503 | ) | | | (17,950 | ) | | | (19,212 | ) | |
Net expenses | | | 625,499 | | | | 50,881 | | | | 130,056 | | | | 59,929 | | |
Net investment income | | | 295,675 | | | | 30,381 | | | | 74,217 | | | | 31,626 | | |
Realized and unrealized gain
(loss) on investments: | |
Net realized gain (loss) on: | |
Swap contracts | | | (8,694,914 | ) | | | 997,801 | | | | (6,583,353 | ) | | | 1,634,038 | | |
| | | | (8,694,914 | ) | | | 997,801 | | | | (6,583,353 | ) | | | 1,634,038 | | |
Change in net unrealized
appreciation (depreciation) on: | |
Swap contracts | | | (5,907,957 | ) | | | (337,652 | ) | | | 1,414,789 | | | | (67,287 | ) | |
| | | | (5,907,957 | ) | | | (337,652 | ) | | | 1,414,789 | | | | (67,287 | ) | |
Net realized and unrealized
gain (loss) | | | (14,602,871 | ) | | | 660,149 | | | | (5,168,564 | ) | | | 1,566,751 | | |
Net increase (decrease) in net
assets resulting from operations | | $ | (14,307,196 | ) | | $ | 690,530 | | | $ | (5,094,347 | ) | | $ | 1,598,377 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
31
Statements of Operations (Unaudited)
For the Six Months Ended February 28, 2019
| | | Direxion Monthly
7-10 Year Treasury
Bull 2X Fund | | Direxion Monthly
7-10 Year Treasury
Bear 2X Fund | | Direxion Monthly
Emerging Markets
Bull 2X Fund | |
Investment Income: | |
Interest income | | $ | 207,556 | | | $ | 31,011 | | | $ | 64,304 | | |
Total investment income | | | 207,556 | | | | 31,011 | | | | 64,304 | | |
Expenses: | |
Investment advisory fees (Note 4) | | | 70,685 | | | | 10,664 | | | | 21,672 | | |
Distribution expenses (Note 4) | | | 23,562 | | | | 3,555 | | | | 7,224 | | |
Accounting fees | | | 11,310 | | | | 1,706 | | | | 3,468 | | |
Professional fees | | | 10,946 | | | | 6,026 | | | | 6,830 | | |
State registration fees | | | 10,107 | | | | 15,459 | | | | 9,863 | | |
Licensing fees | | | 9,922 | | | | 9,917 | | | | 4,959 | | |
Interest expense | | | 3,099 | | | | — | | | | 502 | | |
Report to shareholders | | | 2,869 | | | | 511 | | | | 897 | | |
Management service fees (Note 4) | | | 2,411 | | | | 363 | | | | 739 | | |
Trustees' fees | | | 1,809 | | | | 323 | | | | 566 | | |
Administration fees | | | 1,546 | | | | 231 | | | | 471 | | |
Insurance fees | | | 767 | | | | 137 | | | | 240 | | |
Other | | | 1,123 | | | | 200 | | | | 351 | | |
Total expenses | | | 150,156 | | | | 49,092 | | | | 57,782 | | |
Less: Reimbursement of expenses from Adviser
(Note 4) | | | (19,823 | ) | | | (29,896 | ) | | | (18,269 | ) | |
Net expenses | | | 130,333 | | | | 19,196 | | | | 39,513 | | |
Net investment income | | | 77,223 | | | | 11,815 | | | | 24,791 | | |
Realized and unrealized gain (loss) on investments: | |
Net realized gain (loss) on: | |
Swap contracts | | | 1,261,307 | | | | (135,968 | ) | | | (432,730 | ) | |
| | | | 1,261,307 | | | | (135,968 | ) | | | (432,730 | ) | |
Change in net unrealized appreciation (depreciation) on: | |
Swap contracts | | | (168,271 | ) | | | 28,106 | | | | 108,625 | | |
| | | | (168,271 | ) | | | 28,106 | | | | 108,625 | | |
Net realized and unrealized gain (loss) | | | 1,093,036 | | | | (107,862 | ) | | | (324,105 | ) | |
Net increase (decrease) in net assets resulting
from operations | | $ | 1,170,259 | | | $ | (96,047 | ) | | $ | (299,314 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
32
Statements of Changes in Net Assets
| | | Direxion Monthly
High Yield Bull 1.2X Fund | | Direxion Monthly
NASDAQ-100® Bull 1.25X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income | | $ | 3,111,833 | | | $ | 6,896,979 | | | $ | 92,109 | | | $ | 73,796 | | |
Net realized gain (loss) | | | (7,211,906 | ) | | | (10,908,343 | ) | | | (4,609,034 | ) | | | 7,733,999 | | |
Change in net unrealized appreciation
(depreciation) | | | (1,441,911 | ) | | | (3,508,353 | ) | | | 134,534 | | | | (737,640 | ) | |
Net increase (decrease) in net assets
resulting from operations | | | (5,541,984 | ) | | | (7,519,717 | ) | | | (4,382,391 | ) | | | 7,070,155 | | |
Distributions to shareholders: | |
Net distributions to shareholders | | | (3,279,364 | ) | | | (7,618,430 | )1 | | | (40,701 | ) | | | (3,734,099 | )2 | |
Total distributions | | | (3,279,364 | ) | | | (7,618,430 | ) | | | (40,701 | ) | | | (3,734,099 | ) | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | (147,896,616 | ) | | | (39,187,891 | ) | | | 33,617,044 | | | | (35,233,366 | ) | |
Total increase (decrease) in net assets | | | (156,717,964 | ) | | | (54,326,038 | ) | | | 29,193,952 | | | | (31,897,310 | ) | |
Net assets: | |
Beginning of year/period | | | 305,350,653 | | | | 359,676,691 | | | | 2,295,421 | | | | 34,192,731 | | |
End of year/period | | $ | 148,632,689 | | | $ | 305,350,6533 | | | $ | 31,489,373 | | | $ | 2,295,4214 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly High Yield Bull 1.2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 43,553,488 | | | $ | 977,667,512 | | | | 127,954,586 | | | $ | 3,003,076,924 | | |
Shares issued in reinvestment of distributions | | | 136,533 | | | | 3,039,943 | | | | 313,212 | | | | 7,401,586 | | |
Shares redeemed | | | (49,848,899 | ) | | | (1,128,604,071 | ) | | | (130,179,026 | ) | | | (3,049,666,401 | ) | |
Net decrease | | | (6,158,878 | ) | | $ | (147,896,616 | ) | | | (1,911,228 | ) | | $ | (39,187,891 | ) | |
| | | Direxion Monthly NASDAQ-100® Bull 1.25X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 6,835,651 | | | $ | 209,691,496 | | | | 18,722,366 | | | $ | 573,206,601 | | |
Shares issued in reinvestment of distributions | | | 1,446 | | | | 40,701 | | | | 127,049 | | | | 3,734,099 | | |
Shares redeemed | | | (5,846,206 | ) | | | (176,115,153 | ) | | | (19,977,917 | ) | | | (612,174,066 | ) | |
Net increase (decrease) | | | 990,891 | | | $ | 33,617,044 | | | | (1,128,502 | ) | | $ | (35,233,366 | ) | |
1 Represents distributions to shareholders from net investment income and realized gains of $7,055,798 and $562,632,respectively.
2 Represents distributions to shareholders from net realized gains.
3 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
4 Includes undistributed net investment income of $40,701. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
33
Statements of Changes in Net Assets
| | | Direxion Monthly
NASDAQ-100® Bear 1.25X Fund | | Direxion Monthly
25+ Year Treasury Bull 1.35X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income | | $ | 28,754 | | | $ | 233 | | | $ | 89,042 | | | $ | 66,780 | | |
Net realized loss | | | (1,872,067 | ) | | | (367,724 | ) | | | (298,244 | ) | | | (3,581,465 | ) | |
Change in net unrealized appreciation
(depreciation) | | | (3,396 | ) | | | 901 | | | | (96,048 | ) | | | (278,789 | ) | |
Net decrease in net assets resulting
from operations | | | (1,846,709 | ) | | | (366,590 | ) | | | (305,250 | ) | | | (3,793,474 | ) | |
Distributions to shareholders: | |
Net distributions to shareholders | | | — | | | | — | | | | (66,770 | ) | | | (130,177 | )1 | |
Total distributions | | | — | | | | — | | | | (66,770 | ) | | | (130,177 | ) | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | 1,839,777 | | | | 490,973 | | | | 1,013,137 | | | | (11,020,024 | ) | |
Total increase (decrease) in net assets | | | (6,932 | ) | | | 124,383 | | | | 641,117 | | | | (14,943,675 | ) | |
Net assets: | |
Beginning of year/period | | | 300,078 | | | | 175,695 | | | | 4,895,466 | | | | 19,839,141 | | |
End of year/period | | $ | 293,146 | | | $ | 300,0782 | | | $ | 5,536,583 | | | $ | 4,895,4663 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly NASDAQ-100® Bear 1.25X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 5,522,621 | | | $ | 63,125,202 | | | | 1,120,137 | | | $ | 11,689,328 | | |
Shares redeemed | | | (5,525,497 | ) | | | (61,285,425 | ) | | | (1,102,011 | ) | | | (11,198,355 | ) | |
Net increase (decrease) | | | (2,876 | ) | | $ | 1,839,777 | | | | 18,126 | | | $ | 490,973 | | |
| | | Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 43,743,318 | | | $ | 844,665,956 | | | | 110,936,639 | | | $ | 2,259,256,514 | | |
Shares issued in reinvestment of distributions | | | 3,447 | | | | 66,770 | | | | 5,640 | | | | 122,055 | | |
Shares redeemed | | | (43,710,221 | ) | | | (843,719,589 | ) | | | (111,617,056 | ) | | | (2,270,398,593 | ) | |
Net increase (decrease) | | | 36,544 | | | $ | 1,013,137 | | | | (674,777 | ) | | $ | (11,020,024 | ) | |
1 Represents distributions to shareholders from net realized gains.
2 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
3 Includes undistributed net investment income of $66,770. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
34
Statements of Changes in Net Assets
| | | Direxion Monthly
25+ Year Treasury Bear 1.35X Fund | | Direxion Monthly
NASDAQ-100® Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income (loss) | | $ | 42,276 | | | $ | 27,522 | | | $ | 682,417 | | | $ | (328,479 | ) | |
Net realized gain (loss) | | | (414,461 | ) | | | (3,335,397 | ) | | | (13,065,674 | ) | | | 36,363,622 | | |
Change in net unrealized appreciation
(depreciation) | | | 2,048 | | | | 17,491 | | | | (37,507,550 | ) | | | 52,008,476 | | |
Net increase (decrease) in net assets
resulting from operations | | | (370,137 | ) | | | (3,290,384 | ) | | | (49,890,807 | ) | | | 88,043,619 | | |
Distributions to shareholders: | |
Net distributions to shareholders | | | — | | | | — | | | | (9,728,117 | ) | | | (10,222,280 | )1 | |
Total distributions | | | — | | | | — | | | | (9,728,117 | ) | | | (10,222,280 | ) | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | 739,427 | | | | 2,985,219 | | | | (43,528,159 | ) | | | 48,665,734 | | |
Total increase (decrease) in net assets | | | 369,290 | | | | (305,165 | ) | | | (103,147,083 | ) | | | 126,487,073 | | |
Net assets: | |
Beginning of year/period | | | 233,898 | | | | 539,063 | | | | 290,583,773 | | | | 164,096,700 | | |
End of year/period | | $ | 603,188 | | | $ | 233,8982 | | | $ | 187,436,690 | | | $ | 290,583,7732 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 15,817,093 | | | $ | 295,336,080 | | | | 66,848,175 | | | $ | 1,189,683,511 | | |
Shares redeemed | | | (15,796,275 | ) | | | (294,596,653 | ) | | | (66,866,592 | ) | | | (1,186,698,292 | ) | |
Net increase (decrease) | | | 20,818 | | | $ | 739,427 | | | | (18,417 | ) | | $ | 2,985,219 | | |
| | | Direxion Monthly NASDAQ-100® Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 6,674,530 | | | $ | 169,429,547 | | | | 27,766,372 | | | $ | 649,537,975 | | |
Shares issued in reinvestment of distributions | | | 450,754 | | | | 9,632,614 | | | | 476,338 | | | | 10,145,054 | | |
Shares redeemed | | | (8,779,702 | ) | | | (222,590,320 | ) | | | (26,664,058 | ) | | | (611,017,295 | ) | |
Net increase (decrease) | | | (1,654,418 | ) | | $ | (43,528,159 | ) | | | 1,578,652 | | | $ | 48,665,734 | | |
1 Represents distributions to shareholders from net realized gains.
2 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
35
Statements of Changes in Net Assets
| | | Direxion Monthly
S&P 500® Bull 2X Fund | | Direxion Monthly
S&P 500® Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income | | $ | 295,675 | | | $ | 7,617 | | | $ | 30,381 | | | $ | 2,541 | | |
Net realized gain (loss) | | | (8,694,914 | ) | | | 19,545,100 | | | | 997,801 | | | | (4,271,019 | ) | |
Change in net unrealized appreciation
(depreciation) | | | (5,907,957 | ) | | | 10,264,839 | | | | (337,652 | ) | | | 749,418 | | |
Net increase (decrease) in net assets
resulting from operations | | | (14,307,196 | ) | | | 29,817,556 | | | | 690,530 | | | | (3,519,060 | ) | |
Distributions to shareholders: | |
Net distributions to shareholders | | | (5,174,424 | ) | | | (6,210,188 | )1 | | | — | | | | — | | |
Total distributions | | | (5,174,424 | ) | | | (6,210,188 | ) | | | — | | | | — | | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | 4,755,743 | | | | 18,816,158 | | | | 2,040,387 | | | | (11,196,125 | ) | |
Total increase (decrease) in net assets | | | (14,725,877 | ) | | | 42,423,526 | | | | 2,730,917 | | | | (14,715,185 | ) | |
Net assets: | |
Beginning of year/period | | | 115,024,228 | | | | 72,600,702 | | | | 6,116,955 | | | | 20,832,140 | | |
End of year/period | | $ | 100,298,351 | | | $ | 115,024,2282 | | | $ | 8,847,872 | | | $ | 6,116,9553 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly S&P 500® Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 7,067,526 | | | $ | 184,628,408 | | | | 8,400,000 | | | $ | 232,531,165 | | |
Shares issued in reinvestment of distributions | | | 210,039 | | | | 5,160,665 | | | | 231,465 | | | | 6,197,249 | | |
Shares redeemed | | | (7,149,777 | ) | | | (185,033,330 | ) | | | (7,907,001 | ) | | | (219,912,256 | ) | |
Net increase | | | 127,788 | | | $ | 4,755,743 | | | | 724,464 | | | $ | 18,816,158 | | |
| | | Direxion Monthly S&P 500® Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 2,283,923 | | | $ | 30,608,783 | | | | 8,796,670 | | | $ | 123,220,268 | | |
Shares redeemed | | | (2,073,166 | ) | | | (28,568,396 | ) | | | (9,515,433 | ) | | | (134,416,393 | ) | |
Net increase (decrease) | | | 210,757 | | | $ | 2,040,387 | | | | (718,763 | ) | | $ | (11,196,125 | ) | |
1 Represents distributions to shareholders from net realized gains.
2 Includes undistributed net investment income of $7,617. See Note 7 in the Notes to the Financial Statements.
3 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
36
Statements of Changes in Net Assets
| | | Direxion Monthly
Small Cap Bull 2X Fund | | Direxion Monthly
Small Cap Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income | | $ | 74,217 | | | $ | 11,900 | | | $ | 31,626 | | | $ | 2,294 | | |
Net realized gain (loss) | | | (6,583,353 | ) | | | 7,039,962 | | | | 1,634,038 | | | | (3,403,979 | ) | |
Change in net unrealized appreciation
(depreciation) | | | 1,414,789 | | | | 1,568,873 | | | | (67,287 | ) | | | (146,609 | ) | |
Net increase (decrease) in net assets
resulting from operations | | | (5,094,347 | ) | | | 8,620,735 | | | | 1,598,377 | | | | (3,548,294 | ) | |
Distributions to shareholders: | |
Net distributions to shareholders | | | (692,285 | ) | | | — | | | | — | | | | — | | |
Total distributions | | | (692,285 | ) | | | — | | | | — | | | | — | | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | 16,494,227 | | | | 223,414 | | | | (2,221,773 | ) | | | 2,070,507 | | |
Total increase (decrease) in net assets | | | 10,707,595 | | | | 8,844,149 | | | | (623,396 | ) | | | (1,477,787 | ) | |
Net assets: | |
Beginning of year/period | | | 25,160,372 | | | | 16,316,223 | | | | 4,294,668 | | | | 5,772,455 | | |
End of year/period | | $ | 35,867,967 | | | $ | 25,160,3721 | | | $ | 3,671,272 | | | $ | 4,294,6682 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly Small Cap Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 767,989 | | | $ | 54,959,901 | | | | 1,268,758 | | | $ | 100,622,090 | | |
Shares issued in reinvestment of distributions | | | 11,516 | | | | 691,888 | | | | — | | | | — | | |
Shares redeemed | | | (529,850 | ) | | | (39,157,562 | ) | | | (1,261,408 | ) | | | (100,398,676 | ) | |
Net increase | | | 249,655 | | | $ | 16,494,227 | | | | 7,350 | | | $ | 223,414 | | |
| | | Direxion Monthly Small Cap Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 3,985,765 | | | $ | 57,457,146 | | | | 4,066,570 | | | $ | 55,729,939 | | |
Shares redeemed | | | (4,065,806 | ) | | | (59,678,919 | ) | | | (4,009,114 | ) | | | (53,659,432 | ) | |
Net increase (decrease) | | | (80,041 | ) | | $ | (2,221,773 | ) | | | 57,456 | | | $ | 2,070,507 | | |
1 Includes undistributed net investment income of $11,900. See Note 7 in the Notes to the Financial Statements.
2 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
37
Statements of Changes in Net Assets
| | | Direxion Monthly
7-10 Year Treasury Bull 2X Fund | | Direxion Monthly
7-10 Year Treasury Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income (loss) | | $ | 77,223 | | | $ | (4,116 | ) | | $ | 11,815 | | | $ | (4,184 | ) | |
Net realized gain (loss) | | | 1,261,307 | | | | (798,464 | ) | | | (135,968 | ) | | | 265,858 | | |
Change in net unrealized appreciation
(depreciation) | | | (168,271 | ) | | | (268,745 | ) | | | 28,106 | | | | 106,455 | | |
Net increase (decrease) in net assets
resulting from operations | | | 1,170,259 | | | | (1,071,325 | ) | | | (96,047 | ) | | | 368,129 | | |
Capital share transactions: | |
Net increase (decrease) in net assets
resulting from net change capital
share transactions(a) | | | 3,585,197 | | | | (4,838,928 | ) | | | (13,208 | ) | | | (2,512,882 | ) | |
Total increase (decrease) in net assets | | | 4,755,456 | | | | (5,910,253 | ) | | | (109,255 | ) | | | (2,144,753 | ) | |
Net assets: | |
Beginning of year/period | | | 9,231,899 | | | | 15,142,152 | | | | 2,975,479 | | | | 5,120,232 | | |
End of year/period | | $ | 13,987,355 | | | $ | 9,231,8991 | | | $ | 2,866,224 | | | $ | 2,975,4791 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly 7-10 Year Treasury Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 2,512,519 | | | $ | 83,799,878 | | | | 1,316,799 | | | $ | 43,699,198 | | |
Shares redeemed | | | (2,383,220 | ) | | | (80,214,681 | ) | | | (1,456,787 | ) | | | (48,538,126 | ) | |
Net increase (decrease) | | | 129,299 | | | $ | 3,585,197 | | | | (139,988 | ) | | $ | (4,838,928 | ) | |
| | | Direxion Monthly 7-10 Year Treasury Bear 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 322,534 | | | $ | 9,867,905 | | | | 1,318,018 | | | $ | 40,071,275 | | |
Shares redeemed | | | (322,425 | ) | | | (9,881,113 | ) | | | (1,401,329 | ) | | | (42,584,157 | ) | |
Net increase (decrease) | | | 109 | | | $ | (13,208 | ) | | | (83,311 | ) | | $ | (2,512,882 | ) | |
1 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
38
Statements of Changes in Net Assets
| | | Direxion Monthly
Emerging Markets Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (Decrease) in net assets from: | |
Operations: | |
Net investment income (loss) | | $ | 24,791 | | | $ | (1,079 | ) | |
Net realized loss | | | (432,730 | ) | | | (551,966 | ) | |
Change in net unrealized appreciation (depreciation) | | | 108,625 | | | | (383,238 | ) | |
Net decrease in net assets resulting from operations | | | (299,314 | ) | | | (936,283 | ) | |
Capital share transactions: | |
Net decrease in net assets resulting from net change capital share transactions(a) | | | (199,454 | ) | | | (3,612,338 | ) | |
Total decrease in net assets | | | (498,768 | ) | | | (4,548,621 | ) | |
Net assets: | |
Beginning of year/period | | | 5,351,320 | | | | 9,899,941 | | |
End of year/period | | $ | 4,852,552 | | | $ | 5,351,3201 | | |
(a) Summary of capital share transactions is as follows:
| | | Direxion Monthly Emerging Markets Bull 2X Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | | | 623,319 | | | $ | 27,806,270 | | | | 2,829,806 | | | $ | 162,738,588 | | |
Shares redeemed | | | (628,236 | ) | | | (28,005,724 | ) | | | (2,905,375 | ) | | | (166,350,926 | ) | |
Net decrease | | | (4,917 | ) | | $ | (199,454 | ) | | | (75,569 | ) | | $ | (3,612,338 | ) | |
1 Includes undistributed net investment income of $–. See Note 7 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
39
Financial Highlights
February 28, 2019
| | | | | RATIOS TO AVERAGE NET ASSETS7 | | | |
| | | Net Asset
Value,
Beginning
of Year/
Period | | Net
Investment
Income
(Loss)1,2 | | Net
Investment
Income
(Loss)1,3 | | Net
Realized and
Unrealized
Gain (Loss) on
Investments4 | | Net Increase
(Decrease) in
Net Asset
Value Resulting
from Operations | | Dividends
from Net
Investment
Income | | Distributions
from
Realized
Capital Gains | | Return of
Capital
Distribution | | Total
Distributions | | Net
Asset
Value,
End of
Year/
Period | | Total
Return5 | | Net
Assets,
End of
Year/
Period
(,000) | | Total
Expenses2 | | Net
Expenses2,6 | | Net Investment
Income (Loss)
after Expense
Reimbursement/
Recoupment2 | | Total
Expenses3 | | Net
Expenses3,6 | | Net Investment
Income (Loss)
after Expense
Reimbursement/
Recoupment3 | | Portfolio
Turnover
Rate7 | |
Direxion Monthly High Yield Bull 1.2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | $ | 23.5163 | | | $ | 0.5763 | | | $ | 0.5773 | | | $ | (0.4051 | ) | | $ | 0.1712 | | | $ | (1.9122 | ) | | $ | — | | | $ | — | | | $ | (1.9122 | ) | | $ | 21.7753 | | | | 1.19 | % | | $ | 148,633 | | | | 1.43 | % | | | 1.37 | % | | | 5.13 | % | | | 1.42 | % | | | 1.36 | % | | | 5.14 | % | | | 558 | % | |
Year ended August 31, 2018 | | | 24.1461 | | | | 0.6932 | | | | 0.6936 | | | | (0.2775 | ) | | | 0.4157 | | | | (0.9561 | ) | | | (0.0894 | ) | | | — | | | | (1.0455 | ) | | | 23.5163 | | | | 1.79 | % | | | 305,351 | | | | 1.33 | % | | | 1.33 | % | | | 2.93 | % | | | 1.33 | % | | | 1.33 | % | | | 2.93 | % | | | 1,218 | % | |
Year ended August 31, 2017 | | | 23.3157 | | | | 0.7368 | | | | 0.7381 | | | | 1.0980 | | | | 1.8348 | | | | (0.7613 | ) | | | (0.2431 | ) | | | — | | | | (1.0044 | ) | | | 24.1461 | | | | 8.08 | % | | | 359,677 | | | | 1.36 | % | | | 1.36 | % | | | 3.08 | % | | | 1.35 | % | | | 1.35 | % | | | 3.09 | % | | | 362 | % | |
February 17, 20169 to August 31, 2016 | | | 20.0000 | | | | 0.3135 | | | | 0.3142 | | | | 3.3260 | | | | 3.6395 | | | | (0.3238 | ) | | | — | | | | — | | | | (0.3238 | ) | | | 23.3157 | | | | 18.29 | % | | | 224,464 | | | | 1.36 | % | | | 1.35 | % | | | 2.64 | % | | | 1.35 | % | | | 1.34 | % | | | 2.65 | % | | | 165 | % | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 33.1531 | | | | 0.1387 | | | | 0.1407 | | | | (3.4799 | ) | | | (3.3412 | ) | | | (0.1085 | ) | | | — | | | | — | | | | (0.1085 | ) | | | 29.7034 | | | | (10.06 | )% | | | 31,489 | | | | 1.59 | % | | | 1.16 | % | | | 0.93 | % | | | 1.58 | % | | | 1.15 | % | | | 0.94 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 28.5477 | | | | 0.0854 | | | | 0.0941 | | | | 8.8391 | | | | 8.9245 | | | | — | | | | (4.3191 | ) | | | — | | | | (4.3191 | ) | | | 33.1531 | | | | 33.39 | % | | | 2,295 | | | | 1.52 | % | | | 1.18 | % | | | 0.27 | % | | | 1.49 | % | | | 1.15 | % | | | 0.30 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 21.6640 | | | | (0.1380 | ) | | | (0.1354 | ) | | | 7.0217 | | | | 6.8837 | | | | — | | | | — | | | | — | | | | — | | | | 28.5477 | | | | 31.77 | % | | | 34,193 | | | | 1.16 | % | | | 1.14 | % | | | (0.57 | )% | | | 1.15 | % | | | 1.13 | % | | | (0.56 | )% | | | 0 | % | |
March 31, 20169 to August 31, 2016 | | | 20.0000 | | | | (0.0091 | ) | | | (0.0088 | ) | | | 1.6731 | | | | 1.6640 | | | | — | | | | — | | | | — | | | | — | | | | 21.6640 | | | | 8.32 | % | | | 58 | | | | 1.15 | % | | | 1.13 | % | | | (0.11 | )% | | | 1.15 | % | | | 1.13 | % | | | (0.11 | )% | | | 0 | % | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 9.5499 | | | | 0.0584 | | | | 0.0604 | | | | 0.6609 | | | | 0.7193 | | | | — | | | | — | | | | — | | | | — | | | | 10.2692 | | | | 7.53 | % | | | 293 | | | | 1.91 | % | | | 1.18 | % | | | 1.02 | % | | | 1.88 | % | | | 1.15 | % | | | 1.05 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 13.2141 | | | | 0.0094 | | | | 0.0094 | | | | (3.6736 | ) | | | (3.6642 | ) | | | — | | | | — | | | | — | | | | — | | | | 9.5499 | | | | (27.73 | )% | | | 300 | | | | 12.28 | % | | | 1.15 | % | | | 0.09 | % | | | 12.28 | % | | | 1.15 | % | | | 0.09 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 18.0798 | | | | (0.0683 | ) | | | (0.0683 | ) | | | (4.7974 | ) | | | (4.8657 | ) | | | — | | | | — | | | | — | | | | — | | | | 13.2141 | | | | (26.91 | )% | | | 176 | | | | 1.15 | % | | | 1.15 | % | | | (0.46 | )% | | | 1.15 | % | | | 1.15 | % | | | (0.46 | )% | | | 0 | % | |
March 31, 20169 to August 31, 2016 | | | 20.0000 | | | | (0.0671 | ) | | | (0.0671 | ) | | | (1.8531 | ) | | | (1.9202 | ) | | | — | | | | — | | | | — | | | | — | | | | 18.0798 | | | | (9.60 | )% | | | 48 | | | | 1.15 | % | | | 1.08 | % | | | (0.81 | )% | | | 1.15 | % | | | 1.08 | % | | | (0.81 | )% | | | 0 | % | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 20.0607 | | | | 0.0993 | | | | 0.0997 | | | | (0.3982 | ) | | | (0.2989 | ) | | | (0.0290 | ) | | | — | | | | — | | | | (0.0290 | ) | | | 19.7328 | | | | (1.49 | )% | | | 5,537 | | | | 1.76 | % | | | 1.11 | % | | | 1.03 | % | | | 1.75 | % | | | 1.10 | % | | | 1.04 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 21.5922 | | | | 0.0317 | | | | 0.0320 | | | | (1.5335 | ) | | | (1.5018 | ) | | | — | | | | (0.0297 | ) | | | — | | | | (0.0297 | ) | | | 20.0607 | | | | (6.97 | )% | | | 4,895 | | | | 1.48 | % | | | 1.10 | % | | | 0.15 | % | | | 1.48 | % | | | 1.10 | % | | | 0.15 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 23.7349 | | | | (0.0879 | ) | | | (0.0877 | ) | | | (2.0548 | ) | | | (2.1427 | ) | | | — | | | | — | | | | — | | | | — | | | | 21.5922 | | | | (9.03 | )% | | | 19,839 | | | | 1.10 | % | | | 1.06 | % | | | (0.45 | )% | | | 1.10 | % | | | 1.06 | % | | | (0.45 | )% | | | 0 | % | |
November 2, 20159 to August 31, 2016 | | | 20.0000 | | | | (0.1101 | ) | | | (0.1099 | ) | | | 3.8450 | | | | 3.7349 | | | | — | | | | — | | | | — | | | | — | | | | 23.7349 | | | | 18.67 | % | | | 2,450 | | | | 1.10 | % | | | 0.88 | % | | | (0.65 | )% | | | 1.10 | % | | | 0.88 | % | | | (0.65 | )% | | | 0 | % | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 17.7896 | | | | 0.0957 | | | | 0.0957 | | | | (0.1267 | ) | | | (0.0310 | ) | | | — | | | | — | | | | — | | | | — | | | | 17.7586 | | | | (0.18 | )% | | | 603 | | | | 2.02 | % | | | 1.10 | % | | | 1.05 | % | | | 2.02 | % | | | 1.10 | % | | | 1.05 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 17.0779 | | | | 0.0415 | | | | 0.0418 | | | | 0.6702 | | | | 0.7117 | | | | — | | | | — | | | | — | | | | — | | | | 17.7896 | | | | 4.17 | % | | | 234 | | | | 1.97 | % | | | 1.10 | % | | | 0.23 | % | | | 1.97 | % | | | 1.10 | % | | | 0.23 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 16.7805 | | | | (0.1069 | ) | | | (0.1068 | ) | | | 0.4043 | | | | 0.2974 | | | | — | | | | — | | | | — | | | | — | | | | 17.0779 | | | | 1.77 | % | | | 539 | | | | 1.10 | % | | | 0.99 | % | | | (0.54 | )% | | | 1.10 | % | | | 0.99 | % | | | (0.54 | )% | | | 0 | % | |
November 2, 20159 to August 31, 2016 | | | 20.0000 | | | | (0.1119 | ) | | | (0.1119 | ) | | | (3.1076 | ) | | | (3.2195 | ) | | | — | | | | — | | | | — | | | | — | | | | 16.7805 | | | | (16.10 | )% | | | 14,685 | | | | 1.10 | % | | | 0.97 | % | | | (0.75 | )% | | | 1.10 | % | | | 0.97 | % | | | (0.75 | )% | | | 0 | % | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 29.61 | | | | 0.09 | | | | 0.12 | | | | (5.37 | ) | | | (5.28 | ) | | | — | | | | (1.36 | ) | | | — | | | | (1.36 | ) | | | 22.97 | | | | (17.48 | )% | | | 187,437 | | | | 1.63 | % | | | 1.59 | % | | | 0.75 | % | | | 1.39 | % | | | 1.35 | % | | | 0.99 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 19.92 | | | | (0.04 | ) | | | 0.01 | | | | 10.95 | | | | 10.91 | | | | — | | | | (1.22 | ) | | | — | | | | (1.22 | ) | | | 29.61 | | | | 57.13 | % | | | 290,584 | | | | 1.57 | % | | | 1.55 | % | | | (0.16 | )% | | | 1.37 | % | | | 1.35 | % | | | 0.04 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 12.89 | | | | (0.12 | ) | | | (0.11 | ) | | | 7.15 | | | | 7.03 | | | | — | | | | — | | | | — | | | | — | | | | 19.92 | | | | 54.55 | % | | | 164,097 | | | | 1.36 | % | | | 1.36 | % | | | (0.78 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.77 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 10.92 | | | | (0.14 | ) | | | (0.14 | ) | | | 2.40 | | | | 2.26 | | | | — | | | | (0.29 | ) | | | — | | | | (0.29 | ) | | | 12.89 | | | | 20.90 | % | | | 126,200 | | | | 1.35 | % | | | 1.35 | % | | | (1.17 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.17 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 10.27 | | | | (0.15 | ) | | | (0.15 | ) | | | 0.93 | | | | 0.78 | | | | — | | | | (0.13 | ) | | | — | | | | (0.13 | ) | | | 10.92 | | | | 7.68 | % | | | 116,172 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 5.87 | | | | (0.11 | ) | | | (0.11 | ) | | | 4.51 | | | | 4.40 | | | | — | | | | — | | | | — | | | | — | | | | 10.27 | | | | 74.98 | % | | | 289,359 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly S&P 500® Bull 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 31.64 | | | | 0.10 | | | | 0.12 | | | | (3.52 | ) | | | (3.42 | ) | | | (0.00 | )10 | | | (1.57 | ) | | | — | | | | (1.57 | ) | | | 26.65 | | | | (10.39 | )% | | | 100,298 | | | | 1.58 | % | | | 1.54 | % | | | 0.73 | % | | | 1.39 | % | | | 1.35 | % | | | 0.92 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 24.94 | | | | 0.0010 | | | | 0.01 | | | | 8.60 | | | | 8.60 | | | | — | | | | (1.90 | ) | | | — | | | | (1.90 | ) | | | 31.64 | | | | 35.87 | % | | | 115,024 | | | | 1.41 | % | | | 1.39 | % | | | 0.01 | % | | | 1.37 | % | | | 1.35 | % | | | 0.05 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 19.13 | | | | (0.17 | ) | | | (0.16 | ) | | | 5.98 | | | | 5.81 | | | | — | | | | — | | | | — | | | | — | | | | 24.94 | | | | 30.33 | % | | | 72,601 | | | | 1.36 | % | | | 1.36 | % | | | (0.79 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.78 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 16.57 | | | | (0.24 | ) | | | (0.07 | ) | | | 3.67 | | | | 3.43 | | | | — | | | | (0.87 | ) | | | — | | | | (0.87 | ) | | | 19.13 | | | | 21.43 | % | | | 63,602 | | | | 1.54 | % | | | 1.54 | % | | | (1.56 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.37 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 17.73 | | | | (0.25 | ) | | | (0.25 | ) | | | (0.18 | ) | | | (0.43 | ) | | | — | | | | (0.73 | ) | | | — | | | | (0.73 | ) | | | 16.57 | | | | (2.40 | )% | | | 43,329 | | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 12.29 | | | | (0.20 | ) | | | (0.20 | ) | | | 6.43 | | | | 6.23 | | | | — | | | | (0.79 | ) | | | — | | | | (0.79 | ) | | | 17.73 | | | | 52.45 | % | | | 39,820 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly S&P 500® Bear 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 11.83 | | | | 0.05 | | | | 0.06 | | | | 0.27 | | | | 0.32 | | | | — | | | | — | | | | — | | | | — | | | | 12.15 | | | | 2.70 | % | | | 8,848 | | | | 2.05 | % | | | 1.38 | % | | | 0.83 | % | | | 2.02 | % | | | 1.35 | % | | | 0.86 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 16.86 | | | | 0.0010 | | | | 0.0010 | | | | (5.03 | ) | | | (5.03 | ) | | | — | | | | — | | | | — | | | | — | | | | 11.83 | | | | (29.83 | )% | | | 6,117 | | | | 1.92 | % | | | 1.35 | % | | | 0.03 | % | | | 1.92 | % | | | 1.35 | % | | | 0.03 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 22.95 | | | | (0.15 | ) | | | (0.15 | ) | | | (5.94 | ) | | | (6.09 | ) | | | — | | | | — | | | | — | | | | — | | | | 16.86 | | | | (26.54 | )% | | | 20,832 | | | | 1.35 | % | | | 1.35 | % | | | (0.77 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.77 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 30.91 | | | | (0.32 | ) | | | (0.32 | ) | | | (7.64 | ) | | | (7.96 | ) | | | — | | | | — | | | | — | | | | — | | | | 22.95 | | | | (25.75 | )% | | | 10,081 | | | | 1.35 | % | | | 1.35 | % | | | (1.16 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.16 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 32.72 | | | | (0.39 | ) | | | (0.39 | ) | | | (1.42 | ) | | | (1.81 | ) | | | — | | | | — | | | | — | | | | — | | | | 30.91 | | | | (5.53 | )% | | | 9,066 | | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 53.84 | | | | (0.53 | ) | | | (0.53 | ) | | | (20.59 | ) | | | (21.12 | ) | | | — | | | | — | | | | — | | | | — | | | | 32.72 | | | | (39.23 | )% | | | 6,464 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
40
Financial Highlights
February 28, 2019
| | | | | RATIOS TO AVERAGE NET ASSETS7 | | | |
| | | Net Asset
Value,
Beginning
of Year/
Period | | Net
Investment
Income
(Loss)1,2 | | Net
Investment
Income
(Loss)1,3 | | Net
Realized and
Unrealized
Gain (Loss) on
Investments4 | | Net Increase
(Decrease) in
Net Asset
Value Resulting
from Operations | | Dividends
from Net
Investment
Income | | Distributions
from
Realized
Capital Gains | | Return of
Capital
Distribution | | Total
Distributions | | Net
Asset
Value,
End of
Year/
Period | | Total
Return5 | | Net
Assets,
End of
Year/
Period
(,000) | | Total
Expenses2 | | Net
Expenses2,6 | | Net Investment
Income (Loss)
after Expense
Reimbursement/
Recoupment2 | | Total
Expenses3 | | Net
Expenses3,6 | | Net Investment
Income (Loss)
after Expense
Reimbursement/
Recoupment3 | | Portfolio
Turnover
Rate7 | |
Direxion Monthly Small Cap Bull 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | $ | 97.04 | | | $ | 0.30 | | | $ | 0.37 | | | $ | (22.87 | ) | | $ | (22.57 | ) | | $ | (0.07 | ) | | $ | (3.92 | ) | | $ | — | | | $ | (3.99 | ) | | $ | 70.48 | | | | (22.55 | )% | | $ | 35,868 | | | | 1.65 | % | | | 1.45 | % | | | 0.83 | % | | | 1.55 | % | | | 1.35 | % | | | 1.03 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 64.77 | | | | 0.04 | | | | 0.06 | | | | 32.23 | | | | 32.27 | | | | — | | | | — | | | | — | | | | — | | | | 97.04 | | | | 49.82 | % | | | 25,160 | | | | 1.58 | % | | | 1.37 | % | | | 0.05 | % | | | 1.56 | % | | | 1.35 | % | | | 0.07 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 51.05 | | | | (0.48 | ) | | | (0.48 | ) | | | 14.20 | | | | 13.72 | | | | — | | | | — | | | | — | | | | — | | | | 64.77 | | | | 26.88 | % | | | 16,316 | | | | 1.36 | % | | | 1.36 | % | | | (0.81 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.80 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 45.38 | | | | (0.49 | ) | | | (0.49 | ) | | | 6.16 | | | | 5.67 | | | | — | | | | — | | | | — | | | | — | | | | 51.05 | | | | 12.49 | % | | | 13,216 | | | | 1.35 | % | | | 1.34 | % | | | (1.14 | )% | | | 1.35 | % | | | 1.34 | % | | | (1.14 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 46.95 | | | | (0.67 | ) | | | (0.67 | ) | | | (0.90 | ) | | | (1.57 | ) | | | — | | | | (0.00 | )10 | | | — | | | | (0.00 | )10 | | | 45.38 | | | | (3.34 | )% | | | 15,325 | | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 35.43 | | | | (0.59 | ) | | | (0.59 | ) | | | 12.76 | | | | 12.17 | | | | — | | | | (0.65 | ) | | | — | | | | (0.65 | ) | | | 46.95 | | | | 34.56 | % | | | 25,266 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly Small Cap Bear 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 11.57 | | | | 0.05 | | | | 0.06 | | | | 0.99 | | | | 1.04 | | | | — | | | | — | | | | — | | | | — | | | | 12.61 | | | | 8.99 | % | | | 3,671 | | | | 1.84 | % | | | 1.39 | % | | | 0.73 | % | | | 1.80 | % | | | 1.35 | % | | | 0.77 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 18.41 | | | | 0.01 | | | | 0.01 | | | | (6.85 | ) | | | (6.84 | ) | | | — | | | | — | | | | — | | | | — | | | | 11.57 | | | | (37.15 | )% | | | 4,295 | | | | 2.06 | % | | | 1.35 | % | | | 0.04 | % | | | 2.06 | % | | | 1.35 | % | | | 0.04 | % | | | 0 | % | |
Year ended August 31, 2017 | | | 26.09 | | | | (0.17 | ) | | | (0.17 | ) | | | (7.51 | ) | | | (7.68 | ) | | | — | | | | — | | | | — | | | | — | | | | 18.41 | | | | (29.44 | )% | | | 5,772 | | | | 1.35 | % | | | 1.35 | % | | | (0.80 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.80 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 34.47 | | | | (0.38 | ) | | | (0.38 | ) | | | (8.00 | ) | | | (8.38 | ) | | | — | | | | — | | | | — | | | | — | | | | 26.09 | | | | (24.31 | )% | | | 7,115 | | | | 1.35 | % | | | 1.35 | % | | | (1.15 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.15 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 37.75 | | | | (0.46 | ) | | | (0.46 | ) | | | (2.82 | ) | | | (3.28 | ) | | | — | | | | — | | | | — | | | | — | | | | 34.47 | | | | (8.69 | )% | | | 7,576 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 57.20 | | | | (0.58 | ) | | | (0.58 | ) | | | (18.87 | ) | | | (19.45 | ) | | | — | | | | — | | | | — | | | | — | | | | 37.75 | | | | (34.00 | )% | | | 15,540 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 32.92 | | | | 0.14 | | | | 0.14 | | | | 1.08 | | | | 1.22 | | | | — | | | | — | | | | — | | | | — | | | | 34.14 | | | | 3.71 | % | | | 13,987 | | | | 1.59 | % | | | 1.38 | % | | | 0.82 | % | | | 1.56 | % | | | 1.35 | % | | | 0.85 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 36.02 | | | | (0.01 | ) | | | (0.01 | ) | | | (3.09 | ) | | | (3.10 | ) | | | — | | | | — | | | | — | | | | — | | | | 32.92 | | | | (8.61 | )% | | | 9,232 | | | | 1.85 | % | | | 1.35 | % | | | (0.04 | )% | | | 1.85 | % | | | 1.35 | % | | | (0.04 | )% | | | 0 | % | |
Year ended August 31, 2017 | | | 38.18 | | | | (0.29 | ) | | | (0.29 | ) | | | (1.87 | ) | | | (2.16 | ) | | | — | | | | — | | | | — | | | | — | | | | 36.02 | | | | (5.66 | )% | | | 15,142 | | | | 1.35 | % | | | 1.35 | % | | | (0.82 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.82 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 34.36 | | | | (0.42 | ) | | | (0.42 | ) | | | 4.24 | | | | 3.82 | | | | — | | | | — | | | | — | | | | — | | | | 38.18 | | | | 11.12 | % | | | 22,500 | | | | 1.35 | % | | | 1.35 | % | | | (1.17 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.17 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 33.01 | | | | (0.46 | ) | | | (0.46 | ) | | | 1.81 | | | | 1.35 | | | | — | | | | — | | | | — | | | | — | | | | 34.36 | | | | 4.09 | % | | | 69,850 | | | | 1.35 | % | | | 1.31 | % | | | (1.30 | )% | | | 1.35 | % | | | 1.31 | % | | | (1.30 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 29.48 | | | | (0.41 | ) | | | (0.41 | ) | | | 3.94 | | | | 3.53 | | | | — | | | | — | | | | — | | | | — | | | | 33.01 | | | | 11.97 | % | | | 22,235 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 30.56 | | | | 0.13 | | | | 0.13 | | | | (1.29 | ) | | | (1.16 | ) | | | — | | | | — | | | | — | | | | — | | | | 29.40 | | | | (3.80 | )% | | | 2,866 | | | | 3.45 | % | | | 1.35 | % | | | 0.83 | % | | | 3.45 | % | | | 1.35 | % | | | 0.83 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 28.34 | | | | (0.02 | ) | | | (0.02 | ) | | | 2.24 | | | | 2.22 | | | | — | | | | — | | | | — | | | | — | | | | 30.56 | | | | 7.83 | % | | | 2,975 | | | | 2.30 | % | | | 1.35 | % | | | (0.07 | )% | | | 2.30 | % | | | 1.35 | % | | | (0.07 | )% | | | 0 | % | |
Year ended August 31, 2017 | | | 27.99 | | | | (0.24 | ) | | | (0.24 | ) | | | 0.59 | | | | 0.35 | | | | — | | | | — | | | | — | | | | — | | | | 28.34 | | | | 1.25 | % | | | 5,120 | | | | 1.35 | % | | | 1.35 | % | | | (0.80 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.80 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 33.01 | | | | (0.37 | ) | | | (0.37 | ) | | | (4.65 | ) | | | (5.02 | ) | | | — | | | | — | | | | — | | | | — | | | | 27.99 | | | | (15.21 | )% | | | 4,819 | | | | 1.35 | % | | | 1.35 | % | | | (1.19 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.19 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 36.66 | | | | (0.46 | ) | | | (0.46 | ) | | | (3.19 | ) | | | (3.65 | ) | | | — | | | | — | | | | — | | | | — | | | | 33.01 | | | | (9.96 | )% | | | 19,935 | | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.34 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 43.12 | | | | (0.53 | ) | | | (0.53 | ) | | | (5.93 | ) | | | (6.46 | ) | | | — | | | | — | | | | — | | | | — | | | | 36.66 | | | | (14.98 | )% | | | 8,010 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Direxion Monthly Emerging Markets Bull 2X Fund | |
Six Months Ended February 28, 2019 (Unaudited) | | | 48.88 | | | | 0.19 | | | | 0.19 | | | | (2.66 | ) | | | (2.47 | ) | | | — | | | | — | | | | — | | | | — | | | | 46.41 | | | | (5.05 | )% | | | 4,853 | | | | 2.00 | % | | | 1.37 | % | | | 0.86 | % | | | 1.98 | % | | | 1.35 | % | | | 0.88 | % | | | 0 | % | |
Year ended August 31, 2018 | | | 53.50 | | | | (0.01 | ) | | | — | | | | (4.61 | ) | | | (4.62 | ) | | | — | | | | — | | | | — | | | | — | | | | 48.88 | | | | (8.64 | )% | | | 5,351 | | | | 1.88 | % | | | 1.36 | % | | | (0.01 | )% | | | 1.87 | % | | | 1.35 | % | | | — | | | | 0 | % | |
Year ended August 31, 2017 | | | 35.73 | | | | (0.32 | ) | | | (0.32 | ) | | | 18.09 | | | | 17.77 | | | | — | | | | — | | | | — | | | | — | | | | 53.50 | | | | 49.73 | % | | | 9,900 | | | | 1.36 | % | | | 1.36 | % | | | (0.78 | )% | | | 1.35 | % | | | 1.35 | % | | | (0.77 | )% | | | 0 | % | |
Year ended August 31, 2016 | | | 30.79 | | | | (0.35 | ) | | | (0.35 | ) | | | 5.29 | | | | 4.94 | | | | — | | | | — | | | | — | | | | — | | | | 35.73 | | | | 16.04 | % | | | 9,117 | | | | 1.35 | % | | | 1.35 | % | | | (1.14 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.14 | )% | | | 0 | % | |
Year ended August 31, 2015 | | | 56.54 | | | | (0.64 | ) | | | (0.64 | ) | | | (25.11 | ) | | | (25.75 | ) | | | — | | | | — | | | | — | | | | — | | | | 30.79 | | | | (45.54 | )% | | | 2,777 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
Year ended August 31, 2014 | | | 41.36 | | | | (0.67 | ) | | | (0.67 | ) | | | 15.85 | | | | 15.18 | | | | — | | | | — | | | | — | | | | — | | | | 56.54 | | | | 36.70 | % | | | 32,357 | | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 1.35 | % | | | 1.35 | % | | | (1.33 | )% | | | 0 | % | |
1 Net investment income (loss) per share represents net investment income (loss) divided by the daily average shares of beneficial interest outstanding throughout each year/period.
2 Includes interest expense and extraordinary expense which is comprised of excise tax expense.
3 Excludes interest expense and extraordinary expense which is comprised of excise tax expense.
4 Due to the timing of sales and redemptions of capital shares, the net realized and unrealized gain(loss) per share will not equal the Fund's changes in net realized and unrealized gain(loss) on investments, futures and swaps for the period.
5 Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period and redemption on the last day of the period. Total return calculated for a period of less than one year is not annualized. The total return would have been lower of certain expenses had not been reimbursed by the investment adviser.
6 Net expenses include effects of any reimbursement or recoupment.
7 For periods less than one year, these ratios are annualized.
8 Portfolio turnover is not annualized and does not include effects of turnover of the swap or future contracts portfolio. Short-term securities with maturities less than or equal to 365 days are also excluded from portfolio turnover calculation.
9 Commencement of operations.
10 Amount is less than $0.01 per share.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
41
Direxion Funds
Notes to the Financial Statements (Unaudited)
February 28, 2019
1. ORGANIZATION
Direxion Funds (the "Trust") was organized as a Massachusetts Business Trust on June 6, 1997, and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objective and policies. The Trust currently has 14 series, of which 13 are included in this report: Direxion Monthly High Yield Bull 1.2X Fund, Direxion Monthly NASDAQ-100® Bull 1.25X Fund, Direxion Monthly NASDAQ-100® Bear 1.25X Fund, Direxion Monthly 25+ Year Treasury Bull 1.35X Fund, Direxion Monthly 25+ Year Treasury Bear 1.35X Fund, Direxion Monthly NASDAQ-100® Bull 2X Fund, Direxion Monthly S&P 500® Bull 2X Fund, Direxion Monthly S&P 500® Bear 2X Fund, Direxion Monthly Small Cap Bull 2X Fund, Direxion Monthly Small Cap Bear 2X Fund, Direxion Monthly 7-10 Year Treasury Bull 2X Fund, Direxion Monthly 7-10 Year Treasury Bear 2X Fund, and Direxion Monthly Emerging Markets Bull 2X Fund (each a "Fund" and collectively, the "Funds"). Each Fund is a non-diversified series of the Trust pursuant to the 1940 Act. The 13 Funds included in this report offer only Investor Class shares.
Rafferty Asset Management, LLC (the "Adviser") has registered as a commodity pool operator ("CPO") and the Funds are considered commodity pools under the Commodity Exchange Act (the "CEA"). Accordingly, the Advisor is subject to registration and regulation as a CPO under the CEA and must comply with various regulatory requirements under the CEA and the rules and regulations of the Commodity Futures Trading Commission and the National Futures Association, including investor protection requirements, antifraud provisions, disclosure requirements and reporting and recordkeeping requirements.
The Funds' investment objectives are to seek monthly investment results, before fees and expenses that correspond to the calendar month performance of a particular index or benchmark. The Funds with the word "Bull" in their name attempt to provide investment results that correlate positively to the return of an index or benchmark. The Funds with the word "Bear" in their name attempt to provide investment results that correlate negatively to the return of an index or benchmark.
Fund | | Index or Benchmark | | Monthly Target | |
Direxion Monthly High Yield Bull 1.2X Fund | | Solactive High Yield Beta Index | | | 120 | % | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | NASDAQ-100® Index | | | 125 | % | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | | | -125 | % | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | ICE U.S. Treasury 25+ Year Bond Index | | | 135 | % | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | | | -135 | % | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | NASDAQ-100® Index | | | 200 | % | |
Direxion Monthly S&P 500® Bull 2X Fund | | S&P 500® Index | | | 200 | % | |
Direxion Monthly S&P 500® Bear 2X Fund | | | | | -200 | % | |
Direxion Monthly Small Cap Bull 2X Fund | | Russell 2000® Index | | | 200 | % | |
Direxion Monthly Small Cap Bear 2X Fund | | | | | -200 | % | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | ICE U.S. Treasury 7-10 Year Bond Index | | | 200 | % | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | | | -200 | % | |
Direxion Monthly Emerging Markets Bull 2X Fund | | MSCI Emerging Markets IndexSM | | | 200 | % | |
The Trust has evaluated the structure, objective and activities of the Funds and determined that they meet the characteristics of an investment company. As such, these financial statements have applied the guidance as set forth in the Accounting Standards Codifications ("ASC") 946, Financial Services Investment Companies.
DIREXION SEMI-ANNUAL REPORT
42
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. These policies are in conformity with U.S. generally accepted accounting principles ("GAAP").
a) Cash Equivalents – The Funds consider investments in the U.S Bank Money Market Deposit Account, a U.S. dollar-denominated deposit account offered through U.S. Bank, to be cash equivalents. The Funds are exposed to the credit risk of U.S. Bank through these holdings of cash equivalents. These cash equivalents are presented on the Statements of Assets and Liabilities as "Cash equivalents" and were classified as Level 1 assets as of February 28, 2019.
b) Investment Valuation – The Net Asset Value ("NAV") of each Fund is determined daily, Monday through Friday, as of the close of regular trading on the New York Stock Exchange ("NYSE"), each day the NYSE is open for business. The value of all portfolio securities and other assets held by a Fund will be determined as of the time a Fund calculates its NAV, 4:00 p.m. Eastern Time ("Valuation Time"). On days that the Securities Industry and Financial Markets Association ("SIFMA") recommends that the bond markets close all day, the Direxion High Yield Bull 1.2X Fund, Direxion Monthly 25+ Year Treasury Bull 1.35X Fund, Direxion Monthly 25+ Year Treasury Bear 1.35X Fund, Direxion Monthly 7-10 Year Treasury Bull 2X Fund and the Direxion Monthly 7-10 Year Treasury Bear 2X Fund (the "Fixed Income Funds") do not calculate their NAVs even if the NYSE is open for business. Similarly, on days that SIFMA recommends that the bond markets close early, each of the Fixed Income Funds calculates its NAV as of the time of the recommended close, usually 2:00 p.m. Eastern Time, rather than the close of regular trading on the NYSE. Equity securities, exchange-traded funds ("ETFs") and over-the-counter securities are valued at their last sales price or, if not available, at the average of the last bid and ask prices. Securities primarily traded on the NASDAQ National Market are valued using the NASDAQ Official Closing Price. Futures contracts are valued at the settlement price established on the exchange on which they are traded, if that settlement price reflects trading prior to the Valuation Time. If the settlement price established by the exchange reflects trading after the Valuation Time, then the last sales price prior to Valuation Time will be used. Swap contracts are valued using the closing price of the underlying reference entity or the closing value of the underlying reference index. Short-term debt securities with an original maturity of 60 days or less are valued using the amortized cost method. Investments in open-end mutual funds, including money market funds, are valued at their respective quoted NAV on the valuation date.
Other debt securities are valued by using the mean prices provided by the Funds' pricing service or, if such prices are unavailable, by a matrix pricing method. Securities for which reliable market quotations are not readily available, the Funds' pricing service does not provide a valuation for such securities, the Funds' pricing service provides valuation that in the judgment of the Adviser does not represent fair value, or the Fund or Adviser believes the market price is stale, are fair valued as determined by the Adviser under the supervision of the Board of Trustees. Additionally, the Adviser will monitor developments in the marketplace for significant events that may affect the value of those securities whose closing prices were established before the Valuation Time.
c) Swap Contracts – Each Fund may enter into equity swap contacts. Standard equity swap contracts are between two parties that agree to exchange the returns (or differentials in rates of return) earned or realized on particular predetermined investments or instruments. The gross amount to be exchanged is calculated with respect to a "notional amount" (i.e. the return on or increase in value of a particular dollar amount invested in a "basket" of securities representing a particular index or industry sector). A Fund enters into master netting agreements with the counterparty. These agreements calculate the obligations of the parties on a "net basis". Consequently, a Fund's current obligations under a swap agreement generally will be equal to the net amount to be paid or received under the agreement based on the relative value of the positions held by each party. A Fund's obligations are accrued daily and offset by any amounts owed to the Fund. However, a Fund does not offset the fair value amounts of the swap contract and the related collateral on the Statement of Assets and Liabilities arising from swap contracts executed with the same counterparty under such master netting agreements.
In a "long" equity swap agreement, the counterparty will generally agree to pay the Fund the amount, if any, by which the notional amount of the swap contract would have increased in value if the Fund had been invested in the particular securities, plus dividends that would have been received on those securities. The Fund will agree to pay the counterparty a floating rate of interest on the notional amount of the swap contract plus the amount, if any, by which the notional amount would have decreased in value had it been invested in such securities plus, in certain instances, commissions or trading spreads on the notional amounts. Thus, the return on the swap contract should be the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Fund on the notional amount. In certain instances, market factors such as the interest rate environment and the demand to borrow the securities underlying the swap agreement can cause
DIREXION SEMI-ANNUAL REPORT
43
a scenario in which the counterparty will pay the Fund interest. Payments may be made at the conclusion of the contract or periodically during its term. Swap contracts do not include the delivery of securities. The net amount of the excess, if any, of the Fund's obligations over its entitlement with respect to each swap is accrued on a daily basis and an amount of cash or liquid assets, having an aggregate net asset value at least equal to such accrued excess is maintained in a segregated account. Until a swap contract is settled in cash, the gain or loss on the notional amount plus dividends on the securities less the interest paid by the Fund on the notional amount are recorded as "unrealized appreciation or depreciation on swaps" and when cash is exchanged, the gain or loss is recorded as "realized gains or losses on swaps."
Each Fund may enter into swap contracts that provide the opposite return of the underlying benchmark or security ("short" the index or security). The operations are similar to that of the swaps disclosed above except that the counterparty pays interest to the Fund on the notional amount outstanding and the dividends on the underlying securities reduce the return of the swap. However, in certain instances, market factors such as the interest rate environment and the demand to borrow the securities underlying the swap agreement can cause a scenario in which the Fund will pay the counterparty interest. These amounts are netted with any unrealized appreciation or depreciation to determine the value of the swap. The Funds will typically enter into equity swap agreements to obtain leverage in order to meet their objectives.
Accounting Standards Update No. 2013-01 "Disclosures about Offsetting Assets and Liabilities" ("ASU 2013-01"), requires entities to disclose (i) gross and net information about both instruments and transactions eligible for offset in the financial statements, and (ii) instruments and transactions subject to an agreement similar to a master netting agreement. ASU 2013-01 is limited in scope to the following financial instruments, to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement: (i) recognized derivative instruments accounted for under ASC 815 (Derivatives and Hedging).
In order to better define its contractual rights and to secure rights that will help a Fund mitigate its counterparty risk , a Fund may enter into an International Swaps and Derivatives Association, Inc. Master Agreement ("ISDA Master Agreement") or similar agreement with its counterparties. An ISDA Master Agreement is a bilateral agreement between a Fund and a counterparty that governs over-the-counter derivatives ("OTC"), including swap contracts, and typically contains, among other things, collateral posting terms, netting and rights of set-off provisions in the event of a default and/or termination event. Under an ISDA Master Agreement, a Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments' payables and receivables to create a single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
Collateral requirements generally differ by type of derivative. Collateral terms are contract specific for OTC derivatives (e.g. swaps). Generally, for transactions traded under an ISDA Master Agreement, the collateral requirements are calculated by netting the marked-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by a Fund and the counterparty. Generally, the amount of collateral due from or to the counterparty must exceed a minimum transfer amount threshold before a transfer is required to be made. To the extent amounts due to a Fund from its derivatives counterparties are not fully collateralized, contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
For financial reporting purposes, the Funds elect to not offset assets and liabilities subject to an ISDA Master Agreement, if any, in the Statements of Assets and Liabilities. Therefore, all qualifying transactions are presented on a gross basis in the Statements of Assets and Liabilities. As of February 28, 2019, the impact of netting of assets and liabilities and the offsetting of collateral pledged or received based on contractual netting/set-off provisions in the ISDA Master Agreement are detailed in the following pages.
In the event of the counterparty's default, bankruptcy or any other event for which the counterparty cannot meet its obligations, a Fund bears the risk of loss equal to the amount of the daily appreciation owed to the Fund. This obligation represents the daily gain accrued to the Fund from the close of business day prior to this event to the day on which this event occurs and the counterparty can no longer meet its obligations. A Fund will enter into swap agreements only with large, well-capitalized and established financial institutions. The creditworthiness of each of the firms that is a party to a swap agreement is monitored by the Adviser. Shareholders may obtain swap counterparty financial statements at www.sec.gov. Swap contracts are subject to credit risk. Credit risk occurs when the financial condition of an issuer of a security or instrument may cause it to default or become unable to pay interest or principal due on the security. The counterparty to a swap contract might default on its obligations. In addition, the Funds have agreements with certain
DIREXION SEMI-ANNUAL REPORT
44
counterparties with which it trades swap contracts that contain credit risk-related contingent features that could be triggered subject to certain circumstances. Such circumstances include agreed upon net asset value and performance-based thresholds. The maximum exposure to the Funds in regard to potential counterparty default and credit-risk related contingent features at February 28, 2019 is detailed in the following table. If such credit risk-related contingencies were triggered the counterparties would have the option to terminate any positions open under the master netting agreement.
Description: Swap Contract
Counterparty: Bank of America Merrill Lynch
| | | | | Assets: | | | | | | Liabilities: | | | |
| | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | |
Fund Name | | Gross
Amounts of
Recognized
Assets | | Financial
Instruments | | Collateral
Received | | Net
Amount2 | | Gross
Amounts of
Recognized
Liabilities | | Financial
Instruments | | Collateral
Pledged | | Net
Amount | |
Direxion Monthly
NASDAQ-100®
Bear 1.25X
Fund | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 9,366 | | | $ | — | | | $ | 9,3661 | | | $ | — | | |
Direxion Monthly
NASDAQ-100®
Bull 2X Fund | | | 23,961,324 | | | | — | | | | 23,961,3241 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly
S&P 500®
Bull 2X Fund | | | 1,869,113 | | | | 3,989 | | | | 1,865,1241 | | | | — | | | | 3,989 | | | | 3,989 | | | | — | | | | — | | |
Direxion Monthly
S&P 500®
Bear 2X Fund | | | 11,411 | | | | 11,411 | | | | — | | | | — | | | | 648,504 | | | | 11,411 | | | | 637,0931 | | | | — | | |
Direxion Monthly
Small Cap Bull
2X Fund | | | 2,478,223 | | | | — | | | | 2,478,2231 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
1 The amount of collateral shown has been limited such that the net amount cannot be less than zero.
2 The amount shown is the maximum credit exposure of the Fund for the corresponding counterparty.
Description: Swap Contract
Counterparty: Credit Suisse International
| | | | | Assets: | | | | | | Liabilities: | | | |
| | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | |
Fund Name | | Gross
Amounts of
Recognized
Assets | | Financial
Instruments | | Collateral
Received | | Net
Amount2 | | Gross
Amounts of
Recognized
Liabilities | | Financial
Instruments | | Collateral
Pledged | | Net
Amount | |
Direxion Monthly
High Yield
Bull 1.2X
Fund | | $ | 310,164 | | | $ | — | | | $ | 310,1641 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
Direxion Monthly
NASDAQ-100®
Bull 1.25X Fund | | | 169,115 | | | | — | | | | 169,1151 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly
25+ Year
Treasury Bull
1.35X Fund | | | — | | | | — | | | | — | | | | — | | | | 55,504 | | | | — | | | | 55,5041 | | | | — | | |
Direxion Monthly
25+ Year
Treasury Bear
1.35X Fund | | | 4,307 | | | | — | | | | — | | | | 4,307 | | | | — | | | | — | | | | — | | | | — | | |
DIREXION SEMI-ANNUAL REPORT
45
| | | | | Assets: | | | | | | Liabilities: | | | |
| | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | | | | Gross Amounts not
offset in the Statement
of Asset and Liabilities | | | |
Fund Name | | Gross
Amounts of
Recognized
Assets | | Financial
Instruments | | Collateral
Received | | Net
Amount2 | | Gross
Amounts of
Recognized
Liabilities | | Financial
Instruments | | Collateral
Pledged | | Net
Amount | |
Direxion Monthly
NASDAQ-100®
Bull 2X Fund | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 294,337 | | | $ | — | | | $ | 294,3371 | | | $ | — | | |
Direxion Monthly
S&P 500®
Bull 2X Fund | | | 4,148,619 | | | | — | | | | 4,148,6191 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly
Small Cap
Bull 2X Fund | | | 510,130 | | | | — | | | | 510,1301 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly
Small Cap
Bear 2X Fund | | | — | | | | — | | | | — | | | | — | | | | 345,622 | | | | — | | | | 345,6221 | | | | — | | |
Direxion Monthly
7-10 Year
Treasury Bull
2X Fund | | | — | | | | — | | | | — | | | | — | | | | 122,084 | | | | — | | | | 122,0841 | | | | — | | |
Direxion Monthly
7-10 Year
Treasury Bear
2X Fund | | | 12,402 | | | | — | | | | — | | | | 12,402 | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly
Emerging
Markets Bull
2X Fund | | | — | | | | — | | | | — | | | | — | | | | 96,374 | | | | — | | | | 96,3741 | | | | — | | |
1 The amount of collateral shown has been limited such that the net amount cannot be less than zero.
2 The amount shown is the maximum credit exposure of the Fund for the corresponding counterparty.
d) Futures Contracts and Options on Futures Contracts – Each Fund may purchase and sell futures contracts and options on such futures contracts. A Fund may use futures contracts to gain exposure to, or hedge against changes in the values of equities, interest rates or foreign currencies. Upon entering into a contract, the Fund deposits and maintains as collateral such initial margin as required by the exchange on which the transaction is effected. Pursuant to the contract, the Fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the contract. Such receipts or payments are known as "variation margin" and are recorded by the Fund as unrealized gains and losses. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. As collateral for futures contracts, the Fund is required under the 1940 Act to maintain assets consisting of cash, cash equivalents or liquid securities. This collateral is required to be adjusted daily to reflect the market value of the purchase obligation for long futures contracts or the market value of the instrument underlying the contract, but not less than the market price at which the futures contract was established, for short futures contracts.
e) Risks of Futures Contracts and Options on Futures Contracts – The risks inherent in the use of futures contracts and options on futures contracts include 1) adverse changes in the value of such instruments; 2) imperfect correlation between the price of futures contracts and options thereon and movements in the price of the underlying securities, index or futures contracts; 3) the possible absence of a liquid secondary market for any particular instrument at any time; 4) the possible need to defer closing out certain positions to avoid adverse tax consequences; and 5) the possible nonperformance by the counterparty under the terms of the contract. The Funds designate cash, cash equivalents and liquid securities as collateral for futures contracts and options on futures contracts. The Funds were not invested in any options on futures contracts during the six months ended February 28, 2019.
DIREXION SEMI-ANNUAL REPORT
46
f) Risks of Investing in Foreign Securities – Investments in foreign securities involve greater risks than investing in domestic securities. As a result, a Fund's returns and net asset values may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The laws and accounting, auditing, and financial reporting standards in foreign countries may require less disclosure as required in the U.S., and there may be less public information available about foreign companies. Investments in foreign emerging markets present a greater risk than investing in foreign issuers in general. The risk of political or social upheaval is greater in emerging markets. In addition, there may be risks of an economy's dependence on revenues from particular commodities, currency transfer restrictions, a limited number of buyers for such securities and delays and disruptions in securities settlement procedures.
g) Investment Transactions – Investment transactions are recorded on trade date. The Funds determine the gain or loss realized from investment transactions by comparing the identified cost, which is the same basis used for federal income tax purposes, with the net sales proceeds.
h) Securities Lending – The Direxion Monthly High Yield Bull 1.2X Fund may lend its investment securities to approved brokers, dealers and other financial institutions. The borrower pledges and maintains with the Fund collateral consisting of cash, an irrevocable letter of credit issued by an approved bank, or securities issued or guaranteed by the U.S. government. The collateral received by the Fund is required to have a value of at least 102% of the current value of the loaned securities. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities but does not receive interest income on securities received as collateral. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the standard time period for settlement of securities transactions.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund is contractually indemnified with the securities lending agent. Furthermore, the Fund requires the value of the securities loaned to be computed daily at the close of the market and additional collateral be furnished if required.
As of February 28, 2019, no securities were loaned by the Fund.
i) Investments in Other Investment Companies – A Fund may invest in another ETF or mutual fund collectively defined as "investment companies". As a result, Fund shareholders indirectly bear the Fund's proportionate share of fees and expenses paid by shareholders of the other investment company, in addition to the fees and expenses Fund shareholders bear in connection with the Fund's own operations. These costs are disclosed in the Fund's prospectus as Acquired Fund Fees and Expenses. Shareholders may obtain the financial statements of these investment companies at www.sec.gov.
j) Federal Income Taxes – Each Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all Federal income taxes and excise taxes. No provision for Federal income taxes has been made in the Funds' financial statements.
k) Income and Expenses – Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and discount, is recognized on an accrual basis. Expenses are charged to the Funds daily. Expenses are computed based on each Fund's respective average daily net assets. For additional discussion on expenses, refer to Note 4.
l) Distributions to Shareholders – Each Fund pays dividends from net investment income and distributes net realized capital gains, if any, at least annually. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Certain Funds also utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividends paid deduction. Distributions to shareholders are recorded on the ex-dividend date.
DIREXION SEMI-ANNUAL REPORT
47
The tax character of distributions during the six months ended February 28, 2019 and year ended August 31, 2018, were as follows:
| | | Direxion Monthly
High Yield Bull 1.2X Fund | | Direxion Monthly
NASDAQ-100® Bull
1.25X Fund | | Direxion Monthly
NASDAQ-100® Bear
1.25X Fund | |
| | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | |
Distributions paid from: | |
Ordinary Income | | $ | 3,279,364 | | | $ | 7,618,430 | | | $ | 40,701 | | | $ | 3,734,099 | | | $ | — | | | $ | — | | |
Long-Term Capital Gains | | | | | | | — | | | | — | | | | — | | | | — | | |
Return of Capital | | | — | | | | — | | | | — | | | | | | — | | | | — | | |
Total Distributions paid | | $ | 3,279,364 | | | $ | 7,618,430 | | | $ | 40,701 | | | $ | 3,734,099 | | | $ | — | | | $ | — | | |
| | | Direxion Monthly
25+ Year Treasury Bull
1.35X Fund | | Direxion Monthly
25+ Year Treasury Bear
1.35X Fund | | Direxion Monthly
NASDAQ-100® Bull 2X Fund | |
| | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | |
Distributions paid from: | |
Ordinary Income | | $ | 66,770 | | | $ | 130,177 | | | $ | — | | | $ | — | | | $ | 9,728,117 | | | $ | 10,222,280 | | |
Long-Term Capital Gains | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Total Distributions paid | | $ | 66,770 | | | $ | 130,177 | | | $ | — | | | $ | — | | | $ | 9,728,117 | | | $ | 10,222,280 | | |
| | | Direxion Monthly
S&P 500® Bull 2X Fund | | Direxion Monthly
S&P 500® Bear 2X Fund | | Direxion Monthly
Small Cap Bull 2X Fund | |
| | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | |
Distributions paid from: | |
Ordinary Income | | $ | 7,617 | | | $ | 6,210,188 | | | $ | — | | | $ | — | | | $ | 692,285 | | | $ | — | | |
Long-Term Capital Gains | | | 5,166,807 | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Total Distributions paid | | $ | 5,174,424 | | | $ | 6,210,188 | | | $ | — | | | $ | — | | | $ | 692,285 | | | $ | — | | |
| | | Direxion Monthly
Small Cap Bear 2X Fund | | Direxion Monthly
7-10 Year Treasury Bull
2X Fund | | Direxion Monthly
7-10 Year Treasury Bear
2X Fund | |
| | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | |
Distributions paid from: | |
Ordinary Income | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
Long-Term Capital Gains | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Return of Capital | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | |
Total Distributions paid | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
DIREXION SEMI-ANNUAL REPORT
48
| | | Direxion Monthly
Emerging Markets
Bull 2X Fund | |
| | | Six Months
Ended
February 28,
2019
(Unaudited) | | Year Ended
August 31,
2018 | |
Distributions paid from: | |
Ordinary Income | | $ | — | | | $ | — | | |
Long-Term Capital Gains | | | — | | | | — | | |
Return of Capital | | | — | | | | — | | |
Total Distributions paid | | $ | — | | | $ | — | | |
As of August 31, 2018, the components of accumulated earnings/losses of the Funds on a tax basis were as follows:
| | | Direxion Monthly
High Yield
Bull 1.2X Fund | | Direxion Monthly
NASDAQ-100®
Bull 1.25X Fund | | Direxion Monthly
NASDAQ-100®
Bear 1.25X Fund | | Direxion Monthly
25+ Year Treasury
Bull 1.35X Fund | |
Net unrealized appreciation/(depreciation) | | $ | (6,984,645 | ) | | $ | 34,581 | | | $ | (24,927 | ) | | $ | (383,801 | ) | |
Undistributed ordinary income (loss) | | | — | | | | 40,701 | | | | — | | | | 66,770 | | |
Undistributed capital gain (loss) | | | — | | | | — | | | | — | | | | — | | |
Total distributable earnings (losses) | | | — | | | | 40,701 | | | | — | | | | 66,770 | | |
Other accumulated earnings (losses) | | | (3,791,754 | ) | | | (3,427,912 | ) | | | (566,778 | ) | | | (3,610,548 | ) | |
Total accumulated earnings (losses) | | $ | (10,776,399 | ) | | $ | (3,352,630 | ) | | $ | (591,705 | ) | | $ | (3,927,579 | ) | |
| | | Direxion Monthly
25+ Year Treasury
Bear 1.35X Fund | | Direxion Monthly
NASDAQ-100®
Bull 2X Fund | | Direxion Monthly
S&P 500®
Bull 2X Fund | | Direxion Monthly
S&P 500®
Bear 2X Fund | |
Net unrealized appreciation/(depreciation) | | $ | (387,698 | ) | | $ | 50,630,133 | | | $ | 11,919,052 | | | $ | (1,112,993 | ) | |
Undistributed ordinary income (loss) | | | — | | | | 10,670,935 | | | | 3,637,030 | | | | — | | |
Undistributed capital gain (loss) | | | — | | | | — | | | | — | | | | — | | |
Total distributable earnings (losses) | | | — | | | | 10,670,935 | | | | 3,637,030 | | | | — | | |
Other accumulated earnings (losses) | | | (6,026,033 | ) | | | — | | | | — | | | | (46,122,157 | ) | |
Total accumulated earnings (losses) | | $ | (6,413,731 | ) | | $ | 61,301,068 | | | $ | 15,556,082 | | | $ | (47,235,150 | ) | |
| | | Direxion Monthly
Small Cap
Bull 2X Fund | | Direxion Monthly
Small Cap
Bear 2X Fund | | Direxion Monthly
7-10 Year
Treasury
Bull 2X Fund | | Direxion Monthly
7-10 Year
Treasury
Bear 2X Fund | |
Net unrealized appreciation/(depreciation) | | $ | 1,513,965 | | | $ | (669,157 | ) | | $ | (844,193 | ) | | $ | (71,163 | ) | |
Undistributed ordinary income (loss) | | | 1,626,185 | | | | — | | | | — | | | | — | | |
Undistributed capital gain (loss) | | | — | | | | — | | | | — | | | | — | | |
Total distributable earnings (losses) | | | 1,626,185 | | | | — | | | | — | | | | — | | |
Other accumulated earnings (losses) | | | — | | | | (49,100,934 | ) | | | (2,083,376 | ) | | | (19,904,800 | ) | |
Total accumulated earnings (losses) | | $ | 3,140,150 | | | $ | (49,770,091 | ) | | $ | (2,927,569 | ) | | $ | (19,975,963 | ) | |
DIREXION SEMI-ANNUAL REPORT
49
| | | Direxion Monthly
Emerging Markets
Bull 2X Fund | |
Net unrealized appreciation/(depreciation) | | $ | (2,704,251 | ) | |
Undistributed ordinary income (loss) | | | — | | |
Undistributed capital gain (loss) | | | — | | |
Total distributable earnings (losses) | | | — | | |
Other accumulated earnings (losses) | | | (41,564,205 | ) | |
Total accumulated earnings (losses) | | $ | (44,268,456 | ) | |
The difference between book cost of investments and tax cost of investments is attributable primarily to the tax deferral of losses on wash sales. Other accumulated gain/(loss) is generally comprised of capital loss carryforwards and qualified late year loss deferrals.
The cost basis for investments for federal income tax purposes as of February 28, 2019 was as follows:
| | | Direxion Monthly
High Yield
Bull 1.2X Fund | | Direxion Monthly
NASDAQ-100®
Bull 1.25X Fund | | Direxion Monthly
NASDAQ-100®
Bear 1.25X Fund | |
Tax cost of investments | | $ | 122,280,845 | | | $ | 5,080,000 | | | $ | 110,000 | | |
Gross unrealized appreciation | | | 2,156,834 | | | | — | | | | — | | |
Gross unrealized depreciation | | | — | | | | — | | | | — | | |
Net unrealized appreciation/(depreciation) | | $ | 2,156,834 | | | $ | — | | | $ | — | | |
| | | Direxion Monthly
25+ Year Treasury
Bull 1.35X Fund | | Direxion Monthly
25+ Year Treasury
Bear 1.35X Fund | | Direxion Monthly
NASDAQ-100®
Bull 2X Fund | |
Tax cost of investments | | $ | 1,160,000 | | | $ | 130,000 | | | $ | 59,320,000 | | |
Gross unrealized appreciation | | | — | | | | — | | | | — | | |
Gross unrealized depreciation | | | — | | | | — | | | | — | | |
Net unrealized appreciation/(depreciation) | | $ | — | | | $ | — | | | $ | — | | |
| | | Direxion Monthly
S&P 500®
Bull 2X Fund | | Direxion Monthly
S&P 500®
Bear 2X Fund | | Direxion Monthly
Small Cap
Bull 2X Fund | |
Tax cost of investments | | $ | 38,450,000 | | | $ | 5,390,000 | | | $ | 8,440,000 | | |
Gross unrealized appreciation | | | — | | | | — | | | | — | | |
Gross unrealized depreciation | | | — | | | | — | | | | — | | |
Net unrealized appreciation/(depreciation) | | $ | — | | | $ | — | | | $ | — | | |
| | | Direxion Monthly
Small Cap
Bear 2X Fund | | Direxion Monthly
7-10 Year
Treasury
Bull 2X Fund | | Direxion Monthly
7-10 Year
Treasury
Bear 2X Fund | |
Tax cost of investments | | $ | 1,460,000 | | | $ | 4,290,000 | | | $ | 920,000 | | |
Gross unrealized appreciation | | | — | | | | — | | | | — | | |
Gross unrealized depreciation | | | — | | | | — | | | | — | | |
Net unrealized appreciation/(depreciation) | | $ | — | | | $ | — | | | $ | — | | |
| | | Direxion Monthly
Emerging Markets
Bull 2X Fund | |
Tax cost of investments | | $ | 1,850,000 | | |
Gross unrealized appreciation | | | — | | |
Gross unrealized depreciation | | | — | | |
Net unrealized appreciation/(depreciation) | | $ | — | | |
DIREXION SEMI-ANNUAL REPORT
50
In order to meet certain excise tax distribution requirements, the Funds are required to measure and distribute annually net capital gains realized during a twelve month period ending October 31 and net investment income earned during a twelve month period ending December 31. In connection with this, the Funds are permitted for tax purpose to defer into their next fiscal year qualified late year losses. Qualified late year capital losses are any net capital losses incurred between November 1 and the end of the fiscal year, August 31, 2018. Qualified late year ordinary losses are generally losses incurred between January 1 and the end of their fiscal year, August 31, 2018.
At August 31, 2018, the following Funds deferred, on a tax basis, qualified late year losses of:
| | | Late Year
Ordinary Losses | | Post-October
Capital Losses | |
Direxion Monthly High Yield Bull 1.2X Fund | | $ | — | | | $ | 3,791,754 | | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | | — | | | | — | | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | — | | | | — | | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | | — | | | | — | | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | — | | | | — | | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | | — | | | | — | | |
Direxion Monthly S&P 500® Bull 2X Fund | | | — | | | | — | | |
Direxion Monthly S&P 500® Bear 2X Fund | | | — | | | | — | | |
Direxion Monthly Small Cap Bull 2X Fund | | | — | | | | — | | |
Direxion Monthly Small Cap Bear 2X Fund | | | — | | | | — | | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | | — | | | | — | | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | — | | | | — | | |
Direxion Monthly Emerging Markets Bull 2X Fund | | | — | | | | — | | |
Under the Regulated Investment Company Modernization Act of 2010, net capital losses recognized for tax years beginning after December 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term. Previous law limited the carry forward of capital losses to the eight tax years following the year the capital loss was realized. If a Fund has capital losses that are subject to current law and also has capital losses subject to prior law, the losses realized under current law will be utilized to offset capital gains before any of the losses governed by prior law can be used. As a result of these ordering rules, capital losses realized under previous law may be more likely to expire unused. Capital losses realized under current law will carry forward retaining their classification as long-term or short-term losses; as compared to under prior law in which all capital losses were carried forward as short-term capital losses.
At August 31, 2018, the following Funds had capital loss carryforwards on a tax basis of:
| | | 8/31/2019 | | 8/31/2020 | | Unlimited ST | | Unlimited LT | | Annual
Limitation | |
Direxion Monthly High Yield Bull 1.2X Fund | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | | — | | | | — | | | | (3,427,912 | ) | | | — | | | | 926 | | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | — | | | | — | | | | (566,778 | ) | | | — | | | | 2,231 | | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | | — | | | | — | | | | (2,146,876 | ) | | | (1,463,672 | ) | | | — | | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | — | | | | — | | | | (3,564,921 | ) | | | (2,461,112 | ) | | | — | | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly S&P 500® Bull 2X Fund | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly S&P 500® Bear 2X Fund | | | — | | | | — | | | | (46,122,157 | ) | | | — | | | | — | | |
Direxion Monthly Small Cap Bull 2X Fund | | | — | | | | — | | | | — | | | | — | | | | — | | |
Direxion Monthly Small Cap Bear 2X Fund | | | — | | | | (5,087,146 | ) | | | (44,013,788 | ) | | | — | | | | — | | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | | — | | | | — | | | | (2,083,376 | ) | | | — | | | | — | | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | — | | | | — | | | | (19,904,800 | ) | | | — | | | | — | | |
Direxion Monthly Emerging Markets Bull 2X Fund | | | — | | | | — | | | | (14,928,402 | ) | | | (26,635,803 | ) | | | — | | |
In accordance with Sections 381-384 of the Internal Revenue Code, a portion of certain Fund's losses have been subjected to an annual limitation.
To the extent that the Funds realize future net capital gains, those gains will be offset by any unused capital loss carryover.
The Funds follow authoritative financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Funds have reviewed all open tax years and concluded that there is no effect to the Funds' financial positions or results of operations and no tax liability resulting from unrecognized tax benefits relating
DIREXION SEMI-ANNUAL REPORT
51
to uncertain income tax positions taken or expected to be taken on a tax return. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During this period, the Funds did not incur any interest or penalties. Open tax years are those years that are open for examination by the relevant income taxing authority. As of February 28, 2019, open Federal and state income tax years include the tax years ended August 31, 2015 through August 31, 2018. The Funds have no examination in progress. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will significantly change in the next twelve months.
m) Guarantees and Indemnifications – In the ordinary course of business, the Funds enter into contracts that contain a variety of indemnification provisions pursuant to which the Funds agree to indemnify third parties upon occurrence of specified events. The Funds' maximum exposure relating to these indemnification agreements is unknown. However, the Funds have not had prior claims or losses in connection with these provisions and believe the risk of loss is remote.
n) Use of Estimates – The preparation of financial statements in conformity with GAAP 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.
3. INVESTMENT TRANSACTIONS
During the six months ended February 28, 2019, the aggregate purchases and sales of investments (excluding short-term investments, swaps and futures contracts) in the Direxion Monthly High Yield Bull 1.2X Fund were $643,498,105 and $762,430,921, respectively. There were no purchases and sales as defined above in any of the other Funds.
There were no purchases or sales of long-term U.S. Government securities in the Funds during the six months ended February 28, 2019.
4. INVESTMENT ADVISORY AND OTHER AGREEMENTS
Investment Advisory Agreement: The Funds have entered into an investment advisory agreement with the Adviser. The Adviser earns a fee, computed daily and payable monthly, applied to each Fund's average daily net assets at the annual rate of 0.75%.
Management Services Agreement: The Funds have entered into a Management Services Agreement with the Adviser. Under the Management Services Agreement, the Funds pays the Adviser a management service fees of 0.026% on the first $10,000,0000 of the Fund's daily net assets and 0.024% on assets in excess of $10,000,000.
Operating Expense Limitation Agreement: Each Fund is responsible for its own operating expenses. Under the Operating Expense Limitation Agreement, the Adviser has contractually agreed to cap all or a portion of the expenses for each Fund based on the annual rates listed below applied to each Fund's average daily net assets.
Direxion Monthly High Yield Bull 1.2X Fund | | | 1.35 | % | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | | 1.15 | % | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | 1.15 | % | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | | 1.10 | % | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | 1.10 | % | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | | 1.35 | % | |
Direxion Monthly S&P 500® Bull 2X Fund | | | 1.35 | % | |
Direxion Monthly S&P 500® Bear 2X Fund | | | 1.35 | % | |
Direxion Monthly Small Cap Bull 2X Fund | | | 1.35 | % | |
Direxion Monthly Small Cap Bear 2X Fund | | | 1.35 | % | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | | 1.35 | % | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | 1.35 | % | |
Direxion Monthly Emerging Markets Bull 2X Fund | | | 1.35 | % | |
DIREXION SEMI-ANNUAL REPORT
52
Any expense cap is subject to recoupment by the Adviser within the following three years only if overall expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.
The table below presents amounts that the Adviser recouped, waived and the amounts available for potential recoupments by the Adviser.
| | | | | | | Potential Recoupment
Amounts Expiring: | | Total Potential | |
| Funds | | Expenses
Recouped | | Expenses
Reimbursed | | August 31,
2021 | | February 28,
2022 | | Recoupment
Amount | |
Direxion Monthly High Yield Bull 1.2X Fund | | $ | — | | | $ | 37,396 | | | $ | — | | | $ | 37,396 | | | $ | 37,396 | | |
Direxion Monthly NASDAQ-100®
Bull 1.25X Fund | | | — | | | | 43,157 | | | | 90,828 | | | | 43,157 | | | | 133,985 | | |
Direxion Monthly NASDAQ-100®
Bear 1.25X Fund | | | — | | | | 20,777 | | | | 29,911 | | | | 20,777 | | | | 50,688 | | |
Direxion Monthly 25+ Year Treasury
Bull 1.35X Fund | | | — | | | | 56,026 | | | | 165,823 | | | | 56,026 | | | | 221,849 | | |
Direxion Monthly 25+ Year Treasury
Bear 1.35X Fund | | | — | | | | 36,994 | | | | 102,780 | | | | 36,994 | | | | 139,774 | | |
Direxion Monthly NASDAQ-100®
Bull 2X Fund | | | — | | | | 37,864 | | | | 40,923 | | | | 37,864 | | | | 78,787 | | |
Direxion Monthly S&P 500® Bull 2X Fund | | | — | | | | 18,043 | | | | 22,239 | | | | 18,043 | | | | 40,282 | | |
Direxion Monthly S&P 500® Bear 2X Fund | | | — | | | | 24,503 | | | | 46,963 | | | | 24,503 | | | | 71,466 | | |
Direxion Monthly Small Cap Bull 2X Fund | | | — | | | | 17,950 | | | | 46,881 | | | | 17,950 | | | | 64,831 | | |
Direxion Monthly Small Cap Bear 2X Fund | | | — | | | | 19,212 | | | | 36,675 | | | | 19,212 | | | | 55,887 | | |
Direxion Monthly 7-10 Year Treasury
Bull 2X Fund | | | — | | | | 19,823 | | | | 49,147 | | | | 19,823 | | | | 68,970 | | |
Direxion Monthly 7-10 Year Treasury
Bear 2X Fund | | | — | | | | 29,896 | | | | 54,385 | | | | 29,896 | | | | 84,281 | | |
Direxion Monthly Emerging Markets
Bull 2X Fund | | | — | | | | 18,269 | | | | 58,430 | | | | 18,269 | | | | 76,699 | | |
The net amounts receivable (payable) arising from the Investment Advisory Agreement, Management Services Agreement and waiver of any expenses as of February 28, 2019 is presented on the Statement of Assets and Liabilities as Due from (to) investment adviser, net.
Distribution Expenses: Shares of the Funds are subject to an annual 12b-1 fee of up to 1.00% of a Fund's average daily net assets. Each Fund currently pays a 12b-1 fee of 0.25% of the respective Fund's average daily net assets.
Rafferty Capital Markets, LLC (the "Distributor") serves as principal underwriter of the Funds and acts as the Funds' distributor in a continuous public offering of the Funds' shares. The Distributor is an affiliate of the Adviser.
5. VALUATION MEASUREMENTS
The Funds follow authoritative fair valuation accounting standards, which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion in changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels below:
Level 1 – Quoted prices in active markets for identical securities
Level 2 – Evaluated price based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 – Significant unobservable inputs (including the Fund's own assumptions in determining fair value of investments)
DIREXION SEMI-ANNUAL REPORT
53
The inputs or methodology used for valuing securities are not an indication of the credit risk associated with investing in those securities.
The follow is a summary of the inputs used to value the Funds' securities as of February 28, 2019.
| | | Direxion Monthly High Yield Bull 1.2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 13,663,722 | | | $ | — | | | $ | — | | | $ | 13,663,722 | | |
Investment Companies | | | 118,897,679 | | | | — | | | | — | | | | 118,897,679 | | |
Short Term Investments | | | 5,540,000 | | | | — | | | | — | | | | 5,540,000 | | |
Total Return Swap Contracts* | | | — | | | | 310,164 | | | | — | | | | 310,164 | | |
| | | Direxion Monthly NASDAQ-100® Bull 1.25X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 36,339,035 | | | $ | — | | | $ | — | | | $ | 36,339,035 | | |
Short Term Investments | | | 5,080,000 | | | | — | | | | — | | | | 5,080,000 | | |
Total Return Swap Contracts* | | | — | | | | 169,115 | | | | — | | | | 169,115 | | |
| | | Direxion Monthly NASDAQ-100® Bear 1.25X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 176,660 | | | $ | — | | | $ | — | | | $ | 176,660 | | |
Short Term Investments | | | 110,000 | | | | — | | | | — | | | | 110,000 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (9,366 | ) | | | — | | | | (9,366 | ) | |
| | | Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 3,792,834 | | | $ | — | | | $ | — | | | $ | 3,792,834 | | |
Short Term Investments | | | 1,160,000 | | | | — | | | | — | | | | 1,160,000 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (55,504 | ) | | | — | | | | (55,504 | ) | |
| | | Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 1,124,277 | | | $ | — | | | $ | — | | | $ | 1,124,277 | | |
Short Term Investments | | | 130,000 | | | | — | | | | — | | | | — | | |
Total Return Swap Contracts* | | | — | | | | 4,307 | | | | — | | | | 4,307 | | |
| | | Direxion Monthly NASDAQ-100® Bull 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 111,427,731 | | | $ | — | | | $ | — | | | $ | 111,427,731 | | |
Short Term Investments | | | 59,320,000 | | | | — | | | | — | | | | 59,320,000 | | |
Total Return Swap Contracts* | | | — | | | | 23,961,324 | | | | — | | | | 23,961,324 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (294,337 | ) | | | — | | | | (294,337 | ) | |
| | | Direxion Monthly S&P 500® Bull 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 58,481,196 | | | $ | — | | | $ | — | | | $ | 58,481,196 | | |
Short Term Investments | | | 38,450,000 | | | | — | | | | — | | | | 38,450,000 | | |
Total Return Swap Contracts* | | | — | | | | 6,017,732 | | | | — | | | | 6,017,732 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (3,989 | ) | | | — | | | | (3,989 | ) | |
DIREXION SEMI-ANNUAL REPORT
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| | | Direxion Monthly S&P 500® Bear 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 4,087,365 | | | $ | — | | | $ | — | | | $ | 4,087,365 | | |
Short Term Investments | | | 5,390,000 | | | | — | | | | — | | | | 5,390,000 | | |
Total Return Swap Contracts* | | | — | | | | 11,411 | | | | — | | | | 11,411 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (648,504 | ) | | | — | | | | (648,504 | ) | |
| | | Direxion Monthly Small Cap Bull 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 27,066,635 | | | $ | — | | | $ | — | | | $ | 27,066,635 | | |
Short Term Investments | | | 8,440,000 | | | | — | | | | — | | | | 8,440,000 | | |
Total Return Swap Contracts* | | | — | | | | 2,998,353 | | | | — | | | | 2,998,353 | | |
| | | Direxion Monthly Small Cap Bear 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 2,715,421 | | | $ | — | | | $ | — | | | $ | 2,715,421 | | |
Short Term Investments | | | 1,460,000 | | | | — | | | | — | | | | 1,460,000 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (345,622 | ) | | | — | | | | (345,622 | ) | |
| | | Direxion Monthly 7-10 Year Treasury Bull 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 9,545,465 | | | $ | — | | | $ | — | | | $ | 9,545,465 | | |
Short Term Investments | | | 4,290,000 | | | | — | | | | — | | | | 4,290,000 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (122,084 | ) | | | — | | | | (122,084 | ) | |
| | | Direxion Monthly 7-10 Year Treasury Bear 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 1,979,871 | | | $ | — | | | $ | — | | | $ | 1,979,871 | | |
Short Term Investments | | | 920,000 | | | | — | | | | — | | | | 920,000 | | |
Total Return Swap Contracts* | | | — | | | | 12,402 | | | | — | | | | 12,402 | | |
| | | Direxion Monthly Emerging Markets Bull 2X Fund | |
Asset Class | | Level 1 | | Level 2 | | Level 3 | | Total | |
Cash Equivalents | | $ | 2,969,557 | | | $ | — | | | $ | — | | | $ | 2,969,557 | | |
Short Term Investments | | | 1,850,000 | | | | — | | | | — | | | | 1,850,000 | | |
Liability Class | | | | | | | | | |
Total Return Swap Contracts* | | | — | | | | (96,374 | ) | | | — | | | | (96,374 | ) | |
For further information regarding each asset class, see each Fund's Schedule of Investments.
* Other financial instruments are derivative instruments not reflected in the Schedules of Investment, such as futures and swap contracts.
The Funds also follow authoritative accounting standards, which require additional disclosure regarding fair value measurements. Specifically, these standards require reporting entities to disclose a) the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements, for Level 2 or Level 3 positions, b) transfers between all levels on a gross basis (i.e. transfers out must be disclosed separately from transfers in) as well as the reason(s) for the transfers, and c) purchases and sales on a gross basis in the Level 3 rollforward rather than as one net number. Additionally, reporting entities are required to disclose quantitative information about unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy.
There were no Level 3 securities held by the Funds during the six months ended February 28, 2019. It is the Funds' policy to recognize transfers into Level 3 at the value as of the beginning of the period, if applicable.
DIREXION SEMI-ANNUAL REPORT
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6. ADDITIONAL DISCLOSURES ABOUT DERIVATIVE INSTRUMENTS
The Funds follow authoritative standards of accounting for derivative instruments, which establish disclosure requirements for derivative instruments. These standards improve financial reporting for derivative instruments by requiring enhanced disclosures that enables investors to understand how and why a fund uses derivatives instruments, how a fund accounts for derivative instruments and how derivative instruments affect a fund's financial position and results of operations.
The Funds use derivative instruments as part of their principal investment strategy to achieve their investment objective. For additional discussion on the risks associated with derivative instruments refer to Note 2. As of February 28, 2019, the Funds were invested in swap contracts.
At February 28, 2019, the fair value of derivatives instruments, by primary risk, were as follows:
Asset Derivatives1 | |
| | | | | Interest Rate Risk | | Equity Risk | | Credit Risk | | Total | |
Direxion Monthly High Yield
Bull 1.2X Fund | | Swap contracts | | $ | — | | | $ | — | | | $ | 310,164 | | | $ | 310,164 | | |
Direxion Monthly NASDAQ-100®
Bull 1.25X Fund | | Swap contracts | | | — | | | | 169,115 | | | | — | | | | 169,115 | | |
Direxion Monthly 25+ Year Treasury
Bear 1.35X Fund | | Swap contracts | | | 4,307 | | | | — | | | | — | | | | 4,307 | | |
Direxion Monthly NASDAQ-100®
Bull 2X Fund | | Swap contracts | | | — | | | | 23,961,324 | | | | — | | | | 23,961,324 | | |
Direxion Monthly S&P 500® Bull 2X Fund | | Swap contracts | | | — | | | | 6,017,732 | | | | — | | | | 6,017,732 | | |
Direxion Monthly S&P 500® Bear 2X Fund | | Swap contracts | | | — | | | | 11,411 | | | | — | | | | 11,411 | | |
Direxion Monthly Small Cap Bull 2X Fund | | Swap contracts | | | — | | | | 2,988,353 | | | | — | | | | 2,988,353 | | |
Direxion Monthly 7-10 Year Treasury
Bear 2X Fund | | Swap contracts | | | 12,402 | | | | — | | | | — | | | | 12,402 | | |
Liability Derivatives2 | |
| | | | | Interest Rate Risk | | Equity Risk | | Credit Risk | | Total | |
Direxion Monthly NASDAQ-100®
Bear 1.25X Fund | | Swap contracts | | $ | — | | | $ | 9,366 | | | $ | — | | | $ | 9,366 | | |
Direxion Monthly 25+ Year Treasury
Bull 1.35X Fund | | Swap contracts | | | 55,504 | | | | — | | | | — | | | | 55,504 | | |
Direxion Monthly NASDAQ-100®
Bull 2X Fund | | Swap contracts | | | — | | | | 294,337 | | | | — | | | | 294,337 | | |
Direxion Monthly S&P 500® Bull 2X Fund | | Swap contracts | | | — | | | | 3,989 | | | | — | | | | 3,989 | | |
Direxion Monthly S&P 500®
Bear 2X Fund | | Swap contracts | | | — | | | | 648,504 | | | | — | | | | 648,504 | | |
Direxion Monthly Small Cap Bear
2X Fund | | Swap contracts | | | — | | | | 345,622 | | | | — | | | | 345,622 | | |
Direxion Monthly 7-10 Year Treasury
Bull 2X Fund | | Swap contracts | | | 122,084 | | | | — | | | | — | | | | 122,084 | | |
Direxion Monthly Emerging Markets
Bull 2X Fund | | Swap contracts | | | — | | | | 96,374 | | | | — | | | | 96,374 | | |
1 Statements of Assets and Liabilities location: Unrealized appreciation on swap contracts.
2 Statements of Assets and Liabilities location: Unrealized depreciation on swap contracts.
DIREXION SEMI-ANNUAL REPORT
56
Transactions in derivative instruments during the six months ended February 28, 2019, by primary risk, were as follows:
| | | | | Interest Rate Risk | | Equity Risk | | Credit Risk | | Total | |
Direxion Monthly
High Yield | | Net Realized gain (loss)1
Swap contracts | | $ | — | | | $ | — | | | $ | (1,672,620 | ) | | $ | (1,672,620 | ) | |
Bull 1.2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | — | | | | (513,049 | ) | | | (513,049) | | |
Direxion Monthly
NASDAQ-100® | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (4,609,034 | ) | | | — | | | | (4,609,034 | ) | |
Bull 1.25X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | 134,534 | | | | — | | | | 134,534 | | |
Direxion Monthly
NASDAQ-100® | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (1,872,067 | ) | | | — | | | | (1,872,067 | ) | |
Bear 1.25X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | (3,396) | | | | — | | | | (3,396) | | |
Direxion Monthly
25+ Year Treasury | | Net Realized gain (loss)1
Futures contracts | | | (148,671) | | | | — | | | | — | | | | (148,671) | | |
Bull 1.35X Fund | | Swap contracts | | | (149,573 | ) | | | — | | | | — | | | | (149,573 | ) | |
| | | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | (96,048) | | | | — | | | | — | | | | (96,048) | | |
Direxion Monthly
25+ Year Treasury | | Net Realized gain (loss)1
Futures contracts | | | (230,364) | | | | — | | | | — | | | | (230,364) | | |
Bear 1.35X Fund | | Swap contracts | | | (184,097 | ) | | | — | | | | — | | | | (184,097 | ) | |
| | | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | 2,048 | | | | — | | | | — | | | | 2,048 | | |
Direxion Monthly
NASDAQ-100® | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (13,065,674 | ) | | | — | | | | (13,065,674 | ) | |
Bull 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | (37,507,550) | | | | — | | | | (37,507,550) | | |
Direxion Monthly
S&P 500® | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (8,694,914 | ) | | | — | | | | (8,694,914 | ) | |
Bull 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | (5,907,957) | | | | — | | | | (5,907,957) | | |
Direxion Monthly
S&P 500® | | Net Realized gain (loss)1
Swap contracts | | | — | | | | 997,801 | | | | — | | | | 997,801 | | |
Bear 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | (337,652) | | | | — | | | | (337,652) | | |
Direxion Monthly
Small Cap | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (6,583,353 | ) | | | — | | | | (6,583,353 | ) | |
Bull 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | 1,414,789 | | | | — | | | | 1,414,789 | | |
DIREXION SEMI-ANNUAL REPORT
57
| | | | | Interest Rate Risk | | Equity Risk | | Credit Risk | | Total | |
Direxion Monthly
Small Cap | | Net Realized gain (loss)1
Swap contracts | | $ | — | | | $ | 1,634,038 | | | $ | — | | | $ | 1,634,038 | | |
Bear 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | (67,287) | | | | — | | | | (67,287) | | |
Direxion Monthly
7-10 Year | | Net Realized gain (loss)1
Swap contracts | | | 1,261,307 | | | | — | | | | — | | | | 1,261,307 | | |
Treasury Bull
2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | (168,271) | | | | — | | | | — | | | | (168,271) | | |
Direxion Monthly
7-10 Year | | Net Realized gain (loss)1
Swap contracts | | | (135,968 | ) | | | — | | | | — | | | | (135,968 | ) | |
Treasury Bear
2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | 28,106 | | | | — | | | | — | | | | 28,106 | | |
Direxion Monthly
Emerging | | Net Realized gain (loss)1
Swap contracts | | | — | | | | (432,730 | ) | | | — | | | | (432,730 | ) | |
Markets
Bull 2X Fund
| | Change in net unrealized
appreciation (depreciation)2
Swap contracts | | | — | | | | 108,625 | | | | — | | | | 108,625 | | |
1 Statements of Operations location: Net realized gain (loss) on futures contracts and swap contracts.
2 Statements of Operations location: Change in net unrealized appreciation (depreciation) on swap contracts.
For the six months ended February 28, 2019, the average quarterly volume of the derivatives held by each of the Funds was as follows:
| | | Quarterly Average Gross
Notional Amounts | |
| | | Long Equity Swap
Contracts | | Short Equity Swap
Contracts | |
Direxion Monthly High Yield Bull 1.2X Fund | | $ | 75,564,148 | | | $ | — | | |
Direxion Monthly NASDAQ-100® Bull 1.25X Fund | | | 21,211,736 | | | | — | | |
Direxion Monthly NASDAQ-100® Bear 1.25X Fund | | | — | | | | 358,629 | | |
Direxion Monthly 25+ Year Treasury Bull 1.35X Fund | | | 6,614,044 | | | | — | | |
Direxion Monthly 25+ Year Treasury Bear 1.35X Fund | | | — | | | | 2,796,661 | | |
Direxion Monthly NASDAQ-100® Bull 2X Fund | | | 413,132,722 | | | | — | | |
Direxion Monthly S&P 500® Bull 2X Fund | | | 195,198,344 | | | | — | | |
Direxion Monthly S&P 500® Bear 2X Fund | | | — | | | | 13,407,170 | | |
Direxion Monthly Small Cap Bull 2X Fund | | | 48,114,599 | | | | — | | |
Direxion Monthly Small Cap Bear 2X Fund | | | — | | | | 9,910,138 | | |
Direxion Monthly 7-10 Year Treasury Bull 2X Fund | | | 27,892,995 | | | | — | | |
Direxion Monthly 7-10 Year Treasury Bear 2X Fund | | | — | | | | 5,733,964 | | |
Direxion Monthly Emerging Markets Bull 2X Fund | | | 11,301,236 | | | | — | | |
The Funds utilize this volume of derivatives to obtain leverage in order to meet the investment objectives of 120%, 125%, -125%, 135%, -135% 200%, and -200% calendar month performance of their respective indices.
7. RECENT ACCOUNTING PRONOUNCEMENT
In August 2018, the U.S. Securities and Exchange Commission approved amendments to eliminate, update or modify certain disclosure requirements required of registered investment companies. In part, these amendments amend Regulation S-X and require presentation of distributable earnings on the Statement of Assets and Liabilities in total rather than disclosing the three components of distributable earnings (undistributed net investment income, undistributed realized gain and net
DIREXION SEMI-ANNUAL REPORT
58
unrealized appreciation (depreciation) on investments). An additional amendment to Regulation S-X amends the requirement to state separately on the Statement of Changes in Net Assets distributions to shareholders from net investment income, net realized gain and other sources and rather disclose distributions to shareholders in total, except for return of capital, which should be disclosed separately. Accumulated net investment loss or undistributed net investment income is no longer required to be disclosed in the Statements of Changes in Net Assets. These updates have been incorporated in the Funds' financial statements and have no impact on each of the Fund's net assets or results of operations. Information previously required to be disclosed that was reported in the August 31, 2018 financial statements are presented in the Statement of Changes in Net Assets.
8. SUBSEQUENT EVENTS
Management has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure besides those noted below.
The Direxion High Yield Bull 1.2X Fund paid an income distribution in the amount of $0.1268 per share with a record date of March 15, 2019 and ex-date and payable date of March 18, 2019.
The Direxion High Yield Bull 1.2X Fund paid an income distribution in the amount of $0.1280 per share with a record date of April 15, 2019 and ex-date and payable date of April 16, 2019.
DIREXION SEMI-ANNUAL REPORT
59
Direxion Funds
Supplemental Information (Unaudited)
Householding
In an effort to decrease costs, the Funds intend to reduce the number of duplicate prospectuses, Annual and Semi-Annual Reports, proxy statements and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Householding begins once you have signed your account application. After such time, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once the Funds receive notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.
DIREXION SEMI-ANNUAL REPORT
60
Direxion Funds
Trustees and Officers
The business affairs of the Funds are managed by or under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers of the Funds is set below. The report includes additional information about the Funds' Trustees and Officers and is available without charge, upon request by calling 1-800-851-0511.
Interested Trustee
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Daniel D. O'Neill(1)
Age: 50 | |
Chairman of the Board of Trustees | |
Lifetime of Trust until removal or resignation; Since 2014 | |
Managing Director of Rafferty Asset Management, LLC, January 1999 – January 2019; Direxion Advisors, LLC, November 2017 – January 2019. | |
135 | |
None. | |
Independent Trustees
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Gerald E. Shanley III
Age: 75 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 1997 | |
Retired, Since 2002; Business Consultant, 1985 – present; Trustee of Trust Under Will of Charles S. Payson, 1987 – present; C.P.A., 1979 – present. | |
135 | |
None. | |
John A. Weisser
Age: 77 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2007 | |
Retired, since 1995; Salomon Brothers, Inc., 1971 – 1995, most recently as Managing Director. | |
135 | |
Director until December 2016, The MainStay Funds Trust, The MainStay Funds, MainStay VP Fund Series, Mainstay Defined Term Municipal Opportunities Fund; Private Advisors Alternative Strategy Fund; Private Advisors Alternative Strategies Master Fund. | |
DIREXION SEMI-ANNUAL REPORT
61
Direxion Funds
Trustees and Officers
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
David L. Driscoll
Age: 49 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2014 | |
Partner, King Associates, LLP, since 2004; Board Advisor, University Common Real Estate, since 2012; Principal, Grey Oaks LLP since 2003; Member, Kendrick LLC, since 2006. | |
135 | |
None. | |
Jacob C. Gaffey
Age: 71 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2014 | |
Managing Director of Loomis & Co. since 2012; Partner, Bay Capital Advisors, LLC 2008 – 2012. | |
135 | |
None. | |
Henry W. Mulholland
Age: 55 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2017 | |
Grove Hill Partners LLC, since 2016 as Managing Partner; Bank of America Merrill Lynch, 1990 – 2015, most recently as Managing Director and Head of Equities for Americas. | |
135 | |
None. | |
(1) Mr. O'Neill is affiliated with Rafferty and Direxion. Mr. O'Neill owns a beneficial interest in Rafferty.
(2) The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this report, offers for sale to the public 93 of the 120 funds registered with the SEC, the Direxion Funds which, as of the date of this report, offers for sale to the public 15 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this report, does not have any funds registered with the SEC.
DIREXION SEMI-ANNUAL REPORT
62
Direxion Funds
Trustees and Officers
Principal Officers of the Trust
The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 1301 Avenue of the Americas, 28th Floor, New York, New York 10019. As of the date of this report, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in the Direxion
Family of
Investment
Companies
Overseen
by Trustee(1) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Robert D. Nestor
Age: 50 | |
President | |
One Year; Since 2018 | |
President, Rafferty Asset Management, LLC and Direxion Advisors, LLC, since April 2018; Blackrock, Inc. (May 2007 – April 2018), most recently as Managing Director. | |
N/A | |
N/A | |
Patrick J. Rudnick
Age: 45 | |
Principal Executive Officer
Principal Financial Officer | |
One Year; Since 2018
One Year; Since 2010 | |
Senior Vice President, since March 2013, Rafferty Asset Management, LLC; Senior Vice President, since November 2017, Direxion Advisors, LLC. | |
N/A | |
N/A | |
Angela Brickl
Age: 42 | |
Chief Compliance Officer
Secretary | |
One Year; Since 2018
One Year; Since 2011 | |
General Counsel, Rafferty Asset Management LLC, since October 2010 and Direxion Advisors, LLC, since November 2017; Chief Compliance Officer, Rafferty Asset Management, LLC, since September 2012 and Direxion Advisors, LLC, since November 2017. | |
N/A | |
N/A | |
(1) The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this report, offers for sale to the public 93 of the 120 funds registered with the SEC, the Direxion Funds which, as of the date of this report, offers for sale to the public 15 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this report, does not have any funds registered with the SEC.
DIREXION SEMI-ANNUAL REPORT
63
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At the Direxion Funds, we are committed to protecting your privacy. To open and service your Direxion accounts, we collect and maintain certain nonpublic personal information about you, such as your address, phone number, social security number, purchases, sales, account balances, bank account information and other personal financial information. We collect this information from the following sources:
• Account applications or other forms on which you provide information,
• Mail, e-mail, the telephone and our website, and
• Your transactions and account inquiries with us.
We safeguard the personal information that you have entrusted to us in the following ways:
• As a general policy, only those employees who maintain your account and respond to your requests for additional services have access to your account information.
• We maintain physical, electronic, and procedural safeguards to insure the security of your personal information and to prevent unauthorized access to your information.
We do not disclose any nonpublic personal information about you or our former shareholders to anyone, except as permitted or required by law. In the course of conducting business and maintaining your account we may share shareholder information, as allowed by law, with our affiliated companies and with other service providers, including financial intermediaries, custodians, transfer agents and marketing consultants. Those companies are contractually bound to use that information only for the services for which we hired them. They are not permitted to use or share our shareholders' nonpublic personal information for any other purpose. There also may be times when we provide information to federal, state or local authorities as required by law.
In the event that you hold fund shares of Direxion through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
For questions about our policy, please contact us at (800) 851-0511.
This page is not a part of the Semi-Annual Report.
DIREXION SEMI-ANNUAL REPORT
SEMI-ANNUAL REPORT FEBRUARY 28, 2019
1301 Avenue of the Americas (6th Ave.), 28th Floor New York, New York 10019 (800) 851-0511 www.direxioninvestments.com
Investment Adviser
Rafferty Asset Management, LLC
1301 Avenue of the Americas (6th Ave.), 28th Floor
New York, NY 10019
Administrator, Transfer Agent, Dividend Paying Agent & Shareholding Servicing Agent
U.S. Bancorp Fund Services, LLC
P.O. Box 1993
Milwaukee, WI 53201-1993
Custodian
U.S. Bank, N.A.
1555 RiverCenter Dr., Suite 302
Milwaukee, WI 53212
Independent Registered Public Accounting Firm
Ernst & Young LLP
220 South Sixth Street
Minneapolis, MN 55402
Distributor
Rafferty Capital Markets, LLC
1010 Franklin Ave., 3rd Floor
Garden City, NY 11530
The Trust's Proxy Voting Policies are available without charge by calling 1-800-851-0511, or by accessing the SEC's website, at www.sec.gov.
The actual voting records relating to portfolio securities during the most recent period ended June 30 is available without charge by calling 1-800-851-0511 or by accessing the SEC's website at www.sec.gov.
The Trust files complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Part F of Form N-PORT. The Funds' Part F of Form N-PORT (and Form N-Q prior to February 28, 2019) is available on the SEC's website at www.sec.gov.
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
Semi-Annual
Report
Hilton Tactical Income Fund
FEBRUARY 28, 2019
TICKERS:
INVESTOR CLASS - HCYAX | INSTITUTIONAL CLASS - HCYIX
1301 Avenue of the Americas (6th Avenue), 28th Floor | New York, New York 10019 | (800) 851-0511
www.direxioninvestments.com
Letter to Shareholders | | | 4 | | |
| Expense Example | | | 7 | | |
| Allocation of Portfolio Holdings | | | 8 | | |
| Schedule of Investments | | | 9 | | |
| Statement of Assets and Liabilities | | | 12 | | |
| Statement of Operations | | | 13 | | |
| Statements of Changes in Net Assets | | | 14 | | |
| Financial Highlights | | | 15 | | |
| Notes to the Financial Statements | | | 16 | | |
| Supplemental Information | | | 22 | | |
| Trustees and Officers | | | 23 | | |
You can find the Fund's prospectus, reports to shareholders, and other information about the Fund online at http://www.direxioninvestments.com/regulatory-documents. You can also get this information at no cost by calling (800) 851-0511 or by sending an email request to info@direxionfunds.com. | |
IMPORTANT NOTE: Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund's annual and semi-annual shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the shareholder reports from your financial intermediary such as a broker-dealer or bank. Instead, annual and semi-annual shareholder reports will be available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report. | |
You may elect to receive all future annual and semi-annual shareholder reports in paper, free of charge. To elect to continue receive paper copies of shareholder reports through the mail or to otherwise change your delivery method, contact your financial intermediary or follow the instructions included with this disclosure. Your election to receive shareholder reports in paper will apply to all funds that you hold through the financial intermediary. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. | |
Help Preserve the Environment – Go Green!
Go paperless with Direxion e-Delivery – a service allowing shareholders to reduce clutter with full online access to regulatory documents. Begin the preservation process with e-delivery.
With Direxion e-Delivery you can:
• Receive email notifications when your most recent shareholder communications are available for review.
• Access prospectuses, annual reports and semi-annual reports online.
It's easy to enroll:
1. Visit www.direxioninvestments.com/edelivery
2. Follow the simple enrollment instructions
If you have questions about Direxion e-Delivery services, contact one of our shareholder representatives at 800-851-0511.
Letter to Shareholders (Unaudited)
Dear Shareholders,
This Semi-Annual Report is for the Hilton Tactical Income Fund (the "Fund"), and covers the period from September 1, 2018 to February 28, 2019 (the "Semi-Annual Period"). Rafferty Asset Management, LLC serves as adviser to the Fund (the "Adviser) and Hilton Capital Management, LLC serves as the Fund's subadviser (the "Subadviser"). The Fund offers an Institutional Class and Investor Class.
Fund & Market Commentary:
The Institutional Class posted a return of -0.53% and the Investor Class -0.65% during the Semi-Annual Period. The Fund's benchmark, a blend of 60% of the Bloomberg Barclays U.S. Intermediate Government/Credit Bond Index and 40% S&P 500® Index, returned 0.11% for the Semi-Annual Period.
The Fund's 30-day SEC Yield at February 28, 2019 was 2.94% and 2.69% for the Institutional Class and Investor Class, respectively.
During the Semi-Annual Period, the Fund decreased its cash position slightly from 4.5% to 4.1%, increased exposure to fixed income from 51.5% to 57.5%, and equity exposure was decreased from 43.9% to 38.4%.
For the Fund, the top overall contributor to performance was exposure to REITs within the equity portfolio. The top individual contributor to the overall portfolio was Americold Realty Trust. Americold Realty Trust represented 3.03% of the overall portfolio's holdings at the end of the Semi-Annual Period.
Exposure to the Consumer Discretionary sector within equity holdings was the largest detractor to overall performance.
Principal Investment Strategy:
The Fund pursues its investment objective by utilizing an investment strategy that employs a disciplined approach to balancing fixed income investments with historically higher income producing equity investments with a focus on minimizing absolute risk and volatility. The Subadviser attempts to mitigate portfolio risk and volatility by creating a diversified portfolio of income producing securities that also offer the potential for capital appreciation but may also invest in options to attempt to attempt to hedge volatility and portfolio risks. The securities in which the Fund may invest include domestic and foreign, including emerging markets, common and preferred stocks of any market capitalization, closed-end funds and exchange-traded funds ("ETFs"), master limited partnerships ("MLPs"), real estate investment trusts ("REITs"), and a variety of debt instruments of any maturity, including corporate bonds, exchange-traded notes ("ETNs"), municipal bonds, and securities issued, backed or otherwise guaranteed by the U.S. government, or its agencies, including securities issued by U.S. government sponsored entities.
MLPs are publicly traded partnerships primarily engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of minerals and natural resources. MLPs trade on national securities exchanges exactly like the shares of a corporation, without entity level taxation. MLPs typically distribute income quarterly and have the potential for capital appreciation to the extent that they experience growth in cash flow or earnings or increases in valuations. The Fund intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended. Consistent with that intention, the Fund shall invest no more than 25% of its total assets in securities of MLPs.
REITs are corporations or trusts that invest primarily in fee or leasehold ownership of real estate, mortgages or shares issued by other REITs, and that receive favorable tax treatment provided they meet certain conditions, including the requirement that they distribute at least 90% of their taxable income.
DIREXION SEMI-ANNUAL REPORT
4
The Subadviser's investment process begins by looking at various global macro-economic factors such as fiscal/monetary policy, interest rates, geo-political risks, inflation, commodity pricing, government policies and general business conditions. For the Fund's equity portfolio, the Subadviser reviews a broad array of possible income-producing investments and then analyzes company-specific fundamental research to understand a company's dividend policy, relative value and balance sheet. Investments are selected for the Fund's portfolio that demonstrate stable and consistent cash flow, strong underlying asset value, competitive advantages and management teams with demonstrable positive track records.
The Subadviser has a two tier approach to managing the Fund's fixed income portfolio. First, it considers a long-term strategic investment view. Second, it buys and sells fixed income securities opportunistically in response to short-term market, economic, political, or other developments. The objective of the Subadviser's fixed income portfolio strategy is to generate higher income than would be expected from traditional intermediate-term fixed income investments such as U.S. government bonds. As a result, the Fund may invest up to 30% in high yield debt or "junk bonds" (higher-risk, lower-rated fixed income securities such as those rated lower than BBB- by Standard & Poor's Rating Service, Inc. or lower than Baa3 by Moody's Investors Service, Inc. or, if unrated, determined by the Subadviser to be of comparable quality). The Fund invests in fixed income securities of any duration and may include foreign bonds that meet the Subadviser's investment criteria. Duration measures the sensitivity of the price of a fixed income investment to a 1% change in interest rates. For example, a five-year duration means the investment will decrease in value by 5% if interest rates rise 1%.
In addition, the Fund may invest in other investment companies, including exchange-traded funds ("ETFs"), to the extent permitted by the Investment Company Act of 1940.
The Subadviser's investment team has the flexibility to change the Fund's asset allocation to reflect its outlook on market conditions and may reallocate the Fund's investments between asset classes in an attempt to improve the Fund's total return and reduce volatility. Volatility in the markets provides the Subadviser with the opportunity to benefit from perceived pricing dislocations that may occur during periods of market distress. The Subadviser make asset allocation adjustments based on a combination of bottom-up/top-down fundamental analysis and relative value analysis among capital market instruments within the target asset classes.
At the discretion of the Subadviser, the Fund may invest its assets in cash, cash equivalents, and high-quality, short-term debt securities and money market instruments for (i) temporary defensive purposes in response to adverse market, economic or political conditions and (ii) cash flow flexibility. Taking a temporary defensive position may result in the Fund not achieving its investment objective.
As always, we thank you for using the Hilton Tactical Income Fund and we look forward to our mutual success.
Regards,
| | 
| | 
| |
William J. Garvey | | Craig O'Neill | | Alex Oxenham | |
Hilton Capital Management, LLC | | Hilton Capital Management, LLC | | Hilton Capital Management, LLC | |
DIREXION SEMI-ANNUAL REPORT
5
The performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate and an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. For most recent month-end performance information please visit direxioninvestments.com or call 1.800.851.0511.
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. The prospectus and summary prospectus contain this and other information about the Fund. To obtain a prospectus or summary prospectus, please contact the Direxion Funds at 1.800.851.0511 or visit www.direxioninvestments.com. The Fund's prospectus or summary prospectus should be read carefully before investing.
Risks of the Fund – Mutual fund investing involves risk. Principal loss is possible. The Fund's strategy of investing in dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. In addition, there is the possibility that such companies could reduce or eliminate the payment of dividends in the future or the anticipated acceleration of dividends could not occur. The Fund may invest in foreign securities and American Depositary Receipts which involve political, economic and currency risks, greater volatility and differences in accounting methods. Medium- and small-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. Investments in REIT securities involve risks such as declines in the value of real estate and increased susceptibility to adverse economic regulatory expenses. The Fund may invest in MLPs which can be negatively influenced when interest rates rise. These investments also entail many of the general tax risks of investing in a partnership. There is always the risk that an MLP will fail to qualify for favorable tax treatments. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investment by the Fund in lower-rated and nonrated securities presents a greater risk of loss to principal and interest than higher-rated securities. Income from municipal securities may be subject to state and local taxes and a portion of income may be subject to the federal alternative minimum tax for certain investors. Federal income tax rules will apply to any capital gains distributions. Because the Fund invests in ETFs, it is subject to additional risks that do not apply to conventional mutual funds. ETF risk includes the risks that the market price of the shares may trade at a discount to its net asset value ("NAV"), an active secondary trading market may not develop or be maintained, or trading may be halted by the exchange in which they trade, which may impact a Fund's ability to sell its shares. ETN risk includes the risks that the value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in the underlying securities' markets, changes in the applicable interest rates, changes in the issuer's credit rating and economic, legal, political or geographic events that affect the referenced index. In addition, ETNs are unsecured debt of the issuer and would lose value if the issuer goes bankrupt. Please read the prospectus.
Index Descriptions – Please note that you cannot invest directly in an index, although you may invest in the underlying securities represented in the index. Index returns are adjusted to reflect the reinvestment of dividends on securities in the index but do not reflect the expenses of the Fund.
The Bloomberg Barclays Intermediate Government/Credit Index is a market value weighted performance benchmark for government and corporate fixed-rate debt issues (rated Baa/BBB or higher) with maturities between one and ten years.
The S&P 500® Index is one of the most commonly used benchmarks for the overall U.S. Stock Market. It is a market value weighted index and each stock's weight is proportionate to its market value.
Distributed by: Rafferty Capital Markets, LLC
DIREXION SEMI-ANNUAL REPORT
6
Expense Example (Unaudited)
February 28, 2019
As a shareholder of a mutual fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees and exchange fees; and (2) ongoing costs, including management fees; distribution and/or service fees; and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a fund and to compare costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (September 1, 2018 – February 28, 2019).
Actual expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expense that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as wire transfers, returned checks or stop payment orders. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expense Example Table (Unaudited)
February 28, 2019
| | | Annualized
Expense
Ratio | | Beginning
Account Value
September 1, 2018 | | Ending
Account Value
February 28, 2019 | | Expenses
Paid During
Period* | |
Hilton Tactical Income Fund Institutional Class | |
Based on actual fund return | | | 0.98 | % | | $ | 1,000.00 | | | $ | 994.70 | | | $ | 4.85 | | |
Based on hypothetical 5% return | | | 0.98 | % | | | 1,000.00 | | | | 1,019.94 | | | | 4.91 | | |
Hilton Tactical Income Fund Investor Class | |
Based on actual fund return | | | 1.23 | % | | | 1,000.00 | | | | 993.50 | | | | 6.08 | | |
Based on hypothetical 5% return | | | 1.23 | % | | | 1,000.00 | | | | 1,018.70 | | | | 6.16 | | |
* Expenses are equal to the Fund's annualized expense ratio, multiplied by the average account value over the period, multiplied by 181 days (the number of days in the period of September 1, 2018 to February 28, 2019), then divided by 365.
DIREXION SEMI-ANNUAL REPORT
7
Allocation of Portfolio Holdings (Unaudited)
February 28, 2019
| | | Common
Stock | | Preferred
Stock | | U.S.
Government
Obligations | | Corporate
Bonds | | Closed-End
Funds | | Master
Limited
Partnerships | | Convertible
Bonds | | Cash* | | Total | |
Hilton Tactical
Income Fund | | | 36 | % | | | 23 | % | | | 17 | % | | | 11 | % | | | 6 | % | | | 2 | % | | | 1 | % | | | 4 | % | | | 100 | % | |
Allocation of Portfolio Holdings reflects percentages of net assets.
* Cash and other assets less liabilities.
DIREXION SEMI-ANNUAL REPORT
8
Hilton Tactical Income Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares/
Principal | | | | Fair Value | |
COMMON STOCKS - 36.3% | | | |
Banks - 1.5% | | | |
| | 86,315 | | | Sterling Bancorp | | $ | 1,754,784 | | |
Beverages - 1.0% | | | |
| | 73,720 | | | Cott Corp. | | | 1,106,537 | | |
Capital Markets - 6.7% | | | |
| | 104,545 | | | Ares Management Corp. | | | 2,469,353 | | |
| | 104,065 | | | KKR & Co, Inc. | | | 2,313,365 | | |
| | 551,955 | | | Oaktree Specialty Lending Corp. | | | 2,870,166 | | |
| | | | 7,652,884 | | |
Commercial Services & Supplies - 2.3% | | | |
| | 33,240 | | | Republic Services, Inc. | | | 2,607,013 | | |
Communications Equipment - 1.6% | | | |
| | 11,490 | | | Harris Corp. | | | 1,895,046 | | |
Electric Utilities - 2.7% | | | |
| | 23,465 | | | Evergy, Inc. | | | 1,311,928 | | |
| | 9,820 | | | NextEra Energy, Inc. | | | 1,843,411 | | |
| | | | 3,155,339 | | |
Diversified Financial Services - 1.7% | | | |
| | 10,955 | | | CME Group, Inc. | | | 1,992,824 | | |
Equity REITs - 7.1% | | | |
| | 120,495 | | | Americold Realty Trust | | | 3,464,231 | | |
| | 21,045 | | | Crown Castle International Corp. | | | 2,499,094 | | |
| | 110,710 | | | Host Hotels & Resorts, Inc. | | | 2,171,023 | | |
| | | | 8,134,348 | | |
Food Products - 2.2% | | | |
| | 25,770 | | | Archer-Daniels-Midland Co. | | | 1,095,225 | | |
| | 21,250 | | | Sysco Corp. | | | 1,435,438 | | |
| | | | 2,530,663 | | |
Household Durables - 1.5% | | | |
| | 43,565 | | | D.R. Horton, Inc. | | | 1,694,243 | | |
IT Services - 3.8% | | | |
| | 32,250 | | | Booz Allen Hamilton Holding
Corp. | | | 1,704,735 | | |
| | 14,325 | | | Broadridge Financial Solutions,
Inc. | | | 1,450,406 | | |
| | 22,225 | | | Thomson Reuters Corp. | | | 1,209,262 | | |
| | | | 4,364,403 | | |
Mortgage REITs - 1.8% | | | |
| | 137,600 | | | Redwood Trust, Inc. | | | 2,105,280 | | |
Pharmaceuticals - 2.4% | | | |
| | 20,430 | | | Johnson & Johnson | | | 2,791,555 | | |
| | | | | TOTAL COMMON STOCKS
(Cost $37,134,978) | | $ | 41,784,919 | | |
PREFERRED STOCKS - 22.9% | | | |
Banks - 2.9% | | | |
| | | | | Customers Bancorp, Inc. | | | | | |
| | 20,000 | | | 7.00%, 06/15/2020 | | $ | 514,500 | | |
| | | | | Customers Bancorp, Inc. | | | | | |
| | 39,000 | | | 6.00%, 12/15/2021 | | | 975,390 | | |
| | | | | Iberiabank Corp. | | | | | |
| | 48,000 | | | 6.63%, 08/01/2025 | | | 1,284,000 | | |
Shares/
Principal | | | | Fair Value | |
Banks (continued) | | | |
| | | | | Synovus Financial Corp. | | | | | |
| | 13,000 | | | 6.30%, 06/21/2023 | | $ | 336,700 | | |
| | | | | TriState Capital Holdings, Inc. | | | | | |
| | 6,500 | | | 6.75%, 04/01/2023 | | | 168,350 | | |
| | | | 3,278,940 | | |
Capital Markets - 10.7% | | | |
| | | | | Ares Management Corp. | | | | | |
| | 66,000 | | | 7.00%, 06/30/2021 | | | 1,742,400 | | |
| | | | | B. Riley Financial, Inc. | | | | | |
| | 31,500 | | | 7.50%, 10/31/2021 | | | 801,675 | | |
| | | | | Capital Southwest Corp. | | | | | |
| | 9,245 | | | 5.95%, 12/15/2022 | | | 236,672 | | |
| | | | | Capitala Finance Corp. | | | | | |
| | 31,635 | | | 6.00%, 05/31/2022 | | | 795,937 | | |
| | | | | Fidus Investment Corp. | | | | | |
| | 11,400 | | | 5.88%, 02/01/2023 | | | 287,166 | | |
| | | | | Fidus Investment Corp. (a) | | | | | |
| | 30,000 | | | 6.00%, 02/15/2024 | | | 755,700 | | |
| | | | | Gladstone Investment Corp. | | | | | |
| | 31,815 | | | 6.38%, 08/31/2025 | | | 809,055 | | |
| | | | | Hercules Capital, Inc. | | | | | |
| | 23,000 | | | 5.25%, 04/30/2025 | | | 565,800 | | |
| | | | | MVC Capital, Inc. | | | | | |
| | 56,210 | | | 6.25%, 11/30/2022 | | | 1,468,205 | | |
| | | | | Oaktree Capital Group LLC | | | | | |
| | 22,000 | | | 6.63%, 06/15/2023 | | | 548,020 | | |
| | | | | Oaktree Specialty Lending Corp. | | | | | |
| | 2,000 | | | 5.88%, 10/30/2024 | | | 50,560 | | |
| | | | | OFS Capital Corp. | | | | | |
| | 37,500 | | | 6.38%, 04/30/2025 | | | 942,750 | | |
| | | | | Oxford Square Capital Corp. | | | | | |
| | 39,282 | | | 6.50%, 03/30/2024 | | | 990,692 | | |
| | | | | Saratoga Investment Corp. | | | | | |
| | 47,300 | | | 6.25%, 08/31/2025 | | | 1,182,027 | | |
| | | | | TriplePoint Venture Growth
BDC Corp. | | | | | |
| | 45,045 | | | 5.75%, 07/15/2022 | | | 1,126,125 | | |
| | | | 12,302,784 | | |
Equity REITs - 2.4% | | | |
| | | | | Bluerock Residential Growth, Inc.
Class A | | | | | |
| | 43,000 | | | 8.25%, 10/21/2020 | | | 1,133,910 | | |
| | | | | Brookfield DTLA Fund Office
Trust Investor, Inc. (a) | | | | | |
| | 77,000 | | | 7.63%, 04/18/2019 | | | 1,617,000 | | |
| | | | 2,750,910 | | |
Mortgage REITs - 6.9% | | | |
| | | | | AG Mortgage Investment
Trust, Inc. | | | | | |
| �� | 44,510 | | | 8.00%, 04/17/2019 | | | 1,150,139 | | |
| | | | | Apollo Commercial Real Estate
Finance, Inc. | | | | | |
| | 43,175 | | | 8.00%, 04/17/2019 | | | 1,122,550 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
9
Hilton Tactical Income Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares/
Principal | | | | Fair Value | |
Mortgage REITs (continued) | | | |
| | | | | Colony Capital, Inc. | | | | | |
| | 23,000 | | | 8.75%, 05/15/2019 | | $ | 579,600 | | |
| | | | | Cherry Hill Mortgage Investment
Corp. | | | | | |
| | 28,800 | | | 8.20%, 08/17/2022 | | | 725,184 | | |
| | | | | Cherry Hill Mortgage Investment
Corp. (a) | | | | | |
| | 2,800 | | | 8.25%, 12/31/2049 | | | 69,720 | | |
| | | | | Chimera Investment Corp. | | | | | |
| | 39,775 | | | 8.00%, 10/30/2021 | | | 1,010,285 | | |
| | | | | Chimera Investment Corp. | | | | | |
| | 39,620 | | | 8.00%, 03/30/2024 | | | 1,006,744 | | |
| | | | | Dynex Capital, Inc. | | | | | |
| | 22,260 | | | 7.63%, 04/17/2019 | | | 527,562 | | |
| | | | | Ready Capital Corp. | | | | | |
| | 26,625 | | | 6.50%, 04/30/2021 | | | 678,538 | | |
| | | | | Two Harbors Investment Corp. | | | | | |
| | 42,400 | | | 8.13%, 04/27/2027 | | | 1,113,000 | | |
| | | | 7,983,322 | | |
| | | | | TOTAL PREFERRED STOCKS
(Cost $25,685,149) | | $ | 26,315,956 | | |
U.S. GOVERNMENT OBLIGATIONS - 16.8% | | | |
| | | | | U.S. Treasury Note | | | | | |
| | 3,165,000 | | | 3.38%, 11/15/2019 | | $ | 3,182,927 | | |
| | | | | U.S. Treasury Note | | | | | |
| | 1,600,000 | | | 2.25%, 02/29/2020 | | | 1,595,406 | | |
| | | | | U.S. Treasury Note | | | | | |
| | 3,280,000 | | | 3.50%, 05/15/2020 | | | 3,316,644 | | |
| | | | | U.S. Treasury Note | | | | | |
| | 1,050,000 | | | 2.25%, 02/15/2021 | | | 1,044,483 | | |
| | | | | U.S. Treasury Note | | | | | |
| | 6,725,000 | | | 3.63%, 02/15/2021 | | | 6,866,330 | | |
| | | | | U.S. Treasury Note | | | | | |
| | 3,350,000 | | | 2.63%, 06/15/2021 | | | 3,359,422 | | |
| | | | | TOTAL U.S. GOVERNMENT
OBLIGATIONS
(Cost $19,354,745) | | $ | 19,365,212 | | |
CORPORATE BONDS - 11.0% | | | |
Communications Equipment - 1.5% | | | |
| | | | | Cisco Systems, Inc. | | | | | |
| | 715,000 | | | 3.63%, 03/04/2024 | | $ | 741,132 | | |
| | | | | Intel Corp. | | | | | |
| | 1,025,000 | | | 3.10%, 07/29/2022 | | | 1,037,648 | | |
| | | | 1,778,780 | | |
Food Products - 0.5% | | | |
| | | | | Sysco Corp. | | | | | |
| | 625,000 | | | 2.60%, 10/01/2020 | | | 621,442 | | |
Food & Staples Retailing - 1.4% | | | |
| | | | | Walmart, Inc. | | | | | |
| | 1,585,000 | | | 3.40%, 06/26/2023 | | | 1,616,792 | | |
Shares/
Principal | | | | Fair Value | |
IT Services - 2.7% | | | |
| | | | | Automatic Data Processing, Inc. | | | | | |
| | 1,585,000 | | | 2.25%, 09/15/2020 | | $ | 1,575,927 | | |
| | | | | salesforce.com, Inc. | | | | | |
| | 1,500,000 | | | 3.25%, 04/11/2023 | | | 1,519,387 | | |
| | | | 3,095,314 | | |
Machinery - 0.9% | | | |
| | | | | Caterpillar Financial Services
Corp. | | | | | |
| | 1,015,000 | | | 2.00%, 11/29/2019 | | | 1,009,492 | | |
Pharmaceuticals - 1.2% | | | |
| | | | | AbbVie, Inc. | | | | | |
| | 1,390,000 | | | 2.90%, 11/06/2022 | | | 1,369,431 | | |
Semiconductors & Semiconductor Equipment - 1.0% | | | |
| | | | | QUALCOMM, Inc. | | | | | |
| | 1,125,000 | | | 3.00%, 05/20/2022 | | | 1,121,771 | | |
Specialty Retail - 0.8% | | | |
| | | | | AutoZone, Inc. | | | | | |
| | 925,000 | | | 1.63%, 04/21/2019 | | | 923,541 | | |
Technology Hardware, Storage & Peripherals - 1.0% | | | |
| | | | | Apple, Inc. | | | | | |
| | 1,100,000 | | | 2.85%, 05/06/2021 | | | 1,102,907 | | |
| | | | | TOTAL CORPORATE BONDS
(Cost $12,569,179) | | $ | 12,639,470 | | |
CLOSED-END FUNDS - 5.8% | | | |
| | 108,160 | | | Invesco Dynamic Credit
Opportunities Fund | | $ | 1,196,250 | | |
| | 20,970 | | | iShares JP Morgan USD
Emerging Markets
Bond ETF | | | 2,283,004 | | |
| | 152,750 | | | Nuveen Credit Strategies
Income Fund | | | 1,197,560 | | |
| | 84,155 | | | Nuveen Mortgage Opportunity
Term Fund | | | 1,943,139 | | |
| | | | | TOTAL CLOSED-END FUNDS
(Cost $6,726,714) | | $ | 6,619,953 | | |
MASTER LIMITED PARTNERSHIPS - 1.9% | | | |
Oil, Gas & Consumable Fuels - 1.9% | | | |
| | 79,000 | | | Enterprise Products Partners L.P. | | $ | 2,184,350 | | |
| | | | | TOTAL MASTER LIMITED
PARTNERSHIPS
(Cost $1,878,280) | | $ | 2,184,350 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
10
Hilton Tactical Income Fund
Schedule of Investments (Unaudited)
February 28, 2019
Shares/
Principal | | | | Fair Value | |
CONVERTIBLE BONDS - 0.8% | |
Mortgage REITs - 0.8% | |
| | | Colony Capital, Inc. | | | | | |
| | 925,000 | | | 3.88%, 01/15/2021 | | $ | 879,953 | | |
| | | TOTAL CONVERTIBLE BONDS
(Cost $928,203) | | $ | 879,953 | | |
| | | TOTAL INVESTMENTS - 95.5%
(Cost $104,277,248) | | $ | 109,789,813 | | |
| | | Other Assets and Liabilities,
Net - 4.5% | | | 5,185,341 | | |
| | | TOTAL NET ASSETS - 100.0% | | $ | 114,975,154 | | |
Percentages are stated as a percent of net assets.
The geographic location of all investments is United States unless otherwise indicated.
(a) Non-income producing security.
REIT - Real Estate Investment Trust
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor's Financial Services LLP ("S&P"). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
11
Statement of Assets and Liabilities (Unaudited)
February 28, 2019
| | | Hilton Tactical
Income Fund | |
Assets: | |
Investments, at fair value (Note 2) | | $ | 109,789,813 | | |
Cash | | | 4,952,831 | | |
Receivable for Fund shares sold | | | 554,632 | | |
Dividends, interest and reclaims receivable | | | 379,787 | | |
Prepaid expenses and other assets | | | 37,182 | | |
Total Assets | | | 115,714,245 | | |
Liabilities: | |
Fund shares redeemed | | | 40,099 | | |
Payable for investment securities purchased | | | 579,205 | | |
Accrued investment advisory fees | | | 48,380 | | |
Accrued distribution expenses | | | 1,871 | | |
Accrued expenses and other liabilities | | | 69,536 | | |
Total Liabilities | | | 739,091 | | |
Net Assets | | $ | 114,975,154 | | |
Net Assets Consist of: | |
Capital stock | | $ | 109,533,306 | | |
Total distributable earnings | | | 5,441,848 | | |
Net Assets | | $ | 114,975,154 | | |
Cost of Investments | | $ | 104,277,248 | | |
Calculation of Net Asset Value Per Share: | |
Institutional Class Shares: | |
Net assets | | $ | 102,291,951 | | |
Shares outstanding (unlimited shares of beneficial interest authorized, par value) | | | 6,221,695 | | |
Net asset value, redemption price and offering price per share | | $ | 16.44 | | |
Investor Class Shares: | |
Net assets | | $ | 12,683,203 | | |
Shares outstanding (unlimited shares of beneficial interest authorized, par value) | | | 772,557 | | |
Net asset value, redemption price and offering price per share | | $ | 16.42 | | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
12
Statement of Operations (Unaudited)
For the Six Months Ended February 28, 2019
| | | Hilton Tactical
Income Fund | |
Investment Income: | |
Dividend income (net of withholding tax of $1,192) | | $ | 1,716,631 | | |
Interest income | | | 436,740 | | |
Total investment income | | | 2,153,371 | | |
Expenses: | |
Investment advisory fees (Note 4) | | | 471,151 | | |
Accounting fees | | | 62,820 | | |
Professional fees | | | 43,018 | | |
State registration fees | | | 21,437 | | |
Reports to shareholders | | | 18,237 | | |
Management service fees (Note 4) | | | 13,377 | | |
Trustees' fees | | | 11,503 | | |
Distribution expenses – Investor Class (Note 4) | | | 10,588 | | |
Administration fees | | | 8,496 | | |
Insurance fees | | | 4,880 | | |
Other | | | 7,137 | | |
Total expenses | | | 672,644 | | |
Less: Reimbursement of expenses from Adviser (Note 4) | | | (149,025 | ) | |
Net expenses | | | 523,619 | | |
Net investment income | | | 1,629,752 | | |
Realized and unrealized gain (loss) on investments: | |
Net realized gain on: | |
Investments | | | 1,362,288 | | |
Capital gain distributions from regulated investment companies | | | 27,520 | | |
Change in net unrealized depreciation on: | |
Investments | | | (3,517,470 | ) | |
Foreign receivables | | | (10 | ) | |
| | | | (3,517,480 | ) | |
Net realized and unrealized loss | | | (2,127,672 | ) | |
Net decrease in net assets resulting from operations | | $ | (497,920 | ) | |
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
13
Statement of Changes in Net Assets
| | | Hilton Tactical Income Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Increase (decrease) in net assets from: | |
Operations: | |
Net investment income | | $ | 1,629,752 | | | $ | 2,770,771 | | |
Net realized gain | | | 1,362,288 | | | | 2,488,783 | | |
Capital gain distributions from regulated investment companies | | | 27,520 | | | | 111,957 | | |
Change in net unrealized appreciation (depreciation) | | | (3,517,480 | ) | | | 2,367,804 | | |
Net increase (decrease) in net assets resulting from operations | | | (497,920 | ) | | | 7,739,315 | | |
Distributions to shareholders: | |
Net distributions to shareholders | |
Institutional Class Shares | | | (2,430,126 | ) | | | (2,973,683 | ) | |
Investor Class Shares | | | (191,163 | ) | | | (18,241 | )1 | |
Class A Shares | | | — | | | | (131,821 | )2 | |
Class C Shares | | | — | | | | (43,619 | )2 | |
Total distributions to shareholders | | | (2,621,289 | ) | | | (3,167,364 | )3 | |
Capital share transactions: | |
Total increase (decrease) in net assets from net change in capital share transactions(a) | | | 9,986,462 | | | | (2,272,315 | ) | |
Total increase in net assets | | | 6,867,253 | | | | 2,299,636 | | |
Net assets: | |
Beginning of year/period | | | 108,107,901 | | | | 105,808,265 | | |
End of year/period | | $ | 114,975,154 | | | $ | 108,107,9014 | | |
(a) Summary of capital share transactions is as follows:
| | | Hilton Tactical Income Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
| | | Shares | | Value | | Shares | | Value | |
Shares sold | |
Institutional Class Shares | | | 741,106 | | | $ | 12,073,292 | | | | 1,671,906 | | | $ | 27,909,321 | | |
Investor Class Shares | | | 387,439 | | | | 6,264,277 | | | | 49,0721 | | | | 819,3861 | | |
Class A Shares | | | — | | | | — | | | | 85,3212 | | | | 1,414,7372 | | |
Class C Shares | | | — | | | | — | | | | 9,4662 | | | | 157,0992 | | |
Shares issued in reinvestment of distributions | |
Institutional Class Shares | | | 139,205 | | | | 2,259,052 | | | | 160,792 | | | | 2,662,521 | | |
Investor Class Shares | | | 10,544 | | | | 170,875 | | | | 9471 | | | | 15,8081 | | |
Class A Shares | | | — | | | | — | | | | 7,1022 | | | | 117,3882 | | |
Class C Shares | | | — | | | | — | | | | 1,9592 | | | | 32,3612 | | |
Shares redeemed | |
Institutional Class Shares | | | (546,729 | ) | | | (8,896,440 | ) | | | (2,013,872 | ) | | | (33,445,528 | ) | |
Investor Class Shares | | | (115,823 | ) | | | (1,884,594 | ) | | | (17,293 | )1 | | | (289,283 | )1 | |
Class A Shares | | | — | | | | — | | | | (74,075 | )2 | | | (1,232,710 | )2 | |
Class C Shares | | | — | | | | — | | | | (26,298 | )2 | | | (433,415 | )2 | |
Shares converted | |
Investor Class Shares | | | — | | | | — | | | | 129,6755 | | | | 2,140,9395 | | |
Class C Shares | | | — | | | | — | | | | (129,754 | )5 | | | (2,140,939 | )5 | |
Shares redesignated | |
Investor Class Shares | | | — | | | | — | | | | 327,9965 | | | | 5,415,2085 | | |
Class A Shares | | | — | | | | — | | | | (327,996 | )5 | | | (5,415,208 | )5 | |
Net increase (decrease) | | | 615,742 | | | $ | 9,986,462 | | | | (145,052 | ) | | $ | (2,272,315 | ) | |
1 For the period from June 30, 2018 to August 31, 2018.
2 For the period from September 1, 2017 to June 29, 2018.
3 Represents distributions to shareholders from net investment income.
4 Includes accumulated net investment loss of $(674,689). See Note 6 in the Notes to the Financial Statements.
5 See Note 1 in the Notes to the Financial Statements.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
14
Financial Highlights
February 28, 2019
| | | | | RATIOS TO AVERAGE NET ASSETS3 | |
| | | Net Asset
Value,
Beginning
of Year/
Period | | Net
Investment
Income1 | | Net Realized
and Unrealized
Gain (Loss)
on Investments | | Net Increase
(Decrease) in
Net Asset
Value Resulting
from Operations | | Dividends
from Net
Investment
Income | | Distributions
from
Realized
Capital Gains | | Return of
Capital
Distribution | | Total
Distributions | | Redemption
Fees Paid to
Fund | | Net
Asset
Value,
End of
Year/
Period | | Total
Return2 | | Net
Assets,
End of
Year/
Period
(,000) | | Total
Expenses | | Net
Expenses4 | | Net Investment
Income
after Expense
Reimbursement/
Recoupment | | Portfolio
Turnover
Rate5 | |
Hilton Tactical Income Fund | |
Institutional Class Shares | |
Six Months Ended February 28, 2019
(Unaudited) | | $ | 16.95 | | | $ | 0.25 | | | $ | (0.35 | ) | | $ | (0.10 | ) | | $ | (0.25 | ) | | $ | (0.16 | ) | | $ | — | | | $ | (0.41 | ) | | $ | —6 | | | $ | 16.44 | | | | (0.53 | )% | | $ | 102,292 | | | | 1.26 | % | | | 0.98 | % | | | 3.14 | % | | | 44 | % | |
Year ended August 31, 2018 | | | 16.22 | | | | 0.44 | | | | 0.79 | | | | 1.23 | | | | (0.50 | ) | | | — | | | | — | | | | (0.50 | ) | | | —6 | | | | 16.95 | | | | 7.73 | % | | | 99,807 | | | | 1.26 | % | | | 1.00 | % | | | 2.62 | % | | | 64 | % | |
Year ended August 31, 2017 | | | 15.75 | | | | 0.46 | | | | 0.53 | | | | 0.99 | | | | (0.49 | ) | | | — | | | | (0.03 | ) | | | (0.52 | ) | | | —6 | | | | 16.22 | | | | 6.39 | % | | | 98,451 | | | | 1.05 | % | | | 1.05 | % | | | 2.85 | % | | | 61 | % | |
Year ended August 31, 2016 | | | 15.02 | | | | 0.41 | | | | 0.99 | | | | 1.40 | | | | (0.46 | ) | | | — | | | | (0.21 | ) | | | (0.67 | ) | | | —6 | | | | 15.75 | | | | 9.60 | % | | | 59,771 | | | | 1.05 | % | | | 1.05 | % | | | 2.70 | % | | | 84 | % | |
Year ended August 31, 2015 | | | 16.49 | | | | 0.52 | | | | (1.21 | ) | | | (0.69 | ) | | | (0.50 | ) | | | (0.13 | ) | | | (0.15 | ) | | | (0.78 | ) | | | —6 | | | | 15.02 | | | | (4.25 | )% | | | 55,752 | | | | 1.17 | % | | | 1.09 | % | | | 3.29 | % | | | 35 | %7 | |
September 16, 20138 to August 31, 2014 | | | 15.00 | | | | 0.37 | | | | 1.50 | | | | 1.87 | | | | (0.35 | ) | | | (0.03 | ) | | | — | | | | (0.38 | ) | | | —6 | | | | 16.49 | | | | 12.61 | % | | | 34,483 | | | | 2.52 | % | | | 1.25 | % | | | 2.63 | % | | | 58 | % | |
Investor Class Shares | |
Six Months Ended February 28, 2019
(Unaudited) | | | 16.93 | | | | 0.23 | | | | (0.35 | ) | | | (0.12 | ) | | | (0.23 | ) | | | (0.16 | ) | | | — | | | | (0.39 | ) | | | — | | | | 16.42 | | | | (0.65 | )% | | | 12,683 | | | | 1.52 | % | | | 1.23 | % | | | 2.82 | % | | | 44 | % | |
June 30, 20189,10 to August 31, 2018 | | | 16.51 | | | | 0.05 | | | | 0.41 | | | | 0.46 | | | | (0.04 | ) | | | — | | | | — | | | | (0.04 | ) | | | — | | | | 16.93 | | | | 2.78 | % | | | 8,300 | | | | 1.58 | % | | | 1.23 | % | | | 1.84 | % | | | 64 | % | |
September 1, 2014 to May 31, 201511 | | | 16.47 | | | | 0.40 | | | | (0.62 | ) | | | (0.22 | ) | | | (0.35 | ) | | | (0.13 | ) | | | (0.09 | ) | | | (0.57 | ) | | | — | | | | 15.68 | | | | (1.26 | )% | | | 3,075 | | | | 1.46 | % | | | 1.37 | % | | | 3.40 | % | | | 35 | %7 | |
September 16, 20138 to August 31, 2014 | | | 15.00 | | | | 0.32 | | | | 1.50 | | | | 1.82 | | | | (0.32 | ) | | | (0.03 | ) | | | — | | | | (0.35 | ) | | | — | | | | 16.47 | | | | 12.26 | % | | | 1,223 | | | | 2.72 | % | | | 1.60 | % | | | 2.27 | % | | | 58 | % | |
Class A Shares | |
September 1, 2017 to June 29, 20189 | | | 16.20 | | | | 0.35 | | | | 0.39 | | | | 0.74 | | | | (0.43 | ) | | | — | | | | — | | | | (0.43 | ) | | | — | | | | 16.51 | | | | 4.57 | % | | | 5,415 | | | | 1.49 | % | | | 1.26 | % | | | 2.53 | % | | | 64 | % | |
Year ended August 31, 2017 | | | 15.73 | | | | 0.42 | | | | 0.53 | | | | 0.95 | | | | (0.45 | ) | | | — | | | | (0.03 | ) | | | (0.48 | ) | | | —6 | | | | 16.20 | | | | 6.14 | % | | | 5,016 | | | | 1.30 | % | | | 1.30 | % | | | 2.60 | % | | | 61 | % | |
Year ended August 31, 2016 | | | 15.00 | | | | 0.37 | | | | 0.99 | | | | 1.36 | | | | (0.43 | ) | | | — | | | | (0.20 | ) | | | (0.63 | ) | | | — | | | | 15.73 | | | | 9.32 | % | | | 1,790 | | | | 1.30 | % | | | 1.30 | % | | | 2.45 | % | | | 84 | % | |
June 1, 201511 to August 31, 2015 | | | 15.68 | | | | 0.10 | | | | (0.62 | ) | | | (0.52 | ) | | | (0.10 | ) | | | — | | | | (0.06 | ) | | | (0.16 | ) | | | — | | | | 15.00 | | | | (3.31 | )% | | | 3,521 | | | | 1.30 | % | | | 1.30 | % | | | 2.47 | % | | | 35 | %7 | |
Class C Shares | |
September 1, 2017 to June 29, 201810 | | | 16.19 | | | | 0.24 | | | | 0.39 | | | | 0.63 | | | | (0.32 | ) | | | — | | | | — | | | | (0.32 | ) | | | — | | | | 16.50 | | | | 3.90 | % | | | 2,141 | | | | 2.24 | % | | | 2.01 | % | | | 1.77 | % | | | 64 | % | |
Year ended August 31, 2017 | | | 15.72 | | | | 0.30 | | | | 0.54 | | | | 0.84 | | | | (0.35 | ) | | | — | | | | (0.02 | ) | | | (0.37 | ) | | | — | | | | 16.19 | | | | 5.38 | % | | | 2,341 | | | | 2.05 | % | | | 2.05 | % | | | 1.86 | % | | | 61 | % | |
Year ended August 31, 2016 | | | 14.99 | | | | 0.25 | | | | 0.99 | | | | 1.24 | | | | (0.35 | ) | | | — | | | | (0.16 | ) | | | (0.51 | ) | | | — | | | | 15.72 | | | | 8.50 | % | | | 2,516 | | | | 2.05 | % | | | 2.05 | % | | | 1.66 | % | | | 84 | % | |
June 2, 20158 to August 31, 2015 | | | 15.62 | | | | 0.08 | | | | (0.62 | ) | | | (0.54 | ) | | | (0.05 | ) | | | — | | | | (0.04 | ) | | | (0.09 | ) | | | — | | | | 14.99 | | | | (3.46 | )% | | | 1,210 | | | | 2.05 | % | | | 2.05 | % | | | 2.17 | % | | | 35 | %7 | |
1 Net investment income per share represents net investment income divided by the daily average shares of benefiicial interest outstanding throughout each year/period.
2 All returns reflect reinvested dividends, if any, but do not reflect the impact of taxes. Total return for a period of less than one year is not annualized.
3 For periods of less than one year, these ratios are annualized.
4 Net expenses include effects of any reimbursement or recoupment.
5 Portfolio turnover rate is not annualized and is calculated without regard to short-term securities having a maturity of less than one year.
6 Amount is less than $0.005.
7 Portfolio turnover excludes the purchase and sales of the Hilton Yield Plus Fund prior to the reorganization on December 15, 2014. If these transactions were included, portfolio turnover would have been higher.
8 Commencement of operations.
9 Class A Shares were redesignated as Investor Class Shares on June 30, 2018.
10 Class C Shares were converted to Investor Class Shares on June 30, 3018.
11 The Investor Class Shares were converted to Class A Shares on June 1, 2015.
The accompanying notes are an integral part of these financial statements.
DIREXION SEMI-ANNUAL REPORT
15
Direxion Funds
Notes to the Financial Statements (Unaudited)
February 28, 2019
1. ORGANIZATION
Direxion Funds (the "Trust") was organized as a Massachusetts Business Trust on June 6, 1997, and is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company issuing its shares in series, each series representing a distinct portfolio with its own investment objective and policies. The Trust currently has 14 series, of which one is included in this report: the Hilton Tactical Income Fund (formerly Direxion Hilton Tactical Income Fund) (the "Fund"). The Fund is a diversified series of the Trust pursuant to the 1940 Act. The Fund was formerly known as the Hilton Yield Plus Fund (the "Predecessor Fund") and was formerly a series of the Managed Portfolio Series Trust, which commenced operations on September 16, 2013. On December 5, 2014, substantially all of the assets of the Predecessor Fund, were transferred to the Fund in a tax-free reorganization, which was approved by shareholders of the Predecessor Fund (the "Reorganization"). Hilton Capital Management, LLC ("Hilton") previously served as the investment adviser to the Predecessor Fund. After the Reorganization, Rafferty Asset Management, LLC serves as the Fund's investment adviser (the "Adviser") and Hilton serves as the Fund's subadviser ("Subadviser"). On June 30, 2018, the Fund redesignated all of the Fund's outstanding Class A shares as Investor Class shares and converted all of the Fund's outstanding Class C shares to Investor Class shares. This conversion and redesignation were tax-free events for shareholders. As a result after this conversion and redesignation, the Fund currently offers Investor Class and Institutional Class shares. Institutional Class shares are made available through investment advisers, banks, trust companies or authorized representatives without a sales charge.
The Fund primarily seeks income with a secondary investment objective of capital appreciation consistent with the preservation of capital. The Fund pursues its investment objective by utilizing an investment strategy that employs a disciplined approach to balancing fixed income investments with historically higher income producing equity securities, with a focus on minimizing absolute risk and volatility. The Subadviser attempts to mitigate portfolio risk and volatility by creating a diversified portfolio of income producing securities that also offer the potential for capital appreciation. These securities may include common and preferred stocks of any capitalization, master limited partnerships ("MLPs"), real estate investment trusts ("REITS"), and a variety of debt instruments of any maturity, including corporate bonds, exchange-traded notes, municipal bonds, and securities issued, backed or otherwise guaranteed by the U.S. Government or its agencies.
The Trust has evaluated the structure, objective and activities of the Fund and determined that it meets the characteristics of an investment company. As such, these financial statements have applied the guidance as set forth in the Accounting Standards Codifications ("ASC") 946, Financial Services Investment Companies.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles ("GAAP").
a) Investment Valuation – The Net Asset Value ("NAV") of the Fund is determined daily, Monday through Friday, as of the close of regular trading on the New York Stock Exchange ("NYSE"), each day the NYSE is open for business. The value of all portfolio securities and other assets held by the Fund will be determined as of the time the Fund calculates its NAV, 4:00 p.m. Eastern Time ("Valuation Time"). Equity securities, including common stocks, preferred stocks, exchange-traded funds, closed-end funds, MLPs and REITs and over-the-counter securities are valued at their last sales price or, if not available, at the average of the last bid and ask prices. Securities primarily traded on the NASDAQ National Market are valued using the NASDAQ Official Closing Price. Investments in open-end mutual funds, including money market funds, are valued at their respective quoted NAV on the valuation date. Asset-backed securities, convertible bonds and corporate bonds are valued using the mean between the closing bid and ask price furnished by an independent pricing service. Securities for which reliable market quotations are not readily available, the Fund's pricing service does not provide a valuation for such securities, the Fund's pricing service provides valuation that in the judgment of the Adviser does not represent fair value, or the Fund or Adviser believes the market price is stale, are fair valued as determined by the Adviser under the supervision of the Board of Trustees. Additionally, the Adviser will monitor developments in the marketplace for significant events that may affect the value of those securities whose closing prices were established before the Valuation Time.
DIREXION SEMI-ANNUAL REPORT
16
b) Investment Transactions – Investment transactions are recorded on trade date. The Fund determines the gain or loss realized from investment transactions by comparing the identified cost, which is the same basis used for federal income tax purposes, with the net sales proceeds.
c) Federal Income Taxes – The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, necessary to qualify as a regulated investment company and to make the requisite distributions of income and capital gains to its shareholders sufficient to relieve it from all or substantially all Federal income taxes and excise taxes. No provision for Federal income taxes has been made.
d) Income and Expenses – Dividend income is recorded on the ex-dividend date. Interest income, including amortization of premium and discount, and dividends received from money market funds, is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized over the expected life of the respective securities. Distributions received from investments in MLPs generally are comprised of ordinary income, capital gains and return of capital from the MLPs. For financial statement purposes, the Fund uses return of capital and income estimates to allocate the dividend income received. Such estimates are based on historical information available from each MLP. These estimates may subsequently be revised based on information received from the MLPs after their respective tax reporting periods are concluded, as the actual character of these distributions is not known until after the fiscal year end. The Fund estimates the allocation of investment income and return of capital for the distributions received from MLPs within the Statement of Operations. For the year ended August 31, 2018, the Fund has estimated approximately 100% of the distributions from MLPs to be return of capital. Expenses are computed based on the Fund's respective average daily net assets. Other than class specific expenses, income and expenses are allocated to each class of shares based upon relative net assets. For an additional discussion on expenses, refer to Note 4.
e) Foreign Currency – Certain assets, such as receivables for foreign dividends and foreign tax reclaims, denominated in foreign currencies are translated into U.S. Dollar amounts at the date of valuation. Foreign dividend income denominated in foreign currencies is translated into U.S. Dollar amounts on the respective dates of such transactions. Realized gains or losses on foreign currency exchange are presented on the Statement of Operations as realized gain or loss on foreign currency and arise from the difference between the amounts of foreign dividends recorded on the Fund's books, and the U.S. dollar equivalent of the amounts actually received. Net unrealized foreign currency exchange gains and losses are presented on the Statement of Operations as unrealized appreciation or deprecation on foreign receivables and arise from changes in the value of foreign tax reclaim receivables resulting from changes in the exchange rate.
f) Risks of Investing in Foreign Securities – Investment in foreign securities involve greater risk than investing in domestic securities. As a result, a Fund's returns and net asset values may be affected to a large degree by fluctuations in currency exchange rates, political, diplomatic or economic conditions and regulatory requirements in other countries. The laws and accounting, auditing, and financial reporting standards in foreign countries may require less disclosure than required in the U.S., and there may be less public information available about foreign companies. Investments in foreign emerging markets present a greater risk than investing in foreign issuers in general. The risk of political or social upheaval is greater in emerging markets. In addition, there may be risks of an economy's dependence on revenues from particular commodities, currency transfer restrictions, a limited number of buyers for such securities and delays and disruptions in securities settlement procedures.
g) Distributions to Shareholders – The Fund will make distributions of net investment income, if any, monthly. The Fund will also distribute net realized capital gains, if any, annually. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. Distributions to shareholders are recorded on the ex-dividend date.
The tax character of distributions during the six months ended February 28, 2019 and year ended August 31, 2018, were as follows:
| | | Hilton Tactical Income Fund | |
| | | Six Months Ended
February 28, 2019
(Unaudited) | | Year Ended
August 31, 2018 | |
Distributions paid from: | |
Ordinary Income | | $ | 1,612,332 | | | $ | 2,940,494 | | |
Long-Term Capital Gains | | | 1,008,957 | | | | 226,870 | | |
Return of Capital | | | — | | | | — | | |
Total Distributions paid | | $ | 2,621,289 | | | $ | 3,167,364 | | |
DIREXION SEMI-ANNUAL REPORT
17
The Fund is designating as long-term capital gain dividends, pursuant to Internal Revenue Code 852(b)(3), the amount necessary to reduce the earnings and profits of the Fund related to net capital gain to zero for the tax year ended August 31, 2018. To the extent necessary to fully distribute such capital gains, the Fund is also designating earnings and profits distributed to shareholders on the redemption of shares.
As of August 31, 2018, the components of accumulated earnings/losses of the Fund on a tax basis were as follows:
| | | Direxion Hilton
Tactical
Income Fund | |
Net unrealized appreciation/(depreciation) | | $ | 8,613,236 | | |
Undistributed ordinary income | | | — | | |
Undistributed long-term capital gain | | | — | | |
Total distributable earnings | | | — | | |
Other accumulated gain/(loss) | | | (52,179 | ) | |
Total accumulated earnings/(losses) | | $ | 8,561,057 | | |
The difference between book cost of investments and tax cost of investments is attributable primarily to publicly traded partnership adjustments and the tax deferral of losses on wash sales.
The cost basis for investments for federal income tax purposes as of February 28, 2019 was as follows:
| | | Hilton Tactical
Income Fund | |
Tax cost of investments | | $ | 104,277,248 | | |
Gross unrealized appreciation | | | 6,375,607 | | |
Gross unrealized depreciation | | | (863,042 | ) | |
Net unrealized appreciation/(depreciation) | | $ | 5,512,565 | | |
Net investment income and realized gains and losses for federal income tax purposes may differ from that reported on the financial statements because of permanent book-to-tax differences. GAAP requires that permanent differences in net investment income and realized gains and losses due to differences between financial reporting and tax reporting be reclassified between various components of net assets. The permanent differences primarily relate to distribution reclasses and publicly traded partnership adjustments.
In order to meet certain excise tax distribution requirements, the Fund is required to measure and distribute annually net capital gains realized during a twelve-month period ending October 31 and net investment income earned during a twelve month period ending December 31. In connection with this, the Fund is permitted for tax purposes to defer into its next fiscal year qualified late year losses. Qualified late year capital losses are any net capital losses incurred between November 1 and the end of its fiscal year, August 31, 2018. Qualified late year ordinary losses are generally losses incurred between January 1 and the end of its fiscal year, August 31, 2018. For the year ended August 31, 2018, the Fund deferred short-term capital losses of $52,179.
Under the Regulated Investment Company Modernization Act of 2010, net capital losses recognized for tax years beginning after December 22, 2010 may be carried forward indefinitely, and their character is retained as short-term and/or long-term. As of August 31, 2018, the Fund had no short-term or long-term capital loss carryforwards.
The Fund follows authoritative financial reporting rules regarding recognition and measurement of tax positions taken or expected to be taken on a tax return. The Fund has reviewed all open tax years and concluded that there is no effect to the Fund's financial positions or results of operations and no tax liability resulting from unrecognized tax benefits relating to uncertain income tax position taken or expected to be taken on a tax return. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During this period, the Fund did not incur any interest or penalties. Open tax years are those years that are open for examination by the relevant income taxing authority. As of February 28, 2019, open Federal and state income tax years include the tax years ended August 31, 2015 through August 31, 2018. The Fund has no examination in progress. The Fund is also not aware of any
DIREXION SEMI-ANNUAL REPORT
18
tax positions for which it is reasonably possible that the total amounts of unrecognized tax expense will significantly change in the next twelve months.
h) Use of Estimates – The preparation of financial statements in conformity with GAAP 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.
3. INVESTMENT TRANSACTIONS
During the six months ended February 28, 2019, the aggregate purchases and sales of investments (excluding short-term investments) in the Fund were $52,175,751 and $43,445,905, respectively. There were no investments in long-term U.S. Government securities during the six months ended February 28, 2019.
4. INVESTMENT ADVISORY FEE AND OTHER AGREEMENTS
Investment Advisory Agreement: The Fund has entered into an investment advisory agreement with the Adviser. The Adviser earns a fee, computed daily and payable monthly, applied to the Fund's average daily net assets at an annual rate of 0.90%.
In addition, the Adviser has entered into a sub-advisory agreement with Hilton, whereby the Subadviser will provide investment management and asset allocation advice to the Fund. The Adviser pays, out of the management fees it receives from the Fund, a fee for these sub-advisory services.
Management Services Agreement: The Fund has entered into a Management Services Agreement with the Adviser. Under the Management Services Agreement, the Fund pays the Adviser a management service fees of 0.026% on the first $10,000,000 of the Fund's daily net assets and 0.024% on assets in excess of $10,000,000.
Operating Expense Limitation Agreement: The Fund is responsible for its own operating expenses. Under the Operating Expense Limitation Agreement the Adviser has contractually agreed to cap all or a portion of the expenses for each Share Class based on an annual rate of 1.23% for Investor Class shares and 0.98% for Institutional Class Shares applied to the Fund's average daily net assets.
Any expense cap is subject to reimbursement by the Fund within the following three years only if overall expenses fall below the lesser of this percentage limitation and any percentage limitation in place at the time. This agreement may be terminated or revised at any time with the consent of the Board of Trustees.
The table below presents amounts that the Adviser recouped, waived and the amounts available for potential recoupments by the Adviser.
| | | | | | | Potential Recoupment
Amounts Expiring: | | Total Potential | |
| | | Expenses
Recouped | | Expenses
Reimbursed | | August 31,
2021 | | February 28,
2022 | | Recoupment
Amount | |
Hilton Tactical Income Fund | | $ | — | | | $ | 149,025 | | | $ | 269,123 | | | $ | 149,025 | | | $ | 418,148 | | |
The net amount payable arising from the Investment Advisory Agreement, Management Services Agreement and waiver of any expenses as of February 28, 2019 is presented on the Statement of Assets and Liabilities as Due from investment adviser, net.
Distribution Expenses: Shares of the Fund are subject to an annual 12b-1 fee of up to 1.00% of the Fund's average daily net assets. The Investor Class shares of the Fund currently pays 0.25% of its average daily net assets. The Institutional Class shares of the Fund do not pay a 12b-1 fee. The Fund does not charge a shareholder service fee.
Rafferty Capital Markets, LLC (the "Distributor") serves as principal underwriter of the Fund and acts as the Fund's distributor in a continuous public offering of the Fund's shares. The Distributor is an affiliate of the Adviser.
DIREXION SEMI-ANNUAL REPORT
19
5. VALUATION MEASUREMENTS
The Fund follows authoritative fair valuation accounting standards, which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value and a discussion of changes in valuation techniques and related inputs during the period. These inputs are summarized in the three broad levels listed below:
Level 1 – Quoted prices in active markets for identical securities
Level 2 – Evaluated price based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 – Significant unobservable inputs including the Fund's own assumptions about the assumptions in determining fair value of investments
To the extent that equity securities are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. If the market for a particular security is not active, and the mean price is used, these securities are categorized in Level 2 of the fair value hierarchy. Asset-backed securities, convertible bonds and corporate bonds are generally categorized in Level 2 of the fair value hierarchy. Investments in other mutual funds are categorized as Level 1 in the hierarchy.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those financial instruments.
The following is a summary of the inputs used to value the Fund's securities as of February 28, 2019:
| | | Level 1 | | Level 2 | | Level 3 | | Total | |
Common Stocks | | $ | 41,784,919 | | | $ | — | | | $ | — | | | $ | 41,784,919 | | |
Preferred Stocks | | | 23,595,303 | | | | 2,720,653 | | | | — | | | | 26,315,956 | | |
U.S. Government Obligations | | | — | | | | 19,365,212 | | | | — | | | | 19,365,212 | | |
Corporate Bonds | | | — | | | | 12,639,470 | | | | — | | | | 12,639,470 | | |
Closed-End Funds | | | 6,619,953 | | | | — | | | | — | | | | 6,619,953 | | |
Master Limited Partnerships | | | 2,184,350 | | | | — | | | | — | | | | 2,184,350 | | |
Convertible Bonds | | | — | | | | 879,953 | | | | — | | | | 879,953 | | |
For further detail on each asset class, see Schedule of Investments.
The Fund follows authoritative accounting standards, which require additional disclosure regarding fair value measurements. Specifically, these standards require reporting entities to disclose a) the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements, for Level 2 or Level 3 positions, b) transfers between all levels (including Level 1 and Level 2) on a gross basis (i.e. transfers out must be disclosed separately from transfers in) as well as the reasons(s) for the transfers, and c) purchases and sales on a gross basis in the Level 3 rollforward rather than as one net number. Additionally, reporting entities are required to disclose quantitative information about unobservable inputs used in the fair value measurements categorized within Level 3 of the fair value hierarchy.
There were no transfers between Level 1 and Level 2 securities. There were no Level 3 securities held by the Fund during the six months ended February 28, 2019. It is the Fund's policy to recognize transfers into Level 3 at the value as of the beginning of the period, if applicable.
6. RECENT ACCOUNTING PRONOUNCEMENT
In August 2018, the U.S. Securities and Exchange Commission approved amendments to eliminate, update or modify certain disclosure requirements required of registered investment companies. In part, these amendments amend Regulation S-X and require presentation of distributable earnings on the Statement of Assets and Liabilities in total rather than disclosing the three components of distributable earnings (undistributed net investment income, undistributed realized gain and net unrealized appreciation (depreciation) on investments). An additional amendment to Regulation S-X amends the requirement to state separately on the Statement of Changes in Net Assets distributions to shareholders from net investment income,
DIREXION SEMI-ANNUAL REPORT
20
net realized gain and other sources and rather disclose distributions to shareholders in total, except for return of capital, which should be disclosed separately. Accumulated net investment loss or undistributed net investment income is no longer required to be disclosed in the Statements of Changes in Net Assets. These updates have been incorporated in the Funds' financial statements and have no impact on each of the Fund's net assets or results of operations. Information previously required to be disclosed that was reported in the August 31, 2018 financial statements are presented in the Statement of Changes in Net Assets.
7. SUBSEQUENT EVENTS
The Fund paid an income distribution to the Investor Class in the amount of $0.0387 per share, and to the Institutional Class in the amount of $0.042 per share, with a record date of February 28, 2019 and ex-date and payable date of March 1, 2019.
The Fund paid an income distribution to the Investor Class in the amount of $0.0387 per share, and to the Institutional Class in the amount of $0.042 per share, with a record date of March 29, 2019 and ex-date and payable date of April 1, 2019.
Management has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no items require recognition or disclosure.
DIREXION SEMI-ANNUAL REPORT
21
Direxion Funds
Supplemental Information (Unaudited)
Householding
In an effort to decrease costs, the Funds intend to reduce the number of duplicate prospectuses, Annual and Semi-Annual Reports, proxy statements and other similar documents you receive by sending only one copy of each to those addresses shared by two or more accounts and to shareholders we reasonably believe are from the same family or household. Householding begins once you have signed your account application. After such time, if you would like to discontinue householding for your accounts, please call toll-free at (800) 851-0511 to request individual copies of these documents. Once the Funds receive notice to stop householding, we will begin sending individual copies thirty days after receiving your request. This policy does not apply to account statements.
DIREXION SEMI-ANNUAL REPORT
22
Direxion Funds
Trustees and Officers
The business affairs of the Fund are managed by or under the direction of the Board of Trustees. Information pertaining to the Trustees and Officers of the Fund is set below. The report includes additional information about the Fund's Trustees and Officers and is available without charge, upon request by calling 1-800-851-0511.
Interested Trustee
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Daniel D. O'Neill(1)
Age: 50 | |
Chairman of the Board of Trustees | |
Lifetime of Trust until removal or resignation;
Since 2014 | |
Managing Director of Rafferty Asset Management, LLC, January 1999 – January 2019; Direxion Advisors, LLC, November 2017 – January 2019. | | |
135 | | |
None. | |
Independent Trustees
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Gerald E. Shanley III
Age: 75 | |
Trustee | |
Lifetime of Trust until removal or resignation;
Since 1997 | |
Retired, Since 2002; Business Consultant, 1985 – present; Trustee of Trust Under Will of Charles S. Payson, 1987 – present; C.P.A., 1979 – present. | | |
135 | | |
None. | |
John A. Weisser
Age: 77 | |
Trustee | |
Lifetime of Trust until removal or resignation;
Since 2007 | |
Retired, since 1995; Salomon Brothers, Inc., 1971 – 1995, most recently as Managing Director. | | |
135 | | |
Director until December 2016, The MainStay Funds Trust, The MainStay Funds, MainStay VP Fund Series, Mainstay Defined Term Municipal Opportunities Fund; Private Advisors Alternative Strategy Fund; Private Advisors Alternative Strategies Master Fund. | |
(1) Mr. O'Neill is affiliated with Rafferty and Direxion. Mr. O'Neill owns a beneficial interest in Rafferty.
(2) The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this report, offers for sale to the public 93 of the 120 funds registered with the SEC, the Direxion Funds which, as of the date of this report, offers for sale to the public 15 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this report, does not have any funds registered with the SEC.
DIREXION SEMI-ANNUAL REPORT
23
Direxion Funds
Trustees and Officers
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in Direxion
Family of
Investment
Companies
Overseen
by Trustee(2) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
David L. Driscoll
Age: 49 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2014 | |
Partner, King Associates, LLP, since 2004; Board Advisor, University Common Real Estate, since 2012; Principal, Grey Oaks LLP since 2003; Member, Kendrick LLC, since 2006. | |
135 | |
None. | |
Jacob C. Gaffey
Age: 71 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2014 | |
Managing Director of Loomis & Co. since 2012; Partner, Bay Capital Advisors, LLC 2008 – 2012. | |
135 | |
None. | |
Henry W. Mulholland
Age: 55 | |
Trustee | |
Lifetime of Trust until removal or resignation; Since 2017 | |
Grove Hill Partners LLC, since 2016 as Managing Partner; Bank of America Merrill Lynch, 1990 – 2015, most recently as Managing Director and Head of Equities for Americas. | |
135 | |
None. | |
(2) The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this report, offers for sale to the public 93 of the 120 funds registered with the SEC, the Direxion Funds which, as of the date of this report, offers for sale to the public 15 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this report, does not have any funds registered with the SEC.
DIREXION SEMI-ANNUAL REPORT
24
Direxion Funds
Trustees and Officers
The officers of the Trust conduct and supervise its daily business. Unless otherwise noted, an individual's business address is 1301 Avenue of the Americas, 28th Floor, New York, New York 10019. As of the date of this report, the officers of the Trust, their ages, their business address and their principal occupations during the past five years are as follows:
Principal Officers of the Trust
Name, Address and
Age | | Position(s)
Held with
Fund | | Term of Office
and Length of
Time Served | | Principal Occupation(s)
During Past Five Years | | # of Portfolios
in the Direxion
Family of
Investment
Companies
Overseen
by Trustee(1) | | Other Trusteeships/
Directorships Held by
Trustee During Past
Five Years | |
Robert D. Nestor
Age: 50 | |
President | |
One Year; Since 2018 | |
President, Rafferty Asset Management, LLC and Direxion Advisors, LLC, since April 2018; Blackrock, Inc. (May 2007 – April 2018), most recently as Managing Director. | |
N/A | |
N/A | |
Patrick J. Rudnick
Age: 45 | |
Principal Executive Officer
Principal Financial Officer | |
One Year;
Since 2018
One Year;
Since 2010 | |
Senior Vice President, since March 2013, Rafferty Asset Management, LLC; Senior Vice President, since November 2017, Direxion Advisors, LLC. | |
N/A | |
N/A | |
Angela Brickl
Age: 42 | |
Chief Compliance Officer
Secretary | |
One Year; Since 2018
One Year;
Since 2011 | |
General Counsel, Rafferty Asset Management LLC, since October 2010 and Direxion Advisors, LLC, since November 2017; Chief Compliance Officer, Rafferty Asset Management, LLC, since September 2012 and Direxion Advisors, LLC, since November 2017. | |
N/A | |
N/A | |
(1) The Direxion Family of Investment Companies consists of the Direxion Shares ETF Trust which, as of the date of this report, offers for sale to the public 93 of the 120 funds registered with the SEC, the Direxion Funds which, as of the date of this report, offers for sale to the public 15 funds registered with the SEC and the Direxion Insurance Trust which, as of the date of this report, does not have any funds registered with the SEC.
DIREXION SEMI-ANNUAL REPORT
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26
At the Direxion Funds, we are committed to protecting your privacy. To open and service your Direxion accounts, we collect and maintain certain nonpublic personal information about you, such as your address, phone number, social security number, purchases, sales, account balances, bank account information and other personal financial information. We collect this information from the following sources:
• Account applications or other forms on which you provide information,
• Mail, e-mail, the telephone and our website, and
• Your transactions and account inquiries with us.
We safeguard the personal information that you have entrusted to us in the following ways:
• As a general policy, only those employees who maintain your account and respond to your requests for additional services have access to your account information.
• We maintain physical, electronic, and procedural safeguards to insure the security of your personal information and to prevent unauthorized access to your information.
We do not disclose any nonpublic personal information about you or our former shareholders to anyone, except as permitted or required by law. In the course of conducting business and maintaining your account we may share shareholder information, as allowed by law, with our affiliated companies and with other service providers, including financial intermediaries, custodians, transfer agents and marketing consultants. Those companies are contractually bound to use that information only for the services for which we hired them. They are not permitted to use or share our shareholders' nonpublic personal information for any other purpose. There also may be times when we provide information to federal, state or local authorities as required by law.
In the event that you hold fund shares of Direxion through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared with nonaffiliated third parties.
For questions about our policy, please contact us at (800) 851-0511.
This page is not a part of the Semi-Annual Report.
DIREXION SEMI-ANNUAL REPORT
Investment Advisor
Rafferty Asset Management, LLC
1301 Avenue of the Americas
28th Floor
New York, NY 10019
Sub-Advisor
Hilton Capital Management, LLC
1010 Franklin Avenue
Garden City, NY 11530
Administrator, Transfer Agent, Dividend Paying
Agent & Shareholding Servicing Agent
U.S. Bancorp Fund Services, LLC
P.O. Box 1993
Milwaukee, WI 53201-1993
Custodian
U.S. Bank, N.A.
1555 RiverCenter Dr., Suite 302
Milwaukee, WI 53212
Independent Registered Public Accounting Firm
Ernst & Young LLP
220 South Sixth Street
Minneapolis, MN 55402
Distributor
Rafferty Capital Markets, LLC
1010 Franklin Ave., 3rd Floor
Garden City, NY 11530
The Trust's Proxy Voting Policies are available without charge by calling 1-800-850-0511, or by accessing the SEC's website at www.sec.gov.
The actual voting records relating to portfolio securities during the most recent period ended June 30 is available without charge by calling 1-800-850-0511, or by accessing the SEC's website at www.sec.gov.
The Trust files complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Part F of Form N-PORT. The Fund's Part F of Form N-PORT (and Form N-Q prior to February 28, 2019) is available on the SEC's website at www.sec.gov.
This report has been prepared for shareholders and may be distributed to others only if preceded or accompanied by a current prospectus.
1301 Avenue of the Americas (6th Avenue), 28th Floor | New York, New York 10019 | (800) 851-0511
www.direxioninvestments.com
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) The Registrant’s Principal Executive Officer and Principal Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.
(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 13. Exhibits.
(a) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith.
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.
(b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Direxion Funds |
|
|
By (Signature and Title | /s/ Patrick J. Rudnick |
| Patrick J. Rudnick, Principal Executive Officer |
| |
| |
Date | May 1, 2019 | |
| | | |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Patrick J. Rudnick | |
| Patrick J. Rudnick, Principal Executive Officer | |
| | |
| | |
Date | May 1, 2019 | | |
| | |
| | |
By (Signature and Title)* | /s/ Patrick J. Rudnick | |
| Patrick J. Rudnick, Principal Financial Officer | |
| | |
| | |
Date | May 1, 2019 | | |
* Print the name and title of each signing officer under his or her signature.
